Goldman Sachs 2012 Annual Report Download - page 71

Management’s Discussion and Analysis
As part of our 2012 CCAR submission, the Federal Reserve
informed us that it did not object to our proposed capital
actions through the first quarter of 2013, including the
repurchase of outstanding common stock and increases in
the quarterly common stock dividend. We submitted our
2013 CCAR to the Federal Reserve on January 7, 2013 and
expect to publish a summary of our results in March 2013.
Our consolidated regulatory capital requirements are
determined by the Federal Reserve Board, as described
below. Our ICAAP incorporates an internal risk-based
capital assessment designed to identify and measure
material risks associated with our business activities,
including market risk, credit risk and operational risk, in a
manner that is closely aligned with our risk management
practices. Our internal risk-based capital assessment is
supplemented with the results of stress tests.
As of December 2012, our total shareholders’ equity was
$75.72 billion (consisting of common shareholders’ equity of
$69.52 billion and preferred stock of $6.20 billion). As of
December 2011, our total shareholders’ equity was
$70.38 billion (consisting of common shareholders’ equity of
$67.28 billion and preferred stock of $3.10 billion). In
addition, as of December 2012 and December 2011,
$2.73 billion and $5.00 billion, respectively, of our junior
subordinated debt issued to trusts qualified as equity capital
for regulatory and certain rating agency purposes.
See “— Consolidated Regulatory Capital Ratios” below for
information regarding the impact of regulatory
developments.
Consolidated Regulatory Capital
The Federal Reserve Board is the primary regulator of
Group Inc., a bank holding company under the Bank
Holding Company Act of 1956 (BHC Act) and a financial
holding company under amendments to the BHC Act
effected by the U.S. Gramm-Leach-Bliley Act of 1999. As a
bank holding company, we are subject to consolidated
regulatory capital requirements that are computed in
accordance with the Federal Reserve Board’s risk-based
capital requirements (which are based on the ‘Basel 1’
Capital Accord of the Basel Committee). These capital
requirements are expressed as capital ratios that compare
measures of capital to risk-weighted assets (RWAs). See
Note 20 to the consolidated financial statements for
additional information regarding the firm’s RWAs. The
firm’s capital levels are also subject to qualitative judgments
by its regulators about components, risk weightings and
other factors.
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
on their particular condition, risk profile 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%.
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