Goldman Sachs Annual Report 2019

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FY2019 Annual Report · Goldman Sachs

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The Goldman Sachs Group, Inc.

Annual Report

2019

(from left to right)

John E. Waldron
President and
Chief Operating Officer

David M. Solomon
Chairman and
Chief Executive Officer

Stephen M. Scherr
Chief Financial Officer

Fellow Shareholders:

As this letter goes to print in mid-March 2020, the world is experiencing a global health crisis that

is putting extraordinary pressure on all of society — from every family in the world to every large

and small company, which represents the vast majority of the work force. This includes pressure

on the nonprofit sector, which provides critical services to the most vulnerable. Government action

generally has been swift and aggressive to help mitigate the effects of COVID-19. This fluid and

historic situation is having a profound influence on the most basic of human needs — the desire

to be near and among our friends, colleagues and families.

As a firm, we are taking actions to support our people, their families, and our clients. I am proud of how our
people have reacted amidst these circumstances, demonstrating the resilience and resolve they put forth on a daily
basis on behalf of our clients. Further, the work they do today is integral to bolstering and sustaining global
financial markets, which are critical to the recovery ahead.

As I write this, it is too early to know the full effect COVID-19 will have on the global economy. As we pursue
our growth plans we will be mindful of the impact this virus will have on broader economic growth. We hopefully
will work our way past the crisis stage soon and will do our part as a global financial institution to help re-build
the global economy from this devastating crisis, which has hurt so many.

As you would expect, we have enacted our business continuity plans that have been informed by past crises
and robust investment. We are operating to protect our people while serving our clients. Helping clients navigate
dynamic environments is core to what we do, and we will stand by and assist them always.

We have defined our path forward over the past year, and we have begun to execute our long-term strategy
and evolution as a firm. We are working to strengthen the market-leading positions of our core franchises, and
we are investing for growth in new businesses. We have embarked on a firmwide effort to enhance how our
clients interact with us in an integrated way, and to be more open and accessible with our stakeholders.

All of this is underpinned by the exceptional talent of the people of Goldman Sachs at all levels of the organization,
starting with my leadership team of John Waldron, our President and Chief Operating Officer, Stephen Scherr,
our Chief Financial Officer, and our entire Management Committee.

Goldman Sachs 2019 Annual Report

2019 Financial Performance

In 2019, the global economy experienced broad-based
growth, inflation was subdued and unemployment fell
to multi-year lows in key regions, while the outlook for
economic growth and geopolitical risk was closely
monitored throughout the year. At Goldman Sachs,
our businesses weathered pockets of market volatility
and delivered strong performance into year end. Our
enduring focus on our clients and our culture of
excellence drove solid financial results. Net revenues
were $36.55 billion for the year and return on average
common shareholders’ equity was 10.0 percent. We
remained the industry’s leading mergers and acquisitions
advisor, and held the #1 position in worldwide equity
and equity-related offerings and common stock
offerings for the year.

Our businesses generally produced strong net revenues,
and the growth we achieved in new initiatives such as our
consumer banking business was encouraging. Investment
Banking generated net revenues of $7.60 billion, its
second highest annual net revenues. In Global Markets,
our broad and diverse franchise across FICC and Equities
delivered net revenues of $14.78 billion, reflecting
growing financing revenues. Asset Management produced
solid results, with net revenues of $8.97 billion, amid
strong asset inflows; net revenues in Equity investments
continue to be robust and rose versus 2018. Rapidly
scaling Consumer & Wealth Management generated
record net revenues of $5.20 billion. Firmwide assets
under supervision increased during the year to a
record $1.86 trillion.

Our Purpose and Core Values

We believe that shareholders and stakeholders alike
expect companies to explain their purpose and
core values. Goldman Sachs’ mission is to advance
sustainable economic growth and financial opportunity
across the globe. Drawing upon over 150 years of
experience working with the world’s leading businesses,
entrepreneurs, and institutions, we mobilize our people
and resources to advance the success of our clients,
broaden individual prosperity and accelerate economic

Goldman Sachs 2019 Annual Report

progress for all. If we successfully deliver on this purpose,
we are confident that we will also succeed in delivering
significant value to our shareholders.

We are taking our foundational strengths and applying
them as we invest in our future. This means affirming
our values while fostering change and innovation. As
part of that effort, we distilled our business principles
into four core values that inform everything we do. First
is the partnership ethos which is central to Goldman
Sachs’ culture. I’m referring not just to our firm’s
leadership group, the partners of Goldman Sachs, but
also to the philosophy behind our client relationships and
the way we interact with our stakeholders. Partnership
fosters a sense of ownership and stewardship that is truly
unique and differentiated. It encourages collaboration,
inclusivity, and teamwork, and it inspires our people to
always put our clients at the center of everything we do.

Of course, putting our clients at the center requires
exceptional client service, which is our second core
value. Having personally spent decades building deep
relationships with clients, I can attest to the results we
can achieve through long-term dedication to client
service. This goes beyond transactional excellence. The
connectivity to our people — our ability to offer advice,
knowledge, and feedback — is often the most significant
driver of value.

As Chairman and Chief Executive Officer, I am intensely
focused on integrity. We must have an unrelenting
commitment to doing the right thing — always.
Particularly in the wake of our experience in Malaysia,
I am keenly aware of how the actions of a few can harm
our firm. We will continue to assess ways to learn and
improve from this experience, and we are committed to
ensuring our culture of integrity remains a core value.

Finally, excellence. We are committed to delivering to
the very best of our ability. This value permeates our
organization from the bottom to the top. It informs
the kind of people we attract, the advice we give, and
the ways in which we strive to exceed our clients’
expectations. Every day, I see examples of the people
of Goldman Sachs going the extra mile, working to
execute at the highest level possible.

Letter to ShareholdersP U R P O S E

We advance sustainable
economic growth and financial
opportunity

P O S I T I O N I N G

Drawing on over 150 years of experience working with the
world’s leading businesses, entrepreneurs and institutions, we
mobilize our people, culture, technologies and ideas to advance
the success of our clients, broaden individual prosperity and
accelerate economic progress for all

Partnership Client Service Integrity Excellence

C O R E VA L U E S

Our Competitive Strengths

Today, Goldman Sachs possesses an enviable portfolio
of market-leading businesses. Foundational to our
success are a number of self-reinforcing competitive
strengths within these businesses. First, we firmly believe
our biggest competitive strength is the exceptional talent
of our people. I frequently hear from clients that our
people differentiate us from the competition, and I see
it firsthand. Goldman Sachs has developed an ecosystem
that attracts and develops top talent from across the
globe, giving them platforms to thrive and grow.

We operate in an industry where people and the
relationships they build are paramount. Our efforts
to find the best people range from extensive campus
recruiting all the way to hiring senior talent laterally,
including at the partner level. We had 85,000 applicants
for 2,600 campus positions for 2020, illustrating our
ability to build a workplace where tomorrow’s leaders
want to be. We are especially focused on ensuring we
have the best pipeline of rising talent, and the best
programs to develop those leaders. It helps that our
history, our people and our ideas have made Goldman
Sachs an aspirational brand around the globe. Our brand
has proven influential with institutions and in corporate
boardrooms, and it resonates with new and different
clients, such as consumers.

Closely linked with exceptional talent is the culture of
innovation which our people foster. This firm is ready
to capitalize on new opportunities; in fact, we are well
underway on a number of efforts that I will describe
below. We are deeply focused on encouraging innovation
and new thinking across all of our businesses.

Additionally, our presence around the world today is
truly global. We are able to serve clients everywhere that
matters to them. As one sign of our focus on growing this
worldwide footprint, our international net revenues have
grown 22-fold since 1990, and represent approximately
40 percent of our overall firmwide net revenues. Hand-
in-hand with a truly global presence is the remarkable
depth of our client relationships. We are a trusted advisor
known for the quality and duration of our relationships
with corporations, governments, institutions, and
individuals. This is because we appreciate that great
relationships require investment and patience, in many
cases over decades.

Lastly, I highlight our robust risk management
culture, which is one of our most important strengths.
We have strong processes, deep analytics, empowered
risk and control functions, and a culture of honesty
and communication.

The risks we face run the gamut: some are financial in
nature, while others are operational, technological, or

Goldman Sachs 2019 Annual Report

reputational. We appreciate that risk will change as our
mix of businesses evolves. Accordingly, we are adapting
our processes to manage risks old and new. We also
know that we can never stop questioning, critiquing
and improving the processes that enable our people to
deliver excellence to clients around the world.

Our New Operating Approach

Even as we stay true to our core values, change and
adaption are inevitable, even healthy. Today’s economic
environment of innovation and disruption requires it.
Over the course of the past year we have begun engaging
in a number of cultural and operational shifts to support
and accelerate our next major growth initiatives. And
we are making efforts to be more open and accessible,
both internally and externally. One example is our
new segment reporting, which more closely aligns to
how we are now managing our businesses, improves
transparency, and enables stakeholders to better hold
us accountable to the execution priorities we have set
forth. Another example is our first Investor Day, held
in January 2020.

A centerpiece of our operational shifts aims at simplifying
touchpoints for our clients. We launched One Goldman
Sachs on my first day as CEO. This initiative has already
succeeded in delivering our capabilities more holistically
to approximately 30 major client relationships. Our

2020 plans include an expansion of One Goldman Sachs
to cover approximately 100 clients, deepening these
relationships and driving stronger returns.

We are also shifting our operating focus to promote
more long-term thinking and investing. Goldman Sachs
has long prided itself on being nimble in the face of
opportunity. This quality remains valuable, but we have
embarked on an effort to evolve our culture more in
favor of incentivizing investments for the future through
a multi-year planning process. These investments in
the future require patience and, of course, hard work
and fortitude.

Our Financial Goals

Our strategy is intended to build a firm capable of
generating mid-teen or higher returns over the long term,
meaning five or more years. For the medium term, we
unveiled a series of three-year financial targets in January
at our Investor Day (see exhibit below). We operate in a
cyclical industry, so our targets must be viewed in the
context of a normalized operating environment. We are
confident we can achieve them in such an environment.

For our medium-term targets, much of the financial
impact comes from our focus on expense and funding
efficiencies, which we believe are largely in our control.
Our ability to achieve mid-teen returns or higher over a
horizon of five years or more will come as investments in

M E D I U M -T E R M F I N A N C I A L TA R G E T S

ROE/ROTE

Efficiency Ratio

CET1 Ratio

>13% / >14%

~60%

13-13.5%

Goldman Sachs 2019 Annual Report

Letter to Shareholdersnew businesses and technologies — such as Marcus,
Apple Card and Transaction Banking — mature. Success
will require diligence and a long-term mindset. But our
early results have been more than encouraging.

Our Strategic Direction

There are three pillars to achieving our medium-term
financial targets, each of which will be examined in
greater depth below:

• Growing and strengthening existing businesses,
including expanding our footprint, to achieve
higher wallet share

• Diversifying products and services and expanding
our addressable market, for more durable earnings

• Operating more efficiently, leading to higher margins

and returns

Grow and Strengthen Our
Existing Businesses

Our review of existing Goldman Sachs businesses makes
clear that we are building on an incredible foundation.
Our market-leading positions include the #1 Investment
Banking franchise1, with room to expand the number of
clients we serve and the offerings we provide; a leading
Global Markets business that can be optimized for higher
returns; a leading asset manager, with opportunities to
scale our advisory-led business; and a premier ultra-high
net worth wealth management business in the U.S. — one
where we are accelerating growth in Europe and Asia.

Investment Banking As the #1 investment bank, we
are the advisor of choice to our clients. But because we are
not #1 in every industry and geography globally, we can
improve our relative position by capitalizing on gaps

Goldman Sachs 2019 Annual Report

and opportunities. In particular, we are focused on
expanding our footprint to cover more companies in the
$500 million-$2 billion enterprise value range. This is
a segment where, historically speaking, we only cover
44 percent of public companies in the Americas and
EMEA — compared to 95 percent of firms over
$10 billion and 80 percent in the $2-10 billion range.

Global Markets The marketplace is navigating a
once-in-a-generation period of significant regulatory
and technological change. We face this moment
of disruption and opportunity with the #2 ranked
institutional client franchise2. We are one of the few
scaled firms in both FICC and Equities, offering
clients differentiated risk intermediation, data analytics,
and a rapidly evolving set of technology platforms.
Our plan is to drive higher returns by instilling further
resource discipline and executing on several client
initiatives to grow our franchise.

Asset Management Over the course of more than
three decades, we have built a truly global, broad and
deep asset management franchise. We have grown
organic, fee-based active assets faster than competitors
over the last five years, a testament to the success of
our diversified advisory model. Our goals over the next
five years include achieving $250 billion of firmwide
traditional assets under supervision net inflows.

Consumer & Wealth Management We envision
substantial opportunities to broaden our wealth
management offering in the years ahead. For one, our
advice-led ultra-high net worth wealth management
franchise is poised for significant growth in the EMEA
and APAC regions, boosted in part by our target of
increasing advisors globally by roughly 30 percent
over the next three years.

Goldman Sachs 2019 Annual Report

Diversifying Our Products and Services,
Expanding Our Addressable Market

In general, our new business initiatives are designed to
target more durable revenues, greater capital efficiency,
and an enhanced funding mix. In our framework for
evaluating opportunities, we examine whether they
address a client need, capitalize on one or more of our
competitive advantages, and are adjacent to one of our
market-leading businesses. Through this lens, we have
identified four major opportunities.

Transaction Banking Corporates’ cash management
and payment needs often span the globe. Even a small
share of the massive transaction banking market would
be accretive. Our transaction banking offering is high-
tech, low-touch, and client-focused — and as a user
of transaction banking services ourselves, we believe
it is unique and differentiated versus existing offerings
in the market. Here, as we roll out offerings over the
next several months, we see a 5-year-plus opportunity
for $50 billion in deposit balances and $1 billion in
net revenues.

Alternatives In the face of a tremendous secular growth
opportunity, we have unified our investing platforms
and leveraged our strong, experienced investment teams
to mount a significant expansion in our alternatives
business. At approximately $320 billion in alternative
assets as of December 31, 2019, we are already a top 5
player in this space. Partnering with major asset allocators
and institutions, we see a 5-year opportunity to achieve
$100 billion in net alternative asset inflows.

High Net Worth Wealth Management We plan to
complement our crown jewel ultra-high net worth wealth
management franchise with a greatly expanded high
net worth offering. Our holistic wealth solutions
through Ayco and Goldman Sachs Personal Financial
Management, the rebranding of the recently acquired
United Capital, are the pillars of our expansion. We have
less than a 1 percent share of this fragmented $18 trillion

Letter to ShareholdersGoldman Sachs 2019 Annual Report

market of investable assets in the U.S., and a modest
increase in market share could drive a meaningful
increase in revenues for our high net worth wealth
management franchise.

Digital Consumer Banking We are building the digital
consumer bank of the future. Today we are already
addressing the spending, borrowing, and savings needs
of millions of customers, helping them take control of
their financial lives through an integrated platform. Our
envisioned 5-year opportunity includes $125 billion in
deposit balances, $20 billion in loan and card balances,
and millions of new customers.

Operating More Efficiently

The third pillar of our strategic direction is to
achieve greater operational efficiency. Streamlining
the organization for the best possible client experience
is a key focus. We have identified ways to deploy our
people and resources more effectively to deliver
One Goldman Sachs, with specific initiatives aimed
at increasing process efficiency. The expected result of
these efforts is a targeted $1.3 billion in run-rate
operating expense savings in three years, which will
create capacity for investment in our growth priorities.
We are also improving our funding profile, for example
by diversifying our funding mix through deposits, which
we expect to result in $1.0 billion in run-rate interest
expense savings in three years. Additionally, consistent
with our history of prudent capital management, we
are looking to optimize our capital footprint, through
efforts such as reducing our on-balance sheet equity
investments in alternatives.

All in, these initiatives to improve the efficiency of
our business should supplement our growth priorities
to drive higher margins and firmwide returns.

across our businesses. The reasons are simple: it makes
sense for our business, and it is the right thing to do.
Moreover, our clients expect it, and our people demand
it. I know our shareholders feel similarly, and I am
convinced we can do better.

While there is more for us to do as a firm, we are proud
that in 2019 we made some important strides. We hired
our most diverse incoming analyst class from campuses
around the world — 49 percent women and 63 percent
ethnically diverse. And we promoted our most diverse
class of managing directors ever, with a record 29 percent
women. We also announced a new practice globally to
interview two diverse, qualified candidates for each open
role at the level of vice president and higher, to advance
diversity more rapidly among our mid- and senior-level
ranks. Finally, we introduced what is now the industry’s
leading parental and family leave policy, to help ensure
that employees can build a family and pursue their
professional ambitions. I am holding my partners
accountable to deliver progress in those areas of the
firm where they have oversight.

At the same time that we are focusing on improving
the state of our own firm’s diversity and reinforcing an
inclusive environment, we are also thinking critically
about our role as a steward of the global capital markets,
and how we can make meaningful progress on this issue
through our client interactions.

I recently announced one way for us to do just that.
Starting this summer, we will only underwrite initial
public offerings for companies domiciled in Western
Europe and the U.S. that have at least one diverse board
member. And come 2021, the figure will rise to two.

We did this, first and foremost, because we believe this
is the best possible advice we could provide our clients
looking to go public. In addition, the benefits will be
long-lasting, and accrue to all of us.

Diversity and Inclusion as
Strategic Imperatives

Advancing diversity and inclusion is a personal priority
of mine, particularly when it comes to leadership roles

Sustainability

The private sector has traditionally seen sustainability
as a peripheral issue, narrowly tailored to a company’s
environmental impact. That kind of thinking no longer

Goldman Sachs 2019 Annual Report

Letter to ShareholdersS U S TA I N A B L E F I N A N C E C O M M I T M E N T

The Path Ahead

$750B

in financing, investing and advisory activity
to nine areas that focus on climate transition
and inclusive economic growth by 2030

holds. Today, the concept of sustainability has broadened
to include not only how a company manages its
operations but also how it conducts its core business.
Sustainability is increasingly top of mind for our clients
and front and center for the next generation of talent.
That is why for Goldman Sachs, executing a best-in-class
sustainability strategy is central to our long-term success.

We see a clear commercial rationale to this work, where
we are able to leverage our leading businesses and global
relationships to deliver results for shareholders and
progress for society as a whole. To that end, we have
announced a 10-year target of $750 billion in financing,
investing and advisory activity to nine areas that focus
on climate transition and inclusive economic growth.
We have created a new team, the Sustainable Finance
Group, to partner with our businesses in executing on
this ambitious mandate, delivering sustainable solutions
consistent with our clients’ long-term objectives.

Philanthropic capital also remains critical. We are
focused on ensuring our efforts in this area are aligned
with and accretive to our overall sustainability objectives.
Our signature entrepreneurship programs 10,000 Women
and 10,000 Small Businesses provide access to capital,
mentorship and community for business owners
around the world. Milestones in 2019 included 10,000
Women’s 10th anniversary of operating in China and
the expansion of 10,000 Small Businesses into Iowa,
New Hampshire, and Ohio. Graduates of these programs
take the knowledge they acquire and apply it to their
businesses — creating jobs and driving growth in the
communities where they live and work.

The year 2019 was a time to define our strategic plan
and financial goals. At the turn of the calendar year,
we had a clear-eyed view of our plan and shared it
with stakeholders on Investor Day. Its essential elements
are now in motion.

The Goldman Sachs of 2020 and beyond will still
resemble the firm I joined in 1999 in terms of its core
values, cultural attributes and its key businesses. The
ethos of this firm is to put capital and ideas to work to
expand the potential of organizations, accelerate global
economies, and amplify personal prosperity. We are
passionate about our role in the world. None of this
has changed.

But our approach to the world and our mix of businesses
are both progressing. In my 21 years with the firm, we
have already seen a significant evolution. This is healthy
and even vital to our success.

As we look to the future, we are committed to executing
upon our long-term strategy, strengthening the market-
leading positions of our core franchises, and investing for
growth in new businesses and opportunities. As the
current COVID-19 pandemic reminds us, however, the
operating environment can shift overnight. This means
that, regardless of market conditions, our focus must
always remain on what has sustained Goldman Sachs
over the last 150 years: our people, our culture, and
above all, the evolving needs of our clients. In doing so,
we are well-positioned to compete in the years ahead,
and to deliver higher, more sustainable returns for our
shareholders.

David M. Solomon
Chairman and
Chief Executive Officer

Goldman Sachs 2019 Annual Report

Our Core Values and Business Principles

Our Core Values

We distilled our Business Principles into 4 core values that inform everything we do:
Partnership Client Service Integrity Excellence

Goldman Sachs Business Principles

Our clients’ interests
always come first.
Our experience shows that if we
serve our clients well, our own
success will follow.

Our assets are our people,
capital and reputation.
If any of these is ever diminished, the
last is the most difficult to restore. We
are dedicated to complying fully with
the letter and spirit of the laws, rules
and ethical principles that govern us.
Our continued success depends upon
unswerving adherence to this standard.

Our goal is to provide superior
returns to our shareholders.
Profitability is critical to achieving
superior returns, building our capital,
and attracting and keeping our best
people. Significant employee stock
ownership aligns the interests of our
employees and our shareholders.

We take great pride in the
professional quality of our work.
We have an uncompromising
determination to achieve excellence
in everything we undertake. Though
we may be involved in a wide variety
and heavy volume of activity, we
would, if it came to a choice, rather
be best than biggest.

We stress creativity and
imagination in everything we do.
While recognizing that the old way may
still be the best way, we constantly
strive to find a better solution to a
client’s problems. We pride ourselves
on having pioneered many of the
practices and techniques that have
become standard in the industry.

We make an unusual effort to
identify and recruit the very best
person for every job.
Although our activities are measured in
billions of dollars, we select our people
one by one. In a service business,
we know that without the best people,
we cannot be the best firm.

We offer our people the opportunity
to move ahead more rapidly than is
possible at most other places.
Advancement depends on merit and
we have yet to find the limits to the
responsibility our best people are able
to assume. For us to be successful, our
people must reflect the diversity of
the communities and cultures in which
we operate. That means we must
attract, retain and motivate people from
many backgrounds and perspectives.
Being diverse is not optional; it is what
we must be.

We stress teamwork
in everything we do.
While individual creativity is always
encouraged, we have found that team
effort often produces the best results.
We have no room for those who put their
personal interests ahead of the interests
of the firm and its clients.

The dedication of our people to
the firm and the intense effort
they give their jobs are greater
than one finds in most other
organizations.
We think that this is an important
part of our success.

We consider our size an asset
that we try hard to preserve.
We want to be big enough to undertake
the largest project that any of our clients
could contemplate, yet small enough to
maintain the loyalty, the intimacy and
the esprit de corps that we all treasure
and that contribute greatly to our
success.

We constantly strive to anticipate
the rapidly changing needs of our
clients and to develop new services
to meet those needs.
We know that the world of finance will
not stand still and that complacency
can lead to extinction.

We regularly receive confidential
information as part of our normal
client relationships.
To breach a confidence or to use
confidential information improperly or
carelessly would be unthinkable.

Our business is highly competitive,
and we aggressively seek to expand
our client relationships.
However, we must always be fair
competitors and must never denigrate
other firms.

Integrity and honesty are
at the heart of our business.
We expect our people to maintain high
ethical standards in everything they do,
both in their work for the firm and in
their personal lives.

Notes about the Letter to Shareholders

Forward-Looking Statements
This letter contains forward-looking statements, including statements about our financial
targets, business initiatives, and operating and interest expense savings. You should read
the cautionary notes on forward-looking statements in our Form 10-K for the period ended
December 31, 2019.

Footnotes
1 Based on cumulative, publicly disclosed investment banking fees since 2015.
2 Coalition institutional client analytics for FY2018. Institutional clients only.

Analysis excludes captive and non-core products.

10 Goldman Sachs 2019 Annual Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

Commission File Number: 001-14965

The Goldman Sachs Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

200 West Street
New York, N.Y.
(Address of principal executive offices)

13-4019460
(I.R.S. Employer
Identification No.)

10282
(Zip Code)

(212) 902-1000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol

Exchange
on which
registered

Common stock, par value $.01 per share
NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate Non-Cumulative Preferred Stock, Series A
GS PrA NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate Non-Cumulative Preferred Stock, Series C
GS PrC NYSE
GS PrD NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate Non-Cumulative Preferred Stock, Series D
Depositary Shares, Each Representing 1/1,000th Interest in a Share of 5.50% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series J GS PrJ NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of 6.375% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K GS PrK NYSE
GS PrN NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of 6.30% Non-Cumulative Preferred Stock, Series N
GS/43PE NYSE
5.793% Fixed-to-Floating Rate Normal Automatic Preferred Enhanced Capital Securities of Goldman Sachs Capital II
Floating Rate Normal Automatic Preferred Enhanced Capital Securities of Goldman Sachs Capital III
GS/43PF NYSE
Medium-Term Notes, Series A, Index-Linked Notes due 2037 of GS Finance Corp.
Medium-Term Notes, Series B, Index-Linked Notes due 2037
Medium-Term Notes, Series E, Index-Linked Notes due 2028 of GS Finance Corp.

GCE NYSE Arca
GSC NYSE Arca
FRLG NYSE Arca

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. È Yes ‘ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. ‘ Yes È No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. È Yes ‘ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). È Yes ‘ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act.

Large accelerated filer È

Accelerated filer ‘

Non-accelerated filer ‘

Smaller reporting company ‘

Emerging growth company ‘

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ‘ Yes È No

As of June 30, 2019, the aggregate market value of the common stock of the registrant held by non-affiliates of the registrant was approximately $73.4 billion.

As of February 7, 2020, there were 345,672,769 shares of the registrant’s common stock outstanding.

Documents incorporated by reference: Portions of The Goldman Sachs Group, Inc.’s Proxy Statement for its 2020 Annual Meeting of Shareholders are
incorporated by reference in the Annual Report on Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14.

T H E G O L D M A N S A C H S G R O U P ,
A N N U A L R E P O R T O N F O R M 1 0 - K F O R T H E F I S C A L Y E A R E N D E D D E C E M B E R 3 1 , 2 0 1 9

I N C . A N D S U B S I D I A R I E S

INDEX

Form 10-K Item Number

Page No.

Item 7

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

Introduction

Executive Overview

Business Environment

Critical Accounting Policies

Use of Estimates

Recent Accounting Developments

Results of Operations

Balance Sheet and Funding Sources

Equity Capital Management and Regulatory Capital

Regulatory Matters and Other Developments

Off-Balance-Sheet Arrangements and Contractual Obligations 75

Risk Management

Overview and Structure of Risk Management

Liquidity Risk Management

Market Risk Management

Credit Risk Management

Operational Risk Management

Model Risk Management

Item 7A

101

Quantitative and Qualitative Disclosures About Market Risk 102

PART I

Item 1

Business

Introduction

Our Business Segments

Investment Banking

Global Markets

Asset Management

Consumer & Wealth Management

Business Continuity and Information Security

Human Capital Management

Competition

Regulation

Information about our Executive Officers

Available Information

Cautionary Statement Pursuant to the U.S. Private Securities

Litigation Reform Act of 1995

Item 1A

Risk Factors

Item 1B

Unresolved Staff Comments

Item 2

Properties

Item 3

Legal Proceedings

Item 4

Mine Safety Disclosures

PART II

Item 5

Market for Registrant’s Common Equity, Related Stockholder

Matters and Issuer Purchases of Equity Securities

Item 6

Selected Financial Data

Goldman Sachs 2019 Form 10-K

Page No.

Supplemental Financial Information

Quarterly Results

Common Stock Performance

Selected Financial Data

Statistical Disclosures

Item 9

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosure

Item 9A

Controls and Procedures

Item 9B

Other Information

PART III

Item 10

198

199

204

Directors, Executive Officers and Corporate Governance

204

Item 11

Executive Compensation

Item 12

Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters

Item 13

Certain Relationships and Related Transactions, and Director

Independence

Item 14

Principal Accounting Fees and Services

PART IV

Item 15

Exhibits, Financial Statement Schedules

SIGNATURES

204

205

210

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INDEX

Item 8

Financial Statements and Supplementary Data

Management’s Report on Internal Control over Financial

Reporting

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements

Consolidated Statements of Earnings

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

102

103

105

106

Consolidated Statements of Changes in Shareholders’ Equity 107

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Note 1. Description of Business

Note 2. Basis of Presentation

Note 3. Significant Accounting Policies

Note 4. Fair Value Measurements

Note 5. Trading Assets and Liabilities

Note 6. Trading Cash Instruments

Note 7. Derivatives and Hedging Activities

Note 8.

Investments

Note 9. Loans

Note 10. Fair Value Option

Note 11. Collateralized Agreements and Financings

Note 12. Other Assets

Note 13. Deposits

Note 14. Unsecured Borrowings

Note 15. Other Liabilities

Note 16. Securitization Activities

Note 17. Variable Interest Entities

Note 18. Commitments, Contingencies and Guarantees

Note 19. Shareholders’ Equity

Note 20. Regulation and Capital Adequacy

Note 21. Earnings Per Common Share

Note 22. Transactions with Affiliated Funds

Note 23. Interest Income and Interest Expense

Note 24. Income Taxes

Note 25. Business Segments

Note 26. Credit Concentrations

Note 27. Legal Proceedings

Note 28. Employee Benefit Plans

Note 29. Employee Incentive Plans

Note 30. Parent Company

108

109

110

115

120

121

124

133

138

144

149

153

156

157

160

162

165

169

172

179

180

182

185

194

196

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

PART I
Item 1. Business
Introduction

Goldman Sachs is a leading global investment banking,
securities and investment management firm that provides a
wide range of financial services to a substantial and
diversified client base that includes corporations, financial
institutions, governments and individuals. Our purpose is
to advance sustainable economic growth and financial
opportunity. Our goal, reflected in our One Goldman
Sachs initiative, is to deliver the full range of our services
and expertise to support our clients in a more accessible,
comprehensive and efficient manner, across businesses and
product areas.

When we use the terms “Goldman Sachs,” “we,” “us” and
“our,” we mean The Goldman Sachs Group, Inc. (Group
Inc. or parent company), a Delaware corporation, and its
consolidated subsidiaries. When we use the term “our
subsidiaries,” we mean the consolidated subsidiaries of
Group Inc. References to “this Form 10-K” are to our
Annual Report on Form 10-K for
the year ended
December 31, 2019. All references to 2019, 2018 and 2017
refer to our years ended, or the dates, as the context
requires, December 31, 2019, December 31, 2018 and
December 31, 2017, respectively.

Group Inc.
is a bank holding company (BHC) and a
financial holding company (FHC) regulated by the Board of
Governors of the Federal Reserve System (FRB). Our U.S.
depository institution subsidiary, Goldman Sachs Bank
USA (GS Bank USA), is a New York State-chartered bank.

As of December 2019, we had offices in over 30 countries
and 46% of our headcount was based outside the Americas.
Our clients are located worldwide and we are an active
participant in financial markets around the world.

Our Business Segments

in four business

segments:
We report our activities
Investment Banking, Global Markets, Asset Management,
and Consumer & Wealth Management. Investment Banking
generates revenues from financial advisory, underwriting and
corporate lending activities. Global Markets consists of
Fixed Income, Currency and Commodities (FICC) and
Equities, and generates revenues from intermediation and
financing activities. Asset Management generates revenues
incentive fees, equity
from management and other fees,
investments and lending. Consumer & Wealth Management
consists of Wealth management and Consumer banking, and
generates revenues from management and other fees,
incentive fees, private banking and lending, and consumer-
oriented activities.

The chart below presents our four business segments and
their revenue sources.

INVESTMENT BANKING

GLOBAL MARKETS

ASSET MANAGEMENT

Financial advisory

FICC
- FICC intermediation
- FICC financing

Management and other fees

CONSUMER & WEALTH
MANAGEMENT

Wealth management

- Management and other fees
- Incentive fees
- Private banking and lending

Underwriting

- Equity underwriting
- Debt underwriting

Equities
- Equities intermediation
- Equities financing

Incentive fees

Consumer banking

Corporate lending

Equity investments

Lending

in the

following four business
Institutional Client

Prior to the fourth quarter of 2019, we reported our
segments:
activities
Investment
Services,
Investing & Lending, and Investment Management. Our
new segments reflect the following changes:
‰ Investing & Lending results are now included across the

Banking,

four segments as described below.

‰ Investment Banking additionally includes the results from
lending to corporate clients,
including middle-market
lending, relationship lending and acquisition financing,
previously reported in Investing & Lending.

‰ Institutional Client Services has been renamed Global
Markets and additionally includes the results from
providing warehouse lending and structured financing to
institutional clients, previously reported in Investing &
Lending, and the results from transactions in derivatives
related to client advisory and underwriting assignments,
previously reported in Investment Banking.

‰ Investment Management has been renamed Asset
Management and additionally includes the results from
investments in equity securities and lending activities
related to our asset management businesses, including
investments in debt securities and loans backed by real
estate, both previously reported in Investing & Lending.
‰ Consumer & Wealth Management is a new segment that
includes management and other fees, incentive fees and
results from deposit-taking activities related to our wealth
management business,
reported in
Investment Management. It also includes the results from
providing loans through our private bank, providing
unsecured loans and accepting deposits through our
digital platform, Marcus by Goldman Sachs (Marcus),
and providing credit cards, all previously reported in
Investing & Lending.

all previously

Goldman Sachs 2019 Form 10-K

‰ Corporate lending. We make loans to corporate clients,
including middle-market lending, relationship lending
and acquisition financing. The hedges related to this
lending and financing activity are reported as part of our
corporate lending activity. We also provide transaction
banking services to certain of our corporate clients.

Global Markets
Global Markets serves our clients who buy and sell
financial products, raise funding and manage risk. We do
this by acting as a market maker and offering market
expertise on a global basis. Global Markets makes markets
and facilitates client transactions in fixed income, equity,
currency and commodity products. In addition, we make
markets in, and clear client transactions on, major stock,
options and futures exchanges worldwide.

As a market maker, we provide prices to clients globally
across thousands of products in all major asset classes and
markets. At times, we take the other side of transactions
ourselves if a buyer or seller is not readily available, and at
other times we connect our clients to other parties who
want to transact. Our willingness to make markets, commit
capital and take risk in a broad range of products is crucial
to our client relationships. Market makers provide liquidity
and play a critical role in price discovery, which contributes
to the overall efficiency of
In
connection with our market-making activities, we maintain
(i) market-making positions, typically for a short period of
time, in response to, or in anticipation of, client demand,
and (ii) positions to actively manage our risk exposures that
arise from these market-making activities (collectively,
inventory). We carry our inventory at fair value with
changes in valuation reflected in net revenues.

the capital markets.

Our clients are institutions that are primarily professional
market participants, including investment entities whose
ultimate clients include individual investors investing for
their retirement, buying insurance or putting aside surplus
cash in a deposit account.

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Investment Banking
Investment Banking serves public and private sector clients
around the world. We provide financial advisory services,
help companies raise capital to strengthen and grow their
businesses and provide financing to corporate clients. We
seek to develop and maintain long-term relationships with a
diverse global group of institutional clients,
including
corporations, governments, states and municipalities. Our
goal is to deliver to our institutional clients all of our
resources in a seamless fashion, with investment banking
serving as the main initial point of contact.

Investment Banking generates revenues from the following:
‰ Financial advisory. We are a leader in providing
financial advisory services, including strategic advisory
assignments with respect to mergers and acquisitions,
divestitures, corporate defense activities, restructurings
and spin-offs. In particular, we help clients execute large,
complex transactions for which we provide multiple
services, including cross-border structuring expertise. We
also assist our clients in managing their asset and liability
exposures and their capital.

‰ Underwriting. We help companies raise capital to fund
their businesses. As a financial intermediary, our job is to
match the capital of our investing clients, who aim to
grow the savings of millions of people, with the needs of
our public and private sector clients, who need financing
to generate growth, create jobs and deliver products and
include public
services. Our underwriting activities
offerings and private placements,
including local and
cross-border transactions and acquisition financing, of a
wide range of securities and other financial instruments,
including loans. Underwriting consists of the following:

Equity underwriting. We underwrite common and
preferred stock and convertible and exchangeable
securities. We regularly receive mandates for large,
complex transactions and have held a leading position in
worldwide
and
worldwide initial public offerings for many years.

common

offerings

public

stock

Debt underwriting. We underwrite and originate
various types of debt instruments, including investment-
grade and high-yield debt, bank and bridge loans,
including in connection with acquisition financing, and
emerging- and growth-market debt, which may be issued
by, among others, corporate, sovereign, municipal and
agency issuers. In addition, we underwrite and originate
structured securities, which include mortgage-related
securities and other asset-backed securities.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

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We execute a high volume of transactions for our clients in
large, highly liquid markets (such as markets for U.S.
Treasury securities, stocks and certain agency mortgage
pass-through securities). We also execute transactions for
our clients in less liquid markets (such as mid-cap corporate
bonds, emerging market currencies and certain non-agency
mortgage-backed securities) for spreads and fees that are
generally somewhat larger than those charged in more
liquid markets. Additionally, we structure and execute
transactions involving customized or tailor-made products
that address our clients’
investment
objectives or other complex needs (such as a jet fuel hedge
for an airline), as well as derivative transactions related to
client advisory and underwriting activities.

risk exposures,

clients,

Through our global sales force, we maintain relationships
with our
receiving orders and distributing
investment research, trading ideas, market information and
analysis. Much of this connectivity between us and our
clients is maintained on technology platforms, including
Marquee, and operates globally where markets are open for
investors with
trading. Marquee provides institutional
market intelligence, risk analytics, proprietary datasets and
trade execution across multiple asset classes.

Global Markets and our other businesses are supported by
our Global Investment Research division, which, as of
December 2019, provided fundamental
research on
approximately 3,000 companies worldwide and more than
40 national economies, as well as on industries, currencies
and commodities.

Global Markets activities are organized by asset class and
include both “cash” and “derivative” instruments. “Cash”
refers to trading the underlying instrument (such as a stock,
bond or barrel of oil). “Derivative” refers to instruments
that derive their value from underlying asset prices, indices,
reference rates and other inputs, or a combination of these
factors (such as an option, which is the right or obligation
to buy or sell a certain bond, stock or other asset on a
specified date in the future at a certain price, or an interest
rate swap, which is the agreement to convert a fixed rate of
interest into a floating rate or vice versa).

Global Markets consists of FICC and Equities.

FICC. FICC generates revenues from intermediation and
financing activities.
‰ FICC intermediation. Includes client execution activities
related to making markets in both trading cash and
derivative instruments, as detailed below.

Interest Rate Products. Government bonds (including
across maturities, other
inflation-linked securities)
government-backed securities, and interest rate swaps,
options and other derivatives.

Credit Products. Investment-grade corporate securities,
high-yield securities, credit derivatives, exchange-traded
funds
loans, municipal
securities, emerging market and distressed debt, and trade
claims.

(ETFs), bank and bridge

Mortgages. Commercial mortgage-related securities,
residential mortgage-related
loans and derivatives,
securities,
(including U.S.
derivatives
and
collateralized mortgage
agency-issued
government
obligations and other securities and loans), and other
asset-backed securities, loans and derivatives.

loans

Currencies. Currency options, spot/forwards and other
derivatives on G-10 currencies and emerging-market
products.

Commodities. Commodity derivatives and, to a lesser
extent, physical commodities, involving crude oil and
petroleum products, natural gas, base, precious and other
metals,
other
electricity,
commodity products.

agricultural

coal,

and

‰ FICC financing. Includes providing financing to our
clients through securities sold under agreements to
repurchase (repurchase agreements), as well as through
structured
(including
residential and commercial mortgage lending) and asset-
backed lending, which are typically longer term in nature.

credit, warehouse

lending

securities,

facilitate

options,

futures

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

sectors,

industry

financial measures

We also structure and make markets in derivatives on
indices,
and
individual company stocks. We develop strategies and
provide
information about portfolio hedging and
restructuring and asset allocation transactions for our
clients. We also work with our clients to create specially
tailored instruments to enable sophisticated investors to
establish or liquidate investment positions or undertake
hedging strategies. We are one of the leading participants
in the trading and development of equity derivative
instruments.

Our exchange-based market-making activities include
making markets in stocks and ETFs, futures and options
on major exchanges worldwide.

We generate commissions and fees from executing and
clearing institutional client transactions on major stock,
options and futures exchanges worldwide, as well as
OTC transactions. We provide our clients with access to a
broad spectrum of equity execution services, including
electronic “low-touch” access and more complex “high-
touch” execution through both traditional and electronic
platforms, including Marquee.

‰ Equities financing. Includes prime brokerage and other
equities financing activities, including securities lending,
margin lending and swaps.

We earn fees by providing clearing, settlement and
custody services globally. In addition, we provide our
hedge fund and other clients with a technology platform
and reporting that enables them to monitor their security
portfolios and manage risk exposures.

We provide services that principally involve borrowing
and lending securities to cover institutional clients’ short
sales and borrowing securities to cover our short sales and
otherwise to make deliveries into the market. In addition,
we are an active participant in broker-to-broker securities
lending and third-party agency lending activities.

through margin loans

We provide financing to our clients for their securities
trading activities
that are
collateralized by securities, cash or other acceptable
collateral. We earn a spread equal to the difference
between the amount we pay for funds and the amount we
receive from our client.

We execute swap transactions to provide our clients with
exposure to securities and indices.

Asset Management
Asset Management provides investment services to help
clients preserve and grow their financial assets. We provide
these services to our institutional clients, as well as investors
who primarily access our products through a network of
third-party distributors around the world.

Goldman Sachs 2019 Form 10-K

investments. Alternative

We manage client assets across a broad range of investment
strategies and asset classes, including equity, fixed income
and alternative
investments
primarily includes hedge funds, credit funds, private equity,
real estate, currencies, commodities and asset allocation
strategies. Our investment offerings include those managed
on a fiduciary basis by our portfolio managers, as well as
strategies managed by third-party managers. We offer our
investments in a variety of structures, including separately
managed accounts, mutual funds, private partnerships and
other commingled vehicles.

We also provide customized investment advisory solutions
designed to address our clients’ investment needs. These
solutions begin with identifying clients’ objectives and
continue through portfolio construction, ongoing asset
allocation and risk management and investment realization.
We draw from a variety of third-party managers, as well as
our proprietary offerings,
to implement solutions for
clients.

Asset Management generates revenues from the following:
‰ Management and Other Fees. The majority of
revenues in management and other fees consists of asset-
based fees on client assets that we manage. The fees that
we charge vary by asset class, distribution channel and the
type of services provided, and are affected by investment
performance, as well as asset inflows and redemptions.
‰ Incentive Fees. In certain circumstances, we also receive
incentive fees based on a percentage of a fund’s or a
separately managed account’s return, or when the return
exceeds a specified benchmark or other performance
targets. Such fees include overrides, which consist of the
increased share of the income and gains derived primarily
from our private equity and credit funds when the return
on a fund’s investments over the life of the fund exceeds
certain threshold returns. Incentive fees are recognized
when it is probable that a significant reversal of such fees
will not occur.

‰ Equity Investments. Our alternative investing activities
relate to public and private equity investments in
corporate, real estate and infrastructure entities. We also
make investments
through consolidated investment
entities, substantially all of which are engaged in real
estate investment activities.

‰ Lending. We provide financing related to our asset
management business and invest in debt securities and
loans backed by real estate. These activities include
investments in mezzanine debt, senior debt and distressed
debt securities.

T H E G O L D M A N S A C H S G R O U P ,

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Consumer & Wealth Management
Consumer & Wealth Management helps clients achieve
their individual financial goals by providing a broad range
of wealth advisory and banking services, including financial
investment management, deposit taking, and
planning,
lending. Services are offered through our global network of
advisors and via our digital platforms.

Wealth Management. Wealth Management provides
tailored wealth advisory services to clients across the wealth
spectrum. We operate globally serving individuals, families,
family offices, and select foundations and endowments.
Our relationships are established directly or introduced
financial wellness
that
through corporations
programs for their employees.

sponsor

structuring,

We offer personalized financial planning inclusive of
income and liability management, compensation and
benefits analysis,
tax
trust and estate
optimization, philanthropic giving, and asset protection.
We also provide customized investment advisory solutions,
and offer structuring and execution capabilities in security
and derivative products across all major global markets.
We
investment
platform and our global execution capabilities to help
clients achieve their investment goals. In addition, we offer
clients a full range of private banking services, including a
variety of deposit alternatives and loans that our clients use
to finance investments in both financial and nonfinancial
assets, bridge cash flow timing gaps or provide liquidity and
flexibility for other needs.

leverage a broad, open-architecture

revenues

generates

from the

Wealth management
following:
‰ Management and other fees. Includes fees related to
managing assets, providing investing and wealth advisory
solutions, providing financial planning and counseling
services via our subsidiary, The Ayco Company, L.P. and
executing brokerage transactions for wealth management
clients.

‰ Incentive fees. In certain circumstances, we also receive
incentive fees based on a percentage of a fund’s return, or
when the return exceeds a specified benchmark or other
performance targets. Such fees include overrides, which
consist of the increased share of the income and gains
derived primarily from our private equity and credit funds
when the return on a fund’s investments over the life of
the fund exceeds certain threshold returns. Incentive fees
are recognized when it is probable that a significant
reversal of such fees will not occur.

‰ Private banking and lending. Includes interest income
allocated to deposit-taking and net interest income earned
on lending activities for wealth management clients.

Consumer Banking. We engage in consumer-oriented
businesses. We issue unsecured loans, through Marcus and
credit cards, to finance the purchases of goods or services.
We also accept deposits through Marcus, primarily through
GS Bank USA and Goldman Sachs International Bank
(GSIB). These deposits include savings and time deposits
which provide us with a diversified source of funding that
reduces our reliance on wholesale funding.

Consumer banking revenues consist of net interest income
earned on unsecured loans issued to consumers through
Marcus and credit card lending activities, and net interest
income allocated to consumer deposits.

Business
Security

Continuity

and

Information

Business continuity and information security,
including
cyber security, are high priorities for us. Their importance
has been highlighted by (i) numerous highly publicized
including cyber attacks against
events in recent years,
financial
large
governmental
institutions,
consumer-based companies and other organizations that
resulted in the unauthorized disclosure of personal
confidential
information
and
information,
the theft and destruction of corporate
information and requests for ransom payments, and
(ii) extreme weather events.

agencies,

sensitive

other

Our Business Continuity & Technology Resilience Program
has been developed to provide reasonable assurance of
business continuity in the event of disruptions at our critical
facilities or of our systems, and to comply with regulatory
requirements, including those of FINRA. Because we are a
BHC, our Business Continuity & Technology Resilience
Program is also subject to review by the FRB. The key
elements of the program are crisis management, business
recovery,
continuity,
assurance and verification, and process improvement. In
the area of information security, we have developed and
implemented a framework of principles, policies and
technology designed to protect the information provided to
us by our clients and our own information from cyber
attacks and other misappropriation, corruption or loss.
Safeguards are designed to maintain the confidentiality,
integrity and availability of information.

resilience, business

technology

Human Capital Management

We believe that a major strength and principal reason for
our success is the quality and dedication of our people and
the shared sense of being part of a team. We strive to
maintain a work environment that fosters professionalism,
excellence, diversity, cooperation among our employees
worldwide and high standards of business ethics.

Goldman Sachs 2019 Form 10-K

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Instilling our culture in all employees is a continuous
process, in which training plays an important part. All
employees are offered the opportunity to participate in
education and periodic seminars that we sponsor at various
locations throughout the world. Another important part of
instilling our culture is our employee review process.
Employees are reviewed by supervisors, co-workers and
employees they supervise in a 360-degree review process
that is integral to our team approach, and which includes
an evaluation of an employee’s performance with respect to
risk management,
compliance and diversity. As of
December 2019, we had headcount of 38,300.

Competition

entities

that make

investments

The financial services industry and all of our businesses are
intensely competitive, and we expect them to remain so.
Our competitors are other entities that provide investment
banking (including transaction banking), market-making,
investment management services, and commercial and/or
consumer lending and deposit-taking products, as well as
in securities,
those
commodities, derivatives, real estate,
loans and other
financial assets. These entities include brokers and dealers,
investment banking firms, commercial banks, credit card
issuers, insurance companies, investment advisers, mutual
funds, hedge funds, private equity funds, merchant banks,
consumer finance companies and financial technology and
other internet-based companies. We compete with some
entities globally and with others on a regional, product or
niche basis. We compete based on a number of factors,
including transaction execution, products and services,
innovation, reputation and price.

We have faced, and expect to continue to face, pressure to
retain market share by committing capital to businesses or
transactions on terms that offer returns that may not be
commensurate with their risks. In particular, corporate
clients seek such commitments (such as agreements to
participate in their loan facilities) from financial services
firms in connection with investment banking and other
assignments.

Consolidation and convergence have significantly increased
the capital base and geographic reach of some of our
competitors, and have also hastened the globalization of the
securities and other financial services markets. As a result,
we have had to commit capital to support our international
operations and to execute large global transactions. To take
advantage of some of our most significant opportunities,
we will have to compete successfully with financial
institutions that are larger and have more capital and that
may have a stronger local presence and longer operating
history outside the U.S.

Goldman Sachs 2019 Form 10-K

We also compete with smaller institutions that offer more
targeted services, such as independent advisory firms. Some
clients may perceive these firms to be less susceptible to
potential conflicts of interest than we are, and, as described
below, our ability to effectively compete with them could be
affected by regulations and limitations on activities that
apply to us but may not apply to them.

A number of our businesses are subject to intense price
competition. Efforts by our competitors to gain market
share have resulted in pricing pressure in our investment
banking, market-making and asset management businesses.
For example, the increasing volume of trades executed
electronically, through the internet and through alternative
trading systems, has increased the pressure on trading
commissions, in that commissions for electronic trading are
generally lower than those for non-electronic trading. It
appears that this trend toward low-commission trading will
continue. Price competition has also led to compression in
the difference between the price at which a market
participant is willing to sell an instrument and the price at
which another market participant is willing to buy it (i.e.,
bid/offer spread), which has affected our market-making
businesses. In addition, we believe that we will continue to
experience competitive pressures in these and other areas in
the future as some of our competitors seek to obtain market
share by further reducing prices, and as we enter into or
expand our presence in markets that may rely more heavily
on electronic trading and execution.

We also compete on the basis of the types of financial
products that we and our competitors offer. In some
circumstances, our
financial
products that we do not offer and that our clients may
prefer.

competitors may offer

(Dodd-Frank Act),

The provisions of the U.S. Dodd-Frank Wall Street Reform
and Consumer Protection Act
the
requirements promulgated by the Basel Committee on
Banking Supervision (Basel Committee) and other financial
regulations could affect our competitive position to the
extent that limitations on activities,
increased fees and
compliance costs or other regulatory requirements do not
apply, or do not apply equally, to all of our competitors or
are
different
jurisdictions. For example, the provisions of the Dodd-
Frank Act that prohibit proprietary trading and restrict
investments in certain hedge and private equity funds
differentiate between U.S.-based and non-U.S.-based
banking organizations and give non-U.S.-based banking
organizations greater flexibility to trade outside of the U.S.
and to form and invest in funds outside the U.S.

implemented

uniformly

across

not

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

the obligations with respect

to derivative
Likewise,
transactions under Title VII of the Dodd-Frank Act depend,
in part, on the location of the counterparties to the
transaction. The impact of the Dodd-Frank Act and other
regulatory developments on our competitive position has
depended and will continue to depend to a large extent on
the manner
in which the required rulemaking and
regulatory guidance evolve, the extent of international
convergence, and the development of market practice and
structures under the new regulatory regimes, as described
further in “Regulation” below.

We also face intense competition in attracting and retaining
qualified employees. Our ability to continue to compete
effectively has depended and will continue to depend upon
our ability to attract new employees, retain and motivate our
existing employees and to continue to compensate employees
competitively amid intense public and regulatory scrutiny on
the compensation practices of large financial institutions.
Our pay practices and those of certain of our competitors are
subject to review by, and the standards of, the FRB and other
including the
regulators inside and outside the U.S.,
Prudential Regulation Authority (PRA) and the Financial
Conduct Authority (FCA) in the U.K. We also compete for
employees with institutions whose pay practices are not
to regulatory oversight. See “Regulation —
subject
Compensation Practices” and “Risk Factors — Our
businesses may be adversely affected if we are unable to hire
and retain qualified employees” in Part I, Item 1A of this
Form 10-K for further information about such regulation.

Regulation

As a participant in the global financial services industry, we
are subject
to extensive regulation and supervision
worldwide. The regulatory regimes applicable to our
operations worldwide have recently been, and continue to
be, subject to significant changes. The Basel Committee is
the primary global standard setter for prudential bank
regulation; however, its standards do not become effective
in a jurisdiction until the relevant regulators have adopted
rules to implement its standards. The implications of these
regulations for our businesses depend to a large extent on
their implementation by the relevant regulators globally,
and the market practices and structures that develop.

New regulations have been adopted or are being considered
by regulators and policy makers worldwide, as described
below. Recent developments have added additional
uncertainty to the implementation, scope and timing of
regulatory reforms and potential for deregulation in some
areas. The effects of any changes to the regulations affecting
our businesses,
including as a result of the proposals
described below, are uncertain and will not be known until
the changes are finalized and market practices and
structures develop under the revised regulations.

Our principal subsidiaries operating in Europe, Goldman
Sachs International (GSI), GSIB and Goldman Sachs Asset
Management International (GSAMI), are incorporated and
headquartered in the U.K. As a result of the U.K.’s
withdrawal from the E.U. (Brexit), we expect considerable
change in the regulatory framework that will govern
transactions and business undertaken by our U.K.
subsidiaries.

The E.U. and the U.K. agreed to a withdrawal agreement
(the Withdrawal Agreement), which became effective on
January 31, 2020 when the U.K. ceased to be an E.U.
member state. The transition period under the Withdrawal
Agreement will last until the end of December 2020 and the
U.K. Government has stated that it does not intend to agree
to an extension to this period. During the transition period,
the U.K. will be treated as if it were a member state of the
E.U. and therefore our U.K. subsidiaries will still benefit
from non-discriminatory access
to E.U. clients and
infrastructure. At the end of the transition period, firms
established in the U.K., including our U.K. subsidiaries, are
expected to lose their pan-E.U. “passports” and generally
to be treated like entities in countries outside the E.U.,
whose access to the E.U. is governed by E.U. and national
law and may depend on the making of E.U. equivalence
decisions or on their obtaining licenses or exemptions under
national regimes, subject to any other arrangements such as
a free trade agreement. After the end of the transition
period, the U.K. will not be required to continue to apply
E.U. financial services legislation and may not adopt rules
that correspond to E.U. legislation not already operative in
the U.K. by then (such as some parts of the 2019 E.U.
capital requirements regulation). We have strengthened the
capabilities of our operating subsidiaries in the remaining
E.U. countries, particularly Goldman Sachs Bank Europe
SE (GSBE), our German bank subsidiary, and have started
to move certain activities there.

Banking Supervision and Regulation
Group Inc.
is a BHC under the U.S. Bank Holding
Company Act of 1956 (BHC Act) and an FHC under
amendments to the BHC Act effected by the U.S. Gramm-
Leach-Bliley Act of 1999 (GLB Act), and is subject to
supervision and examination by the FRB, which is our
primary regulator.

The FRB has a rating system for large financial institutions
that is intended to align with its supervisory program. It
consists of component ratings for capital planning and
positions, liquidity risk management and positions, and
governance and controls. The FRB has proposed guidance
for the governance and controls component.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

Under the system of “functional regulation” established
under the BHC Act, the primary regulators of our U.S.
non-bank subsidiaries directly regulate the activities of
those subsidiaries, with the FRB exercising a supervisory
role. Such “functionally regulated” subsidiaries include
broker-dealers registered with the SEC, such as our
principal U.S. broker-dealer, Goldman Sachs & Co. LLC
(GS&Co.), entities registered with or regulated by the
CFTC with respect to futures-related and swaps-related
activities and investment advisers registered with the SEC
with respect to their investment advisory activities.

Our principal U.S. bank subsidiary, GS Bank USA,
is
supervised and regulated by the FRB, the FDIC, the New
York State Department of Financial Services (NYDFS) and
the Consumer Financial Protection Bureau (CFPB). A
number of our activities are conducted partially or entirely
through GS Bank USA and its subsidiaries, including: bank
loans (including leveraged lending); personal loans and
mortgages; credit cards; interest rate, credit, currency and
other derivatives; deposit-taking; and agency lending.

Certain of our subsidiaries are regulated by the banking and
securities regulatory authorities of the countries in which
they operate. As described below, our E.U. subsidiaries,
including our U.K. subsidiaries during the Brexit transition
period, are subject to various European regulations, as well
as national
implement
laws, which to some extent
European directives.

GSI, our U.K. broker-dealer subsidiary and a designated
investment firm, and GSIB, our U.K. bank subsidiary, are
regulated by the PRA and the FCA. GSI provides broker-
dealer services in and from the U.K., and GSIB acts as a
primary dealer for European government bonds and is
involved in lending (including securities lending) and
deposit-taking
activities. GSBE, our German bank
subsidiary, is primarily regulated by the ECB within the
context of the European Single Supervisory Mechanism.
Goldman Sachs Paris Inc. et Cie., an investment firm
primarily regulated by the French Prudential Supervision
and Resolution Authority, may, among other activities,
is
conduct activities that GSBE, as a bank subsidiary,
prevented from undertaking.

Goldman Sachs 2019 Form 10-K

Capital and Liquidity Requirements. We and GS Bank
USA are subject
to regulatory risk-based capital and
leverage requirements that are calculated in accordance
with the regulations of the FRB (Capital Framework). The
largely based on the Basel
Capital Framework is
Committee’s framework for strengthening the regulation,
supervision and risk management of banks (Basel III) and
also implements certain provisions of the Dodd-Frank Act.
Under the tailoring rules adopted by the U.S. federal bank
regulatory agencies in October 2019, we and GS Bank USA
are subject to “Category I” standards because we have been
designated as a global systemically important bank (G-SIB).
Accordingly, under the Capital Framework, we and GS
banking
Bank USA are
organizations. Under
adequacy
requirements, we and GS Bank USA must meet specific
regulatory capital requirements that involve quantitative
measures of assets, liabilities and certain off-balance-sheet
items. The sufficiency of our capital levels is also subject to
qualitative judgments by regulators. We and GS Bank USA
are also subject to liquidity requirements established by the
U.S. federal bank regulatory agencies.

“Advanced
the

approach”
capital

FRB’s

GSI and GSIB are subject to capital requirements prescribed
in the E.U. Capital Requirements Regulation (CRR) and the
E.U. Fourth Capital Requirements Directive (CRD IV),
which are largely based on Basel III. GSI and GSIB are
subject
to liquidity requirements established by U.K.
regulatory authorities that are similar to those applicable to
GS Bank USA and us.

Amendments to the CRR and CRD IV (respectively, CRR II
and CRD V) became effective on June 27, 2019. CRR II
will generally begin to apply in June 2021, and E.U.
member states are directed to implement CRD V by
December 2020.

Risk-Based Capital Ratios. The Capital Framework
provides for an additional capital ratio requirement that
includes three components: (i) for capital conservation
(capital conservation buffer),
for countercyclicality
(countercyclical capital buffer) and (iii) as a consequence of
our designation as a G-SIB (G-SIB surcharge). The
additional capital ratio requirement must be satisfied
entirely with capital that qualifies as Common Equity
Tier 1 (CET1). GS Bank USA is not subject to the G-SIB
surcharge.

(ii)

The FRB proposed a rule in April 2018 that would, among
other things, replace the capital conservation buffer with a
stress capital buffer (SCB) requirement for large BHCs
subject to the FRB’s Comprehensive Capital Analysis and
Review (CCAR). See “Regulation — Banking Supervision
and Regulation — Stress Tests” for further information
about this proposed rule.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

The countercyclical capital buffer is designed to counteract
systemic vulnerabilities and currently applies only to
banking organizations subject to Category I, II or III
standards, including us. Several other national supervisors
also require countercyclical capital buffers. The G-SIB
surcharge and countercyclical capital buffer applicable to
us could change in the future and, as a result, the minimum
capital ratios to which we are subject could change.

The U.S. federal bank regulatory agencies adopted a rule in
December 2018 that provides an optional
three-year
phase-in period for the day-one regulatory capital effects of
the adoption of the Current Expected Credit Losses (CECL)
accounting standard. The FRB also released a statement
indicating that it will not incorporate CECL into the
calculation of the allowance for credit losses in supervisory
stress tests through the 2021 stress test cycle. See Note 3 to
the consolidated financial statements in Part II, Item 8 of
this Form 10-K for further information about CECL.

The U.S. federal bank regulatory agencies adopted a rule in
November 2019 that will implement the Basel Committee’s
standardized approach for measuring counterparty credit
risk exposures in connection with derivative contracts
(SA-CCR). Under the rule, beginning January 1, 2022, but
with the option to adopt starting April 1, 2020, “Advanced
approach” banking organizations will be required to use
SA-CCR for purposes of calculating their standardized risk-
weighted assets (RWAs) and, with some adjustments, for
purposes of determining their supplementary leverage
ratios (SLRs) discussed below.

The Basel Committee standards include guidelines for
calculating incremental capital ratio requirements for
banking institutions that are systemically significant from a
domestic but not global perspective (D-SIBs). When these
guidelines are implemented by national regulators, they
may apply, among others, to certain subsidiaries of G-SIBs.
These guidelines are in addition to the framework for
G-SIBs, but are more principles-based. CRD V and CRR II
provide that institutions that are systemically important at
the E.U. or member state level, known as other systemically
to
important
additional capital ratio requirements of up to 3% of CET1,
according to their degree of systemic importance (O-SII
buffers). The designated authority may impose an O-SII
buffer that is greater than 3% in certain cases. CRD IV and
the CRR currently provide for an additional requirement of
up to 2%. O-SIIs are identified annually, along with their
applicable buffers. The PRA has identified Goldman Sachs
Group UK Limited (GSG UK), the parent company of GSI
and GSIB, as an O-SII. GSG UK’s O-SII buffer is currently
set at zero percent.

(O-SIIs), may be

institutions

subject

revises

things,

The Basel Committee finalized revisions to the framework
in January 2019 for calculating capital requirements for
market risk, which is expected to increase market risk
capital requirements for most banking organizations. The
the
revised framework, among other
standardized approach and internal models used to
calculate market risk requirements and clarifies the scope of
positions subject to market risk capital requirements. The
Basel Committee has proposed that national regulators
implement
beginning
January 1, 2022. CRR II, which became effective in
June 2019 and establishes a reporting standard, will require
institutions to report their market risk
E.U. financial
calculations under the revised framework as early as
January 1, 2021. The U.S. federal bank regulatory agencies
have not yet proposed rules implementing the 2019 version
of the revised market risk framework for U.S. financial
institutions.

framework

revised

the

Basel

capital

standards

published

Committee

requirements under

The
in
December 2017 that it described as the finalization of the
Basel III post-crisis regulatory reforms. These standards set
a floor on internally modeled capital requirements at a
percentage of
the
standardized approach. They also revise
the Basel
Committee’s standardized and model-based approaches for
credit risk, provide a new standardized approach for
operational risk capital and revise the frameworks for
risk. The Basel
credit valuation adjustment
regulators
Committee has proposed that national
implement these standards beginning January 1, 2022, and
that the new floor be phased in through January 1, 2027. In
November 2019, the Basel Committee proposed further
revisions to the framework for CVA risk.

(CVA)

The Basel Committee has also published updated
frameworks relating to Pillar 3 disclosure requirements and
the regulatory capital treatment of securitization exposures
and a revised G-SIB assessment methodology. The U.S.
federal bank regulatory agencies have not yet proposed
rules implementing the December 2017 standards for
purposes of
the Basel
Committee frameworks.

risk-based capital

ratios or

See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Equity Capital
Management and Regulatory Capital” in Part II, Item 7 of
this Form 10-K and Note 20 to the consolidated financial
statements in Part II, Item 8 of this Form 10-K for
information about our capital ratios and those of GS Bank
USA and GSI.

described

“Other Restrictions”

As
in
September 2016, the FRB issued a proposed rule that
would, among other
to hold
things,
in connection with covered physical
additional capital
commodity activities.

require FHCs

below,

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

Leverage Ratios. Under the Capital Framework, we and
GS Bank USA are subject to Tier 1 leverage ratios and SLRs
established by the FRB. In April 2018, the FRB and the OCC
issued a proposed rule which would replace the current 2%
SLR buffer for G-SIBs, including us, with a buffer equal to
50% of their G-SIB surcharge. This proposal, together with
the adopted rule requiring use of SA-CCR for purposes of
calculating the SLR, would implement certain of
the
revisions to the leverage ratio framework published by the
Basel Committee in December 2017.

The Basel Committee adopted changes in June 2019 to the
leverage ratio treatment of client-cleared derivatives and
adopted a requirement to publicly disclose daily average
balances
ratio
certain components of
calculations.

leverage

for

The U.S. federal bank regulatory agencies’ November 2019
rule implementing SA-CCR similarly allows for greater
recognition of collateral in the calculation of total leverage
exposure relating to client-cleared derivative contracts.

CRR II establishes a 3% minimum leverage ratio
requirement
institutions,
including GSI and GSIB. This requirement will begin to
apply in June 2021.

certain E.U.

financial

for

Liquidity Ratios. The Basel Committee’s framework for
liquidity risk measurement, standards and monitoring
requires banking organizations to measure their liquidity
against two specific liquidity tests: the Liquidity Coverage
Ratio (LCR) and the Net Stable Funding Ratio (NSFR).

The LCR rule issued by the U.S. federal bank regulatory
agencies and applicable to both us and GS Bank USA is
generally consistent with the Basel Committee’s framework
and is designed to ensure that a banking organization
maintains an adequate level of unencumbered, high-quality
liquid assets equal to or greater than the expected net cash
outflows under an acute short-term liquidity stress scenario.
The LCR rule issued by the European Commission and
applicable to GSI and GSIB is also generally consistent with
the Basel Committee’s framework. We are required to
maintain a minimum LCR of 100%. We disclose, on a
quarterly basis, our average daily LCR. See “Available
Information” below and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations
— Equity Capital Management and Regulatory Capital” in
Part II, Item 7 of this Form 10-K for information about our
average daily LCR.

Goldman Sachs 2019 Form 10-K

The NSFR is designed to promote medium- and long-term
stable funding of the assets and off-balance-sheet activities
of banking organizations over a one-year time horizon. The
Basel Committee’s NSFR framework requires banking
organizations to maintain a minimum NSFR of 100%.

The U.S. federal bank regulatory agencies issued a proposed
rule in May 2016 that would implement the NSFR for large
U.S. banking organizations, including us and GS Bank USA,
but have not yet released a final rule. CRR II implements
the NSFR for certain E.U. financial institutions, including
GSG UK, GSI and GSIB during the Brexit transition period.

The FRB’s enhanced prudential standards require BHCs
with $100 billion or more in total consolidated assets, to
comply with enhanced liquidity
risk
management standards, which include maintaining a level
of highly liquid assets based on projected funding needs for
30 days, and increased involvement by boards of directors
in liquidity and overall risk management. Although the
liquidity requirement under these rules has some similarities
to the LCR, it is a separate requirement.

and overall

See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Risk Management —
Overview and Structure of Risk Management” and
“— Liquidity Risk Management” in Part II, Item 7 of this
Form 10-K for information about the LCR and NSFR, as well
as our risk management practices and liquidity.

Stress Tests. As required by the FRB’s CCAR rules, we
submit an annual capital plan for review by the FRB. In
addition, we are required to perform company-run stress
tests on an annual basis. As described in “Available
Information” below, we publish summaries of our stress
tests results on our website.

Our annual stress test submission is incorporated into the
annual capital plans that we submit to the FRB as part of
the CCAR process for large BHCs, which is designed to
ensure that capital planning processes will permit continued
operations by such institutions during times of economic
and financial stress. As part of CCAR, the FRB evaluates an
institution’s plan to make capital distributions, such as by
repurchasing or redeeming stock or making dividend
payments, across a range of macroeconomic and company-
specific assumptions based on the institution’s and the
FRB’s stress tests. If the FRB objects to an institution’s
capital plan, the institution is generally prohibited from
making capital distributions other than those to which the
FRB has not objected. In addition, an institution faces
limitations on capital distributions to the extent that actual
capital issuances are less than the amounts indicated in its
capital plan.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

The FRB issued a proposed rule in April 2018 to establish
stress buffer requirements. Under the proposal, the SCB
would replace the static component of
the capital
conservation buffer. The SCB, subject to a minimum,
would reflect stressed losses in the supervisory severely
adverse scenario of the FRB’s CCAR stress tests and would
also include four quarters of planned common stock
dividends. The proposal would also introduce a stress
leverage buffer requirement, similar to the SCB, which
would apply to the Tier 1 leverage ratio. In addition, the
proposal would require BHCs to reduce their planned
capital distributions if those distributions would not be
consistent with the applicable capital buffer constraints
based on the BHCs’ own baseline scenario projections.

Under rules adopted by the U.S. federal bank regulatory
agencies implementing 2018 amendments to the Dodd-
Frank Act, depository institutions with total consolidated
assets between $100 billion and $250 billion, such as GS
Bank USA, are no longer required to conduct annual
company-run stress tests. They are still required to have
their own capital planning process. GSI and GSIB have their
own capital planning and stress testing process, which
incorporates internally designed stress tests and those
required under the PRA’s Internal Capital Adequacy
Assessment Process.

Dividends and Stock Repurchases. Dividend payments
to our shareholders and our stock repurchases are subject
to the oversight of the FRB.

U.S. federal and state laws impose limitations on the
payment of dividends by U.S. depository institutions, such
as GS Bank USA. In general, the amount of dividends that
may be paid by GS Bank USA is limited to the lesser of the
amounts calculated under a recent earnings test and an
undivided profits test. Under the recent earnings test, a
dividend may not be paid if the total of all dividends
declared by the entity in any calendar year is in excess of the
current year’s net income combined with the retained net
income of the two preceding years, unless the entity obtains
prior regulatory approval. Under the undivided profits test,
a dividend may not be paid in excess of the entity’s
undivided profits (generally, accumulated net profits that
have not been paid out as dividends or transferred to
surplus).

