Goldman Sachs 2015 Annual Report Download - page 38

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Our businesses and those of our clients are subject to
extensive and pervasive regulation around the world.
As a participant in the financial services industry and a
systemically important financial institution, we are subject
to extensive regulation in jurisdictions around the world.
We face the risk of significant intervention by regulatory
and taxing authorities in all jurisdictions in which we
conduct our businesses. In many cases, our activities may be
subject to overlapping and divergent regulation in different
jurisdictions. Among other things, as a result of regulators
or private parties challenging our compliance with existing
laws and regulations, we could be fined, prohibited from
engaging in some of our business activities, subject to
limitations or conditions on our business activities or
subjected to new or substantially higher taxes or other
governmental charges in connection with the conduct of
our businesses or with respect to our employees. Such
limitations or conditions may negatively impact our
profitability.
Separate and apart from the impact on the scope and
profitability of our business activities, day-to-day
compliance with existing laws and regulations, in particular
those laws and regulations adopted since 2008, has
involved and will continue to involve significant amounts of
time, including that of our senior leaders and that of an
increasing number of dedicated compliance and other
reporting and operational personnel, all of which may
negatively impact our profitability.
If there are new laws or regulations or changes in the
enforcement of existing laws or regulations applicable to
our businesses or those of our clients, including capital,
liquidity, leverage, long-term debt, total loss-absorbing
capacity and margin requirements, restrictions on leveraged
lending or other business practices, reporting requirements,
requirements relating to recovery and resolution planning,
tax burdens and compensation restrictions, that are
imposed on a limited subset of financial institutions (either
based on size, activities, geography or other criteria),
compliance with these new laws or regulations, or changes
in the enforcement of existing laws or regulations, could
adversely affect our ability to compete effectively with other
institutions that are not affected in the same way. In
addition, regulation imposed on financial institutions or
market participants generally, such as taxes on financial
transactions, could adversely impact levels of market
activity more broadly, and thus impact our businesses.
These developments could impact our profitability in the
affected jurisdictions, or even make it uneconomic for us to
continue to conduct all or certain of our businesses in such
jurisdictions, or could cause us to incur significant costs
associated with changing our business practices,
restructuring our businesses, moving all or certain of our
businesses and our employees to other locations or
complying with applicable capital requirements, including
liquidating assets or raising capital in a manner that
adversely increases our funding costs or otherwise adversely
affects our shareholders and creditors.
U.S. and non-U.S. regulatory developments, in particular
the Dodd-Frank Act and Basel III, have significantly altered
the regulatory framework within which we operate and
may adversely affect our competitive position and
profitability.
Among the aspects of the Dodd-Frank Act that have
affected or may in the future affect our businesses are:
increased capital, liquidity and reporting requirements;
limitations on activities in which we may engage; increased
regulation of and restrictions on OTC derivatives markets
and transactions; limitations on incentive compensation;
limitations on affiliate transactions; requirements to
reorganize or limit activities in connection with recovery
and resolution planning; increased deposit insurance
assessments; and increased standards of care for broker-
dealers and investment advisers in dealing with clients. The
implementation of higher capital requirements, the liquidity
coverage ratio, the net stable funding ratio, requirements
relating to long-term debt and total loss-absorbing capacity
and the prohibition on proprietary trading and the
sponsorship of, or investment in, covered funds by the
Volcker Rule may adversely affect our profitability and
competitive position, particularly if these requirements do
not apply, or do not apply equally, to our competitors or
are not implemented uniformly across jurisdictions.
As described under “Business — Regulation — Capital and
Liquidity Requirements — Payment of Dividends and Stock
Repurchases” in Part I, Item 1 of the 2015 Form 10-K,
Group Inc.’s proposed capital actions and capital plan are
reviewed by the Federal Reserve Board as part of the CCAR
process. If the Federal Reserve Board objects to our
proposed capital actions in our capital plan, Group Inc.
could be prohibited from taking some or all of the proposed
capital actions, including increasing or paying dividends on
common or preferred stock or repurchasing common stock
or other capital securities. Our inability to carry out our
proposed capital actions could, among other things,
prevent us from returning capital to our shareholders and
impact our return on equity.
26 Goldman Sachs 2015 Form 10-K