Goldman Sachs 2015 Annual Report Download - page 86

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
As required by the Federal Reserve Board’s annual CCAR
rules, we submit a capital plan for review by the Federal
Reserve Board. The purpose of the Federal Reserve Board’s
review is to ensure that we have a robust, forward-looking
capital planning process that accounts for our unique risks
and that permits continued operation during times of
economic and financial stress.
The Federal Reserve Board evaluates us based, in part, on
whether we have the capital necessary to continue
operating under the baseline and stress scenarios provided
by the Federal Reserve Board and those developed
internally. This evaluation also takes into account our
process for identifying risk, our controls and governance
for capital planning, and our guidelines for making capital
planning decisions. In addition, the Federal Reserve Board
evaluates our plan to make capital distributions (i.e.,
dividend payments and repurchases or redemptions of
stock, subordinated debt or other capital securities) and
issue capital, across a range of macroeconomic scenarios
and firm-specific assumptions.
In addition, the DFAST rules require us to conduct stress
tests on a semi-annual basis and publish a summary of
certain results. The Federal Reserve Board also conducts its
own annual stress tests and publishes a summary of certain
results.
We submitted our initial 2015 CCAR to the Federal
Reserve Board in January 2015 and, based on the Federal
Reserve Board feedback, we submitted revised capital
actions in March 2015. The Federal Reserve Board
informed us that it did not object to our revised capital
actions, including the repurchase of outstanding common
stock, an increase in our quarterly common stock dividend
and the possible issuance, redemption and modification of
other capital securities from the second quarter of 2015
through the second quarter of 2016. We published a
summary of our annual DFAST results in March 2015. See
“Business — Available Information” in Part I, Item 1 of the
2015 Form 10-K.
In July 2015, we submitted the results of our semi-annual
DFAST to the Federal Reserve Board and published a
summary of our internally developed severely adverse
scenario results. See “Business — Available Information” in
Part I, Item 1 of the 2015 Form 10-K.
In accordance with the Federal Reserve Board
requirements, we plan to submit our 2016 CCAR in
April 2016.
In addition, the rules adopted by the Federal Reserve Board
under the Dodd-Frank Act require GS Bank USA to
conduct stress tests on an annual basis and publish a
summary of certain results. GS Bank USA submitted its
2015 annual DFAST stress results to the Federal Reserve
Board in January 2015 and published a summary of its
results in March 2015. See “Business — Available
Information” in Part I, Item 1 of the 2015 Form 10-K.
Goldman Sachs International (GSI) also has its own capital
planning and stress testing process, which incorporates
internally designed stress tests and those required under the
Prudential Regulation Authority’s (PRA) Internal Capital
Adequacy Assessment Process.
Contingency Capital Plan. As part of our comprehensive
capital management policy, we maintain a contingency
capital plan. Our contingency capital plan provides a
framework for analyzing and responding to a perceived or
actual capital deficiency, including, but not limited to,
identification of drivers of a capital deficiency, as well as
mitigants and potential actions. It outlines the appropriate
communication procedures to follow during a crisis period,
including internal dissemination of information as well as
timely communication with external stakeholders.
Capital Attribution. We assess each of our businesses’
capital usage based upon our internal assessment of risks,
which incorporates an attribution of all of our relevant
regulatory capital requirements. These regulatory capital
requirements are allocated using our attributed equity
framework, which takes into consideration our binding
capital constraints. We also attribute risk-weighted assets
(RWAs) to our business segments. As of December 2015,
approximately two-thirds of RWAs calculated in
accordance with the Standardized Capital Rules and the
Basel III Advanced Rules, subject to transitional provisions,
were attributed to our Institutional Client Services segment
and substantially all of the remaining RWAs were
attributed to our Investing & Lending segment. We manage
the levels of our capital usage based upon balance sheet and
risk limits, as well as capital return analyses of our
businesses based on our capital attribution.
74 Goldman Sachs 2015 Form 10-K