The applicable U.S. banking regulators have authority to
prohibit or limit the payment of dividends if, in the banking
regulator’s opinion, payment of a dividend would
constitute an unsafe or unsound practice in light of the
financial condition of the banking organization.

Source of Strength. The Dodd-Frank Act requires BHCs
to act as a source of strength to their bank subsidiaries and
to commit capital and financial resources to support those
subsidiaries. This support may be required by the FRB at
to
times when BHCs might otherwise determine not
provide it. Capital loans by a BHC to a subsidiary bank are
subordinate in right of payment to deposits and to certain
other indebtedness of the subsidiary bank. In addition, if a
BHC commits to a U.S. federal banking agency that it will
maintain the capital of its bank subsidiary, whether in
response to the FRB’s invoking its source-of-strength
authority or in response to other regulatory measures, that
commitment will be assumed by the bankruptcy trustee for
the BHC and the bank will be entitled to priority payment
in respect of that commitment, ahead of other creditors of
the BHC.

credit

exposure

including

Transactions between Affiliates. Transactions between
GS Bank USA or its subsidiaries and Group Inc. or its other
subsidiaries and affiliates are subject to restrictions under
the Federal Reserve Act and regulations issued by the FRB.
These laws and regulations generally limit the types and
amounts of transactions (such as loans and other credit
extensions,
from
repurchase and reverse repurchase agreements, securities
borrowing and derivative transactions, from GS Bank USA
or its subsidiaries to Group Inc. or its other subsidiaries and
affiliates and purchases of assets by GS Bank USA or its
subsidiaries from Group Inc. or its other subsidiaries and
affiliates) that may take place and generally require those
transactions to be on market terms or better to GS Bank
USA or its subsidiaries. These laws and regulations
generally do not apply to transactions between GS Bank
USA and its subsidiaries.

arising

The BHC Act prohibits the FRB from requiring a payment
by a BHC subsidiary to a depository institution if the
functional regulator of
that subsidiary objects to the
payment. In that case, the FRB could instead require the
divestiture of
the depository institution and impose
operating restrictions pending the divestiture.

Goldman Sachs 2019 Form 10-K

The U.S. federal bank regulatory agencies have adopted
rules imposing restrictions on qualified financial contracts
(QFCs) entered into by G-SIBs, which became fully effective
on January 1, 2020. The rules are intended to facilitate the
orderly resolution of a failed G-SIB by limiting the ability of
the G-SIB to enter into a QFC unless (i) the counterparty
waives certain default rights in such contract arising upon
the entry of the G-SIB or one of its affiliates into resolution,
(ii) the contract does not contain enumerated prohibitions
on the transfer of such contract and/or any related credit
enhancement, and (iii) the counterparty agrees that the
contract will be subject to the special resolution regimes set
forth in the Dodd-Frank Act orderly liquidation authority
(OLA) and the Federal Deposit Insurance Act of 1950
(FDIA), described below. Compliance can be achieved by
adhering to the International Swaps and Derivatives
(ISDA
Association Universal Resolution Stay Protocol
Universal Protocol) or International Swaps and Derivatives
Association 2018 U.S. Resolution Stay Protocol (U.S. ISDA
Protocol) described below.

Certain of our subsidiaries, along with those of a number of
other major global banking organizations, adhere to the
ISDA Universal Protocol, which was developed and
updated in coordination with the Financial Stability Board
(FSB), an international body that sets standards and
coordinates the work of national financial authorities and
international standard-setting bodies. The ISDA Universal
Protocol imposes a stay on certain cross-default and early
termination rights within standard ISDA derivative
contracts and securities financing transactions between
adhering parties in the event that one of them is subject to
resolution in its home jurisdiction, including a resolution
under the OLA or the FDIA in the U.S. In addition, certain
Group Inc. subsidiaries adhere to the U.S. ISDA Protocol,
which was based on the ISDA Universal Protocol and was
created to allow market participants to comply with the
final QFC rules adopted by the federal bank regulatory
agencies.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

leverage or

Resolution and Recovery. We are required by the FRB
and the FDIC to submit a periodic plan for our rapid and
orderly resolution in the event of material financial distress
or failure (resolution plan).
the regulators jointly
determine that an institution has failed to remediate
identified shortcomings in its resolution plan and that its
resolution plan, after any permitted resubmission, is not
credible or would not facilitate an orderly resolution under
the U.S. Bankruptcy Code, the regulators may jointly
impose more stringent capital,
liquidity
requirements or
restrictions on growth, activities or
operations, or may jointly order the institution to divest
assets or operations, in order to facilitate orderly resolution
in the event of failure. We submitted our 2019 resolution
plan in June 2019 and the FRB and FDIC did not identify
deficiencies or shortcomings. In October 2019, the FRB and
FDIC adopted a rule requiring U.S. G-SIBs to submit
resolution plans on a two-year cycle (alternating between
full and targeted submissions). Our next
required
submission is a targeted submission by July 1, 2021. See
“Risk Factors — The application of Group Inc.’s proposed
resolution strategy could result in greater losses for Group
Inc.’s security holders” in Part I, Item 1A of this Form 10-K
and “Available Information” in Part I, Item 1 of this
Form 10-K for further information about our resolution
plan.

We are also required by the FRB to submit, on a periodic
basis, a global recovery plan that outlines the steps that we
could take to reduce risk, maintain sufficient liquidity, and
conserve capital in times of prolonged stress.

The FDIC has issued a rule requiring each insured
depository institution (IDI) with $50 billion or more in
assets, such as GS Bank USA, to provide a resolution plan.
Our resolution plan for GS Bank USA must, among other
things, demonstrate that it is adequately protected from
risks arising from our other entities. GS Bank USA’s most
recent resolution plan was submitted in June 2018. In
April 2019, the FDIC released an advanced notice of
proposed rulemaking about potential changes
to its
resolution planning requirements for IDIs, including GS
Bank USA, and delayed the next round of IDI resolution
plan submissions until the rulemaking process is complete.

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financial

to promote

The amended E.U. Bank Recovery and Resolution Directive
(BRRD II) establishes a framework for the recovery and
resolution of financial institutions in the E.U., such as GSI
and GSIB during the Brexit transition period. The BRRD II
provides national supervisory authorities with tools and
powers to pre-emptively address potential financial crises in
order
stability and minimize
taxpayers’ exposure to losses, such as the power to impose
a temporary stay. The BRRD II requires E.U. member states
to grant “bail-in” powers to E.U. resolution authorities to
recapitalize a failing entity by writing down its unsecured
debt or converting its unsecured debt into equity. Financial
institutions in the E.U. must provide that contracts
recognize those temporary stay and bail-in powers unless
doing so would be impracticable. Further, certain U.K.
financial institutions, including GSI and GSIB, have been
required by the PRA to submit solvent wind-down plans on
how they could be wound down in a stressed environment.

Total Loss-Absorbing Capacity (TLAC). The FRB has
issued a rule addressing U.S. implementation of the FSB’s
TLAC principles and term sheet on minimum TLAC
requirements for G-SIBs. The rule (i) establishes minimum
TLAC requirements, (ii) establishes minimum “eligible
long-term debt” (i.e., debt that is unsecured, has a maturity
of at least one year from issuance and satisfies certain
additional criteria) requirements,
(iii) prohibits certain
parent company transactions and (iv) caps the amount of
parent company liabilities that are not eligible long-term
debt.

The rule also prohibits a BHC that has been designated as a
U.S. G-SIB from (i) guaranteeing liabilities of subsidiaries
that are subject to early termination provisions if the BHC
enters into an insolvency or receivership proceeding, subject
to an exception for guarantees permitted by rules of the U.S.
federal banking agencies imposing restrictions on QFCs;
(ii)
subsidiaries;
(iii) issuing short-term debt; or (iv) entering into derivatives
and certain other
financial contracts with external
counterparties.

guaranteed by

incurring

liabilities

Additionally, the rule caps, at 5% of the value of the parent
company’s eligible TLAC,
the amount of unsecured
non-contingent third-party liabilities that are not eligible
long-term debt that could rank equally with or junior to
eligible long-term debt.

The FRB, the OCC and the FDIC issued a proposed rule in
April 2019 that would require “Advanced approach”
banking organizations, such as us, to deduct from their own
regulatory capital certain investments above thresholds in
unsecured debt instruments issued by G-SIBs, including
those issued for purposes of satisfying TLAC requirements.

The BRRD II subjects institutions to a minimum requirement
for own funds and eligible liabilities (MREL), which is
generally consistent with the FSB’s TLAC standard. In
June 2018, the Bank of England published a statement of
policy on internal MREL, which requires a material U.K.
subsidiary of an overseas banking group, such as GSI, to
meet a minimum internal MREL requirement to facilitate the
transfer of losses to its resolution entity, which for GSI is
Group Inc. The transitional minimum internal MREL
requirement began to phase in from January 1, 2019 and will
become fully effective on January 1, 2022. In order to comply
with the MREL statement of policy, bail-in triggers have
been provided to the Bank of England over certain
intercompany regulatory capital and senior debt instruments
issued by GSI. These triggers enable the Bank of England to
write down such instruments or convert such instruments to
equity. The triggers can be exercised by the Bank of England
if
that GSI has reached the point of
non-viability and the FRB and the FDIC have not objected to
the bail-in or if Group Inc. enters bankruptcy or similar
proceedings.

it determines

CRR II and the BRRD II are designed to, among other
things, implement the FSB’s minimum TLAC requirement
for G-SIBs. For example, CRR II requires subsidiaries of a
non-E.U. G-SIB that account for more than 5% of its
RWAs, operating income or leverage exposure, such as
GSG UK, to meet 90% of the TLAC requirement applicable
to E.U. G-SIBs.

CRD V requires a non-E.U. group with more than
€40 billion of assets in the E.U., such as us, to establish an
E.U. intermediate holding company (E.U. IHC) if it has two
or more of certain types of E.U. financial
institution
subsidiaries, including broker-dealers and banks. CRR II
requires E.U. IHCs to satisfy MREL requirements and
certain other prudential requirements. The directives are
subject to implementing rulemakings by E.U. member
states, which have not yet occurred.

Insolvency of an IDI or a BHC. Under the FDIA, if the FDIC
is appointed as conservator or receiver for an IDI such as GS
Bank USA, upon its insolvency or in certain other events, the
FDIC has broad powers, including the power:
‰ To transfer any of the IDI’s assets and liabilities to a new
obligor, including a newly formed “bridge” bank, without
the approval of the depository institution’s creditors;

‰ To enforce the IDI’s contracts pursuant to their terms
without regard to any provisions triggered by the
appointment of the FDIC in that capacity; or

‰ To repudiate or disaffirm any contract or lease to which
the IDI is a party, the performance of which is determined
by the FDIC to be burdensome and the repudiation or
disaffirmance of which is determined by the FDIC to
promote the orderly administration of the IDI.

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In addition, the claims of holders of domestic deposit
liabilities and certain claims for administrative expenses
against an IDI would be afforded a priority over other
general unsecured claims, including deposits at non-U.S.
in the
branches and claims of debtholders of the IDI,
“liquidation or other resolution” of such an institution by
any receiver. As a result, whether or not the FDIC ever
sought to repudiate any debt obligations of GS Bank USA,
the debtholders (other than depositors at U.S. branches)
would be treated differently from, and could receive, if
anything, substantially less than, the depositors at U.S.
branches of GS Bank USA.

The Dodd-Frank Act created a new resolution regime
(known as OLA) for BHCs and their affiliates that are
systemically important. Under OLA, the FDIC may be
appointed as receiver for the systemically important
institution and its failed non-bank subsidiaries if, upon the
recommendation of
the U.S.
applicable
Secretary of the Treasury determines, among other things,
that the institution is in default or in danger of default, that
the institution’s failure would have serious adverse effects
on the U.S. financial system and that resolution under OLA
would avoid or mitigate those effects.

regulators,

If the FDIC is appointed as receiver under OLA, then the
powers of the receiver, and the rights and obligations of
creditors and other parties who have dealt with the
institution, would be determined under OLA, and not
under the bankruptcy or insolvency law that would
otherwise apply. The powers of the receiver under OLA
were generally based on the powers of the FDIC as receiver
for depository institutions under the FDIA.

Substantial differences in the rights of creditors exist
between OLA and the U.S. Bankruptcy Code, including the
right of the FDIC under OLA to disregard the strict priority
of creditor claims in some circumstances, the use of an
administrative claims procedure to determine creditors’
claims (as opposed to the judicial procedure utilized in
bankruptcy proceedings), and the right of the FDIC to
transfer claims to a “bridge” entity. In addition, OLA limits
the ability of creditors to enforce certain contractual cross-
defaults against affiliates of the institution in receivership.
The FDIC has issued a notice that it would likely resolve a
failed FHC by transferring its assets to a “bridge” holding
company under its “single point of entry” or “SPOE”
strategy pursuant to OLA.

Goldman Sachs 2019 Form 10-K

Deposit Insurance. Deposits at GS Bank USA have the
benefit of FDIC insurance up to the applicable limits. The
FDIC’s Deposit Insurance Fund is funded by assessments on
IDIs. GS Bank USA’s assessment (subject to adjustment by
is currently based on its average total
the FDIC)
consolidated assets less its average tangible equity during
the assessment period, its supervisory ratings and specified
forward-looking financial measures used to calculate the
assessment rate. In addition, deposits at GSIB are covered
by the Financial Services Compensation Scheme up to the
applicable limits.

Prompt Corrective Action. The U.S. Federal Deposit
Insurance Corporation Improvement Act of 1991 (FDICIA)
requires the U.S. federal bank regulatory agencies to take
“prompt corrective action” in respect of depository
institutions that do not meet specified capital requirements.
FDICIA establishes five capital categories for FDIC-insured
banks, such as GS Bank USA: well-capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized
and critically undercapitalized.

An institution may be downgraded to, or deemed to be in, a
capital category that is lower than is indicated by its capital
ratios if it is determined to be in an unsafe or unsound
condition or if it receives an unsatisfactory examination
rating with respect to certain matters. FDICIA imposes
progressively more restrictive constraints on operations,
management and capital distributions, as the capital
category of an institution declines. Failure to meet the
capital requirements could also require a depository
institution
critically
undercapitalized institutions are subject to the appointment
of a receiver or conservator, as described in “Insolvency of
an IDI or a BHC” above.

capital. Ultimately,

raise

The prompt corrective action regulations do not apply to
BHCs. However, the FRB is authorized to take appropriate
action at the BHC level, based upon the undercapitalized
status of the BHC’s depository institution subsidiaries. In
certain instances, relating to an undercapitalized depository
institution subsidiary, the BHC would be required to
the undercapitalized
guarantee
subsidiary’s capital restoration plan and might be liable for
civil money damages for failure to fulfill its commitments
on that guarantee. Furthermore,
the
bankruptcy of the BHC, the guarantee would take priority
over the BHC’s general unsecured creditors, as described in
“Source of Strength” above.

the performance of

in the event of

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Volcker Rule and Other Restrictions on Activities. As a
BHC, we are subject to limitations on the types of business
activities we may engage in.

Volcker Rule. The Volcker Rule prohibits “proprietary
trading,” but permits activities such as underwriting,
market making and risk-mitigation hedging, requires an
extensive compliance program and includes additional
reporting and record-keeping requirements.

In addition, the Volcker Rule limits the sponsorship of, and
investment in, “covered funds” (as defined in the rule) by
banking entities, including us. It also limits certain types of
transactions between us and our sponsored and advised funds,
similar to the limitations on transactions between depository
institutions and their affiliates. Covered funds include our
private equity funds, certain of our credit and real estate funds,
our hedge funds and certain other investment structures. The
limitation on investments in covered funds requires us to limit
our investment in each such fund to 3% or less of the fund’s
net asset value, and to limit our aggregate investment in all
such funds to 3% or less of our Tier 1 capital.

The FRB has extended the conformance period to July 2022
for our investments in, and relationships with, certain legacy
“illiquid funds” (as defined in the Volcker Rule) that were in
place prior to December 2013. See Note 8 to the consolidated
financial statements in Part II, Item 8 of this Form 10-K for
further information about our investments in such funds.

certain

implementing the Volcker Rule,

The FRB, OCC, FDIC, CFTC and SEC (Volcker Rule
regulators) finalized amendments in October 2019 to their
regulations
tailoring
compliance requirements based on the size and scope of a
banking entity’s trading activities and clarifying and
and
definitions,
amending
exemptions. These amendments became effective on
January 1, 2020 but with a required compliance date of
January 1, 2021. In January 2020, the Volcker Rule
regulators issued a proposal to clarify and amend certain
definitions, requirements and exemptions with respect to
covered funds. The ultimate impact of any amendments to
the Volcker Rule regulations will depend on, among other
things, further rulemaking and implementation guidance
from the Volcker Rule regulators.

requirements

Other Restrictions. FHCs generally can engage in a
broader range of financial and related activities than are
otherwise permissible for BHCs as long as they continue to
meet the eligibility requirements for FHCs. The broader
range of permissible
includes
activities
underwriting, dealing and making markets in securities and
making investments in non-FHCs (merchant banking
activities). In addition, certain FHCs are permitted to
engage in certain commodities activities in the U.S. that
may otherwise be impermissible for BHCs, so long as the
assets held pursuant to these activities do not equal 5% or
more of their consolidated assets.

for FHCs

The FRB, however, has the authority to limit an FHC’s
ability to conduct activities that would otherwise be
permissible, and will likely do so if the FHC does not
satisfactorily meet certain requirements of the FRB. For
example, if an FHC or any of its U.S. depository institution
subsidiaries ceases to maintain its status as well-capitalized
or well-managed, the FRB may impose corrective capital
and/or managerial requirements, as well as additional
limitations or conditions. If the deficiencies persist, the FHC
may be required to divest its U.S. depository institution
subsidiaries or to cease engaging in activities other than the
business of banking and certain closely related activities.

If any IDI subsidiary of an FHC fails to maintain at least a
“satisfactory” rating under the Community Reinvestment
Act, the FHC would be subject to restrictions on certain
new activities and acquisitions.

In addition, we are required to obtain prior FRB approval
before engaging in certain banking and other financial
activities both within and outside the U.S.

The FRB issued a proposed rule in September 2016 which,
if adopted, would impose new requirements on the physical
commodity activities and certain merchant banking
activities of FHCs. The proposed rule would, among other
in
things, (i) require FHCs to hold additional capital
connection with covered physical commodity activities,
including merchant banking investments in companies
engaged in physical commodity activities; (ii) tighten the
quantitative limits on permissible physical trading activity;
and (iii) establish new public reporting requirements on the
nature and extent of an FHC’s physical commodity
holdings and activities. In addition, in a September 2016
report, the FRB recommended that Congress repeal (i) the
authority of FHCs to engage in merchant banking activities;
and (ii) the authority described above for certain FHCs to
engage in certain otherwise impermissible commodities
activities.

Effective January 1, 2020, U.S. G-SIBs, like us, are required
to comply with a rule regarding single counterparty credit
limits, which imposes more stringent requirements for
institutions. In
credit exposures among major financial
addition,
the FRB has proposed early remediation
requirements, which are modeled on the prompt corrective
action regime, described in “Prompt Corrective Action”
above, but are designed to require action to begin in earlier
stages of a company’s financial distress, based on a range of
triggers, including capital and leverage, stress test results,
liquidity and risk management.

The New York State banking law imposes lending limits
(which take into account credit exposure from derivative
transactions) and other requirements that could impact the
manner and scope of GS Bank USA’s activities.

Goldman Sachs 2019 Form 10-K

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The U.S. federal bank regulatory agencies have issued
guidance that focuses on transaction structures and risk
management
frameworks and that outlines high-level
principles for safe-and-sound leveraged lending, including
underwriting standards, valuation and stress testing. This
guidance has, among other things, limited the percentage
amount of debt that can be included in certain transactions.

Broker-Dealer and Securities Regulation
Our broker-dealer subsidiaries are subject to regulations
that cover all aspects of the securities business, including
sales methods, trade practices, use and safekeeping of
clients’
funds and securities, capital structure, record-
the financing of clients’ purchases, and the
keeping,
conduct of directors, officers and employees. In the U.S., the
SEC is the federal agency responsible for the administration
of the federal securities laws. GS&Co. is registered as a
broker-dealer, a municipal advisor and an investment
adviser with the SEC and as a broker-dealer in all 50 states
and the District of Columbia. U.S.
self-regulatory
organizations, such as FINRA and the NYSE, adopt rules
that apply to, and examine, broker-dealers such as GS&Co.

U.S. state securities and other U.S. regulators also have
regulatory or oversight authority over GS&Co. Similarly,
our businesses are also subject to regulation by various
non-U.S. governmental and regulatory bodies and self-
regulatory authorities in virtually all countries where we
have offices, as described further below, as well as in
“Other Regulation.” For a description of net capital
requirements applicable to GS&Co., see “Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Equity Capital Management and
Regulatory Capital — U.S. Regulated Broker-Dealer
Subsidiaries” in Part II, Item 7 of this Form 10-K.

In Europe, we provide broker-dealer services, including
through GSI, that are subject to oversight by national
regulators. These services are regulated in accordance with
national laws, many of which implement E.U. directives,
and, increasingly, by directly applicable E.U. regulations.
These national and E.U. laws require, among other things,
compliance with certain capital adequacy standards,
customer protection requirements and market conduct and
trade reporting rules. Certain of our European subsidiaries
are also regulated by the securities, derivatives and
commodities exchanges of which they are members.

Goldman Sachs 2019 Form 10-K

Goldman Sachs Japan Co., Ltd. (GSJCL), our regulated
Japanese broker-dealer, is subject to capital requirements
imposed by Japan’s Financial Services Agency. GSJCL is
also regulated by the Tokyo Stock Exchange, the Osaka
the Japan
the Tokyo Financial Exchange,
Exchange,
Securities Dealers Association,
the Tokyo Commodity
Exchange,
the Securities and Exchange Surveillance
Commission, the Bank of Japan and the Ministry of
Finance, among others.

The Securities and Futures Commission in Hong Kong, the
Monetary Authority of Singapore, the China Securities
Regulatory Commission, the Korean Financial Supervisory
Service, the Reserve Bank of India, the Securities and
Exchange Board of India, the Australian Securities and
Investments Commission and the Australian Securities
Exchange, among others,
regulate various of our
subsidiaries and also have capital standards and other
requirements comparable to the rules of the SEC.

Our exchange-based market-making activities are subject
to extensive regulation by a number of securities exchanges.
As a market maker on exchanges, we are required to
maintain orderly markets in the securities to which we are
assigned.

In the E.U., MiFID II includes extensive market structure
reforms, such as the establishment of new trading venue
categories for the purposes of discharging the obligation to
trade OTC derivatives on a trading platform and enhanced
pre- and post-trade transparency covering a wider range of
instruments. In equities, MiFID II introduced
financial
volume caps on non-transparent
liquidity trading for
trading venues, limited the use of broker-dealer crossing
systematic
networks and created a new regime for
internalizers, which are investment firms that execute client
transactions outside a trading venue. Additional control
requirements were introduced for algorithmic trading, high
access.
frequency
Commodities trading firms are required to calculate their
positions and adhere to specific limits. Other reforms
introduced enhanced transaction reporting, the publication
of best execution data by investment firms and trading
venues, transparency on costs and charges of service to
investors, changes to the way investment managers can pay
for the receipt of investment research and mandatory
unbundling for broker-dealers between execution and other
major services.

electronic

trading

direct

and

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The SEC adopted a rule in June 2019 that requires broker-
dealers to act in the best interest of their customers, and also
issued an interpretation clarifying the SEC’s views of the
existing fiduciary duty owed by investment advisers to their
clients. Additionally, the SEC adopted a rule that requires
broker-dealers and investment advisers to provide a
standardized, short-form disclosure highlighting services
offered, applicable standards of conduct, fees and costs, the
differences between brokerage and advisory services, and
any conflicts of interest. Several states have also proposed
adopting uniform fiduciary duty standards applicable to
broker-dealers and advisers.

The SEC, FINRA and regulators in various non-U.S.
jurisdictions have
imposed both conduct-based and
disclosure-based requirements with respect to research
reports and research analysts and may impose additional
regulations.

GS&Co., GS Bank USA and other U.S. subsidiaries are also
subject to rules adopted by U.S. federal agencies pursuant
to the Dodd-Frank Act that require any person who
organizes or
certain asset-backed securities
transactions to retain a portion (generally, at least five
percent) of any credit risk that the person conveys to a third
party. For certain securitization transactions, retention by
third-party purchasers may satisfy this requirement.

initiates

Swaps, Derivatives and Commodities Regulation
The commodity futures, commodity options and swaps
industry in the U.S. is subject to regulation under the U.S.
Commodity Exchange Act (CEA). The CFTC is the U.S.
federal agency charged with the administration of the CEA.
In addition, the SEC is the U.S. federal agency charged with
the regulation of security-based swaps. The rules and
regulations of various self-regulatory organizations, such as
the Chicago Mercantile Exchange, other futures exchanges
and the National Futures Association, also govern
commodity options and swaps
commodity futures,
activities.

The terms “swaps” and “security-based swaps” include a
wide variety of derivative instruments in addition to those
conventionally referred to as swaps (including certain
forward contracts and options), and relate to a wide variety
of underlying assets or obligations, including currencies,
commodities,
interest or other monetary rates, yields,
indices, securities, credit events, loans and other financial
obligations.

CFTC rules require registration of swap dealers, mandatory
clearing and execution of interest rate and credit default
swaps and real-time public reporting and adherence to
business conduct standards for all in-scope swaps. GS&Co.
and other subsidiaries, including GS Bank USA, GSI and
J. Aron & Company LLC (J. Aron), are registered with the
CFTC as swap dealers. In December 2016, the CFTC
proposed revised capital regulations for swap dealers that
are not subject to the capital rules of a prudential regulator,
such as the FRB, as well as a liquidity requirement for those
swap dealers. Certain of our registered swap dealers will be
subject to the CFTC’s capital requirements, when they are
adopted.

Our affiliates registered as swap dealers are subject to the
margin rules issued by the CFTC (in the case of our
non-bank swap dealers) and the FRB (in the case of GS
Bank USA). The rules for variation margin have become
effective, and those for initial margin will phase in through
September 2020 depending on certain activity levels of the
swap dealer and the relevant counterparty. In contrast to
the FRB margin rules, inter-affiliate transactions under the
CFTC margin rules are generally exempt from initial
margin requirements. The FRB issued proposed rules in
September 2019 to conform its margin rules on inter-
affiliate transactions to the CFTC’s margin rules and to
allow initial margin requirements to phase in through
September 2021 depending on certain activity levels of the
swap dealer and the relevant counterparty. The CFTC
issued proposed rules in October 2019 to similarly modify
the phase-in of initial margin requirements.

The CFTC has adopted rules relating to cross-border
regulation of swaps, and has proposed cross-border
business conduct and registration rules. The CFTC has
entered into agreements with certain non-U.S. regulators,
including in the E.U., regarding the cross-border regulation
of derivatives and the mutual recognition of cross-border
clearing houses, and has approved substituted compliance
including E.U.
with
regulations,
conduct
requirements and margin rules. The U.S. prudential
regulators have not yet made a determination with respect
to substituted compliance for transactions subject
to
non-U.S. margin rules.

regulations,
certain

non-U.S.

business

certain

Goldman Sachs 2019 Form 10-K

registered with the CFTC as a futures
GS&Co.
commission merchant, and several of our subsidiaries,
including GS&Co., are registered with the CFTC and act as
commodity pool operators and commodity trading
is
advisors. Goldman Sachs Financial Markets, L.P.
registered with the SEC as an OTC derivatives dealer.

Asset Management and Wealth Management
Regulation
Our asset management and wealth management businesses
are subject to extensive oversight by regulators around the
world relating to, among other things, the safeguarding of
client assets, offerings of
funds, marketing activities,
transactions among affiliates and our management of client
funds.

Certain of our European subsidiaries, including GSAMI,
are subject to the Alternative Investment Fund Managers
Directive and related regulations, which govern the
reporting
approval,
requirements
investment
managers and the ability of alternative investment fund
managers located outside the E.U. to access the E.U.
market.

organizational, marketing
E.U.-based

alternative

and

Consumer Regulation
to
Our U.S. consumer-oriented activities are subject
extensive oversight by federal and state regulators. These
businesses are subject to supervision and regulation by the
CFPB with respect to federal consumer protection laws,
including laws relating to fair lending and the prohibition
of unfair, deceptive or abusive acts or practices in
connection with the offer, sale or provision of consumer
financial products and services. Our consumer-oriented
businesses are also subject to various state and local
consumer protection laws. These
rules and
regulations, among other
impose obligations
relating to our marketing, origination, servicing and
collections activity in our consumer businesses. Our U.K.
consumer deposit-taking activities are subject
to U.K
consumer protection regulations.

things,

laws,

Compensation Practices
Our compensation practices are subject to oversight by the
FRB and, with respect to some of our subsidiaries and
employees, by other regulatory bodies worldwide.

T H E G O L D M A N S A C H S G R O U P ,

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Similar types of swap regulation have been proposed or
adopted in jurisdictions outside the U.S., including in the
E.U. and Japan. For example, the E.U. has established
regulatory requirements relating to portfolio reconciliation
and reporting, clearing certain OTC derivatives and
margining for uncleared derivatives activities under the
European Market Infrastructure Regulation.

(ii)

record-keeping,

SEC rules govern the registration and regulation of security-
based swap dealers. The SEC adopted a number of rules
and rule amendments for security-based swap dealers in
including (i) capital, margin and segregation
2019,
requirements,
and
notification requirements, and (iii) the application of risk
mitigation techniques to uncleared portfolios of security-
based swaps and the cross-border application of certain
security-based swap requirements. The compliance date for
these SEC rules, as well as SEC rules addressing registration
requirements and business conduct standards, is generally
October 2021.

reporting

The CFTC has proposed position limit rules that will limit
the size of positions in physical commodity derivatives that
can be held by any entity, or any group of affiliates or other
parties trading under common control, subject to certain
exemptions, such as for bona fide hedging positions. These
proposed rules would apply to positions in swaps, as well as
futures and options on futures. Currently, position limits on
futures on physical commodities are administered by the
futures on
relevant exchanges, with the exception of
agricultural commodities, which are administered by the
CFTC.

J. Aron is authorized by the U.S. Federal Energy Regulatory
Commission (FERC) to sell wholesale physical power at
market-based rates. As
a FERC-authorized power
marketer, J. Aron is subject to regulation under the U.S.
Federal Power Act and FERC regulations and to the
oversight of FERC. As a result of our investing activities,
Group Inc. is also an “exempt holding company” under the
U.S. Public Utility Holding Company Act of 2005 and
applicable FERC rules.

and

are
subject
governmental

activities, we
other

In addition, as a result of our power-related and
to energy,
commodities
environmental
and
laws
regulations, as described in “Risk Factors — Our
physical
commodities
commodities activities, subject us to extensive regulation
and
including
environmental, reputational and other risks that may
expose us to significant liabilities and costs” in Part I,
Item 1A of this Form 10-K.

particularly

activities,

potential

involve

certain

risks,

our

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

arrangements

compensation

The FSB has released standards for local regulators to
implement certain compensation principles for banks and
other financial companies designed to encourage sound
compensation practices. The U.S. federal bank regulatory
agencies have provided guidance designed to ensure that
incentive
banking
organizations take into account risk and are consistent with
safe and sound practices. The guidance sets forth the
following three key principles with respect to incentive
compensation arrangements: (i) the arrangements should
provide employees with incentives that appropriately
balance risk and financial results in a manner that does not
encourage employees to expose their organizations to
imprudent risk; (ii) the arrangements should be compatible
with effective controls and risk management; and (iii) the
arrangements should be supported by strong corporate
supervisory
governance. The guidance provides
findings with respect to incentive compensation will be
incorporated, as appropriate,
into the organization’s
supervisory ratings, which can affect its ability to make
acquisitions or perform other actions. The guidance also
provides that enforcement actions may be taken against a
banking organization if
compensation
its
arrangements or related risk management, control or
governance processes pose a risk to the organization’s
safety and soundness.

incentive

that

The Dodd-Frank Act requires the U.S. financial regulators,
including the FRB and SEC, to adopt rules on incentive-
based payment arrangements at specified regulated entities
having at least $1 billion in total assets. The U.S. financial
regulators proposed revised rules in 2016, which have not
been finalized.

The NYDFS issued guidance in October 2016 emphasizing
that its regulated banking institutions, including GS Bank
USA, must ensure that any incentive compensation
arrangements tied to employee performance indicators are
subject to effective risk management, oversight and control.

In the E.U., the CRR and CRD IV include compensation
provisions designed to implement the FSB’s compensation
standards. These rules have been implemented by E.U.
member states and, among other things, limit the ratio of
variable to fixed compensation of certain employees,
including those identified as having a material impact on
the risk profile of E.U.-regulated entities, including GSI.
CRR II and CRD V amend certain aspects of these rules,
including, among other things, by increasing minimum
compensation deferral periods.

The E.U. has also introduced rules regulating compensation
for certain persons providing services to certain investment
funds. These requirements are in addition to the guidance
issued by U.S. financial regulators and the Dodd-Frank Act
provision, each as described above.

Anti-Money Laundering and Anti-Bribery Rules and
Regulations
The U.S. Bank Secrecy Act (BSA), as amended by the USA
PATRIOT Act of 2001 (PATRIOT Act), contains anti-
money laundering and financial transparency laws and
mandates
regulations
the implementation of various
applicable to all financial institutions, including standards
for verifying client identification at account opening, and
transactions and report
obligations to monitor client
suspicious activities. Through these and other provisions,
the BSA and the PATRIOT Act seek to promote the
identification of parties that may be involved in terrorism,
money laundering or other suspicious activities. Anti-
money laundering laws outside the U.S. contain some
similar provisions.

In addition, we are subject
to laws and regulations
worldwide, including the U.S. Foreign Corrupt Practices
Act (FCPA) and the U.K. Bribery Act, relating to corrupt
and illegal payments to, and hiring practices with regard to,
government officials and others. The scope of the types of
payments or other benefits covered by these laws is very
broad and regulators are frequently using enforcement
proceedings to define the scope of
these laws. The
obligation of financial institutions to identify their clients,
to monitor for and report suspicious transactions, to
monitor direct and indirect payments to government
officials,
to respond to requests for information by
regulatory authorities and law enforcement agencies, and to
institutions, has
share information with other financial
required the implementation and maintenance of internal
practices, procedures and controls.

Privacy and Cyber Security Regulation
to laws and
Certain of our businesses are subject
regulations enacted by U.S. federal and state governments,
the E.U. or other non-U.S. jurisdictions and/or enacted by
various regulatory organizations or exchanges relating to
the privacy of the information of clients, employees or
others, including the GLB Act, the E.U.’s General Data
Protection Regulation (GDPR),
the Japanese Personal
Information Protection Act, the Hong Kong Personal Data
(Privacy) Ordinance, the Australian Privacy Act and the
Brazilian Bank Secrecy Law. The GDPR has heightened our
privacy compliance obligations, impacted our businesses’
collection, processing and retention of personal data and
imposed strict standards for reporting data breaches. The
GDPR also provides
for
non-compliance. In addition, California and several other
states have recently enacted, or are actively considering,
consumer privacy laws that impose compliance obligations
with regard to the collection, use and disclosure of personal
information.

significant penalties

for

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

The NYDFS also requires financial institutions regulated by
the NYDFS, including GS Bank USA, to, among other
things, (i) establish and maintain a cyber security program
designed to ensure the confidentiality,
integrity and
availability of their information systems; (ii) implement and
maintain a written cyber security policy setting forth
policies and procedures
their
for
information systems and nonpublic information; and
(iii) designate a Chief Information Security Officer. In
addition, in October 2016, the U.S. federal bank regulatory
agencies issued an advance notice of proposed rulemaking
on potential enhanced cyber risk management standards for
large financial institutions.

the protection of

Information about our Executive Officers

Set forth below are the name, age, present title, principal
occupation and certain biographical information for the
executive officers who have been appointed by, and serve at
the pleasure of, Group Inc.’s Board of Directors (Board).

Sheara Fredman, 44
Ms. Fredman has been Controller and Chief Accounting
Officer since November 2019. She had previously served as
Head of Regulatory Controllers from September 2017 and,
prior to that, she had served as Global Product Controller.

Elizabeth M. Hammack, 48
Ms. Hammack has been Global Treasurer
since
January 2018. She had previously served as Global Head of
Short Term Macro Trading and Global Repo Trading from
August 2015 to January 2018. Prior to that, she was
Co-Head of U.S. Interest Rate Products Cash Trading from
January 2011 to August 2015.

Brian J. Lee, 53
Mr. Lee has been Chief Risk Officer since November 2019.
He had previously served as Controller and Chief
Accounting Officer from March 2017 and, prior to that, he
had served as Deputy Controller from 2014.

John F.W. Rogers, 63
Mr. Rogers has been an Executive Vice President since
April 2011 and Chief of Staff and Secretary to the Board
since December 2001.

Stephen M. Scherr, 55
Mr. Scherr has been Chief Financial Officer
since
November 2018. He had previously served as Chief
Executive Officer of Goldman Sachs Bank USA from
May 2016, and Head of the Consumer & Commercial
Banking Division from 2016 to 2018. From June 2014 to
November 2017, he was Chief Strategy Officer, and from
2011 to 2016 he was Head of the Latin America business.
He was also Global Head of the Financing Group from
2008 to 2014.

Karen P. Seymour, 58
Ms. Seymour has been an Executive Vice President, General
January 2018. Since
Counsel and Secretary since
January 2019, she has been Head of the Legal Division and
was previously Co-Head of
the Legal Division from
January 2018 to January 2019. From 2000 through
January 2002 and 2005 through 2017, she was a partner at
Sullivan & Cromwell LLP, a global law firm, including
serving as a member of its management committee from
April 2015 to December 2017, and as the co-managing
partner of its litigation group from December 2012 to
April 2015.

David M. Solomon, 58
Mr. Solomon has been Chairman of the Board since
January 2019 and Chief Executive Officer and a director
since October 2018. He had previously served as President
and Chief
from
January 2017 and Co-Head of the Investment Banking
Division from July 2006 to December 2016.

or Co-Chief Operating Officer

Laurence Stein, 52
Mr. Stein has been Chief Administrative Officer since
January 2018. He had previously served as Global Head of
the Operations Division from October 2015 to
December 2017. From August 2009 to October 2015, he
was Chief Operating Officer of the Securities Division.

John E. Waldron, 50
Mr. Waldron has been President and Chief Operating
Officer since October 2018. He had previously served as
Co-Head of
the Investment Banking Division from
December 2014. Prior to that he was Global Head of
Investment Banking Services/Client Coverage for
the
Investment Banking Division and had oversight of the
Investment Banking Services Leadership Group, and from
2007 to 2009 was Global Co-Head of the Financial
Sponsors Group.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

Available Information

Our internet address is www.goldmansachs.com and the
investor relations section of our website is located at
www.goldmansachs.com/investor-relations, where we
make available, free of charge, our annual reports on
Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act, as well as proxy statements, as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the SEC. Also posted on our
website, and available in print upon request of any
shareholder to our Investor Relations Department (Investor
Relations), are our certificate of incorporation and by-laws,
charters for our Audit, Risk, Compensation, Corporate
Governance and Nominating, and Public Responsibilities
Committees, our Policy Regarding Director Independence
Determinations, our Policy on Reporting of Concerns
Regarding Accounting and Other Matters, our Corporate
Governance Guidelines and our Code of Business Conduct
and Ethics governing our directors, officers and employees.
Within the time period required by the SEC, we will post on
our website any amendment to the Code of Business
Conduct and Ethics and any waiver applicable to any
executive officer, director or senior financial officer.

Our website also includes information about (i) purchases
and sales of our equity securities by our executive officers
and directors; (ii) disclosure relating to certain non-GAAP
financial measures (as defined in the SEC’s Regulation G)
that we may make public orally, telephonically, by webcast,
by broadcast or by other means; (iii) DFAST results; (iv) the
public portion of our resolution plan submission; (v) our
Pillar 3 disclosure; and (vi) our average daily LCR.

our

website,

Investor Relations,

Investor Relations can be contacted at The Goldman Sachs
Group, Inc., 200 West Street, 29th Floor, New York, New
telephone:
York 10282, Attn:
212-902-0300, e-mail: gs-investor-relations@gs.com. We
Twitter
use
account
(twitter.com/GoldmanSachs),
Instagram account
(instagram.com/GoldmanSachs) and other social media
channels as additional means of disclosing public
information to investors, the media and others. Our officers
may use similar social media channels to disclose public
information. It is possible that certain information we or
our officers post on our website and on social media could
be deemed material, and we encourage investors, the media
and others interested in Goldman Sachs to review the
business and financial information we or our officers post
on our website and on the social media channels identified
above. The information on our website and those social
media channels is not incorporated by reference into this
Form 10-K.

Cautionary Statement Pursuant to the U.S.
Private Securities Litigation Reform Act of
1995

We have included in this Form 10-K, and our management
may make, statements that may constitute “forward-looking
statements” within the meaning of the safe harbor provisions
of the U.S. Private Securities Litigation Reform Act of 1995.
Forward-looking statements are not historical
facts or
statements of current conditions, but instead represent only
our beliefs regarding future events, many of which, by their
nature, are inherently uncertain and outside our control.

(vi)

implications

information security program,

These statements may relate to, among other things, (i) our
future plans and results, including our target ROE, ROTE,
efficiency ratio and CET1 capital ratio, and how they can
be achieved, (ii) various legal proceedings, governmental
forth in
investigations or other contingencies as set
Notes 27 and 18 to the consolidated financial statements in
Part II, Item 8 of this Form 10-K, (iii) the results of stress
tests, (iv) the objectives and effectiveness of our business
risk
continuity plan,
management and liquidity policies, (v) our resolution plan
and resolution strategy and their
for
stakeholders,
the design and effectiveness of our
resolution capital and liquidity models and triggers and
alerts framework, (vii) trends in or growth opportunities
for our businesses, including the timing and benefits of
business and strategic initiatives and changes in and the
importance of the efficiency ratio, (viii) the effect of changes
to regulations, as well as our future status, activities or
reporting under banking and financial regulation, (ix) our
NSFR and SCB, (x) our level of future compensation
expense as a percentage of operating expenses, (xi) our
investment banking transaction backlog, (xii) our expected
tax rate, (xiii) our proposed capital actions (including those
permitted by our CCAR 2019 capital plan), (xiv) our
expected interest
(xv) our credit exposures,
(xvi) our expected provisions for credit losses, (xvii) our
preparations for Brexit, including a hard Brexit scenario,
(xviii) the replacement of LIBOR and other IBORs and our
program for the transition to alternative risk-free reference
rates, (xix) the adequacy of our allowance for credit losses,
(xx) the projected growth of our deposits and associated
interest expense savings, (xxi) the projected growth of our
consumer loan and credit card businesses,
(xxii) our
business initiatives, including those related to transaction
banking and new consumer financial products, (xxiii) our
expense savings initiatives and increasing use of strategic
locations, (xxiv) our planned 2020 parent vanilla debt
issuances, (xxv) the amount of GCLA we expect to hold,
(xxvi) our expected G-SIB surcharge and (xxvii) expenses
we may incur, including future litigation expense and those
associated with investing in our consumer lending, credit
card and transaction banking businesses.

income,

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

By identifying these statements for you in this manner, we
are alerting you to the possibility that our actual results and
financial condition may differ, possibly materially, from the
anticipated results and financial condition in these forward-
looking statements. Important factors that could cause our
results, financial condition and capital actions to differ
from those in these statements include, among others, those
described below and in “Risk Factors” in Part I, Item 1A of
this Form 10-K.

Statements about our investment banking transaction
backlog are subject to the risk that such transactions may be
modified or may not be completed at all and related net
revenues may not be realized or may be materially less than
expected. Important factors that could have such a result
include,
for underwriting transactions, a decline or
weakness in general economic conditions, outbreak of
hostilities, volatility in the securities markets or an adverse
development with respect to the issuer of the securities and,
for financial advisory transactions, a decline in the
securities markets, an inability to obtain adequate
financing, an adverse development with respect to a party
to the transaction or a failure to obtain a required
information about other
regulatory
important
could adversely affect our
investment banking transactions, see “Risk Factors” in
Part I, Item 1A of this Form 10-K.

approval. For
factors

that

Statements about our future effective income tax rate are
subject to the risk that it may differ from the anticipated
rate indicated in such statements, possibly materially, due
to, among other things, changes in our earnings mix, our
profitability and entities in which we generate profits, the
assumptions we have made in forecasting our expected tax
rate, as well as guidance that may be issued by the U.S.
Internal Revenue Service.

Statements about our NSFR and SCB are based on our
current interpretation and expectations of the relevant
proposals, and reflect significant assumptions about how
our NSFR and SCB are calculated. Our actual NSFR and
SCB will depend on the final rules and, for the SCB, the
results of the applicable supervisory stress tests, and the
methods used to calculate our NSFR and SCB may differ,
possibly materially, from those used to calculate our NSFR
and SCB for future disclosures.

the level of compensation expense,
Statements about
including as a percentage of operating expenses, and our
efficiency ratio as our platform business initiatives reach
scale are subject to the risks that the compensation and
other costs to operate our businesses, including platform
initiatives, may be greater than currently expected.

Goldman Sachs 2019 Form 10-K

Statements about our expected provisions for credit losses
are subject to the risk that actual credit losses may differ
and our expectations may change, possibly materially, from
that currently anticipated due to, among other things,
changes to the composition of our loan portfolio and
changes in the economic environment in future periods and
our forecasts of future economic conditions, as well as
changes in our models, policies and other management
judgments.

Statements about the projected growth of our deposits and
associated interest expense savings, and our consumer loan
and credit card businesses, are subject to the risk that actual
growth may differ, possibly materially, from that currently
anticipated due to, among other things, changes in interest
rates and competition from other similar products.

Statements about our target ROE, ROTE, efficiency ratio,
and expense savings, and how they can be achieved, are
based on our current expectations regarding our business
prospects and are subject to the risk that we may be unable
to achieve our targets due to, among other things, changes
in our business mix, lower profitability of new business
initiatives, increases in technology and other costs to launch
and bring new business initiatives to scale, and increases in
liquidity requirements.

Statements about our target ROE, ROTE and CET1 capital
ratio, and how they can be achieved, are based on our
current expectations regarding the capital requirements
applicable to us and are subject to the risk that our actual
capital
than currently
anticipated because of, among other factors, changes in the
regulatory capital requirements applicable to us resulting
from changes in regulations or the interpretation or
application of existing regulations or changes in the nature
and composition of our activities.

requirements may be higher

Statements about the timing, costs and benefits of business
and expense savings initiatives, the level and composition of
more durable revenues and increases in market share are
based on our current expectations regarding our ability to
implement these initiatives and actual results may differ,
possibly materially, from current expectations due to,
among other things, a delay in the timing of
these
initiatives, increased competition and an inability to reduce
expenses and grow businesses with durable revenues.

Statements about planned 2020 parent vanilla debt
issuances and the amount of GCLA we expect to hold are
subject to the risk that actual issuances and GCLA levels
from that currently
may differ, possibly materially,
expected due to changes in market conditions, business
opportunities or our funding and projected liquidity needs.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

Item 1A. Risk Factors

We face a variety of risks that are substantial and inherent
in our businesses,
liquidity, credit,
operational, legal, regulatory and reputational risks. The
following are some of the more important factors that
could affect our businesses.

including market,

Our businesses have been and may continue to be
adversely affected by conditions in the global
financial markets and economic conditions generally.

Our businesses, by their nature, do not produce predictable
earnings, and all of our businesses are materially affected by
conditions in the global financial markets and economic
conditions generally, both directly and through their impact
on client activity levels and creditworthiness. These
conditions can change suddenly and negatively.

Our financial performance is highly dependent on the
environment in which our businesses operate. A favorable
business environment is generally characterized by, among
other factors, high global gross domestic product growth,
regulatory and market conditions that result in transparent,
liquid and efficient capital markets, low inflation, high
business and investor confidence,
stable geopolitical
conditions, clear regulations and strong business earnings.

rates; concerns about

Unfavorable or uncertain economic and market conditions
can be caused by: declines in economic growth, business
activity or investor, business or consumer confidence;
limitations on the availability or increases in the cost of
credit and capital; illiquid markets; increases in inflation,
interest rates, exchange rate or basic commodity price
volatility or default
sovereign
defaults; uncertainty concerning fiscal or monetary policy,
government shutdowns, debt ceilings or funding; the extent
of and uncertainty about tax and other regulatory changes;
the
limitations on
international trade and travel; outbreaks of domestic or
international
terrorism, nuclear
proliferation, cyber security threats or attacks and other
forms of disruption to or
global
communication, energy transmission or transportation
networks or other geopolitical instability or uncertainty,
such as Brexit; corporate, political or other scandals that
reduce investor confidence in capital markets; extreme
weather events or other natural disasters or pandemics; or a
combination of these or other factors.

tensions or hostilities,

tariffs or other

curtailment of

imposition of

The financial services industry and the securities and other
financial markets have been materially and adversely
affected in the past by significant declines in the values of
nearly all asset classes, by a serious lack of liquidity and by
high levels of borrower defaults. In addition, concerns
about European sovereign debt risk and its impact on the
the
European banking system,
imposition of tariffs and actions taken by other countries in
response, and changes in interest rates and other market
conditions or actual changes in interest rates and other
market conditions, have resulted, at times, in significant
volatility while negatively impacting the levels of client
activity.

the impact of Brexit,

General uncertainty about economic, political and market
activities, and the scope, timing and impact of regulatory
reform, as well as weak consumer,
investor and CEO
confidence resulting in large part from such uncertainty,
has in the past negatively impacted client activity, which
can adversely affect many of our businesses. Periods of low
volatility and periods of high volatility combined with a
lack of liquidity, have at times had an unfavorable impact
on our market-making businesses.

Financial institution returns in many countries may be
negatively impacted by increased funding costs due in part
to the lack of perceived government support of such
institutions in the event of future financial crises relative to
financial institutions in countries in which governmental
support is maintained. In addition, liquidity in the financial
markets has also been negatively impacted as market
participants and market practices and structures continue
to adjust to new regulations.

Our revenues and profitability and those of our competitors
have been and will continue to be impacted by requirements
loss-absorbing capacity,
relating to capital, additional
leverage, minimum liquidity and long-term funding levels,
requirements related to resolution and recovery planning,
derivatives clearing and margin rules and levels of
regulatory oversight, as well as limitations on which and, if
permitted, how certain business activities may be carried
out by financial institutions.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

Our businesses and those of our clients are subject to
extensive and pervasive regulation around the world.

As a participant in the financial services industry and a
systemically important financial institution, we are subject
to extensive regulation in jurisdictions around the world.
We face the risk of significant
intervention by law
enforcement, regulatory and taxing authorities, as well as
private litigation, in all jurisdictions in which we conduct
our businesses. In many cases, our activities have been and
may continue to be subject to overlapping and divergent
regulation in different jurisdictions. Among other things, as
a result of law enforcement authorities, regulators or
private parties challenging our compliance with existing
laws and regulations, we or our employees have been, and
could be,
sanctioned;
prohibited from engaging in some of our business activities;
subjected to limitations or conditions on our business
activities,
requirements; or
subjected to new or substantially higher taxes or other
governmental charges in connection with the conduct of
our businesses or with respect to our employees. These
limitations or conditions may limit our business activities
and negatively impact our profitability.

criminally charged or

including higher

capital

fined,

In addition to the impact on the scope and profitability of
our business activities, day-to-day compliance with existing
laws and regulations has involved and will, except to the
extent that some of these regulations are modified or
otherwise repealed, continue to involve significant amounts
of time, including that of our senior leaders and that of a
large number of dedicated compliance and other reporting
and operational personnel, all of which may negatively
impact our profitability.

leverage,

long-term debt, total

If there are new laws or regulations or changes in the
enforcement of existing laws or regulations applicable to
our businesses or those of our clients, including capital,
loss-absorbing
liquidity,
capacity and margin requirements, restrictions on leveraged
lending or other business practices, reporting requirements,
requirements relating to recovery and resolution planning,
that are
tax burdens and compensation restrictions,
imposed on a limited subset of
institutions
(whether based on size, method of funding, activities,
geography or other criteria), compliance with these new
laws or regulations, or changes in the enforcement of
existing laws or regulations, could adversely affect our
ability to compete effectively with other institutions that are
not affected in the same way. In addition, regulation
imposed on financial institutions or market participants
generally, such as taxes on financial transactions, could
adversely impact levels of market activity more broadly,
and thus impact our businesses.

financial

Goldman Sachs 2019 Form 10-K

changing

These developments could impact our profitability in the
affected jurisdictions, or even make it uneconomic for us to
continue to conduct all or certain of our businesses in those
jurisdictions, or could cause us to incur significant costs
practices,
associated with
restructuring our businesses, moving all or certain of our
businesses and our employees to other locations or
complying with applicable capital requirements, including
reducing dividends or share repurchases, liquidating assets
or raising capital in a manner that adversely increases our
funding
affects our
shareholders and creditors.

costs or otherwise

adversely

business

our

U.S. and non-U.S. regulatory developments, in particular the
Dodd-Frank Act and Basel III, have significantly altered the
regulatory framework within which we operate and have
adversely affected and may in the future affect our
profitability. Among the aspects of the Dodd-Frank Act that
have affected or may in the future affect our businesses are:
increased capital,
liquidity and reporting requirements;
limitations on activities in which we may engage; increased
regulation of and restrictions on OTC derivatives markets
limitations on incentive compensation;
and transactions;
limitations on affiliate
to
reorganize or limit activities in connection with recovery and
resolution planning; increased deposit insurance assessments;
and increased standards of care for broker-dealers and
investment
clients. The
advisers
implementation of higher capital
requirements, more
stringent requirements relating to liquidity, long-term debt
and total loss-absorbing capacity and the prohibition on
proprietary trading and the sponsorship of, or investment in,
covered funds by the Volcker Rule may continue to adversely
affect our profitability and competitive position, particularly
if these requirements do not apply equally to our competitors
or are not implemented uniformly across jurisdictions.

dealing with

requirements

transactions;

As described in “Business — Regulation — Banking
Supervision and Regulation” in Part I, Item 1 of this
Form 10-K, our proposed capital actions and capital plan
are reviewed by the FRB as part of the CCAR process. If the
FRB objects to our proposed capital actions in our capital
plan, we could be prohibited from taking some or all of the
proposed capital actions, including increasing or paying
dividends on common or preferred stock or repurchasing
common stock or other capital securities. Our inability to
carry out our proposed capital actions could, among other
things, prevent us
to our
shareholders and impact our return on equity. Additionally,
as a consequence of our designation as a G-SIB, we are
subject to the G-SIB buffer. Our G-SIB buffer is updated
annually based on financial data from the prior year.
Expansion of our businesses, growth in our balance sheet or
increased reliance on short-term wholesale funding may
in an increase in our G-SIB buffer and a
result
corresponding increase in our capital requirements.

from returning capital

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

We are also subject to laws and regulations, such as the
GDPR and the California Consumer Privacy Act, relating
to the privacy of the information of clients, employees or
others, and any failure to comply with these laws and
regulations could expose us to liability and/or reputational
damage. As new privacy-related laws and regulations are
implemented, the time and resources needed for us to
comply with such laws and regulations, as well as our
liability for non-compliance and reporting
potential
obligations in the case of data breaches, may significantly
increase.

In addition, our businesses are increasingly subject to laws
and regulations relating to surveillance, encryption and
data on-shoring in the jurisdictions in which we operate.
Compliance with these laws and regulations may require us
to change our policies, procedures and technology for
information security, which could, among other things,
make us more
and
misappropriation, corruption or loss of information or
technology.

vulnerable

to cyber

attacks

We have entered into consumer-oriented deposit-taking,
lending and credit card businesses, and we expect to expand
the product and geographic scope of our offerings. Entering
into these businesses subjects us to numerous additional
regulations in the jurisdictions in which these businesses
operate. Not only are these regulations extensive, but they
involve types of regulations and supervision, as well as
regulatory compliance risks, that we have not previously
encountered. The level of regulatory scrutiny and the scope
of
interactions with
consumers is often much greater than that associated with
doing business with institutions and high-net-worth
individuals. Complying with these regulations is time-
consuming, costly and presents new and increased risks.

regulations

financial

affecting

controlled by financial

institution had no direct knowledge of

Increasingly, regulators and courts have sought to hold
financial
institutions liable for the misconduct of their
clients where such regulators and courts have determined
that the financial institution should have detected that the
client was engaged in wrongdoing, even though the
financial
the
activities engaged in by its client. Regulators and courts
have also increasingly found liability as a “control person”
for activities of entities in which financial institutions or
funds
institutions have an
investment, but which they do not actively manage. In
addition, regulators and courts continue to seek to establish
“fiduciary” obligations to counterparties to which no such
duty had been assumed to exist. To the extent that such
efforts are successful, the cost of, and liabilities associated
with, engaging in brokerage, clearing, market-making,
investing and other similar activities
prime brokerage,
could increase significantly. To the extent that we have
fiduciary obligations in connection with acting as a
financial adviser or investment adviser or in other roles for
fund
individual,
clients, any breach, or even an alleged breach, of such
obligations could have materially negative legal, regulatory
and reputational consequences.

institutional, sovereign or investment

For information about the extensive regulation to which
our businesses are subject, see “Business — Regulation” in
Part I, Item 1 of this Form 10-K.

Our businesses have been and may be adversely
affected by declining asset values. This is particularly
true for those businesses in which we have net “long”
positions, receive fees based on the value of assets
managed, or receive or post collateral.

Many of our businesses have net “long” positions in debt
securities, loans, derivatives, mortgages, equities (including
private equity and real estate) and most other asset classes.
These include positions we take when we act as a principal
to facilitate our clients’ activities, including our exchange-
based market-making activities, or commit large amounts
of capital to maintain positions in interest rate and credit
products, as well as through our currencies, commodities,
equities and mortgage-related activities. In addition, we
invest in similar asset classes. Substantially all of our
investing and market-making positions and a portion of our
loans are marked-to-market on a daily basis and declines in
asset values directly and immediately impact our earnings,
unless we have effectively “hedged” our exposures to those
declines.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

In certain circumstances (particularly in the case of credit
products, including leveraged loans, and private equities or
other securities that are not
freely tradable or lack
established and liquid trading markets), it may not be
possible or economic to hedge our exposures and to the
extent that we do so the hedge may be ineffective or may
greatly reduce our ability to profit from increases in the
values of
the assets. Sudden declines and significant
volatility in the prices of assets have in the past and may in
the future substantially curtail or eliminate the trading
markets for certain assets, which may make it difficult to
sell, hedge or value such assets. The inability to sell or
effectively hedge assets reduces our ability to limit losses in
such positions and the difficulty in valuing assets may
negatively affect our capital, liquidity or leverage ratios,
increase our funding costs and generally require us to
maintain additional capital.

In our exchange-based market-making activities, we are
obligated by stock exchange rules to maintain an orderly
market, including by purchasing securities in a declining
market. In markets where asset values are declining and in
volatile markets, this results in losses and an increased need
for liquidity.

We receive asset-based management fees based on the value
of our clients’ portfolios or investment in funds managed by
us and, in some cases, we also receive incentive fees based
on increases in the value of such investments. Declines in
asset values would ordinarily reduce the value of our
clients’ portfolios or fund assets, which in turn would
ordinarily reduce the fees we earn for managing such assets.

We post collateral to support our obligations and receive
collateral to support the obligations of our clients and
counterparties in connection with our client execution
businesses. When the value of the assets posted as collateral
or the credit ratings of the party posting collateral decline,
the party posting the collateral may need to provide
additional collateral or,
if possible, reduce its trading
position. An example of such a situation is a “margin call”
in connection with a brokerage account. Therefore, declines
in the value of asset classes used as collateral mean that
either the cost of funding positions is increased or the size of
positions is decreased. If we are the party providing
collateral, this can increase our costs and reduce our
profitability and if we are the party receiving collateral, this
can also reduce our profitability by reducing the level of
business done with our clients and counterparties.

Goldman Sachs 2019 Form 10-K

In addition, volatile or less liquid markets increase the
difficulty of valuing assets, which can lead to costly and
time-consuming disputes over asset values and the level of
required collateral, as well as increased credit risk to the
the collateral due to delays in receiving
recipient of
adequate collateral.
In cases where we foreclose on
collateral, sudden declines in the value or liquidity of the
collateral may,
over-
collateralization, the ability to call for additional collateral
or the ability to force repayment of
the underlying
obligation, result in significant losses to us, especially where
there is a single type of collateral supporting the obligation.
In addition, we have been, and may in the future be, subject
to claims that the foreclosure was not permitted under the
legal documents, was conducted in an improper manner or
caused a client or counterparty to go out of business.

credit monitoring,

despite

Our businesses have been and may be adversely
affected by disruptions in the credit markets,
including reduced access to credit and higher costs of
obtaining credit.

Widening credit spreads, as well as significant declines in
the availability of credit, have in the past adversely affected
our ability to borrow on a secured and unsecured basis and
may do so in the future. We fund ourselves on an unsecured
basis by issuing long-term debt, by accepting deposits at our
bank subsidiaries, by issuing hybrid financial instruments
or by obtaining loans or lines of credit from commercial or
other banking entities. We seek to finance many of our
assets on a secured basis. Any disruptions in the credit
markets may make it harder and more expensive to obtain
funding for our businesses. If our available funding is
limited or we are forced to fund our operations at a higher
cost, these conditions may require us to curtail our business
activities and increase our cost of funding, both of which
could reduce our profitability, particularly in our businesses
that involve investing, lending and market making.

Our clients engaging in mergers, acquisitions and other
types of strategic transactions often rely on access to the
secured and unsecured credit markets to finance their
transactions. A lack of available credit or an increased cost
of credit can adversely affect the size, volume and timing of
our
transactions,
particularly large transactions, and adversely affect our
financial advisory and underwriting businesses.

clients’ merger

acquisition

and

Our credit businesses have been and may in the future be
negatively affected by a lack of liquidity in credit markets. A
lack of liquidity reduces price transparency, increases price
volatility and decreases transaction volumes and size, all of
which can increase transaction risk or decrease the
profitability of these businesses.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

Our market-making activities have been and may be
affected by changes in the levels of market volatility.

Certain of our market-making activities depend on market
volatility to provide trading and arbitrage opportunities to
our clients, and decreases in volatility have reduced and
may in the future reduce these opportunities and the level of
client activity associated with them and adversely affect the
results of these activities. Increased volatility, while it can
increase trading volumes and spreads, also increases risk as
measured by Value-at-Risk (VaR) and may expose us to
increased risks in connection with our market-making
activities or cause us to reduce our inventory in order to
avoid increasing our VaR. Limiting the size of our market-
making positions can adversely affect our profitability. In
periods when volatility is increasing, but asset values are
declining significantly, it may not be possible to sell assets at
all or it may only be possible to do so at steep discounts. In
those circumstances we may be forced to either take on
additional risk or to realize losses in order to decrease our
VaR. In addition, increases in volatility increase the level of
our RWAs, which increases our capital requirements.

Our
investment banking, client execution, asset
management and wealth management businesses
have been adversely affected and may in the future be
adversely affected by market uncertainty or lack of
confidence among investors and CEOs due to general
declines in economic activity and other unfavorable
economic, geopolitical or market conditions.

Our investment banking business has been, and may in the
future be, adversely affected by market conditions. Poor
economic
conditions and other adverse geopolitical
conditions may adversely affect and have in the past
adversely affected investor and CEO confidence, resulting
in significant industry-wide declines in the size and number
of underwritings and of financial advisory transactions,
which would likely have an adverse effect on our revenues
and our profit margins. In particular, because a significant
portion of our investment banking revenues is derived from
our participation in large transactions, a decline in the
number of large transactions has in the past and would in
the future adversely affect our investment banking business.

In certain circumstances, market uncertainty or general
declines in market or economic activity may affect our
client execution businesses by decreasing levels of overall
activity or by decreasing volatility, but at other times
market uncertainty and even declining economic activity
may result in higher trading volumes or higher spreads or
both.

Market uncertainty, volatility and adverse economic
conditions, as well as declines in asset values, may cause our
clients to transfer their assets out of our funds or other
products or their brokerage accounts and result in reduced
net revenues, principally in our asset management and
wealth management businesses. Even if clients do not
withdraw their funds, they may invest them in products
that generate less fee income.

Our asset management and wealth management
businesses may be affected by the poor investment
performance of our investment products or a client
preference for products other than those which we
offer or for products that generate lower fees.

Poor investment returns in our asset management and
wealth management businesses, due to either general
market conditions or underperformance (relative to our
competitors or to benchmarks) by funds or accounts that
we manage or investment products that we design or sell,
affects our ability to retain existing assets and to attract new
clients or additional assets from existing clients. This could
affect the management and incentive fees that we earn on
assets under supervision or the commissions and net
spreads that we earn for selling other investment products,
such as structured notes or derivatives. To the extent that
our clients choose to invest in products that we do not
currently offer, we will suffer outflows and a loss of
management fees. Further, if, due to changes in investor
sentiment or the relative performance of certain asset
classes or otherwise, clients invest in products that generate
lower fees (e.g., passively managed or fixed income
products), our asset management and wealth management
businesses could be adversely affected.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

We may incur losses as a result of ineffective risk
management processes and strategies.

We seek to monitor and control our risk exposure through
a risk and control framework encompassing a variety of
separate but complementary financial, credit, operational,
compliance and legal reporting systems, internal controls,
management review processes and other mechanisms. Our
risk management process seeks to balance our ability to
profit from market-making, investing or lending positions,
and underwriting activities, with our exposure to potential
losses. While we employ a broad and diversified set of risk
monitoring
those
risk mitigation
and
that accompany their
techniques and the judgments
application cannot anticipate every economic and financial
outcome or the specifics and timing of such outcomes.
Thus, in the course of our activities, we have incurred and
may in the future incur losses. Market conditions in recent
years have involved unprecedented dislocations and
highlight the limitations inherent in using historical data to
manage risk.

techniques,

reflect assumptions about

The models that we use to assess and control our risk
exposures
the degrees of
correlation or lack thereof among prices of various asset
classes or other market indicators. In times of market stress
or other unforeseen circumstances, previously uncorrelated
indicators may become correlated, or conversely previously
correlated indicators may move in different directions.
These types of market movements have at times limited the
effectiveness of our hedging strategies and have caused us to
incur significant losses, and they may do so in the future.
These changes in correlation have been and may in the
future be exacerbated where other market participants are
trading models with assumptions or
using risk or
algorithms that are similar to ours. In these and other cases,
it may be difficult to reduce our risk positions due to the
activity of other market participants or widespread market
dislocations, including circumstances where asset values are
declining significantly or no market exists for certain assets.

In addition, the use of models in connection with risk
management and numerous other critical activities presents
risks that such models may be ineffective, either because of
poor design,
ineffective testing, or improper or flawed
inputs, as well as unpermitted access to such models
resulting in unapproved or malicious changes to the model
or its inputs.

Goldman Sachs 2019 Form 10-K

To the extent that we have positions through our market-
making or origination activities or we make investments
directly through our investing activities, including private
equity, that do not have an established liquid trading
market or are otherwise subject to restrictions on sale or
hedging, we may not be able to reduce our positions and
therefore reduce our risk associated with those positions. In
addition, to the extent permitted by applicable law and
regulation, we invest our own capital in private equity,
credit, real estate and hedge funds that we manage and
limitations on our ability to withdraw some or all of our
investments in these funds, whether for legal, reputational
or other reasons, may make it more difficult for us to
control the risk exposures relating to these investments.

Prudent risk management, as well as regulatory restrictions,
may cause us to limit our exposure to counterparties,
geographic areas or markets, which may limit our business
opportunities and increase the cost of our funding or
hedging activities.

As we have expanded and intend to continue to expand the
product and geographic scope of our offerings of credit
products to consumers, we are presented with different
credit risks and must expand and adapt our credit risk
monitoring and mitigation activities to account for these
business activities. A failure to adequately assess and
control such risk exposures could result in losses to us.

For further information about our risk management
policies and procedures, see “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations — Risk Management” in Part II, Item 7 of this
Form 10-K.

Our liquidity, profitability and businesses may be
adversely affected by an inability to access the debt
capital markets or to sell assets or by a reduction in
our credit ratings or by an increase in our credit
spreads.

Liquidity is essential to our businesses. It is of critical
importance to us, as most of the failures of financial
institutions have occurred in large part due to insufficient
liquidity. Our liquidity may be impaired by an inability to
access secured and/or unsecured debt markets, an inability
to access funds from our subsidiaries or otherwise allocate
liquidity optimally, an inability to sell assets or redeem our
investments, or unforeseen outflows of cash or collateral.
This situation may arise due to circumstances that we may
be unable to control, such as a general market disruption or
an operational problem that affects third parties or us, or
even by the perception among market participants that we,
or other market participants, are experiencing greater
liquidity risk.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

We employ structured products to benefit our clients and
hedge our own risks. The financial instruments that we
hold and the contracts to which we are a party are often
complex, and these complex structured products often do
not have readily available markets to access in times of
liquidity stress. Our investing and financing activities may
lead to situations where the holdings from these activities
represent a significant portion of specific markets, which
could restrict liquidity for our positions.

