Goldman Sachs 2012 Annual Report Download - page 190

Notes to Consolidated Financial Statements
Broker-Dealer Subsidiaries
The firm’s U.S. regulated broker-dealer subsidiaries include
GS&Co. and GSEC. GS&Co. and GSEC are registered U.S.
broker-dealers and futures commission merchants, and are
subject to regulatory capital requirements, including those
imposed by the SEC, the CFTC, Chicago Mercantile
Exchange, the Financial Industry Regulatory Authority,
Inc. (FINRA) and the National Futures Association.
Rule 15c3-1 of the SEC and Rule 1.17 of the CFTC specify
uniform minimum net capital requirements, as defined, for
their registrants, and also effectively require that a
significant 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 2012 and December 2011, GS&Co. had
regulatory net capital, as defined by Rule 15c3-1, of
$14.12 billion and $11.24 billion, respectively, which
exceeded the amount required by $12.42 billion and
$9.34 billion, respectively. As of December 2012 and
December 2011, GSEC had regulatory net capital, as
defined by Rule 15c3-1, of $2.02 billion and $2.10 billion,
respectively, which exceeded the amount required by
$1.92 billion and $2.00 billion, respectively.
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
capital is less than $5 billion. As of December 2012 and
December 2011, GS&Co. had tentative net capital and net
capital in excess of both the minimum and the
notification requirements.
Insurance Subsidiaries
The firm has U.S. insurance subsidiaries that are subject to
state insurance regulation and oversight in the states in
which they are domiciled and in the other states in which
they are licensed. In addition, certain of the firm’s insurance
subsidiaries outside of the U.S. are regulated by the FSA and
certain are regulated by the Bermuda Monetary Authority.
The firm’s insurance subsidiaries were in compliance with
all regulatory capital requirements as of December 2012
and December 2011.
Other Non-U.S. Regulated Subsidiaries
The firm’s principal non-U.S. regulated subsidiaries include
GSI and Goldman Sachs Japan Co., Ltd. (GSJCL). GSI, the
firm’s regulated U.K. broker-dealer, is subject to the capital
requirements imposed by the FSA. GSJCL, the firm’s
regulated Japanese broker-dealer, is subject to the capital
requirements imposed by Japan’s Financial Services
Agency. As of December 2012 and December 2011, GSI
and GSJCL were in compliance with their local capital
adequacy requirements. Certain other non-U.S. subsidiaries
of the firm are also subject to capital adequacy
requirements promulgated by authorities of the countries in
which they operate. As of December 2012 and
December 2011, these subsidiaries were in compliance with
their local capital adequacy requirements.
Restrictions on Payments
The regulatory requirements referred to above restrict
Group Inc.’s ability to withdraw capital from its regulated
subsidiaries. As of December 2012 and December 2011,
Group Inc. was required to maintain approximately
$31.01 billion and $25.53 billion, respectively, of minimum
equity capital in these regulated subsidiaries. This minimum
equity capital requirement includes certain restrictions
imposed by federal and state laws as to the payment of
dividends to Group Inc. by its regulated subsidiaries. In
addition to limitations on the payment of dividends
imposed by federal and state laws, the Federal Reserve
Board, the FDIC and the New York State Department of
Financial Services have authority to prohibit or to limit the
payment of dividends by the banking organizations they
supervise (including GS Bank USA) if, in the relevant
regulator’s opinion, payment of a dividend would
constitute an unsafe or unsound practice in the light of the
financial condition of the banking organization.
188 Goldman Sachs 2012 Annual Report