Goldman Sachs 2015 Annual Report Download - page 22

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
The Basel Committee has issued a series of updates which
propose other changes to capital regulations. In particular,
it has finalized a revised standard approach for calculating
RWAs for counterparty credit risk on derivatives exposures
(“Standardized Approach for measuring Counterparty
Credit Risk exposures,” known as “SA-CCR”). In addition,
it has published guidelines for measuring and controlling
large exposures (“Supervisory Framework for measuring
and controlling Large Exposures”), and issued an updated
framework for regulatory capital treatment of banking
book securitizations.
The Basel Committee has also issued consultation papers
on, among other matters, a “Review of Interest Rate Risk in
the Banking Book,” a “Review of the Credit Valuation
Adjustment Risk Framework,” revisions to the Basel
Standardized approach for credit risk and operational risk
capital, and the design of a capital floor framework based
on the revised Standardized approach.
See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Equity Capital
Management and Regulatory Capital” in Part II, Item 7 of
the 2015 Form 10-K and Note 20 to the consolidated
financial statements in Part II, Item 8 of the 2015
Form 10-K for information about CET1, CET1 ratio, Tier 1
capital, Tier 1 capital ratio, Total capital, Total capital
ratio, risk-weighted assets (RWAs), and for information
about minimum required ratios, as well as applicable
capital buffers and surcharges.
Leverage Ratios. Under the Revised Capital Framework,
we and GS Bank USA are subject to Tier 1 leverage
requirements established by the Federal Reserve Board. The
Revised Capital Framework also introduced a
supplementary leverage ratio for Advanced approach
banking organizations effective January 1, 2018.
See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Equity Capital
Management and Regulatory Capital” in Part II, Item 7 of
the 2015 Form 10-K and Note 20 to the consolidated
financial statements in Part II, Item 8 of the 2015
Form 10-K for information about our Tier 1 leverage ratio
and supplementary leverage ratio.
Liquidity Ratios. The Basel Committee’s international
framework for liquidity risk measurement, standards and
monitoring requires banking organizations to measure their
liquidity against two specific liquidity tests.
The liquidity coverage ratio (LCR) is designed to ensure
that the entity maintains an adequate level of
unencumbered high-quality liquid assets based on expected
net cash outflows under an acute short-term liquidity stress
scenario. The U.S. federal bank regulatory agencies’ rules
implementing the LCR for Advanced approach banking
organizations are generally consistent with the Basel
Committee’s framework, but include accelerated
transitional provisions and more stringent requirements
related to both the range of assets that qualify as high-
quality liquid assets and cash outflow assumptions for
certain types of funding and other liquidity risks.
Under the accelerated transition timeline, the LCR became
effective in the United States on January 1, 2015, with a
phase-in period whereby firms, including Group Inc. and
GS Bank USA, must have an 80% and 90% minimum ratio
in 2015 and 2016, respectively, and a 100% minimum ratio
commencing in 2017. In November 2015, the Federal
Reserve Board proposed a rule that would require bank
holding companies to disclose their LCR on a quarterly
basis beginning in the quarter ended September 2016.
These requirements include LCR averages over the prior
quarter, detailed information on certain components of the
LCR calculation and projected net cash outflows. See
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Risk
Management — Liquidity Risk Management” in Part II,
Item 7 of the 2015 Form 10-K for information about the
LCR.
The LCR rule issued by the U.K. regulatory authorities
became effective in the United Kingdom on
October 1, 2015, with a phase-in period whereby certain
financial institutions, including Goldman Sachs
International (GSI), our regulated U.K. broker-dealer
subsidiary, must have an 80% minimum ratio initially,
increasing to 90% on January 1, 2017 and 100% on
January 1, 2018.
The net stable funding ratio (NSFR) is designed to promote
more medium- and long-term stable funding of the assets
and off-balance-sheet activities of banking organizations
over a one-year time horizon. Under the Basel Committee
framework, the NSFR will be effective on January 1, 2018.
The U.S. federal bank regulatory agencies and the U.K.
regulatory authorities have not yet proposed rules
implementing the NSFR for U.S. banks and bank holding
companies, and U.K. financial institutions, respectively.
10 Goldman Sachs 2015 Form 10-K