Further, our ability to sell assets may be impaired if there is
not generally a liquid market for such assets, as well as in
circumstances where other market participants are seeking
to sell similar otherwise generally liquid assets at the same
time, as is likely to occur in a liquidity or other market crisis
or in response to changes to rules or regulations. In
addition, financial institutions with which we interact may
exercise set-off rights or the right to require additional
collateral, including in difficult market conditions, which
could further impair our liquidity.

to our liquidity. A
Our credit ratings are important
reduction in our credit ratings could adversely affect our
liquidity and competitive position, increase our borrowing
costs, limit our access to the capital markets or trigger our
obligations under certain provisions in some of our trading
and collateralized financing contracts. Under
these
provisions, counterparties could be permitted to terminate
contracts with us or require us to post additional collateral.
Termination of our trading and collateralized financing
contracts could cause us to sustain losses and impair our
liquidity by requiring us to find other sources of financing
or
securities
movements.

to make significant cash payments or

our

credit

ratings

As of December 2019, our counterparties could have called
for additional collateral or termination payments related to
our net derivative liabilities under bilateral agreements in an
aggregate amount of $358 million in the event of a
one-notch downgrade of
and
$1.27 billion in the event of a two-notch downgrade of our
credit ratings. A downgrade by any one rating agency,
depending on the agency’s relative ratings of us at the time
of
the downgrade, may have an impact which is
comparable to the impact of a downgrade by all rating
agencies. For further information about our credit ratings,
see “Management’s Discussion and Analysis of Financial
Condition
of Operations — Risk
Management — Liquidity Risk Management — Credit
Ratings” in Part II, Item 7 of this Form 10-K.

and Results

Our cost of obtaining long-term unsecured funding is
directly related to our credit spreads (the amount in excess
of the interest rate of benchmark securities that we need to
pay). Increases in our credit spreads can significantly
increase our cost of this funding. Changes in credit spreads
are continuous, market-driven, and subject at times to
unpredictable and highly volatile movements. Our credit
spreads are also influenced by market perceptions of our
creditworthiness and movements in the costs to purchasers
of credit default swaps referenced to our long-term debt.
The market for credit default swaps has proven to be
extremely volatile and at times has lacked a high degree of
transparency or liquidity.

funding,

Regulatory changes relating to liquidity may also negatively
impact our results of operations and competitive position.
Numerous regulations have been adopted or proposed to
introduce more stringent liquidity requirements for large
financial
institutions. These regulations address, among
other matters, liquidity stress testing, minimum liquidity
requirements, wholesale
limitations on the
issuance of short-term debt and structured notes and
prohibitions on parent guarantees that are subject to certain
cross-defaults. New and prospective
liquidity-related
regulations may overlap with, and be impacted by, other
regulatory changes, including rules relating to minimum
long-term debt requirements and TLAC, guidance on the
treatment of brokered deposits and the capital, leverage and
resolution and recovery frameworks applicable to large
institutions. Given the overlap and complex
financial
interactions among these new and prospective regulations,
they may have unintended cumulative effects, and their full
impact will remain uncertain, while regulatory reforms are
being adopted and market practices develop.

We face enhanced risks as new business initiatives
and acquisitions lead us to engage in new activities,
transact with a broader array of clients and
counterparties and expose us to new asset classes
and new markets.

existing businesses,

A number of our recent and planned business initiatives and
including through
expansions of
acquisitions, may bring us into contact, directly or indirectly,
with individuals and entities that are not within our
traditional client and counterparty base, expose us to new
asset classes and new markets, and present us with
integration challenges. For example, we continue to transact
business and invest in new regions, including a wide range of
emerging and growth markets. Furthermore, in a number of
our businesses, including where we make markets, invest and
lend, we own interests in, or otherwise become affiliated with
the ownership and operation of, public services, such as
airports, toll roads and shipping ports, as well as physical
commodities and commodities infrastructure components,
both within and outside the U.S.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

compliance,

to face, additional

We have increased and intend to further increase our
consumer-oriented deposit-taking and lending activities.
For example, during 2019, we started to issue credit cards
to consumers. To the extent we engage in those and other
consumer-oriented activities, we have faced, and would
continue
legal and
regulatory risk, increased reputational risk and increased
operational risk due to, among other things, higher
transaction volumes and significantly increased retention
and transmission of consumer and client information. We
are also subject to additional legal requirements, including
with respect to suitability and consumer protection (for
example, Regulation Best Interest, fair lending laws and
regulations and privacy laws and regulations). Further,
identity fraud may increase and credit reporting practices
may change in a manner that makes it more difficult for
the
financial
creditworthiness of consumers.

such as us,

to evaluate

institutions,

respect

We have increased and intend to further increase our
transaction banking activities. As a result, we expect to face
additional compliance, legal and regulatory risk, including
with
anti-money
laundering and reporting requirements and prohibitions on
transfers of property belonging to countries, entities and
to sanctions by U.S. or other
individuals
governmental authorities.

know-your-customer,

subject

New business initiatives expose us to new and enhanced
including risks associated with dealing with
risks,
governmental entities, reputational concerns arising from
dealing with different types of clients, counterparties and
investors, greater regulatory scrutiny of these activities,
increased credit-related, market, sovereign and operational
risks, risks arising from accidents or acts of terrorism, and
reputational concerns with the manner in which certain
assets are being operated or held or in which we interact
with
and
in connection with
reputational risks may also exist
activities and transactions involving new products or
markets where there is regulatory uncertainty or where
there are different or conflicting regulations depending on
the regulator or the jurisdiction involved, particularly
where transactions in such products may involve multiple
jurisdictions.

counterparties. Legal,

regulatory

these

Goldman Sachs 2019 Form 10-K

We have developed and pursued new business and strategic
initiatives, and expect to continue to do so. If and to the
extent we are unable to successfully execute those
initiatives, we may incur unanticipated costs and losses, and
such as negative
consequences,
face other adverse
reputational effects.
the actual effects of
In addition,
pursuing those initiatives may differ, possibly materially,
from the benefits that we expect to realize from them, such
revenues, achieving expense
as generating additional
savings, reducing operational risk exposures or using
capital and funding more efficiently. Engaging in new
activities exposes us to a variety of risks, including that we
may be unable to successfully develop new, competitive,
efficient and effective systems and processes, and hire and
retain the necessary personnel. Due to our lack of historical
experience with unsecured retail lending, our loan loss
assumptions may prove to be incorrect and we may incur
losses
significantly above those which we originally
anticipated in entering the business.

In recent years, we have invested, and may continue to
invest, more in businesses that we expect will generate a
higher level of more consistent revenues. In order to develop
and be able to offer consumer financial products that
compete effectively, we have made and expect to continue
to make significant investments in technology and human
capital resources in connection with our consumer-oriented
activities. Such investments may not be successful or have
returns similar to our other businesses.

Our operating expenses and efficiency ratio depend, in part,
on our overall headcount and the proportion of our
employees that are located in strategic locations. Our future
human capital resource requirements and the benefits
provided by strategic locations are uncertain, and we may
not realize the benefits we anticipate.

A failure in our operational systems or infrastructure,
or those of third parties, as well as human error,
malfeasance or other misconduct, could impair our
liquidity, disrupt our businesses,
in the
disclosure of confidential information, damage our
reputation and cause losses.

result

Our businesses are highly dependent on our ability to
process and monitor, on a daily basis, a very large number
of transactions, many of which are highly complex and
occur at high volumes and frequencies, across numerous
and diverse markets in many currencies. These transactions,
as well as the information technology services we provide to
clients, often must adhere to client-specific guidelines, as
well as legal and regulatory standards.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

and other

to execute transactions and report

Many rules and regulations worldwide govern our
obligations
such
transactions
information to regulators,
exchanges and investors. Compliance with these legal and
reporting requirements can be challenging, and we have
been, and may in the future be, subject to regulatory fines
and penalties for failing to follow these rules or to report
timely, accurate and complete information in accordance
with these rules. As such requirements expand, compliance
with these rules and regulations has become more
challenging.

(as well

electronic

to clients,

regulators and exchanges)

As our client base,
including through our consumer
businesses, and our geographical reach expand and the
volume, speed, frequency and complexity of transactions,
especially
the
transactions
requirements to report such transactions on a real-time
increase,
basis
developing and maintaining our operational systems and
infrastructure becomes more challenging, and the risk of
systems or human error
in connection with such
transactions increases, as well as the potential consequences
of such errors due to the speed and volume of transactions
involved and the potential difficulty associated with
discovering errors quickly enough to limit the resulting
consequences. As with other similarly situated institutions,
we utilize credit underwriting models in connection with
our businesses, including our consumer-oriented activities.
Allegations, whether or not accurate, that the ultimate
underwriting decisions do not treat consumers or clients
fairly, or comply with the applicable law or regulation, can
result
in negative publicity, reputational damage and
governmental and regulatory scrutiny.

The use of computing devices and phones is critical to the
work done by our employees and the operation of our
systems and businesses and those of our clients and our
third-party service providers and vendors. Computers and
computer networks are subject to various risks, including,
among others, cyber attacks, inherent technological defects,
system failures and errors by human operators. For
example, fundamental security flaws in computer chips
found in many types of these computing devices and phones
have been reported in the past and may be discovered in the
future. Cloud technologies are also critical to the operation
of our systems and platforms and our reliance on cloud
technologies is growing. Service disruptions may lead to
delays in accessing, or the loss of, data that is important to
our businesses and may hinder our clients’ access to our
platforms. Addressing these and similar issues could be
costly and affect the performance of these businesses and
systems. Operational risks may be incurred in applying
fixes and there may still be residual security risks.

Additionally, although the prevalence and scope of
applications of distributed ledger technology and similar
technologies is growing, the technology is also nascent and
may be vulnerable to cyber attacks or have other inherent
weaknesses. We may be, or may become, exposed to risks
related to distributed ledger technology through our
facilitation of clients’ activities involving financial products
linked to distributed ledger technology, such as blockchain
or cryptocurrencies, our investments in companies that seek
to develop platforms based on distributed ledger
technology, and the use of distributed ledger technology by
third-party vendors, clients, counterparties, clearing houses
and other financial intermediaries.

financial, accounting, data processing or other
Our
operational systems and facilities may fail to operate
properly or become disabled as a result of events that are
wholly or partially beyond our control, such as a spike in
transaction volume, adversely affecting our ability to
process these transactions or provide these services. We
must continuously update these systems to support our
operations and growth and to respond to changes in
regulations and markets, and invest heavily in systemic
controls and training to pursue our objective of ensuring
that such transactions do not violate applicable rules and
regulations or, due
in processing such
to errors
transactions, adversely affect markets, our clients and
counterparties or us. Enhancements and updates
to
systems, as well as the requisite training,
including in
connection with the integration of new businesses, entail
associated with
significant
implementing new systems and integrating them with
existing ones.

and create

costs

risks

always

are not

technology and
Notwithstanding the proliferation of
technology-based risk and control systems, our businesses
ultimately rely on people as our greatest resource, and,
from time to time, they make mistakes or engage in
violations of applicable policies, laws, rules or procedures
that
immediately by our
caught
technological processes or by our controls and other
procedures, which are intended to prevent and detect such
errors or violations. These can include calculation errors,
mistakes in addressing emails, errors in software or model
development or implementation, or simple errors in
judgment, as well as intentional efforts to ignore or
circumvent applicable policies, laws, rules or procedures.
Human errors, malfeasance and other misconduct,
including the intentional misuse of client information in
connection with insider trading or for other purposes, even
in
if promptly discovered and remediated, can result
reputational damage and material losses and liabilities for
us.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

In addition, we face the risk of operational failure or
significant operational delay,
termination or capacity
constraints of any of
the clearing agents, exchanges,
clearing houses or other financial intermediaries we use to
facilitate our securities and derivatives transactions, and as
grows, we
our
increasingly face the risk of operational
failure or
significant operational delay with respect to our clients’
systems.

interconnectivity with our

clients

exposure

failure or

to operational

There has been significant consolidation among clearing
agents, exchanges and clearing houses and an increasing
number of derivative transactions are now or in the near
future will be cleared on exchanges, which has increased
our
significant
operational delay, termination or capacity constraints of
the particular financial
intermediaries that we use and
could affect our ability to find adequate and cost-effective
alternatives in the event of any such failure, delay,
termination or constraint. Industry consolidation, whether
among market participants or financial
intermediaries,
increases the risk of operational failure or significant
operational delay as disparate complex systems need to be
integrated, often on an accelerated basis.

The interconnectivity of multiple financial institutions with
central agents, exchanges and clearing houses, and the
increased centrality of these entities, increases the risk that
an operational failure at one institution or entity may cause
an industry-wide operational failure that could materially
impact our ability to conduct business. Any such failure,
termination or constraint could adversely affect our ability
to effect transactions, service our clients, manage our
exposure to risk or expand our businesses or result in
financial loss or liability to our clients, impairment of our
liquidity, disruption of our businesses,
regulatory
intervention or reputational damage.

Despite our resiliency plans and facilities, our ability to
conduct business may be adversely impacted by a
disruption in the infrastructure that supports our businesses
and the communities where we are located. This may
include a disruption involving electrical, satellite, undersea
cable or other communications, internet, transportation or
other facilities used by us, our employees or third parties
with which we conduct business, including cloud service
providers. These disruptions may occur as a result of events
that affect only our buildings or systems or those of such
third parties, or as a result of events with a broader impact
globally, regionally or in the cities where those buildings or
systems are located, including, but not limited to, natural
disasters, war, civil unrest, terrorism, economic or political
developments, pandemics and weather events.

Goldman Sachs 2019 Form 10-K

In addition, although we seek to diversify our third-party
vendors to increase our resiliency, we are also exposed to
the risk that a disruption or other information technology
event at a common service provider to our vendors could
impede their ability to provide products or services to us.
We may not be able to effectively monitor or mitigate
operational risks relating to our vendors’ use of common
service providers.

Nearly all of our employees in our primary locations,
including the New York metropolitan area, London,
Bengaluru, Hong Kong, Tokyo and Salt Lake City, work in
close proximity to one another, in one or more buildings.
to maintain business
efforts
Notwithstanding our
continuity, given that our headquarters and the largest
concentration of our employees are in the New York
metropolitan area, and our two principal office buildings in
the New York area both are located on the waterfront of
the Hudson River, depending on the intensity and longevity
of the event, a catastrophic event impacting our New York
metropolitan area offices,
including a terrorist attack,
extreme weather event or other hostile or catastrophic
event, could negatively affect our business. If a disruption
occurs in one location and our employees in that location
are unable to occupy our offices or communicate with or
travel to other locations, our ability to service and interact
with our clients may suffer, and we may not be able to
successfully implement contingency plans that depend on
communication or travel.

A failure to protect our computer systems, networks
and information, and our clients’ information, against
cyber attacks and similar threats could impair our
ability to conduct our businesses, result in the
theft or destruction of confidential
disclosure,
information, damage our reputation and cause losses.

Our operations rely on the secure processing, storage and
transmission of confidential and other information in our
computer systems and networks and those of our vendors.
There have been a number of highly publicized cases
involving financial services companies, consumer-based
companies, governmental agencies and other organizations
reporting the unauthorized disclosure of client, customer or
other confidential information in recent years, as well as
cyber attacks
theft and
destruction of corporate information or other assets, as a
result of failure to follow procedures by employees or
contractors or as a result of actions by third parties,
including actions by foreign governments. There have also
been several highly publicized cases where hackers have
requested “ransom” payments
in exchange for not
disclosing customer information or for restoring access to
information or systems.

involving the dissemination,

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

We are regularly the target of attempted cyber attacks,
including denial-of-service attacks, and must continuously
monitor and develop our systems to protect the integrity
and functionality of our technology infrastructure and
access to and the security of our data. We may face an
increasing number of attempted cyber attacks as we expand
our mobile- and other internet-based products and services,
as well as our usage of mobile and cloud technologies, and
as we provide more of these services to a greater number of
individual consumers. The increasing migration of our
communication from devices we provide to employee-
owned devices presents additional risks of cyber attacks. In
addition, due to our interconnectivity with third-party
vendors (and their respective service providers), central
agents, exchanges, clearing houses and other financial
institutions, we could be adversely impacted if any of them
is subject to a successful cyber attack or other information
security event. These impacts could include the loss of
access to information or services from the third party
subject to the cyber attack or other information security
interrupt certain of our
event, which could,
businesses.

in turn,

the

especially because

Despite our efforts to ensure the integrity of our systems
and information, we may not be able to anticipate, detect or
implement effective preventive measures against all cyber
threats,
techniques used are
increasingly sophisticated, change frequently and are often
not recognized until launched. Cyber attacks can originate
from a variety of sources, including third parties who are
affiliated with or sponsored by foreign governments or are
involved with organized crime or terrorist organizations.
Third parties may also attempt to place individuals in our
offices or induce employees, clients or other users of our
systems to disclose sensitive information or provide access
to our data or that of our clients, and these types of risks
may be difficult to detect or prevent.

systems,

Although we take protective measures proactively and
endeavor to modify them as circumstances warrant, our
computer
software and networks may be
vulnerable to unauthorized access, misuse, computer
viruses or other malicious code, cyber attacks on our
vendors and other events that could have a security impact.
Due to the complexity and interconnectedness of our
systems, the process of enhancing our protective measures
can itself create a risk of systems disruptions and security
issues. In addition, protective measures that we employ to
compartmentalize our data may reduce our visibility into,
and adversely affect our ability to respond to, cyber threats
and issues with our systems.

If one or more of such events occur, this potentially could
jeopardize our or our clients’ or counterparties’ confidential
and other information processed, stored in, or transmitted
through our computer systems and networks, or otherwise
cause interruptions or malfunctions in our operations or
those of our clients, counterparties or third parties, which
could impact their ability to transact with us or otherwise
result in legal or regulatory action, significant losses or
reputational damage. In addition, such an event could
persist for an extended period of time before being detected,
and, following detection, it could take considerable time for
us to obtain full and reliable information about the extent,
amount and type of information compromised. During the
course of an investigation, we may not know the full impact
of the event and how to remediate it, and actions, decisions
and mistakes that are taken or made may further increase
the negative effects of the event on our business, results of
operations and reputation.

We have expended, and expect to continue to expend,
significant resources on an ongoing basis to modify our
protective measures and to investigate and remediate
vulnerabilities or other exposures, but these measures may
be ineffective and we may be subject to legal or regulatory
action, as well as financial losses that are either not insured
fully covered through any insurance
against or not
maintained by us.

Our clients’ confidential information may also be at risk
from the compromise of clients’ personal electronic devices
or as a result of a data security breach at an unrelated
company. Losses due to unauthorized account activity
could harm our reputation and may have adverse effects on
our business, financial condition and results of operations.

The increased use of mobile and cloud technologies can
heighten these and other operational risks. Certain aspects
of the security of such technologies are unpredictable or
beyond our control, and the failure by mobile technology
and cloud service providers to adequately safeguard their
systems and prevent cyber attacks could disrupt our
operations and result in misappropriation, corruption or
loss of confidential and other information. In addition,
there is a risk that encryption and other protective
measures, despite their sophistication, may be defeated,
particularly to the extent that new computing technologies
vastly increase the speed and computing power available.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

We routinely transmit and receive personal, confidential
and proprietary information by email and other electronic
means. We have discussed and worked with clients,
vendors, service providers, counterparties and other third
parties to develop secure transmission capabilities and
protect against cyber attacks, but we do not have, and may
be unable to put in place, secure capabilities with all of our
clients, vendors, service providers, counterparties and other
third parties and we may not be able to ensure that these
third parties have appropriate controls in place to protect
the confidentiality of the information. An interception,
misuse or mishandling of personal, confidential or
proprietary information being sent to or received from a
client, vendor, service provider, counterparty or other third
party could result in legal liability, regulatory action and
reputational harm.

Our businesses, profitability and liquidity may be
adversely affected by Brexit.

On January 31, 2020, the U.K. left the E.U. As discussed in
this
“Business — Regulation” in Part
Form 10-K we expect considerable change in the regulatory
framework that will govern transactions and business
undertaken by our U.K. subsidiaries in the E.U. As a result,
we face numerous risks that could adversely affect how we
conduct our businesses or our profitability and liquidity.

Item 1 of

Our principal subsidiaries operating in the E.U., GSI, GSIB
and GSAMI, are incorporated and headquartered in the
U.K. They all currently benefit from non-discriminatory
access to E.U. clients and infrastructure based on E.U.
treaties and E.U. legislation, including arrangements for
cross-border “passporting” and the establishment of E.U.
branches. The E.U and the U.K. Parliament have ratified the
Withdrawal Agreement, which provides for a transition
period for the U.K. and E.U. to negotiate and agree to a
framework for their future relationship. The transition
period is currently scheduled to end on December 31, 2020
and the relationship between the U.K and E.U. beyond that
date is uncertain. At the end of the transition period, firms
based in the U.K. are expected to lose their existing access
arrangements to the E.U. markets.

Goldman Sachs 2019 Form 10-K

including GSI, GSIB

As necessary, our German bank subsidiary, GSBE, will act
as our main operating subsidiary in the E.U. and will
assume certain functions that can no longer be efficiently
and effectively performed by our U.K. operating
and GSAMI.
subsidiaries,
Implementing this strategy could materially adversely affect
the manner in which we operate certain businesses in
Europe, require us to restructure certain of our operations
and expose us to higher operational, regulatory and
compliance costs, higher taxes, higher subsidiary-level
capital and liquidity requirements, additional restrictions
on intercompany transactions, and new restrictions on the
ability of our subsidiaries to share personal data, including
client data, all of which could adversely affect our liquidity
and profitability.

We have strengthened the capabilities of our operating
subsidiaries in the remaining E.U. countries, particularly
GSBE. Depending on the terms of the future relationship
between the U.K. and E.U., Brexit could necessitate a rapid
and significant expansion in the scope of GSBE’s activities,
as well as its headcount, balance sheet, and capital and
funding needs. Although we have invested significant
resources to plan for and address Brexit, there can be no
assurance that we will be able to successfully execute our
strategy. In addition, even if we are able to successfully
execute our strategy, we face the risk that Brexit could have
a disproportionately adverse effect on our E.U operations
compared to some of our competitors who have more
extensive pre-existing operations in the E.U. outside of the
U.K.

In addition, Brexit has created an uncertain political and
economic environment in the U.K., and may create such
environments in current E.U. member states. Political and
economic uncertainty has in the past led to, and the impact
of Brexit could lead to, declines in market liquidity and
activity levels, volatile market conditions, a contraction of
available credit, changes in interest rates or exchange rates,
weaker economic growth and reduced business confidence
all of which could adversely impact our business.

Our businesses, profitability and liquidity may be
adversely affected by deterioration in the credit
quality of, or defaults by, third parties who owe us
money, securities or other assets or whose securities
or obligations we hold.

We are exposed to the risk that third parties that owe us
money, securities or other assets will not perform their
obligations. These parties may default on their obligations
to us due to bankruptcy, lack of liquidity, operational
failure or other reasons. A failure of a significant market
participant, or even concerns about a default by such an
institution, could lead to significant liquidity problems,
losses or defaults by other institutions, which in turn could
adversely affect us.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

We are also subject to the risk that our rights against third
parties may not be enforceable in all circumstances. In
addition, deterioration in the credit quality of third parties
whose securities or obligations we hold,
including a
deterioration in the value of collateral posted by third
parties to secure their obligations to us under derivative
contracts and loan agreements, could result in losses and/or
adversely affect our ability to rehypothecate or otherwise
use those securities or obligations for liquidity purposes.

A significant downgrade in the credit ratings of our
counterparties could also have a negative impact on our
results. While in many cases we are permitted to require
additional collateral from counterparties that experience
financial difficulty, disputes may arise as to the amount of
collateral we are entitled to receive and the value of pledged
assets. The termination of contracts and the foreclosure on
collateral may subject us to claims for the improper exercise
of our rights. Default rates, downgrades and disputes with
counterparties as to the valuation of collateral typically
increase significantly in times of market stress, increased
volatility and illiquidity.

As part of our clearing and prime brokerage activities, we
finance our clients’ positions, and we could be held
responsible for the defaults or misconduct of our clients.
Although we regularly review credit exposures to specific
clients and counterparties and to specific industries,
countries and regions that we believe may present credit
from events or
risk may arise
concerns, default
circumstances that are difficult to detect or foresee.

Concentration of risk increases the potential
significant
in
underwriting, investing and financing activities.

for
our market-making,

losses

Concentration of risk increases the potential for significant
losses in our market-making, underwriting, investing and
financing activities. The number and size of
these
transactions has affected and may in the future affect our
results of operations in a given period. Moreover, because
of concentration of risk, we may suffer losses even when
economic and market conditions are generally favorable for
our competitors. Disruptions in the credit markets can
make it difficult to hedge these credit exposures effectively
or economically. In addition, we extend large commitments
as part of our credit origination activities.

Rules adopted under the Dodd-Frank Act, and similar rules
adopted in other jurisdictions, require issuers of certain
asset-backed securities and any person who organizes and
initiates certain asset-backed securities transactions to
retain economic exposure to the asset, which has affected
the cost of and structures used in connection with these
securitization activities. Our inability to reduce our credit
risk by selling, syndicating or securitizing these positions,
including during periods of market stress, could negatively
affect our results of operations due to a decrease in the fair
value of the positions, including due to the insolvency or
bankruptcy of the borrower, as well as the loss of revenues
associated with selling such securities or loans.

In the ordinary course of business, we may be subject to a
concentration of credit risk to a particular counterparty,
borrower, issuer (including sovereign issuers) or geographic
area or group of related countries, such as the E.U., and a
failure or downgrade of, or default by, such entity could
negatively impact our businesses, perhaps materially, and
the systems by which we set limits and monitor the level of
industries,
our credit exposure to individual entities,
countries and regions may not
function as we have
anticipated. Regulatory reform, including the Dodd-Frank
Act, has led to increased centralization of trading activity
through particular clearing houses, central agents or
exchanges, which
our
concentration of risk with respect to these entities. While
our activities expose us to many different
industries,
counterparties and countries, we routinely execute a high
volume of transactions with counterparties engaged in
financial services activities, including brokers and dealers,
commercial banks,
exchanges and
investment funds. This has resulted in significant credit
concentration with respect to these counterparties.

clearing houses,

significantly

increased

has

The financial services industry is both highly
competitive and interrelated.

our products

The financial services industry and all of our businesses are
intensely competitive, and we expect them to remain so. We
compete on the basis of a number of factors, including
and services,
transaction execution,
innovation, reputation, creditworthiness and price. There
has been substantial consolidation and convergence among
companies in the financial services industry. This has
hastened the globalization of the securities and other
financial services markets. As a result, we have had to
commit capital to support our international operations and
to execute large global transactions. To the extent we
expand into new business areas and new geographic
regions, we will face competitors with more experience and
more established relationships with clients, regulators and
industry participants in the relevant market, which could
adversely affect our ability to expand.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

adopted

and regulators have
imposed

recently adopted
Governments
regulations,
compensation
taxes,
restrictions or otherwise put forward various proposals that
have impacted or may impact our ability to conduct certain
of our businesses in a cost-effective manner or at all in certain
or all
relating to
restrictions on the type of activities in which financial
institutions are permitted to engage. These or other similar
rules, many of which do not apply to all our U.S. or non-U.S.
competitors, could impact our ability to compete effectively.

including proposals

jurisdictions,

Pricing and other competitive pressures in our businesses
have continued to increase, particularly in situations where
some of our competitors may seek to increase market share
by reducing prices. For example,
in connection with
investment banking and other assignments, in response to
competitive pressure we have experienced, we have
extended and priced credit at levels that may not always
fully compensate us for the risks we take.

The financial services industry is highly interrelated in that
a significant volume of transactions occur among a limited
number of members of that industry. Many transactions are
syndicated to other financial
institutions and financial
institutions are often counterparties in transactions. This
has led to claims by other market participants and
regulators that such institutions have colluded in order to
manipulate markets or market prices, including allegations
that antitrust laws have been violated. While we have
extensive procedures and controls that are designed to
identify and prevent such activities, allegations of such
activities, particularly by regulators, can have a negative
reputational impact and can subject us to large fines and
settlements, and potentially significant penalties, including
treble damages.

A failure to appropriately identify and address
potential conflicts of interest could adversely affect
our businesses.

Due to the broad scope of our businesses and our client base,
we regularly address potential conflicts of interest, including
situations where our services to a particular client or our own
investments or other interests conflict, or are perceived to
conflict, with the interests of that client or another client, as
well as situations where one or more of our businesses have
access to material non-public information that may not be
shared with our other businesses and situations where we
may be a creditor of an entity with which we also have an
advisory or other relationship.

In addition, our status as a BHC subjects us to heightened
regulation and increased regulatory scrutiny by the FRB
with respect to transactions between GS Bank USA and
entities that are or could be viewed as affiliates of ours and,
under the Volcker Rule, transactions between us and
covered funds.

Goldman Sachs 2019 Form 10-K

among

businesses.

We have extensive procedures and controls that are
designed to identify and address conflicts of interest,
including those designed to prevent the improper sharing of
information
However,
our
appropriately identifying and dealing with conflicts of
interest is complex and difficult, and our reputation, which
is one of our most important assets, could be damaged and
the willingness of clients to enter into transactions with us
may be affected if we fail, or appear to fail, to identify,
disclose and deal appropriately with conflicts of interest. In
addition, potential or perceived conflicts could give rise to
litigation or regulatory enforcement actions. Additionally,
our One Goldman Sachs initiative aims to increase
collaboration among our businesses, which may increase
the potential for actual or perceived conflicts of interest and
improper information sharing.

Our results have been and may in the future be
adversely affected by the composition of our client
base.

Our client base is not the same as that of our major
competitors. Our businesses may have a higher or lower
percentage of clients in certain industries or markets than
some or all of our competitors. Therefore, unfavorable
industry developments or market conditions affecting
certain industries or markets have resulted in the past and
may result in the future in our businesses underperforming
relative to similar businesses of a competitor if our
businesses have a higher concentration of clients in such
industries or markets. For example, our market-making
businesses have a higher percentage of clients with actively
managed assets than our competitors and such clients have
in the past and may in the future be disproportionately
affected by low volatility.

less

simply

and may

favorable or

Correspondingly,
adverse
developments or market conditions involving industries or
markets in a business where we have a lower concentration
of clients in such industry or market have also resulted in
the past
in our
underperforming relative to a similar business of a
competitor that has a higher concentration of clients in such
industry or market. For example, we have a smaller
corporate client base in our market-making businesses than
many of our peers and therefore those competitors may
benefit more from increased activity by corporate clients.

in the

future

result

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

Derivative transactions and delayed settlements may
expose us to unexpected risk and potential losses.

are

negotiated

We are party to a large number of derivative transactions,
these derivative
including credit derivatives. Many of
instruments
and
individually
non-standardized, which can make exiting, transferring or
settling positions difficult. Many credit derivatives require
that we deliver to the counterparty the underlying security,
loan or other obligation in order to receive payment. In a
number of cases, we do not hold the underlying security,
loan or other obligation and may not be able to obtain the
underlying security, loan or other obligation. This could
cause us to forfeit the payments due to us under these
contracts or result in settlement delays with the attendant
credit and operational risk, as well as increased costs to us.

Derivative transactions may also involve the risk that
documentation has not been properly executed,
that
executed agreements may not be enforceable against the
counterparty, or that obligations under such agreements
may not be able to be “netted” against other obligations
with such counterparty. In addition, counterparties may
claim that such transactions were not appropriate or
authorized.

As a signatory to the ISDA Universal Protocol or U.S. ISDA
Protocol (ISDA Protocols) and being subject to the FRB’s
and FDIC’s rules on QFCs and similar rules in other
jurisdictions, we may not be able to exercise remedies
against counterparties and, as this new regime has not yet
been tested, we may suffer risks or losses that we would not
have expected to suffer if we could immediately close out
transactions upon a termination event. Various non-U.S.
regulators have also proposed regulations contemplated by
the ISDA Universal Protocol, and those implementing
regulations may result in additional limitations on our
ability to exercise remedies against counterparties. The
ISDA Protocols and these rules and regulations extend to
repurchase agreements and other instruments that are not
derivative contracts, and their impact will depend on the
development of market practices and structures.

including
Derivative contracts and other transactions,
secondary bank loan purchases and sales, entered into with
third parties are not always confirmed by the counterparties
or settled on a timely basis. While the transaction remains
unconfirmed or during any delay in settlement, we are
subject to heightened credit and operational risk and in the
event of a default may find it more difficult to enforce our
rights.

the terms of

instruments, disputes about

In addition, as new complex derivative products are
created, covering a wider array of underlying credit and
other
the
underlying contracts could arise, which could impair our
ability to effectively manage our risk exposures from these
products and subject us to increased costs. The provisions
of the Dodd-Frank Act requiring central clearing of credit
derivatives and other OTC derivatives, or a market shift
toward standardized derivatives, could reduce the risk
associated with these transactions, but under certain
circumstances could also limit our ability to develop
derivatives that best suit the needs of our clients and to
hedge our own risks, and could adversely affect our
profitability and increase our credit exposure to central
clearing platforms.

Certain of our businesses, our funding and financial
products may be adversely affected by changes in or
the discontinuance of
Interbank Offered Rates
(IBORs), in particular LIBOR.

The FCA, which regulates LIBOR, has announced that it
will not compel panel banks to contribute to LIBOR after
2021. It is likely that banks will not continue to provide
submissions for the calculation of LIBOR after 2021 and
possibly prior to then. Similarly, it is not possible to know
whether LIBOR will continue to be viewed as an acceptable
market benchmark, what rate or rates may become
accepted alternatives to LIBOR, or what the effect of any
such changes in views or alternatives may have on the
financial markets for LIBOR-linked financial instruments.
Similar statements have been made with respect to other
IBORs.

and the

regarding

taking of
IBORs
Uncertainty
discretionary actions or negotiation of fallback provisions
could result in pricing volatility, loss of market share in
certain products, adverse tax or accounting impacts,
compliance, legal and operational costs and risks associated
with client disclosures, as well as systems disruption, model
disruption and other business continuity issues. In addition,
uncertainty relating to IBORs could result in increased
capital requirements for us given potential low transaction
volumes, a lack of liquidity or limited observability for
exposures linked to IBORs or any emerging successor rates
and operational incidents associated with changes in and
the discontinuance of IBORs.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

The language in our contracts and financial instruments
that define IBORs, in particular LIBOR, have developed
over time and have various events that trigger when a
successor rate to the designated rate would be selected. If a
trigger is satisfied, contracts and financial instruments often
give the calculation agent (which may be us) discretion over
the successor rate or benchmark to be selected. As a result,
there is considerable uncertainty as to how the financial
the discontinuance of
services
designated rates in contracts and financial instruments or
such designated rates ceasing to be acceptable reference
rates. This uncertainty could ultimately result in client
proper
disputes
interpretation of our IBOR-based contracts and financial
instruments.

industry will address

surrounding

litigation

and

the

amounts

Further, the discontinuation of an IBOR, changes in an
IBOR or changes in market acceptance of any IBOR as a
reference rate may also adversely affect the yield on loans or
securities held by us, amounts paid on securities we have
issued,
received and paid on derivative
instruments we have entered into, the value of such loans,
securities or derivative instruments, the trading market for
securities,
the terms of new loans being made using
different or modified reference rates, our ability to
effectively use derivative instruments to manage risk, or the
availability or cost of our floating-rate funding and our
exposure to fluctuations in interest rates.

Certain of our businesses and our funding may be
adversely affected by changes in other reference
rates, currencies, indexes, baskets or ETFs to which
products we offer or funding that we raise are linked.

Many of the products that we own or that we offer, such as
structured notes, warrants, swaps or security-based swaps,
pay interest or determine the principal amount to be paid at
maturity or in the event of default by reference to rates or
by reference to an index, currency, basket, ETF or other
financial metric (the underlier). In the event that the
composition of the underlier is significantly changed, by
reference to rules governing such underlier or otherwise, the
underlier ceases to exist (for example, in the event that a
country withdraws from the Euro or links its currency to or
delinks its currency from another currency or benchmark,
or an index or ETF sponsor materially alters
the
composition of an index or ETF) or the underlier ceases to
be recognized as an acceptable market benchmark, we may
experience adverse effects consistent with those described
above for IBORs.

Goldman Sachs 2019 Form 10-K

Our businesses may be adversely affected if we are
unable to hire and retain qualified employees.

Our performance is largely dependent on the talents and
efforts of highly skilled people; therefore, our continued
ability to compete effectively in our businesses, to manage
our businesses effectively and to expand into new
businesses and geographic areas depends on our ability to
attract new talented and diverse employees and to retain
and motivate our existing employees. Factors that affect
our ability to attract and retain such employees include the
level and composition of our compensation and benefits,
and our reputation as a successful business with a culture of
fairly hiring, training and promoting qualified employees.
As a significant portion of the compensation that we pay to
our employees is in the form of year-end discretionary
compensation, a significant portion of which is in the form
in our
of deferred equity-related awards, declines
profitability, or in the outlook for our future profitability,
as well as regulatory limitations on compensation levels and
terms, can negatively impact our ability to hire and retain
highly qualified employees.

Competition from within the financial services industry and
from businesses outside the financial services industry,
including the technology industry, for qualified employees
has often been intense. We have experienced increased
competition in hiring and retaining employees to address
the demands of new regulatory requirements, expanding
technology
consumer-oriented
initiatives. This is also the case in emerging and growth
markets, where we are often competing for qualified
employees with entities that have a significantly greater
presence or more extensive experience in the region.

businesses

and

our

Changes in law or regulation in jurisdictions in which our
operations are located that affect taxes on our employees’
income, or the amount or composition of compensation,
may also adversely affect our ability to hire and retain
qualified employees in those jurisdictions.

Item 1 of

As described further in “Business — Regulation —
Compensation Practices” in Part
this
Form 10-K, our compensation practices are subject to
review by, and the standards of, the FRB. As a large global
financial and banking institution, we are subject
to
limitations on compensation practices (which may or may
not affect our competitors) by the FRB, the PRA, the FCA,
the FDIC and other
regulators worldwide. These
limitations, including any imposed by or as a result of
future legislation or regulation, may require us to alter our
compensation practices in ways that could adversely affect
our ability to attract and retain talented employees.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

We may be adversely affected by increased
governmental and regulatory scrutiny or negative
publicity.

sentiment

and public

Governmental scrutiny from regulators, legislative bodies
and law enforcement agencies with respect to matters
relating to compensation, our business practices, our past
actions and other matters has increased dramatically in the
past several years. The financial crisis and the current
financial
political
institutions has resulted in a significant amount of adverse
press coverage, as well as adverse statements or charges by
regulators or other government officials. Press coverage and
form of
other public
wrongdoing (including, in some cases, press coverage and
public statements that do not directly involve us) often
result in some type of investigation by regulators, legislators
and law enforcement officials or in lawsuits.

that assert

statements

regarding

some

the proceeding,

the ultimate outcome of

Responding to these investigations and lawsuits, regardless
of
is time-
consuming and expensive and can divert the time and effort
of our senior management from our business. Penalties and
fines sought by regulatory authorities have increased
substantially over the last several years, and certain
regulators have been more likely in recent years to
commence enforcement actions or to advance or support
legislation targeted at
the financial services industry.
Adverse publicity, governmental scrutiny and legal and
enforcement proceedings can also have a negative impact
on our reputation and on the morale and performance of
our employees, which could adversely affect our businesses
and results of operations.

The financial services industry generally and our businesses
in particular have been subject to negative publicity. Our
reputation and businesses may be adversely affected by
negative publicity or information regarding our businesses
and personnel, whether or not accurate or true, that may be
forums or
posted on social media or other internet
published by news organizations. The
speed and
pervasiveness with which information can be disseminated
through these channels, in particular social media, may
magnify risks relating to negative publicity.

liability or significant
Substantial civil or criminal
regulatory action against us could have material
adverse financial effects or cause us significant
reputational harm, which in turn could seriously harm
our business prospects.

We face significant legal risks in our businesses, and the
volume of claims and amount of damages and penalties
claimed in litigation and regulatory proceedings against
financial institutions remain high. See Notes 18 and 27 to
the consolidated financial statements in Part II, Item 8 of
this Form 10-K for information about certain legal and
regulatory proceedings and investigations in which we are
involved. Our experience has been that legal claims by
consumers and clients increase in a market downturn and
that employment-related claims increase following periods
in which we have reduced our headcount. Additionally,
governmental entities have been and are plaintiffs in certain
of the legal proceedings in which we are involved, and we
may face future civil or criminal actions or claims by the
same or other governmental entities, as well as follow-on
civil litigation that is often commenced after regulatory
settlements.

large

cases,

affect
in

several
some

settlements
including,

financial
by
Significant
us, with
in
institutions,
governmental entities have been publicly announced. The
trend of large settlements with governmental entities may
the outcomes
adversely
financial
especially where
similar
institutions
governmental officials have announced that
the large
settlements will be used as the basis or a template for other
settlements. The
enforcement
environment makes it difficult to estimate probable losses,
which can lead to substantial disparities between legal
reserves and subsequent actual settlements or penalties.

for other

regulatory

uncertain

actions,

Claims of collusion or anti-competitive conduct have
become more common. Civil cases have been brought
against financial
institutions (including us) alleging bid
rigging, group boycotts or other anti-competitive practices.
Antitrust laws generally provide for joint and several
liability and treble damages. These claims have resulted in
significant settlements in the past and may do so in the
future.

We are subject
to laws and regulations worldwide,
including the FCPA and the U.K. Bribery Act, relating to
corrupt and illegal payments to, and hiring practices with
regard to, government officials and others. Violation of
these or similar laws and regulations could result in
significant monetary penalties, severe restrictions on our
activities and damage to our reputation.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

institutions or

Certain law enforcement authorities have recently required
admissions of wrongdoing, and, in some cases, criminal
pleas, as part of the resolutions of matters brought against
financial
their employees. Any such
resolution of a criminal matter involving us or our
employees could lead to increased exposure to civil
litigation, could adversely affect our reputation, could
result in penalties or limitations on our ability to conduct
our activities generally or in certain circumstances and
could have other negative effects.

Group Inc. is a holding company and is dependent for
liquidity on payments from its subsidiaries, many of
which are subject to restrictions.

Group Inc. is a holding company and, therefore, depends
on dividends, distributions and other payments from its
subsidiaries to fund dividend payments and to fund all
payments on its obligations, including debt obligations.
Many of our subsidiaries, including our broker-dealer and
bank subsidiaries, are subject to laws that restrict dividend
payments or authorize regulatory bodies to block or reduce
the flow of funds from those subsidiaries to Group Inc.

transactions,

increased capital

In addition, our broker-dealer and bank subsidiaries are
subject to restrictions on their ability to lend or transact
with affiliates and to minimum regulatory capital and other
requirements, as well as restrictions on their ability to use
funds deposited with them in brokerage or bank accounts
to fund their businesses. Additional restrictions on related-
and liquidity
party
requirements and additional limitations on the use of funds
on deposit in bank or brokerage accounts, as well as lower
earnings, can reduce the amount of funds available to meet
the obligations of Group Inc., including under the FRB’s
source of strength requirement, and even require Group
Inc. to provide additional funding to such subsidiaries.
Restrictions or regulatory action of that kind could impede
access to funds that Group Inc. needs to make payments on
its obligations,
including debt obligations, or dividend
payments. In addition, Group Inc.’s right to participate in a
distribution of assets upon a subsidiary’s liquidation or
the
reorganization is subject
subsidiary’s creditors.

to the prior claims of

Goldman Sachs 2019 Form 10-K

There has been a trend towards increased regulation and
supervision of our subsidiaries by the governments and
regulators in the countries in which those subsidiaries are
located or do business. Concerns about protecting clients
and creditors of financial institutions that are controlled by
persons or entities located outside of the country in which
such entities are located or do business have caused or may
cause a number of governments and regulators to take
additional steps to “ring fence” or require internal total
loss-absorbing capacity (which may also be subject to
“bail-in” powers, as described below) at those entities in
order to protect clients and creditors of those entities in the
event of financial difficulties involving those entities. The
result has been and may continue to be additional
limitations on our ability to efficiently move capital and
liquidity among our affiliated entities, thereby increasing
the overall level of capital and liquidity required by us on a
consolidated basis.

other

to certain exceptions.

Furthermore, Group Inc. has guaranteed the payment
obligations of certain of its subsidiaries, including GS&Co.
In
and GS Bank USA, subject
addition, Group Inc. guarantees many of the obligations of
its
a
transaction-by-transaction basis,
as negotiated with
counterparties. These guarantees may require Group Inc. to
provide substantial funds or assets to its subsidiaries or
their creditors or counterparties at a time when Group Inc.
is in need of liquidity to fund its own obligations.

consolidated

subsidiaries

The requirements for us and GS Bank USA to develop and
submit recovery and resolution plans to regulators, and the
incorporation of feedback received from regulators, may
require us to increase capital or liquidity levels or issue
long-term debt at Group Inc. or particular
additional
subsidiaries or otherwise incur additional or duplicative
operational or other costs at multiple entities, and may
reduce our ability to provide Group Inc. guarantees of the
obligations of our subsidiaries or raise debt at Group Inc.
Resolution planning may also impair our ability to
structure our intercompany and external activities in a
manner that we may otherwise deem most operationally
to facilitate our
efficient. Furthermore, arrangements
resolution planning may cause us to be subject to additional
taxes. Any such limitations or requirements would be in
addition to the legal and regulatory restrictions described
above on our ability to engage in capital actions or make
intercompany dividends or payments.

See “Business — Regulation” in Part I, Item 1 of this
Form 10-K for further information about regulatory
restrictions.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

regulatory

application of

and
The
requirements in the U.S. and non-U.S. jurisdictions to
facilitate the orderly resolution of
large financial
institutions could create greater risk of loss for Group
Inc.’s security holders.

strategies

As described in “Business — Regulation — Banking
Supervision and Regulation — Insolvency of an IDI or a
BHC,” if the FDIC is appointed as receiver under OLA, the
rights of Group Inc.’s creditors would be determined under
OLA, and substantial differences exist in the rights of
creditors between OLA and the U.S. Bankruptcy Code,
including the right of the FDIC under OLA to disregard the
strict priority of creditor claims in some circumstances,
which could have a material adverse effect on debtholders.

The FDIC has announced that a single point of entry
strategy may be a desirable strategy under OLA to resolve a
large financial institution in a manner that would, among
other things, impose losses on shareholders, debtholders
and other creditors of the top-tier BHC (in our case, Group
Inc.), while the BHC’s subsidiaries may continue to operate.
It is possible that the application of the single point of entry
strategy under OLA, in which Group Inc. would be the only
entity to enter resolution proceedings (and its material
broker-dealer, bank and other operating entities would not
enter resolution proceedings), would result in greater losses
to Group Inc.’s security holders (including holders of our
fixed rate, floating rate and indexed debt securities), than
the losses that would result from the application of a
bankruptcy proceeding or a different resolution strategy,
such as a multiple point of entry resolution strategy for
Group Inc. and certain of its material subsidiaries.

security holders

Assuming Group Inc. entered resolution proceedings and
that support from Group Inc. or other available resources
to its subsidiaries was sufficient to enable the subsidiaries to
remain solvent, losses at the subsidiary level would be
transferred to Group Inc. and ultimately borne by Group
Inc.’s security holders, third-party creditors of Group Inc.’s
subsidiaries would receive full recoveries on their claims,
and Group Inc.’s
(including our
shareholders, debtholders and other unsecured creditors)
could face significant and possibly complete losses. In that
case, Group Inc.’s security holders would face losses while
the third-party creditors of Group Inc.’s subsidiaries would
incur no losses because the subsidiaries would continue to
operate and would not enter resolution or bankruptcy
proceedings. In addition, holders of Group Inc.’s eligible
long-term debt and holders of Group Inc.’s other debt
securities could face losses ahead of its other similarly
situated creditors in a resolution under OLA if the FDIC
exercised its right, described above, to disregard the priority
of creditor claims.

OLA also provides the FDIC with authority to cause
creditors and shareholders of the financial company in
receivership to bear losses before taxpayers are exposed to
such losses, and amounts owed to the U.S. government
would generally receive a statutory payment priority over
the claims of private creditors, including senior creditors.

In addition, under OLA, claims of creditors (including
debtholders) could be satisfied through the issuance of
equity or other securities in a bridge entity to which Group
Inc.’s assets are transferred. If such a securities-for-claims
exchange were implemented, there can be no assurance that
the value of the securities of the bridge entity would be
sufficient to repay or satisfy all or any part of the creditor
claims for which the securities were exchanged. While the
FDIC has issued regulations to implement OLA, not all
aspects of how the FDIC might exercise this authority are
known and additional rulemaking is possible.

In addition, certain jurisdictions, including the U.K. and the
E.U., have implemented, or are considering, changes to
resolution regimes to provide resolution authorities with
the ability to recapitalize a failing entity by writing down its
unsecured debt or converting its unsecured debt into equity.
Such “bail-in” powers are intended to enable the
recapitalization of a failing institution by allocating losses
to its
shareholders and unsecured debtholders. For
example, the Bank of England requires a certain amount of
intercompany funding that we provide to our material U.K.
subsidiaries to contain a contractual trigger to expressly
permit the Bank of England to exercise such “bail-in”
powers in certain circumstances.
the intercompany
funding we provide to our subsidiaries is “bailed in,”
Group Inc.’s
subsidiaries would be
subordinated to the claims of the subsidiaries’ third-party
creditors or written down. U.S. regulators are considering
and non-U.S. authorities have adopted requirements that
certain subsidiaries of large financial institutions maintain
minimum amounts of total loss-absorbing capacity that
would pass losses up from the subsidiaries to the top-tier
BHC and, ultimately, to security holders of the top-tier
BHC in the event of failure.

claims on its

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

The application of Group Inc.’s proposed resolution
strategy could result in greater losses for Group Inc.’s
security holders.

In our resolution plan, Group Inc. would be resolved under
the U.S. Bankruptcy Code. The strategy described in our
resolution plan is a variant of the single point of entry
strategy: Group Inc. and Goldman Sachs Funding LLC
(Funding IHC), a wholly-owned, direct subsidiary of Group
Inc., would recapitalize and provide liquidity to certain
major subsidiaries, including through the forgiveness of
intercompany indebtedness, the extension of the maturities
of
intercompany indebtedness and the extension of
strategy were
additional
successful, creditors of some or all of Group Inc.’s major
subsidiaries would receive full recoveries on their claims,
while Group Inc.’s security holders could face significant
and possibly complete losses.

intercompany loans.

this

To facilitate the execution of our resolution plan, we
formed Funding IHC.
In exchange for an unsecured
subordinated funding note and equity interest, Group Inc.
transferred
and
substantially all of its global core liquid assets (GCLA) to
Funding IHC, and agreed to transfer additional GCLA
above prescribed thresholds.

intercompany

receivables

certain

the

and

financial

terminate

automatically

We also put in place a Capital and Liquidity Support
Agreement (CLSA) among Group Inc., Funding IHC and
our major subsidiaries. Under the CLSA, Funding IHC has
provided Group Inc. with a committed line of credit that
allows Group Inc. to draw sufficient funds to meet its cash
needs during the ordinary course of business. In addition, if
our
resources deteriorate so severely that
resolution may be imminent, (i) the committed line of credit
will
unsecured
subordinated funding note will automatically be forgiven,
(ii) all
intercompany receivables owed by the major
subsidiaries to Group Inc. will be transferred to Funding
IHC or their maturities will be extended to five years,
(iii) Group Inc. will be obligated to transfer substantially all
of its remaining intercompany receivables and GCLA (other
than an amount to fund anticipated bankruptcy expenses)
to Funding IHC, and (iv) Funding IHC will be obligated to
provide capital and liquidity support
to the major
subsidiaries. Group Inc.’s and Funding IHC’s obligations
under the CLSA are secured pursuant to a related security
agreement. Such actions would materially and adversely
affect Group Inc.’s liquidity. As a result, during a period of
severe stress, Group Inc. might commence bankruptcy
proceedings at an earlier time than it otherwise would if the
CLSA and related security agreement had not been
implemented.

Goldman Sachs 2019 Form 10-K

If Group Inc.’s proposed resolution strategy were successful,
Group Inc.’s security holders could face losses while the
third-party creditors of Group Inc.’s major subsidiaries
would incur no losses because those subsidiaries would
continue to operate and not enter resolution or bankruptcy
proceedings. As part of the strategy, Group Inc. could also
seek to elevate the priority of its guarantee obligations
relating to its major subsidiaries’ derivative contracts or
transfer them to another entity so that cross-default and early
termination rights would be stayed under
the ISDA
Protocols, as applicable, which would result in holders of
Group Inc.’s eligible long-term debt and holders of Group
Inc.’s other debt securities incurring losses ahead of the
beneficiaries of those guarantee obligations. It is also possible
that holders of Group Inc.’s eligible long-term debt and other
debt securities could incur losses ahead of other similarly
situated creditors.

If Group Inc.’s proposed resolution strategy were not
successful, Group Inc.’s financial condition would be
adversely impacted and Group Inc.’s security holders,
including debtholders, may as a consequence be in a worse
position than if the strategy had not been implemented. In
all cases, any payments to debtholders are dependent on
our ability to make such payments and are therefore subject
to our credit risk.

As a result of our recovery and resolution planning
processes,
including incorporating feedback from our
regulators, we may incur increased operational, funding or
other costs and face limitations on our ability to structure
our internal organization or engage in internal or external
activities in a manner that we may otherwise deem most
operationally efficient.

The growth of electronic trading and the introduction
of new trading technology may adversely affect our
business and may increase competition.

transactions are

to our business and our
Technology is fundamental
industry. The growth of electronic trading and the
introduction of new technologies is changing our businesses
and presenting us with new challenges. Securities, futures
increasingly occurring
and options
electronically, both on our own systems and through other
alternative trading systems, and it appears that the trend
toward alternative trading systems will continue. Some of
compete with us,
trading systems
these alternative
particularly our exchange-based market-making activities,
and we may experience continued competitive pressures in
these and other areas. In addition, the increased use by our
clients of low-cost electronic trading systems and direct
electronic access to trading markets could cause a reduction
in commissions and spreads. As our clients increasingly use
our systems to trade directly in the markets, we may incur
liabilities as a result of their use of our order routing and
execution infrastructure.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

have

invested

resources

the
significant
We
development of electronic trading systems and expect to
continue to do so, but there is no assurance that the
revenues generated by these systems will yield an adequate
return on our investment, particularly given the generally
lower commissions arising from electronic trades.

into

In conducting our businesses around the world, we
are subject to political, economic, legal, operational
and other risks that are inherent in operating in many
countries.

In conducting our businesses and maintaining and
supporting our global operations, we are subject to risks of
possible nationalization, expropriation, price controls,
capital controls, exchange controls and other restrictive
governmental actions, as well as the outbreak of hostilities
or acts of terrorism. For example, sanctions have been
imposed by the U.S. and the E.U. on certain individuals and
companies in Russia and Venezuela. In many countries, the
laws and regulations applicable to the securities and
financial services industries and many of the transactions in
which we are involved are uncertain and evolving, and it
may be difficult for us to determine the exact requirements
of local laws in every market. Any determination by local
regulators that we have not acted in compliance with the
application of local laws in a particular market or our
failure to develop effective working relationships with local
regulators could have a significant and negative effect not
only on our businesses in that market, but also on our
in some jurisdictions a
reputation generally. Further,
failure, or alleged failure,
to comply with laws and
regulations has subjected, and may in the future subject, us
and our personnel not only to civil actions, but also
criminal actions. We are also subject to the enhanced risk
that
transactions we structure might not be legally
enforceable in all cases.

Our businesses and operations are increasingly expanding
throughout the world, including in emerging and growth
markets, and we expect this trend to continue. Various
emerging and growth market countries have experienced
including
severe economic and financial disruptions,
significant devaluations of their currencies, defaults or
threatened defaults on sovereign debt, capital and currency
exchange controls, and low or negative growth rates in
their economies, as well as military activity, civil unrest or
acts of terrorism. The possible effects of any of these
conditions include an adverse impact on our businesses and
increased volatility in financial markets generally.

While business and other practices throughout the world
differ, our principal entities are subject in their operations
worldwide to rules and regulations relating to corrupt and
illegal payments, hiring practices and money laundering, as
well as laws relating to doing business with certain
individuals, groups and countries, such as the FCPA, the
USA PATRIOT Act and the U.K. Bribery Act. While we
have invested and continue to invest significant resources in
training and in compliance monitoring, the geographical
diversity of our operations, employees, clients and
consumers, as well as the vendors and other third parties
that we deal with, greatly increases the risk that we may be
found in violation of such rules or regulations and any such
violation could subject us to significant penalties or
adversely affect our reputation.

In addition, there have been a number of highly publicized
cases around the world, involving actual or alleged fraud or
other misconduct by employees in the financial services
industry in recent years, and we have had, and may in the
future have, employee misconduct. This misconduct has
included and may also in the future include intentional
efforts to ignore or circumvent applicable policies, rules or
procedures or misappropriation of funds and the theft of
proprietary information, including proprietary software. It
is not always possible to deter or prevent employee
misconduct and the precautions we take to prevent and
detect this activity have not been and may not be effective in
all cases. See for example, “1Malaysia Development Berhad
(1MDB)-Related Matters” in Note 27 to the consolidated
financial statements in Part II, Item 8 of this Form 10-K.

Our commodities activities, particularly our physical
commodities activities, subject us to extensive
risks,
regulation and involve certain potential
including environmental, reputational and other risks
that may expose us to significant liabilities and costs.

As part of our commodities business, we purchase and sell
certain physical commodities, arrange for their storage and
transport, and engage in market making of commodities.
The commodities involved in these activities may include
crude oil, refined oil products, natural gas, liquefied natural
gas, electric power, agricultural products, metals (base and
precious), minerals
(including unenriched uranium),
emission credits, coal, freight and related products and
indices.

We make investments in and finance entities that engage in
the production, storage and transportation of numerous
commodities,
commodities
referenced above.

including many of

the

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

These activities subject us and/or the entities in which we
invest to extensive and evolving federal, state and local
energy, environmental, antitrust and other governmental
laws and regulations worldwide, including environmental
laws and regulations relating to, among others, air quality,
water quality, waste management,
transportation of
hazardous substances, natural resources, site remediation
and health and safety. Additionally, rising climate change
concerns have led to additional regulation that could
increase the operating costs and adversely affect
the
profitability of certain of our investments.

There may be substantial costs in complying with current or
future laws and regulations relating to our commodities-
related activities and investments. Compliance with these
laws and regulations could require significant commitments
of capital toward environmental monitoring, renovation of
storage facilities or transport vessels, payment of emission
fees and carbon or other taxes, and application for, and
holding of, permits and licenses.

Commodities involved in our intermediation activities and
investments are also subject to the risk of unforeseen or
catastrophic events, which are likely to be outside of our
control, including those arising from the breakdown or
failure of transport vessels, storage facilities or other
equipment or processes or other mechanical malfunctions,
fires,
leaks, spills or release of hazardous substances,
performance below expected levels of output or efficiency,
terrorist attacks, extreme weather events or other natural
disasters or other hostile or catastrophic events. In addition,
we rely on third-party suppliers or service providers to
perform their contractual obligations and any failure on
their part, including the failure to obtain raw materials at
store
reasonable prices or
commodities, could expose us to costs or losses. Also, while
we seek to insure against potential risks, we may not be able
to obtain insurance to cover some of these risks and the
insurance that we have may be inadequate to cover our
losses.

to safely transport or

The occurrence of any of such events may prevent us from
performing under our agreements with clients, may impair
our operations or financial results and may result in
litigation, regulatory action, negative publicity or other
reputational harm.

We may also be required to divest or discontinue certain of
these activities for regulatory or legal reasons.

Goldman Sachs 2019 Form 10-K

We may incur losses as a result of unforeseen or
catastrophic events, including the emergence of a
pandemic, terrorist attacks, extreme weather events
or other natural disasters.

emergence of a pandemic,

The occurrence of unforeseen or catastrophic events,
including the
such as
coronavirus, or other widespread health emergency (or
concerns over the possibility of such an emergency),
terrorist attacks, extreme terrestrial or solar weather events
or other natural disasters, could create economic and
financial disruptions, and could lead to operational
difficulties (including travel limitations) that could impair
our ability to manage our businesses.

change

Climate
businesses,
creditworthiness and damage our reputation.

concerns
client

could
activity

disrupt
levels

affect

our
and

Climate change may cause extreme weather events that
disrupt operations at one or more of our primary locations,
which may negatively affect our ability to service and interact
with our clients, and also may adversely affect the value of
our investments,
including our real estate investments.
Climate change may also have a negative impact on the
financial condition of our clients, which may decrease
revenues from those clients and increase the credit risk
associated with loans and other credit exposures to those
clients. Additionally, our reputation may be damaged as a
result of our involvement, or our clients’ involvement, in
certain industries or projects associated with climate change.

Item 1B. Unresolved Staff Comments

There are no material unresolved written comments that
were received from the SEC staff 180 days or more before
the end of our fiscal year relating to our periodic or current
reports under the Exchange Act.

Item 2. Properties

In the U.S. and elsewhere in the Americas, we have offices
consisting of approximately 6.8 million square feet of
leased and owned space. Our principal executive offices are
located at 200 West Street, New York, New York and
consist of approximately 2.1 million square feet. The
building is located on a parcel leased from Battery Park City
Authority pursuant to a ground lease. Under the lease,
Battery Park City Authority holds title to all improvements,
including the office building, subject
to our right of
exclusive possession and use until June 2069, the expiration
date of the lease. Under the terms of the ground lease, we
made a lump sum ground rent payment in June 2007 of
$161 million for rent through the term of the lease.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

In Europe, the Middle East and Africa, we have offices
consisting of approximately 2.2 million square feet of
leased and owned space. Our European headquarters is
located in London at Plumtree Court, consisting of 826,000
square feet under a lease which can be terminated in 2039.

In Asia, Australia and New Zealand, we have offices
consisting of approximately 2.6 million square feet,
including our offices in India, and regional headquarters in
Tokyo and Hong Kong. In India, we have offices with
approximately 1.6 million square feet, the majority of
which have leases that will expire in 2028.

In the preceding paragraphs, square footage figures are
provided only for properties that are used in the operation of
our businesses. Our occupancy expenses include costs for
office space held in excess of our current requirements. This
space, the cost of which is charged to earnings as incurred, is
held for potential growth or to replace currently occupied
space that we may exit in the future. We regularly evaluate
our space capacity in relation to current and projected
headcount. We may incur exit costs in the future if we
(i) reduce our space capacity or (ii) commit to, or occupy,
new properties in locations in which we operate and dispose
of existing space that had been held for potential growth.
These costs may be material to our operating results in a
given period.

Item 3. Legal Proceedings

We are involved in a number of judicial, regulatory and
arbitration proceedings concerning matters arising in
connection with the conduct of our businesses. Many of
these proceedings are in early stages, and many of these cases
seek an indeterminate amount of damages. We have
estimated the upper end of the range of reasonably possible
aggregate loss for matters where we have been able to
estimate a range and we believe, based on currently available
information, that the results of matters where we have not
been able to estimate a range of reasonably possible loss, in
the aggregate, will not have a material adverse effect on our
financial condition, but may be material to our operating
results in a given period. Given the range of litigation and
investigations presently under way, our litigation expenses
can be expected to remain high. See “Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Use of Estimates” in Part II, Item 7 of this
Form 10-K. See Notes 18 and 27 to the consolidated
financial statements in Part II, Item 8 of this Form 10-K for
information about our reasonably possible aggregate loss
estimate and judicial, regulatory and legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

PART II
Item 5. Market
Registrant’s
Common Equity, Related Stockholder
Matters and Issuer Purchases of
Equity Securities

for

The principal market on which our common stock is traded
is the NYSE under the symbol “GS.” Information relating
to the performance of our
common stock from
December 31, 2014 through December 31, 2019 is set forth
in “Supplemental Financial Information — Common Stock
Performance” in Part II, Item 8 of this Form 10-K. As of
February 7, 2020, there were 6,845 holders of record of our
common stock.

The table below presents purchases made by or on behalf of
Group Inc. or any “affiliated purchaser” (as defined in
Rule 10b-18(a)(3) under the Exchange Act) of our common
stock during the fourth quarter of 2019.

Total
Shares
Purchased

Average
Price Paid
Per Share

Total Shares
Purchased as
Part of a Publicly
Announced Program

Maximum Shares
That May Yet Be
Purchased Under
the Program

October
5,607,574 $206.69
November 4,560,133 $220.03
–
December
Total

–
10,167,707

5,607,574
4,560,133
–
10,167,707

62,411,047
57,850,914
57,850,914

Since March 2000, our Board has approved a repurchase
program authorizing repurchases of up to 605 million
shares of our common stock. The repurchase program is
effected primarily through regular open-market purchases
(which may include repurchase plans designed to comply
with Rule 10b5-1 and accelerated share repurchases), the
amounts and timing of which are determined primarily by
our current and projected capital position, but which may
also be influenced by general market conditions and the
prevailing price and trading volumes of our common stock.
The repurchase program has no set expiration or
termination date. Prior to repurchasing common stock, we
must receive confirmation that the FRB does not object to
such capital action.

Information relating to compensation plans under which
our equity securities are authorized for issuance is presented
in Part III, Item 12 of this Form 10-K.

Item 6. Selected Financial Data

The Selected Financial Data table is set forth in Part II, Item
8 of this Form 10-K.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Item 7. Management’s Discussion
and Analysis of Financial Condition
and Results of Operations
Introduction

is a leading global

The Goldman Sachs Group, Inc. (Group Inc. or parent
together with its
company), a Delaware corporation,
consolidated subsidiaries,
investment
banking, securities and investment management firm that
provides a wide range of financial services to a substantial and
diversified client base that includes corporations, financial
institutions, governments and individuals. Founded in 1869,
we are headquartered in New York and maintain offices in all
major financial centers around the world. We report our
activities in four business segments: Investment Banking,
Global Markets, Asset Management, and Consumer &
Wealth Management. See “Results of Operations” for further
information about our business segments.

statements”

When we use the terms “we,” “us” and “our,” we mean
Group Inc. and its consolidated subsidiaries. When we use
the term “our subsidiaries,” we mean the consolidated
subsidiaries of Group Inc. References to “this Form 10-K”
are to our Annual Report on Form 10-K for the year ended
December 31, 2019. All references to “the consolidated
financial
Financial
Information” are to Part II, Item 8 of this Form 10-K. All
references to 2019, 2018 and 2017 refer to our years ended,
or the dates, as the context requires, December 31, 2019,
December 31, 2018 and December 31, 2017, respectively.
Any reference to a future year refers to a year ending on
December 31 of that year. Certain reclassifications have
been made to previously reported amounts to conform to
the current presentation.

“Supplemental

In this discussion and analysis of our financial condition
and results of operations, we have included information
that may constitute “forward-looking statements” within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are not historical facts or statements of current
conditions, but instead represent only our beliefs regarding
future events, many of which, by their nature, are
inherently uncertain and outside our control.

By identifying the following statements for you in this
manner, we are alerting you to the possibility that our
actual results and financial condition may differ, possibly
materially,
from the anticipated results and financial
condition in these forward-looking statements. Important
factors that could cause our results, financial condition and
capital actions to differ from those in these statements
include, among others, those described in “Risk Factors” in
Part I, Item 1A of this Form 10-K and “Cautionary
Statement Pursuant to the U.S. Private Securities Litigation
Reform Act of 1995” in Part I, Item 1 of this Form 10-K.

Goldman Sachs 2019 Form 10-K

(vi)

implications

information security program,

These statements may relate to, among other things, (i) our
future plans and results, including our target ROE, ROTE,
efficiency ratio and CET1 capital ratio, and how they can
be achieved, (ii) various legal proceedings, governmental
investigations or other contingencies as set
forth in
Notes 27 and 18 to the consolidated financial statements in
Part II, Item 8 of this Form 10-K, (iii) the results of stress
tests, (iv) the objectives and effectiveness of our business
continuity plan,
risk
management and liquidity policies, (v) our resolution plan
and resolution strategy and their
for
the design and effectiveness of our
stakeholders,
resolution capital and liquidity models and triggers and
alerts framework, (vii) trends in or growth opportunities
for our businesses, including the timing and benefits of
business and strategic initiatives and changes in and the
importance of the efficiency ratio, (viii) the effect of changes
to regulations, as well as our future status, activities or
reporting under banking and financial regulation, (ix) our
NSFR and SCB, (x) our level of future compensation
expense as a percentage of operating expenses, (xi) our
investment banking transaction backlog, (xii) our expected
tax rate, (xiii) our proposed capital actions (including those
permitted by our CCAR 2019 capital plan), (xiv) our
expected interest
(xv) our credit exposures,
(xvi) our expected provisions for credit losses, (xvii) our
preparations for Brexit, including a hard Brexit scenario,
(xviii) the replacement of LIBOR and other IBORs and our
program for the transition to alternative risk-free reference
rates, (xix) the adequacy of our allowance for credit losses,
(xx) the projected growth of our deposits and associated
interest expense savings, (xxi) the projected growth of our
consumer loan and credit card businesses,
(xxii) our
business initiatives, including those related to transaction
banking and new consumer financial products, (xxiii) our
expense savings initiatives and increasing use of strategic
locations, (xxiv) our planned 2020 parent vanilla debt
issuances, (xxv) the amount of GCLA we expect to hold,
(xxvi) our expected G-SIB surcharge and (xxvii) expenses
we may incur, including future litigation expense and those
associated with investing in our consumer lending, credit
card and transaction banking businesses.

income,

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Executive Overview

We generated net earnings of $8.47 billion for 2019, a
decrease of 19%, compared with $10.46 billion for 2018.
Diluted earnings per common share was $21.03 for 2019, a
decrease of 17%, compared with $25.27 for 2018. Return
on average common shareholders’ equity (ROE) was
10.0% for 2019, compared with 13.3% for 2018. Book
$218.52
value
of
compared with
December
December 2018.

share was
5.4% higher

common
2019,

per

During 2019, we recorded net provisions for litigation and
regulatory proceedings of $1.24 billion, which reduced
diluted earnings per common share by $3.16 and ROE by
1.5 percentage points.

Net revenues were $36.55 billion for 2019, essentially
unchanged compared with 2018, reflecting lower net
revenues in Investment Banking, driven by lower net
revenues in Underwriting and Financial advisory, offset by
slightly higher net revenues in Global Markets, due to
higher net revenues in Fixed Income, Currency and
Commodities (FICC). Net revenues in Asset Management
and Consumer & Wealth Management were both
essentially unchanged.

