Goldman Sachs 2009 Annual Report Download - page 64

CONSOLIDATED CAPITAL RATIOS
The following table sets forth information regarding our
consolidated capital ratios as of December2009 calculated in
accordance with the Federal Reserve Board’s regulatory capital
requirements currently applicable to bank holding companies,
which are based on Basel I. These ratios are used by the
Federal Reserve Board and other U.S. federal banking agencies
in the supervisory review process, including the assessment
of our capital adequacy. The calculation of these ratios
includes certain market risk measures that are under review
by the Federal Reserve Board. The calculation of these ratios
has not been reviewed with the Federal Reserve Board and,
accordingly, these ratios may be revised in subsequent  lings.
($ inmillions)
As of December2009
Tier1 Capital
Common shareholders’ equity $ 63,757
Preferred stock 6,957
Junior subordinated debt issued to trusts 5,000
Less: Goodwill (3,543)
Less: Disallowable intangible assets (1,377)
Less: Other deductions (1) (6,152)
Tier1 Capital 64,642
Tier2 Capital
Qualifying subordinated debt (2) 14,004
Less: Other deductions (1) (176)
Tier2 Capital $ 13,828
Total Capital $ 78,470
Risk-Weighted Assets $431,890
Tier1 Capital Ratio 15.0%
Total Capital Ratio 18.2%
Tier1 Leverage Ratio 7.6%
(1) Principally includes equity investments in non- nancial companies and
the cumulative change in the fair value of our unsecured borrowings
attributable to the impact of changes in our own credit spreads, disallowed
deferred tax assets, and investments in certain nonconsolidating entities.
(2) Substantially all of our subordinated debt quali es as Tier2 capital for
Basel
I purposes.
RWAs under the Federal Reserve Board’s risk-based capital
guidelines are calculated based on the amount of market
risk and credit risk. RWAs for market risk include certain
measures that are under review by the Federal Reserve Board.
Credit risk for on-balance sheet assets is based on the balance
sheet value. For off-balance sheet exposures, including OTC
derivatives and commitments, a credit equivalent amount is
calculated based on the notional of each trade. All such assets
and amounts are then assigned a risk weight depending on,
among other things, whether the counterparty is a sovereign,
bank or qualifying securities  rm, or other entity (or if
collateral is held, depending on the nature of the collateral).
Our Tier1 leverage ratio is de ned as Tier1 capital under
Basel I divided by adjusted average total assets (which
includes adjustments for disallowed goodwill and certain
intangible assets).
Federal Reserve Board regulations require bank holding
companies to maintain a minimum Tier1 capital ratio of
4% and a minimum total capital ratio of 8%. The required
minimum Tier1 capital ratio and total capital ratio in order
to be considered a “well capitalized” bank holding company
under the Federal Reserve Board guidelines are 6% and 10%,
respectively. Bank holding companies may be expected to
maintain ratios well above the minimum levels, depending
upon their particular condition, risk pro le and growth
plans. The minimum Tier1 leverage ratio is 3% for bank
holding companies that have received the highest supervisory
rating under Federal Reserve Board guidelines or that have
implemented the Federal Reserve Board’s risk-based capital
measure for market risk. Other bank holding companies must
have a minimum Tier1 leverage ratio of 4%.
During 2009, the Basel Committee on Banking Supervision
proposed several changes to the method of computing
capital ratios. In addition, there are several other proposals
which could potentially impact capital requirements. As a
consequence, it is possible that minimum capital ratios required
to be maintained under Federal Reserve Board regulations
could be increased. It is also possible that changes in the
prescribed calculation methodology could result in higher
RWAs and lower capital ratios than are currently computed.
Subsidiary Capital Requirements
Many of our subsidiaries are subject to separate regulation
and capital requirements in jurisdictions throughout the
world. 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
and is subject to minimum capital requirements that (subject
Goldman Sachs 2009 Annual Report
62
Management’s Discussion and Analysis