Goldman Sachs 2012 Annual Report Download - page 189

Notes to Consolidated Financial Statements
Bank Subsidiaries
GS Bank USA, an FDIC-insured, New York State-chartered
bank and a member of the Federal Reserve System, is
supervised and regulated by the Federal Reserve Board, the
FDIC, the New York State Department of Financial
Services and the Consumer Financial Protection Bureau,
and is subject to minimum capital requirements (described
below) that are calculated in a manner similar to those
applicable to bank holding companies. GS Bank USA
computes its capital ratios in accordance with the
regulatory capital requirements currently applicable to state
member banks, which are based on Basel 1 as implemented
by the Federal Reserve Board, for purposes of assessing the
adequacy of its capital. Under the regulatory framework for
prompt corrective action that is applicable to GS Bank
USA, in order to be considered a “well-capitalized”
depository institution, 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%.
GS Bank USA has agreed with the Federal Reserve Board to
maintain 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%. As noted in the table
below, GS Bank USA was in compliance with these
minimum capital requirements as of December 2012 and
December 2011.
The table below presents information regarding GS Bank
USA’s regulatory capital ratios under Basel 1 as
implemented by the Federal Reserve Board.
As of December
$ in millions 2012 2011
Tier 1 capital $ 20,704 $ 19,251
Tier 2 capital $39 $6
Total capital $ 20,743 $ 19,257
Risk-weighted assets $109,669 $112,824
Tier 1 capital ratio 18.9% 17.1%
Total capital ratio 18.9% 17.1%
Tier 1 leverage ratio 17.6% 18.5%
Effective January 1, 2013, GS Bank USA implemented the
revised market risk regulatory framework outlined above.
These changes resulted in increased regulatory capital
requirements for market risk, and will be reflected in all of
GS Bank USA’s Basel-based capital ratios for periods
beginning on or after January 1, 2013.
GS Bank USA is also currently working to implement the
Basel 2 framework, as implemented by the Federal Reserve
Board. GS Bank USA will adopt Basel 2 once approved to
do so by regulators.
In addition, the capital requirements for GS Bank USA are
expected to be impacted by the June 2012 proposed
modifications to the Agencies’ capital adequacy regulations
outlined above, including the requirements of a floor to the
advanced risk-based capital ratios. If enacted as proposed,
these proposals would also change the regulatory
framework for prompt corrective action that is applicable
to GS Bank USA by, among other things, introducing a
common equity Tier 1 ratio requirement, increasing the
minimum Tier 1 capital ratio requirement and introducing
a supplementary leverage ratio as a component of the
prompt corrective action analysis. GS Bank USA will also
be impacted by aspects of the Dodd-Frank Act, including
new stress tests.
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
firm’s depository institution held at the Federal Reserve
Bank was approximately $58.67 billion and $40.06 billion
as of December 2012 and December 2011, respectively,
which exceeded required reserve amounts by $58.59 billion
and $39.51 billion as of December 2012 and
December 2011, respectively.
Transactions between GS Bank USA and its subsidiaries
and Group Inc. and its subsidiaries and affiliates (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
credit extensions from GS Bank USA) that may take place
and generally require those transactions to be on market
termsorbettertoGSBankUSA.
The firm’s principal non-U.S. bank subsidiaries include
GSIB, a wholly-owned credit institution, regulated by the
FSA, and GS Bank Europe, a wholly-owned credit
institution, regulated by the Central Bank of Ireland, which
are both subject to minimum capital requirements. As of
December 2012 and December 2011, GSIB and GS Bank
Europe were both in compliance with all regulatory capital
requirements. On January 18, 2013, GS Bank Europe
surrendered its banking license to the Central Bank of
Ireland after transferring its deposits to GSIB.
Goldman Sachs 2012 Annual Report 187