Provision for credit losses was $1.07 billion for 2019, 58%
higher than 2018, primarily reflecting higher impairments
related to corporate loans and higher provisions related to
credit card loans.

Operating expenses were $24.90 billion for 2019, 6%
higher than 2018, primarily reflecting significantly higher
net provisions for litigation and regulatory proceedings and
and
higher
technology. Our efficiency ratio (total operating expenses
divided by total net revenues) for 2019 was 68.1%,
compared with 64.1% for 2018.

consolidated investments

expenses

for

Pre-tax earnings were $10.58 billion for 2019 and included
our investments in our digital platform, Marcus by
Goldman Sachs (Marcus), our credit card activities and the
planned launch of our transaction banking activities, which
approximately
collectively had a pre-tax loss of
$700 million.

capital

returned $6.88 billion of

to common
We
including $5.34 billion of
shareholders during 2019,
common share repurchases and $1.54 billion of common
stock dividends. As of December 2019, our Common
Equity Tier 1 (CET1) capital ratio as calculated in
accordance with the Standardized Capital Rules was 13.3%
and as calculated in accordance with the Advanced Capital
Rules was 13.7%. See Note 20 to the consolidated financial
statements for further information about our capital ratios.

In 2020, we announced strategic initiatives related to expense
efficiencies and funding optimization with an emphasis on
improving profitability and shareholder returns. We estimated
that over the next three years we will generate (i) $1.3 billion
of expense efficiencies, which will create capacity to fund
growth, and (ii) $1.0 billion of interest expense savings
through funding optimization from the growth of deposits and
the reduction of wholesale unsecured funding.

Business Environment

During 2019, global real gross domestic product (GDP)
growth appeared to decrease compared with 2018, reflecting
decreased growth in both emerging markets and advanced
economies, including in the U.S. Concerns about future
global growth and a mixed macroeconomic environment led
to accommodative monetary policies by global central banks,
including three cuts to the federal funds rate by the U.S.
Federal Reserve during the year to a target range of 1.5% to
1.75%. The market sentiment in 2019 was also impacted by
geopolitical uncertainty, including ongoing trade concerns
between the U.S. and China and multiple extensions of the
deadline related to the U.K.’s decision to leave the E.U.
(Brexit). See “Results of Operations — Segment Operating
Results” for further information about
the operating
environment for each of our business segments.

Critical Accounting Policies

Fair Value
Fair Value Hierarchy. Trading assets and liabilities, certain
investments and loans, and certain other financial assets and
liabilities, are included in our consolidated balance sheets at
fair value (i.e., marked-to-market), with related gains or
losses generally recognized in our consolidated statements of
earnings. The use of
fair value to measure financial
instruments is fundamental to our risk management practices
and is our most critical accounting policy.

The fair value of a financial instrument is the amount that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the
measurement date. We measure certain financial assets and
liabilities as a portfolio (i.e., based on its net exposure to
market and/or credit risks). In determining fair value, the
hierarchy under U.S. generally accepted accounting principles
(U.S. GAAP) gives (i) the highest priority to unadjusted quoted
prices in active markets for identical, unrestricted assets or
liabilities (level 1 inputs), (ii) the next priority to inputs other
than level 1 inputs that are observable, either directly or
indirectly (level 2 inputs), and (iii) the lowest priority to inputs
that cannot be observed in market activity (level 3 inputs). In
evaluating the significance of a valuation input, we consider,
among other factors, a portfolio’s net risk exposure to that
input. Assets and liabilities are classified in their entirety based
on the lowest level of input that is significant to their fair value
measurement.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

The fair values for substantially all of our financial assets
and liabilities are based on observable prices and inputs and
are classified in levels 1 and 2 of the fair value hierarchy.
Certain level 2 and level 3 financial assets and liabilities
may require appropriate valuation adjustments that a
market participant would require to arrive at fair value for
factors, such as counterparty and our credit quality,
funding risk, transfer restrictions, liquidity and bid/offer
spreads.

for

the

evidence

statements

level 3 financial assets,

Instruments classified in level 3 of the fair value hierarchy
are those which require one or more significant inputs that
are not observable. Level 3 financial assets represented
2.3% as of December 2019 and 2.4% as of
December 2018, of our total assets. See Notes 4 through 10
to the consolidated financial
further
information about
including
changes in level 3 financial assets and related fair value
measurements. Absent
contrary,
instruments classified in level 3 of the fair value hierarchy
are initially valued at transaction price, which is considered
to be the best initial estimate of fair value. Subsequent to the
transaction date, we use other methodologies to determine
fair value, which vary based on the type of instrument.
Estimating the fair value of level 3 financial instruments
requires judgments to be made. These judgments include:
‰ Determining the appropriate valuation methodology and/
or model for each type of level 3 financial instrument;
‰ Determining model inputs based on an evaluation of all
relevant
including prices
evidenced by market transactions, interest rates, credit
spreads, volatilities and correlations; and

empirical market data,

‰ Determining

appropriate

adjustments,
including those related to illiquidity or counterparty
credit quality.

valuation

the methodology, valuation inputs and
Regardless of
assumptions are only changed when corroborated by
substantive evidence.

control

infrastructure

instruments. Our

to ensuring that all of our

Controls Over Valuation of Financial
Instruments.
in our
Market makers and investment professionals
revenue-producing units are responsible for pricing our
financial
is
independent of
the revenue-producing units and is
financial
fundamental
instruments are appropriately valued at market-clearing
levels. In the event that there is a difference of opinion in
situations where estimating the fair value of financial
instruments requires judgment (e.g., calibration to market
comparables or trade comparison, as described below), the
final valuation decision is made by senior managers in
independent risk oversight and control functions. This
independent price verification is critical to ensuring that our
financial instruments are properly valued.

Goldman Sachs 2019 Form 10-K

Price Verification. All financial instruments at fair value
classified in levels 1, 2 and 3 of the fair value hierarchy are
subject to our independent price verification process. The
objective of price verification is to have an informed and
independent opinion with regard to the valuation of
financial instruments under review. Instruments that have
one or more
inputs which cannot be
corroborated by external market data are classified in
the fair value hierarchy. Price verification
level 3 of
strategies utilized by our independent risk oversight and
control functions include:
‰ Trade Comparison. Analysis of trade data (both internal
and external, where available) is used to determine the
most relevant pricing inputs and valuations.

significant

‰ External Price Comparison. Valuations and prices are
compared to pricing data obtained from third parties
IDC,
(e.g., brokers or dealers, Markit, Bloomberg,
TRACE). Data obtained from various
is
compared to ensure consistency and validity. When
third-party pricing
broker or dealer quotations or
vendors are used for valuation or price verification,
greater priority is generally given to executable
quotations.

sources

‰ Calibration to Market Comparables. Market-based
transactions are used to corroborate the valuation of
positions with
and
components.

characteristics,

similar

risks

‰ Relative Value Analyses. Market-based transactions
are analyzed to determine the similarity, measured in
terms of risk, liquidity and return, of one instrument
relative to another or, for a given instrument, of one
maturity relative to another.

‰ Collateral Analyses. Margin calls on derivatives are
analyzed to determine implied values, which are used to
corroborate our valuations.

‰ Execution of Trades. Where appropriate, market-
making desks are instructed to execute trades in order to
provide evidence of market-clearing levels.

‰ Backtesting.

Valuations

are

corroborated

comparison to values realized upon sales.

See Note 4 to the consolidated financial statements for
further information about fair value measurements.

Review of Net Revenues. Independent risk oversight and
control functions ensure adherence to our pricing policy
through a combination of daily procedures, including the
explanation and attribution of net revenues based on the
underlying factors. Through this process, we independently
validate net revenues, identify and resolve potential fair value
or trade booking issues on a timely basis and seek to ensure
that risks are being properly categorized and quantified.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Review of Valuation Models. Our independent model
risk management group (Model Risk), consisting of
quantitative professionals who are separate from model
developers, performs an independent model review and
validation process of our valuation models. New or
changed models are reviewed and approved prior to
implementation. Models are reviewed annually to assess the
impact of any changes in the product or market and any
in pricing theories. See “Risk
market developments
Management — Model Risk Management” for further
information about
the review and validation of our
valuation models.

Allowance for Credit Losses
We estimate and record an allowance for credit losses
related to our loans held for investment and accounted for
at amortized cost. The allowance for loan losses consists of
specific loan-level reserves, portfolio-level reserves and
reserves on Purchased Credit
Impaired loans. The
these components entails
determination of each of
significant judgment on various risk factors,
including
industry default and loss data, current macroeconomic
indicators, borrower’s capacity to meet
financial
obligations, borrower’s country of risk, loan seniority and
collateral type. In addition, for loans backed by real estate,
risk factors include loan-to-value ratio, debt service ratio
and home price index. Risk factors for consumer and credit
card loans include Fair Isaac Corporation (FICO) credit
scores and delinquency status.

its

losses entails judgment about
Our estimate of credit
collectability at
the reporting dates, and there are
uncertainties inherent in those judgments. While we use the
best information available to determine this estimate, future
adjustments to the allowance may be necessary based on,
among other things, changes in the economic environment
or variances between actual results and the original
assumptions used. Loans are charged off against
the
allowance for loan losses when deemed to be uncollectible.
See Note 3 to the consolidated financial statements for
further information about adoption of ASU No. 2016-13,
“Financial Instruments — Credit Losses (Topic 326) —
Measurement of Credit Losses on Financial Instruments.”

We also record an allowance for losses on lending
commitments which are held for investment and accounted
for at amortized cost. Such allowance is determined using
the same methodology as the allowance for loan losses,
while also taking into consideration the probability of
drawdowns or funding, and is included in other liabilities.

See Note 9 to the consolidated financial statements for
further information about the allowance for credit losses.

Use of Estimates

U.S. GAAP requires us to make certain estimates and
assumptions. In addition to the estimates we make in
connection with fair value measurements and the allowance
for credit losses on loans and lending commitments held for
investment and accounted for at amortized cost, the use of
estimates and assumptions is also important in determining
the accounting for goodwill and identifiable intangible
assets, provisions for losses that may arise from litigation
and regulatory proceedings
(including governmental
investigations), and provisions for losses that may arise
from tax audits.

Goodwill is assessed for impairment annually in the fourth
quarter or more frequently if events occur or circumstances
change that indicate an impairment may exist. When
first, a qualitative
for impairment,
assessing goodwill
assessment can be made to determine whether it is more
likely than not that the estimated fair value of a reporting
unit is less than its estimated carrying value. If the results of
the qualitative assessment are not conclusive, a quantitative
goodwill test is performed. Alternatively, a quantitative
goodwill test can be performed without performing a
qualitative assessment.

Estimating the fair value of our reporting units requires
judgment. Critical inputs to the fair value estimates include
projected earnings and allocated equity. There is inherent
uncertainty in the projected earnings. The estimated
carrying value of each reporting unit reflects an allocation
of total shareholders’ equity and represents the estimated
amount of total shareholders’ equity required to support
the activities of
the reporting unit under currently
applicable regulatory capital requirements. See Note 12 to
the
further
information about goodwill.

consolidated

statements

financial

for

If we experience a prolonged or severe period of weakness
financial markets, our
in the business environment,
performance or our common stock price, or additional
increases in capital requirements, our goodwill could be
impaired in the future.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Identifiable intangible assets are tested for impairment
whenever events or changes in circumstances suggest that
an asset’s or asset group’s carrying value may not be fully
recoverable. Judgment is required to evaluate whether
indications of potential impairment have occurred, and to
test
if required. An
impairment is recognized if the total of the estimated
undiscounted cash flows relating to the asset or asset group
is less than the corresponding carrying value. See Note 12
to the consolidated financial
further
information about identifiable intangible assets.

intangible assets for impairment,

statements

for

We also estimate and provide for potential losses that may
arise out of litigation and regulatory proceedings to the
extent that such losses are probable and can be reasonably
estimated. In addition, we estimate the upper end of the
range of reasonably possible aggregate loss in excess of the
related reserves for litigation and regulatory proceedings
where we believe the risk of loss is more than slight. See
Notes 18 and 27 to the consolidated financial statements
for information about certain judicial,
litigation and
regulatory proceedings. Significant judgment is required in
making these estimates and our final
liabilities may
ultimately be materially different. Our total estimated
liability in respect of litigation and regulatory proceedings is
determined on a case-by-case basis and represents an
estimate of probable losses after considering, among other
factors,
each case, proceeding or
investigation, our experience and the experience of others
in similar cases, proceedings or investigations, and the
opinions and views of legal counsel.

the progress of

In accounting for income taxes, we recognize tax positions
in the financial statements only when it is more likely than
not that the position will be sustained on examination by
the relevant taxing authority based on the technical merits
of the position. See Note 24 to the consolidated financial
statements for further information about income taxes.

Recent Accounting Developments

See Note 3 to the consolidated financial statements for
information about Recent Accounting Developments.

Results of Operations

The composition of our net revenues has varied over time as
financial markets and the scope of our operations have
changed. The composition of net revenues can also vary
over the shorter term due to fluctuations in U.S. and global
economic and market conditions. See “Risk Factors” in
Part I, Item 1A of this Form 10-K for further information
about the impact of economic and market conditions on
our results of operations.

Goldman Sachs 2019 Form 10-K

Financial Overview
The table below presents an overview of our financial
results and selected financial ratios.

Year Ended December

$ in millions, except per share amounts

2019

2018

2017

Net revenues
Pre-tax earnings
Net earnings
Net earnings to common
Diluted earnings per common share
ROE
ROTE
Net earnings to average total assets
Return on average total shareholders’ equity
Average equity to average assets
Dividend payout ratio

$36,546 $36,616 $32,730
$10,583 $12,481 $11,132
$ 8,466 $10,459 $ 4,286
$ 7,897 $ 9,860 $ 3,685
9.01
$ 21.03 $ 25.27 $
10.0% 13.3% 4.9%
10.6% 14.1% 5.2%
0.9% 1.1% 0.5%
9.4% 12.3% 5.0%
9.3% 8.8% 9.5%
19.7% 12.5% 32.2%

In the table above:
‰ Net earnings

to common represents net earnings
applicable to common shareholders, which is calculated
as net earnings less preferred stock dividends.

‰ Average equity to average assets is calculated by dividing
average total shareholders’ equity by average total assets.
‰ Dividend payout ratio is calculated by dividing dividends
declared per common share by diluted earnings per
common share.

‰ ROE is calculated by dividing net earnings to common by
average monthly common shareholders’ equity. Tangible
total
common shareholders’ equity is calculated as
shareholders’ equity less preferred stock, goodwill and
identifiable intangible assets. Return on average tangible
common shareholders’ equity (ROTE) is calculated by
dividing net earnings to common by average monthly
tangible common shareholders’ equity. We believe that
tangible common shareholders’ equity is meaningful because
it is a measure that we and investors use to assess capital
adequacy and that ROTE is meaningful because it measures
the performance of businesses consistently, whether they
were acquired or developed internally. Tangible common
shareholders’ equity and ROTE are non-GAAP measures
and may not be comparable to similar non-GAAP measures
used by other companies. Return on average total
shareholders’ equity is calculated by dividing net earnings by
average monthly total shareholders’ equity.

The table below presents our average equity and the
reconciliation of average common shareholders’ equity
to average tangible common shareholders’ equity.

$ in millions

Average for the Year Ended December

2019

2018

2017

$ 90,297
Total shareholders’ equity
(11,203)
Preferred stock
$ 79,094
Common shareholders’ equity
(4,464)
Goodwill and identifiable intangible assets
Tangible common shareholders’ equity$ 74,630

$ 85,238
(11,253)
$ 73,985
(4,090)
$ 69,895

$ 85,959
(11,238)
$ 74,721
(4,065)
$ 70,656

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

‰ In 2017, we recorded $4.40 billion of estimated income
tax expense related to the Tax Cuts and Jobs Act (Tax
Legislation). Excluding this expense, diluted earnings per
common share was $19.76, ROE was 10.8% and ROTE
was 11.4% for 2017. In the fourth quarter of 2018, we
finalized this estimate to reflect the impact of updated
information, including subsequent guidance issued by the
U.S.
Internal Revenue Service (IRS), resulting in a
$487 million income tax benefit for 2018. Excluding this
benefit, diluted earnings per common share was $24.02,
ROE was 12.7% and ROTE was 13.4% for 2018. We
believe that presenting our
results excluding Tax
Legislation is meaningful as excluding the above items
increases the comparability of period-to-period results.
See “Results of Operations — Provision for Taxes” for
further information about Tax Legislation. Diluted
earnings per common share, ROE and ROTE, excluding
the impact of the above items related to Tax Legislation,
are non-GAAP measures and may not be comparable to
similar non-GAAP measures used by other companies.
The tables below present the calculation of net earnings to
common, diluted earnings per common share and average
common shareholders’ equity, excluding the impact of
the above items related to Tax Legislation.

in millions, except per share amounts

Net earnings to common, as reported
Impact of Tax Legislation
Net earnings to common, excluding

the impact of Tax Legislation

Divided by average diluted common shares
Diluted earnings per common share, excluding

Year Ended December

2018

$9,860
(487)

2017

$3,685
4,400

$9,373
390.2

$8,085
409.1

the impact of Tax Legislation

$24.02

$19.76

$ in millions

Common shareholders’ equity, as reported
Impact of Tax Legislation
Common shareholders’ equity, excluding

the impact of Tax Legislation

Goodwill and identifiable intangible assets
Tangible common shareholders’ equity,

Average for the
Year Ended December

2018

2017

$73,985
(42)

$74,721
338

$73,943
(4,090)

$75,059
(4,065)

excluding the impact of Tax Legislation

$69,853

$70,994

to Employee

‰ In 2017, as required, we adopted ASU No. 2016-09,
“Compensation — Stock Compensation (Topic 718) —
Improvements
Share-Based Payment
Accounting.” The impact of adoption was a reduction to
our provision for taxes of $719 million for 2017, which
increased diluted earnings per common share by
approximately $1.75 and both ROE and ROTE by
approximately 1.0 percentage points. The impact for
2019 and 2018 was not material.

Net Revenues
The table below presents our net revenues by line item.

$ in millions

2019

2018

2017

Year Ended December

Investment banking
Investment management
Commissions and fees
Market making
Other principal transactions
Total non-interest revenues
Interest income
Interest expense
Net interest income
Total net revenues

$ 6,798
6,189
2,988
10,157
6,052
32,184
21,738
17,376
4,362
$36,546

$ 7,430
6,590
3,199
9,724
5,906
32,849
19,679
15,912
3,767
$36,616

$ 7,076
5,867
3,051
7,853
5,951
29,798
13,113
10,181
2,932
$32,730

In the table above:
‰ Investment banking consists of revenues (excluding net
from financial advisory and underwriting
interest)
assignments. These activities are
included in our
Investment Banking segment. Revenues from transactions
in derivatives related to client advisory and underwriting
assignments, previously reported in investment banking,
are now reported in market making. Reclassifications
have been made to previously reported amounts to
conform to the current presentation.

‰ Investment management consists of revenues (excluding
net interest) from providing asset management services
across all major asset classes to a diverse set of asset
management clients (included in our Asset Management
segment), as well as asset management services, wealth
advisory services and certain transaction services for
wealth management clients (included in our Consumer &
Wealth Management segment).

‰ Commissions and fees

revenues

consists of

from
executing and clearing client transactions on major stock,
options and futures exchanges worldwide, as well as
over-the-counter (OTC) transactions. These activities are
included in our Global Markets and Consumer & Wealth
Management segments.

‰ Market making consists of revenues (excluding net
interest) from client execution activities related to making
markets
rate products, credit products,
mortgages, currencies, commodities and equity products.
These activities are included in our Global Markets
segment.

in interest

interest)

transactions

consists of

‰ Other principal
revenues
(excluding net
from our equity investing
activities, including revenues related to our consolidated
investments
(included in our Asset Management
segment), and lending activities (included across our four
segments).

Goldman Sachs 2019 Form 10-K

Commissions and fees in the consolidated statements of
earnings were $2.99 billion for 2019, 7% lower than 2018,
primarily reflecting a decrease in our listed cash equity
volumes in the U.S., generally consistent with market
volumes.

Market making revenues in the consolidated statements of
earnings were $10.16 billion for 2019, 4% higher than
2018, primarily reflecting significantly higher revenues in
interest rate products and commodities, and slightly higher
revenues in equity products, partially offset by significantly
lower revenues in currencies and lower revenues in
mortgages.

Other principal transactions in the consolidated statements
of earnings were $6.05 billion for 2019, 2% higher than
2018, primarily reflecting significantly higher net gains
from investments in public equities, partially offset by
lower net gains from investments in debt instruments and
slightly lower net gains from investments in private equities.

interest

Interest

Income. Net

Net
income in the
consolidated statements of earnings was $4.36 billion for
2019, 16% higher than 2018, reflecting an increase in
interest income primarily related to trading assets and loans
reflecting the impact of higher average balances, and
collateralized agreements reflecting the impact of higher
interest rates, partially offset by impact of lower average
balances. The increase in interest income was partially
offset by higher interest expense primarily related to
deposits reflecting the impact of higher interest rates and
higher average balances, and collateralized financings
reflecting an impact of higher interest rates. See “Statistical
Disclosures — Distribution of Assets, Liabilities and
Shareholders’ Equity” for further information about our
sources of net interest income.

2018 versus 2017
Net revenues in the consolidated statements of earnings
were $36.62 billion for 2018, 12% higher than 2017,
primarily due to significantly higher market making
income, as well as higher
revenues and net
investment management
revenues and slightly higher
investment banking revenues.

interest

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

operated

environment

Operating Environment. During 2019, market-making
activities
generally
an
characterized by macroeconomic concerns, driven by
continued trade tensions and concerns over a slowdown in
future global economic growth. Volatility in equity markets
decreased with the average daily VIX for the year lower
compared with 2018. Monetary policies set by global
central banks remained accommodative throughout the
year. Investment banking activities reflected decreases in
industry-wide
acquisitions
equity underwriting
transactions
transactions. Other
revenues
principal
benefited from company-specific events, including sales.
Our assets under supervision increased from acquisitions,
organic net inflows and appreciation in our client assets,
reflecting generally higher equity and fixed income prices.

completed mergers

and industry-wide

transactions

and

there are
If macroeconomic concerns continue, or if
continued declines
in market-making activity levels,
volatility or investment banking transaction levels, or if
there are declines in assets under supervision or global
equity markets, net revenues would likely be negatively
impacted.
for
information about the operating environment and material
trends and uncertainties that may impact our results of
operations.

“Segment Operating Results”

See

2019 versus 2018
Net revenues in the consolidated statements of earnings
were $36.55 billion for 2019, essentially unchanged
compared with 2018, primarily reflecting lower investment
banking revenues and investment management revenues,
offset by higher net interest income and slightly higher
market making revenues.

Non-Interest Revenues. Investment banking revenues in
the consolidated statements of earnings were $6.80 billion
for 2019, 9% lower than 2018, reflecting lower revenues in
underwriting and financial advisory. The decrease in
underwriting revenues was due to lower revenues in debt
underwriting, driven by lower revenues from investment-
grade and leveraged finance activity, and in equity
underwriting, reflecting a decline in industry-wide initial
public offerings. The decrease in financial advisory
revenues reflected a decrease in industry-wide completed
mergers and acquisitions transactions.

Investment management revenues in the consolidated
statements of earnings were $6.19 billion for 2019, 6%
lower than 2018, driven by significantly lower incentive
fees. This decrease was partially offset by slightly higher
management and other fees (including the impact of United
Capital Financial Partners, Inc. (United Capital)), reflecting
the impact of higher average assets under supervision,
partially offset by a lower average effective fee due to shifts
in the mix of client assets and strategies. United Capital was
acquired in the third quarter of 2019.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Non-Interest Revenues. Investment banking revenues in
the consolidated statements of earnings were $7.43 billion
for 2018, 5% higher than 2017. Revenues in financial
advisory were higher, reflecting an increase in industry-
completed mergers and acquisitions volumes.
wide
Revenues in underwriting were slightly higher, due to
significantly higher revenues in equity underwriting, driven
by initial public offerings, partially offset by lower revenues
in debt underwriting, reflecting a decline in leveraged
finance activity.

Investment management revenues in the consolidated
statements of earnings were $6.59 billion for 2018, 12%
higher than 2017, primarily due to significantly higher
incentive fees, as a result of harvesting. Management and
other fees were also higher, reflecting higher average assets
under
revenue
recognition standard, partially offset by shifts in the mix of
client assets and strategies. See Note 3 to the consolidated
financial statements for further information about ASU
No. 2014-09, “Revenue from Contracts with Customers
(Topic 606).”

supervision and the

impact of

the

Commissions and fees in the consolidated statements of
earnings were $3.20 billion for 2018, 5% higher than 2017,
reflecting an increase in our listed cash equity and futures
volumes, generally consistent with market volumes.

Market making revenues in the consolidated statements of
earnings were $9.72 billion for 2018, 24% higher than
2017, due to significantly higher revenues in equity
products, interest rate products and commodities. These
increases were partially offset by significantly lower results
in mortgages and lower revenues in credit products.

Other principal transactions revenues in the consolidated
statements of earnings were $5.91 billion for 2018,
essentially unchanged compared with 2017, reflecting net
losses from investments in public equities compared with net
gains in the prior year, offset by significantly higher net gains
from investments in private equities, driven by company-
specific events, including sales, and corporate performance.

interest

Interest

Income. Net

income primarily

Net
income in the
consolidated statements of earnings was $3.77 billion for
2018, 28% higher than 2017, reflecting an increase in
interest
related to collateralized
agreements and other interest-earning assets, reflecting the
impact of higher interest rates, as well as loans reflecting the
impact of higher average balances and higher yields. The
increase in interest income was partially offset by higher
interest expense primarily related to other interest-bearing
liabilities, deposits and collateralized financings, each
reflecting the impact of higher interest rates. See “Statistical
Disclosures — Distribution of Assets, Liabilities and
Shareholders’ Equity” for further information about our
sources of net interest income.

Provision for Credit Losses
Provision for credit losses consists of provision for credit
losses on loans and lending commitments held for
investment and accounted for at amortized cost. See Note 9
further
to the consolidated financial
information about the provision for credit losses.

statements

for

The table below presents our provision for credit losses.

$ in millions

2019

2018

2017

Provision for credit losses

$ 1,065

674

657

Year Ended December

2019 versus 2018. Provision for credit losses in the
consolidated statements of earnings was $1.07 billion for
2019, 58% higher than 2018, primarily reflecting higher
impairments
related to corporate loans, and higher
provisions related to credit card loans.

2018 versus 2017. Provision for credit losses in the
consolidated statements of earnings was $674 million for
2018, 3% higher than 2017, as the higher provision for
credit losses primarily related to consumer loan growth in
2018 was partially offset by
an impairment of
approximately $130 million on a secured loan in 2017.

Operating Expenses
Our operating expenses are primarily influenced by
compensation, headcount and levels of business activity.
Compensation and benefits includes salaries, year-end
discretionary compensation, amortization of equity awards
and
benefits. Discretionary
as
compensation is significantly impacted by, among other
factors,
financial
performance, prevailing labor markets, business mix, the
structure of our share-based compensation programs and
the external environment.

the level of net

revenues, overall

other

items

such

The table below presents our operating expenses by line
item and headcount.

$ in millions

Compensation and benefits
Brokerage, clearing, exchange and

distribution fees
Market development
Communications and technology
Depreciation and amortization
Occupancy
Professional fees
Other expenses
Total operating expenses

Year Ended December

2019

2018

2017

$12,353

$12,328

$11,653

3,252
739
1,167
1,704
1,029
1,316
3,338
$24,898

3,200
740
1,023
1,328
809
1,214
2,819
$23,461

2,876
588
897
1,152
733
1,165
1,877
$20,941

Headcount at period-end

38,300

36,600

33,600

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

2019 versus 2018. Operating expenses in the consolidated
statements of earnings were $24.90 billion for 2019, 6%
higher than 2018. Our efficiency ratio (total operating
expenses divided by total net revenues) for 2019 was
68.1%, compared with 64.1% for 2018.

depreciation

The increase in operating expenses compared with 2018
primarily reflected significantly higher net provisions for
litigation and regulatory proceedings and higher expenses
for consolidated investments and technology (increases
primarily
amortization,
communications and technology, occupancy and other
expenses). In addition, 2019 included higher expenses
related to our credit card and transaction banking activities
(increases were primarily in professional fees and other
expenses) and also included the impact of United Capital.
Compensation and benefits expenses were essentially
unchanged compared with 2018.

and

Net provisions for litigation and regulatory proceedings for
2019 were $1.24 billion compared with $844 million for
2018. 2019 included a $140 million charitable contribution
to Goldman Sachs Gives, our donor-advised fund.

As of December 2019, headcount increased 5% compared
with December 2018,
reflecting an increase in our
technology professionals and the impact of United Capital.

2018 versus 2017. Operating expenses in the consolidated
statements of earnings were $23.46 billion for 2018, 12%
higher than 2017. Our efficiency ratio (total operating
expenses divided by total net revenues) for 2018 was
64.1%, compared with 64.0% for 2017.

for

levels,

and technology

The increase in operating expenses compared with 2017
was primarily due to higher compensation and benefits
expenses, reflecting improved operating performance, and
significantly higher net provisions
litigation and
regulatory proceedings. Brokerage, clearing, exchange and
distribution fees were also higher, reflecting an increase in
activity
increased,
reflecting higher expenses related to computing services. In
addition, expenses related to consolidated investments and
our digital lending and deposit platform increased, with the
increases primarily in depreciation and amortization
expenses, market development
expenses and other
expenses. The increase compared with 2017 also included
$297 million related to the revenue recognition standard.
See Note 3 to the consolidated financial statements for
further information about ASU No. 2014-09, “Revenue
from Contracts with Customers (Topic 606).”

expenses

Goldman Sachs 2019 Form 10-K

Net provisions for litigation and regulatory proceedings for
2018 were $844 million compared with $188 million for
2017. 2018 included a $132 million charitable contribution
to Goldman Sachs Gives, our donor-advised fund.
reduced to fund this charitable
Compensation was
contribution to Goldman Sachs Gives.

As of December 2018, headcount increased 9% compared
with December 2017, reflecting an increase in technology
professionals and investments in new business initiatives.

Provision for Taxes
The effective income tax rate for 2019 was 20.0%, up from
16.2% for 2018, which included a $487 million income tax
benefit in 2018 related to the finalization of the impact of
the Tax Legislation. Additionally, the increase compared
with 2018 was due to an increase in non-deductible
litigation provisions and changes in the geographic mix of
earnings partially offset by discrete tax benefits in 2019.

The effective income tax rate for 2018 was 16.2%, down
from 61.5% for 2017, as 2017 included the estimated
impact of Tax Legislation, which increased our effective
income tax rate by 39.5 percentage points. Additionally,
the decrease compared with 2017 reflected the impact of
the lower U.S. corporate income tax rate in 2018. The
estimated impact of Tax Legislation was an increase in
income tax expense of $4.40 billion for 2017. During 2018,
we finalized this estimate to reflect the impact of updated
information, including subsequent guidance issued by the
IRS, resulting in a $487 million income tax benefit for
2018.

In December 2019,

In June 2019, the IRS and the U.S. Department of the
Treasury (U.S. Treasury) released final, temporary and
proposed regulations relating to the implementation of
Global
Intangible Low Taxed Income. The proposed
regulations would be applicable only after final regulations
are published.
the IRS and U.S.
Treasury released final and proposed regulations relating to
the implementation of Base Erosion and Anti-Abuse Tax.
The final regulations are generally consistent, with certain
modifications,
to the proposed regulations issued in
December 2018. These final and proposed regulations did
not have a material impact on our effective tax rate for
2019.

Based on our current interpretations of the rules and
legislative guidance to date, we expect our 2020 tax rate to
be approximately 21%, excluding the impact of
tax
benefits on employee share based awards and any non-
deductible litigation.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Segment Assets and Operating Results
Commencing with the fourth quarter of 2019, we made
certain changes to our business segments. Prior to the
fourth quarter of 2019, we reported our activities in the
following four business segments: Investment Banking,
Institutional Client Services, Investing & Lending, and
Investment Management. Beginning with the fourth quarter
of 2019, we report our activities in four business segments:
Investment Banking, Global Markets, Asset Management,
and Consumer & Wealth Management. See “Business —
Our Business Segments” in Part I, Item 1 of this Form 10-K
for further information about changes to our business
segments.

Segment Assets. The table below presents assets by
segment.

$ in millions

Investment
Banking

Global
Markets

Asset
Management

Consumer
& Wealth
Management

Total

As of December 2019
Cash and cash
equivalents
Collateralized
agreements
Customer and other

$25,301 $ 82,819

$ 6,756

$18,670 $133,546

13,376 196,278

3,433

8,675 221,762

receivables
Trading assets
Investments
Loans
Other assets
Total assets

3,576

63,277
20,737 316,242
25,937
31,111
9,396
$92,009 $725,060

854
26,565
1,600

1,579
5,266
37,096
17,101
20,871
$92,102

6,173

74,605
13,087 355,332
63,937
34,127 108,904
34,882
$83,797 $992,968

3,015

As of December 2018
Cash and cash
equivalents
Collateralized
agreements

$24,007 $ 82,521

$ 8,357

$15,662 $130,547

18,619 238,682

6,481

10,761 274,543

Customer and other

receivables
Trading assets
Investments
Loans
Other assets
Total assets

4,199

60,201
14,925 250,512
14,249
28,876
8,661
$89,451 $683,702

493
26,020
1,188

1,486
4,949
32,435
13,956
17,339
$85,003

72,455
6,569
9,809 280,195
47,224
97,837
28,995
$73,640 $931,796

47
28,985
1,807

The allocation process for segment assets is based on the
activities of
these segments. The allocation of assets
includes allocation of global core liquid assets (GCLA)
(which consists of unencumbered, highly liquid securities
and cash), which is generally included within cash and cash
equivalents, collateralized agreements and trading assets on
our balance sheet. Due to the integrated nature of these
segments, estimates and judgments are made in allocating
these assets. See “Risk Management — Liquidity Risk
Management” for further information about our GCLA.

Segment Operating Results. The table below presents
our segment operating results.

$ in millions

2019

2018

2017

Year Ended December

Investment Banking
Net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Net earnings to common
Average common equity
Return on average common equity

Global Markets
Net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Net earnings to common
Average common equity
Return on average common equity

Asset Management
Net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Net earnings to common
Average common equity
Return on average common equity

Consumer & Wealth Management
Net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Net earnings to common
Average common equity
Return on average common equity

Total net revenues
Total provision for credit losses
Total operating expenses
Total pre-tax earnings
Net earnings to common
Average common equity
Return on average common equity

$ 7,599
333
4,685
$ 2,581
$ 1,996
$11,167
17.9%

$14,779
35
10,851
$ 3,893
$ 2,729
$40,060
6.8%

$ 8,965
274
4,817
$ 3,874
$ 3,013
$21,575
14.0%

$ 5,203
423
4,545
235
$
$
159
$ 6,292
2.5%

$36,546
1,065
24,898
$10,583
$ 7,897
$79,094
10.0%

$ 8,178
124
4,473
$ 3,581
$ 2,924
$ 8,737
33.5%

$14,438
52
10,585
$ 3,801
$ 2,796
$41,237
6.8%

$ 8,835
160
4,179
$ 4,496
$ 3,668
$19,061
19.2%

$ 5,165
338
4,224
603
$
$
472
$ 4,950
9.5%

$36,616
674
23,461
$12,481
$ 9,860
$73,985
13.3%

$ 7,459
34
3,613
$ 3,812
$ 1,394
$ 8,753
15.9%

$12,295
178
9,981
$ 2,136
397
$
$44,448
0.9%

$ 8,530
322
3,773
$ 4,435
$ 1,639
$16,904
9.7%

$ 4,446
123
3,574
749
$
$
255
$ 4,616
5.5%

$32,730
657
20,941
$11,132
$ 3,685
$74,721
4.9%

In the table above, operating expenses related to corporate
charitable contributions, previously not allocated to our
segments, have now been allocated. This allocation reflects
a change in the manner in which we measure the
performance of our segments. As a result of this change, all
operating expenses are now allocated to segments.
Reclassifications have been made to previously reported
segment amounts to conform to the current presentation.

Net revenues in our segments include allocations of interest
income and expense to specific positions in relation to the
cash generated by, or funding requirements of, such
positions. See Note 25 to the consolidated financial
statements for further information about our business
segments.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

The allocation of common shareholders’ equity and
preferred stock dividends to each segment is based on the
estimated amount of equity required to support
the
activities of
current applicable
segment under
regulatory capital requirements. Net earnings for each
segment is calculated by applying the firmwide tax rate to
each segment’s pre-tax earnings.

the

the performance of

Compensation and benefits expenses within our segments
reflect, among other factors, our overall performance, as
well as
individual businesses.
Consequently, pre-tax margins in one segment of our
business may be significantly affected by the performance
of our other business segments. A description of segment
operating results follows.

Investment Banking
Investment Banking generates revenues from the following:
‰ Financial

advisory
assignments with respect to mergers and acquisitions,
divestitures, corporate defense activities, restructurings
and spin-offs.

advisory.

strategic

Includes

‰ Underwriting. Includes public offerings and private
placements, including local and cross-border transactions
and acquisition financing, of a wide range of securities
and other financial instruments, including loans.

‰ Corporate lending.

lending to corporate
including middle-market lending, relationship

Includes

clients,
lending and acquisition financing.

The table below presents the operating results of our
Investment Banking segment.

$ in millions

Financial advisory

Equity underwriting
Debt underwriting
Underwriting

Corporate lending
Net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Provision for taxes
Net earnings
Preferred stock dividends
Net earnings to common

Average common equity
Return on average common equity

Year Ended December

2019

2018

2017

$ 3,197

$3,444

$3,161

1,482
2,119
3,601

801
7,599
333
4,685
2,581
516
2,065
69
$ 1,996

$11,167
17.9%

1,628
2,358
3,986

748
8,178
124
4,473
3,581
580
3,001
77
$2,924

1,235
2,680
3,915

383
7,459
34
3,613
3,812
2,344
1,468
74
$1,394

$8,753
$8,737
33.5% 15.9%

The table below presents our financial advisory and
underwriting transaction volumes.

$ in billions

Announced mergers and acquisitions
Completed mergers and acquisitions
Equity and equity-related offerings
Debt offerings

Goldman Sachs 2019 Form 10-K

Year Ended December

2019

$ 1,401
$ 1,256
68
$
245
$

2018

$1,274
$1,168
67
$
$ 256

2017

$ 869
$ 942
69
$
$ 289

In the table above:
‰ Volumes are per Dealogic.
‰ Announced and completed mergers and acquisitions
volumes are based on full credit to each of the advisors in
a transaction. Equity and equity-related offerings and
debt offerings are based on full credit for single book
managers and equal credit for joint book managers.
Transaction volumes may not be indicative of net
revenues in a given period. In addition, transaction
volumes for prior periods may vary from amounts
previously reported due to the subsequent withdrawal or
a change in the value of a transaction.

‰ Equity and equity-related offerings includes Rule 144A
and public common stock offerings, convertible offerings
and rights offerings.

‰ Debt offerings includes non-convertible preferred stock,
mortgage-backed securities, asset-backed securities and
taxable municipal debt. Includes publicly registered and
Rule 144A issues and excludes leveraged loans.

transactions,

industry-wide

In underwriting,

Operating Environment. During 2019,
industry-wide
completed mergers and acquisitions transactions decreased
and industry-wide announced mergers and acquisitions
transactions decreased slightly, both compared with a
equity
strong 2018.
underwriting transactions decreased compared with 2018,
reflecting a decline in initial public offerings. Industry-wide
debt underwriting activity reflected a decrease in loan
syndications compared with 2018. In the future, if industry-
wide mergers and acquisitions
equity
underwriting transactions or loan syndications continue to
decline, net revenues in Investment Banking would likely be
negatively impacted.
2019 versus 2018. Net revenues in Investment Banking
were $7.60 billion for 2019, 7% lower compared with a
strong 2018, reflecting lower net revenues in Underwriting
and Financial advisory, partially offset by higher net
revenues in Corporate lending.
The decrease in Underwriting net revenues was due to
lower net revenues in Debt underwriting, driven by lower
net revenues from investment-grade and leveraged finance
activity, and in Equity underwriting, reflecting a decline in
industry-wide initial public offerings. The decrease in
Financial advisory net revenues reflected a decrease in
acquisitions
industry-wide
transactions.
Provision for credit losses was $333 million for 2019,
compared with $124 million for 2018, primarily reflecting
higher impairments related to corporate loans.
Operating expenses were $4.69 billion for 2019, 5% higher
than 2018, primarily due to higher net provisions for
litigation and regulatory proceedings and higher expenses
related to transaction banking activities. Pre-tax earnings
were $2.58 billion for 2019, 28% lower than 2018.

completed mergers

and

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

As of December 2019, our investment banking transaction
backlog was
essentially unchanged compared with
December 2018, due to lower estimated net revenues from
potential debt underwriting transactions, particularly from
and equity underwriting
asset-backed
transactions, offset by higher estimated net revenues from
potential advisory transactions.

transactions,

Our investment banking transaction backlog represents an
estimate of our future net revenues from investment
banking transactions where we believe that future revenue
realization is more likely than not. We believe changes in
our investment banking transaction backlog may be a
useful indicator of client activity levels which, over the long
term, impact our net revenues. However, the time frame for
completion and corresponding revenue recognition of
transactions in our backlog varies based on the nature of
the assignment, as certain transactions may remain in our
backlog for longer periods of time and others may enter and
leave within the same reporting period. In addition, our
transaction backlog is subject to certain limitations, such as
assumptions about the likelihood that individual client
transactions will occur in the future. Transactions may be
cancelled or modified, and transactions not included in the
estimate may also occur.

2018 versus 2017. Net revenues in Investment Banking
were $8.18 billion for 2018, 10% higher than 2017,
reflecting significantly higher net revenues in Corporate
lending, higher net revenues in Financial advisory and
slightly higher net revenues in Underwriting.

The increase in Corporate lending net revenues was driven
by significantly higher net interest income from middle-
market lending activities and higher results on hedges
related to relationship lending activities. The increase in
Financial advisory net revenues reflected an increase in
industry-wide completed mergers and acquisitions volumes.
The increase in Underwriting net revenues was due to
significantly higher net revenues in Equity underwriting,
driven by initial public offerings, partially offset by lower
net revenues in Debt underwriting, reflecting a decline in
leveraged finance activity.

Provision for credit losses was $124 million for 2018,
compared with $34 million for 2017, primarily reflecting
higher impairments related to corporate loans.

Operating expenses were $4.47 billion for 2018, 24%
higher than 2017, due to higher net provisions for litigation
and regulatory proceedings, increased compensation and
operating
reflecting
benefits
performance, and the impact of the revenue recognition
standard. Pre-tax earnings were $3.58 billion for 2018, 6%
lower than 2017.

improved

expenses,

As of December 2018, our investment banking transaction
backlog increased compared with December 2017, driven
by significantly higher estimated net
from
potential advisory transactions. Estimated net revenues
from potential debt and equity underwriting transactions
were lower.

revenues

Global Markets
Our Global Markets segment consists of:

Interest Rate Products. Government bonds (including
across maturities, other
inflation-linked securities)
government-backed securities, and interest rate swaps,
options and other derivatives.

(ETFs), bank and bridge

loans

Currencies. Currency options, spot/forwards and other
derivatives on G-10 currencies and emerging-market
products.

agricultural

coal,

and

For further information about market-making activities,
see “Market-Making Activities” below.

credit, warehouse

lending

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

futures

sectors,

options,

industry

securities,

In addition, we

Equities. Equities generates revenues from intermediation
and financing activities.
‰ Equities intermediation. We make markets in equity
securities and equity-related products, including ETFs,
convertible
and
over-the-counter (OTC) derivative instruments, on a
global basis. We also structure and make markets in
derivatives on indices,
financial
measures and individual company stocks. Our exchange-
based market-making activities include making markets
in stocks and ETFs, futures and options on major
exchanges worldwide.
generate
commissions and fees from executing and clearing
institutional client transactions on major stock, options
and futures exchanges worldwide, as well as OTC
transactions. For further information about market-
making activities, see “Market-Making Activities” below.
‰ Equities financing. Includes prime brokerage and other
equities financing activities, including securities lending,
margin lending and swaps. We earn fees by providing
clearing, settlement and custody services globally. We
provide services that principally involve borrowing and
lending securities to cover institutional clients’ short sales
and borrowing securities to cover our short sales and
otherwise to make deliveries into the market. In addition,
we are an active participant in broker-to-broker securities
lending and third-party agency lending activities. We
provide financing to our clients for their securities trading
activities through margin loans that are collateralized by
securities, cash or other acceptable collateral. In addition,
we execute swap transactions to provide our clients with
exposure to securities and indices.

institutions,

Market-Making Activities
As a market maker, we facilitate transactions in both liquid
and less liquid markets, primarily for institutional clients,
investment
such as corporations, financial
funds and governments, to assist clients in meeting their
investment objectives and in managing their risks. In this
role, we seek to earn the difference between the price at
which a market participant is willing to sell an instrument
to us and the price at which another market participant is
willing to buy it from us, and vice versa (i.e., bid/offer
spread).
In addition, we maintain (i) market-making
positions, typically for a short period of time, in response
to, or in anticipation of, client demand, and (ii) positions to
actively manage our risk exposures that arise from these
market-making activities (collectively,
inventory). Our
inventory is recorded in trading assets (long positions) or
trading liabilities (short positions) in our consolidated
balance sheets.

Goldman Sachs 2019 Form 10-K

results are

influenced by a combination of
Our
interconnected drivers, including (i) client activity levels and
transactional bid/offer spreads (collectively, client activity),
and (ii) changes in the fair value of our inventory and
interest income and interest expense related to the holding,
hedging and funding of our inventory (collectively, market-
making inventory changes). Due to the integrated nature of
our market-making activities, disaggregation of net
revenues into client activity and market-making inventory
changes is judgmental and has inherent complexities and
limitations.

affecting

The amount and composition of our net revenues vary over
time as these drivers are impacted by multiple interrelated
factors
conditions,
including volatility and liquidity in the market, changes in
interest rates, currency exchange rates, credit spreads,
equity prices and commodity prices, investor confidence,
and other macroeconomic concerns and uncertainties.

and market

economic

In general, assuming all other market-making conditions
remain constant, increases in client activity levels or bid/
offer spreads tend to result in increases in net revenues, and
decreases tend to have the opposite effect. However,
changes in market-making conditions can materially impact
client activity levels and bid/offer spreads, as well as the fair
value of our inventory. For example, a decrease in liquidity
in the market could have the impact of (i) increasing our
bid/offer spread, (ii) decreasing investor confidence and
thereby decreasing client activity levels, and (iii) widening
of credit spreads on our inventory positions.

The table below presents the operating results of our Global
Markets segment.

$ in millions

FICC intermediation
FICC financing
FICC

Equities intermediation
Equities financing
Equities
Net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Provision for taxes
Net earnings
Preferred stock dividends
Net earnings to common

Year Ended December

2019

2018

$ 6,009
1,379
7,388

4,374
3,017
7,391
14,779
35
10,851
3,893
779
3,114
385
$ 2,729

$ 5,737
1,248
6,985

4,681
2,772
7,453
14,438
52
10,585
3,801
616
3,185
389
$ 2,796

2017

$ 5,067
1,151
6,218

4,000
2,077
6,077
12,295
178
9,981
2,136
1,313
823
426
397

Average common equity
Return on average common equity

$40,060
6.8%

$41,237
6.8%

$44,448
0.9%

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

The table below presents the net revenues of our Global
Markets
segment by line item in the consolidated
statements of earnings.

$ in millions

FICC

Equities

Year Ended December 2019

Market making
Commissions and fees
Other principal transactions
Net interest income
Total net revenues

Year Ended December 2018

Market making
Commissions and fees
Other principal transactions
Net interest income
Total net revenues

Year Ended December 2017

Market making
Commissions and fees
Other principal transactions
Net interest income
Total net revenues

$5,813
–
1
1,574
$7,388

$5,531
–
19
1,435
$6,985

$4,612
–
60
1,546
$6,218

Global
Markets

$10,157
2,900
52
1,670
$14,779

$ 9,724
3,055
52
1,607
$14,438

$4,344
2,900
51
96
$7,391

$4,193
3,055
33
172
$7,453

$3,241
2,920
20
(104)
$6,077

$ 7,853
2,920
80
1,442
$12,295

2019 versus 2018. Net revenues in Global Markets were
$14.78 billion for 2019, 2% higher than 2018.

Net revenues in FICC were $7.39 billion, 6% higher than
2018, due to slightly higher net revenues in FICC
intermediation, driven by
improved market-making
conditions on our inventory, and higher net revenues in
FICC financing, reflecting higher net revenues in structured
credit financing.

The following provides information about our FICC
intermediation net revenues by business, compared with
2018 results:
‰ Net revenues in commodities were significantly higher
reflecting

and interest
improved market-making conditions on our inventory.
‰ Net revenues in mortgages were significantly higher,

rate products were higher,

primarily reflecting higher client activity.

‰ Net revenues in currencies were significantly lower,
challenging market-making

reflecting

primarily
conditions on our inventory.

‰ Net revenues in credit products were lower, reflecting

lower client activity.

Net revenues in Equities were $7.39 billion, essentially
unchanged compared with 2018. Net revenues in Equities
intermediation were lower, reflecting lower net revenues in
derivatives, partially offset by higher net revenues in cash
products. This decrease was offset by higher net revenues in
Equities financing, reflecting improved spreads.

Provision for credit losses was $35 million for 2019,
compared with $52 million for 2018.

Operating expenses were $10.85 billion for 2019, 3%
higher than 2018, due to higher net provisions for litigation
and regulatory proceedings and higher expenses
for
technology (increases primarily in depreciation and
amortization and communications
and technology),
partially offset by decreased compensation and benefits
expenses. Pre-tax earnings were $3.89 billion for 2019, 2%
higher than 2018.

In the table above:
‰ The difference between commissions and fees and those
in the consolidated statements of earnings represents
commissions and fees included in our Consumer &
Wealth Management segment.

‰ See “Net Revenues” for further information about
market making revenues, commissions and fees, and net
interest income. See Note 25 to the consolidated financial
statements for net interest income by business segment.

‰ The primary driver of net
intermediation was client activity.

revenues

for FICC

Operating Environment. During 2019, Global Markets
operated in an environment generally characterized by
concerns about
future global growth and a mixed
macroeconomic environment, which led to accommodative
monetary policies set by global central banks. Volatility
was lower, with the average daily VIX decreasing to 15 for
2019 compared with 17 for 2018. The yield curve for the
U.S. Treasury 2-year note versus the 10-year widened 15
basis points and global equity markets generally increased
(with the MSCI World Index up 24% compared with the
end of 2018). These conditions contributed to lower client
activity, primarily in Equities, compared with 2018. If
activity levels or volatility continue to decline, or if
macroeconomic concerns continue, net revenues in Global
Markets would likely be negatively impacted.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

2018 versus 2017. Net revenues in Global Markets were
$14.44 billion for 2018, 17% higher than 2017.

Net revenues in FICC were $6.99 billion, 12% higher than
2017, due to higher net revenues in FICC intermediation,
reflecting higher client activity and the impact of improved
market-making conditions on our inventory, and FICC
financing, reflecting an increase in lending activity.

The following provides information about our FICC
intermediation net revenues by business, compared with
2017 results:
‰ Net revenues in currencies were significantly higher,
reflecting higher client activity and the impact of
improved market-making conditions on our inventory.
‰ Net revenues in commodities were significantly higher,
reflecting higher client activity and the impact of
improved market-making conditions on our inventory,
compared with challenging conditions in 2017.

‰ Net revenues in credit products were higher, reflecting
higher client activity, partially offset by the impact of
challenging market-making conditions on our inventory.
‰ Net revenues in interest rate products were lower,
reflecting lower client activity, partially offset by the
impact of improved market-making conditions on our
inventory.

‰ Net revenues in mortgages were lower, reflecting the
impact of challenging market-making conditions on our
inventory.

Net revenues in Equities were $7.45 billion, 23% higher
than 2017. Net revenues in Equities financing were
significantly higher, reflecting improved spreads and higher
average
in Equities
intermediation were higher, reflecting significantly higher
net revenues in derivatives.

client balances. Net

revenues

Provision for credit losses was $52 million for 2018, 71%
lower than 2017, due to an impairment of approximately
$130 million on a secured loan in 2017.

and

Operating expenses were $10.59 billion for 2018, 6%
higher than 2017, primarily due to higher net provisions for
litigation
increased
compensation and benefits expenses, reflecting improved
operating performance, and higher brokerage, clearing,
exchange and distribution fees. Pre-tax earnings were
$3.80 billion for 2018, 78% higher than 2017.

proceedings,

regulatory

Goldman Sachs 2019 Form 10-K

including equity,

Asset Management
We manage client assets across a broad range of investment
strategies and asset classes to a diverse set of institutional
clients and a network of third-party distributors around the
fixed income and alternative
world,
investments. We provide investment solutions including
those managed on a fiduciary basis by our portfolio
managers, as well as those managed by a variety of third-
party managers. We offer our investment solutions in a
variety of
including separately managed
accounts, mutual funds, private partnerships and other
comingled vehicles. These solutions begin with identifying
through portfolio
and continue
clients’ objectives
construction,
risk
and
asset
ongoing
management and investment realization.

structures,

allocation

In addition to managing client assets, we invest
in
alternative investments across a range of asset classes that
seek to deliver long-term accretive risk-adjusted returns.
Our investing activities, which are typically longer term,
include investments in public and private equity and debt
investments in real estate and infrastructure entities.

Asset Management generates revenues from the following:
‰ Management and Other Fees. The majority of
revenues in management and other fees consists of asset-
based fees on client assets that we manage. For further
information about assets under supervision (AUS), see
“Assets Under Supervision” below. The fees that we
charge vary by asset class, distribution channel and the
types of services provided, and are affected by investment
performance, as well as asset inflows and redemptions.
‰ Incentive Fees. In certain circumstances, we also receive
incentive fees based on a percentage of a fund’s or a
separately managed account’s return, or when the return
exceeds a specified benchmark or other performance
targets. Such fees include overrides, which consist of the
increased share of the income and gains derived primarily
from our private equity and credit funds when the return
on a fund’s investments over the life of the fund exceeds
certain threshold returns. Incentive fees are recognized
when it is probable that a significant reversal of such fees
will not occur.

‰ Lending. We provide financing related to our asset
management businesses and invest in debt securities and
loans backed by real estate. These activities include
investments in mezzanine debt, senior debt and distressed
debt securities.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

The table below presents the operating results of our Asset
Management segment.

$ in millions

2019

2018

2017

Year Ended December

Management and other fees
Incentive fees
Equity investments
Lending
Net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Provision for taxes
Net earnings
Preferred stock dividends
Net earnings to common

$ 2,600
130
4,765
1,470
8,965
274
4,817
3,874
775
3,099
86
$ 3,013

$ 2,612
384
4,207
1,632
8,835
160
4,179
4,496
729
3,767
99
$ 3,668

$ 2,329
296
4,405
1,500
8,530
322
3,773
4,435
2,728
1,707
68
$ 1,639

Average common equity
Return on average common equity

$21,575
14.0%

$19,061
19.2%

$16,904
9.7%

Operating Environment. Higher global equity markets
and increased fixed income asset prices contributed
positively to our assets under supervision and our global
equity and lending investment portfolio within our Asset
Management segment. In the future, if asset prices decline,
or investors continue to favor asset classes that typically
generate lower fees or investors withdraw their assets, or if
macroeconomic concerns negatively impact company-
specific events, net revenues in Asset Management would
likely be negatively impacted.

2019 versus 2018. Net revenues in Asset Management
were $8.97 billion for 2019, essentially unchanged
compared with 2018, reflecting higher net revenues in
Equity investments, offset by significantly lower Incentive
fees and lower net revenues in Lending. Management and
other fees were essentially unchanged.

The increase in Equity investments net revenues reflected
significantly higher net gains from investments in public
equities (2019 included $477 million of net gains), partially
offset by slightly lower net gains from investments in
private equities (2019 included $4.29 billion of net gains,
driven by company-specific events, including sales, and
corporate performance). For 2019, 50% of the net revenues
in Equity investments were generated from corporate
investments and 50% were generated from real estate.

The decrease in Lending net revenues primarily reflected
lower net gains from investments in debt instruments.
Management and other fees reflected the impact of higher
average assets under supervision, offset by a lower average
effective fee due to shifts in the mix of client assets and
strategies.

Provision for credit losses was $274 million for 2019, 71%
higher than 2018, primarily reflecting higher impairments
related to Purchased Credit Impaired (PCI) loans.

Operating expenses were $4.82 billion for 2019, 15%
higher than 2018, primarily due to higher expenses related
to consolidated investments and increased compensation
and benefits expenses. Pre-tax earnings were $3.87 billion
for 2019, 14% lower than 2018.

2018 versus 2017. Net revenues in Asset Management
were $8.84 billion for 2018, 4% higher than 2017,
reflecting higher Management and other fees, net revenues
in Lending and Incentive fees, partially offset by slightly
lower net revenues in Equity investments.

The increase in Management and other fees reflected higher
average assets under supervision and the impact of the
revenue recognition standard, partially offset by shifts in
the mix of client assets and strategies. The increase in
Lending net revenues reflected significantly higher net
interest income, partially offset by significantly lower net
gains from investments in debt instruments.

The decrease in Equity investments net revenues reflected
net
losses from investments in public equities (2018
included $183 million of net losses) compared with net
gains in the prior year, partially offset by significantly
higher net gains from investments in private equities (2018
included $4.39 billion of net gains), driven by company-
specific events, including sales, and corporate performance.
For 2018, 57% of the net revenues in Equity investments
were generated from corporate investments and 43% were
generated from real estate.

Provision for credit losses was $160 million for 2018, 50%
lower than 2017, primarily reflecting lower impairments
related to PCI loans.

Operating expenses were $4.18 billion for 2018, 11%
higher than 2017, primarily due to higher expenses related
to consolidated investments and the impact of the revenue
recognition standard. Pre-tax earnings were $4.50 billion
for 2018, essentially unchanged compared with 2017.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

sponsor

structuring,

leverage a broad, open-architecture

revenues

generates

from the

‰ Private banking and lending. Includes interest income
allocated to deposit-taking and net interest income earned
on lending activities for wealth management clients.

Goldman Sachs 2019 Form 10-K

Consumer Banking. Our Consumer banking business
issues unsecured loans, through Marcus and credit cards to
finance the purchases of goods or services. We also accept
deposits through Marcus, primarily through Goldman Sachs
Bank USA and Goldman Sachs International Bank, that are
used as a source of funding. These deposits include savings
and time deposits which provide us with a diversified source
of funding that reduces our reliance on wholesale funding.

The table below presents the operating results of our
Consumer & Wealth Management segment.

$ in millions

Management and other fees
Incentive fees
Private banking and lending
Wealth management
Consumer banking
Net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Provision for taxes
Net earnings
Preferred stock dividends
Net earnings to common

Average common equity
Return on average common equity

Year Ended December

2019

2018

2017

$3,475
81
783
4,339
864
5,203
423
4,545
235
47
188
29
$ 159

$6,292
2.5%

$3,282
446
826
4,554
611
5,165
338
4,224
603
97
506
34
$ 472

$4,950
9.5%

$3,156
121
790
4,067
379
4,446
123
3,574
749
461
288
33
$ 255

$4,616
5.5%

Operating Environment. Higher global equity markets and
increased fixed income asset prices contributed positively to
our assets under supervision within our Consumer & Wealth
Management segment. Our consumer banking activities
continue to reflect increased deposits and loans. In the future,
if asset prices decline, or investors continue to favor asset
classes that typically generate lower fees or investors withdraw
their assets, or if consumers withdraw their deposits or
consumer credit deteriorates, net revenues in Consumer &
Wealth Management would likely be negatively impacted.

2019 versus 2018. Net revenues in Consumer & Wealth
Management were $5.20 billion for 2019, essentially
unchanged compared with 2018.

Net revenues in Wealth management were $4.34 billion, 5%
lower than 2018, reflecting significantly lower Incentive fees
and slightly lower net revenues in Private banking and
lending. These decreases were partially offset by higher
Management and other fees (including the impact of United
Capital), reflecting higher average assets under supervision.

Net revenues in Consumer banking were $864 million,
41% higher than 2018, driven by higher net interest
income, primarily reflecting an increase in deposit balances.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Provision for credit losses was $423 million for 2019, 25%
higher than 2018, primarily reflecting higher provisions
related to credit card loans.

The table below presents our firmwide period-end assets
under supervision by segment, asset class, distribution
channel, region and vehicle.

Operating expenses were $4.55 billion for 2019, 8% higher
than 2018, due to higher expenses related to our credit card
activities and the impact of United Capital. Pre-tax earnings
were $235 million for 2019, 61% lower than 2018.

2018 versus 2017. Net revenues in Consumer & Wealth
Management were $5.17 billion for 2018, 16% higher than
2017.

Net revenues in Wealth management were $4.55 billion,
12% higher than 2017, primarily reflecting significantly
higher Incentive fees, as a result of harvesting. In addition,
Management and other fees were slightly higher, reflecting
higher average assets under supervision and the impact of
the revenue recognition standard, partially offset by shifts
in the mix of client assets and strategies. Net revenues in
Private banking and lending were slightly higher.

Net revenues in Consumer banking were $611 million,
61% higher than 2017, driven by significantly higher net
interest income, primarily reflecting an increase in deposit
balances.

Provision for credit losses was $338 million for 2018,
compared with $123 million for 2017, reflecting higher
provisions primarily related to consumer loan growth.

Operating expenses were $4.22 billion for 2018, 18%
higher than 2017, primarily due to increased compensation
and benefits expenses,
reflecting improved operating
performance, higher expenses related to our digital lending
and deposit platform and the impact of the revenue
recognition standard. Pre-tax earnings were $603 million
for 2018, 19% lower than 2017.

assets

Assets Under Supervision
Assets under supervision includes our institutional clients’
assets and assets sourced through third-party distributors
(both included in our Asset Management segment), as well
as high-net-worth clients’
(included in our
Consumer & Wealth Management segment), where we
earn a fee for managing assets on a discretionary basis. This
includes net assets in our mutual funds, hedge funds, credit
funds, private equity funds, real estate funds, and separately
and individual
managed accounts
investors. Assets under supervision also include client assets
invested with third-party managers, private bank deposits
and advisory relationships where we earn a fee for advisory
and other services, but do not have investment discretion.
Assets under supervision do not include the self-directed
brokerage assets of our clients.

institutional

for

$ in billions

2019

2018

2017

As of December

Segment
Asset Management
Consumer & Wealth Management
Total AUS

Asset Class
Alternative investments
Equity
Fixed income
Total long-term AUS
Liquidity products
Total AUS

Distribution Channel
Institutional
Wealth management
Third-party distributed
Total AUS

Region
Americas
EMEA
Asia
Total AUS

Vehicle
Separate accounts
Public funds
Private funds and other
Total AUS

$1,298
561
$1,859

$ 185
423
789
1,397
462
$1,859

$ 684
561
614
$1,859

$1,408
279
172
$1,859

$1,069
603
187
$1,859

$1,087
455
$1,542

$ 167
301
677
1,145
397
$1,542

$ 575
455
512
$1,542

$1,151
239
152
$1,542

$ 867
506
169
$1,542

$1,036
458
$1,494

$ 168
321
660
1,149
345
$1,494

$ 576
458
460
$1,494

$1,120
229
145
$1,494

$ 857
482
155
$1,494

In the table above:
‰ Liquidity products includes money market funds and

private bank deposits.

‰ EMEA represents Europe, Middle East and Africa.

Asset classes, such as alternative investment and equity
assets, typically generate higher fees relative to fixed income
and liquidity product assets. The average
effective
management fee (which excludes non-asset-based fees) we
earned on our firmwide assets under supervision was 32
basis points for 2019, 34 basis points for 2018 and 35 basis
points for 2017. These decreases reflected shifts in the mix
of client assets and strategies.

We earn management fees on client assets that we manage
and also receive incentive fees based on a percentage of a
fund’s or a separately managed account’s return, or when the
return exceeds a specified benchmark or other performance
targets. These incentive fees are recognized when it is
probable that a significant reversal of such fees will not
occur. Our unrecognized incentive fees, assuming liquidation
at fair value, were $1.63 billion as of December 2019,
$1.50 billion as of December 2018 and $2.06 billion as of
December 2017. These fees will be recognized, assuming no
decline in fair value, if and when it is probable that a
significant reversal of such fees will not occur, which is
generally when such fees are no longer subject to fluctuations
in the market value of the assets of the funds.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

The table below presents changes in our assets under
supervision.

The table below presents information about our average
monthly firmwide assets under supervision.

Year Ended December

2019

2018

2017

$ in billions

Asset Management
Beginning balance
Net inflows/(outflows):

Alternative investments
Equity
Fixed income

Total long-term AUS net inflows/(outflows)
Liquidity products
Total AUS net inflows/(outflows)
Net market appreciation/(depreciation)
Ending balance

Consumer & Wealth Management
Beginning balance
Net inflows/(outflows):

Alternative investments
Equity
Fixed income

Total long-term AUS net inflows/(outflows)
Liquidity products
Total AUS net inflows/(outflows)
Net market appreciation/(depreciation)
Ending balance

Firmwide
Beginning balance
Net inflows/(outflows):

Alternative investments
Equity
Fixed income

Total long-term AUS net inflows/(outflows)
Liquidity products
Total AUS net inflows/(outflows)
Net market appreciation/(depreciation)
Ending balance

$1,087

$1,036

$ 966

2
34
35
71
52
123
88
$1,298

6
6
14
26
51
77
(26)
$1,087

16
2
7
25
(12)
13
57
$1,036

$ 455

$ 458

$ 413

9
11
17
37
13
50
56
$ 561

(5)
7
9
11
1
12
(15)
$ 455

(1)
–
18
17
(1)
16
29
$ 458

$1,542

$1,494

$1,379

11
45
52
108
65
173
144
$1,859

1
13
23
37
52
89
(41)
$1,542

15
2
25
42
(13)
29
86
$1,494

In the table above:
‰ Total AUS net inflows/(outflows) for 2019 included
$71 billion of inflows (substantially all in equity and fixed
income assets) in connection with the acquisitions of
Standard & Poor’s Investment Advisory Services (SPIAS),
United Capital and Rocaton Investment Advisors
(Rocaton). SPIAS and Rocaton were included in the Asset
Management segment and United Capital was included in
the Consumer & Wealth Management segment.

‰ Total AUS net inflows/(outflows) for 2017 included
$23 billion of inflows ($20 billion in long-term AUS and
$3 billion in liquidity products) in connection with the
acquisition of a portion of Verus Investors’ outsourced
chief investment officer business (Verus acquisition) and
$5 billion of equity asset outflows in connection with the
divestiture of our local Australian-focused investment
capabilities and fund platform (Australian divestiture).
The Verus acquisition and Australian divestiture were
included in the Asset Management segment.

Goldman Sachs 2019 Form 10-K

Segment
Asset Management
Consumer & Wealth Management
Total AUS
Asset Class
Alternative investments
Equity
Fixed income
Total long-term AUS
Liquidity products
Total AUS

Average for the
Year Ended December

2019

2018

2017

$1,182
505
$1,687

$ 176
364
746
1,286
401
$1,687

$1,050
467
$1,517

$ 171
329
665
1,165
352
$1,517

$ 979
438
$1,417

$ 162
292
633
1,087
330
$1,417

In addition to our assets under supervision, we have discretion
over alternative investments where we currently do not earn
management fees (non-fee-earning alternative assets).

The table below presents information about our assets
under supervision for alternative assets, non-fee-earning
alternative assets and total alternative assets.

$ in billions

As of December 2019
Private equity
Credit
Real estate
Hedge funds and multi-asset
Other
Total

As of December 2018
Private equity
Credit
Real estate
Hedge funds and multi-asset
Other
Total

As of December 2017
Private equity
Credit
Real estate
Hedge funds and multi-asset
Other
Total

AUS

Non-fee-earning
alternative assets

Total
alternative
assets

$ 81
14
13
77
–
$185

$ 72
11
10
74
–
$167

$ 74
7
10
77
–
$168

$ 38
51
43
1
1
$134

$ 35
47
38
1
1
$122

$ 35
37
28
1
1
$102

$119
65
56
78
1
$319

$107
58
48
75
1
$289

$109
44
38
78
1
$270

In the table above:
‰ Total alternative assets included uncalled capital that is
available for future investing of $32 billion as of
December 2019, $27 billion as of December 2018 and
$26 billion as of December 2017.

‰ Non-fee-earning alternative assets primarily includes
investments that we hold on our balance sheet, our
unfunded commitments, unfunded commitments of our
clients (where we do not charge fees on commitments),
credit facilities collateralized by fund assets and employee
funds. Our calculation of non-fee-earning alternative
assets may not be comparable to similar calculations used
by other companies.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

The table below presents information about alternative
investments in our Asset Management segment that we
hold on our balance sheet.

$ in billions

As of December 2019

Private equity
Credit
Real estate
Other
Total

As of December 2018

Private equity
Credit
Real estate
Other
Total

As of December 2017

Private equity
Credit
Real estate
Other
Total

Loans and
debt securities

Equity

Other
assets

Total

$ –
20
11
–
$31

$ –
14
10
–
$24

$ –
13
9
–
$22

$17
–
5
–
$22

$17
–
4
–
$21

$18
–
4
–
$22

$ –
–
17
1
$18

$ –
–
13
1
$14

$ –
–
9
1
$10

$17
20
33
1
$71

$17
14
27
1
$59

$18
13
22
1
$54

In the table above:
‰ Private equity includes positions which converted to
public equity upon the initial public offering of the
underlying company of $2 billion as of December 2019,
$1 billion as of December 2018 and $2 billion as of
December 2017.

