Goldman Sachs 2015 Annual Report Download - page 47

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
There has been a trend towards increased regulation and
supervision of our subsidiaries by the governments and
regulators in the countries in which those subsidiaries are
located or do business. Concerns about protecting clients
and creditors of financial institutions that are controlled by
persons or entities located outside of the country in which
such entities are located or do business have caused or may
cause a number of governments and regulators to take
additional steps to “ring fence” or maintain internal total
loss-absorbing capacity at such entities in order to protect
clients and creditors of such entities in the event of financial
difficulties involving such entities. The result has been and
may continue to be additional limitations on our ability to
efficiently move capital and liquidity among our affiliated
entities, thereby increasing the overall level of capital and
liquidity required by the firm on a consolidated basis.
Furthermore, Group Inc. has guaranteed the payment
obligations of certain of its subsidiaries, including GS&Co.,
GS Bank USA and GSEC subject to certain exceptions. In
addition, Group Inc. guarantees many of the obligations of
its other consolidated subsidiaries on a transaction-by-
transaction basis, as negotiated with counterparties. These
guarantees may require Group Inc. to provide substantial
funds or assets to its subsidiaries or their creditors or
counterparties at a time when Group Inc. is in need of
liquidity to fund its own obligations.
The requirements for Group Inc. and GS Bank USA to
develop and submit recovery and resolution plans to
regulators, and the incorporation of feedback received from
regulators, may require us to increase capital or liquidity
levels or issue additional long-term debt at Group Inc. or
particular subsidiaries or otherwise incur additional or
duplicative operational or other costs at multiple entities,
and may reduce our ability to provide Group Inc.
guarantees of the obligations of our subsidiaries or raise
debt at Group Inc. Resolution planning may also impair
our ability to structure our intercompany and external
activities in a manner that we may otherwise deem most
operationally efficient. Furthermore, we may incur
additional taxes. Any such limitations or requirements
would be in addition to the legal and regulatory restrictions
described above on our ability to engage in capital actions
or make intercompany dividends or payments.
See “Business — Regulation” in Part I, Item 1 of the 2015
Form 10-K for further information about regulatory
restrictions.
The application of regulatory strategies and
requirements in the United States and non-U.S.
jurisdictions to facilitate the orderly resolution of
large financial institutions could create greater risk of
loss for Group Inc.’s security holders.
As described under “Business — Regulation — Insolvency
of an Insured Depository Institution or a Bank Holding
Company,” if the FDIC is appointed as receiver under the
orderly liquidation authority, the rights of Group Inc.’s
creditors would be determined under the orderly
liquidation authority, and substantial differences exist in
the rights of creditors between the orderly liquidation
authority and the U.S. Bankruptcy Code, including the right
of the FDIC under the orderly liquidation authority to
disregard the strict priority of creditor claims in some
circumstances, which could have a material adverse effect
on debt holders.
Goldman Sachs 2015 Form 10-K 35