Goldman Sachs 2015 Annual Report Download - page 87

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Share Repurchase Program. We use our share
repurchase program to help maintain the appropriate level
of common equity. The repurchase program is effected
primarily through regular open-market purchases (which
may include repurchase plans designed to comply with
Rule 10b5-1), the amounts and timing of which are
determined primarily by our current and projected capital
position and our capital plan submitted to the Federal
Reserve Board as part of CCAR. The amounts and timing
of the repurchases may also be influenced by general
market conditions and the prevailing price and trading
volumes of our common stock.
On October 14, 2015, the Board of Directors of Group Inc.
(Board) authorized the repurchase of an additional
60.0 million shares of common stock pursuant to our
existing share repurchase program. As of December 2015,
the remaining share authorization under our existing
repurchase program was 63.2 million shares; however, we
are only permitted to make repurchases to the extent that
such repurchases have not been objected to by the Federal
Reserve Board. See “Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities” in Part II, Item 5 of the 2015
Form 10-K and Note 19 to the consolidated financial
statements for additional information about our share
repurchase program and see above for information about
our capital planning and stress testing process.
Resolution and Recovery Plans
We are required by the Federal Reserve Board and the FDIC
to submit an annual plan that describes our strategy for a
rapid and orderly resolution in the event of material
financial distress or failure (resolution plan). We are also
required by the Federal Reserve Board to submit and have
submitted, on an annual basis, a global recovery plan that
outlines the steps that management could take to reduce
risk, maintain sufficient liquidity, and conserve capital in
times of prolonged stress. In August 2014, the Federal
Reserve Board and the FDIC indicated that we and other
large industry participants had certain shortcomings in the
2013 resolution plans that must be addressed in the 2015
resolution plans. We submitted our 2015 resolution plan on
June 30, 2015. See “Risk Factors” in Part 1, Item 1A of the
2015 Form 10-K for information about the potential
consequences to us if we failed to address the identified
shortcomings in our 2015 resolution plan.
In addition, GS Bank USA is required by the FDIC to
submit a resolution plan. As required, GS Bank USA’s 2015
resolution plan was submitted on September 1, 2015.
Rating Agency Guidelines
The credit rating agencies assign credit ratings to the
obligations of Group Inc., which directly issues or
guarantees substantially all of the firm’s senior unsecured
obligations. Goldman, Sachs & Co. (GS&Co.) and GSI
have been assigned long- and short-term issuer ratings by
certain credit rating agencies. GS Bank USA and GSIB have
also been assigned long- and short-term issuer ratings, as
well as ratings on their long-term and short-term bank
deposits. In addition, credit rating agencies have assigned
ratings to debt obligations of certain other subsidiaries of
Group Inc.
The level and composition of our equity capital are among
the many factors considered in determining our credit
ratings. Each agency has its own definition of eligible
capital and methodology for evaluating capital adequacy,
and assessments are generally based on a combination of
factors rather than a single calculation. See “Liquidity Risk
Management — Credit Ratings” for further information
about credit ratings of Group Inc., GS Bank USA, GSIB,
GS&Co. and GSI.
Consolidated Regulatory Capital
We are subject to the Federal Reserve Board’s revised risk-
based capital and leverage regulations, subject to certain
transitional provisions (Revised Capital Framework). These
regulations are largely based on the Basel Committee on
Banking Supervision’s (Basel Committee) final capital
framework for strengthening international capital
standards (Basel III) and also implement certain provisions
of the Dodd-Frank Act. Under the Revised Capital
Framework, we are an “Advanced approach” banking
organization.
As of December 2015, we calculated our Common Equity
Tier 1 (CET1), Tier 1 capital and Total capital ratios in
accordance with (i) the Standardized approach and market
risk rules set out in the Revised Capital Framework
(together, the Standardized Capital Rules) and (ii) the
Advanced approach and market risk rules set out in the
Revised Capital Framework (together, the Basel III
Advanced Rules) as described in Note 20 to the
consolidated financial statements. The lower of each ratio
calculated in (i) and (ii) is the ratio against which our
compliance with minimum ratio requirements is assessed.
Each of the ratios calculated in accordance with the Basel III
Advanced Rules was lower than that calculated in
accordance with the Standardized Capital Rules and
therefore the Basel III Advanced ratios were the ratios that
applied to us as of December 2015.
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