‰ Other assets represents investments held by consolidated
investment entities (CIEs), which were funded with
liabilities
of
December 2019, $6 billion as of December 2018 and
$4 billion as of December 2017. Substantially all such
liabilities were nonrecourse, thereby reducing our equity
at risk.

approximately

billion

The table below presents information about our equity
investments by vintage.

$ in billions

Equity investments

2012 or earlier
2013 - 2015
2016 - thereafter
Total

As of
December 2019

$22

29%
31%
40%
100%

Geographic Data
See Note 25 to the consolidated financial statements for a
summary of our total net revenues, pre-tax earnings and net
earnings by geographic region.

Balance Sheet and Funding Sources

Balance Sheet Management
One of our risk management disciplines is our ability to
manage the size and composition of our balance sheet.
While our asset base changes due to client activity, market
fluctuations and business opportunities,
the size and
composition of our balance sheet also reflects factors
including (i) our overall risk tolerance, (ii) the amount of
equity capital we hold and (iii) our funding profile, among
other factors. See “Equity Capital Management and
Regulatory Capital — Equity Capital Management” for
information about our equity capital management process.

Although our balance sheet fluctuates on a day-to-day
basis, our total assets at quarter-end and year-end dates are
generally not materially different from those occurring
within our reporting periods.

In order to ensure appropriate risk management, we seek to
maintain a sufficiently liquid balance sheet and have
processes in place to dynamically manage our assets and
liabilities, which include (i) balance sheet planning,
(ii) balance sheet limits, (iii) monitoring of key metrics and
(iv) scenario analyses.

Balance Sheet Planning. We prepare a balance sheet plan
that combines our projected total assets and composition of
assets with our expected funding sources over a three-year
time horizon. This plan is reviewed quarterly and may be
adjusted in response to changing business needs or market
conditions. The objectives of this planning process are:
‰ To develop our balance sheet projections, taking into
account the general state of the financial markets and
expected business activity levels, as well as regulatory
requirements;

‰ To allow Treasury and our independent risk oversight
and control functions to objectively evaluate balance
sheet limit requests from our revenue-producing units in
the context of our overall balance sheet constraints,
including our liability profile and equity capital levels,
and key metrics; and

‰ To inform the target amount, tenor and type of funding to
raise, based on our projected assets and contractual
maturities.

Treasury and our independent risk oversight and control
functions, along with our revenue-producing units, review
current and prior period information and expectations for
the year to prepare our balance sheet plan. The specific
information reviewed includes asset and liability size and
composition,
risk and performance
measures, and capital usage.

limit utilization,

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Our consolidated balance sheet plan, including our balance
sheets by business, funding projections and projected key
metrics, is reviewed and approved by the Firmwide Asset
Liability Committee and the Risk Governance Committee.
See “Risk Management — Overview and Structure of Risk
Management” for an overview of our risk management
structure.

Balance Sheet Limits. The Firmwide Asset Liability
Committee and the Risk Governance Committee have the
responsibility to review and approve balance sheet limits.
These limits are set at levels which are close to actual
operating levels, rather than at levels which reflect our
in order to ensure prompt
maximum risk appetite,
escalation and discussion among our revenue-producing
units, Treasury and our independent risk oversight and
control functions on a routine basis. Additionally, the Risk
Governance Committee sets aged limits for certain financial
instruments as a disincentive to hold such positions over
longer periods of time. Requests for changes in limits are
evaluated after giving consideration to their impact on our
key metrics. Compliance with limits is monitored by our
revenue-producing units and Treasury, as well as our
independent risk oversight and control functions.

Monitoring of Key Metrics. We monitor key balance
sheet metrics both by business and on a consolidated basis,
including asset and liability size and composition, limit
utilization and risk measures. We allocate assets to
businesses and review and analyze movements resulting
from new business activity, as well as market fluctuations.

Scenario Analyses. We conduct various scenario analyses
including as part of the Comprehensive Capital Analysis
and Review (CCAR) and U.S. Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act)
Stress Tests (DFAST), as well as our resolution and
recovery planning. See “Equity Capital Management and
Regulatory Capital — Equity Capital Management” for
further information about these scenario analyses. These
scenarios cover short- and long-term time horizons using
various macroeconomic and firm-specific assumptions,
based on a range of economic scenarios. We use these
analyses to assist us in developing our longer-term balance
including the level and
sheet management
composition of assets,
funding and equity capital.
Additionally, these analyses help us develop approaches for
maintaining appropriate funding,
liquidity and capital
across a variety of situations, including a severely stressed
environment.

strategy,

Balance Sheet Analysis and Metrics
As of December 2019, total assets in our consolidated
balance sheets were $992.97 billion, an increase of
$61.17 billion from December 2018, primarily reflecting
increases in trading assets of $75.14 billion, investments of
$16.71 billion, and loans of $11.07 billion, partially offset
by a net decrease
in collateralized agreements of
$52.78 billion. The increase in trading assets primarily
reflected higher client activity in government and agency
in
obligations, and equity securities. The
investments primarily reflected an increase
in U.S.
government obligations accounted for as available-for-sale
and held to maturity. The increase in loans primarily
reflected an increase in corporate, wealth management, and
commercial real estate loans, partially offset by a decrease
in residential real estate loans. The net decrease in
collateralized agreements primarily reflected the impact of
our and our clients’ activities.

increase

As of December 2019, total liabilities in our consolidated
balance sheets were $902.70 billion, an increase of
$61.09 billion from December 2018, primarily reflecting
increases in collateralized financings of $40.05 billion and
deposits of $31.76 billion, partially offset by a decrease in
unsecured borrowings of $9.29 billion. The net increase in
collateralized financings primarily reflected our and our
clients’ activities. The increase in deposits primarily
reflected an increase in consumer deposits. The decrease in
unsecured borrowings was primarily due to net maturities.

total

Our
repurchase agreements, accounted for as
collateralized financings, were $117.76 billion as of
December 2019 and $78.72 billion as of December 2018,
which were 32% higher as of December 2019 and 1%
higher as of December 2018 than the average daily amount
of repurchase agreements over the respective quarters, and
40% higher as of December 2019 and 12% lower as of
December 2018 than the average daily amount of
repurchase agreements over the respective years. As of
December 2019, the increase in our repurchase agreements
relative to the average daily amount of
repurchase
agreements during the quarter and year resulted from
higher levels of our and our clients’ activity at the end of the
period.

The level of our repurchase agreements fluctuates between
and within periods, primarily due to providing clients with
access to highly liquid collateral, such as liquid government
and agency obligations, through collateralized financing
activities.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

The table below presents information about our balance
sheet and leverage ratios.

$ in millions

Total assets
Unsecured long-term borrowings
Total shareholders’ equity
Leverage ratio
Debt to equity ratio

As of December

2019

2018

$992,968
$207,076
$ 90,265
11.0x
2.3x

$931,796
$224,149
$ 90,185
10.3x
2.5x

In the table above:
‰ The leverage ratio equals total assets divided by total
shareholders’ equity and measures the proportion of
equity and debt we use to finance assets. This ratio is
different from the leverage ratios included in Note 20 to
the consolidated financial statements.

‰ The debt-to-equity ratio equals unsecured long-term

borrowings divided by total shareholders’ equity.

table below presents

The
information about our
shareholders’ equity and book value per common share,
including the reconciliation of common shareholders’
equity to tangible common shareholders’ equity.

As of December

$ in millions, except per share amounts

2019

2018

Total shareholders’ equity
Preferred stock
Common shareholders’ equity
Goodwill and identifiable intangible assets
Tangible common shareholders’ equity

$ 90,265
(11,203)
79,062
(4,837)
$ 74,225

$ 90,185
(11,203)
78,982
(4,082)
$ 74,900

Book value per common share
Tangible book value per common share

$ 218.52
$ 205.15

$ 207.36
$ 196.64

In the table above:
‰ Tangible common shareholders’ equity is calculated as
total shareholders’ equity less preferred stock, goodwill
and identifiable intangible assets. We believe that tangible
common shareholders’ equity is meaningful because it is a
measure that we and investors use to assess capital
adequacy. Tangible common shareholders’ equity is a
non-GAAP measure and may not be comparable to
similar non-GAAP measures used by other companies.
‰ Book value per common share and tangible book value per
common share are based on common shares outstanding
and restricted stock units granted to employees with no
future service requirements and not subject to performance
conditions (collectively, basic shares) of 361.8 million as of
December 2019 and 380.9 million as of December 2018.
We believe that tangible book value per common share
(tangible common shareholders’ equity divided by basic
shares) is meaningful because it is a measure that we and
investors use to assess capital adequacy. Tangible book
value per common share is a non-GAAP measure and may
not be comparable to similar non-GAAP measures used by
other companies.

Funding Sources
Our primary sources of funding are deposits, collateralized
financings, unsecured short- and long-term borrowings, and
shareholders’ equity. We seek to maintain broad and diversified
funding sources globally across products, programs, markets,
currencies and creditors to avoid funding concentrations.
The table below presents information about our funding
sources.

$ in millions

Deposits
Collateralized financings
Unsecured short-term borrowings
Unsecured long-term borrowings
Total shareholders’ equity
Total funding sources

As of December

2019

2018

$190,019
152,018
48,287
207,076
90,265

25%
18%
7%
36%
14%
$687,665 100% $625,057 100%

28% $158,257
22% 111,964
7% 40,502
30% 224,149
13% 90,185

Our funding is primarily raised in U.S. dollar, Euro, British
pound and Japanese yen. We generally distribute our
funding products through our own sales force and third-
party distributors to a large, diverse creditor base in a
variety of markets in the Americas, Europe and Asia. We
believe that our relationships with our creditors are critical
to our liquidity. Our creditors include banks, governments,
securities lenders, corporations, pension funds, insurance
companies, mutual
funds and individuals. We have
imposed various internal guidelines to monitor creditor
concentration across our funding programs.
Deposits. Our deposits provide us with a diversified source
of funding and reduce our reliance on wholesale funding. A
growing portion of our deposit base consists of consumer
deposits. We raise deposits, including savings, demand and
time deposits, through internal and third-party broker-
dealers, and from consumers and institutional clients, and
primarily through Goldman Sachs Bank USA (GS Bank
USA) and Goldman Sachs International Bank (GSIB). See
Note 13 to the consolidated financial statements for further
information about our deposits.
Secured Funding. We fund a significant amount of
inventory and a portion of investments on a secured basis.
Secured funding includes collateralized financings in the
consolidated balance sheets. We may also pledge our
securities
inventory and investments as collateral
borrowed under a securities lending agreement. We also use
our own inventory and investments to cover transactions in
which we or our clients have sold securities that have not yet
been purchased. Secured funding is less sensitive to changes
in our credit quality than unsecured funding, due to our
posting of collateral to our lenders. Nonetheless, we analyze
the refinancing risk of our secured funding activities, taking
into account trade tenors, maturity profiles, counterparty
concentrations,
eligibility and counterparty
rollover probabilities. We seek to mitigate our refinancing
risk by executing term trades with staggered maturities,
diversifying counterparties, raising excess secured funding
and pre-funding residual risk through our GCLA.

collateral

for

Goldman Sachs 2019 Form 10-K

Unsecured Short-Term Borrowings. A significant
portion of our unsecured short-term borrowings was
originally long-term debt that is scheduled to mature within
one year of the reporting date. We use unsecured short-term
borrowings, including U.S. and non-U.S. hybrid financial
instruments, to finance liquid assets and for other cash
management purposes. In light of regulatory developments,
Group Inc. no longer issues debt with an original maturity
of less than one year, other than to its subsidiaries. See
Note 14 to the consolidated financial statements for further
information about our unsecured short-term borrowings.

Unsecured Long-Term Borrowings. Unsecured long-
term borrowings, including structured notes, are raised
through syndicated U.S. registered offerings, U.S. registered
and Rule 144A medium-term note programs, offshore
medium-term note offerings and other debt offerings. We
tenors, currencies and products to
issue in different
maximize the diversification of our investor base.

The table below presents our quarterly unsecured long-term
borrowings maturity profile as of December 2019.

$ in millions

2021
2022
2023
2024
2025 - thereafter
Total

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

$5,174
$6,409
$9,629
$5,983

$5,354
$6,327
$4,558
$4,186

$7,896
$6,406
$8,029
$5,842

$7,913
$6,145
$4,476
$3,133

Total

$ 26,337
25,287
26,692
19,144
109,616
$207,076

The weighted average maturity of our unsecured long-term
borrowings as of December 2019 was approximately eight
years. To mitigate refinancing risk, we seek to limit the
principal amount of debt maturing over the course of any
monthly, quarterly or annual time horizon. We enter into
interest rate swaps to convert a portion of our unsecured
long-term borrowings into floating-rate obligations to
manage our exposure to interest rates. See Note 14 to the
consolidated financial statements for further information
about our unsecured long-term borrowings.

Shareholders’ Equity. Shareholders’ equity is a stable and
funding. See Note 19 to the
perpetual
consolidated financial statements for further information
about our shareholders’ equity.

source of

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

We seek to raise secured funding with a term appropriate
for the liquidity of the assets that are being financed, and we
seek longer maturities for secured funding collateralized by
asset classes that may be harder to fund on a secured basis,
especially during times of market stress. Our secured
funding,
excluding funding collateralized by liquid
government and agency obligations, is primarily executed
for tenors of one month or greater and is primarily executed
through term repurchase agreements and securities loaned
contracts.

The weighted average maturity of our secured funding
included in collateralized financings in the consolidated
balance sheets, excluding funding that can only be
collateralized by liquid government and agency obligations,
exceeded 120 days as of December 2019.

and

loans

Assets that may be harder to fund on a secured basis during
times of market stress include certain financial instruments
in the following categories: mortgage and other asset-
backed
non-investment-grade
securities,
corporate debt securities, equity securities and emerging
market securities. Assets that are classified in level 3 of the
fair value hierarchy are generally funded on an unsecured
basis. See Notes 4 through 10 to the consolidated financial
statements for further information about the classification
of financial instruments in the fair value hierarchy and
“Unsecured Long-Term Borrowings” below for further
information about
the use of unsecured long-term
borrowings as a source of funding.

financing

also raise

through other

We
types of
collateralized financings, such as secured loans and notes.
GS Bank USA has access to funding from the Federal Home
the
Loan Bank. Our outstanding borrowings against
Federal Home Loan Bank were $527 million as of
December 2019 and $528 million as of December 2018.

GS Bank USA also has access to funding through the
Federal Reserve Bank discount window. While we do not
rely on this funding in our liquidity planning and stress
testing, we maintain policies and procedures necessary to
access this funding and test discount window borrowing
procedures.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Equity Capital Management and Regulatory
Capital

Capital adequacy is of critical importance to us. We have in
place a comprehensive capital management policy that
provides a framework, defines objectives and establishes
guidelines to assist us in maintaining the appropriate level
and composition of capital in both business-as-usual and
stressed conditions.

Equity Capital Management
We determine the appropriate amount and composition of
our equity capital by considering multiple factors, including
our current and future regulatory capital requirements, the
results of our capital planning and stress testing process, the
results of resolution capital models and other factors, such
as rating agency guidelines, subsidiary capital requirements,
the business environment and conditions in the financial
markets.

We manage our capital requirements and the levels of our
capital usage principally by setting limits on the balance
sheet and/or limits on risk, in each case at both the firmwide
and business levels.

We principally manage the level and composition of our
equity capital through issuances and repurchases of our
common stock. We may also, from time to time, issue or
repurchase our preferred stock, junior subordinated debt
issued to trusts, and other subordinated debt or other forms
of capital as business conditions warrant. Prior to any
repurchases, we must receive confirmation that the Board
of Governors of the Federal Reserve System (FRB) does not
object to such capital action. See Notes 14 and 19 to the
consolidated financial statements for further information
about our preferred stock, junior subordinated debt issued
to trusts and other subordinated debt.

Capital Planning and Stress Testing Process. As part of
capital planning, we project sources and uses of capital
given a range of business environments, including stressed
conditions. Our stress testing process is designed to identify
and measure material risks associated with our business
activities, including market risk, credit risk and operational
risk, as well as our ability to generate revenues.

Our capital planning process incorporates an internal
capital adequacy assessment with the objective of ensuring
that we are appropriately capitalized relative to the risks in
our businesses. We incorporate stress scenarios into our
capital planning process with a goal of holding sufficient
capital to ensure we remain adequately capitalized after
experiencing a severe stress event. Our assessment of capital
adequacy is viewed in tandem with our assessment of
liquidity adequacy and is integrated into our overall risk
management structure, governance and policy framework.

Our stress tests incorporate our internally designed stress
scenarios,
including our internally developed severely
adverse scenario, and those required under CCAR and
specific
DFAST, and are designed to capture our
vulnerabilities and risks. We provide further information
about our stress test processes and a summary of the results
on our website as described in “Business — Available
Information” in Part I, Item 1 of this Form 10-K.

As required by the FRB’s CCAR rules, we submit an annual
capital plan for review by the FRB. The purpose of the
FRB’s review is to ensure that we have a robust, forward-
looking capital planning process that accounts for our
unique risks and that permits continued operation during
times of economic and financial stress.

The FRB evaluates us based, in part, on whether we have
the capital necessary to continue operating under the
baseline and severely adverse scenarios provided by the
FRB and those developed internally. This evaluation also
takes into account our process for identifying risk, our
controls and governance for capital planning, and our
guidelines
In
addition, the FRB evaluates our plan to make capital
distributions (i.e., dividend payments and repurchases or
redemptions of stock, subordinated debt or other capital
securities) and issue
range of
macroeconomic scenarios and firm-specific assumptions.

for making capital planning decisions.

capital, across

the

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

With respect to our 2019 CCAR submission, the FRB
informed us that it did not object to our capital plan, which
includes the return of up to $8.8 billion of capital from the
third quarter of 2019 through the second quarter of 2020
(2019 CCAR cycle). The capital plan provides for up to
$7.0 billion in repurchases of outstanding common stock
and $1.8 billion in total common stock dividends, including
an increase in our common stock dividend from $0.85 to
$1.25 per share in the third quarter of 2019. During the
third and fourth quarters of 2019, we returned a total of
$3.75 billion of capital, including stock repurchases of
$2.83 billion and common stock dividends of $919 million.
Our stock repurchase amount was less than the authorized
amount included in our capital plan submission for the first
half of the 2019 CCAR cycle. The unutilized amount will
be carried forward to the second half of the 2019 CCAR
cycle. We may elect to execute only a portion or all of our
capital actions, based on, among other things, our current
and projected capital position, and capital deployment
opportunities. Our target CET1 capital ratio over the next
is between 13.0% to 13.5% (including
three years
management buffers). This target reflects, among other
things, our calculations and our current interpretation of
the proposed SCB rule and may change when the rule is
finalized and implemented. We published a summary of our
annual DFAST results in June 2019. See “Business —
Available Information” in Part I, Item 1 of this Form 10-K.

In October 2019, in accordance with the DFAST rules, we
submitted our Mid-Cycle DFAST results to the FRB and
published a summary of the results of our internally
developed severely adverse scenario. The FRB eliminated
the requirement
the Mid-Cycle DFAST
beginning in 2020. We are still required to conduct a stress
test on an annual basis and publish a summary of the
results. The FRB also conducts its own annual stress tests
and publishes a summary of
certain results. See
“Business — Available Information” in Part I, Item 1 of this
Form 10-K.

to conduct

GS Bank USA has its own capital planning process, but was
not required to conduct its annual stress test in 2019.

Goldman Sachs International (GSI) and GSIB also have
their own capital planning and stress testing process, which
incorporates internally designed stress tests and those
required under the Prudential Regulation Authority’s
(PRA) Internal Capital Adequacy Assessment Process.

Goldman Sachs 2019 Form 10-K

Contingency Capital Plan. As part of our comprehensive
capital management policy, we maintain a contingency
capital plan. Our contingency capital plan provides a
framework for analyzing and responding to a perceived or
including, but not limited to,
actual capital deficiency,
identification of drivers of a capital deficiency, as well as
mitigants and potential actions. It outlines the appropriate
communication procedures to follow during a crisis period,
including internal dissemination of information, as well as
timely communication with external stakeholders.

Capital Attribution. We assess each of our businesses’
capital usage based on our internal assessment of risks,
which incorporates an attribution of all of our relevant
regulatory capital requirements. These regulatory capital
requirements are allocated using our attributed equity
framework, which takes into consideration our most
binding capital constraints. Our most binding capital
constraint is based on the results of the FRB’s annual stress
test scenarios which include the Standardized risk-based
capital and leverage ratios. See “Segment Assets and
Operating Results — Segment Operating Results” for
information about our attributed equity by segment.

Share Repurchase Program. We use our
share
repurchase program to help maintain the appropriate level
of common equity. The repurchase program is effected
primarily through regular open-market purchases (which
may include repurchase plans designed to comply with
the
Rule 10b5-1 and accelerated share repurchases),
amounts and timing of which are determined primarily by
our current and projected capital position and our capital
plan submitted to the FRB as part of CCAR. The amounts
and timing of the repurchases may also be influenced by
general market conditions and the prevailing price and
trading volumes of our common stock.

On July 15, 2019, the Board of Directors of Group Inc.
(Board) authorized the repurchase of an additional
50 million shares of common stock pursuant to our existing
share repurchase program; however, we are only permitted
to make repurchases to the extent that such repurchases
have not been objected to by the FRB. As of
December 2019, the remaining share authorization under
our existing repurchase program was 57.9 million shares.
See “Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities” in Part II, Item 5 of this Form 10-K and Note 19
to the consolidated financial
further
information about our share repurchase program, and see
above for information about our capital planning and stress
testing process.

statements

for

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Resolution Capital Models.
In connection with our
resolution planning efforts, we have
established a
Resolution Capital Adequacy and Positioning framework,
which is designed to ensure that our major subsidiaries (GS
Bank USA, Goldman Sachs & Co. LLC (GS&Co.), GSI,
GSIB, Goldman Sachs Japan Co., Ltd. (GSJCL), Goldman
Sachs Asset Management, L.P. and Goldman Sachs Asset
Management International) have access to sufficient loss-
absorbing capacity (in the form of equity, subordinated
debt and unsecured senior debt) so that they are able to
wind-down following a Group Inc. bankruptcy filing in
accordance with our preferred resolution strategy.

In addition, we have established a triggers and alerts
framework, which is designed to provide the Board with
information needed to make an informed decision on
whether and when to commence bankruptcy proceedings
for Group Inc.

Rating Agency Guidelines
The credit rating agencies assign credit ratings to the
obligations of Group Inc., which directly issues or
guarantees substantially all of our senior unsecured debt
obligations. GS&Co. and GSI have been assigned long-term
and short-term issuer ratings by certain credit rating
agencies. GS Bank USA and GSIB have also been assigned
long-term and short-term issuer ratings, as well as ratings
on their long-term and short-term bank deposits.
In
addition, credit rating agencies have assigned ratings to
debt obligations of certain other subsidiaries of Group Inc.

The level and composition of our equity capital are among
the many factors considered in determining our credit
ratings. Each agency has its own definition of eligible
capital and methodology for evaluating capital adequacy,
and assessments are generally based on a combination of
factors
than a single calculation. See “Risk
Management — Liquidity Risk Management — Credit
Ratings” for further information about credit ratings of
Group Inc., GS Bank USA, GSIB, GS&Co. and GSI.

rather

subject

Consolidated Regulatory Capital
We are
to consolidated regulatory capital
requirements which are calculated in accordance with the
regulations of the FRB (Capital Framework). Under the
Capital Framework, we are an “Advanced approach”
banking organization and have been designated as a global
systemically important bank (G-SIB).

The capital requirements calculated in accordance with the
Capital Framework include the risk-based capital buffers
and G-SIB surcharge. The risk-based capital buffers,
applicable to us for 2019, include the capital conservation
buffer of 2.5% and the countercyclical capital buffer, which
the FRB has set to zero percent. In addition, the G-SIB
surcharge applicable to us for 2019 is 2.5% based on 2017
financial data. The G-SIB surcharge applicable to us for
2020 is 2.5% based on 2018 financial data and 2.5% for
2021 based on 2019 financial data. The G-SIB surcharge
and countercyclical buffer in the future may differ due to
additional guidance from our regulators and/or positional
changes. We expect that our G-SIB surcharge will increase
to 3% over the next three years. This increase would be
effective on January 1 of the year that is one full calendar
year after the increased G-SIB surcharge is finalized. See
Note 20 to the consolidated financial statements for further
ratios and
information about our
leverage ratios, and the Capital Framework.

risk-based capital

Subsidiary Capital Requirements
Many of our subsidiaries, including our bank and broker-
dealer subsidiaries, are subject to separate regulation and
capital requirements of the jurisdictions in which they
operate.

Bank Subsidiaries. GS Bank USA is our primary U.S.
banking subsidiary and GSIB is our primary non-U.S.
banking subsidiary. These entities are subject to regulatory
capital requirements. See Note 20 to the consolidated
financial statements for further information about the
regulatory capital requirements of our bank subsidiaries.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

U.S. Regulated Broker-Dealer Subsidiaries. GS&Co. is
our primary U.S. regulated broker-dealer subsidiary and is
subject to regulatory capital requirements, including those
imposed by the SEC and the Financial Industry Regulatory
Authority, Inc. In addition, GS&Co. is a registered futures
commission merchant and is subject to regulatory capital
requirements
the Chicago
imposed by the CFTC,
Mercantile Exchange 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. has elected to calculate its minimum
capital requirements in accordance with the “Alternative
Net Capital Requirement” as permitted by Rule 15c3-1.

GS&Co. had regulatory net capital, as defined by
Rule 15c3-1, of $20.88 billion as of December 2019 and
$17.45 billion as of December 2018, which exceeded the
amount required by $18.15 billion as of December 2019
and $15.00 billion as of December 2018. 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 both December 2019 and
December 2018, GS&Co. had tentative net capital and net
capital in excess of both the minimum and the notification
requirements.

In February 2020, GS&Co. made a cash dividend
distribution of $4.00 billion to Group Inc.

Non-U.S. Regulated Broker-Dealer Subsidiaries. Our
principal non-U.S. regulated broker-dealer subsidiaries
include GSI and GSJCL.

capital

GSI, our U.K. broker-dealer, is regulated by the PRA and
the Financial Conduct Authority (FCA). GSI is subject to
the
framework for E.U.-regulated financial
institutions prescribed in the E.U. Fourth Capital
Requirements Directive and the E.U. Capital Requirements
Regulation (CRR). These capital regulations are largely
based on Basel III.

Goldman Sachs 2019 Form 10-K

table below presents GSI’s

The
requirements.

risk-based capital

Risk-based capital requirements
CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

As of December

2019

2018

8.8%
10.8%
13.4%

8.1%
10.1%
12.7%

In the table above, the risk-based capital requirements
incorporate capital guidance received from the PRA and
could change
capital
requirements may also be impacted by developments, such
as the introduction of risk-based capital buffers.

future. GSI’s

in the

future

The table below presents information about GSI’s risk-
based capital ratios.

$ in millions

As of December

2019

2018

Risk-based capital and risk-weighted assets (RWAs)
$ 24,142
CET1 capital
$ 32,442
Tier 1 capital
$
Tier 2 capital
5,374
$ 37,816
Total capital
$206,669
RWAs

$ 23,956
$ 32,256
$
5,377
$ 37,633
$200,089

Risk-based capital ratios
CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

11.7%
15.7%
18.3%

12.0%
16.1%
18.8%

In the table above, CET1 capital, Tier 1 capital and Total
capital as of December 2019 excluded GSI’s undistributed
profits
through
December 31, 2019, which may be distributed as dividends
in the future by GSI, subject to approval by the Board of
Directors of GSI.

December

2018

from

commitments

In November 2016, the European Commission proposed
amendments to the CRR to implement a 3% leverage ratio
requirement for certain E.U. financial institutions. This
leverage ratio compares the CRR’s definition of Tier 1
capital to a measure of leverage exposure, defined as the
sum of certain assets plus certain off-balance-sheet
(which include a measure of derivatives,
exposures
securities
and
transactions,
financing
guarantees), less Tier 1 capital deductions. The required
leverage ratio is expected to become effective for GSI on
June 28, 2021. GSI had a leverage ratio of 4.6% as of
December 2019 and 4.4% as of December 2018. GSI’s
leverage ratio as of December 2019 excluded GSI’s
undistributed profits from December 1, 2018 through
December 31, 2019, which may be distributed as dividends
in the future by GSI, subject to approval by the Board of
Directors of GSI. This leverage ratio is based on our current
interpretation and understanding of this rule and may
evolve as we discuss the interpretation and application of
this rule with GSI’s regulators.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

GSI is also subject to a minimum requirement for own
funds and eligible liabilities issued to affiliates. This
requirement is subject to a transitional period which began
to phase in from January 1, 2019 and will become fully
effective on January 1, 2022. As of December 2019, GSI
was in compliance with this requirement.

subsidiaries

GSJCL, our Japanese broker-dealer, is regulated by Japan’s
Financial Services Agency. GSJCL and certain other
to capital
non-U.S.
requirements promulgated by authorities of the countries in
which they operate. As of both December 2019 and
December 2018, these subsidiaries were in compliance with
their local capital requirements.

also subject

are

In the table above:
‰ The TLAC to RWAs requirement includes (i) the 18%
minimum, (ii) the 2.5% buffer, (iii) the 1.5% G-SIB
surcharge (Method 1) and (iv) the countercyclical capital
buffer, which the FRB has set to zero percent.

‰ The TLAC to

requirement
includes (i) the 7.5% minimum and (ii) the 2.0% leverage
exposure buffer.

exposure

leverage

‰ The external

long-term debt

to RWAs requirement
includes (i) the 6% minimum and (ii) the 2.5% G-SIB
surcharge (Method 2).

‰ The external long-term debt to total leverage exposure is

the 4.5% minimum.

Regulatory
Developments

Matters

and

Other

The table below presents information about our TLAC and
external long-term debt ratios.

Regulatory Matters
Our businesses are subject to extensive regulation and
supervision worldwide. Regulations have been adopted or
are being considered by regulators and policy makers
worldwide. Given that many of the new and proposed rules
are highly complex, the full impact of regulatory reform
will not be known until the rules are implemented and
market practices develop under the final regulations.

See “Business — Regulation” in Part I, Item 1 of this
Form 10-K for further information about the laws, rules
and regulations and proposed laws, rules and regulations
that apply to us and our operations.

TLAC. We are subject to the FRB’s TLAC and related
requirements, which became effective in January 2019.
Failure to comply with the TLAC and related requirements
could result in restrictions being imposed by the FRB and
could limit our ability to repurchase shares, pay dividends
and make certain discretionary compensation payments.

The table below presents TLAC and external long-term
debt requirements.

TLAC to RWAs
TLAC to leverage exposure
External long-term debt to RWAs
External long-term debt to leverage exposure

Requirements

22.0%
9.5%
8.5%
4.5%

$ in millions

TLAC
External long-term debt
RWAs
Leverage exposure

As of December

2019

2018

$ 236,850
$ 141,770
$ 563,575
$1,375,467

$ 254,836
$ 160,493
$ 558,111
$1,342,906

TLAC to RWAs
TLAC to leverage exposure
External long-term debt to RWAs
External long-term debt to leverage exposure

42.0%
17.2%
25.2%
10.3%

45.7%
19.0%
28.8%
12.0%

In the table above:
‰ TLAC includes common and preferred stock, and eligible
long-term debt issued by Group Inc. Eligible long-term
debt represents unsecured debt, which has a remaining
maturity of at least one year and satisfies additional
requirements.

‰ External long-term debt consists of eligible long-term
debt subject to a haircut if it is due to be paid between one
and two years.

‰ RWAs

RWAs

Standardized

represent
2019

and Advanced RWAs

of
December
of
December 2018. In accordance with the TLAC rules, the
higher of Advanced or Standardized RWAs are used in
the calculation of TLAC and external long-term debt
ratios and applicable requirements.

as
as

‰ Leverage exposure consists of average adjusted total

assets and certain off-balance-sheet exposures.

See “Business — Regulation” in Part I, Item 1 of this
Form 10-K for further information about TLAC.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Other Developments
Brexit. In March 2017, the U.K. government commenced
the formal proceedings to withdraw from the E.U. The E.U.
and the U.K. agreed to a withdrawal agreement (the
Withdrawal Agreement), which became effective on
the
January 31, 2020. The transition period under
Withdrawal Agreement will
end of
December 2020 to allow the two sides to negotiate a future
trade agreement. During the transition period, the U.K. will
be treated as if it were a member state of the E.U. and
therefore the existing arrangements between the U.K. and
the E.U. will not change. The Withdrawal Agreement
provides for the possibility of an extension of the transition
period for either one or two more years. However, the U.K.
has pledged not to extend the transition period beyond
December 31, 2020.

last until

the

Based upon the existing non-E.U. country equivalence
regimes, the E.U. and the U.K. have agreed to complete
their assessments of equivalence by the end of June 2020.
There is significant uncertainty as to whether the outcome
of those assessments will be published before the end of the
transition period, and whether U.K. firms can rely upon the
availability of equivalence in their post-transition planning.
We continue to prepare for a scenario where the U.K.
financial services firms will lose access to E.U. markets on
December 31, 2020 (a “hard” Brexit) while ensuring we
remain flexible and well positioned to allow our clients to
benefit from any more favorable scenarios. Our planning
also recognizes that after the end of the transition period,
we can rely on a degree of continuing access for our U.K.
entities pursuant to national cross-border access regimes in
certain jurisdictions (for example, based on specific licenses
or exemptions).

In a hard Brexit scenario or as otherwise necessary, our plan
is to service our E.U. client base in the following manner:
‰ Our German bank subsidiary, Goldman Sachs Bank
Europe SE (GSBE), will act as our main operating
subsidiary in the E.U. and will assume certain functions
that can no longer be efficiently and effectively performed
by our U.K. operating subsidiaries, including GSI, GSIB
and GSAMI. For clients in jurisdictions which do not
benefit from a specific “permissive” regime, we will
actively work with those clients to plan the most
appropriate timeline for any required migration of their
business to GSBE in an orderly fashion which may be
required before the end of the transition period.

‰ We have set up branches of GSBE in a number of
jurisdictions in the E.U. to enable Investment Banking,
Global Markets and Consumer & Wealth Management
personnel to be situated in our offices in those countries.

Goldman Sachs 2019 Form 10-K

‰ A meaningful portion of our Global Markets and
Investment Banking clients are classified as professionals
or eligible counterparties in specific jurisdictions and may
choose to continue being serviced by, and to continue to
transact with, the U.K. service providers and entities
under domestic arrangements provided by individual
member states (licenses or exemptions). We expect to
continue providing products and services in this manner
to the extent that clients prefer such coverage and it is
available. Such clients could continue to face GSI and we
have applied for the applicable cross-border licenses and
exemptions for GSI where these are available. We also
plan to have authorized third-country branches of GSI in
the E.U. which will be used for our Global Markets
business with domestic clients in the jurisdictions in
which those branches are authorized.

‰ We intend to use Goldman Sachs Paris Inc. et Cie (GSPIC)
as our primary broker-dealer entity for E.U. clients
primarily to conduct certain activities that GSBE may be
prevented from undertaking (such as activities related to
physical commodities and related products).

‰ We have opened accounts to enable clients to transact
with GSBE and will continue to facilitate our clients
trading with our subsidiaries and branches in the E.U.

‰ The

internal

infrastructure build-out and external
connectivity to financial market infrastructure required
for the new E.U. entities is complete. GSBE is connected
and operational with E.U. exchange, clearing and
settlement platforms.

(Fitch), A1/P-1 by Moody’s

‰ GSBE has been assigned a credit rating of A/F1 by Fitch,
Investors Service
Inc.
(Moody’s) and A+/A-1 by Standard & Poor’s Ratings
Services (S&P), which are consistent with those issued to
GSI.

from the

received approval

‰ In order to service our Asset Management clients, we
have
Irish Financial
Regulator, the Central Bank of Ireland, for a Collective
Investment Fund and Alternative Investment Fund
Manager in Ireland,
to replace the similar existing
London-based Alternative Investment Fund Manager,
which will lose its E.U. passport post-Brexit.

‰ Headcount in our E.U. offices has increased over the
course of 2019, with further roles expected to transition
into the E.U. under our current planning assumptions.
‰ We have developed additional real estate capacity in
Frankfurt, Stockholm, Milan and Dublin and are
sourcing further real estate capacity in Paris.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Interbank Offered Rates (IBORs),
Replacement of
including LIBOR. Central banks and regulators in a
number of major jurisdictions (for example, U.S., U.K.,
E.U., Switzerland and Japan) have convened working
groups to find, and implement the transition to, suitable
replacements for IBORs. The U.K. FCA, which regulates
LIBOR, has announced that it will not compel panel banks
to contribute to LIBOR after 2021.

Market-led working groups in major jurisdictions, noted
above, have already selected their preferred alternative risk-
free reference rates and have published and are expected to
continue to publish consultations on issues,
including
methodologies for fallback provisions in contracts and
financial instruments linked to IBORs and the development
of term structures for alternative risk-free reference rates,
which will be critical for financial markets to transition to
the use of alternative risk-free reference rates in place of
IBORs.

We have exposure to IBORs,
including in financial
instruments and contracts that mature after 2021. Our
exposures arise from securities and loans we hold for
investment or in connection with market-making activities,
as well as derivatives we enter into to make markets for our
clients and hedge our risks. We also have exposure to
IBORs in the floating-rate securities and other funding
products we issue.

We are seeking to facilitate an orderly transition from
IBORs to alternative risk-free reference rates for us and our
clients. Accordingly, we have created a program that
focuses on:
‰ Evaluating and monitoring the impacts across our

businesses, including transactions and products;

‰ Identifying and evaluating the scope of existing financial
instruments and contracts that may be affected, and the
extent to which those financial instruments and contracts
already contain appropriate fallback language or would
require amendment, either through bilateral negotiation
or using industry-wide tools, such as protocols;

‰ Enhancements to infrastructure (for example, models and
systems) to prepare for a smooth transition to alternative
risk-free reference rates;

‰ Active participation in central bank and sector working
groups, including responding to industry consultations;
and

‰ Client education and communication.

in this transition,

As part of this program, we have sought to systematically
identify the risks inherent
including
financial risks (for example, earnings volatility under stress
due to widening swap spreads and the loss of funding sources
as a result of counterparties’ reluctance to participate in
transitioning their positions) and nonfinancial risks (for
example, the inability to negotiate fallbacks with clients and/
or counterparties, the potential for disputes relating to the
interpretation and implementation of fallback provision and
operational impediments to the transition). We are engaged
with a range of industry and regulatory working groups (for
example, ISDA, the Bank of England’s Working Group on
Sterling Risk-Free Reference Rates and the Federal Reserve’s
Alternative Reference Rates Committee) and will continue to
engage with our clients and counterparties to facilitate an
orderly transition to alternative risk-free reference rates.

for alternative risk-free reference rates
The markets
continue to develop and as they develop we expect to
transition to these alternative risk-free reference rates.
Where liquidity allows, we have begun this transition. In
particular, during 2019 we have:
‰ Issued debt and deposits linked to the Secured Overnight
Financing Rate (SOFR) and Sterling Overnight Index
Average (SONIA), as well as preferred stock with the rate
reset based on 5-year U.S. Treasury rates.

‰ Executed SOFR- and SONIA-based derivative contracts

to make markets and facilitate client activities.

‰ Executed transactions in the market to reduce our LIBOR
exposures arising from hedges to our fixed-rate debt
issuances and replace with alternative risk-free reference
rates exposures.

Off-Balance-Sheet
Contractual Obligations

Arrangements

and

Off-Balance-Sheet Arrangements
In the ordinary course of business, we enter into various
types of off-balance-sheet arrangements. Our involvement
in these arrangements can take many different forms,
including:
‰ Purchasing or retaining residual and other interests in
special purpose entities, such as mortgage-backed and
other asset-backed securitization vehicles;

‰ Holding senior and subordinated debt, interests in limited
and general partnerships, and preferred and common
stock in other nonconsolidated vehicles;

‰ Entering into interest rate, foreign currency, equity,
commodity and credit derivatives, including total return
swaps; and

‰ Providing guarantees,

indemnifications, commitments,

letters of credit and representations and warranties.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

We enter into these arrangements for a variety of business
purposes,
including securitizations. The securitization
vehicles that purchase mortgages, corporate bonds, and
other types of financial assets are critical to the functioning
including the
of several significant
mortgage-backed
securities
other
and
markets, since they offer investors access to specific cash
flows and risks created through the securitization process.

investor markets,

asset-backed

investments

We also enter into these arrangements to underwrite client
securitization transactions; provide secondary market
liquidity; make
and
nonperforming debt, distressed loans, power-related assets,
equity securities, real estate and other assets; provide
investors with credit-linked and asset-repackaged notes;
and receive or provide letters of credit to satisfy margin
requirements and to facilitate the clearance and settlement
process.

performing

The table below presents where information about our
various off-balance-sheet arrangements may be found in
this Form 10-K. In addition, see Note 3 to the consolidated
financial
our
statements
consolidation policies.

information

about

for

Off-Balance-Sheet Arrangement

Disclosure in Form 10-K

and

interests

Variable
other
obligations, including contingent
obligations, arising from variable
interests
nonconsolidated
variable interest entities (VIEs)

See Note 17 to the consolidated
financial statements.

Guarantees, letters of credit, and
lending and other commitments

See Note 18 to the consolidated
financial statements.

Derivatives

See “Risk Management — Credit
Risk Management — Credit
Exposures — OTC Derivatives”
and Notes 4, 5, 7 and 18 to the
consolidated financial statements.

Contractual Obligations
We have certain contractual obligations which require us to
make future cash payments. These contractual obligations
include our time deposits, secured long-term financings,
unsecured long-term borrowings, interest payments and
operating lease payments.

Our obligations to make future cash payments also include
our commitments and guarantees related to off-balance-
sheet arrangements, which are excluded from the table
below. See Note 18 to the consolidated financial statements
for further information about such commitments and
guarantees.

Due to the uncertainty of the timing and amounts that will
ultimately be paid, our liability for unrecognized tax
benefits has been excluded from the table below. See
Note 24 to the consolidated financial statements for further
information about our unrecognized tax benefits.

Goldman Sachs 2019 Form 10-K

The table below presents our contractual obligations by type.

$ in millions

Time deposits
Financings and borrowings:

Secured long-term
Unsecured long-term

Interest payments
Operating lease payments

As of December

2019

2018

$ 32,273

$ 28,413

$ 11,953
$207,076
$ 47,649
3,980
$

$ 11,878
$224,149
$ 54,594
2,399
$

The table below presents our contractual obligations by
expiration.

$ in millions

Time deposits
Financings and borrowings:

Secured long-term
Unsecured long-term

Interest payments
Operating lease payments

As of December 2019

2020

2021 -
2022

2023 -
2024

2025 -
Thereafter

–

$17,340

$10,351

$ 4,582

–
$
$
–
$6,024
$ 384

$ 5,525
$51,624
$10,648
576
$

$ 2,757
$45,836
$ 7,289
454
$

$ 3,671
$109,616
$ 23,688
$ 2,566

In the table above:
‰ Obligations maturing within one year of our financial
statement date or redeemable within one year of our
financial statement date at the option of the holders are
excluded as they are treated as short-term obligations. See
Note 14 to the consolidated financial statements for
further information about our short-term borrowings.
‰ Obligations that are repayable prior to maturity at our
option are reflected at their contractual maturity dates
and obligations that are redeemable prior to maturity at
the option of the holders are reflected at the earliest dates
such options become exercisable.

senior

‰ As of December 2019, unsecured long-term borrowings
had maturities extending through 2067, consisted
principally
included
$7.69 billion of adjustments to the carrying value of
certain unsecured long-term borrowings resulting from
the application of hedge accounting. See Note 14 to the
consolidated financial statements for further information
about our unsecured long-term borrowings.

borrowings,

and

‰ As of December 2019,

the difference between the
aggregate contractual principal amount and the related
fair value of long-term other secured financings for which
the fair value option was elected was not material.

‰ As of December 2019, the fair value of unsecured long-
term borrowings for which the fair value option was
elected exceeded the aggregate contractual principal
amount by $199 million.

‰ Interest payments represents estimated future contractual
related to unsecured long-term
interest payments
secured long-term financings and time
borrowings,
deposits based on applicable interest
rates as of
December 2019, and includes stated coupons, if any, on
structured notes.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

‰ Operating lease payments include lease commitments for
office space that expire on various dates through 2069.
Certain agreements are subject to periodic escalation
provisions for increases in real estate taxes and other
charges. See Note 15 to the consolidated financial
statements for further information about our operating
lease liabilities.

Risk Management

Risks are inherent in our businesses and include liquidity,
legal, compliance,
market, credit, operational, model,
conduct, regulatory and reputational risks. Our risks
include the risks across our risk categories, regions or global
businesses, as well as those which have uncertain outcomes
and have the potential to materially impact our financial
results, our liquidity and our reputation. For further
information about our risk management processes, see
“Overview and Structure of Risk Management” and for
information about our areas of risk, see “Liquidity Risk
Management,” “Market Risk Management,” “Credit Risk
Management,” “Operational Risk Management” and
“Model Risk Management” and “Risk Factors” in Part I,
Item 1A of this Form 10-K.

Overview and Structure of Risk Management

Overview
We believe that effective risk management is critical to our
success. Accordingly, we have established an enterprise risk
management framework that employs a comprehensive,
integrated approach to risk management, and is designed to
enable comprehensive risk management processes through
which we identify, assess, monitor and manage the risks we
assume in conducting our activities. Our risk management
components:
around three
structure
governance, processes and people.

is built

core

its Risk Committee, oversees our

Governance. Risk management governance starts with the
Board, which both directly and through its committees,
risk
including
management policies and practices implemented through
the enterprise risk management framework. The Board is
also responsible for the annual review and approval of our
risk appetite statement. The risk appetite statement
describes the levels and types of risk we are willing to accept
or to avoid, in order to achieve our objectives included in
our strategic business plan, while remaining in compliance
with regulatory requirements. The Board reviews our
strategic business plan and is ultimately responsible for
overseeing and providing direction about our strategy and
risk appetite.

The Board receives regular briefings on firmwide risks,
including liquidity risk, market risk, credit risk, operational
risk and model risk from our independent risk oversight
and control functions, including the chief risk officer, and
on compliance risk and conduct risk from the head of
Compliance, on legal and regulatory matters from the
general counsel, and on other matters impacting our
reputation from the chair of our Firmwide Client and
and our Firmwide
Business
Reputational Risk Committee. The chief risk officer reports
to our chief executive officer and to the Risk Committee of
the Board. As part of the review of the firmwide risk
portfolio, the chief risk officer regularly advises the Risk
Committee of the Board of relevant risk metrics and
material exposures, including risk limits and thresholds
established in our risk appetite statement.

Standards Committee

The implementation of our risk governance structure and
core risk management processes are overseen by Enterprise
Risk, which reports to our chief risk officer, and is
for
responsible
risk
framework provides the Board, our risk
management
committees and senior management with a consistent and
integrated approach to managing our various risks in a
manner consistent with our risk appetite.

that our

enterprise

ensuring

revenue-producing units, as well as Treasury,
Our
Engineering, Human Capital Management, Operations and
Services, are considered our first line of defense. They are
accountable for the outcomes of our risk-generating
activities, as well as for assessing and managing those risks
within our risk appetite.

Our independent risk oversight and control functions are
considered our
second line of defense and provide
independent assessment, oversight and challenge of the
risks taken by our first line of defense, as well as lead and
participate in risk committees. Independent risk oversight
and control
include Compliance, Conflicts
Resolution, Controllers, Credit Risk, Enterprise Risk,
Legal, Liquidity Risk, Market Risk, Model Risk,
Operational Risk and Tax.

functions

to the Audit Committee of

Internal Audit is considered our third line of defense and
reports
the Board and
administratively to our chief executive officer. Internal
Audit includes professionals with a broad range of audit
including risk management
and industry experience,
expertise. Internal Audit is responsible for independently
assessing and validating the effectiveness of key controls,
including those within the risk management framework,
and providing timely reporting to the Audit Committee of
the Board, senior management and regulators.

the
The three lines of defense structure promotes
accountability of
risk takers, provides a
line
framework for effective challenge by the second line and
empowers independent review from the third line.

first

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Processes. We maintain various processes that are critical
components of our risk management framework, including
(i) risk identification and assessment, (ii) risk appetite, limit
and threshold setting, (iii) risk reporting and monitoring,
and (iv) risk decision-making.
‰ Risk Identification and Assessment. We believe that
the identification and assessment of our risks is a critical
step in providing our Board and senior management
transparency and insight into the range and materiality of
our risks. We have a comprehensive data collection
process, including firmwide policies and procedures that
require all employees to report and escalate risk events.
Our approach for risk identification and assessment is
comprehensive across all risk types,
is dynamic and
forward-looking to reflect and adapt to our changing risk
profile and business environment,
leverages subject
matter expertise, and allows for prioritization of our most
critical risks.

To effectively assess our risks, we maintain a daily
discipline of marking substantially all of our inventory to
current market levels. We carry our inventory at fair
value, with changes in valuation reflected immediately in
our risk management systems and in net revenues. We do
so because we believe this discipline is one of the most
effective tools for assessing and managing risk and that it
provides
into our
transparent and realistic insight
inventory exposures.

tail

risks,

highlight

potential

An important part of our risk management process is
firmwide stress testing. It allows us to quantify our
exposure
loss
concentrations, undertake risk/reward analysis, and
assess and mitigate our risk positions. Firmwide stress
tests are performed on a regular basis and are designed to
ensure a comprehensive analysis of our vulnerabilities
and idiosyncratic
and
nonfinancial risks, including, but not limited to, credit,
market,
and
compliance, strategic, systemic and emerging risks into a
single combined scenario. We also perform ad hoc stress
tests in anticipation of market events or conditions. Stress
tests are also used to assess capital adequacy as part of
our capital planning and stress testing process. See
“Equity Capital Management and Regulatory Capital —
Equity Capital Management” for further information.

operational

combining

financial

funding,

liquidity

risks

and

risk across

‰ Risk Appetite, Limit and Threshold Setting. We apply
a rigorous framework of limits and thresholds to control
and monitor
transactions, products,
businesses and markets. The Board, directly or indirectly
limits and
through its Risk Committee, approves
thresholds included in our risk appetite statement at
firmwide, business and product levels. In addition, the
Firmwide Enterprise Risk Committee is responsible for
approving our risk limits framework, subject to the
overall limits approved by the Risk Committee of the
Board, and monitoring these limits.

The Risk Governance Committee is responsible for
approving limits at firmwide, business and product levels.
Certain limits may be set at levels that will require
periodic adjustment, rather than at levels that reflect our
maximum risk appetite. This fosters an ongoing dialogue
about risk among our first and second lines of defense,
committees and senior management, as well as rapid
escalation of risk-related matters. Additionally, through
delegated
from the Risk Governance
Committee, Market Risk sets limits at certain product
and desk levels, and Credit Risk sets limits for individual
counterparties, counterparties and their subsidiaries,
industries and countries. Limits are reviewed regularly
and amended on a permanent or temporary basis to
reflect changing market conditions, business conditions
or risk tolerance.

authority

accurate

‰ Risk Reporting and Monitoring. Effective

risk
reporting and risk decision-making depends on our
ability to get the right information to the right people at
the right time. As such, we focus on the rigor and
effectiveness of our risk systems, with the objective of
ensuring that our risk management technology systems
provide us with complete,
and timely
information. Our risk reporting and monitoring processes
are designed to take into account information about both
existing and emerging risks, thereby enabling our risk
committees and senior management to perform their
responsibilities with the appropriate level of insight into
risk exposures. Furthermore, our limit and threshold
breach processes provide means for timely escalation. We
evaluate changes in our risk profile and our businesses,
including changes in business mix or jurisdictions in
which we operate, by monitoring risk factors at a
firmwide level.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

the

and

‰ Risk Decision-Making. Our governance
protocol

structure
provides
for
decision-making on risk management issues and ensures
implementation of those decisions. We make extensive
use of risk committees that meet regularly and serve as an
important means
to facilitate and foster ongoing
discussions to manage and mitigate risks.

responsibility

We maintain strong and proactive communication about
risk and we have a culture of collaboration in decision-
making among our first and second lines of defense,
committees and senior management. While our first line
of defense is responsible for management of their risk, we
dedicate extensive resources to our second line of defense
in order to ensure a strong oversight structure and an
appropriate segregation of duties. We regularly reinforce
our strong culture of escalation and accountability across
all functions.

People. Even the best technology serves only as a tool for
helping to make informed decisions in real time about the
risks we are taking. Ultimately, effective risk management
requires our people to interpret our risk data on an ongoing
and timely basis and adjust risk positions accordingly. The
experience of our professionals, and their understanding of
the nuances and limitations of each risk measure, guides us
in assessing exposures and maintaining them within
prudent levels.

We reinforce a culture of effective risk management,
in our training and
consistent with our risk appetite,
development programs, as well as in the way we evaluate
performance, and recognize and reward our people. Our
training and development programs,
including certain
sessions led by our most senior leaders, are focused on the
importance of risk management, client relationships and
reputational excellence. As part of our annual performance
review process, we assess reputational excellence, including
how an employee exercises good risk management and
reputational judgment, and adheres to our code of conduct
and compliance policies. Our review and reward processes
are designed to communicate and reinforce to our
professionals the link between behavior and how people are
recognized, the need to focus on our clients and our
reputation, and the need to always act in accordance with
our highest standards.

Structure
Ultimate oversight of risk is the responsibility of our Board.
The Board oversees risk both directly and through its
committees, including its Risk Committee. We have a series
of committees with specific risk management mandates that
have oversight or decision-making responsibilities for risk
management activities. Committee membership generally
consists of senior managers from both our first and second
lines of defense. We have established procedures for these
committees to ensure that appropriate information barriers
are in place. Our primary risk committees, most of which
also have additional sub-committees or working groups,
are described below. In addition to these committees, we
have other risk committees that provide oversight for
different businesses, activities, products,
regions and
entities. All of our committees have responsibility for
considering the impact of transactions and activities, which
they oversee, on our reputation.

Membership of our risk committees is reviewed regularly
and updated to reflect changes in the responsibilities of the
committee members. Accordingly, the length of time that
members serve on the respective committees varies as
determined by the committee chairs and based on the
responsibilities of the members.

The chart below presents an overview of our
management governance structure.

risk

Corporate Oversight

Board of Directors

Board Commi(cid:2)ees

Senior Management Oversight

Chief Execu(cid:4)ve Oﬃcer

President/Chief Opera(cid:4)ng Oﬃcer

Chief Financial Oﬃcer

Commi(cid:2)ee Oversight

Management Commi(cid:2)ee

Chief Risk Oﬃcer

Director of
Internal Audit

Firmwide Enterprise Risk
Commi(cid:2)ee

Firmwide Client and Business
Standards Commi(cid:2)ee

Firmwide Asset Liability
Commi(cid:2)ee

Management Committee. The Management Committee
oversees our global activities. It provides this oversight
directly and through authority delegated to committees it
has established. This committee consists of our most senior
leaders, and is chaired by our chief executive officer. Most
members of the Management Committee are also members
of other committees. The following are the committees that
are principally involved in firmwide risk management.

Goldman Sachs 2019 Form 10-K

‰ Firmwide Conduct Committee. The

Firmwide
Conduct Committee is globally responsible for the
ongoing approval and monitoring of the frameworks and
policies which govern our conduct risks. Conduct risk is
the risk that our people fail to act in a manner consistent
with our Business Principles and related core values,
policies or codes, or applicable laws or regulations,
thereby falling short in fulfilling their responsibilities to
us, our clients, colleagues, other market participants or
the broader community. The co-chairs of this committee
are appointed by the chairs of the Firmwide Enterprise
Risk Committee.

‰ Risk Governance Committee. The Risk Governance
Committee (through delegated authority from the
Firmwide Enterprise Risk Committee) is responsible for
the ongoing approval and monitoring of risk frameworks
and policies related to our core risk management
processes, as well as limits, at firmwide, business and
product levels. In addition, this committee reviews the
results of stress tests and scenario analyses. To assist the
Risk Governance Committee in carrying out its mandate,
a number of other risk committees with dedicated
oversight for stress testing, model risks and Volcker Rule
compliance report into the Risk Governance Committee.
This committee is chaired by our chief risk officer, who is
appointed as chair by the chairs of
the Firmwide
Enterprise Risk Committee.

Firmwide Client and Business Standards Committee.
The Firmwide Client and Business Standards Committee is
responsible for overseeing relationships with our clients,
client
service and experience, and related business
standards, as well as client-related reputational matters.
This committee is chaired by our president and chief
operating officer, who is appointed as chair by the chief
executive officer, and reports
to the Management
Committee. This committee periodically provides updates
to, and receives guidance from, the Public Responsibilities
Committee of the Board.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Firmwide Enterprise Risk Committee. The Firmwide
Enterprise Risk Committee is responsible for overseeing all
of our financial and nonfinancial risks. As a part of such
oversight, the committee is responsible for the ongoing
review, approval and monitoring of our enterprise risk
management
risk limits
framework, as well as our
framework. This committee is co-chaired by our chief
financial officer and our chief risk officer, who are
appointed as chairs by our chief executive officer, and
reports to the Management Committee. The following are
the primary committees that report
to the Firmwide
Enterprise Risk Committee:
‰ Firmwide Risk Committee. The Firmwide Risk
Committee is responsible for the ongoing monitoring of
relevant financial risks and related risk limits at the
firmwide, business and product levels. This committee is
co-chaired by the chairs of the Firmwide Enterprise Risk
Committee.

‰ Firmwide New Activity Committee. The Firmwide
New Activity Committee is responsible for reviewing new
activities and for establishing a process to identify and
review previously approved activities that are significant
and that have changed in complexity and/or structure or
present different reputational and suitability concerns
over time to consider whether these activities remain
appropriate. This committee is co-chaired by the
controller and chief accounting officer, and the head of
Operations and Engineering for the Global Markets
Division, who are appointed as chairs by the chairs of the
Firmwide Enterprise Risk Committee.

‰ Firmwide

Resilience

and Operational

Risk
Committee. The Firmwide Resilience and Operational
Risk Committee is globally responsible for overseeing
operational risk, and for ensuring our business and
operational resilience. To assist the Firmwide Resilience
and Operational Risk Committee in carrying out its
mandate, other risk committees with dedicated oversight
for technology-related risks,
including cyber security
into the Firmwide Resilience and
matters,
is
Operational Risk Committee. This
co-chaired by our chief administrative officer and deputy
chief risk officer, who are appointed as chairs by the
chairs of the Firmwide Enterprise Risk Committee.

committee

report

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

The following committees report jointly to the Firmwide
Enterprise Risk Committee and the Firmwide Client and
Business Standards Committee:
‰ Firmwide Reputational Risk Committee. The
Firmwide Reputational Risk Committee is responsible for
assessing reputational risks arising from transactions that
have been identified as having potential heightened
reputational risk pursuant to the criteria established by
the Firmwide Reputational Risk Committee. This
committee is chaired by our president and chief operating
officer, and the vice-chairs are the chair of Compliance
and the head of Conflicts Resolution, who are appointed
as vice-chairs by the chair of the Firmwide Reputational
Risk Committee. This committee periodically provides
updates to, and receives guidance from,
the Public
Responsibilities Committee of the Board.

‰ Firmwide Suitability Committee. The Firmwide
Suitability Committee is responsible for setting standards
and policies for product, transaction and client suitability
and providing a forum for consistency across functions,
regions and products on suitability assessments. This
committee also reviews suitability matters escalated from
other committees. This committee is co-chaired by the
head of Compliance, and the co-head of EMEA FICC
sales, who are appointed as chairs by the chair of the
Firmwide Client and Business Standards Committee.

Investment

Policy Committee

‰ Firmwide Investment Policy Committee. The
reviews,
Firmwide
approves, sets policies, and provides oversight for certain
illiquid principal investments, including review of risk
management and controls for these types of investments.
This committee is co-chaired by the chairman of our
Merchant Banking Division, the head of our Merchant
Banking Division and the chief risk officer, who are
appointed as chairs by our president and chief operating
officer and our chief financial officer.

that

ensure

designed

procedures

‰ Firmwide Commitments Committee. The Firmwide
Commitments Committee reviews our underwriting and
distribution activities with respect to equity and equity-
related product offerings, and sets and maintains policies
legal,
and
reputational, regulatory and business standards are
maintained on a global basis. In addition to reviewing
specific
periodically
this
conducts general strategic reviews of sectors and products
and establishes policies in connection with transaction
practices. This committee is co-chaired by the co-head of
the Industrials Group in our
Investment Banking
Division, the chief debt underwriting officer for EMEA,
and a managing director in our Investment Banking
Division, who are appointed as chairs by the chair of the
Firmwide Client and Business Standards Committee.

transactions,

committee

liquidity,

funding and balance

Firmwide Asset Liability Committee. The Firmwide
Asset Liability Committee reviews and approves the
strategic direction for our financial resources, including
capital,
sheet. This
committee has oversight responsibility for asset liability
management,
including interest rate and currency risk,
funds transfer pricing, capital allocation and incentives, and
credit ratings. This committee makes recommendations as
to any adjustments to asset liability management and
financial resource allocation in light of current events, risks,
exposures, and regulatory requirements and approves
related policies. This committee is co-chaired by our chief
treasurer, who are
financial officer and our global
appointed as chairs by our chief executive officer, and
reports to the Management Committee.

‰ Firmwide Capital Committee. The Firmwide Capital
Committee provides approval and oversight of debt-
related transactions, including principal commitments of
our capital. This committee aims to ensure that business,
reputational and suitability standards for underwritings
and capital commitments are maintained on a global
basis. This committee is co-chaired by the head of Credit
Risk and a co-head of the Financing Group, who are
appointed as chairs by the chairs of
the Firmwide
Enterprise Risk Committee.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Conflicts Management
Conflicts of interest and our approach to dealing with them
are fundamental to our client relationships, our reputation
and our long-term success. The term “conflict of interest”
does not have a universally accepted meaning, and conflicts
can arise in many forms within a business or between
businesses. The responsibility for identifying potential
conflicts, as well as complying with our policies and
procedures, is shared by all of our employees.

risk. Our

We have a multilayered approach to resolving conflicts and
senior management
addressing reputational
oversees policies related to conflicts resolution, and,
in
and
conjunction with Conflicts Resolution, Legal
Compliance, the Firmwide Client and Business Standards
Committee, and other internal committees,
formulates
policies, standards and principles, and assists in making
judgments regarding the appropriate resolution of particular
conflicts. Resolving potential conflicts necessarily depends on
the facts and circumstances of a particular situation and the
application of experienced and informed judgment.

As a general matter, Conflicts Resolution reviews financing
and advisory assignments in Investment Banking and certain
of our investing, lending and other activities. In addition, we
have various transaction oversight committees, such as the
Firmwide Capital, Commitments and Suitability Committees
and other committees that also review new underwritings,
loans, investments and structured products. These groups
and committees work with internal and external counsel and
Compliance to evaluate and address any actual or potential
conflicts. Conflicts Resolution reports to our president and
chief operating officer. We regularly assess our policies and
procedures that address conflicts of interest in an effort to
conduct our business in accordance with the highest ethical
standards and in compliance with all applicable laws, rules
and regulations.

Compliance Risk Management
Compliance risk is the risk of legal or regulatory sanctions,
material financial loss or damage to our reputation arising
from our failure to comply with the requirements of
applicable laws, rules and regulations, and our internal
policies and procedures. Compliance risk is inherent in all
activities through which we conduct our businesses. Our
Compliance Risk Management Program, administered by
regulatory and
Compliance, assesses our compliance,
reputational risk; monitors for compliance with new or
amended laws, rules and regulations; designs and implements
controls, policies, procedures and training;
conducts
independent testing; investigates, surveils and monitors for
compliance risks and breaches; and leads our responses to
regulatory examinations, audits and inquiries. We monitor
and review business practices to assess whether they meet or
exceed minimum regulatory and legal standards in all
markets and jurisdictions in which we conduct business.

Goldman Sachs 2019 Form 10-K

Liquidity Risk Management

Overview
Liquidity risk is the risk that we will be unable to fund
ourselves or meet our liquidity needs in the event of firm-
specific, broader industry or market liquidity stress events.
We have in place a comprehensive and conservative set of
liquidity and funding policies. Our principal objective is to
be able to fund ourselves and to enable our core businesses
to continue to serve clients and generate revenues, even
under adverse circumstances.

Treasury, which reports to our chief financial officer, has
primary responsibility for developing, managing and
executing our liquidity and funding strategy within our risk
appetite.

Liquidity Risk, which is independent of our revenue-
producing units and Treasury, and reports to our chief risk
officer, has primary responsibility for assessing, monitoring
and managing our liquidity risk through firmwide oversight
across our global businesses and the establishment of stress
testing and limits frameworks.

Liquidity Risk Management Principles
We manage liquidity risk according to three principles:
(i) hold sufficient excess liquidity in the form of GCLA to
cover outflows during a stressed period, (ii) maintain
appropriate Asset-Liability Management and (iii) maintain
a viable Contingency Funding Plan.

GCLA. GCLA is liquidity that we maintain to meet a broad
range of potential cash outflows and collateral needs in a
stressed environment. A primary liquidity principle is to
pre-fund our estimated potential cash and collateral needs
during a liquidity crisis and hold this liquidity in the form of
unencumbered, highly liquid securities and cash. We believe
that the securities held in our GCLA would be readily
convertible to cash in a matter of days, through liquidation,
by entering into repurchase agreements or from maturities
of resale agreements, and that this cash would allow us to
meet immediate obligations without needing to sell other
assets or depend on additional funding from credit-sensitive
markets.

Our GCLA reflects the following principles:
‰ The first days or weeks of a liquidity crisis are the most

critical to a company’s survival;

‰ Focus must be maintained on all potential cash and
collateral outflows, not just disruptions to financing
flows. Our businesses are diverse, and our liquidity needs
including market
are determined by many factors,
movements,
client
commitments, all of which can change dramatically in a
difficult funding environment;

requirements

collateral

and

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

credit-sensitive

‰ During a liquidity crisis,

funding,
including unsecured debt, certain deposits and some types
of secured financing agreements, may be unavailable, and
the terms (e.g., interest rates, collateral provisions and
tenor) or availability of other types of secured financing
may change and certain deposits may be withdrawn; and
‰ As a result of our policy to pre-fund liquidity that we
estimate may be needed in a crisis, we hold more
funding
unencumbered securities and have
balances than our businesses would otherwise require.
We believe that our liquidity is stronger with greater
balances of highly liquid unencumbered securities, even
though it increases our total assets and our funding costs.

larger

We maintain our GCLA across Group Inc., Goldman Sachs
Funding LLC (Funding IHC) and Group Inc.’s major
types and
broker-dealer and bank subsidiaries, asset
clearing agents to provide us with sufficient operating
liquidity to ensure timely settlement in all major markets,
even in a difficult funding environment. In addition to the
GCLA, we maintain cash balances and securities in several
of our other entities, primarily for use in specific currencies,
entities or jurisdictions where we do not have immediate
access to parent company liquidity.

liquidity

Asset-Liability Management. Our
risk
management policies are designed to ensure we have a
sufficient amount of financing, even when funding markets
experience persistent stress. We manage the maturities and
diversity of our funding across markets, products and
counterparties, and seek to maintain a diversified funding
profile with an appropriate tenor, taking into consideration
the characteristics and liquidity profile of our assets.

Our approach to asset-liability management includes:
‰ Conservatively managing the overall characteristics of
our funding book, with a focus on maintaining long-term,
diversified sources of funding in excess of our current
requirements. See “Balance Sheet and Funding Sources —
Funding Sources” for further information;

‰ Actively managing and monitoring our asset base, with
particular focus on the liquidity, holding period and our
ability to fund assets on a secured basis. We assess our
funding requirements and our ability to liquidate assets in
a stressed environment while appropriately managing
risk. This enables us to determine the most appropriate
funding products and tenors. See “Balance Sheet and
Funding Sources — Balance Sheet Management” for
further information about our balance sheet management
process and “— Funding Sources — Secured Funding”
for further information about asset classes that may be
harder to fund on a secured basis; and

‰ Raising secured and unsecured financing that has a long
tenor relative to the liquidity profile of our assets. This
reduces the risk that our liabilities will come due in
advance of our ability to generate liquidity from the sale
of our assets. Because we maintain a highly liquid balance
sheet, the holding period of certain of our assets may be
materially shorter than their contractual maturity dates.

Our goal is to ensure that we maintain sufficient liquidity to
fund our assets and meet our contractual and contingent
obligations in normal times, as well as during periods of
market
stress. Through our dynamic balance sheet
management process, we use actual and projected asset
balances to determine secured and unsecured funding
requirements. Funding plans are reviewed and approved by
the Firmwide Asset Liability Committee. In addition, our
independent risk oversight and control functions analyze,
and the Firmwide Asset Liability Committee reviews, our
consolidated total capital position (unsecured long-term
borrowings plus total shareholders’ equity) so that we
maintain a level of long-term funding that is sufficient to
meet our long-term financing requirements. In a liquidity
crisis, we would first use our GCLA in order to avoid
reliance on asset sales (other than our GCLA). However, we
recognize that orderly asset sales may be prudent or
necessary in a severe or persistent liquidity crisis.

