Goldman Sachs 2009 Annual Report Download - page 83

Our intercompany funding policies are predicated on an
assumption that, unless legally provided for, funds or
securities are not freely available from a subsidiary to its
parent company or other subsidiaries. In particular, many of
our subsidiaries are subject to laws that authorize regulatory
bodies to block or reduce the  ow of funds from those
subsidiaries to Group Inc. Regulatory action of that kind
could impede access to funds that Group Inc. needs to make
payments on obligations, including debt obligations. As such,
we assume that capital or other  nancing provided to our
regulated subsidiaries is not available to GroupInc. or other
subsidiaries until the maturity of such  nancing.
Group Inc. has provided substantial amounts of equity
and subordinated indebtedness, directly or indirectly, to its
regulated subsidiaries. For example, as of December2009,
Group Inc. had $25.45billion of such equity and subordinated
indebtedness invested in GS&Co., its principal U.S. registered
broker-dealer; $21.90billion invested in GSI, a regulated
U.K. broker-dealer; $2.64billion invested in Goldman Sachs
Execution & Clearing, L.P., a U.S. registered broker-dealer;
$3.74billion invested in Goldman Sachs Japan Co., Ltd., a
regulated Japanese broker-dealer; and $22.32billion invested
in GSBank USA, a regulated NewYork State-chartered bank.
Group Inc. also had $78.59billion of unsubordinated loans
and $18.09billion of collateral provided to these entities as
of December2009, as well as signi cant amounts of capital
invested in and loans to its other regulated subsidiaries.
CONTINGENCY FUNDING PLAN
The Goldman Sachs CFP sets out the plan of action to fund
business activity in emergency situations and/orperiods
of market stress. The CFP outlines the appropriate
communication channels to be followed throughout a
crisisperiod and also provides a framework for analyzing and
responding to a liquidity crisis including, but not limited to,
the potential risk factors, identi cation of liquidity out ows,
mitigants and potential actions.
CREDIT RATINGS
We rely upon the short-term and long-term debt capital
markets to fund a signi cant portion of our day-to-day
operations. The cost and availability of debt  nancing is
in uenced by our credit ratings. Credit ratings are important
when we are competing in certain markets and when we seek to
engage in longer-term transactions, including OTC derivatives.
We believe our credit ratings are primarily based on the credit
rating agencies’ assessment of our liquidity, market, credit
and operational risk management practices, the level and
variability of our earnings, our capital base, our franchise,
reputation and management, our corporate governance and the
external operating environment, including theperceived level
of government support. See “— Certain Risk Factors That May
Affect Our Businesses” above, and “Risk Factors” in PartI,
Item 1A of our Annual Report on Form10-K for a discussion
of the risks associated with a reduction in our credit ratings.
The following table sets forth our unsecured credit ratings (excluding debt guaranteed by the FDIC under the TLGP) and outlook
as of December2009. Preferred Stock in the table below includes Group Inc.’s non-cumulative preferred stock and the Normal
Automatic Preferred Enhanced Capital Securities (APEX) issued by Goldman Sachs Capital II and Goldman Sachs Capital III. As
of December2009, the trust preferred securities (Trust Preferred) issued by Goldman Sachs Capital I were rated A by DBRS, Inc.,
A- by Fitch, Inc., A2 by Moody’s Investors Service, and BBB by Standard & Poor’s Ratings Services.
Short-Term Debt Long-Term Debt Subordinated Debt Preferred Stock Rating Outlook
DBRS, Inc. R-1 (middle) A (high) A BBB Stable (3)
Fitch, Inc. (1) F1+ A+ A A– Stable (4)
Moody’s Investors Service (2) P-1 A1 A2 A3 Negative (5)
Standard & Poor’s Ratings Services A-1 A A– BBB Negative (5)
Rating and Investment Information, Inc. a-1+ AA– A+ Not Applicable Negative (6)
(1) As of February 1, 2010, GSBank USA has been assigned a rating of AA- for long-term bank deposits, F1+ for short-term bank deposits and A+ for long-term issuer.
(2) GSBank USA has been assigned a rating of Aa3 for long-term bank deposits, P-1 for short-term bank deposits and Aa3 for long-term issuer.
(3) Applies to long-term and short-term ratings.
(4) Applies to long-term issuer default ratings.
(5) Applies to long-term ratings.
(6) Applies to issuer rating.
Goldman Sachs 2009 Annual Report
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Management’s Discussion and Analysis