Goldman Sachs 2015 Annual Report Download - page 89

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Fully Phased-in Capital Ratios
The table below presents our capital ratios calculated in
accordance with the Standardized Capital Rules and the
Basel III Advanced Rules on a fully phased-in basis.
As of December
$ in millions 2015 2014
Common shareholders’ equity $ 75,528 $ 73,597
Deductions for goodwill and identifiable
intangible assets, net of deferred tax liabilities (3,044) (3,196)
Deductions for investments in nonconsolidated
financial institutions (2,274) (4,928)
Other adjustments (1,409) (1,213)
Total Common Equity Tier 1 68,801 64,260
Perpetual non-cumulative preferred stock 11,200 9,200
Deduction for investments in covered funds (413) —
Other adjustments (128) (286)
Tier 1 capital $ 79,460 $ 73,174
Standardized Tier 2 and total capital
Tier 1 capital $ 79,460 $ 73,174
Qualifying subordinated debt 15,132 11,894
Allowance for losses on loans and lending
commitments 602 316
Other adjustments (19) (9)
Standardized Tier 2 capital 15,715 12,201
Standardized total capital $ 95,175 $ 85,375
Basel III Advanced Tier 2 and total capital
Tier 1 capital $ 79,460 $ 73,174
Standardized Tier 2 capital 15,715 12,201
Allowance for losses on loans and lending
commitments (602) (316)
Basel III Advanced Tier 2 capital 15,113 11,885
Basel III Advanced total capital $ 94,573 $ 85,059
RWAs
Standardized $534,135 $627,444
Basel III Advanced 587,319 577,869
CET1 ratio
Standardized 12.9% 10.2%
Basel III Advanced 11.7% 11.1%
Tier 1 capital ratio
Standardized 14.9% 11.7%
Basel III Advanced 13.5% 12.7%
Total capital ratio
Standardized 17.8% 13.6%
Basel III Advanced 16.1% 14.7%
Although the fully phased-in capital ratios are not
applicable until 2019, we believe that the ratios in the table
above are meaningful because they are measures that we,
our regulators and investors use to assess our ability to meet
future regulatory capital requirements. The fully phased-in
Basel III Advanced and Standardized capital ratios are non-
GAAP measures as of both December 2015 and
December 2014 and may not be comparable to similar non-
GAAP measures used by other companies as of those dates.
These ratios are based on our current interpretation,
expectations and understanding of the Revised Capital
Framework and may evolve as we discuss its interpretation
and application with our regulators.
In the table above:
‰The deductions for goodwill and identifiable intangible
assets, net of deferred tax liabilities, include goodwill of
$3.66 billion and $3.65 billion as of December 2015 and
December 2014, respectively, and identifiable intangible
assets of $491 million and $515 million as of
December 2015 and December 2014, respectively, net of
associated deferred tax liabilities of $1.10 billion and
$964 million as of December 2015 and December 2014,
respectively.
‰The deductions for investments in nonconsolidated
financial institutions represent the amount by which our
investments in the capital of nonconsolidated financial
institutions exceed certain prescribed thresholds. The
decrease from December 2014 to December 2015
primarily reflects reductions in our fund investments.
‰The deduction for investments in covered funds
represents our aggregate investments in applicable
covered funds, as permitted by the Volcker Rule, that
were purchased after December 2013. Substantially all of
these investments in covered funds were purchased in
connection with our market-making activities. This
deduction became effective in July 2015 and is not subject
to a transition period. See “Regulatory Developments”
below for further information about the Volcker Rule.
‰Other adjustments within CET1 and Tier 1 capital
primarily include the overfunded portion of our defined
benefit pension plan obligation net of associated deferred
tax liabilities, disallowed deferred tax assets, credit
valuation adjustments on derivative liabilities, debt
valuation adjustments and other required credit risk-
based deductions.
‰Qualifying subordinated debt represents subordinated
debt issued by Group Inc. with an original term to
maturity of five years or greater. The outstanding amount
of subordinated debt qualifying for Tier 2 capital is
reduced upon reaching a remaining maturity of five years.
See Note 16 to the consolidated financial statements for
additional information about our subordinated debt.
See Note 20 to the consolidated financial statements for
information about our transitional capital ratios, which
represent the ratios that are applicable to us as of
December 2015 and December 2014.
Goldman Sachs 2015 Form 10-K 77