Subsidiary Funding Policies
The majority of our unsecured funding is raised by Group
Inc., which lends the necessary funds to Funding IHC and
other subsidiaries, some of which are regulated, to meet
their asset financing, liquidity and capital requirements. In
addition, Group Inc. provides its regulated subsidiaries
with the necessary capital
regulatory
requirements. The benefits of this approach to subsidiary
funding are enhanced control and greater flexibility to meet
the funding requirements of our subsidiaries. Funding is
also raised at the subsidiary level through a variety of
and
products,
unsecured borrowings.

including deposits,

secured funding

to meet

their

intercompany funding policies assume

Our
that a
subsidiary’s funds or securities are not freely available to its
parent, Funding IHC or other subsidiaries unless (i) legally
provided for and (ii) there are no additional regulatory, tax
or other restrictions. In particular, many of our subsidiaries
are subject to laws that authorize regulatory bodies to block
or reduce the flow of funds from those subsidiaries to
Group Inc. or Funding IHC. Regulatory action of that kind
could impede access to funds that Group Inc. needs to make
payments on its obligations. Accordingly, we assume that
the capital provided to our regulated subsidiaries is not
available to Group Inc. or other subsidiaries and any other
financing provided to our regulated subsidiaries is not
available to Group Inc. or Funding IHC until the maturity
of such financing.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

invested in GS&Co.,

Group Inc. has provided substantial amounts of equity and
subordinated indebtedness, directly or indirectly, to its
regulated subsidiaries. For example, as of December 2019,
Group Inc. had $32.05 billion of equity and subordinated
its principal U.S.
indebtedness
registered broker-dealer; $39.60 billion invested in GSI, a
regulated U.K. broker-dealer; $2.85 billion invested in
GSJCL, a regulated Japanese broker-dealer; $33.57 billion
invested in GS Bank USA, a regulated New York State-
chartered bank; and $4.03 billion invested in GSIB, a
regulated U.K. bank. Group Inc. also provided, directly or
indirectly, $83.78 billion of unsubordinated loans
and
(including
$15.04 billion of collateral and cash deposits to these
entities, substantially all of which was to GS&Co., GSI and
GSJCL, as of December 2019.
In addition, as of
December 2019, Group Inc. had significant amounts of
capital
invested in and loans to its other regulated
subsidiaries.

secured

billion)

$23.08

loans

Contingency Funding Plan. We maintain a contingency
funding plan to provide a framework for analyzing and
responding to a liquidity crisis situation or periods of
market stress. Our contingency funding plan outlines a list
of potential risk factors, key reports and metrics that are
reviewed on an ongoing basis to assist in assessing the
severity of, and managing through, a liquidity crisis and/or
market dislocation. The contingency funding plan also
describes
if our
assessments indicate that we have entered a liquidity crisis,
which include pre-funding for what we estimate will be our
potential cash and collateral needs, as well as utilizing
secondary sources of liquidity. Mitigants and action items
to address specific risks which may arise are also described
and assigned to individuals responsible for execution.

in detail our potential

responses

The contingency funding plan identifies key groups of
individuals and their
responsibilities, which include
fostering effective coordination, control and distribution of
information, implementing liquidity maintenance activities
and managing internal and external communication, all of
which are critical in the management of a crisis or period of
market stress.

Goldman Sachs 2019 Form 10-K

Stress Tests
In order to determine the appropriate size of our GCLA, we
model liquidity outflows over a range of scenarios and time
horizons. One of our primary internal liquidity risk models,
referred to as the Modeled Liquidity Outflow, quantifies our
liquidity risks over a 30-day stress scenario. We also consider
other factors, including, but not limited to, an assessment of
our potential intraday liquidity needs through an additional
internal liquidity risk model, referred to as the Intraday
Liquidity Model, the results of our long-term stress testing
models, our resolution liquidity models and other applicable
regulatory requirements and a qualitative assessment of our
condition, as well as the financial markets. The results of the
Modeled Liquidity Outflow, the Intraday Liquidity Model,
the long-term stress testing models and the resolution
liquidity models are reported to senior management on a
regular basis. We also perform firmwide stress tests. See
“Overview and Structure of Risk Management” for
information about firmwide stress tests.

Modeled Liquidity Outflow. Our Modeled Liquidity
Outflow is based on conducting multiple scenarios that
include combinations of market-wide and firm-specific
stress. These scenarios are characterized by the following
qualitative elements:
‰ Severely challenged market environments, including low
consumer and corporate confidence,
financial and
political instability, adverse changes in market values,
in equity markets and
including potential declines
widening of credit spreads; and

‰ A firm-specific crisis potentially triggered by material losses,
reputational damage, litigation and/or a ratings downgrade.

The following are key modeling elements of our Modeled
Liquidity Outflow:
‰ Liquidity needs over a 30-day scenario;
‰ A two-notch downgrade of our

long-term senior

unsecured credit ratings;

‰ Changing conditions in funding markets, which limit our

access to unsecured and secured funding;

‰ No support

from additional government

funding
facilities. Although we have access to various central bank
funding programs, we do not assume reliance on
additional sources of funding in a liquidity crisis; and

‰ A combination of

contractual outflows,

such as
upcoming maturities of unsecured debt, and contingent
outflows, including but not limited to, the withdrawal of
customer credit balances in our prime brokerage business
or an increase in variation margin requirements due to
adverse changes in the value of our exchange-traded and
OTC-cleared derivatives and withdrawals of deposits that
have no contractual maturity.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Intraday Liquidity Model. Our Intraday Liquidity Model
measures our intraday liquidity needs using a scenario
analysis characterized by the same qualitative elements as
our Modeled Liquidity Outflow. The model assesses the
risk of increased intraday liquidity requirements during a
scenario where access to sources of intraday liquidity may
become constrained.

Long-Term Stress Testing. We utilize longer-term stress
tests to take a forward view on our liquidity position
through prolonged stress periods in which we experience a
severe liquidity stress and recover in an environment that
continues to be challenging. We are focused on ensuring
conservative asset-liability management to prepare for a
prolonged period of potential stress, seeking to maintain a
diversified funding profile with an appropriate tenor,
taking into consideration the characteristics and liquidity
profile of our assets.

and

Liquidity

Adequacy

Resolution Liquidity Models. In connection with our
resolution planning efforts, we have established our
Positioning
Resolution
framework, which estimates liquidity needs of our major
subsidiaries in a stressed environment. The liquidity needs
are measured using our Modeled Liquidity Outflow
assumptions and include certain additional inter-affiliate
exposures. We have also established our Resolution
Liquidity Execution Need framework, which measures the
liquidity needs of our major subsidiaries to stabilize and
wind-down following a Group Inc. bankruptcy filing in
accordance with our preferred resolution strategy.

Limits
We use liquidity risk limits at various levels and across
liquidity risk types to manage the size of our liquidity
exposures. Limits are measured relative to acceptable levels
of risk given our liquidity risk tolerance. See “Overview and
Structure of Risk Management” for information about the
limit approval process.

Limits are monitored by Treasury and Liquidity Risk.
Liquidity Risk is responsible for identifying and escalating
to senior management and/or
risk
committee, on a timely basis, instances where limits have
been exceeded.

the appropriate

GCLA and Unencumbered Metrics
GCLA. Based on the results of our internal liquidity risk
models, described above, as well as our consideration of
other factors, including, but not limited to, a qualitative
assessment of our condition, as well as the financial
markets, we believe our liquidity position as of both
December 2019 and December 2018 was appropriate. We
strictly limit our GCLA to a narrowly defined list of
securities and cash because they are highly liquid, even in a
difficult funding environment. We do not include other
potential sources of excess liquidity in our GCLA, such as
less liquid unencumbered securities or committed credit
facilities.

The table below presents information about our GCLA.

$ in millions

Denomination
U.S. dollar
Non-U.S. dollar
Total

Asset Class
Overnight cash deposits
U.S. government obligations
U.S. agency obligations
Non-U.S. government obligations
Total

Entity Type
Group Inc. and Funding IHC
Major broker-dealer subsidiaries
Major bank subsidiaries
Total

Average for the
Year Ended December

2019

2018

$146,751
86,899
$233,650

$155,348
77,995
$233,343

$ 68,733
94,500
14,005
56,412
$233,650

$ 40,043
95,281
98,326
$233,650

$ 98,811
79,810
12,171
42,551
$233,343

$ 40,920
104,364
88,059
$233,343

unencumbered U.S.

In the table above:
‰ The U.S. dollar-denominated GCLA consists of
agency
(i)
obligations
agency
mortgage-backed obligations), all of which are eligible as
collateral in Federal Reserve open market operations and
(ii) certain overnight U.S. dollar cash deposits.

and
liquid U.S.

(including highly

government

‰ The non-U.S. dollar-denominated GCLA consists of
non-U.S. government obligations (only unencumbered
German, French,
Japanese and U.K. government
obligations) and certain overnight cash deposits in highly
liquid currencies.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

We maintain our GCLA to enable us to meet current and
potential liquidity requirements of our parent company,
Group Inc., and its subsidiaries. Our Modeled Liquidity
Outflow and Intraday Liquidity Model
incorporate a
requirement for Group Inc., as well as a standalone
requirement for each of our major broker-dealer and bank
subsidiaries. Funding IHC is required to provide the
necessary liquidity to Group Inc. during the ordinary course
of business, and is also obligated to provide capital and
liquidity support to major subsidiaries in the event of our
material financial distress or failure. Liquidity held directly
in each of our major broker-dealer and bank subsidiaries is
intended for use only by that subsidiary to meet its liquidity
requirements and is assumed not to be available to Group
Inc. or Funding IHC unless (i) legally provided for and
(ii)
tax or other
restrictions. In addition, the Modeled Liquidity Outflow
and Intraday Liquidity Model also incorporate a broader
assessment of standalone liquidity requirements for other
subsidiaries and we hold a portion of our GCLA directly at
Group Inc. or Funding IHC to support such requirements.

there are no additional regulatory,

instruments,

Other Unencumbered Assets. In addition to our GCLA,
we have a significant amount of other unencumbered cash
and financial
including other government
obligations, high-grade money market securities, corporate
obligations, marginable equities, loans and cash deposits
not
included in our GCLA. The fair value of our
unencumbered assets averaged $202.03 billion for 2019
and $177.08 billion for 2018. We do not consider these
assets liquid enough to be eligible for our GCLA.

Liquidity Regulatory Framework
As a bank holding company (BHC), we are subject to a
minimum Liquidity Coverage Ratio (LCR) under the LCR
rule approved by the U.S. federal bank regulatory agencies.
The LCR rule requires organizations to maintain an
adequate ratio of eligible high-quality liquid assets (HQLA)
to expected net cash outflows under an acute short-term
liquidity stress scenario. Eligible HQLA excludes HQLA
held by subsidiaries that is in excess of their minimum
requirement and is subject to transfer restrictions. We are
required to maintain a minimum LCR of 100%. We expect
that fluctuations in client activity, business mix and the
market environment will impact our LCR.

Goldman Sachs 2019 Form 10-K

The table below presents information about our average
daily LCR.

$ in millions

Total HQLA
Eligible HQLA
Net cash outflows

Average for the
Three Months Ended

December
2019

$229,029
$170,371
$134,436

September
2019

$233,620
$175,937
$131,227

December
2018

$226,473
$160,016
$126,511

LCR

127%

134%

127%

The U.S. federal bank regulatory agencies have issued a
proposed rule that calls for a net stable funding ratio
(NSFR) for large U.S. banking organizations. The proposal
would require banking organizations to ensure they have
access to stable funding over a one-year time horizon and
includes quarterly disclosure of the ratio and a description
of the banking organization’s stable funding sources. We
expect
that we will be compliant with the NSFR
requirement when it is effective.

The following provides information about our subsidiary
liquidity regulatory requirements:
‰ GS Bank USA. GS Bank USA is subject to a minimum
LCR of 100% under the LCR rule approved by the U.S.
federal bank regulatory agencies. As of December 2019,
GS Bank USA’s LCR exceeded the minimum requirement.
The NSFR requirement described above would also apply
to GS Bank USA.

‰ GSI. GSI is subject to a minimum LCR of 100% under
the LCR rule approved by the U.K. regulatory authorities
and the European Commission. GSI’s average monthly
trailing twelve-month period ended
LCR for
December 2019 exceeded the minimum requirement.

the

local

‰ Other Subsidiaries. We monitor

regulatory
liquidity requirements of our subsidiaries to ensure
these
compliance. For many of our
requirements either have changed or are likely to change
in the future due to the implementation of the Basel
Committee on Banking Supervision’s framework for
liquidity risk measurement, standards and monitoring, as
well as other regulatory developments.

subsidiaries,

The implementation of these rules and any amendments
adopted by the regulatory authorities, could impact our
liquidity and funding requirements and practices in the
future.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Credit Ratings
We rely on the short- and long-term debt capital markets to
fund a significant portion of our day-to-day operations and
the cost and availability of debt financing is influenced by
our credit ratings. Credit ratings are also important when
we are competing in certain markets, such as OTC
derivatives, and when we seek to engage in longer-term
transactions. See “Risk Factors” in Part I, Item 1A of this
Form 10-K for information about the risks associated with
a reduction in our credit ratings.

The table below presents the unsecured credit ratings and
outlook of Group Inc.

As of December 2019

DBRS

Fitch Moody’s

R&I

S&P

Short-term debt
Long-term debt
Subordinated debt
Trust preferred
Preferred stock
Ratings outlook

R-1 (middle)
A (high)
A
A
BBB (high)

F1
A
A-
BBB-
BB+
Stable Stable

P-2
A3
Baa2
Baa3
Ba1

A-2
BBB+
BBB-
BB
BB
Stable Stable Stable

a-1
A
A-
N/A
N/A

In the table above:
‰ The ratings and outlook are by DBRS, Inc. (DBRS), Fitch,
Inc.

Information,

Moody’s, Rating and Investment
(R&I), and S&P.

‰ The ratings for trust preferred relate to the guaranteed
preferred beneficial interests issued by Goldman Sachs
Capital I.

‰ The DBRS, Fitch, Moody’s and S&P ratings for preferred
stock include the APEX issued by Goldman Sachs
Capital II and Goldman Sachs Capital III.

The table below presents the unsecured credit ratings and
outlook of GS Bank USA, GSIB, GS&Co. and GSI, by
Fitch, Moody’s and S&P.

GS Bank USA
Short-term debt
Long-term debt
Short-term bank deposits
Long-term bank deposits
Ratings outlook
GSIB
Short-term debt
Long-term debt
Short-term bank deposits
Long-term bank deposits
Ratings outlook
GS&Co.
Short-term debt
Long-term debt
Ratings outlook
GSI
Short-term debt
Long-term debt
Ratings outlook

As of December 2019

Fitch

Moody’s

S&P

F1
A+
F1+
AA-
Stable

F1
A
F1
A
Stable

F1
A+
Stable

F1
A
Stable

P-1
A1
P-1
A1
Stable

N/A
N/A
N/A

P-1
A1
Stable

A-1
A+
N/A
N/A
Stable

A-1
A+
Stable

We believe our credit ratings are primarily based on the
credit rating agencies’ assessment of:
‰ Our

liquidity, market, credit and operational

risk

management practices;

‰ Our level and variability of earnings;
‰ Our capital base;
‰ Our franchise, reputation and management;
‰ Our corporate governance; and
‰ The external operating and economic environment,
including, in some cases, the assumed level of government
support or other
such as
potential resolution.

systemic considerations,

Certain of our derivatives have been transacted under
bilateral agreements with counterparties who may require
us to post collateral or terminate the transactions based on
changes in our credit ratings. We manage our GCLA to
ensure we would, among other potential requirements, be
able to make the additional collateral or termination
payments that may be required in the event of a two-notch
reduction in our long-term credit ratings, as well as
collateral that has not been called by counterparties, but is
available to them.

See Note 7 to the consolidated financial statements for
further information about derivatives with credit-related
features and the additional collateral or
contingent
termination payments
related to our net derivative
liabilities under bilateral agreements that could have been
called by counterparties in the event of a one- or two-notch
downgrade in our credit ratings.

Goldman Sachs 2019 Form 10-K

Market Risk Management

Overview
Market risk is the risk of loss in the value of our inventory,
investments, loans and other financial assets and liabilities
accounted for at fair value due to changes in market
conditions. We hold such positions primarily for market
making for our clients and for our investing and financing
activities, and therefore, these positions change based on
client demands and our investment opportunities. Since
these positions are accounted for at
they
fluctuate on a daily basis, with the related gains and losses
included in the consolidated statements of earnings. We
employ a variety of risk measures, each described in the
respective
risk.
Categories of market risk include the following:
‰ Interest rate risk: results from exposures to changes in the
level, slope and curvature of yield curves, the volatilities
of interest rates, prepayment speeds and credit spreads;
‰ Equity price risk: results from exposures to changes in
prices and volatilities of individual equities, baskets of
equities and equity indices;

to monitor market

sections below,

fair value,

‰ Currency rate risk: results from exposures to changes in
spot prices, forward prices and volatilities of currency
rates; and

‰ Commodity price risk: results from exposures to changes
in spot prices,
forward prices and volatilities of
commodities, such as crude oil, petroleum products,
natural gas, electricity, and precious and base metals.

Market Risk, which is independent of our revenue-
producing units and reports to our chief risk officer, has
primary responsibility for assessing, monitoring and
managing our market risk through firmwide oversight
across our global businesses.

Managers in revenue-producing units and Market Risk
discuss market information, positions and estimated loss
scenarios on an ongoing basis. Managers in revenue-
producing units are accountable for managing risk within
prescribed limits. These managers have in-depth knowledge
of their positions, markets and the instruments available to
hedge their exposures.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Cash Flows
As a global financial institution, our cash flows are complex
and bear little relation to our net earnings and net assets.
Consequently, we believe that traditional cash flow analysis
is less meaningful in evaluating our liquidity position than
the liquidity and asset-liability management policies
described above. Cash flow analysis may, however, be
helpful in highlighting certain macro trends and strategic
initiatives in our businesses.

Year Ended December 2019. Our cash and cash
equivalents increased by $3.00 billion to $133.55 billion at
the end of 2019, primarily due to net cash provided by
operating activities and financing activities, partially offset
by net cash used for investing activities. The net cash
provided by operating activities primarily reflected cash
provided by collateralized transactions (a decrease in
collateralized agreements and an increase in collateralized
financings) as a result of our and our clients’ activities,
partially offset by an increase in trading assets, as a result of
client activity. The net cash provided by financing activities
primarily reflected an increase in consumer deposits,
partially offset by net repayments of unsecured long-term
borrowings and common stock repurchases. The net cash
used for
investing activities primarily reflected net
purchases of investments and an increase in loans.

Year Ended December 2018. Our cash and cash
equivalents increased by $20.50 billion to $130.55 billion
at the end of 2018, primarily due to net cash provided by
financing activities and operating activities, partially offset
by net cash used for investing activities. The net cash
provided by financing activities primarily reflected
increases in consumer deposits. The net cash provided by
operating activities primarily reflected net earnings and a
decrease
in
collateralized transactions, partially offset by an increase in
trading assets. The net cash used for investing activities
primarily reflected an increase in loans and net purchases of
investments.

collateralized

agreements

included

Year Ended December 2017. Our cash and cash
equivalents decreased by $11.66 billion to $110.05 billion
at the end of 2017, primarily due to net cash used for
investing activities and operating activities, partially offset
by net cash provided by financing activities. The net cash
used for investing activities primarily reflected an increase
in loans and net purchases of investments. The net cash
used for operating activities primarily reflected an increase
in net customer and other receivables and payables,
partially offset by an increase in collateralized financings
included in collateralized transactions. The net cash
provided by financing activities primarily reflected net
issuances of unsecured long-term borrowings and increases
in institutional and consumer deposits, partially offset by
repurchases of common stock.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Market Risk Management Process
Our process for managing market risk includes the critical
components of our risk management framework described
in the “Overview and Structure of Risk Management,” as
well as the following:
‰ Monitoring compliance with established market risk

limits and reporting our exposures;

‰ Diversifying exposures;
‰ Controlling position sizes; and
‰ Evaluating mitigants, such as economic hedges in related

securities or derivatives.

Our market risk management systems enable us to perform
an independent calculation of Value-at-Risk (VaR) and
stress measures, capture risk measures at
individual
position levels, attribute risk measures to individual risk
factors of each position, report many different views of the
risk measures (e.g., by desk, business, product type or
entity) and produce ad hoc analyses in a timely manner.

Risk Measures
We produce risk measures and monitor them against
established market risk limits. These measures reflect an
extensive range of scenarios and the results are aggregated
at product, business and firmwide levels.

We use a variety of risk measures to estimate the size of
potential
losses for both moderate and more extreme
market moves over both short- and long-term time
horizons. Our primary risk measures are VaR, which is
used for shorter-term periods, and stress tests. Our risk
reports detail key risks, drivers and changes for each desk
and business, and are distributed daily to senior
management of both our revenue-producing units and our
independent risk oversight and control functions.

Value-at-Risk. VaR is the potential loss in value due to
adverse market movements over a defined time horizon
with a specified confidence level. For assets and liabilities
included in VaR, see “Financial Statement Linkages to
Market Risk Measures.” We typically employ a one-day
time horizon with a 95% confidence level. We use a single
VaR model, which captures risks including interest rates,
equity prices, currency rates and commodity prices. As
such, VaR facilitates comparison across portfolios of
different
the
risk characteristics. VaR also captures
diversification of aggregated risk at the firmwide level.

We are aware of the inherent limitations to VaR and
therefore use a variety of risk measures in our market risk
management process. Inherent limitations to VaR include:
‰ VaR does not estimate potential losses over longer time

horizons where moves may be extreme;

‰ VaR does not take account of the relative liquidity of

different risk positions; and

‰ Previous moves in market risk factors may not produce

accurate predictions of all future market moves.

To comprehensively capture our exposures and relevant
risks in our VaR calculation, we use historical simulations
with full valuation of market factors at the position level by
simultaneously shocking the relevant market factors for
that position. These market factors include spot prices,
credit spreads, funding spreads, yield curves, volatility and
correlation, and are updated periodically based on changes
in the composition of positions, as well as variations in
market conditions. We sample from five years of historical
data to generate the scenarios for our VaR calculation. The
historical data is weighted so that the relative importance of
the data reduces over time. This gives greater importance to
more recent observations and reflects current asset
volatilities, which improves the accuracy of our estimates of
potential loss. As a result, even if our positions included in
VaR were unchanged, our VaR would increase with
increasing market volatility and vice versa.

Given its reliance on historical data, VaR is most effective in
estimating risk exposures in markets in which there are no
sudden fundamental changes or shifts in market conditions.

Our VaR measure does not include:
‰ Positions that are best measured and monitored using

sensitivity measures; and

‰ The impact of changes in counterparty and our own
credit spreads on derivatives, as well as changes in our
own credit spreads on financial liabilities for which the
fair value option was elected.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

We perform daily backtesting of our VaR model (i.e.,
comparing daily net revenues for positions included in VaR
to the VaR measure calculated as of the prior business day)
at the firmwide level and for each of our businesses and
major regulated subsidiaries.

Stress Testing. Stress testing is a method of determining
the effect of various hypothetical stress scenarios. We use
stress testing to examine risks of specific portfolios, as well
as the potential impact of our significant risk exposures. We
use a variety of stress testing techniques to calculate the
potential loss from a wide range of market moves on our
portfolios,
sensitivity
analysis and scenario analysis. The results of our various
stress tests are analyzed together for risk management
purposes.
See “Overview and Structure of Risk
Management” for information about firmwide stress tests.

including firmwide stress

tests,

Sensitivity analysis is used to quantify the impact of a
market move in a single risk factor across all positions (e.g.,
equity prices or credit spreads) using a variety of defined
market shocks, ranging from those that could be expected
over a one-day time horizon up to those that could take
many months to occur. We also use sensitivity analysis to
quantify the impact of the default of any single entity,
which captures the risk of large or concentrated exposures.

Scenario analysis is used to quantify the impact of a
specified event, including how the event impacts multiple
risk factors simultaneously. For example, for sovereign
testing we calculate potential direct exposure
stress
associated with our sovereign positions, as well as the
corresponding debt,
equity and currency exposures
associated with our non-sovereign positions that may be
impacted by the sovereign distress. When conducting
scenario analysis, we often consider a number of possible
outcomes for each scenario, ranging from moderate to
severely adverse market impacts. In addition, these stress
tests are constructed using both historical events and
forward-looking hypothetical scenarios.

Unlike VaR measures, which have an implied probability
because they are calculated at a specified confidence level,
there may not be an implied probability that our stress
testing scenarios will occur. Instead, stress testing is used to
model both moderate and more extreme moves
in
underlying market factors. When estimating potential loss,
we generally assume that our positions cannot be reduced
or hedged (although experience demonstrates that we are
generally able to do so).

Goldman Sachs 2019 Form 10-K

Limits
We use market risk limits at various levels to manage the
size of our market exposures. These limits are set based on
VaR and on a range of stress tests relevant to our exposures.
See “Overview and Structure of Risk Management” for
information about the limit approval process.

Market Risk is responsible for monitoring these limits, and
identifying and escalating to senior management and/or the
appropriate risk committee, on a timely basis, instances
where limits have been exceeded (e.g., due to positional
changes or changes in market conditions, such as increased
volatilities or changes in correlations). Such instances are
remediated by a reduction in the positions we hold and/or a
temporary or permanent increase to the limit.

Metrics
We analyze VaR at the firmwide level and a variety of more
detailed levels, including by risk category, business and
region. Diversification effect in the tables below represents
the difference between total VaR and the sum of the VaRs
for the four risk categories. This effect arises because the
four market risk categories are not perfectly correlated.

The table below presents our average daily VaR.

$ in millions

Categories
Interest rates
Equity prices
Currency rates
Commodity prices
Diversification effect
Total

Year Ended December

2019

2018

$ 46
27
11
12
(40)
$ 56

$ 46
31
14
11
(42)
$ 60

Our average daily VaR decreased to $56 million in 2019
from $60 million in 2018, primarily due to decreases in the
equity prices and currency rates categories, partially offset
by a decrease in the diversification effect. The overall
decrease was primarily due to reduced exposures.

The table below presents our period-end VaR.

$ in millions

Categories
Interest rates
Equity prices
Currency rates
Commodity prices
Diversification effect
Total

As of December

2019

2018

$ 54
24
10
10
(28)
$ 70

$ 46
32
12
11
(44)
$ 57

Our period-end VaR increased to $70 million as of
December 2019 from $57 million as of December 2018,
primarily due to a decrease in the diversification effect and
an increase in the interest rates category, partially offset by
decreases in the equity prices and currency rates categories.
The overall increase was due to higher levels of volatility
and increased exposures.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

During 2019 and 2018, the firmwide VaR risk limit was
not exceeded, raised or reduced.

The table below presents our high and low VaR.

$ in millions

Categories
Interest rates
Equity prices
Currency rates
Commodity prices

Firmwide
VaR

Year Ended December

2019

2018

High

Low

High

Low

$64
$38
$22
$16

$35
$20
$ 6
$ 9

$61
$45
$27
$17

$34
$24
$ 7
$ 8

$77

$43

$86

$42

The chart below presents our daily VaR for 2019.

R
a
V
y

l
i

a
D

)
s
n
o

i
l
l
i

m
n

(

First Quarter
2019

Second Quarter
2019

Third Quarter
2019

Fourth Quarter
2019

The table below presents, by number of business days, the
frequency distribution of our daily net revenues for
positions included in VaR.

$ in millions

>$100
$75 - $100
$50 - $75
$25 - $50
$0 - $25
$(25) - $0
$(50) - $(25)
$(75) - $(50)
$(100) - $(75)
Total

Year Ended
December

2019

2018

16
17
45
71
72
26
5
–
–
252

12
22
56
66
64
23
6
1
1
251

Daily net revenues for positions included in VaR are
compared with VaR calculated as of the end of the prior
business day. Net losses incurred on a single day for such
positions did not exceed our 95% one-day VaR (i.e., a VaR
exception) during 2019 and exceeded our 95% one-day
VaR on two occasions during 2018.

During periods in which we have significantly more positive
net revenue days than net revenue loss days, we expect to
have fewer VaR exceptions because, under normal
conditions, our business model generally produces positive
net revenues. In periods in which our franchise revenues are
adversely affected, we generally have more loss days,
resulting in more VaR exceptions. The daily net revenues
for positions included in VaR used to determine VaR
exceptions reflect the impact of any intraday activity,
including bid/offer net revenues, which are more likely than
not to be positive by their nature.

Sensitivity Measures
Certain portfolios and individual positions are not included
in VaR because VaR is not the most appropriate risk
measure. Other sensitivity measures we use to analyze
market risk are described below.

10% Sensitivity Measures. The table below presents our
market risk by asset category for positions accounted for at
fair value, that are not included in VaR.

$ in millions

Equity
Debt
Total

As of December

2019

2018

$1,865
2,368
$4,233

$1,923
1,890
$3,813

In the table above:
‰ The market risk of these positions is determined by
estimating the potential reduction in net revenues of a
10% decline in the value of these positions.

‰ Equity positions relate to private and restricted public
equity securities, including interests in funds that invest in
corporate equities and real estate and interests in hedge
funds.

‰ Debt positions include interests in funds that invest in
corporate mezzanine and senior debt instruments, loans
backed by commercial and residential
real estate,
corporate bank loans and other corporate debt, including
acquired portfolios of distressed loans.

‰ Funded equity and debt positions are included in our
consolidated balance sheets in investments and loans. See
Note 8 to the consolidated financial statements for
further information about investments and Note 9 to the
consolidated financial statements for further information
about loans.

‰ These measures do not reflect the diversification effect
across asset categories or across other market risk
measures.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Credit and Funding Spread Sensitivity on Derivatives
and Financial Liabilities. VaR excludes the impact of
changes in counterparty credit spreads, our own credit
spreads and unsecured funding spreads on derivatives, as
well as changes in our own credit spreads (debt valuation
adjustment) on financial liabilities for which the fair value
option was elected. The estimated sensitivity to a one basis
point increase in credit spreads (counterparty and our own)
and unsecured funding spreads on derivatives (including
hedges) was a loss of $2 million as of both December 2019
and December 2018. In addition, the estimated sensitivity
to a one basis point increase in our own credit spreads on
financial liabilities for which the fair value option was
elected was a gain of $29 million as of December 2019 and
$41 million as of December 2018. However, the actual net
impact of a change in our own credit spreads is also affected
by the liquidity, duration and convexity (as the sensitivity is
not linear to changes in yields) of those financial liabilities
for which the fair value option was elected, as well as the
relative performance of any hedges undertaken.

Interest Rate Sensitivity. Loans accounted for at
amortized cost were $89.20 billion as of December 2019
and $80.59 billion as of December 2018, substantially all of
which had floating interest rates. The estimated sensitivity
to a 100 basis point increase in interest rates on such loans
was $681 million as of December 2019 and $607 million as
of December 2018 of additional interest income over a
twelve-month period, which does not take into account the
potential impact of an increase in costs to fund such loans.
See Note 9 to the consolidated financial statements for
further information about loans accounted for at amortized
cost.

Other Market Risk Considerations
As of both December 2019 and December 2018, we had
commitments and held loans for which we have obtained
credit loss protection from Sumitomo Mitsui Financial
Group, Inc. See Note 18 to the consolidated financial
statements for further information about such lending
commitments.

In addition, we make investments in securities that are
accounted for as available-for-sale, held-to-maturity or
under the equity method which are included in investments
in the consolidated balance sheets. See Note 8 to the
consolidated financial statements for further information.

Direct investments in real estate are accounted for at cost
less accumulated depreciation. See Note 12 to the
consolidated financial statements for further information
about other assets.

Goldman Sachs 2019 Form 10-K

Financial Statement Linkages to Market Risk
Measures
We employ a variety of risk measures, each described in the
respective sections above, to monitor market risk across the
consolidated balance sheets and consolidated statements of
earnings. The related gains and losses on these positions are
included in market making, other principal transactions,
interest income and interest expense in the consolidated
statements of earnings, and debt valuation adjustment in
the consolidated statements of comprehensive income.

The table below presents certain assets and liabilities in our
consolidated balance sheets and the market risk measures
used to assess those assets and liabilities.

Assets or Liabilities

Market Risk Measures

Collateralized agreements, at fair value

VaR

Receivables

Trading assets

Investments

Loans

Deposits, at fair value

VaR
Interest Rate Sensitivity

VaR
Credit Spread Sensitivity —
Derivatives

VaR
10% Sensitivity Measures

VaR
Credit Spread Sensitivity —
Financial Liabilities

Collateralized financings, at fair value

VaR

Trading liabilities

Unsecured short- and long-term
borrowings, at fair value

VaR
Credit Spread Sensitivity —
Derivatives

VaR
Credit Spread Sensitivity —
Financial Liabilities

Credit Risk Management

Overview
Credit risk represents the potential for loss due to the
default or deterioration in credit quality of a counterparty
(e.g., an OTC derivatives counterparty or a borrower) or an
issuer of securities or other instruments we hold. Our
exposure
risk comes mostly from client
transactions in OTC derivatives and loans and lending
commitments. Credit risk also comes from cash placed with
banks, securities financing transactions (i.e., resale and
repurchase agreements and securities borrowing and
lending activities) and customer and other receivables.

to credit

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

independent of our

revenue-
Credit Risk, which is
producing units and reports to our chief risk officer, has
primary responsibility for assessing, monitoring and
managing our credit risk through firmwide oversight across
our global businesses. The Risk Governance Committee
reviews and approves credit policies and parameters. In
addition, we hold other positions that give rise to credit risk
(e.g., bonds and secondary bank loans). These credit risks
are captured as a component of market risk measures,
which are monitored and managed by Market Risk. We
also enter into derivatives to manage market risk exposures.
Such derivatives also give rise to credit risk, which is
monitored and managed by Credit Risk.

Credit Risk Management Process
Our process for managing credit risk includes the critical
components of our risk management framework described
in the “Overview and Structure of Risk Management,” as
well as the following:
‰ Monitoring compliance with established credit risk limits
and credit
credit

exposures

and reporting our
concentrations;

‰ Establishing or approving underwriting standards;
‰ Assessing the likelihood that a counterparty will default

on its payment obligations;

‰ Measuring our current and potential credit exposure and

losses resulting from a counterparty default;

‰ Using credit risk mitigants,

including collateral and

hedging; and

‰ Maximizing recovery through active workout and

restructuring of claims.

review. A credit

We also perform credit reviews, which include initial and
ongoing analyses of our counterparties. For substantially all
of our credit exposures, the core of our process is an annual
review is an
counterparty credit
independent analysis of the capacity and willingness of a
counterparty to meet its financial obligations, resulting in
an internal credit rating. The determination of internal
credit ratings also incorporates assumptions with respect to
the nature of and outlook for the counterparty’s industry,
and the economic environment. Senior personnel, with
expertise in specific industries, inspect and approve credit
reviews and internal credit ratings.

Our risk assessment process may also include, where
applicable, reviewing certain key metrics, including, but not
limited to, delinquency status, collateral values, Fair Isaac
Corporation credit scores and other risk factors.

risk management

systems capture credit
Our credit
exposure to individual counterparties and on an aggregate
basis to counterparties and their subsidiaries. These systems
also provide management with comprehensive information
about our aggregate credit risk by product, internal credit
rating, industry, country and region.

Risk Measures
We measure our credit risk based on the potential loss in the
event of non-payment by a counterparty using current and
potential exposure. For derivatives and securities financing
transactions, current exposure represents the amount
presently owed to us after taking into account applicable
netting and collateral arrangements, while potential
exposure represents our estimate of the future exposure
that could arise over the life of a transaction based on
market movements within a specified confidence level.
Potential exposure also takes into account netting and
collateral
lending
commitments, the primary measure is a function of the
notional amount of the position.

arrangements.

loans

and

For

Stress Tests
We conduct regular stress tests to calculate the credit
exposures, including potential concentrations that would
result from applying shocks to counterparty credit ratings
or credit risk factors (e.g., currency rates, interest rates,
equity prices). These shocks cover a wide range of moderate
and more extreme market movements, including shocks to
multiple risk factors, consistent with the occurrence of a
severe market or economic event. In the case of sovereign
default, we estimate the direct impact of the default on our
sovereign credit exposures, changes to our credit exposures
arising from potential market moves in response to the
default, and the impact of credit market deterioration on
corporate borrowers and counterparties that may result
from the sovereign default. Unlike potential exposure,
which is calculated within a specified confidence level,
stress testing does not generally assume a probability of
these events occurring. We also perform firmwide stress
tests. See “Overview and Structure of Risk Management”
for information about firmwide stress tests.

To supplement these regular stress tests, as described above,
we also conduct tailored stress tests on an ad hoc basis in
response to specific market events that we deem significant.
We also utilize these stress tests to estimate the indirect
impact of certain hypothetical events on our country
exposures, such as the impact of credit market deterioration
on corporate borrowers and counterparties along with the
shocks to the risk factors described above. The parameters
of these shocks vary based on the scenario reflected in each
stress test. We review estimated losses produced by the
stress tests in order to understand their magnitude,
loss concentrations, and assess and
highlight potential
mitigate our exposures where necessary.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Limits
We use credit risk limits at various levels, as well as
underwriting standards to manage the size and nature of
our credit exposures. Limits for industries and countries are
based on our risk appetite and are designed to allow for
regular monitoring, review, escalation and management of
credit risk concentrations. See “Overview and Structure of
Risk Management” for
the limit
approval process.

information about

Credit Risk is responsible for monitoring these limits, and
identifying and escalating to senior management and/or the
appropriate risk committee, on a timely basis, instances
where limits have been exceeded.

Risk Mitigants
To reduce our credit exposures on derivatives and securities
into netting
financing transactions, we may enter
agreements with counterparties that permit us to offset
receivables and payables with such counterparties. We may
also reduce credit risk with counterparties by entering into
agreements that enable us to obtain collateral from them on
an upfront or contingent basis and/or
to terminate
transactions if the counterparty’s credit rating falls below a
specified level. We monitor the fair value of the collateral to
exposures are appropriately
ensure
collateralized. We seek to minimize exposures where there
is
correlation between the
creditworthiness of our counterparties and the market
value of collateral we receive.

significant

that our

positive

credit

For loans and lending commitments, depending on the
credit quality of the borrower and other characteristics of
the transaction, we employ a variety of potential risk
mitigants. Risk mitigants include collateral provisions,
guarantees, covenants, structural seniority of the bank loan
claims and, for certain lending commitments, provisions in
the legal documentation that allow us to adjust loan
amounts, pricing, structure and other terms as market
conditions change. The type and structure of risk mitigants
employed can significantly influence the degree of credit
risk involved in a loan or lending commitment.

When we do not have sufficient visibility into a
counterparty’s financial strength or when we believe a
counterparty requires support from its parent, we may
obtain third-party guarantees of
counterparty’s
obligations. We may also mitigate our credit risk using
credit derivatives or participation agreements.

the

Goldman Sachs 2019 Form 10-K

arising

exposures

Credit Exposures
As of December 2019, our aggregate credit exposure
increased as compared with December 2018, primarily
reflecting an increase in loans and lending commitments
and securities financing transactions. The percentage of our
credit
from non-investment-grade
counterparties (based on our internally determined public
rating agency equivalents) increased as compared with
December 2018, primarily reflecting an increase in
non-investment-grade loans and lending commitments.
Our credit exposure to counterparties that defaulted during
2019 was higher as compared with our credit exposure to
counterparties that defaulted during the same prior year
period, and substantially all of such exposure was related to
loans and lending commitments. Our credit exposure to
counterparties that defaulted during 2019 remained low,
representing less than 0.5% of our total credit exposure.
Estimated losses associated with these defaults have been
recognized in earnings. Our credit exposures are described
further below.

Cash and Cash Equivalents. Our credit exposure on cash
and cash equivalents arises from our unrestricted cash, and
includes both interest-bearing and non-interest-bearing
deposits. To mitigate the risk of credit loss, we place
substantially all of our deposits with highly rated banks and
central banks.

The table below presents our credit exposure from
and the
cash and cash equivalents,
unrestricted
concentration by industry, region and credit quality.

$ in millions

Cash and Cash Equivalents

As of December

2019

2018

$110,774

$107,408

Industry
Financial Institutions
Sovereign
Total

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
AAA
AA
A
BBB
Total

12%
88%
100%

50%
31%
19%
100%

66%
11%
22%
1%
100%

16%
84%
100%

36%
41%
23%
100%

62%
10%
27%
1%
100%

The table above excludes cash segregated for regulatory
and other purposes of $22.78 billion as of December 2019
and $23.14 billion as of December 2018.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

OTC Derivatives. Our credit exposure on OTC derivatives
arises primarily from our market-making activities. As a
market maker, we enter into derivative transactions to
provide liquidity to clients and to facilitate the transfer and
hedging of their risks. We also enter into derivatives to
manage market risk exposures. We manage our credit
exposure on OTC derivatives using the credit risk process,
measures, limits and risk mitigants described above.

We generally enter into OTC derivatives transactions under
bilateral collateral arrangements that require the daily
exchange of collateral. As credit risk is an essential
component of fair value, we include a credit valuation
adjustment (CVA) in the fair value of derivatives to reflect
counterparty credit risk, as described in Note 7 to the
consolidated financial statements. CVA is a function of the
present value of expected exposure, the probability of
counterparty default and the assumed recovery upon default.

The table below presents our net credit exposure from OTC
derivatives and the concentration by industry and region.

$ in millions

OTC derivative assets
Collateral (not netted under U.S. GAAP)
Net credit exposure

Industry
Consumer, Retail & Healthcare
Diversified Industrials
Financial Institutions
Funds
Municipalities & Nonprofit
Natural Resources & Utilities
Sovereign
Technology, Media & Telecommunications
Other (including Special Purpose Vehicles)
Total

Region
Americas
EMEA
Asia
Total

As of December

2019

2018

$ 43,011
(15,420)
$ 27,591

$ 40,576
(14,278)
$ 26,298

4%
7%
13%
11%
8%
15%
25%
9%
8%
100%

44%
48%
8%
100%

2%
8%
14%
17%
7%
13%
25%
7%
7%
100%

35%
55%
10%
100%

In the table above:
‰ OTC derivative assets,

included in the consolidated
balance sheets, are reported on a net-by-counterparty basis
(i.e., the net receivable for a given counterparty) when a
legal right of setoff exists under an enforceable netting
agreement (counterparty netting) and are accounted for at
fair value, net of cash collateral received under enforceable
credit support agreements (cash collateral netting).

collateral, primarily U.S.

‰ Collateral represents cash collateral and the fair value of
securities
and non-U.S.
government and agency obligations, received under credit
support agreements, that we consider when determining
credit risk, but such collateral is not eligible for netting
under U.S. GAAP.

The table below presents the distribution of our net credit
exposure from OTC derivatives by tenor.

$ in millions

As of December 2019
Less than 1 year
1 - 5 years
Greater than 5 years
Total
Netting
Net credit exposure

As of December 2018
Less than 1 year
1 - 5 years
Greater than 5 years
Total
Netting
Net credit exposure

Investment-
Grade

Non-Investment-
Grade / Unrated

Total

$ 18,764
18,674
60,190
97,628
(78,081)
$ 19,547

$ 15,697
21,300
51,737
88,734
(68,736)
$ 19,998

$ 4,247
6,879
5,896
17,022
(8,978)
$ 8,044

$ 5,427
4,091
4,191
13,709
(7,409)
$ 6,300

$ 23,011
25,553
66,086
114,650
(87,059)
$ 27,591

$ 21,124
25,391
55,928
102,443
(76,145)
$ 26,298

In the table above:
‰ Tenor is based on remaining contractual maturity.
‰ Netting includes counterparty netting across

tenor
categories and cash and securities collateral that we
risk (including
consider when determining credit
collateral that is not eligible for netting under U.S.
GAAP). Counterparty netting within the same tenor
category is included within such tenor category.

The tables below present the distribution of our net credit
exposure from OTC derivatives by tenor and internally
determined public rating agency equivalents.

$ in millions

AAA

BBB

Total

Investment-Grade

As of December 2019
Less than 1 year
1 - 5 years
Greater than 5 years
Total
Netting
Net credit exposure

As of December 2018
Less than 1 year
1 - 5 years
Greater than 5 years
Total
Netting
Net credit exposure

$ in millions

As of December 2019
Less than 1 year
1 - 5 years
Greater than 5 years
Total
Netting
Net credit exposure

As of December 2018
Less than 1 year
1 - 5 years
Greater than 5 years
Total
Netting
Net credit exposure

326 $ 2,022
3,196
669
5,770
12,381
10,988
13,376
(8,273)
(8,146)
$ 5,230 $ 2,715

$ 10,002 $ 6,414 $ 18,764
18,674
6,174
8,635
60,190
19,715
22,324
97,628
32,303
40,961
(35,932)
(78,081)
(25,730)
$ 5,029 $ 6,573 $ 19,547

881
9,202
11,345
(6,444)

$ 1,262 $ 2,506
5,192
3,028
10,726
(7,107)
$ 4,901 $ 3,619

9,072
21,415
36,960
(32,390)

$ 6,473 $ 5,456 $ 15,697
21,300
6,155
51,737
18,092
88,734
29,703
(68,736)
(22,795)
$ 4,570 $ 6,908 $ 19,998

Non-Investment-Grade / Unrated

BB or lower Unrated

Total

$ 3,964 $
6,772
5,835
16,571
(8,811)
$ 7,760 $

283 $ 4,247
6,879
107
5,896
61
17,022
451
(167)
(8,978)
284 $ 8,044

$ 5,255 $
4,053
4,138
13,446
(7,339)
$ 6,107 $

172 $ 5,427
4,091
38
4,191
53
13,709
263
(70)
(7,409)
193 $ 6,300

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

include

commercial

Lending. Our

Lending Activities. We manage our lending activities
using the credit risk process, measures, limits and risk
mitigants described above. Other
lending positions,
including secondary trading positions, are risk-managed as
a component of market risk.
‰ Commercial
lending
activities
lending to investment-grade and
non-investment-grade corporate borrowers. Loans and
lending commitments associated with these activities are
principally used for operating and general corporate
purposes or in connection with contingent acquisitions.
Corporate loans may be secured or unsecured, depending
on the loan purpose, the risk profile of the borrower and
other factors. Our commercial
lending activities also
include extending loans to borrowers that are secured by
commercial and other real estate.

The table below presents our credit exposure from
commercial
loans and lending commitments, and the
concentration by industry, region and credit quality.

$ in millions

As of December

2019

2018

Loans and Lending Commitments

$222,745

$200,823

Industry
Consumer, Retail & Healthcare
Diversified Industrials
Financial Institutions
Funds
Natural Resources & Utilities
Real Estate
Technology, Media & Telecommunications
Other (including Special Purpose Vehicles)
Total

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
AAA
AA
A
BBB
BB or lower
Total

19%
14%
8%
3%
17%
10%
16%
13%
100%

73%
22%
5%
100%

1%
5%
13%
27%
54%
100%

16%
16%
9%
4%
15%
10%
18%
12%
100%

76%
20%
4%
100%

1%
5%
14%
29%
51%
100%

‰ Wealth Management, Residential Real Estate and
Other Lending. We extend wealth management loans
and lending commitments through our private bank,
substantially all of which are secured by commercial and
residential real estate, securities or other assets. The fair
value of the collateral received against such loans and
lending commitments generally exceeds their carrying
value.

Goldman Sachs 2019 Form 10-K

We also have residential real estate and other lending
exposures, which include purchased residential real estate
and unsecured consumer loans and commitments to
purchase such loans (including distressed loans) and
securities.

The table below presents our credit exposure from
Wealth management, residential real estate and other
lending, and the concentration by region.

$ in millions

As of December 2019
Credit Exposure

Americas
EMEA
Asia
Total

As of December 2018
Credit Exposure

Americas
EMEA
Asia
Total

Wealth
Management

Residential Real
Estate and Other

$30,668

$10,885

89%
9%
2%
100%

74%
26%
–
100%

$26,775

$11,976

91%
7%
2%
100%

72%
27%
1%
100%

‰ Consumer and Credit Card Lending. We originate

unsecured consumer and credit card loans.

The table below presents our credit exposure from
originated
the
concentration by the five most concentrated U.S. states.

unsecured

consumer

loans

and

$ in millions

As of December 2019

Credit Exposure

California
Texas
New York
Florida
Illinois
Other
Total

As of December 2018
Credit Exposure

California
Texas
New York
Florida
Illinois
Other
Total

Consumer

$4,747

12%
9%
7%
7%
4%
61%
100%

$4,536

12%
9%
7%
7%
4%
61%
100%

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

The table below presents our credit exposure from
originated credit card loans and the concentration by
the five most concentrated U.S. states.

The table below presents our credit exposure from
securities financing transactions and the concentration by
industry, region and credit quality.

Credit Card

$ in millions

As of December

2019

2018

$ in millions

As of December 2019
Credit Exposure

California
Texas
New York
Florida
Illinois
Other
Total

$1,858

21%
9%
8%
8%
4%
50%
100%

See Note 9 to the consolidated financial statements for
further information about the credit quality indicators
of consumer loans.

Securities Financing Transactions. We enter
into
securities financing transactions in order to, among other
things, facilitate client activities, invest excess cash, acquire
securities to cover short positions and finance certain
activities. We bear credit risk related to resale agreements
and securities borrowed only to the extent that cash
advanced or the value of securities pledged or delivered to
the collateral
the counterparty exceeds the value of
received. We also have credit exposure on repurchase
agreements and securities loaned to the extent that the
value of securities pledged or delivered to the counterparty
for these transactions exceeds the amount of cash or
collateral
received. Securities collateral obtained for
securities financing transactions primarily includes U.S. and
non-U.S. government and agency obligations.

Securities Financing Transactions

$26,958

$20,979

Industry
Financial Institutions
Funds
Municipalities & Nonprofit
Sovereign
Other (including Special Purpose Vehicles)
Total

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
AAA
AA
A
BBB
BB or lower
Unrated
Total

37%
27%
5%
28%
3%
100%

38%
39%
23%
100%

15%
27%
39%
9%
6%
4%
100%

31%
33%
7%
28%
1%
100%

33%
41%
26%
100%

11%
34%
35%
10%
10%
–
100%

The table above reflects both netting agreements and
collateral that we consider when determining credit risk.

and

and
dealers

from brokers,

Other Credit Exposures. We are exposed to credit risk
from our receivables from brokers, dealers and clearing
counterparties.
customers
organizations
Receivables
clearing
and
organizations primarily consist of initial margin placed
with clearing organizations and receivables related to sales
of securities which have traded, but not yet settled. These
receivables generally have minimal credit risk due to the
low probability of clearing organization default and the
short-term nature of receivables related to securities
settlements. Receivables from customers and counterparties
generally consist of collateralized receivables related to
customer
transactions and generally have
minimal credit risk due to both the value of the collateral
received and the short-term nature of these receivables.

securities

Goldman Sachs 2019 Form 10-K

inflation and has

Significant depreciation of the Argentine Peso has resulted
in higher
raised concerns about
Argentina’s economic stability. As of December 2019, our
total credit exposure to Argentina was $132 million, which
was with non-sovereign counterparties or borrowers, and
was
related to loans and lending
commitments. In addition, our total market exposure to
Argentina was $180 million, primarily reflecting debt
exposure with sovereign issuers or underliers.

substantially all

financial

The potential restructuring of Lebanon’s sovereign debt has
led to concerns about
stability. As of
its
December 2019, our credit exposure to Lebanon was
$689 million, substantially all of which related to loans and
lending commitments with non-sovereign borrowers. After
taking into consideration the benefit of Lebanese sovereign
collateral
exposure was
$331 million. In addition, our total market exposure to
Lebanon as of December 2019 was $101 million, primarily
reflecting debt
exposure with sovereign issuers or
underliers.

received, our net

credit

political

Venezuela has delayed payments on its sovereign debt and
its
of
December 2019, our total credit and market exposure for
Venezuela was not material.

unclear. As

situation

remains

the

revenue,

We have a comprehensive framework to monitor, measure
and assess our country exposures and to determine our risk
appetite. We determine the country of risk by the location
of the counterparty, issuer or underlier’s assets, where they
generate
country in which they are
headquartered, the jurisdiction where a claim against them
could be enforced, and/or the government whose policies
affect their ability to repay their obligations. We monitor
our credit exposure to a specific country both at the
individual counterparty level, as well as at the aggregate
country level. See “Stress Tests” for information about
stress tests that are designed to estimate the direct and
indirect impact of events involving the above countries.

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

The table below presents our other credit exposures and the
concentration by industry, region and credit quality.

$ in millions

Other Credit Exposures

Industry
Financial Institutions
Funds
Natural Resources & Utilities
Other (including Special Purpose Vehicles)
Total

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
AAA
AA
A
BBB
BB or lower
Unrated
Total

As of December

2019

2018

$44,931

$41,649

86%
8%
1%
5%
100%

49%
41%
10%
100%

2%
56%
23%
7%
11%
1%
100%

84%
7%
4%
5%
100%

44%
46%
10%
100%

3%
47%
26%
8%
16%
–
100%

The table above reflects collateral that we consider when
determining credit risk.

Selected Exposures
We have credit and market exposures, as described below,
that have had heightened focus due to recent events and
broad market concerns. Credit exposure represents the
potential for loss due to the default or deterioration in
credit quality of a counterparty or borrower. Market
exposure represents the potential for loss in value of our
long and short positions due to changes in market prices.

High inflation in Turkey combined with current account
deficits and significant depreciation of the Turkish Lira has
led to concerns about
its economic stability. As of
December 2019, our total credit exposure to Turkey was
$2.10 billion, which was with non-sovereign counterparties
or borrowers. Such exposure consisted of $1.75 billion
related to OTC derivatives, $330 million related to loans
and lending commitments and $22 million related to
secured receivables. After taking into consideration the
benefit of Turkish corporate and sovereign collateral and
other risk mitigants provided by Turkish counterparties,
our net credit exposure was $434 million. In addition, our
total market exposure to Turkey as of December 2019 was
not material.

Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Operational Risk Management

Overview
Operational risk is the risk of an adverse outcome resulting
from inadequate or failed internal processes, people,
systems or
from external events. Our exposure to
operational risk arises from routine processing errors, as
well as extraordinary incidents, such as major systems
failures or legal and regulatory matters.

Potential types of loss events related to internal and external
operational risk include:
‰ Clients, products and business practices;
‰ Execution, delivery and process management;
‰ Business disruption and system failures;
‰ Employment practices and workplace safety;
‰ Damage to physical assets;
‰ Internal fraud; and
‰ External fraud.

Operational Risk, which is independent of our revenue-
producing units and reports to our chief risk officer, has
primary responsibility for developing and implementing a
formalized framework for assessing, monitoring and
managing operational risk with the goal of maintaining our
exposure to operational risk at levels that are within our
risk appetite.

Operational Risk Management Process
Our process for managing operational risk includes the
critical components of our risk management framework
described in the “Overview and Structure of Risk
Management,” including a comprehensive data collection
process, as well as firmwide policies and procedures, for
operational risk events.

We combine top-down and bottom-up approaches to
manage and measure operational risk. From a top-down
perspective, our senior management assesses firmwide and
business-level operational risk profiles. From a bottom-up
perspective, our first and second lines of defense are
responsible for risk identification and risk management on
a day-to-day basis, including escalating operational risks to
senior management.

We maintain a comprehensive control framework designed
to provide a well-controlled environment to minimize
operational risks. The Firmwide Conduct and Operational
Risk Committee is responsible for the ongoing approval
and monitoring of the frameworks, policies, parameters,
limits and thresholds which govern our operational risks.

Our operational risk management framework is in part
designed to comply with the operational risk measurement
rules under the Capital Framework and has evolved based
on the changing needs of our businesses and regulatory
guidance.

We have established policies that require all employees to
risk events. When
report and escalate operational
operational risk events are identified, our policies require
that the events be documented and analyzed to determine
whether changes are required in our systems and/or
processes to further mitigate the risk of future events.

We use operational risk management applications to
capture and organize operational risk event data and key
metrics. One of our key risk identification and assessment
tools is an operational risk and control self-assessment
process, which is performed by our managers. This process
consists of the identification and rating of operational risks,
on a forward-looking basis, and the related controls. The
from this process are analyzed to evaluate
results
operational
risk exposures and identify businesses,
activities or products with heightened levels of operational
risk.

Risk Measurement
We measure our operational risk exposure using both
statistical modeling and scenario analyses, which involve
qualitative and quantitative assessments of internal and
external operational risk event data and internal control
factors for each of our businesses. Operational risk
measurement also incorporates an assessment of business
environment factors, including:
‰ Evaluations of the complexity of our business activities;
‰ The degree of automation in our processes;
‰ New activity information;
‰ The legal and regulatory environment; and
‰ Changes in the markets for our products and services,
including the diversity and sophistication of our
customers and counterparties.

The results from these scenario analyses are used to
monitor changes in operational risk and to determine
business lines that may have heightened exposure to
operational
risk. These analyses are used in the
determination of the appropriate level of operational risk
capital to hold. We also perform firmwide stress tests. See
“Overview and Structure of Risk Management” for
information about firmwide stress tests.

Goldman Sachs 2019 Form 10-K

Third-Party Risk. Third-party risk, including vendor risk,
is the risk of an adverse impact due to reliance on third
parties performing services or activities on our behalf.
information
These risks may include legal, regulatory,
security, reputational, operational or any other risks
inherent in engaging a third party. We identify, manage and
report key third-party risks and conduct due diligence
including information
across multiple risk domains,
security and cyber security, resilience and additional third-
party dependencies. The Third-Party Risk Program
monitors, reviews and reassesses third-party risks on an
ongoing basis. See “Risk Factors” in Part I, Item 1A of this
Form 10-K for further information about third-party risk.

Business Resilience Risk. Business resilience risk is the
risk of disruption to our critical processes. We monitor
threats and assess risks and seek to ensure our state of
readiness in the event of a significant operational disruption
to the normal operations of our critical functions or their
dependencies, such as, critical facilities, systems, third
parties, data and/or personnel. We approach business
continuity planning (BCP) through the lens of business and
operational resilience. The resilience framework defines the
fundamental principles for BCP and crisis management to
ensure that critical functions can continue to operate in the
event of a disruption. The business continuity program is
and up-to-date,
comprehensive,
incorporating
and
techniques
technologies as and when they become available, and our
resilience recovery plans incorporate and test specific and
measurable recovery time objectives in accordance with
local market best practices and regulatory requirements,
and under specific scenarios. See “Business — Business
Continuity and Information Security” in Part I, Item 1 of
this Form 10-K for further information about business
continuity.

consistent
new information,

firmwide

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Types of Operational Risks
Increased
third-party
reliance
relationships has resulted in increased operational risks,
such as information and cyber security risk, third-party risk
and business resilience risk. We manage those risks as
follows:

technology

and

Information and Cyber Security Risk. Information and
cyber security risk is the risk of compromising the
confidentiality, integrity or availability of our data and
systems, leading to an adverse impact to us, our reputation,
our clients and/or the broader financial system. We seek to
minimize the occurrence and impact of unauthorized
access, disruption or use of information and/or information
systems. We deploy and operate preventive and detective
controls and processes to mitigate emerging and evolving
information security and cyber security threats, including
monitoring our network for known vulnerabilities and
signs of unauthorized attempts to access our data and
systems. There is increased information risk through
diversification of our data across external service providers,
including use of a variety of cloud-provided or -hosted
services and applications. See “Risk Factors” in Part I,
Item 1A of this Form 10-K for further information about
information and cyber security risk.

100 Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Management’s Discussion and Analysis

I N C . A N D S U B S I D I A R I E S

Model Risk Management

Overview
Model risk is the potential for adverse consequences from
decisions made based on model outputs that may be
incorrect or used inappropriately. We rely on quantitative
models across our business activities primarily to value
certain financial assets and liabilities, to monitor and
manage our risk, and to measure and monitor our
regulatory capital.

independent of our

Model Risk, which is
revenue-
producing units, model developers, model owners and
model users, and reports to our chief risk officer, has
primary responsibility for assessing, monitoring and
managing our model risk through firmwide oversight
across our global businesses, and provides periodic updates
to senior management, risk committees and the Risk
Committee of the Board.

Our model risk management
framework is managed
through a governance structure and risk management
controls, which encompass standards designed to ensure we
maintain a comprehensive model inventory, including risk
assessment and classification, sound model development
practices,
independent review and model-specific usage
controls. The Firmwide Model Risk Control Committee
oversees our model risk management framework.

Model Review and Validation Process
Model Risk consists of quantitative professionals who
perform an independent review, validation and approval of
our models. This review includes an analysis of the model
documentation, independent testing, an assessment of the
appropriateness of the methodology used, and verification
of
and
implementation standards.

compliance with model

development

We regularly refine and enhance our models to reflect
changes in market or economic conditions and our business
mix. All models are reviewed on an annual basis, and new
models or significant changes to existing models and their
assumptions are approved prior to implementation.

The model validation process incorporates a review of
models and trade and risk parameters across a broad range
of scenarios (including extreme conditions) in order to
critically evaluate and verify:
‰ The model’s

including the
reasonableness of model assumptions, and suitability for
intended use;

soundness,

conceptual

‰ The testing strategy utilized by the model developers to

ensure that the models function as intended;

‰ The suitability of the calculation techniques incorporated

in the model;

‰ The model’s accuracy in reflecting the characteristics of

the related product and its significant risks;
‰ The model’s consistency with models

for

similar

products; and
‰ The model’s
assumptions.

sensitivity to input parameters and

See “Critical Accounting Policies — Fair Value — Review
of Valuation Models,” “Liquidity Risk Management,”
“Market Risk Management,” “Credit Risk Management”
and “Operational Risk Management” for
further
information about our use of models within these areas.

Goldman Sachs 2019 Form 10-K 101

Our internal control over financial reporting includes
policies and procedures that pertain to the maintenance of
records that, in reasonable detail, accurately and fairly
reflect transactions and dispositions of assets; provide
reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with U.S. generally accepted accounting
principles, and that receipts and expenditures are being
in accordance with authorizations of
made only
management and the directors of the firm; and provide
reasonable assurance regarding prevention or
timely
detection of unauthorized acquisition, use or disposition of
the firm’s assets that could have a material effect on our
financial statements.

31,

has

2019

The firm’s internal control over financial reporting as of
December
by
PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated in their report appearing
on pages 103 and 104, which expresses an unqualified
opinion on the effectiveness of the firm’s internal control
over financial reporting as of December 31, 2019.

audited

been

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

Item 7A. Quantitative and Qualitative
Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk
are set forth in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Risk
Management” in Part II, Item 7 of this Form 10-K.

Item 8. Financial Statements and
Supplementary Data
Management’s Report on Internal Control
over Financial Reporting

reporting is a process designed under

Management of The Goldman Sachs Group, Inc., together
with its consolidated subsidiaries (the firm), is responsible
for establishing and maintaining adequate internal control
over financial reporting. The firm’s internal control over
financial
the
supervision of the firm’s principal executive and principal
financial officers to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
the firm’s financial statements for external reporting
purposes in accordance with U.S. generally accepted
accounting principles.

As of December 31, 2019, management conducted an
assessment of the firm’s internal control over financial
reporting based on the framework established in Internal
Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway
Commission
assessment,
management has determined that the firm’s internal control
over financial reporting as of December 31, 2019 was
effective.

(COSO). Based

this

102 Goldman Sachs 2019 Form 10-K

Report of Independent Registered Public
Accounting Firm

To the Board of Directors and the Shareholders of The
Goldman Sachs Group, Inc.:

Opinions on the Financial Statements and Internal
Control over Financial Reporting
We have audited the accompanying consolidated balance sheets
of The Goldman Sachs Group, Inc. and its subsidiaries (the
Company) as of December 31, 2019 and 2018, and the related
consolidated statements of earnings, comprehensive income,
changes in shareholders’ equity and cash flows for each of the
three years in the period ended December 31, 2019, including the
related notes (collectively referred to as the “consolidated
financial statements”). We also have audited the Company’s
internal control over financial reporting as of December 31, 2019,
based on criteria established in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of the Company as of December 31, 2019 and 2018, and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 2019 in conformity with
accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2019, based on criteria established
in Internal Control — Integrated Framework (2013) issued by
the COSO.

for

responsible

Basis for Opinions
these
The Company’s management
consolidated financial statements,
for maintaining effective
internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting,
included in Management’s Report on Internal Control over
Financial Reporting appearing on page 102. Our responsibility is
to express opinions on the Company’s consolidated financial
statements and on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the
consolidated financial
free of material
misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained
in all material respects.

statements are

Internal Control over

Our audits of the consolidated financial statements included
performing procedures
the risks of material
to assess
misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures
in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit
of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
Definition and Limitations of
Financial Reporting
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters
arising from the current period audit of the consolidated financial
required to be
statements
communicated to the audit committee and that (i) relate to
accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging,
subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are
not, by communicating the critical audit matters below, providing
separate opinions on the critical audit matters or on the accounts
or disclosures to which they relate.

that were communicated or

Goldman Sachs 2019 Form 10-K 103

Report of Independent Registered Public
Accounting Firm

statements,

the Company carries

Valuation of Certain Level 3 Financial Instruments
As described in Notes 4 through 10 to the consolidated
financial
financial
instruments at fair value, which includes $23.1 billion of
financial assets and $25.9 billion of financial liabilities
classified in Level 3 of the fair value hierarchy as one or
more inputs
instrument’s valuation
technique are significant and unobservable. Significant
unobservable inputs used by management to value certain
of these Level 3 financial instruments included (i) industry
multiples and public comparables, (ii) credit spreads and
(iii) correlation.

to the financial

The principal considerations for our determination that
performing procedures relating to the valuation of certain
Level 3 financial instruments is a critical audit matter are
(i) the valuation of these certain financial
instruments
involved the application of significant judgment on the part
of management, which in turn led to a high degree of
auditor subjectivity in performing procedures related to the
valuation of these financial instruments, (ii) a high degree of
auditor judgment and effort to evaluate the audit evidence
obtained related to the
aforementioned significant
unobservable inputs used for these certain Level 3 financial
instruments, and (iii) the involvement of professionals with
specialized skill and knowledge to assist in evaluating the
audit evidence obtained related to the valuation of these
financial instruments.

Addressing the matter involved performing procedures and
evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements.
These procedures included testing the effectiveness of
controls relating to the valuation of
these financial
including controls over the methods and
instruments,
significant unobservable inputs used in the valuation of
these financial instruments. These procedures also included,
among others, for a sample of financial instruments, the
involvement of professionals with specialized skill and
knowledge to assist in developing an independent estimate
of fair value or testing management’s process to determine
the fair value of these financial instruments. Developing the
independent estimate involved testing the completeness and
accuracy of data provided by management, developing
independent
and
comparing management’s estimate to the independently
developed estimate of fair value. Testing management’s
process included evaluating the reasonableness of
the
aforementioned significant unobservable inputs, evaluating
the appropriateness of the methods used, and testing the
and accuracy of data provided by
completeness
management
these
to determine
instruments.

fair value of

unobservable

significant

inputs,

the

104 Goldman Sachs 2019 Form 10-K

Provision for Losses That May Arise from Litigation and
Regulatory Proceedings related to 1Malaysia Development
Berhad
As described in Note 27 to the consolidated financial
statements, the Company has received subpoenas and requests
for documents and information from various governmental
and regulatory bodies and self-regulatory organizations as part
of investigations and reviews relating to financing transactions
and other matters involving 1Malaysia Development Berhad
(1MDB), a sovereign wealth fund in Malaysia. Management
estimates and provides for potential losses that may arise out
of litigation and regulatory proceedings to the extent that such
losses are probable and can be reasonably estimated. The
Company’s total estimated liability in respect of litigation and
regulatory proceedings is determined on a case-by-case basis
and represents an estimate of probable losses after considering,
among other factors, the progress of each case, proceeding or
investigation, management’s experience and the experience of
others in similar cases, proceedings or investigations, and the
opinions and views of legal counsel. In addition, management
includes disclosures relating to the actions, proceedings and
inquiries related to 1MDB.

The principal considerations for our determination that
performing procedures relating to the provision for losses that
may arise from litigation and regulatory proceedings related to
1MDB is a critical audit matter are the significant judgment on
the part of management when assessing the likelihood of a loss
being incurred and in determining a reasonable estimate of the
loss, which in turn led to a high degree of auditor judgment,
subjectivity, and effort in evaluating management’s assessment
of the provision for losses and related disclosures.

relating to management’s estimation of

Addressing the matter involved performing procedures and
evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements.
These procedures included testing the effectiveness of
controls
the
provision for losses that may arise from litigation and
regulatory proceedings, including controls over determining
whether a loss is probable and whether the amount of loss
can be reasonably estimated, as well as controls over the
related financial statement disclosures. These procedures also
included, among others, obtaining and evaluating the letters
of audit inquiry with internal and external legal counsel,
evaluating the reasonableness of management’s assessment
regarding whether an unfavorable outcome is reasonably
possible or probable and reasonably estimable, and
evaluating the sufficiency of the Company’s litigation and
regulatory proceedings disclosures.

/s/ PRICEWATERHOUSECOOPERS LLP

New York, New York
February 20, 2020

We have served as the Company’s auditor since 1922.

T H E G O L D M A N S A C H S G R O U P ,
Consolidated Statements of Earnings

I N C . A N D S U B S I D I A R I E S

in millions, except per share amounts

Revenues
Investment banking
Investment management
Commissions and fees
Market making
Other principal transactions
Total non-interest revenues

Interest income
Interest expense
Net interest income
Total net revenues

Provision for credit losses

Operating expenses
Compensation and benefits
Brokerage, clearing, exchange and distribution fees
Market development
Communications and technology
Depreciation and amortization
Occupancy
Professional fees
Other expenses
Total operating expenses

Pre-tax earnings
Provision for taxes
Net earnings
Preferred stock dividends
Net earnings applicable to common shareholders

Earnings per common share
Basic
Diluted

Average common shares
Basic
Diluted

Consolidated Statements of Comprehensive Income

$ in millions

Net earnings
Other comprehensive income/(loss) adjustments, net of tax:

Currency translation
Debt valuation adjustment
Pension and postretirement liabilities
Available-for-sale securities

Other comprehensive income/(loss)
Comprehensive income

Year Ended December

2019

2018

2017

$ 6,798
6,189
2,988
10,157
6,052
32,184

21,738
17,376
4,362
36,546

$ 7,430
6,590
3,199
9,724
5,906
32,849

19,679
15,912
3,767
36,616

$ 7,076
5,867
3,051
7,853
5,951
29,798

13,113
10,181
2,932
32,730

1,065

674

657

12,353
3,252
739
1,167
1,704
1,029
1,316
3,338
24,898

10,583
2,117
8,466
569
$ 7,897

12,328
3,200
740
1,023
1,328
809
1,214
2,819
23,461

12,481
2,022
10,459
599
$ 9,860

11,653
2,876
588
897
1,152
733
1,165
1,877
20,941

11,132
6,846
4,286
601
$ 3,685

$ 21.18
$ 21.03

$ 25.53
$ 25.27

$
$

9.12
9.01

371.6
375.5

385.4
390.2

401.6
409.1

Year Ended December

2019

2018

2017

$ 8,466

$10,459

$ 4,286

5
(2,079)
(261)
158
(2,177)
$ 6,289

4
2,553
119
(103)
2,573
$13,032

22
(807)
130
(9)
(664)
$ 3,622

The accompanying notes are an integral part of these consolidated financial statements.

