Goldman Sachs 2012 Annual Report Download - page 188

Notes to Consolidated Financial Statements
In November 2011, the Basel Committee published its final
provisions for assessing the global systemic importance of
banking institutions and the range of additional Tier 1
common equity that should be maintained by banking
institutions deemed to be globally systemically important.
The additional capital for these institutions would initially
range from 1% to 2.5% of Tier 1 common equity and could
be as much as 3.5% for a banking institution that increases
its systemic footprint (e.g., by increasing total assets). In
November 2012, the Financial Stability Board (established
at the direction of the leaders of the Group of 20) indicated
that the firm, based on its 2011 financial data, would be
required to hold an additional 1.5% of Tier 1 common
equity as a globally systemically important banking
institution under the Basel Committee’s methodology. The
final determination of the amount of additional Tier 1
common equity that the firm will be required to hold will be
based on the firm’s 2013 financial data and the manner and
timing of the U.S. banking regulators’ implementation of
the Basel Committee’s methodology. The Basel Committee
indicated that globally systemically important banking
institutions will be required to meet the capital surcharges
on a phased-in basis from 2016 through 2019.
In October 2012, the Basel Committee published its final
provisions for calculating incremental capital requirements
for domestic systemically important banking institutions.
The provisions are complementary to the framework
outlined above for global systemically important banking
institutions, but are more principles-based in order to
provide an appropriate degree of national discretion. The
impact of these provisions on the regulatory capital
requirements of GS Bank USA and the firm’s other
subsidiaries, including Goldman Sachs International (GSI),
will depend on how they are implemented by the banking
and non-banking regulators in the United States and
other jurisdictions.
The Basel Committee has released other consultation
papers that may result in further changes to the regulatory
capital requirements, including a “Fundamental Review of
the Trading Book.” and “Revisions to the Basel
Securitization Framework.” The full impact of these
developments on the firm will not be known with certainty
until after any resulting rules are finalized.
The Dodd-Frank Act contains provisions that require the
registration of all swap dealers, major swap participants,
security-based swap dealers and major security-based swap
participants. The firm has registered certain subsidiaries as
“swap dealers” under the U.S. Commodity Futures Trading
Commission (CFTC) rules, including GS&Co., GS Bank
USA, GSI and J. Aron & Company. These entities and other
entities that would require registration under the CFTC or
SEC rules will be subject to regulatory capital requirements,
which have not yet been finalized by the CFTC and SEC.
The interaction among the Dodd-Frank Act, other reform
initiatives contemplated by the Agencies, the Basel
Committee’s proposed and announced changes and other
proposed or announced changes from other governmental
entities and regulators (including the European Union (EU)
and the U.K.’s Financial Services Authority (FSA)) adds
further uncertainty to the firm’s future capital and liquidity
requirements and those of the firm’s subsidiaries.
186 Goldman Sachs 2012 Annual Report