Goldman Sachs 2015 Annual Report Download - page 93

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
The proposed rule would prohibit Group Inc., as a U.S.
G-SIB, from (i) guaranteeing liabilities of subsidiaries that
are subject to early termination provisions under certain
conditions, (ii) incurring liabilities guaranteed by
subsidiaries, (iii) issuing short-term debt, or (iv) entering
into derivatives and certain other financial contracts with
external counterparties. Additionally, the proposed rule
would cap the amount of certain liabilities of a U.S. G-SIB
that are not eligible long-term debt. Finally, the proposed
rule would require U.S. G-SIBs and other large banking
entities to deduct from their own Tier 2 capital certain
holdings in unsecured debt of other U.S. G-SIBs, as well as
holdings of their own unsecured debt securities.
Under the proposal, the TLAC requirements would phase
in between 2019 and 2022. We are currently evaluating the
impact of the proposed TLAC requirements. See
“Business — Regulation” in Part I, Item 1 of the 2015
Form 10-K for further information on the Federal Reserve
Board’s proposed TLAC rule.
Other Developments
In January 2016, the Basel Committee finalized a revised
framework for calculating minimum capital requirements
for market risk. The revisions constitute a fundamental
change to the calculation of both model-based and non-
model-based components of market risk capital. The Basel
Committee has set an effective date for first reporting under
the revised framework of December 31, 2019. The U.S.
federal bank regulatory agencies have not yet proposed
rules implementing these revisions for U.S. banking
organizations. We are currently evaluating the potential
impact of the Basel Committee’s revised framework.
See “Business — Regulation” in Part I, Item 1 of the 2015
Form 10-K for further information on regulations that may
impact us in the future.
Off-Balance-Sheet Arrangements
and Contractual Obligations
Off-Balance-Sheet Arrangements
We have various types of off-balance-sheet arrangements
that we enter into in the ordinary course of business. Our
involvement in these arrangements can take many different
forms, including:
‰Purchasing or retaining residual and other interests in
special purpose entities such as mortgage-backed and
other asset-backed securitization vehicles;
‰Holding senior and subordinated debt, interests in limited
and general partnerships, and preferred and common
stock in other nonconsolidated vehicles;
‰Entering into interest rate, foreign currency, equity,
commodity and credit derivatives, including total return
swaps;
‰Entering into operating leases; and
‰Providing guarantees, indemnifications, loan
commitments, letters of credit and representations and
warranties.
We enter into these arrangements for a variety of business
purposes, including securitizations. The securitization
vehicles that purchase mortgages, corporate bonds, and
other types of financial assets are critical to the functioning
of several significant investor markets, including the
mortgage-backed and other asset-backed securities
markets, since they offer investors access to specific cash
flows and risks created through the securitization process.
We also enter into these arrangements to underwrite client
securitization transactions; provide secondary market
liquidity; make investments in performing and
nonperforming debt, equity, real estate and other assets;
provide investors with credit-linked and asset-repackaged
notes; and receive or provide letters of credit to satisfy
margin requirements and to facilitate the clearance and
settlement process.
Our financial interests in, and derivative transactions with,
such nonconsolidated entities are generally accounted for at
fair value, in the same manner as our other financial
instruments, except in cases where we apply the equity
method of accounting.
Goldman Sachs 2015 Form 10-K 81