Goldman Sachs 2019 Form 10-K 105

T H E G O L D M A N S A C H S G R O U P ,
Consolidated Balance Sheets

I N C . A N D S U B S I D I A R I E S

$ in millions

Assets
Cash and cash equivalents
Collateralized agreements:

Securities purchased under agreements to resell (includes $85,691 and $139,220 at fair value)
Securities borrowed (includes $26,279 and $23,142 at fair value)
Customer and other receivables (includes $53 and $160 at fair value)
Trading assets (at fair value and includes $66,605 and $47,371 pledged as collateral)
Investments (includes $57,827 and $45,579 at fair value, and $10,968 and $7,710 pledged as collateral)
Loans (includes $14,386 and $13,416 at fair value)
Other assets
Total assets

Liabilities and shareholders’ equity
Deposits (includes $17,765 and $21,060 at fair value)
Collateralized financings:

Securities sold under agreements to repurchase (at fair value)
Securities loaned (includes $714 and $3,241 at fair value)
Other secured financings (includes $18,071 and $20,904 at fair value)

Customer and other payables
Trading liabilities (at fair value)
Unsecured short-term borrowings (includes $26,007 and $16,963 at fair value)
Unsecured long-term borrowings (includes $43,661 and $46,584 at fair value)
Other liabilities (includes $150 and $132 at fair value)
Total liabilities

Commitments, contingencies and guarantees

As of December

2019

2018

$133,546

$130,547

85,691
136,071
74,605
355,332
63,937
108,904
34,882
$992,968

139,258
135,285
72,455
280,195
47,224
97,837
28,995
$931,796

$190,019

$158,257

117,756
14,985
19,277
174,817
108,835
48,287
207,076
21,651
902,703

78,723
11,808
21,433
180,235
108,897
40,502
224,149
17,607
841,611

Shareholders’ equity
Preferred stock; aggregate liquidation preference of $11,203 and $11,203
Common stock; 896,782,650 and 891,356,284 shares issued, and 347,343,184 and 367,741,973 shares outstanding
Share-based awards
Nonvoting common stock; no shares issued and outstanding
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income/(loss)
Stock held in treasury, at cost; 549,439,468 and 523,614,313 shares
Total shareholders’ equity
Total liabilities and shareholders’ equity

11,203
9
3,195
–
54,883
106,465
(1,484)
(84,006)
90,265
$992,968

11,203
9
2,845
–
54,005
100,100
693
(78,670)
90,185
$931,796

The accompanying notes are an integral part of these consolidated financial statements.

106 Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Consolidated Statements of Changes in Shareholders’ Equity

I N C . A N D S U B S I D I A R I E S

$ in millions

Preferred stock
Beginning balance
Issued
Redeemed
Ending balance
Common stock
Beginning balance
Issued
Ending balance
Share-based awards
Beginning balance, as previously reported
Cumulative effect of change in accounting principle for forfeiture of share-based awards
Beginning balance, adjusted
Issuance and amortization of share-based awards
Delivery of common stock underlying share-based awards
Forfeiture of share-based awards
Exercise of share-based awards
Ending balance
Additional paid-in capital
Beginning balance
Delivery of common stock underlying share-based awards
Cancellation of share-based awards in satisfaction of withholding tax requirements
Preferred stock issuance costs, net of reversals upon redemption
Cash settlement of share-based awards
Ending balance
Retained earnings
Beginning balance, as previously reported
Cumulative effect of change in accounting principle for:

Leases, net of tax
Revenue recognition from contracts with clients, net of tax
Forfeiture of share-based awards, net of tax

Beginning balance, adjusted
Net earnings
Dividends and dividend equivalents declared on common stock and share-based awards
Dividends declared on preferred stock
Preferred stock redemption premium
Ending balance
Accumulated other comprehensive income/(loss)
Beginning balance
Other comprehensive income/(loss)
Ending balance
Stock held in treasury, at cost
Beginning balance
Repurchased
Reissued
Other
Ending balance
Total shareholders’ equity

Year Ended December

2019

2018

2017

$ 11,203
1,100
(1,100)
11,203

$ 11,853
–
(650)
11,203

$ 11,203
1,500
(850)
11,853

9
–
9

2,845
–
2,845
2,073
(1,623)
(100)
–
3,195

54,005
1,617
(743)
4
–
54,883

9
–
9

2,777
–
2,777
1,355
(1,175)
(80)
(32)
2,845

53,357
1,751
(1,118)
15
–
54,005

9
–
9

3,914
35
3,949
1,810
(2,704)
(89)
(189)
2,777

52,638
2,934
(2,220)
8
(3)
53,357

100,100

91,519

89,039

12
–
–
100,112
8,466
(1,544)
(560)
(9)
106,465

693
(2,177)
(1,484)

–
(53)
–
91,466
10,459
(1,226)
(584)
(15)
100,100

(1,880)
2,573
693

–
–
(24)
89,015
4,286
(1,181)
(587)
(14)
91,519

(1,216)
(664)
(1,880)

(78,670)
(5,335)
12
(13)
(84,006)
$ 90,265

(75,392)
(3,294)
21
(5)
(78,670)
$ 90,185

(68,694)
(6,721)
34
(11)
(75,392)
$ 82,243

The accompanying notes are an integral part of these consolidated financial statements.

Goldman Sachs 2019 Form 10-K 107

T H E G O L D M A N S A C H S G R O U P ,
Consolidated Statements of Cash Flows

I N C . A N D S U B S I D I A R I E S

$ in millions

Cash flows from operating activities
Net earnings
Adjustments to reconcile net earnings to net cash provided by/(used for) operating activities:

Depreciation and amortization
Deferred income taxes
Share-based compensation
Gain related to extinguishment of unsecured borrowings
Provision for credit losses

Changes in operating assets and liabilities:

Customer and other receivables and payables, net
Collateralized transactions (excluding other secured financings), net
Trading assets
Trading liabilities
Loans held for sale, net
Other, net

Net cash provided by/(used for) operating activities
Cash flows from investing activities
Purchase of property, leasehold improvements and equipment
Proceeds from sales of property, leasehold improvements and equipment
Net cash used for business acquisitions
Purchase of investments
Proceeds from sales and paydowns of investments
Loans, net (excluding loans held for sale)
Net cash used for investing activities
Cash flows from financing activities
Unsecured short-term borrowings, net
Other secured financings (short-term), net
Proceeds from issuance of other secured financings (long-term)
Repayment of other secured financings (long-term), including the current portion
Purchase of Trust Preferred securities
Proceeds from issuance of unsecured long-term borrowings
Repayment of unsecured long-term borrowings, including the current portion
Derivative contracts with a financing element, net
Deposits, net
Preferred stock redemption
Common stock repurchased
Settlement of share-based awards in satisfaction of withholding tax requirements
Dividends and dividend equivalents paid on common stock, preferred stock and share-based awards
Proceeds from issuance of preferred stock, net of issuance costs
Proceeds from issuance of common stock, including exercise of share-based awards
Cash settlement of share-based awards
Other financing, net
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents, beginning balance
Cash and cash equivalents, ending balance

Supplemental disclosures:
Cash payments for interest, net of capitalized interest
Cash payments for income taxes, net

See Notes 12, 14 and 16 for information about non-cash activities.

Year Ended December

2019

2018

2017

8,466

$ 10,459

4,286

1,704
(334)
2,018
(20)
1,065

(7,693)
94,991
(68,682)
(231)
(1,458)
(5,958)
23,868

(8,443)
6,632
(803)
(29,773)
17,812
(9,661)
(24,236)

14
(2,050)
7,257
(7,468)
(206)
22,381
(43,936)
3,952
31,214
(1,100)
(5,335)
(745)
(2,104)
1,098
–
–
395
3,367
2,999
130,547
$133,546

1,328
(2,645)
1,831
(160)
674

6,416
28,147
(23,652)
(3,670)
442
(2,606)
16,564

(7,982)
3,711
(162)
(9,418)
8,095
(13,064)
(18,820)

2,337
586
4,996
(9,482)
(35)
45,927
(37,243)
2,294
20,206
(650)
(3,294)
(1,118)
(1,810)
–
38
–
–
22,752
20,496
110,051
$130,547

1,152
5,458
1,769
(114)
657

(26,981)
10,025
(9,586)
(5,296)
(2,385)
526
(20,489)

(3,184)
574
(2,383)
(17,381)
13,031
(17,034)
(26,377)

(501)
(405)
7,401
(4,726)
(237)
58,347
(30,748)
1,684
14,506
(850)
(6,772)
(2,223)
(1,769)
1,495
7
(3)
–
35,206
(11,660)
121,711
$110,051

$ 18,645
1,266
$

$ 16,721
1,271
$

$ 11,174
1,425
$

The accompanying notes are an integral part of these consolidated financial statements.

108 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 1.
Description of Business

investment banking,

The Goldman Sachs Group, Inc. (Group Inc. or parent
together with its
company), a Delaware corporation,
consolidated subsidiaries (collectively, the firm), is a leading
global
securities and investment
management firm that provides a wide range of financial
services to a substantial and diversified client base that
includes corporations, financial institutions, governments
and individuals. Founded in 1869,
firm is
headquartered in New York and maintains offices in all
major financial centers around the world.

the

Commencing with the fourth quarter of 2019, the firm
began reporting its activities in the following four business
segments consistent with how the firm’s activities are now
Investment Banking, Global Markets, Asset
managed:
Management, and Consumer & Wealth Management.
Prior periods are presented on a comparable basis.

Investment Banking
The firm provides a broad range of investment banking
services
financial
to a diverse group of corporations,
institutions,
investment funds and governments. Services
include strategic advisory assignments with respect to mergers
and acquisitions, divestitures, corporate defense activities,
restructurings and spin-offs, and equity and debt underwriting
of public offerings and private placements. The firm also
provides lending to corporate clients, including middle-market
lending, relationship lending and acquisition financing.

Global Markets
The firm facilitates client transactions and makes markets
in fixed income, equity, currency and commodity products
with institutional clients, such as corporations, financial
institutions, investment funds and governments. The firm
also makes markets in and clears institutional client
transactions on major stock, options and futures exchanges
worldwide and provides prime brokerage and other equities
financing activities,
including securities lending, margin
lending and swaps. The firm also provides financing to
clients through repurchase agreements, as well as through
structured credit, warehouse and asset-backed lending.

Asset Management
The firm manages assets and offers investment products
(primarily through separately managed accounts and
commingled vehicles, such as mutual funds and private
investment funds) across all major asset classes to a diverse
set of institutional clients and a network of third-party
distributors around the world. The firm makes equity
investments, which includes alternative investing activities
related to public and private equity investments in corporate,
real estate and infrastructure entities, as well as investments
through consolidated investment entities, substantially all of
which are engaged in real estate investment activities.

The firm also provides financing related to its asset
management businesses,
including investments in debt
securities and loans backed by real estate.

Consumer & Wealth Management
The firm provides investing and wealth advisory solutions,
including financial planning and counseling, executing
brokerage transactions and managing assets for individuals
in its wealth management business. The firm also provides
loans and accepts deposits through its consumer banking
digital platform, Marcus by Goldman Sachs, and through
its private bank, as well as issues credit cards to consumers.

Note 2.
Basis of Presentation

These consolidated financial statements are prepared in
accordance with accounting principles generally accepted in
the United States (U.S. GAAP) and include the accounts of
Group Inc. and all other entities in which the firm has a
controlling financial
interest. Intercompany transactions
and balances have been eliminated.

All references to 2019, 2018 and 2017 refer to the firm’s
the dates, as the context requires,
years ended, or
and
2019, December
December
December 31, 2017, respectively. Any reference to a future
year refers to a year ending on December 31 of that year.

2018

31,

include

the financial

Beginning in the fourth quarter of 2019 and concurrent
with the changes to business segments, the firm changed its
balance sheet presentation to better reflect the nature of the
firm’s activities. The primary changes
the
elimination of
instruments owned and
financial instruments sold, but not yet purchased line items,
the introduction of new line items for trading assets, trading
liabilities and investments, and the inclusion of all non-
trading loans in the loans line item, reclassifying the related
Investments and loans
cash flows, where applicable.
generally include positions held for longer-term purposes,
while trading assets and liabilities generally include
positions held for market-making or risk management
In addition, revenues from transactions in
activities.
derivatives related to client advisory and underwriting
assignments, previously reported in investment banking,
are now reported in market making within the consolidated
statements of earnings.

Reclassifications have been made to previously reported
amounts to conform to the current presentation.

Goldman Sachs 2019 Form 10-K 109

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 3.
Significant Accounting Policies

The firm’s significant accounting policies include when and
how to measure the fair value of assets and liabilities,
measuring the allowance for credit losses on loans and
lending commitments accounted for at amortized cost, and
when to consolidate an entity. See Note 4 for policies on
fair value measurements, Note 9 for policies on the
allowance for credit losses, and below and Note 17 for
policies on consolidation accounting. All other significant
accounting policies are either described below or included
in the following footnotes:

Fair Value Measurements

Trading Assets and Liabilities

Trading Cash Instruments

Derivatives and Hedging Activities

Investments

Loans

Fair Value Option

Collateralized Agreements and Financings

Other Assets

Deposits

Unsecured Borrowings

Other Liabilities

Securitization Activities

Variable Interest Entities

Note 4

Note 5

Note 6

Note 7

Note 8

Note 9

Note 10

Note 11

Note 12

Note 13

Note 14

Note 15

Note 16

Note 17

Commitments, Contingencies and Guarantees Note 18

Shareholders’ Equity

Regulation and Capital Adequacy

Earnings Per Common Share

Transactions with Affiliated Funds

Interest Income and Interest Expense

Income Taxes

Business Segments

Credit Concentrations

Legal Proceedings

Employee Benefit Plans

Employee Incentive Plans

Parent Company

110 Goldman Sachs 2019 Form 10-K

Note 19

Note 20

Note 21

Note 22

Note 23

Note 24

Note 25

Note 26

Note 27

Note 28

Note 29

Note 30

Consolidation
The firm consolidates entities in which the firm has a
controlling financial interest. The firm determines whether
it has a controlling financial interest in an entity by first
evaluating whether the entity is a voting interest entity or a
variable interest entity (VIE).

Voting Interest Entities. Voting interest entities are
entities in which (i) the total equity investment at risk is
sufficient to enable the entity to finance its activities
independently and (ii) the equity holders have the power to
direct the activities of the entity that most significantly
impact its economic performance, the obligation to absorb
the losses of the entity and the right to receive the residual
returns of the entity. The usual condition for a controlling
financial interest in a voting interest entity is ownership of a
majority voting interest. If the firm has a controlling
majority voting interest in a voting interest entity, the entity
is consolidated.

Variable Interest Entities. A VIE is an entity that lacks
one or more of the characteristics of a voting interest entity.
The firm has a controlling financial interest in a VIE when
the firm has a variable interest or interests that provide it
with (i) the power to direct the activities of the VIE that
most significantly impact the VIE’s economic performance
and (ii) the obligation to absorb losses of the VIE or the
right to receive benefits from the VIE that could potentially
be significant
to the VIE. See Note 17 for further
information about VIEs.

Equity-Method Investments. When the firm does not
have a controlling financial interest in an entity but can
exert significant influence over the entity’s operating and
financial policies, the investment is generally accounted for
at fair value by electing the fair value option available under
U.S. GAAP. Significant influence generally exists when the
firm owns 20% to 50% of the entity’s common stock or
in-substance common stock.

In certain cases, the firm applies the equity method of
accounting to new investments that are strategic in nature
or closely related to the firm’s principal business activities,
when the firm has a significant degree of involvement in the
cash flows or operations of the investee or when cost-
benefit considerations are less significant. See Note 8 for
further information about equity-method investments.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Investment Funds. The firm has formed investment funds
with third-party investors. These funds are typically
organized as limited partnerships or limited liability
companies for which the firm acts as general partner or
manager. Generally, the firm does not hold a majority of
the economic interests in these funds. These funds are
usually voting interest entities and generally are not
consolidated because third-party investors typically have
rights to terminate the funds or to remove the firm as
general partner or manager. Investments in these funds are
generally measured at net asset value (NAV) and are
included in investments. See Notes 8, 18 and 22 for further
information about investments in funds.

Use of Estimates
these consolidated financial statements
Preparation of
requires management
to make certain estimates and
assumptions, the most important of which relate to fair
value measurements, the allowance for credit losses on
loans and lending commitments accounted for at amortized
cost, accounting for goodwill and identifiable intangible
assets, provisions for losses that may arise from litigation
and regulatory proceedings
(including governmental
investigations), and provisions for losses that may arise
from tax audits. These estimates and assumptions are based
on the best available information but actual results could be
materially different.

Revenue Recognition
Financial Assets and Liabilities at Fair Value. Trading
assets and liabilities and certain investments are recorded at
fair value either under the fair value option or in accordance
with other U.S. GAAP. In addition, the firm has elected to
account for certain of its loans and other financial assets
and liabilities at fair value by electing the fair value option.
The fair value of a financial instrument is the amount that
would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market
participants at the measurement date. Financial assets are
marked to bid prices and financial liabilities are marked to
offer prices. Fair value measurements do not include
transaction costs. Fair value gains or losses are generally
included in market making or other principal transactions.
See Note 4 for further information about
fair value
measurements.

such

Revenue from Contracts with Clients. The firm
accounts for revenue earned from contracts with clients for
services,
investment
investment
management, and execution and clearing (contracts with
from
clients), under ASU No. 2014-09, “Revenue
Contracts with Customers (Topic 606).” As such, revenues
for these services are recognized when the performance
obligations related to the underlying transaction are
completed.

banking,

Revenues from contracts with clients subject to this ASU
represent approximately 45% of total non-interest revenues
investment
for 2019 (including approximately 85% of
banking revenues, approximately 95% of
investment
management revenues and all commissions and fees), and
approximately 50% of total non-interest revenues for 2018
(including approximately 85% of
investment banking
revenues, approximately 95% of investment management
revenues and all commissions and fees for 2018). Net interest
income is not subject to this ASU. See Note 25 for information
about net revenues by business segment.

Investment Banking
Advisory. Fees from financial advisory assignments are
recognized in revenues when the services related to the
underlying transaction are completed under the terms of the
assignment. Non-refundable deposits and milestone payments
in connection with financial advisory assignments are
recognized in revenues upon completion of the underlying
transaction or when the assignment is otherwise concluded.

Expenses associated with financial advisory assignments
are recognized when incurred and are included in other
expenses. Client reimbursements for such expenses are
included in investment banking revenues.

Underwriting. Fees from underwriting assignments are
recognized in revenues upon completion of the underlying
transaction based on the terms of the assignment.

Expenses associated with underwriting assignments are
generally deferred until the related revenue is recognized or
the assignment is otherwise concluded. Such expenses are
included in other expenses.

Investment Management
The firm earns management fees and incentive fees for
investment management services, which are included in
investment management revenues. The firm makes payments
to brokers and advisors related to the placement of the firm’s
investment funds (distribution fees), which are included in
brokerage, clearing, exchange and distribution fees.

Management Fees. Management fees for mutual funds are
calculated as a percentage of daily net asset value and are
received monthly. Management fees for hedge funds and
separately managed accounts are calculated as a percentage
of month-end net asset value and are generally received
quarterly. Management fees for private equity funds are
calculated as a percentage of monthly invested capital or
committed capital and are received quarterly, semi-annually
or annually, depending on the fund. Management fees are
recognized over time in the period the services are provided.

Distribution fees paid by the firm are calculated based on either
a percentage of the management fee, the investment fund’s net
asset value or the committed capital. Such fees are included in
brokerage, clearing, exchange and distribution fees.

Goldman Sachs 2019 Form 10-K 111

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Incentive Fees.
Incentive fees are calculated as a
percentage of a fund’s or separately managed account’s
return, or excess return above a specified benchmark or
other performance target. Incentive fees are generally based
on investment performance over a twelve-month period or
over the life of a fund. Fees that are based on performance
over a twelve-month period are subject to adjustment prior
to the end of the measurement period. For fees that are
based on investment performance over the life of the fund,
future investment underperformance may require fees
previously distributed to the firm to be returned to the fund.

Incentive fees earned from a fund or separately managed
account are recognized when it is probable that a significant
reversal of such fees will not occur, which is generally when
such fees are no longer subject to fluctuations in the market
value of
investments held by the fund or separately
incentive fees recognized
managed account. Therefore,
during the period may relate to performance obligations
satisfied in previous periods.

Commissions and Fees
The firm earns commissions and fees from executing and
clearing client transactions on stock, options and futures
markets, as well as over-the-counter (OTC) transactions.
Commissions and fees are recognized on the day the trade is
executed. The firm also provides third-party research
services to clients in connection with certain soft-dollar
arrangements. Third-party research costs incurred by the
firm in connection with such arrangements are presented
net within commissions and fees.

associated with

Remaining Performance Obligations
Remaining performance obligations are services that the firm
has committed to perform in the future in connection with its
contracts with clients. The firm’s remaining performance
obligations are generally related to its financial advisory
assignments and certain investment management activities.
performance
Revenues
obligations relating to financial advisory assignments cannot
be determined until the outcome of the transaction. For the
firm’s investment management activities, where fees are
calculated based on the net asset value of the fund or
separately managed account, future revenues associated with
such remaining performance obligations
cannot be
determined as such fees are subject to fluctuations in the
market value of investments held by the fund or separately
managed account.

remaining

The firm is able to determine the future revenues associated
with management fees calculated based on committed
capital. As of December 2019, substantially all future net
revenues associated with such remaining performance
obligations will be recognized through 2026. Annual
revenues associated with such performance obligations
average less than $250 million through 2026.

112 Goldman Sachs 2019 Form 10-K

Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when
the firm has relinquished control over the assets transferred.
For transfers of financial assets accounted for as sales, any
gains or losses are recognized in net revenues. Assets or
liabilities that arise from the firm’s continuing involvement
with transferred financial assets are initially recognized at fair
value. For transfers of financial assets that are not accounted
for as sales, the assets are generally included in trading assets
and the transfer is accounted for as a collateralized financing,
with the related interest expense recognized over the life of
the transaction. See Note 11 for further information about
transfers of financial assets accounted for as collateralized
financings and Note 16 for further information about
transfers of financial assets accounted for as sales.

Cash and Cash Equivalents
The firm defines cash equivalents as highly liquid overnight
deposits held in the ordinary course of business. Cash and
cash equivalents included cash and due from banks of
$12.57 billion as of December 2019 and $10.66 billion as of
December 2018. Cash and cash equivalents also included
interest-bearing deposits with banks of $120.98 billion as of
December 2019 and $119.89 billion as of December 2018.

The firm segregates cash for regulatory and other purposes
related to client activity. Cash and cash equivalents
segregated for
regulatory and other purposes were
$22.78 billion as of December 2019 and $23.14 billion as of
December 2018. In addition, the firm segregates securities for
regulatory and other purposes related to client activity. See
Note 11 for further information about segregated securities.

Customer and Other Receivables
Customer and other receivables included receivables from
customers and counterparties of $50.90 billion as of
December 2019 and $46.95 billion as of December 2018,
and receivables
from brokers, dealers and clearing
organizations of $23.71 billion as of December 2019 and
$25.50 billion as of December 2018. Such receivables
primarily consist of customer margin loans, receivables
resulting from unsettled transactions and collateral posted
in connection with certain derivative transactions.

fair value. As

Substantially all of these receivables are accounted for at
amortized cost net of estimated uncollectible amounts,
which generally approximates
these
receivables are not accounted for at fair value, they are not
included in the firm’s fair value hierarchy in Notes 4
through 10. Had these receivables been included in the
firm’s fair value hierarchy, substantially all would have
been classified in level 2 as of both December 2019 and
December 2018. See Note 10 for further information about
customer and other receivables accounted for at fair value
under the fair value option. Interest on customer and other
receivables is recognized over the life of the transaction and
included in interest income.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Customer and other receivables includes receivables from
contracts with clients and contract assets. Contract assets
represent the firm’s right to receive consideration for
services provided in connection with its contracts with
clients for which collection is conditional and not merely
subject to the passage of time. The firm’s receivables from
contracts with clients were $2.27 billion as of
December 2019 and $1.94 billion as of December 2018. As
of both December 2019 and December 2018 contract assets
were not material.

included payables

Customer and Other Payables
Customer and other payables
to
customers and counterparties of $170.21 billion as of
December 2019 and $173.99 billion as of December 2018,
and payables to brokers, dealers and clearing organizations
of $4.61 billion as of December 2019 and $6.24 billion as
of December 2018. Such payables primarily consist of
customer credit balances related to the firm’s prime
brokerage activities. Customer and other payables are
accounted for at cost plus accrued interest, which generally
these payables are not
approximates
accounted for at fair value, they are not included in the
firm’s fair value hierarchy in Notes 4 through 10. Had these
payables been included in the firm’s fair value hierarchy,
substantially all would have been classified in level 2 as of
both December 2019 and December 2018. Interest on
customer and other payables is recognized over the life of
the transaction and included in interest expense.

fair value. As

Offsetting Assets and Liabilities
To reduce credit exposures on derivatives and securities
financing transactions, the firm may enter into master
netting agreements or similar arrangements (collectively,
netting agreements) with counterparties that permit it to
offset receivables and payables with such counterparties. A
netting agreement is a contract with a counterparty that
permits net settlement of multiple transactions with that
counterparty, including upon the exercise of termination
rights by a non-defaulting party. Upon exercise of such
termination rights, all transactions governed by the netting
agreement are terminated and a net settlement amount is
calculated. In addition, the firm receives and posts cash and
securities collateral with respect to its derivatives and
securities financing transactions, subject to the terms of the
related credit support agreements or similar arrangements
(collectively, credit support agreements). An enforceable
credit support agreement grants the non-defaulting party
exercising termination rights the right to liquidate the
collateral and apply the proceeds to any amounts owed. In
order to assess enforceability of the firm’s right of setoff
under netting and credit support agreements, the firm
evaluates various factors, including applicable bankruptcy
laws,
local statutes and regulatory provisions in the
jurisdiction of the parties to the agreement.

Derivatives are reported on a net-by-counterparty basis
(i.e., the net payable or receivable for derivative assets and
liabilities for a given counterparty) in the consolidated
balance sheets when a legal right of setoff exists under an
enforceable netting agreement. Securities purchased under
agreements to resell (resale agreements) and securities sold
under agreements to repurchase (repurchase agreements)
and securities borrowed and loaned transactions with the
a
same
net-by-counterparty basis in the consolidated balance
sheets when such transactions meet certain settlement
criteria and are subject to netting agreements.

term and

presented

currency

are

In the consolidated balance sheets, derivatives are reported
net of cash collateral received and posted under enforceable
credit support agreements, when transacted under an
enforceable netting agreement. In the consolidated balance
sheets, resale and repurchase agreements, and securities
borrowed and loaned, are not reported net of the related
cash and securities received or posted as collateral. See
Note 11 for further information about collateral received
including rights to deliver or repledge
and pledged,
collateral. See Notes 7 and 11 for further information about
offsetting assets and liabilities.

Foreign Currency Translation
Assets and liabilities denominated in non-U.S. currencies
are translated at rates of exchange prevailing on the date of
the consolidated balance sheets and revenues and expenses
are translated at average rates of exchange for the period.
Foreign currency remeasurement gains or
losses on
transactions in nonfunctional currencies are recognized in
earnings. Gains or losses on translation of the financial
statements of a non-U.S. operation, when the functional
currency is other than the U.S. dollar, are included, net of
hedges and taxes,
in the consolidated statements of
comprehensive income.

Recent Accounting Developments
Revenue from Contracts with Customers (ASC 606).
In May 2014, the FASB issued ASU No. 2014-09. This
ASU, as amended, provides comprehensive guidance on the
revenue earned from contracts with
recognition of
customers arising from the transfer of goods and services,
guidance on accounting for certain contract costs and new
disclosures.

The firm adopted this ASU in January 2018 under a
modified retrospective approach. As a result of adopting
this ASU, the firm, among other things, delays recognition
of non-refundable and milestone payments on financial
advisory assignments until the assignments are completed,
and recognizes certain investment management fees earlier
than under the firm’s previous revenue recognition policies.
The cumulative effect of adopting this ASU as of January 1,
2018 was a decrease to retained earnings of $53 million
(net of tax).

Goldman Sachs 2019 Form 10-K 113

The firm adopted this ASU in January 2020 under a
modified retrospective approach. As a result of adopting
this ASU, the firm’s allowance for credit losses on financial
assets and commitments that are measured at amortized
cost will reflect management’s estimate of credit losses over
the remaining expected life of such assets. Expected credit
losses
and
commitments, as well as changes to expected credit losses
during the period, will be recognized in earnings. These
expected credit losses will be measured based on historical
experience, current conditions and forecasts that affect the
collectability of the reported amount.

recognized financial

for newly

assets

The cumulative effect of measuring the allowance under
CECL as a result of adopting this ASU as of January 1,
2020 was an increase in the allowance for credit losses of
$848 million. The increase in the allowance is driven by the
fact that the allowance under CECL covers expected credit
losses over the full expected life of the loan portfolios and
also takes into account
forecasts of expected future
economic conditions. In addition, in accordance with the
ASU, the firm elected the fair value option for loans that
were previously accounted for as Purchased Credit
Impaired (PCI), which resulted in a decrease to the
allowance for PCI loans of $169 million. The cumulative
effect of adopting this ASU was a decrease to retained
earnings of approximately $640 million (net of tax).

Other

Effects

“Income

2018-02,

of Certain

Tax
Comprehensive

from
Reclassification
Income
Accumulated
(ASC 220). In February 2018, the FASB issued ASU
No.
Statement — Reporting
Comprehensive Income (Topic 220) — Reclassification of
Certain
from Accumulated Other
Comprehensive Income.” This ASU permits a reporting
entity to reclassify the income tax effects of the Tax Cuts
and Jobs Act
(Tax Legislation) on items within
accumulated other comprehensive income to retained
earnings.

Effects

Tax

The firm adopted this ASU in January 2019 and did not
elect to reclassify the income tax effects of Tax Legislation
from accumulated other comprehensive income to retained
earnings. Therefore, the adoption of the ASU did not have
an impact on the firm’s consolidated financial statements.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The firm also prospectively changed the presentation of
certain costs from a net presentation within revenues to a
gross basis, and vice versa. Beginning in 2018, certain
underwriting
expenses, which were netted against
investment banking revenues, and certain distribution fees,
which were netted against
investment management
revenues, are presented gross as operating expenses. Costs
incurred
soft-dollar
arrangements, which were presented gross as operating
expenses, are presented net within commissions and fees.

connection with

certain

Leases (ASC 842). In February 2016, the FASB issued ASU
No. 2016-02, “Leases (Topic 842).” This ASU requires
that, for leases longer than one year, a lessee recognize in
the balance sheet a right-of-use asset, representing the right
to use the underlying asset for the lease term, and a lease
liability, representing the liability to make lease payments.
It also requires that for finance leases, a lessee recognize
interest expense on the lease liability, separately from the
amortization of the right-of-use asset in the statements of
earnings, while for operating leases, such amounts should
be recognized as a combined expense. It also requires that
for qualifying sale-leaseback transactions
seller
recognize any gain or loss (based on the estimated fair value
of the asset at the time of sale) when control of the asset is
transferred instead of amortizing it over the lease period. In
addition, this ASU requires expanded disclosures about the
nature and terms of lease agreements.

the

The firm adopted this ASU in January 2019 under a
modified retrospective approach. Upon adoption,
in
accordance with the ASU, the firm elected to not reassess
the lease classification or initial direct costs of existing
leases, and to not reassess whether existing contracts
contain a lease. In addition, the firm has elected to account
for each contract’s lease and non-lease components as a
single lease component. The impact of adoption was a gross
up of $1.77 billion on the firm’s consolidated balance sheet
and an increase to retained earnings of $12 million (net of
tax) as of January 1, 2019.

Measurement of Credit
Losses on Financial
Instruments (ASC 326). In June 2016, the FASB issued
ASU No. 2016-13, “Financial Instruments — Credit Losses
(Topic 326) — Measurement of Credit Losses on Financial
Instruments.” This ASU amends several aspects of the
losses on certain financial
measurement of
instruments, including replacing the existing incurred credit
loss model and other models with the Current Expected
Credit Losses (CECL) model and amending certain aspects
of accounting for purchased financial assets with
deterioration in credit quality since origination (Purchased
Credit Deteriorated or PCD loans).

credit

114 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 4.
Fair Value Measurements

The fair value of a financial instrument is the amount that
would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market
participants at the measurement date. Financial assets are
marked to bid prices and financial liabilities are marked to
offer prices. Fair value measurements do not include
transaction costs. The firm measures certain financial assets
and liabilities as a portfolio (i.e., based on its net exposure
to market and/or credit risks).

internally developed models

The best evidence of fair value is a quoted price in an active
market. If quoted prices in active markets are not available,
fair value is determined by reference to prices for similar
instruments, quoted prices or recent transactions in less
that
active markets, or
primarily use market-based or independently sourced
inputs,
rates,
volatilities, equity or debt prices, foreign exchange rates,
commodity prices, credit spreads and funding spreads (i.e.,
the spread or difference between the interest rate at which a
borrower could finance a given financial instrument relative
to a benchmark interest rate).

including, but not

limited to,

interest

U.S. GAAP has a three-level hierarchy for disclosure of fair
value measurements. This hierarchy prioritizes inputs to the
valuation techniques used to measure fair value, giving the
highest priority to level 1 inputs and the lowest priority to
in this
level 3 inputs. A financial
hierarchy is based on the lowest level of input that is
significant to its fair value measurement. In evaluating the
significance of a valuation input, the firm considers, among
other factors, a portfolio’s net risk exposure to that input.
The fair value hierarchy is as follows:

instrument’s level

Level 1. Inputs are unadjusted quoted prices in active
markets to which the firm had access at the measurement
date for identical, unrestricted assets or liabilities.

Level 2. Inputs to valuation techniques are observable,
either directly or indirectly.

Level 3. One or more inputs to valuation techniques are
significant and unobservable.

The fair values for substantially all of the firm’s financial
assets and liabilities are based on observable prices and
inputs and are classified in levels 1 and 2 of the fair value
hierarchy. Certain level 2 and level 3 financial assets and
liabilities may require valuation adjustments that a market
participant would require to arrive at fair value for factors,
such as counterparty and the firm’s credit quality, funding
risk, transfer restrictions, liquidity and bid/offer spreads.
Valuation adjustments are generally based on market
evidence.

The valuation techniques and nature of significant inputs
used to determine the fair value of the firm’s financial
instruments are described below. See Notes 5 through 10
for further information about significant unobservable
inputs used to value level 3 financial instruments.

Valuation Techniques and Significant Inputs for
Trading Cash Instruments, Investments and Loans
Level 1. Level 1 instruments include U.S. government
obligations, most non-U.S. government obligations, certain
agency obligations, certain corporate debt instruments,
certain other debt obligations and actively traded listed
equities. These instruments are valued using quoted prices
for identical unrestricted instruments in active markets. The
firm defines active markets for equity instruments based on
the average daily trading volume both in absolute terms and
relative to the market capitalization for the instrument. The
firm defines active markets for debt instruments based on
both the average daily trading volume and the number of
days with trading activity.

Level 2. Level 2 instruments include certain non-U.S.
government obligations, most agency obligations, most
mortgage-backed loans and securities, most corporate debt
instruments, most state and municipal obligations, most
other debt obligations, restricted or less liquid listed
equities, certain private equities, commodities and certain
lending commitments.

Valuations of level 2 instruments can be verified to quoted
prices, recent
trading activity for identical or similar
instruments, broker or dealer quotations or alternative
pricing sources with reasonable levels of price transparency.
Consideration is given to the nature of the quotations (e.g.,
indicative or firm) and the relationship of recent market
activity to the prices provided from alternative pricing
sources.

Valuation adjustments are typically made to level 2
instruments (i) if the instrument is subject to transfer
restrictions and/or (ii) for other premiums and liquidity
discounts that a market participant would require to arrive
at fair value. Valuation adjustments are generally based on
market evidence.

Goldman Sachs 2019 Form 10-K 115

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Level 3. Level 3 instruments have one or more significant
valuation inputs that are not observable. Absent evidence to
the contrary, level 3 instruments are initially valued at
transaction price, which is considered to be the best initial
estimate of fair value. Subsequently, the firm uses other
methodologies to determine fair value, which vary based on
the type of instrument. Valuation inputs and assumptions
are changed when corroborated by substantive observable
evidence, including values realized on sales.

Valuation techniques of
level 3 instruments vary by
instrument, but are generally based on discounted cash flow
techniques. The valuation techniques and the nature of
significant inputs used to determine the fair values of each
type of level 3 instrument are described below:

Loans and Securities Backed by Commercial Real Estate
Loans and securities backed by commercial real estate are
directly or indirectly collateralized by a single property or a
portfolio of properties, and may include tranches of varying
levels of subordination. Significant inputs are generally
determined based on relative value analyses and include:
‰ Market yields implied by transactions of similar or related
assets and/or current levels and changes in market indices,
such as the CMBX (an index that tracks the performance
of commercial mortgage bonds);

‰ Transaction prices in both the underlying collateral and
similar underlying

same or

instruments with the
collateral;

‰ A measure of expected future cash flows in a default
scenario (recovery rates) implied by the value of the
underlying collateral, which is mainly driven by current
performance of the underlying collateral and capitalization
rates. Recovery rates are expressed as a percentage of
notional or face value of the instrument and reflect the
benefit of credit enhancements on certain instruments; and
‰ Timing of expected future cash flows (duration) which, in
certain cases, may incorporate the impact of other
unobservable inputs (e.g., prepayment speeds).

Loans and Securities Backed by Residential Real Estate
Loans and securities backed by residential real estate are
directly or
indirectly collateralized by portfolios of
residential real estate and may include tranches of varying
levels of subordination. Significant inputs are generally
determined based on relative value analyses, which
incorporate comparisons
to instruments with similar
collateral and risk profiles. Significant inputs include:
‰ Market yields implied by transactions of similar or related

assets;

‰ Transaction prices in both the underlying collateral and
similar underlying

same or

instruments with the
collateral;

116 Goldman Sachs 2019 Form 10-K

‰ Cumulative loss expectations, driven by default rates,
home price projections, residential property liquidation
timelines, related costs and subsequent recoveries; and
‰ Duration, driven by underlying loan prepayment speeds

and residential property liquidation timelines.

Corporate Debt Instruments
Corporate debt instruments includes corporate loans, debt
securities and convertible debentures. Significant inputs for
corporate debt instruments are generally determined based
on relative value analyses, which incorporate comparisons
both to prices of credit default swaps that reference the
same or similar underlying instrument or entity and to
other debt instruments for the same or similar issuer for
which observable prices or broker quotations are available.
Significant inputs include:
‰ Market yields implied by transactions of similar or related
assets and/or current levels and trends of market indices,
such as the CDX (an index that tracks the performance of
corporate credit);

‰ Current performance and recovery assumptions and,
where the firm uses credit default swaps to value the
related instrument, the cost of borrowing the underlying
reference obligation;

‰ Duration; and
‰ Market and transaction multiples for corporate debt
instruments with convertibility or participation options.

Equity Securities
Equity securities consists of private equities. Recent third-
party completed or pending transactions (e.g., merger
proposals, debt restructurings, tender offers) are considered
the best evidence for any change in fair value. When these
are not available, the following valuation methodologies
are used, as appropriate:
‰ Industry multiples

(primarily EBITDA and revenue

multiples) and public comparables;
‰ Transactions in similar instruments;
‰ Discounted cash flow techniques; and
‰ Third-party appraisals.

The firm also considers changes in the outlook for the
relevant industry and financial performance of the issuer as
compared to projected performance. Significant
inputs
include:
‰ Market and transaction multiples;
‰ Discount rates and capitalization rates; and
‰ For equity securities with debt-like features, market yields
implied by transactions of similar or related assets, current
performance and recovery assumptions, and duration.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Investments and

Other Trading Cash Instruments,
Loans
The significant inputs to the valuation of other instruments,
such as U.S. and non-U.S. government and agency
obligations, state and municipal obligations, and other
loans and debt obligations are generally determined based
on relative value analyses, which incorporate comparisons
both to prices of credit default swaps that reference the
same or similar underlying instrument or entity and to
other debt instruments for the same issuer for which
observable prices or broker quotations are available.
Significant inputs include:
‰ Market yields implied by transactions of similar or related
assets and/or current levels and trends of market indices;
‰ Current performance and recovery assumptions and,
where the firm uses credit default swaps to value the
related instrument, the cost of borrowing the underlying
reference obligation; and

‰ Duration.

Valuation Techniques and Significant Inputs for
Derivatives
The firm’s level 2 and level 3 derivatives are valued using
derivative pricing models (e.g., discounted cash flow
models, correlation models, and models that incorporate
option pricing methodologies,
such as Monte Carlo
simulations). Price transparency of derivatives can generally
be characterized by product type, as described below.
‰ Interest Rate. In general, the key inputs used to value
interest rate derivatives are transparent, even for most
long-dated contracts. Interest rate swaps and options
denominated in the currencies of leading industrialized
nations are characterized by high trading volumes and tight
bid/offer spreads. Interest rate derivatives that reference
indices, such as an inflation index, or the shape of the yield
curve (e.g., 10-year swap rate vs. 2-year swap rate) are
more complex, but the key inputs are generally observable.

‰ Credit. Price transparency for credit default

sovereigns generally exhibit

swaps,
including both single names and baskets of credits, varies by
market and underlying reference entity or obligation. Credit
default swaps that reference indices, large corporates and
major
the most price
transparency. For credit default swaps with other underliers,
price transparency varies based on credit rating, the cost of
borrowing the underlying reference obligations, and the
availability of the underlying reference obligations for
delivery upon the default of the issuer. Credit default swaps
that reference loans, asset-backed securities and emerging
market debt instruments tend to have less price transparency
than those that reference corporate bonds. In addition, more
complex credit derivatives, such as those sensitive to the
correlation between two or more underlying reference
obligations, generally have less price transparency.

‰ Currency. Prices for currency derivatives based on the
industrialized nations,
exchange
leading
rates of
including those with longer
tenors, are generally
transparent. The primary difference between the price
transparency of developed and emerging market currency
derivatives is that emerging markets tend to be only
observable for contracts with shorter tenors.

and base)

commodities

‰ Commodity. Commodity derivatives include transactions
referenced to energy (e.g., oil and natural gas), metals (e.g.,
precious
(e.g.,
and soft
agricultural). Price transparency varies based on the
underlying commodity, delivery location,
tenor and
product quality (e.g., diesel fuel compared to unleaded
gasoline). In general, price transparency for commodity
derivatives is greater for contracts with shorter tenors and
contracts that are more closely aligned with major and/or
benchmark commodity indices.

‰ Equity. Price transparency for equity derivatives varies by
market and underlier. Options on indices and the
common stock of corporates included in major equity
indices exhibit
the most price transparency. Equity
derivatives generally have observable market prices,
except for contracts with long tenors or reference prices
that differ significantly from current market prices. More
complex equity derivatives, such as those sensitive to the
correlation between two or more individual stocks,
generally have less price transparency.

Liquidity is essential to observability of all product types. If
transaction volumes decline, previously transparent prices
and other inputs may become unobservable. Conversely,
even highly structured products may at times have trading
volumes large enough to provide observability of prices and
other inputs.

Level 1. Level 1 derivatives include short-term contracts for
future delivery of securities when the underlying security is
a level 1 instrument, and exchange-traded derivatives if
they are actively traded and are valued at their quoted
market price.

Level 2. Level 2 derivatives include OTC derivatives for
which all significant valuation inputs are corroborated by
market evidence and exchange-traded derivatives that are
not actively traded and/or that are valued using models that
calibrate to market-clearing levels of OTC derivatives.

The selection of a particular model to value a derivative
depends on the contractual terms of and specific risks
inherent in the instrument, as well as the availability of
pricing information in the market. For derivatives that
trade in liquid markets, model selection does not involve
significant management
judgment because outputs of
models can be calibrated to market-clearing levels.

Goldman Sachs 2019 Form 10-K 117

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Valuation models require a variety of inputs, such as
contractual terms, market prices, yield curves, discount
rates (including those derived from interest rates on
collateral received and posted as specified in credit support
agreements for collateralized derivatives), credit curves,
measures of volatility, prepayment rates, loss severity rates
and correlations of such inputs. Significant inputs to the
valuations of level 2 derivatives can be verified to market
transactions, broker or dealer quotations or other
alternative pricing sources with reasonable levels of price
transparency. Consideration is given to the nature of the
quotations (e.g., indicative or firm) and the relationship of
recent market activity to the prices provided from
alternative pricing sources.

Level 3. Level 3 derivatives are valued using models which
utilize observable level 1 and/or level 2 inputs, as well as
unobservable level 3 inputs. The significant unobservable
inputs used to value the firm’s level 3 derivatives are
described below.
‰ For level 3 interest rate and currency derivatives,
significant unobservable inputs include correlations of
certain currencies and interest rates (e.g., the correlation
between Euro inflation and Euro interest rates).
In
addition, for level 3 interest rate derivatives, significant
unobservable
rate
include
volatilities.

specific

interest

inputs

‰ For level 3 credit derivatives, significant unobservable
inputs include illiquid credit spreads and upfront credit
points, which are unique to specific reference obligations
and reference
recovery rates and certain
correlations required to value credit derivatives (e.g., the
the underlying reference
likelihood of default of
obligation relative to one another).

entities,

‰ For

level

derivatives,

commodity

significant
unobservable inputs include volatilities for options with
strike prices that differ significantly from current market
prices and prices or spreads for certain products for which
the product quality or physical location of the commodity
is not aligned with benchmark indices.

significantly from current market prices.

‰ For level 3 equity derivatives, significant unobservable
inputs generally include equity volatility inputs for
options that are long-dated and/or have strike prices that
In
differ
addition,
the valuation of certain structured trades
requires the use of level 3 correlation inputs, such as the
correlation of the price performance of two or more
the price
individual
performance for a basket of stocks to another asset class,
such as commodities.

the correlation of

stocks or

118 Goldman Sachs 2019 Form 10-K

Subsequent to the initial valuation of a level 3 derivative, the
firm updates the level 1 and level 2 inputs to reflect observable
market changes and any resulting gains and losses are
classified in level 3. Level 3 inputs are changed when
corroborated by evidence, such as similar market transactions,
third-party pricing services and/or broker or dealer quotations
or other empirical market data. In circumstances where the
firm cannot verify the model value by reference to market
transactions, it is possible that a different valuation model
could produce a materially different estimate of fair value. See
Note 7 for further information about significant unobservable
inputs used in the valuation of level 3 derivatives.

Valuation Adjustments. Valuation adjustments are
integral
to determining the fair value of derivative
portfolios and are used to adjust the mid-market valuations
produced by derivative pricing models to the exit price
valuation. These adjustments incorporate bid/offer spreads,
the cost of liquidity, credit valuation adjustments and
funding valuation adjustments, which account for the credit
and funding risk inherent in the uncollateralized portion of
funding
derivative portfolios. The firm also makes
valuation adjustments to collateralized derivatives where
the terms of the agreement do not permit the firm to deliver
or repledge collateral received. Market-based inputs are
generally used when calibrating valuation adjustments to
market-clearing levels.

for derivatives

In addition,
include significant
unobservable inputs, the firm makes model or exit price
adjustments to account
for the valuation uncertainty
present in the transaction.

that

Valuation Techniques and Significant Inputs for
Other Financial Instruments at Fair Value
In addition to trading cash instruments, derivatives, and
certain investments and loans, the firm accounts for certain
of its other financial assets and liabilities at fair value under
the fair value option. Such instruments include repurchase
agreements and substantially all resale agreements; securities
borrowed and loaned in Fixed Income, Currency and
Commodities (FICC) financing; certain customer and other
including certain margin loans; certain time
receivables,
deposits, including structured certificates of deposit, which
are hybrid financial
instruments; substantially all other
secured financings, including transfers of assets accounted
for as financings; certain unsecured short- and long-term
borrowings, substantially all of which are hybrid financial
instruments; and other liabilities. These instruments are
generally valued based on discounted cash flow techniques,
which incorporate inputs with reasonable levels of price
transparency, and are generally classified in level 2 because
the inputs are observable. Valuation adjustments may be
made for liquidity and for counterparty and the firm’s credit
quality. The significant inputs used to value the firm’s other
financial instruments are described below.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Resale and Repurchase Agreements and Securities
Borrowed and Loaned. The significant inputs to the
valuation of
resale and repurchase agreements and
securities borrowed and loaned are funding spreads, the
amount and timing of expected future cash flows and
interest rates.

Customer and Other Receivables. The significant inputs
to the valuation of receivables are interest rates, the amount
and timing of expected future cash flows and funding
spreads.

Deposits. The significant inputs to the valuation of time
deposits are interest rates and the amount and timing of
future cash flows. The inputs used to value the embedded
derivative component of hybrid financial instruments are
consistent with the inputs used to value the firm’s other
derivative instruments described above. See Note 7 for
further information about derivatives and Note 13 for
further information about deposits.

Other Secured Financings. The significant inputs to the
valuation of other secured financings are the amount and
timing of expected future cash flows, interest rates, funding
spreads, the fair value of the collateral delivered by the firm
(determined using the amount and timing of expected
future cash flows, market prices, market yields and
recovery assumptions) and the frequency of additional
collateral calls. See Note 11 for further information about
collateralized agreements and financings.

Unsecured Short- and Long-Term Borrowings. The
significant inputs to the valuation of unsecured short- and
long-term borrowings are the amount and timing of
expected future cash flows, interest rates, the credit spreads
of the firm and commodity prices for prepaid commodity
transactions. The inputs used to value the embedded
derivative component of hybrid financial instruments are
consistent with the inputs used to value the firm’s other
derivative instruments described above. See Note 7 for
further information about derivatives and Note 14 for
further information about borrowings.

Other Liabilities. The significant inputs to the valuation of
other liabilities are the amount and timing of expected
future cash flows and equity volatility and correlation
inputs.

Financial Assets and Liabilities at Fair Value
The table below presents financial assets and liabilities
accounted for at fair value.

$ in millions

Total level 1 financial assets
Total level 2 financial assets
Total level 3 financial assets
Investments in funds at NAV
Counterparty and cash collateral netting
Total financial assets at fair value

Total assets

Total level 3 financial assets divided by:

Total assets
Total financial assets at fair value

Total level 1 financial liabilities
Total level 2 financial liabilities
Total level 3 financial liabilities
Counterparty and cash collateral netting
Total financial liabilities at fair value

As of December

2019

2018

$242,562
325,259
23,068
4,206
(55,527)
$539,568

$170,463
354,515
22,181
3,936
(49,383)
$501,712

$992,968

$931,796

2.3%
4.3%
$ 54,790
293,902
25,938
(41,671)
$332,959

2.4%
4.4%
$ 54,151
258,335
23,804
(39,786)
$296,504

Total level 3 financial liabilities divided by
total financial liabilities at fair value

7.8%

8.0%

In the table above:
‰ Counterparty netting among positions classified in the

same level is included in that level.

‰ Counterparty and cash collateral netting represents the
impact on derivatives of netting across levels of the fair
value hierarchy.

The table below presents a summary of level 3 financial
assets.

$ in millions

Trading assets:

Trading cash instruments
Derivatives
Investments
Loans
Other financial assets
Total

As of December

2019

2018

1,242
4,654
15,282
1,890
–
$ 23,068

1,689
4,948
13,548
1,990
6
$ 22,181

Level 3 financial assets as of December 2019 increased
compared with December 2018, primarily reflecting an
increase in level 3 investments. See Notes 5 through 10 for
further information about level 3 financial assets (including
information about unrealized gains and losses related to
level 3 financial assets and transfers in and out of level 3).

Goldman Sachs 2019 Form 10-K 119

In the table above:
‰ Gains/(losses) include both realized and unrealized gains
and losses. Gains/(losses) exclude related interest income
and interest expense. See Note 23 for further information
about interest income and interest expense.

‰ Gains and losses included in market making are primarily
related to the firm’s trading assets and liabilities,
including both derivative and non-derivative financial
instruments. Gains/(losses) are not representative of the
manner in which the firm manages its business activities
because many of the firm’s market-making and client
facilitation strategies utilize financial instruments across
various product types. Accordingly, gains or losses in one
product type frequently offset gains or losses in other
product types. For example, most of the firm’s longer-
term derivatives across product types are sensitive to
changes in interest rates and may be economically hedged
with interest rate swaps. Similarly, a significant portion of
the firm’s trading cash instruments and derivatives across
product types has exposure to foreign currencies and may
be economically hedged with foreign currency contracts.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 5.
Trading Assets and Liabilities

include

Trading assets and liabilities
trading cash
instruments and derivatives held in connection with the
firm’s market-making or risk management activities. These
assets and liabilities are accounted for at fair value either
under the fair value option or in accordance with other U.S.
GAAP, and the related fair value gains and losses are
generally recognized in the consolidated statements of
earnings.

The table below presents a summary of trading assets and
liabilities.

$ in millions

As of December 2019

Trading cash instruments
Derivatives
Total

As of December 2018

Trading cash instruments
Derivatives
Total

Trading
Assets

Trading
Liabilities

$310,080
45,252
$355,332

$ 65,033
43,802
$108,835

$235,349
44,846
$280,195

$ 66,303
42,594
$108,897

See Note 6 for further information about trading cash
instruments and Note 7 for further information about
derivatives.

Gains and Losses from Market Making
The table below presents market making revenues by major
product type.

$ in millions

Interest rates
Credit
Currencies
Equities
Commodities
Total

Year Ended December

2019

2018

2017

$ 3,272
682
2,902
2,946
355
$10,157

$(1,917)
1,268
4,646
5,264
463
$ 9,724

$ 6,587
696
(3,240)
3,170
640
$ 7,853

120 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 6.
Trading Cash Instruments
Trading cash instruments consists of instruments held in
risk
connection with the
management activities. These instruments are accounted for
at fair value and the related fair value gains and losses are
recognized in the consolidated statements of earnings.

firm’s market-making or

Fair Value of Trading Cash Instruments by Level
The table below presents trading cash instruments by level
within the fair value hierarchy.

In the table above:
‰ Trading cash instrument assets are shown as positive
amounts and trading cash instrument liabilities are shown
as negative amounts.

‰ Corporate debt instruments includes corporate loans,
debt
prepaid
commodity transactions and transfers of assets accounted
for as secured loans rather than purchases.

debentures,

convertible

securities,

$ in millions

Level 1

Level 2 Level 3

Total

‰ Equity securities includes public equities and exchange-

As of December 2019
Assets
Government and agency obligations:

U.S.
Non-U.S.

Loans and securities backed by:

Commercial real estate
Residential real estate
Corporate debt instruments
State and municipal obligations
Other debt obligations
Equity securities
Commodities
Total

Liabilities
Government and agency obligations:

U.S.
Non-U.S.

Loans and securities backed by:

Commercial real estate
Residential real estate
Corporate debt instruments
State and municipal obligations
Equity securities
Commodities
Total

As of December 2018
Assets
Government and agency obligations:

$108,200 $ 34,714 $

33,709

11,108

21 $142,935
44,839
22

–
–
1,313
–
409
78,782
–

2,222
6,025
28,773
680
1,493
79,346
3,767
$222,413 $ 86,425 $1,242 $310,080

2,031
5,794
26,768
680
1,074
489
3,767

191
231
692
–
10
75
–

$ (9,914) $
(21,213)

(47) $

(2,205)

– $ (9,961)
(23,424)
(6)

–
–
(115)
–
(23,519)
–

(32)
(31)
(2)
(2)
(7,862)
(7,494)
(2)
(2)
(23,744)
(212)
(6)
(6)
$ (54,761) $ (9,999) $ (273) $ (65,033)

(1)
–
(253)
–
(13)
–

U.S.
Non-U.S.

$ 70,220 $ 28,327 $

33,231

10,322

25 $ 98,572
43,563
10

Loans and securities backed by:

Commercial real estate
Residential real estate
Corporate debt instruments
State and municipal obligations
Other debt obligations
Equity securities
Commodities
Total
Liabilities
Government and agency obligations:

U.S.
Non-U.S.

Loans and securities backed by:

Residential real estate
Corporate debt instruments
Other debt obligations
Equity securities
Total

–
–
445
–
770
52,531
–

1,592
4,893
23,788
1,210
1,989
56,013
3,729
$157,197 $ 76,463 $1,689 $235,349

1,260
4,545
22,431
1,210
1,180
3,459
3,729

332
348
912
–
39
23
–

$ (5,067) $
(23,872)

(13) $

(1,475)

– $ (5,080)
(25,347)
–

–
(4)
–
(25,147)

(1)
(10,489)
(1)
(25,385)
$ (54,090) $(12,164) $ (49) $ (66,303)

(1)
(10,454)
(1)
(220)

–
(31)
–
(18)

See Note 4 for an overview of the firm’s fair value
measurement policies and the valuation techniques and
significant inputs used to determine the fair value of trading
cash instruments.

traded funds.

‰ Other debt obligations

includes other asset-backed

securities and money market instruments.

Significant Unobservable Inputs
The table below presents the amount of level 3 assets, and
ranges and weighted averages of significant unobservable
inputs used to value level 3 trading cash instruments.

Level 3 Assets and Range of Significant Unobservable
Inputs (Weighted Average) as of December

$ in millions

2019

2018

$191

0.3 to 6.6 (2.8)

$332
2.7% to 21.7% (13.5%) 6.9% to 22.5% (14.2%)
11.4% to 81.1% (55.6%) 17.0% to 78.4% (53.0%)
0.4 to 7.1 (3.3)

Loans and securities backed by commercial real estate
Level 3 assets
Yield
Recovery rate
Duration (years)
Loans and securities backed by residential real estate
$348
$231
Level 3 assets
Yield
2.8% to 11.8% (5.9%)
1.2% to 12.0% (5.8%)
Cumulative loss rate 5.4% to 30.4% (16.3%) 8.3% to 37.7% (15.3%)
Duration (years)
1.5 to 14.0 (8.6)
Corporate debt instruments
Level 3 assets
Yield
Recovery rate
Duration (years)

$912
0.7% to 17.3% (8.4%)
0.0% to 69.7% (54.9%) 0.0% to 75.0% (61.2%)
0.4 to 13.5 (3.6)

$692
0.1% to 20.4% (7.2%)

2.3 to 12.4 (5.7)

1.7 to 16.6 (5.1)

Level 3 government and agency obligations, other debt
obligations and equity securities were not material as of
both December 2019 and December 2018, and therefore,
are not included in the table above.

In the table above:
‰ Ranges represent the significant unobservable inputs that
were used in the valuation of each type of trading cash
instrument.

‰ Weighted averages are calculated by weighting each input
by the relative fair value of the trading cash instruments.

Goldman Sachs 2019 Form 10-K 121

In the table above:
‰ Changes in fair value are presented for all trading cash
instruments that are classified in level 3 as of the end of
the period.

‰ Net unrealized gains/(losses) relates to trading cash

instruments that were still held at period-end.

‰ Transfers between levels of the fair value hierarchy are
reported at the beginning of the reporting period in which
they occur. If a trading cash instrument was transferred to
level 3 during a reporting period, its entire gain or loss for
the period is classified in level 3.

‰ For level 3 trading cash instrument assets, increases are
shown as positive amounts, while decreases are shown as
negative amounts. For level 3 trading cash instrument
liabilities, increases are shown as negative amounts, while
decreases are shown as positive amounts.
‰ Level 3 trading cash instruments are

frequently
economically hedged with level 1 and level 2 trading cash
instruments and/or level 1, level 2 or level 3 derivatives.
Accordingly, gains or losses that are classified in level 3
can be partially offset by gains or losses attributable to
level 1 or level 2 trading cash instruments and/or level 1,
level 2 or level 3 derivatives. As a result, gains or losses
included in the level 3 rollforward below do not
necessarily represent the overall impact on the firm’s
results of operations, liquidity or capital resources.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

‰ The ranges and weighted averages of these inputs are not
representative of the appropriate inputs to use when
calculating the fair value of any one trading cash
instrument. For example, the highest recovery rate for
corporate debt instruments is appropriate for valuing a
specific corporate debt instrument, but may not be
appropriate for valuing any other corporate debt
instrument. Accordingly, the ranges of inputs do not
represent uncertainty in, or possible ranges of, fair value
measurements of level 3 trading cash instruments.

‰ Increases in yield, duration or cumulative loss rate used in
the valuation of level 3 trading cash instruments would
have resulted in a lower fair value measurement, while
increases in recovery rate would have resulted in a higher
fair value measurement as of both December 2019 and
December 2018. Due to the distinctive nature of each
level 3 trading cash instrument, the interrelationship of
inputs is not necessarily uniform within each product
type.

‰ Trading cash instruments are valued using discounted

cash flows.

Level 3 Rollforward
The table below presents a summary of the changes in fair
value for level 3 trading cash instruments.

$ in millions

Total trading cash instrument assets
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Total trading cash instrument liabilities
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Year Ended December

2019

2018

$1,689
89
(35)
522
(885)
(252)
256
(142)
$1,242

$ (49)
10
(236)
56
(35)
–
(24)
5
$ (273)

$1,213
188
(89)
831
(607)
(423)
698
(122)
$1,689

(68)
6
(7)
41
(26)
8
(7)
4
(49)

122 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents information, by product type, for
assets included in the summary table above.

$ in millions

Year Ended December

2019

2018

Loans and securities backed by commercial real estate
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

$ 332
5
(17)
49
(153)
(48)
37
(14)
$ 191

Loans and securities backed by residential real estate
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

$ 348
14
28
111
(223)
(37)
19
(29)
$ 231

Corporate debt instruments
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Other
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

$ 912
58
(27)
291
(458)
(134)
142
(92)
$ 692

$ 97
12
(19)
71
(51)
(33)
58
(7)
$ 128

$ 260
28
(28)
119
(122)
(76)
156
(5)
$ 332

$ 436
28
29
109
(205)
(85)
99
(63)
$ 348

$ 450
126
(96)
559
(246)
(231)
395
(45)
$ 912

$ 67
6
6
44
(34)
(31)
48
(9)
$ 97

In the table above, other includes U.S. and non-U.S.
government and agency obligations, other debt obligations
and equity securities.

Level 3 Rollforward Commentary
Year Ended December 2019. The net realized and
unrealized gains on level 3 trading cash instrument assets of
$54 million (reflecting $89 million of net realized gains and
$35 million of net unrealized losses) for 2019 included
gains/(losses) of $(56) million reported in market making
and $110 million reported in interest income.

The drivers of net unrealized losses on level 3 trading cash
instrument assets for 2019 were not material.

Transfers into level 3 trading cash instrument assets during
2019 primarily reflected transfers of certain corporate debt
instruments from level 2, principally due to reduced price
transparency as a result of a lack of market evidence,
including fewer market transactions in these instruments.

The drivers of
instrument assets during 2019 were not material.

transfers out of

level 3 trading cash

Year Ended December 2018. The net realized and
unrealized gains on level 3 trading cash instrument assets of
$99 million (reflecting $188 million of net realized gains
and $89 million of net unrealized losses) for 2018 included
gains/(losses) of $(87) million reported in market making
and $186 million reported in interest income.

The drivers of net unrealized losses on level 3 trading cash
instrument assets for 2018 were not material.

Transfers into level 3 trading cash instrument assets during
2018 primarily reflected transfers of certain corporate debt
instruments and loans and securities backed by commercial
real estate from level 2, principally due to reduced price
transparency as a result of a lack of market evidence,
including fewer market transactions in these instruments.

The drivers of
instruments during 2018 were not material.

transfers out of

level 3 trading cash

Goldman Sachs 2019 Form 10-K 123

The firm enters into various types of derivatives, including:
‰ Futures and Forwards. Contracts

commit
counterparties to purchase or sell financial instruments,
commodities or currencies in the future.

that

‰ Swaps. Contracts

that

require

counterparties

to
exchange cash flows, such as currency or interest
payment streams. The amounts exchanged are based on
the specific terms of the contract with reference to
commodities,
specified rates,
currencies or indices.

instruments,

financial

‰ Options. Contracts in which the option purchaser has
the right, but not the obligation, to purchase from or sell
to the option writer financial instruments, commodities
or currencies within a defined time period for a specified
price.

Derivatives are reported on a net-by-counterparty basis
(i.e., the net payable or receivable for derivative assets and
liabilities for a given counterparty) when a legal right of
setoff exists under an enforceable netting agreement
(counterparty netting). Derivatives are accounted for at fair
value, net of cash collateral received or posted under
enforceable credit support agreements (cash collateral
netting). Derivative assets are included in trading assets and
derivative liabilities are included in trading liabilities.
Realized and unrealized gains and losses on derivatives not
designated as hedges are included in market making (for
derivatives included in the Global Markets segment), and
other principal transactions (for derivatives included in the
consolidated
segments)
remaining business
statements of earnings. For the years ended December 2019
and December 2018,
the firm’s
derivatives were included in the Global Markets segment.

substantially all of

in the

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 7.
Derivatives and Hedging Activities

Derivative Activities
Derivatives are instruments that derive their value from
underlying asset prices, indices, reference rates and other
inputs, or a combination of these factors. Derivatives may
be traded on an exchange (exchange-traded) or they may be
privately negotiated contracts, which are usually referred to
as OTC derivatives. Certain of the firm’s OTC derivatives
are
clearing
counterparties (OTC-cleared), while others are bilateral
contracts between two counterparties (bilateral OTC).

and settled through central

cleared

Market Making. As a market maker, the firm enters into
derivative transactions to provide liquidity to clients and to
facilitate the transfer and hedging of their risks. In this role,
the firm typically acts as principal and is required to commit
capital to provide execution, and maintains market-making
positions in response to, or in anticipation of, client
demand.

Risk Management. The firm also enters into derivatives to
actively manage risk exposures that arise from its market-
making and investing and financing activities. The firm’s
holdings and exposures are hedged, in many cases, on either
a portfolio or risk-specific basis, as opposed to an
instrument-by-instrument basis. The offsetting impact of
this economic hedging is reflected in the same business
segment as the related revenues. In addition, the firm may
enter into derivatives designated as hedges under U.S.
GAAP. These derivatives are used to manage interest rate
exposure in certain fixed-rate unsecured long-term and
short-term borrowings, and deposits, and to manage
foreign currency exposure on the net investment in certain
non-U.S. operations.

124 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The tables below present the gross fair value and the
notional amounts of derivative contracts by major product
type, the amounts of counterparty and cash collateral
netting in the consolidated balance sheets, as well as cash
and securities collateral posted and received under
enforceable credit support agreements that do not meet the
criteria for netting under U.S. GAAP.

$ in millions

As of December 2019

As of December 2018

Derivative
Assets

Derivative
Liabilities

Derivative
Assets

Derivative
Liabilities

760 $

476 $

856 $

5,040
227,274
233,074
4,778
14,658
19,436
11
656
85,772
86,439
4,445
433
12,746
17,624
13,431
34,687
48,118
404,691

8,618
242,046
251,520
6,929
13,860
20,789
10
391
81,613
82,014
2,272
243
13,034
15,549
16,976
39,531
56,507
426,379

9,958
266,387
276,821
6,551
14,178
20,729
35
411
79,887
80,333
2,390
180
8,568
11,138
13,499
36,162
49,661
438,682

1,553
3,552
211,091
216,196
4,517
13,784
18,301
16
800
87,953
88,769
4,093
439
15,595
20,127
11,765
40,668
52,433
395,826

Not accounted for as hedges
Exchange-traded
OTC-cleared
Bilateral OTC
Total interest rates
OTC-cleared
Bilateral OTC
Total credit
Exchange-traded
OTC-cleared
Bilateral OTC
Total currencies
Exchange-traded
OTC-cleared
Bilateral OTC
Total commodities
Exchange-traded
Bilateral OTC
Total equities
Subtotal
Accounted for as hedges
–
OTC-cleared
7
Bilateral OTC
7
Total interest rates
53
OTC-cleared
61
Bilateral OTC
114
Total currencies
Subtotal
121
Total gross fair value $ 441,896 $ 426,590 $ 407,796 $ 395,947

–
3,182
3,182
16
16
32
3,214

2
3,024
3,026
25
54
79
3,105

–
1
1
57
153
210
211

Offset in the consolidated balance sheets
$ (14,159) $ (14,159) $ (14,377) $ (14,377)
Exchange-traded
(8,888)
(15,565)
OTC-cleared
(290,961)
(310,920)
Bilateral OTC
(314,226)
(340,644)
Counterparty netting
(164)
(1,302)
OTC-cleared
(38,963)
Bilateral OTC
(54,698)
(39,127)
Cash collateral netting (56,000)
Total amounts offset $(396,644) $(382,788) $(362,950) $(353,353)

(15,565)
(310,920)
(340,644)
(526)
(41,618)
(42,144)

(8,888)
(290,961)
(314,226)
(1,389)
(47,335)
(48,724)

Included in the consolidated balance sheets
Exchange-traded
OTC-cleared
Bilateral OTC
Total

3,050
309
39,235
$ 45,252 $ 43,802 $ 44,846 $ 42,594

5,955 $
147
37,700

2,241 $
249
42,762

4,270 $
657
39,919

Not offset in the consolidated balance sheets
Cash collateral
$
Securities collateral
Total

(1,328)
(8,414)
$ 30,452 $ 32,947 $ 31,492 $ 32,852

(1,603) $
(9,252)

(14,196)

(12,740)

(604) $

(614) $

$ in millions

Not accounted for as hedges
Exchange-traded
OTC-cleared
Bilateral OTC
Total interest rates
OTC-cleared
Bilateral OTC
Total credit
Exchange-traded
OTC-cleared
Bilateral OTC
Total currencies
Exchange-traded
OTC-cleared
Bilateral OTC
Total commodities
Exchange-traded
Bilateral OTC
Total equities
Subtotal
Accounted for as hedges
OTC-cleared
Bilateral OTC
Total interest rates
OTC-cleared
Bilateral OTC
Total currencies
Subtotal
Total notional amounts

Notional Amounts as of December

2019

2018

$ 4,757,300
13,440,376
11,668,171
29,865,847
396,342
707,935
1,104,277
4,566
134,060
5,926,602
6,065,228
230,018
2,639
243,228
475,885
910,099
1,182,335
2,092,434
39,603,671

123,531
9,714
133,245
4,152
9,247
13,399
146,644
$39,750,315

$ 5,139,159
14,290,327
12,858,248
32,287,734
394,494
762,653
1,157,147
5,599
113,360
6,596,741
6,715,700
259,287
1,516
244,958
505,761
635,988
1,070,211
1,706,199
42,372,541

85,681
12,022
97,703
2,911
8,089
11,000
108,703
$42,481,244

In the tables above:
‰ Gross fair values exclude the effects of both counterparty
not

therefore

netting
representative of the firm’s exposure.

collateral,

and

are

‰ Where the firm has received or posted collateral under
credit support agreements, but has not yet determined
such agreements are enforceable, the related collateral has
not been netted.

