Goldman Sachs 2009 Annual Report Download - page 152

GSBank USA, a NewYork State-chartered bank and a
member of the Federal Reserve System and the Federal Deposit
Insurance Corporation (FDIC), is regulated by the Federal
Reserve Board and the NewYork State Banking Department
(NYSBD) and is subject to minimum capital requirements that
(subject to certain exceptions) are similar to those applicable
to bank holding companies. GSBank USA computes its capital
ratios in accordance with the regulatory capital guidelines
currently applicable to state member banks, which are based
on Basel I as implemented by the Federal Reserve Board, for
purposes of assessing the adequacy of its capital. In order to be
considered a “well capitalized” depository institution under
the Federal Reserve Board guidelines, GSBank USA must
maintain a Tier 1 capital ratio of at least 6%, a total capital
ratio of at least 10% and a Tier 1 leverage ratio of at least 5%.
In November2008, the  rm contributed subsidiaries into
GSBank USA. In connection with this contribution, GSBank
USA agreed with the Federal Reserve Board to minimum
capital ratios in excess of these “well capitalized” levels.
Accordingly, for a period of time, GSBank USA is expected
to maintain a Tier 1 capital ratio of at least 8%, a total capital
ratio of at least 11% and a Tier 1 leverage ratio of at least 6%.
The following table sets forth information regarding GSBank
USA’s capital ratios under Basel I as implemented by the
Federal Reserve Board, as of December2009.
As of December2009
Tier 1 capital ratio 14.9%
Total capital ratio 19.3%
Tier 1 leverage ratio 15.4%
Consistent with the calculation of Group Inc.’s capital ratios,
the calculation of GSBank USA’s capital ratios includes
certain market risk measures that are under review by the
Federal Reserve Board. Accordingly, these ratios may be
revised in subsequent  lings. GSBank USA is currently
working to implement the Basel II framework. Similar to the
 rm’s requirement as a bank holding company, GSBank USA
is required to transition to Basel II over the next several years.
The deposits of GSBank USA are insured by the FDIC to the
extent provided by law. The Federal Reserve Board requires
depository institutions to maintain cash reserves with a
Federal Reserve Bank. The amount deposited by the  rm’s
depository institution subsidiaries held at the Federal Reserve
Bank was approximately $27.43billion and $94million
as of December2009 and November2008, respectively,
which exceeded required reserve amounts by $25.86billion
and $6million as of December2009 and November2008,
respectively. GSBank Europe, a wholly owned credit
institution, is regulated by the Irish Financial Services
Regulatory Authority and is subject to minimum capital
requirements. As of December2009 and November2008,
GSBank USA and GSBank Europe were both in
compliance with all regulatory capital requirements.
Transactions between GSBank USA and its subsidiaries
and Group Inc. and its subsidiaries and af liates (other
than, generally, subsidiaries of GSBank USA) are regulated
by the Federal Reserve Board. These regulations generally
limit the types and amounts of transactions (including
loans to and borrowings from GSBank USA) that may take
place and generally require those transactions to be on an
arms-length basis.
The  rm’s U.S. regulated broker-dealer subsidiaries
include GS&Co. and Goldman Sachs Execution &
Clearing, L.P. (GSEC). GS&Co. and GSEC are registered
U.S. broker-dealers and futures commission merchants
subject to Rule 15c3-1 of the SEC and Rule 1.17 of
the Commodity Futures Trading Commission, which
specify uniform minimum net capital requirements,
as de ned, for their registrants, and also effectively
require that a signi cant part of the registrants’
assets be kept in relatively liquid form. GS&Co. and
GSEC have elected to compute their minimum capital
requirements in accordance with the “Alternative Net
Capital Requirement” as permitted by Rule 15c3-1. As
of December2009, GS&Co. had regulatory net capital,
as de ned by Rule 15c3-1, of $13.65billion, which
exceeded the amount required by $11.81billion. As of
December2009, GSEC had regulatory net capital, as
de ned by Rule 15c3-1, of $1.97billion, which exceeded
the amount required by $1.86billion. In addition to its
alternative minimum net capital requirements, GS&Co.
is also required to hold tentative net capital in excess of
$1billion and net capital in excess of $500million in
accordance with the market and credit risk standards
of Appendix E of Rule 15c3-1. GS&Co. is also required
to notify the SEC in the event that its tentative net
Goldman Sachs 2009 Annual Report
150
Notes to Consolidated Financial Statements