‰ Notional amounts, which represent the sum of gross long
and short derivative contracts, provide an indication of
the volume of the firm’s derivative activity and do not
represent anticipated losses.

‰ Total gross fair value of derivatives included derivative
assets of $9.15 billion as of December 2019 and
$10.68 billion as of December 2018, and derivative
liabilities of $14.88 billion as of December 2019 and
$14.58 billion as of December 2018, which are not
subject to an enforceable netting agreement or are subject
to a netting agreement
the firm has not yet
that
determined to be enforceable.

Goldman Sachs 2019 Form 10-K 125

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Fair Value of Derivatives by Level
The table below presents derivatives on a gross basis by
level and product type, as well as the impact of netting.

$ in millions

Level 1

Level 2

Level 3

Total

As of December 2019

Assets
Interest rates
Credit
Currencies
Commodities
Equities
Gross fair value
Counterparty netting in levels
Subtotal
Cross-level counterparty netting
Cash collateral netting
Net fair value

Liabilities
Interest rates
Credit
Currencies
Commodities
Equities
Gross fair value
Counterparty netting in levels
Subtotal
Cross-level counterparty netting
Cash collateral netting
Net fair value

As of December 2018

Assets
Interest rates
Credit
Currencies
Commodities
Equities
Gross fair value
Counterparty netting in levels
Subtotal
Cross-level counterparty netting
Cash collateral netting
Net fair value

Liabilities
Interest rates
Credit
Currencies
Commodities
Equities
Gross fair value
Counterparty netting in levels
Subtotal
Cross-level counterparty netting
Cash collateral netting
Net fair value

–
–
–
21
24
–

$ 3 $ 279,443 $

3,525
187
490
687
5,446
(792)

17,204
80,178
10,648
48,953
436,426
(340,325)

557 $ 280,003
20,729
80,365
11,138
49,661
441,896
(341,117)
$ 24 $ 96,101 $ 4,654 $ 100,779
473
(56,000)
$ 45,252

–
–
–
(26)
(29)
–

(1,648)
(398)
(243)
(2,664)
(5,421)
792

(19,141)
(81,826)
(15,306)
(53,817)
(421,140)
340,325

$ (3) $(251,050) $ (468) $(251,521)
(20,789)
(82,224)
(15,549)
(56,507)
(426,590)
341,117
$(29) $ (80,815) $(4,629) $ (85,473)
(473)
42,144
$ (43,802)

–
–
–
10
22
–

$ 12 $ 235,680 $

3,444
681
431
940
5,904
(956)

15,992
85,837
17,193
47,168
401,870
(312,611)

408 $ 236,100
19,436
86,518
17,624
48,118
407,796
(313,567)
$ 22 $ 89,259 $ 4,948 $ 94,229
(659)
(48,724)
$ 44,846

–
–
–
(37)
(61)
–

(1,772)
(220)
(319)
(2,486)
(5,314)
956

(16,529)
(88,663)
(19,808)
(49,910)
(390,572)
312,611

$(24) $(215,662) $ (517) $(216,203)
(18,301)
(88,883)
(20,127)
(52,433)
(395,947)
313,567
$(61) $ (77,961) $(4,358) $ (82,380)
659
39,127
$ (42,594)

See Note 4 for an overview of the firm’s fair value
measurement policies and the valuation techniques and
significant inputs used to determine the fair value of
derivatives.

126 Goldman Sachs 2019 Form 10-K

In the table above:
‰ Gross fair values exclude the effects of both counterparty
netting and collateral netting, and therefore are not
representative of the firm’s exposure.

‰ Counterparty netting is reflected in each level to the
extent that receivable and payable balances are netted
within the same level and is included in counterparty
netting in levels. Where the counterparty netting is across
levels, the netting is included in cross-level counterparty
netting.

‰ Derivative assets are shown as positive amounts and

derivative liabilities are shown as negative amounts.

Significant Unobservable Inputs
The table below presents the amount of level 3 derivative
assets (liabilities), and ranges, averages and medians of
significant unobservable inputs used to value level 3
derivatives.

Level 3 Assets (Liabilities) and Range of Significant
Unobservable Inputs (Average/Median) as of December

$ in millions, except inputs

Interest rates, net

2019

$89

2018

$(109)

Correlation

(42)% to 81% (52%/60%) (10)% to 86% (66%/64%)

Volatility (bps)
Credit, net

31 to 150 (70/61)
$1,877

31 to 150 (74/65)
$1,672

Credit spreads (bps)

1 to 559 (96/53)

1 to 810 (109/63)

Upfront credit points

2 to 90 (38/32)

2 to 99 (44/40)

Recovery rates
Currencies, net

10% to 60% (31%/25%) 25% to 70% (40%/40%)
$461

$(211)

Correlation
Commodities, net

20% to 70% (37%/36%) 10% to 70% (40%/36%)
$112

$247

Volatility

9% to 57% (26%/25%) 10% to 75% (28%/27%)

Natural gas spread

Oil spread

Equities, net

Correlation

Volatility

$(1.93) to $1.69
($(0.16)/$(0.17))

$(4.86) to $19.77
($9.82/$11.15)
$(1,977)

$(2.32) to $4.68
($(0.26)/$(0.30))

$(3.44) to $16.62
($4.53/$3.94)
$(1,546)

(70)% to 99% (42%/45%) (68)% to 97% (48%/51%)

2% to 72% (14%/7%) 3% to 102% (20%/18%)

In the table above:
‰ Derivative assets are shown as positive amounts and

derivative liabilities are shown as negative amounts.

‰ Ranges represent the significant unobservable inputs that

were used in the valuation of each type of derivative.

‰ Averages represent the arithmetic average of the inputs
and are not weighted by the relative fair value or notional
of the respective financial instruments. An average greater
than the median indicates that the majority of inputs are
below the average. For example, the difference between
the average and the median for credit spreads indicates
that the majority of the inputs fall in the lower end of the
range.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

the highest

‰ The ranges, averages and medians of these inputs are not
representative of the appropriate inputs to use when
calculating the fair value of any one derivative. For
example,
rate
derivatives is appropriate for valuing a specific interest
rate derivative but may not be appropriate for valuing any
other interest rate derivative. Accordingly, the ranges of
inputs do not represent uncertainty in, or possible ranges
of, fair value measurements of level 3 derivatives.

correlation for

interest

‰ Interest rates, currencies and equities derivatives are
valued using option pricing models, credit derivatives are
valued using option pricing, correlation and discounted
cash flow models, and commodities derivatives are valued
using option pricing and discounted cash flow models.
‰ The fair value of any one instrument may be determined
using multiple valuation techniques. For example, option
pricing models and discounted cash flows models are
typically used together to determine fair value. Therefore,
the level 3 balance encompasses both of these techniques.
‰ Correlation within currencies and equities includes cross-

product type correlation.

‰ Natural gas spread represents the spread per million

British thermal units of natural gas.

‰ Oil spread represents the spread per barrel of oil and

refined products.

Range of Significant Unobservable Inputs
The following is information about the ranges of significant
unobservable inputs used to value the firm’s level 3
derivative instruments:
‰ Correlation. Ranges for correlation cover a variety of
underliers both within one product type (e.g., equity
index and equity single stock names) and across product
types (e.g., correlation of an interest rate and a currency),
as well as across regions. Generally, cross-product type
correlation inputs are used to value more complex
instruments and are lower than correlation inputs on
assets within the same derivative product type.

‰ Volatility. Ranges

cover numerous
underliers across a variety of markets, maturities and
strike prices. For example, volatility of equity indices is
generally lower than volatility of single stocks.

volatility

for

‰ Credit spreads, upfront credit points and recovery
rates. The ranges for credit spreads, upfront credit points
and recovery rates cover a variety of underliers (index and
single names), regions, sectors, maturities and credit
qualities (high-yield and investment-grade). The broad
range of this population gives rise to the width of the
ranges of significant unobservable inputs.

‰ Commodity prices and spreads. The ranges for
commodity prices and spreads cover variability in
products, maturities and delivery locations.

Sensitivity of Fair Value Measurement to Changes
in Significant Unobservable Inputs
The following is a description of the directional sensitivity
of the firm’s level 3 fair value measurements to changes in
significant unobservable inputs, in isolation, as of each
period-end:
‰ Correlation. In general, for contracts where the holder
benefits from the convergence of the underlying asset or
index prices (e.g., interest rates, credit spreads, foreign
inflation rates and equity prices), an
exchange rates,
increase in correlation results in a higher fair value
measurement.

‰ Volatility. In general, for purchased options, an increase
in volatility results in a higher fair value measurement.
‰ Credit spreads, upfront credit points and recovery
rates. In general, the fair value of purchased credit
protection increases as credit spreads or upfront credit
points increase or recovery rates decrease. Credit spreads,
upfront credit points and recovery rates are strongly
related to distinctive risk factors of
the underlying
reference obligations, which include reference entity-
specific factors, such as leverage, volatility and industry,
market-based risk factors, such as borrowing costs or
liquidity of the underlying reference obligation, and
macroeconomic conditions.

‰ Commodity prices and spreads.

for
contracts where the holder is receiving a commodity, an
increase in the spread (price difference from a benchmark
index due to differences in quality or delivery location) or
price results in a higher fair value measurement.

In general,

Due to the distinctive nature of each of the firm’s level 3
derivatives, the interrelationship of inputs is not necessarily
uniform within each product type.

Goldman Sachs 2019 Form 10-K 127

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Level 3 Rollforward
The table below presents a summary of the changes in fair
value for level 3 derivatives.

The table below presents information, by product type, for
derivatives included in the summary table above.

Year Ended December

2019

2018

$ in millions

Year Ended December

2019

2018

Interest rates, net
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Credit, net
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Currencies, net
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Commodities, net
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance
Equities, net
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

$ (109)
(24)
199
8
(13)
40
–
(12)
89

$ 1,672
42
273
146
(114)
(251)
108
1
$ 1,877

461
(32)
(327)
11
(1)
(306)
(14)
(3)
$ (211)

112
(34)
219
25
(81)
(6)
8
4
247

$(1,546)
166
(818)
254
(459)
759
(95)
(238)
$(1,977)

$ (410)
(51)
122
8
(2)
171
(9)
62
$ (109)

$ 1,505
(23)
2
53
(65)
244
(35)
(9)
$ 1,672

$ (181)
(51)
372
36
(25)
212
101
(3)
$ 461

47
18
61
42
(64)
12
21
(25)
$ 112

$(1,249)
(6)
694
473
(1,354)
(66)
(44)
6
$(1,546)

$ in millions

Total level 3 derivatives, net
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

$ 590
118
(454)
444
(668)
236
7
(248)
$ 25

$ (288)
(113)
1,251
612
(1,510)
573
34
31
$ 590

In the table above:
‰ Changes in fair value are presented for all derivative
assets and liabilities that are classified in level 3 as of the
end of the period.

‰ Net unrealized gains/(losses) relates to instruments that

were still held at period-end.

‰ Transfers between levels of the fair value hierarchy are
reported at the beginning of the reporting period in which
they occur. If a derivative was transferred into level 3
during a reporting period, its entire gain or loss for the
period is classified in level 3.

‰ Positive amounts for transfers into level 3 and negative
amounts for transfers out of level 3 represent net transfers
of derivative assets. Negative amounts for transfers into
level 3 and positive amounts for transfers out of level 3
represent net transfers of derivative liabilities.

‰ A derivative with level 1 and/or level 2 inputs is classified
in level 3 in its entirety if it has at least one significant
level 3 input.

‰ If there is one significant level 3 input, the entire gain or
loss from adjusting only observable inputs (i.e., level 1
and level 2 inputs) is classified in level 3.

‰ Gains or losses that have been classified in level 3
resulting from changes in level 1 or level 2 inputs are
frequently offset by gains or losses attributable to level 1
or level 2 derivatives and/or level 1, level 2 and level 3
trading cash instruments. As a result, gains/(losses)
included in the level 3 rollforward below do not
necessarily represent the overall impact on the firm’s
results of operations, liquidity or capital resources.

128 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Level 3 Rollforward Commentary
Year Ended December 2019. The net realized and
unrealized losses on level 3 derivatives of $336 million
(reflecting $118 million of net
realized gains and
$454 million of net unrealized losses) for 2019 included
losses of $305 million reported in market making and
$31 million reported in other principal transactions.

The net unrealized losses on level 3 derivatives for 2019
were primarily attributable to losses on certain equity
derivatives (primarily reflecting the impact of an increase in
equity prices),
losses on certain currency derivatives
(primarily reflecting the impact of a decrease in interest
rates and changes in foreign exchange rates), partially offset
by gains on certain credit derivatives (primarily reflecting
the impact of a decrease in interest rates), gains on certain
commodity derivatives (primarily reflecting the impact of
changes in commodity prices), and gains on certain interest
rate derivatives (primarily reflecting the impact of a
decrease in interest rates).

The drivers of transfers into level 3 derivatives during 2019
were not material.

Transfers out of level 3 derivatives during 2019 primarily
reflected transfers of certain equity derivative assets to
level 2, principally due to certain unobservable inputs no
longer being significant to the valuation of these derivatives.

Year Ended December 2018. The net realized and
unrealized gains on level 3 derivatives of $1.14 billion
(reflecting $113 million of net
realized losses and
$1.25 billion of net unrealized gains) for 2018 included
gains of $1.11 billion reported in market making and
$28 million reported in other principal transactions.

The net unrealized gains on level 3 derivatives for 2018
were primarily attributable to gains on certain equity
derivatives (reflecting the impact of a decrease in certain
equity prices) and gains on certain currency derivatives
(primarily reflecting the impact of changes in foreign
exchange rates).

Both transfers into level 3 derivatives and transfers out of
level 3 derivatives during 2018 were not material.

OTC Derivatives
The table below presents OTC derivative assets and
liabilities by tenor and major product type.

$ in millions

As of December 2019

Assets
Interest rates
Credit
Currencies
Commodities
Equities
Counterparty netting in tenors
Subtotal
Cross-tenor counterparty netting
Cash collateral netting
Total OTC derivative assets

Liabilities
Interest rates
Credit
Currencies
Commodities
Equities
Counterparty netting in tenors
Subtotal
Cross-tenor counterparty netting
Cash collateral netting
Total OTC derivative liabilities

As of December 2018

Assets
Interest rates
Credit
Currencies
Commodities
Equities
Counterparty netting in tenors
Subtotal
Cross-tenor counterparty netting
Cash collateral netting
Total OTC derivative assets

Liabilities
Interest rates
Credit
Currencies
Commodities
Equities
Counterparty netting in tenors
Subtotal
Cross-tenor counterparty netting
Cash collateral netting
Total OTC derivative liabilities

Less than
1 Year

1 - 5
Years

Greater than
5 Years

Total

678
10,236
2,507
7,332
(3,263)

$ 5,521 $15,183
3,259
5,063
1,212
4,509
(3,673)
$23,011 $25,553

1,368
12,486
2,796
5,755
(3,263)

$ 3,654 $ 9,113
4,052
6,906
1,950
7,381
(3,673)
$22,796 $25,729

807
10,976
4,978
4,962
(3,409)

$ 2,810 $13,177
3,676
5,076
2,101
5,244
(3,883)
$21,124 $25,391

1,127
13,553
4,271
9,278
(3,409)

$ 4,193 $ 9,153
4,173
6,871
2,663
5,178
(3,883)
$29,013 $24,155

3,183
6,245
302
1,294
(2,332)

$57,394 $ 78,098
7,120
21,544
4,021
13,135
(9,268)
$66,086 $114,650
(15,639)
(56,000)
$ 43,011

1,760
4,036
3,804
3,367
(2,332)

$36,470 $ 49,237
7,180
23,428
8,550
16,503
(9,268)
$47,105 $ 95,630
(15,639)
(42,144)
$ 37,847

3,364
6,486
145
1,329
(2,822)

$47,426 $ 63,413
7,847
22,538
7,224
11,535
(10,114)
$55,928 $102,443
(13,143)
(48,724)
$ 40,576

1,412
4,474
3,145
3,060
(2,822)

$29,377 $ 42,723
6,712
24,898
10,079
17,516
(10,114)
$38,646 $ 91,814
(13,143)
(39,127)
$ 39,544

In the table above:
‰ Tenor is based on remaining contractual maturity.
‰ Counterparty netting within the same product type and
tenor category is included within such product type and
tenor category.

‰ Counterparty netting across product types within the
same tenor category is included in counterparty netting in
tenors. Where the counterparty netting is across tenor
categories,
included in cross-tenor
counterparty netting.

the netting is

Goldman Sachs 2019 Form 10-K 129

‰ Total Return Swaps. A total return swap transfers the
risks relating to economic performance of a reference
obligation from the protection buyer to the protection
seller. Typically, the protection buyer receives a floating
rate of interest and protection against any reduction in
fair value of the reference obligation, and the protection
seller receives the cash flows associated with the reference
obligation, plus any increase in the fair value of the
reference obligation.

The firm economically hedges its exposure to written credit
derivatives primarily by entering into offsetting purchased
credit derivatives with identical underliers. Substantially all
of the firm’s purchased credit derivative transactions are
with financial
institutions and are subject to stringent
collateral thresholds. In addition, upon the occurrence of a
specified trigger event, the firm may take possession of the
reference obligations underlying a particular written credit
derivative, and consequently may, upon liquidation of the
reference obligations, recover amounts on the underlying
reference obligations in the event of default.

As of December 2019, written credit derivatives had a total
gross notional amount of $522.57 billion and purchased
credit derivatives had a total gross notional amount of
$581.76 billion, for total net notional purchased protection
of $59.19 billion. As of December 2018, written credit
derivatives had a total gross notional amount of
$554.17 billion and purchased credit derivatives had a total
gross notional amount of $603.00 billion, for total net
notional purchased protection of $48.83 billion. The firm’s
written and purchased credit derivatives primarily consist
of credit default swaps.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Credit Derivatives
The firm enters into a broad array of credit derivatives to
facilitate client transactions and to manage the credit risk
associated with market-making and investing and financing
activities. Credit derivatives are actively managed based on
the firm’s net risk position. Credit derivatives are generally
individually negotiated contracts and can have various
settlement and payment conventions. Credit events include
failure to pay, bankruptcy, acceleration of indebtedness,
restructuring, repudiation and dissolution of the reference
entity.

into the following types of credit

The firm enters
derivatives:
‰ Credit Default Swaps. Single-name credit default swaps
protect the buyer against the loss of principal on one or
more bonds, loans or mortgages (reference obligations) in
the event the issuer of the reference obligations suffers a
credit event. The buyer of protection pays an initial or
periodic premium to the seller and receives protection for
the period of the contract. If there is no credit event, as
defined in the contract, the seller of protection makes no
payments to the buyer. If a credit event occurs, the seller
of protection is required to make a payment to the buyer,
calculated according to the terms of the contract.

‰ Credit Options. In a credit option, the option writer
assumes the obligation to purchase or sell a reference
obligation at a specified price or credit spread. The option
purchaser buys the right, but does not assume the
obligation, to sell the reference obligation to, or purchase
it from, the option writer. The payments on credit options
depend either on a particular credit spread or the price of
the reference obligation.

‰ Credit

Indices, Baskets and Tranches. Credit
derivatives may reference a basket of single-name credit
default swaps or a broad-based index. If a credit event
occurs in one of the underlying reference obligations, the
protection seller pays the protection buyer. The payment
is typically a pro-rata portion of the transaction’s total
notional amount based on the underlying defaulted
reference obligation. In certain transactions, the credit
risk of a basket or index is separated into various portions
(tranches), each having different levels of subordination.
The most junior tranches cover initial defaults and once
these junior
losses exceed the notional amount of
tranches, any excess loss is covered by the next most
senior tranche.

130 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents
derivatives.

information about credit

Credit Spread on Underlier (basis points)

$ in millions

0 - 250

As of December 2019

251 -
500

501 -
1,000

Greater
than
1,000

Total

Maximum Payout/Notional Amount of Written Credit Derivatives by Tenor
759 $ 2,953 $154,433
Less than 1 year
316,786
1 – 5 years
Greater than 5 years
51,350
$484,119 $19,540 $ 6,668 $12,242 $522,569
Total

$143,566 $ 7,155 $

292,444
48,109

10,125
2,260

8,735
554

5,482
427

$395,127 $14,492 $ 5,938 $10,543 $426,100
$149,092 $ 2,617 $ 1,599 $ 2,354 $155,662

Maximum Payout/Notional Amount of Purchased Credit Derivatives
Offsetting
Other
Fair Value of Written Credit Derivatives
Asset
Liability
Net asset/(liability) $ 11,864 $

202 $ 13,911
5,549
(2) $ (212) $ (3,288) $ 8,362

$ 13,103 $
1,239

160 $
372

446 $
448

3,490

As of December 2018

Maximum Payout/Notional Amount of Written Credit Derivatives by Tenor
$145,828 $ 9,763 $ 1,151 $ 3,848 $160,590
Less than 1 year
340,683
13,835
1 – 5 years
52,899
1,121
Greater than 5 years
$489,746 $36,829 $16,107 $11,490 $554,172
Total

298,228
45,690

21,100
5,966

7,520
122

$413,445 $25,373 $14,243 $ 8,841 $461,902
$115,754 $14,273 $ 7,555 $ 3,513 $141,095

Maximum Payout/Notional Amount of Purchased Credit Derivatives
Offsetting
Other
Fair Value of Written Credit Derivatives
Asset
Liability
Net asset/(liability)

80 $ 9,374
7,972
$ 6,666 $ (872) $ (1,104) $ (3,288) $ 1,402

$ 8,656 $
1,990

543 $

95 $

3,368

1,199

1,415

In the table above:
‰ Fair values exclude the effects of both netting of
receivable balances with payable balances under
enforceable netting agreements, and netting of cash
received or posted under enforceable credit support
agreements, and therefore are not representative of the
firm’s credit exposure.

‰ Tenor is based on remaining contractual maturity.
‰ The credit spread on the underlier, together with the tenor
of the contract, are indicators of payment/performance
risk. The firm is less likely to pay or otherwise be required
to perform where the credit spread and the tenor are
lower.

‰ Offsetting purchased credit derivatives represent

the
notional amount of purchased credit derivatives that
economically hedge written credit derivatives with
identical underliers.

‰ Other purchased credit derivatives represent the notional
amount of all other purchased credit derivatives not
included in offsetting.

Impact of Credit and Funding Spreads on Derivatives
The firm realizes gains or losses on its derivative contracts.
These gains or losses, include credit valuation adjustments
(CVA) relating to uncollateralized derivative assets and
liabilities, which represents the gains or losses (including
hedges) attributable to the impact of changes in credit
exposure, counterparty credit spreads,
liability funding
spreads (which includes the firm’s own credit), probability
of default and assumed recovery. These gains or losses also
include funding valuation adjustments (FVA) relating to
uncollateralized derivative assets, which represents the
gains or losses (including hedges) attributable to the impact
of changes in expected funding exposures and funding
spreads.

The table below presents information about CVA and FVA.

$ in millions

CVA, net of hedges
FVA, net of hedges
Total

Year Ended December

2019

2018

$(289)
485
$ 196

$ 371
(194)
$ 177

2017

$ 66
288
$354

Bifurcated Embedded Derivatives
The table below presents the fair value and the notional
amount of derivatives that have been bifurcated from their
related borrowings.

$ in millions

Fair value of assets
Fair value of liabilities
Net liability

Notional amount

As of December

2019

2018

$ 1,148
1,717
569

980
1,297
317

$11,003

$10,229

In the table above, derivatives that have been bifurcated
from their related borrowings are recorded at fair value and
primarily consist of interest rate, equity and commodity
products. These derivatives are included in unsecured short-
and long-term borrowings with the related borrowings.

Derivatives with Credit-Related Contingent Features
Certain of the firm’s derivatives have been transacted under
bilateral agreements with counterparties who may require
the firm to post collateral or terminate the transactions
based on changes in the firm’s credit ratings. The firm
these bilateral agreements by
assesses the impact of
determining the collateral or termination payments that
would occur assuming a downgrade by all rating agencies.
A downgrade by any one rating agency, depending on the
agency’s relative ratings of the firm at the time of the
downgrade, may have an impact which is comparable to
the impact of a downgrade by all rating agencies.

Goldman Sachs 2019 Form 10-K 131

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents information about net derivative
liabilities under bilateral agreements (excluding collateral
posted), the fair value of collateral posted and additional
collateral or termination payments that could have been
called by counterparties in the event of a one- or two-notch
downgrade in the firm’s credit ratings.

$ in millions

As of December

2019

2018

Net derivative liabilities under bilateral agreements $32,800
Collateral posted
$28,510
Additional collateral or termination payments:

$29,583
$24,393

One-notch downgrade
Two-notch downgrade

$
358
$ 1,268

$
$

262
959

Hedge Accounting
The firm applies hedge accounting for (i) certain interest
rate swaps used to manage the interest rate exposure of
certain fixed-rate unsecured long-term and short-term
borrowings and certain fixed-rate certificates of deposit and
(ii) certain foreign currency forward contracts and foreign
foreign
currency-denominated debt used to manage
currency exposures on the firm’s net investment in certain
non-U.S. operations.

To qualify for hedge accounting, the hedging instrument
must be highly effective at reducing the risk from the
exposure being hedged. Additionally,
the firm must
formally document the hedging relationship at inception
and assess the hedging relationship at least on a quarterly
basis to ensure the hedging instrument continues to be
highly effective over the life of the hedging relationship.

Fair Value Hedges
The firm designates certain interest rate swaps as fair value
hedges of certain fixed-rate unsecured long-term and short-
term debt and fixed-rate certificates of deposit. These
interest rate swaps hedge changes in fair value attributable
to the designated benchmark interest rate (e.g., London
Interbank Offered Rate (LIBOR) or Overnight Index Swap
Rate), effectively converting a substantial portion of fixed-
rate obligations into floating-rate obligations.

The firm applies a statistical method that utilizes regression
analysis when assessing the effectiveness of its fair value
hedging relationships in achieving offsetting changes in the
fair values of the hedging instrument and the risk being
hedged (i.e., interest rate risk). An interest rate swap is
considered highly effective in offsetting changes in fair value
attributable to changes in the hedged risk when the
regression analysis results in a coefficient of determination
of 80% or greater and a slope between 80% and 125%.

132 Goldman Sachs 2019 Form 10-K

For qualifying fair value hedges, gains or losses on
derivatives are included in interest expense. The change in
fair value of the hedged item attributable to the risk being
hedged is reported as an adjustment to its carrying value
(hedging adjustment) and is also included in interest
expense. When a derivative is no longer designated as a
hedge, any remaining difference between the carrying value
and par value of the hedged item is amortized to interest
expense over the remaining life of the hedged item using the
effective interest method. See Note 23 for
further
information about interest income and interest expense.

The table below presents the gains/(losses) from interest
rate derivatives accounted for as hedges and the related
hedged borrowings and deposits, and total interest expense.

Year Ended December

$ in millions

2019

2018

2017

Interest rate hedges
Hedged borrowings and deposits
Interest expense

$ 3,196
$ (3,657)
$17,376

$ (1,854)
$ 1,295
$15,912

$ (2,867)
$ 2,183
$10,181

In the table above:
‰ The difference between gains/(losses) from interest rate
hedges and hedged borrowings and deposits was
primarily due to the amortization of prepaid credit
spreads resulting from the passage of time.

‰ Hedge ineffectiveness was $(684) million for 2017.

The table below presents the carrying value of the hedged
items that are currently designated in a hedging relationship
and the related cumulative hedging adjustment (increase/
(decrease)) from current and prior hedging relationships
included in such carrying values.

$ in millions

As of December 2019
Deposits
Unsecured short-term borrowings
Unsecured long-term borrowings

As of December 2018

Deposits
Unsecured short-term borrowings
Unsecured long-term borrowings

Carrying
Value

$19,634
$ 6,008
$87,874

$11,924
$ 4,450
$68,839

Cumulative
Hedging
Adjustment

$ 200
$
28
$7,292

$ (156)
$
(12)
$2,759

In the table above, cumulative hedging adjustment included
$3.48 billion as of December 2019 and $1.74 billion as of
December 2018 of hedging adjustments from prior hedging
relationships that were de-designated and substantially all
were related to unsecured long-term borrowings.

In addition, cumulative hedging adjustments for items no
longer designated in a hedging
relationship were
$425 million as of December 2019 and $1.51 billion as of
December 2018 and substantially all were related to
unsecured long-term borrowings.

The table below presents the gains/(losses)
investment hedging.

from net

$ in millions

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Net Investment Hedges
The firm seeks to reduce the impact of fluctuations in
foreign exchange rates on its net investments in certain
non-U.S. operations through the use of foreign currency
forward contracts and foreign currency-denominated debt.
For foreign currency forward contracts designated as
hedges, the effectiveness of the hedge is assessed based on
the overall changes in the fair value of the forward contracts
(i.e., based on changes in forward rates). For foreign
currency-denominated debt designated as a hedge, the
effectiveness of the hedge is assessed based on changes in
spot rates. For qualifying net investment hedges, all gains or
losses on the hedging instruments are included in currency
translation.

$ in millions

Hedges:

Year Ended December

2019

2018

2017

Foreign currency forward contract
Foreign currency-denominated debt

$ 6
$(19)

$577
$ (50)

$(805)
$ (67)

comprehensive

Gains or losses on individual net investments in non-U.S.
operations are reclassified to earnings from accumulated
other
income/(loss) when such net
investments are sold or substantially liquidated. The gross
and net gains and losses on hedges and the related net
investments in non-U.S. operations reclassified to earnings
from accumulated other comprehensive income/(loss) were
not material for both 2019 and 2018. The net gain
reclassified
other
comprehensive income was $41 million (reflecting a gain of
$205 million related to hedges and a loss of $164 million on
the related net investments in non-U.S. operations) for
2017. The gain/(loss) related to ineffectiveness was not
material for 2017.

from accumulated

earnings

The firm had designated $3.05 billion as of December 2019
and $1.99 billion as of December 2018 of foreign currency-
denominated debt, included in unsecured long-term and
short-term borrowings, as hedges of net investments in
non-U.S. subsidiaries.

Note 8.
Investments

Investments includes debt instruments and equity securities
that are accounted for at fair value and are generally held by
the firm in connection with its
long-term investing
activities. In addition, investments includes debt securities
classified as available-for-sale and held-to-maturity that are
generally held in connection with the firm’s asset-liability
management activities. Investments also consists of equity
securities that are accounted for under the equity method.

The table below presents information about investments.

Equity securities, at fair value
Debt instruments, at fair value
Available-for-sale securities, at fair value
Investments, at fair value
Held-to-maturity securities
Equity method investments
Total investments

As of December

2019

2018

$22,163
16,570
19,094
57,827
5,825
285
$63,937

$21,430
12,117
12,032
45,579
1,288
357
$47,224

Equity Securities and Debt Instruments, at Fair Value
Equity securities and debt instruments, at fair value are
accounted for at fair value either under the fair value option
or in accordance with other U.S. GAAP, and the related fair
value gains and losses are recognized in earnings.

Equity Securities, at Fair Value. Equity securities, at fair
value consists of the firm’s public and private equity-related
investments in corporate and real estate entities.

The table below presents
securities, at fair value.

information about equity

$ in millions

Equity securities, at fair value

Equity Type
Public equity
Private equity
Total

Asset Class
Corporate
Real estate
Total

Region
Americas
EMEA
Asia
Total

As of December

2019

2018

$22,163

$21,430

11%
89%
100%

79%
21%
100%

50%
17%
33%
100%

7%
93%
100%

81%
19%
100%

53%
16%
31%
100%

Goldman Sachs 2019 Form 10-K 133

Substantially all of the firm’s investments in funds at NAV
consist of investments in firm-sponsored private equity,
credit, real estate and hedge funds where the firm co-invests
with third-party investors.

Private equity funds primarily invest in a broad range of
leveraged buyouts,
including
industries worldwide,
recapitalizations,
and distressed
growth investments
investments. Credit funds generally invest in loans and
other fixed income instruments and are focused on
for leveraged and
providing private high-yield capital
management
recapitalizations,
transactions,
buyout
financings, refinancings, acquisitions and restructurings for
private equity firms, private family companies and
corporate issuers. Real estate funds
invest globally,
primarily in real estate companies, loan portfolios, debt
recapitalizations and property. Private equity, credit and
real estate funds are closed-end funds in which the firm’s
investments are generally not eligible for redemption.
Distributions will be received from these funds as the
underlying assets are liquidated or distributed, the timing of
which is uncertain.

The firm also invests in hedge funds, primarily multi-
disciplinary hedge funds that employ a fundamental
bottom-up investment approach across various asset classes
and strategies. The firm’s investments in hedge funds
primarily include interests where the underlying assets are
illiquid in nature, and proceeds from redemptions will not
be received until the underlying assets are liquidated or
distributed, the timing of which is uncertain.

Private equity, hedge and real estate funds described above
are primarily “covered funds” as defined in the Volcker
Rule of the U.S. Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act). The Board of
Governors of the Federal Reserve System (FRB) extended
the conformance period to July 2022 for the firm’s
investments in, and relationships with, certain legacy
“illiquid funds” (as defined in the Volcker Rule) that were
in place prior to December 2013. This extension is
applicable to substantially all of the firm’s remaining
investments in, and relationships with, such covered funds.
Substantially all of the credit funds described above are not
covered funds.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

In the table above:
‰ Equity securities, at

fair value included investments
accounted for at fair value under the fair value option
where the firm would otherwise apply the equity method
of accounting of $8.23 billion as of December 2019 and
$7.91 billion as of December 2018. Gains recognized by
the firm as a result of changes in the fair value of such
securities was $1.29 billion for 2019 and $1.41 billion for
2018. These gains are included in other principal
transactions in the consolidated statements of earnings.
‰ Equity securities, at fair value included $3.22 billion as of
December 2019 and $3.39 billion as of December 2018
of investments in funds that are measured at NAV.
‰ EMEA represents Europe, Middle East and Africa.

Debt Instruments, at Fair Value. Debt instruments, at
fair value primarily includes mezzanine debt, senior and
distressed debt.

table below presents

The
instruments, at fair value.

information about debt

$ in millions

Corporate debt securities
Securities backed by real estate
Other
Total

As of December

2019

2018

$11,821
2,619
2,130
$16,570

$ 8,434
1,775
1,908
$12,117

In the table above:
‰ Corporate debt securities includes convertible debentures.
‰ Other primarily includes money market instruments and

time deposits.

‰ Total debt instruments included $983 million as of
December 2019 and $548 million as of December 2018
of investments in credit funds that are measured at NAV.

Investments in Funds at Net Asset Value Per Share.
Equity securities and debt instruments, at fair value include
investments in funds that are measured at NAV of the
investment fund. The firm uses NAV to measure the fair
value of fund investments when (i) the fund investment does
not have a readily determinable fair value and (ii) the NAV
of the investment fund is calculated in a manner consistent
with the measurement principles of investment company
accounting, including measurement of the investments at
fair value.

134 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents the fair value of investments in
funds at NAV and the related unfunded commitments.

$ in millions

As of December 2019

Private equity funds
Credit funds
Hedge funds
Real estate funds
Total

As of December 2018

Private equity funds
Credit funds
Hedge funds
Real estate funds
Total

Fair Value of
Investments

Unfunded
Commitments

$2,767
983
125
331
$4,206

$2,683
548
161
544
$3,936

$ 765
820
–
196
$1,781

$ 809
1,099
–
203
$2,111

Available-for-Sale Securities
Available-for-sale securities are accounted for at fair value,
and the related unrealized fair value gains and losses are
included in accumulated other comprehensive income/
(loss).

table

The
available-for-sale securities by tenor.

below presents

information

about

$ in millions

As of December 2019

Less than 5 years
Greater than 5 years
Total

As of December 2018

Less than 5 years
Greater than 5 years
Total

Amortized
Cost

Fair
Value

Weighted
Average
Yield

$14,063
4,974
$19,037

$14,041
5,053
$19,094

$ 5,954
6,231
$12,185

$ 5,879
6,153
$12,032

1.53%
2.10%
1.68%

2.10%
2.44%
2.28%

In the table above:
‰ Available-for-sale securities consists of U.S. government
obligations that were classified in level 1 of the fair value
hierarchy as of both December 2019 and December 2018.
‰ The firm sold $9.58 billion of available-for-sale securities
during 2019. The realized gains on sales of such securities
were $181 million for 2019, and were included in the
consolidated statements of earnings. The sales and
realized gains during 2018 were not material.

‰ The gross unrealized gains included in accumulated other
comprehensive income/(loss) were $137 million and the
gross unrealized losses included in accumulated other
comprehensive income/(loss) were not material as of
December 2019. The gross unrealized losses included in
accumulated other comprehensive income/(loss) were
$153 million as of December 2018 and were related to
securities in a continuous unrealized loss position for
greater than a year.

‰ Available-for-sale securities in an unrealized loss position
are periodically reviewed for other-than-temporary
impairment. The firm considers various factors, including
market conditions, changes in issuer credit ratings,
severity and duration of the unrealized losses, and the
intent and ability to hold the security until recovery to
determine if the securities are other-than-temporarily
impaired. There were no such impairments during
2019, 2018 or 2017.

Fair Value of Investments by Level
The table below presents investments accounted for at fair
value by level within the fair value hierarchy.

$ in millions

Level 1

Level 2

Level 3

Total

As of December 2019

Government and agency obligations:

U.S.
Non-U.S.

Corporate debt securities
Securities backed by real estate
Other debt obligations
Equity securities
Subtotal
Investments in funds at NAV
Total investments

– $

$19,094 $

–
48
–
732
251

36
7,325
2,024
1,043
7,786

– $19,094
36
–
10,838
3,465
2,619
595
2,094
319
18,940
10,903
$20,125 $18,214 $15,282 $53,621
4,206
$57,827

As of December 2018

Government and agency obligations:

U.S.
Non-U.S.

Corporate debt securities
Securities backed by real estate
Other debt obligations
Equity securities
Subtotal
Investments in funds at NAV
Total investments

– $

$12,044 $

–
23
–
719
458

44
5,323
1,318
917
7,249

– $12,044
44
–
7,886
2,540
1,775
457
1,852
216
18,042
10,335
$13,244 $14,851 $13,548 $41,643
3,936
$45,579

See Note 4 for an overview of the firm’s fair value
measurement policies and the valuation techniques and
significant inputs used to determine the fair value of
investments.

Goldman Sachs 2019 Form 10-K 135

‰ The fair value of any one instrument may be determined
using multiple valuation techniques. For example, market
comparables and discounted cash flows may be used
together to determine fair value. Therefore, the level 3
balance encompasses both of these techniques.

‰ Recovery rate was not significant to the valuation of
level 3 securities backed by real estate as of December
2018.

Level 3 Rollforward
The table below presents a summary of the changes in fair
value for level 3 investments.

$ in millions

Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Year Ended December

2019

$13,548
252
1,295
1,322
(986)
(1,192)
2,646
(1,603)
$15,282

2018

$12,208
237
834
1,366
(1,512)
(1,451)
3,456
(1,590)
$13,548

In the table above:
‰ Changes in fair value are presented for all investments
that are classified in level 3 as of the end of the period.
‰ Net unrealized gains/(losses) relates to instruments that

were still held at period-end.

‰ Transfers between levels of the fair value hierarchy are
reported at the beginning of the reporting period in which
they occur. If an investment was transferred to level 3
during a reporting period, its entire gain or loss for the
period is classified in level 3.

‰ For level 3 investments, increases are shown as positive
amounts, while decreases are shown as negative amounts.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Significant Unobservable Inputs
The table below presents the amount of level 3 investments,
and ranges
significant
unobservable inputs used to value such investments.

and weighted averages of

Level 3 Assets and Range of Significant Unobservable
Inputs (Weighted Average) as of December

$ in millions

2019

2018

Corporate debt securities
Level 3 assets
Yield
Recovery rate
Duration (years)
Multiples
Securities backed by real estate
Level 3 assets
Yield
Recovery rate
Duration (years)
Other debt obligations
Level 3 assets
Yield
Duration (years)
Equity securities
Level 3 assets
Multiples
Discount rate/yield
Capitalization rate

$3,465

$2,540
5.5% to 29.8% (12.0%) 6.5% to 32.3% (12.7%)
25.0% to 100.0% (68.5%) 50.5% to 78.0% (74.6%)
2.0 to 4.7 (3.8)
1.3x to 20.3x (7.7x)

2.9 to 5.9 (5.0)
0.6x to 24.4x (7.0x)

$595

$457
9.4% to 20.3% (16.0%) 9.5% to 20.3% (15.5%)
33.1% to 34.4% (33.5%) 32.9% to 39.7% (37.9%)
1.1 to 4.8 (2.2)

0.4 to 3.0 (0.9)

$319
3.4% to 5.2% (4.5%)
4.0 to 8.0 (6.7)

$216
4.1% to 6.1% (5.2%)
4.0 to 9.0 (7.5)

$10,903
0.8x to 36.0x (8.0x)

$10,335
1.0x to 23.6x (8.1x)
2.1% to 20.3% (13.4%) 7.2% to 22.1% (14.4%)
3.5% to 12.3% (6.1%)

3.6% to 15.1% (6.1%)

In the table above:
‰ Ranges represent the significant unobservable inputs that
were used in the valuation of each type of investment.
‰ Weighted averages are calculated by weighting each input

by the relative fair value of the investment.

‰ The ranges and weighted averages of these inputs are not
representative of the appropriate inputs to use when
calculating the fair value of any one investment. For
example, the highest multiple for private equity securities
is appropriate for valuing a specific private equity security
but may not be appropriate for valuing any other private
equity security. Accordingly, the ranges of inputs do not
represent uncertainty in, or possible ranges of, fair value
measurements of level 3 investments.

‰ Increases in yield, discount rate, capitalization rate or
duration used in the valuation of level 3 investments
would have resulted in a lower fair value measurement,
while increases in recovery rate or multiples would have
resulted in a higher fair value measurement as of both
December 2019 and December 2018. Due to the
distinctive nature of each level 3 investment,
the
interrelationship of inputs is not necessarily uniform
within each product type.

‰ Corporate debt securities, securities backed by real estate
and other debt obligations are valued using discounted
cash flows, and equity securities are valued using market
comparables and discounted cash flows.

136 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents information, by product type, for
investments included in the summary table above.

$ in millions

Corporate debt securities
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Securities backed by real estate
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Equity securities
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Other debt obligations
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Ending balance

Year Ended December

2019

2018

$ 2,540
64
198
297
(43)
(274)
1,106
(423)
$ 3,465

457
27
–
238
(82)
(98)
63
(10)
595

$10,335
160
1,096
669
(852)
(812)
1,477
(1,170)
$10,903

216
1
1
118
(9)
(8)
319

$ 1,722
62
66
369
(231)
(358)
1,077
(167)
$ 2,540

662
20
(9)
109
(97)
(56)
76
(248)
457

$ 9,626
155
775
819
(1,161)
(1,007)
2,303
(1,175)
$10,335

198
–
2
69
(23)
(30)
216

Level 3 Rollforward Commentary
Year Ended December 2019. The net realized and
unrealized gains on level 3 investments of $1.55 billion
(reflecting $252 million of net
realized gains and
$1.30 billion of net unrealized gains) for 2019 included
gains of $1.44 billion reported in other principal
transactions and $108 million reported in interest income.

The net unrealized gains on level 3 investments for 2019
primarily reflected gains on private equity securities,
principally driven by corporate performance and company-
specific events.

Transfers into level 3 during 2019 primarily reflected
transfers of certain private equity securities and corporate
debt securities from level 2, principally due to reduced price
transparency as a result of a lack of market evidence,
including fewer transactions in these instruments.

Transfers out of level 3 investments during 2019 primarily
reflected transfers of certain private equity securities and
corporate debt securities to level 2, principally due to
increased price transparency as a result of market evidence,
including market transactions in these instruments.

Year Ended December 2018. The net realized and
unrealized gains on level 3 investments of $1.07 billion
(reflecting $237 million of net
realized gains and
$834 million of net unrealized gains) for 2018 included
gains of $848 million reported in other principal
transactions and $223 million reported in interest income.

The net unrealized gains on level 3 investments for 2018
primarily reflected gains on private equity securities,
principally driven by corporate performance.

Transfers into level 3 during 2018 primarily reflected
transfers of certain private equity securities and corporate
debt instruments from level 2, principally due to reduced
price transparency as a result of a lack of market evidence,
including fewer transactions in these instruments.

Transfers out of level 3 investments during 2018 primarily
reflected transfers of certain private equity securities to
level 2, principally due to increased price transparency as a
result of market evidence, including market transactions in
these instruments.

Goldman Sachs 2019 Form 10-K 137

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Held-to-Maturity Securities
Held-to-maturity securities are accounted for at amortized
cost, net of other-than-temporary impairments.

table

The
held-to-maturity securities by type and tenor.

below presents

information

about

$ in millions

As of December 2019

Less than 5 years
Greater than 5 years
Total U.S. government obligations
Less than 5 years
Greater than 5 years
Total securities backed by real estate
Total held-to-maturity securities

As of December 2018

Less than 5 years
Total U.S. government obligations
Less than 5 years
Greater than 5 years
Total securities backed by real estate
Total held-to-maturity securities

Amortized
Cost

Fair
Value

Weighted
Average
Yield

$3,534
1,534
5,068
6
751
757
$5,825

$ 498
498
5
785
790
$1,288

$3,613
1,576
5,189
6
769
775
$5,964

$ 511
511
6
800
806
$1,317

2.40%
2.25%
2.35%
4.16%
1.67%
1.69%
2.27%

3.08%
3.08%
4.61%
1.78%
1.80%
2.29%

In the table above:
‰ Substantially all of the securities backed by real estate

consist of securities backed by residential real estate.

‰ As these securities are not accounted for at fair value, they
are not included in the firm’s fair value hierarchy in
Notes 4 through 10. Had these securities been included in
the
fair value hierarchy, U.S. government
obligations would have been classified in level 1 and
substantially all securities backed by real estate would
have been classified in level 2 of the fair value hierarchy as
of both December 2019 and December 2018.

firm’s

‰ The gross unrealized gains were $141 million and the
gross unrealized losses were not material as of
December 2019. Gross unrealized gains/(losses) were not
material as of December 2018.

‰ Held-to-maturity securities in an unrealized loss position
are periodically reviewed for other-than-temporary
impairment. The firm considers various factors, including
market conditions, changes in issuer credit ratings,
severity and duration of the unrealized losses, and the
intent and ability to hold the security until recovery to
determine if the securities are other-than-temporarily
impaired. There were no such impairments during
2019, 2018 or 2017.

138 Goldman Sachs 2019 Form 10-K

Note 9.
Loans

loans held for investment

Loans include (i)
that are
accounted for at amortized cost net of allowance for loan
losses or at fair value under the fair value option and (ii)
loans held for sale that are accounted for at the lower of
cost or fair value. Interest on loans is recognized over the
life of the loan and is recorded on an accrual basis.

The table below presents information about loans.

$ in millions

As of December 2019

Loan Type
Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer
Credit cards
Other
Total loans, gross
Allowance for loan losses
Total loans

As of December 2018

Loan Type
Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer
Other
Total loans, gross
Allowance for loan losses
Total loans

Amortized
Cost

Fair
Value

Held For
Sale

Total

$41,129
20,116
13,258
6,132
4,747
1,858
3,396
90,636
(1,441)
$89,195

$ 3,224
7,824
1,876
792
–
–
670
14,386
–
$14,386

$37,283
17,518
11,441
7,284
4,536
3,594
81,656
(1,066)
$80,590

$ 2,819
7,250
1,718
973
–
656
13,416
–
$13,416

$1,954
–
2,609
34
–
–
726
5,323
–
$5,323

$2,273
–
1,019
44
–
495
3,831
–
$3,831

$ 46,307
27,940
17,743
6,958
4,747
1,858
4,792
110,345
(1,441)
$108,904

$ 42,375
24,768
14,178
8,301
4,536
4,745
98,903
(1,066)
$ 97,837

The following is a description of the loan types in the table
above:
‰ Corporate. Corporate

term loans,
loans
revolving lines of credit, letter of credit facilities and
bridge loans, and are principally used for operating and
general corporate purposes, or in connection with
acquisitions. Corporate loans may be secured or
unsecured, depending on the loan purpose, the risk profile
of the borrower and other factors.

includes

‰ Wealth Management. Wealth management

loans
includes loans extended by the private bank to its wealth
management and other clients. These loans are used to
finance investments in both financial and nonfinancial
assets, bridge cash flow timing gaps or provide liquidity
for other needs. Substantially all of such loans are secured
by securities, residential real estate, commercial real estate
or other assets.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

‰ Commercial Real Estate. Commercial real estate loans
includes loans extended by the firm, other than those
extended by the private bank,
that are directly or
indirectly secured by hotels, retail stores, multifamily
housing complexes and commercial and industrial
properties. Commercial real estate loans also includes
loans purchased by the firm.

‰ Residential Real Estate. Residential real estate loans
primarily includes loans extended by the firm, other than
those extended by the private bank, to clients who
warehouse assets that are directly or indirectly secured by
residential real estate and loans purchased by the firm.
‰ Consumer. Consumer loans are unsecured and are

originated by the firm.

‰ Credit Cards. Credit card loans are loans made pursuant
to revolving lines of credit issued to consumers by the firm.
‰ Other. Other loans primarily includes loans extended to
clients who warehouse assets that are directly or indirectly
including auto loans and
secured by consumer loans,
private student loans. Other loans also includes unsecured
consumer and credit card loans purchased by the firm.

PCI Loans
Loans accounted for at amortized cost include PCI loans,
which represent acquired loans or pools of loans with
evidence of credit deterioration subsequent
to their
origination and where it is probable, at acquisition, that the
firm will not be able to collect all contractually required
payments. PCI loans are initially recorded at the acquisition
price and the difference between the acquisition price and
the expected cash flows (accretable yield) is recognized as
interest income over the life of such loans on an effective
yield method.

The tables below present information about PCI loans.

$ in millions

Commercial real estate
Residential real estate
Other
Total gross carrying value

Total outstanding principal balance
Total accretable yield

As of December

2019

2018

$ 455
1,167
–
$1,622

$3,231
$ 220

$ 581
2,457
4
$3,042

$5,576
$ 459

In January 2020, the firm elected the fair value option for
these PCI loans in accordance with ASU No. 2016-13. See
Note 3 for further information about adoption of this ASU.

$ in millions

Acquired during the period
Fair value
Expected cash flows
Contractually required cash flows

Year Ended December

2019

2018

2017

$ –
$ –
$ –

$ 839
$ 937
$1,881

$1,769
$1,961
$4,092

In the table above:
‰ Fair value, expected cash flows and contractually

required cash flows were as of the acquisition date.

‰ Expected cash flows represents the cash flows expected to
be received over the life of the loan or as a result of
liquidation of the underlying collateral.

‰ Contractually required cash flows represents cash flows
required to be repaid by the borrower over the life of the
loan.

Credit Quality
Risk Assessment. The firm’s risk assessment process
includes evaluating the credit quality of its loans. For loans
(excluding originated and purchased consumer and credit
card loans, PCI loans and certain wealth management loans
backed by residential real estate), the firm performs credit
reviews which include initial and ongoing analyses of its
borrowers, resulting in an internal credit rating. A credit
review is an independent analysis of the capacity and
willingness of a borrower to meet its financial obligations.
The determination of internal credit ratings also incorporates
assumptions with respect to the nature of and outlook for the
borrower’s industry and the economic environment.

The table below presents gross loans by an internally
determined public rating agency equivalent or other credit
metrics and the concentration of secured and unsecured
loans.

$ in millions

Investment-
Grade

Non-Investment-
Grade

Other/
Unrated

Total

As of December 2019

Amortized cost
Fair value
Held for sale
Total

Secured
Unsecured
Total

As of December 2018

Amortized cost
Fair value
Held for sale
Total

Secured
Unsecured
Total

$30,266
2,844
323
$33,433

25%
5%
30%

$28,290
2,371
1,231
$31,892

25%
7%
32%

$51,222 $ 9,148 $ 90,636
14,386
6,368
5,323
632
$60,764 $16,148 $110,345

5,174
4,368

50%
5%
55%

8%
7%
15%

83%
17%
100%

$45,468 $ 7,898 $ 81,656
13,416
6,046
3,831
512
$52,555 $14,456 $ 98,903

4,999
2,088

50%
3%
53%

9%
6%
15%

84%
16%
100%

In the table above, other/unrated includes $15.52 billion as of
December 2019 and $11.72 billion as of December 2018 of
loans evaluated using other credit metrics described below.
Such loans primarily include originated and purchased
consumer and credit card loans, PCI loans and certain wealth
management loans backed by residential real estate.

Goldman Sachs 2019 Form 10-K 139

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

For purchased consumer and credit card loans, PCI loans
and certain wealth management loans backed by residential
real estate, the firm’s risk assessment process includes
reviewing certain key metrics, such as loan-to-value ratio,
delinquency status, collateral values, expected cash flows,
the Fair Isaac Corporation (FICO) credit score and other
risk factors.

For originated consumer and credit card loans, an
important credit-quality indicator is the FICO credit score,
which measures
creditworthiness by
considering factors such as payment and credit history.
FICO credit scores are refreshed periodically by the firm to
assess the updated creditworthiness of the borrower.

a borrower’s

The table below presents gross consumer and credit card
loans and the concentration by refreshed FICO credit score.

Credit Concentrations. The table below presents the
concentration of gross loans by region.

$ in millions

Loans, gross

Region
Americas
EMEA
Asia
Total

As of December

2019

2018

$110,345

$98,903

73%
21%
6%
100%

77%
18%
5%
100%

The table below presents the concentration of gross
corporate loans by industry.

$ in millions

Consumer, gross
Credit cards, gross
Total

Refreshed FICO credit score
Greater than or equal to 660
Less than 660
Total

As of December

2019

2018

$4,747
1,858
$6,605

$4,536
–
$4,536

85%
15%
100%

88%
12%
100%

$ in millions

Corporate, gross

As of December

2019

2018

$46,307

$42,375

15%
17%
10%
9%
12%
7%
17%
13%
100%

16%
16%
11%
10%
11%
6%
18%
12%
100%

The firm also assigns a regulatory risk rating to its loans
based on the definitions provided by the U.S. federal bank
regulatory agencies. The table below presents gross loans
by regulatory risk rating.

$ in millions

As of December 2019

Amortized cost
Fair value
Held for sale
Total

As of December 2018

Amortized cost
Fair value
Held for sale
Total

Non-criticized/
Pass

Criticized

Total

$ 82,952
12,153
5,216
$100,321

$ 7,684
2,233
107
$10,024

$ 90,636
14,386
5,323
$110,345

$ 75,596
10,752
3,817
$ 90,165

$ 6,060
2,664
14
$ 8,738

$ 81,656
13,416
3,831
$ 98,903

Impaired Loans. Loans accounted for at amortized cost
(excluding PCI loans) are determined to be impaired when
it is probable that the firm will not collect all principal and
interest due under the contractual terms. At that time, such
loans are generally placed on nonaccrual status and all
accrued but uncollected interest is reversed against interest
income and interest subsequently collected is recognized on
a cash basis to the extent the loan balance is deemed
collectible. Otherwise, all cash received is used to reduce the
outstanding loan balance. A loan is considered past due
when a principal or interest payment has not been made
according to its contractual terms.

In certain circumstances, the firm may also modify the
original terms of a loan agreement by granting a concession
to a borrower experiencing financial difficulty. Such
modifications are considered troubled debt restructurings
and typically include interest rate reductions, payment
extensions, and modification of loan covenants. Loans
modified in a troubled debt restructuring are considered
impaired and are subject to specific loan-level reserves.

140 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The gross carrying value of impaired loans (excluding PCI
loans) on nonaccrual status was $1.49 billion as of
December 2019 and $838 million as of December 2018.
Such loans included $251 million as of December 2019 and
$27 million as of December 2018 of corporate loans that
were modified in a troubled debt restructuring. The firm’s
lending commitments related to these loans were not
material as of both December 2019 and December 2018.
The amount of loans 30 days or more past due was
$627 million as of December 2019 and $208 million as of
December 2018.

When it is determined that the firm cannot reasonably
estimate expected cash flows on PCI loans or pools of
loans, such loans are placed on nonaccrual status.

Allowance for Credit Losses
The firm’s allowance for credit losses consists of the
allowance for losses on loans and lending commitments
accounted for at amortized cost. Loans and lending
commitments accounted for at fair value or accounted for
at the lower of cost or fair value are not subject to an
allowance for credit losses.

The firm’s allowance for loan losses consists of specific
loan-level reserves, portfolio-level reserves and reserves on
PCI loans, as described below:
‰ Specific loan-level reserves are determined on loans
(excluding PCI loans) that exhibit credit quality weakness
and are therefore individually evaluated for impairment.

‰ Portfolio-level

reserves

are determined on loans
(excluding PCI loans) not evaluated for specific loan-level
reserves by aggregating groups of loans with similar risk
characteristics and estimating the probable loss inherent
in the portfolio.

‰ Reserves on PCI loans are recorded when it is determined
that the expected cash flows, which are reassessed on a
quarterly basis, will be lower than those used to establish
the current effective yield for such loans or pools of loans.
If the expected cash flows are determined to be significantly
higher than those used to establish the current effective
yield, such increases are initially recognized as a reduction
to any previously recorded allowances for loan losses and
any remaining increases are recognized as interest income
prospectively over the life of the loan or pools of loans as
an increase to the effective yield.

The allowance for loan losses is determined using various
risk factors,
including industry default and loss data,
current macroeconomic indicators, borrower’s capacity to
meet its financial obligations, borrower’s country of risk,
loan seniority and collateral type. In addition, for loans
backed by real estate, risk factors include loan-to-value
ratio, debt service ratio and home price index. Risk factors
for consumer and credit card loans include FICO credit
scores and delinquency status.

Management’s estimate of loan losses entails judgment about
loan collectability at the reporting dates, and there are
uncertainties inherent in those judgments. While management
uses the best information available to determine this estimate,
future adjustments to the allowance may be necessary based
on, among other things, changes in the economic environment
or variances between actual
results and the original
assumptions used. Loans are charged off against the allowance
for loan losses when deemed to be uncollectible.

The firm also records an allowance for losses on lending
commitments that are held for investment and accounted
for at amortized cost. Such allowance is determined using
the same methodology as the allowance for loan losses,
while also taking into consideration the probability of
drawdowns or funding, and is included in other liabilities.

The table below presents gross
loans and lending
commitments accounted for at amortized cost by
impairment methodology.

$ in millions

Specific

Portfolio

PCI

Total

As of December 2019
Loans
Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer
Credit cards
Other
Total
Lending Commitments
Corporate
Credit card
Other
Total

As of December 2018
Loans
Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer
Other
Total
Lending Commitments
Corporate
Other
Total

$1,122
52
175
143
–
–
–
$1,492

$ 128
–
11
$ 139

$ 358
46
9
425
–
–
$ 838

31
–
31

$ 40,007
20,064
12,628
4,822
4,747
1,858
3,396
$ 87,522

$127,098
13,669
9,194
$149,961

$ 36,925
17,472
10,851
4,402
4,536
3,590
$ 77,776

–
–
455
1,167
–
–
–
$1,622

–
–
–
–

–
–
581
2,457
–
4
$3,042

$ 41,129
20,116
13,258
6,132
4,747
1,858
3,396
$ 90,636

$127,226
13,669
9,205
$150,100

$ 37,283
17,518
11,441
7,284
4,536
3,594
$ 81,656

$113,453
7,513
$120,966

–
–
–

$113,484
7,513
$120,997

reserves,

In the table above:
‰ Gross loans and lending commitments, subject to specific
loan-level
included $832 million as of
December 2019 and $484 million as of December 2018 of
impaired loans and lending commitments, which did not
require a reserve as the loan was deemed to be recoverable.
‰ Gross loans deemed impaired and subject to specific loan-
level reserves as a percentage of total gross loans was 1.6%
as of December 2019 and 1.0% as of December 2018.

‰ See Note 18 for further information about lending

commitments.

Goldman Sachs 2019 Form 10-K 141

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents information about the allowance
for credit losses.

Year Ended December

2019

2018

$ in millions

Loans

Lending
Commitments

Loans

Changes in the allowance for credit losses
$286
Beginning balance
–
Net charge-offs
75
Provision
–
Other
$361
Ending balance

$1,066
(490)
990
(125)
$1,441

$ 803
(337)
654
(54)
$1,066

Allowance for losses by impairment methodology
$ 207
Specific
1,065
Portfolio
169
PCI
$1,441
Total

$ 21
340
–
$361

$ 102
848
116
$1,066

$274
–
20
(8)
$286

3
283
–
$286

In the table above:
‰ Net charge-offs were primarily related to consumer loans
for 2019 and consumer loans and commercial real estate
PCI loans for 2018.

‰ The provision for credit losses was primarily related to
consumer loans and corporate loans for both 2019 and
2018.

‰ Other represents the reduction to the allowance related to
loans and lending commitments transferred to held for
sale.

‰ Portfolio-level

reserves were primarily

related to
consumer loans and corporate loans. Specific loan-level
reserves were substantially all related to corporate loans.
Reserves on PCI loans were related to real estate loans.
‰ Substantially all of the allowance for losses on lending
lending
related

corporate

commitments was
commitments.

‰ Allowance for loan losses as a percentage of total gross
loans accounted for at amortized cost was 1.6% as of
December 2019 and 1.3% as of December 2018.

‰ Net charge-offs as a percentage of average total gross
loans accounted for at amortized cost were 0.6% for
2019 and 0.5% for 2018.

142 Goldman Sachs 2019 Form 10-K

Fair Value of Loans by Level
The table below presents loans held for investment
accounted for at fair value under the fair value option by
level within the fair value hierarchy.

$ in millions

Level 1

Level 2

Level 3

Total

As of December 2019

Loan Type
Corporate
Wealth management
Commercial real estate
Residential real estate
Other
Total

As of December 2018

Loan Type
Corporate
Wealth management
Commercial real estate
Residential real estate
Other
Total

$ –
–
–
–
–
$ –

$ 2,472
7,764
1,285
571
404
$12,496

$ 2,160
7,192
1,041
683
350
$11,426

$ 752
60
591
221
266
$1,890

$ 659
58
677
290
306
$1,990

$ 3,224
7,824
1,876
792
670
$14,386

$ 2,819
7,250
1,718
973
656
$13,416

The gains as a result of changes in the fair value of loans
included in the table above were $355 million for 2019 and
$372 million for 2018. These gains were included in other
principal transactions.

See Note 4 for an overview of the firm’s fair value
measurement policies and the valuation techniques and
significant inputs used to determine the fair value of loans.

Significant Unobservable Inputs
The table below presents the amount of level 3 loans, and
ranges and weighted averages of significant unobservable
inputs used to value such loans.

Level 3 Assets and Range of Significant Unobservable
Inputs (Weighted Average) as of December

$ in millions

2019

2018

$752
1.9% to 26.3% (9.5%)

$659
4.8% to 30.0% (12.5%)
13.5% to 78.0% (44.4%) 13.5% to 55.0% (28.4%)
1.6 to 6.7 (3.0)

3.7 to 5.8 (3.9)

Corporate
Level 3 assets
Yield
Recovery rate
Duration (years)
Commercial real estate
Level 3 assets
Yield
Recovery rate
Duration (years)
Residential real estate
Level 3 assets
Yield
Duration (years)
Wealth management and other
Level 3 assets
Yield
Duration (years)

$591
7.0% to 16.0% (9.3%)
5.9% to 85.2% (48.6%)
0.2 to 5.3 (3.5)

$221
1.1% to 14.0% (11.5%)
1.1 to 4.8 (4.0)

$326
3.9% to 16.0% (9.9%)
1.6 to 6.7 (3.7)

$677
8.3% to 22.0% (11.7%)
9.7% to 64.9% (37.8%)
0.7 to 5.9 (3.8)

$290
2.6% to 19.3% (11.9%)
1.4 to 5.4 (4.6)

$364
4.7% to 11.5% (9.0%)
2.2 to 4.8 (2.8)

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

In the table above:
‰ Ranges represent the significant unobservable inputs that

were used in the valuation of each type of loan.

‰ Weighted averages are calculated by weighting each input

$ in millions

The table below presents information, by loan type, for
loans included in the summary table above.

by the relative fair value of the loan.

‰ The ranges and weighted averages of these inputs are not
representative of the appropriate inputs to use when
calculating the fair value of any one loan. For example,
the highest yield for residential real estate loans is
appropriate for valuing a specific residential real estate
loan but may not be appropriate for valuing any other
residential real estate loan. Accordingly, the ranges of
inputs do not represent uncertainty in, or possible ranges
of, fair value measurements of level 3 loans.

‰ Increases in yield or duration used in the valuation of
level 3 loans would have resulted in a lower fair value
measurement, while increases in recovery rate would have
resulted in a higher fair value measurement as of both
December 2019 and December 2018. Due to the
distinctive
the
each
interrelationship of inputs is not necessarily uniform
within each product type.

nature

loan,

level

‰ Loans are valued using discounted cash flows.

Level 3 Rollforward
The table below presents a summary of the changes in fair
value for level 3 loans.

$ in millions

Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Year Ended December

2019

$1,990
46
85
249
(14)
(795)
444
(115)
$1,890

2018

$1,973
74
72
88
(66)
(717)
995
(429)
$1,990

In the table above:
‰ Changes in fair value are presented for loans that are

classified in level 3 as of the end of the period.

‰ Net unrealized gains/(losses) relates to loans that were

still held at period-end.

‰ Purchases includes originations and secondary purchases.
‰ Transfers between levels of the fair value hierarchy are
reported at the beginning of the reporting period in which
they occur. If a loan was transferred to level 3 during a
reporting period, its entire gain or loss for the period is
classified in level 3.

Corporate
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Commercial real estate
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Residential real estate
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Wealth management and other
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Year Ended December

2019

2018

$ 659
5
(27)
151
–
(298)
290
(28)
$ 752

$ 677
20
28
11
(9)
(229)
94
(1)
$ 591

$ 290
15
26
58
(5)
(137)
60
(86)
$ 221

$ 364
6
58
29
–
(131)
–
–
$ 326

$ 672
15
(11)
69
(58)
(225)
310
(113)
$ 659

$ 853
38
33
14
(4)
(330)
382
(309)
$ 677

$ 213
18
(13)
3
(4)
(70)
143
–
$ 290

$ 235
3
63
2
–
(92)
160
(7)
$ 364

Level 3 Rollforward Commentary
Year Ended December 2019. The net realized and
unrealized gains on level 3 loans of $131 million (reflecting
$46 million of net realized gains and $85 million of net
unrealized gains) for 2019 included gains of $98 million
reported in other principal transactions and $33 million
reported in interest income.

The drivers of the net unrealized gains on level 3 loans for
2019 were not material.

Transfers into level 3 loans during 2019 primarily reflected
transfers of certain corporate loans from level 2, principally
due to reduced price transparency as a result of a lack of
market evidence.

The drivers of transfers out of level 3 loans during 2019
were not material.

Goldman Sachs 2019 Form 10-K 143

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Year Ended December 2018. The net realized and
unrealized gains on level 3 loans of $146 million (reflecting
$74 million of net realized gains and $72 million of net
unrealized gains) for 2018 included gains of $52 million
reported in other principal transactions and $94 million
reported in interest income.

The drivers of the net unrealized gains on level 3 loans for
2018 were not material.

Transfers into level 3 loans during 2018 primarily reflected
transfers of certain commercial real estate and corporate
loans from level 2, principally due to reduced price
transparency as a result of a lack of market evidence.

Transfers out of level 3 loans during 2018 primarily
reflected transfers of certain commercial real estate loans to
level 2, principally due to certain unobservable yield and
duration inputs no longer being significant to the valuation
of these instruments.

Estimated Fair Value
The table below presents the estimated fair value of loans
that are not accounted for at fair value and in what level of
the fair value hierarchy they would have been classified if
they had been included in the firm’s fair value hierarchy.

$ in millions

As of December 2019

Carrying
Value

Estimated Fair Value

Level 2

Level 3

Total

Amortized cost
Held for sale

$89,195
$ 5,323

$52,091
$ 4,157

$37,095
$ 1,252

$89,186
$ 5,409

As of December 2018

Amortized cost
Held for sale

$80,590
$ 3,831

$40,640
$ 2,662

$40,103
$ 1,180

$80,743
$ 3,842

144 Goldman Sachs 2019 Form 10-K

Note 10.
Fair Value Option

financial assets and liabilities at

Other Financial Assets and Liabilities at Fair Value
In addition to trading assets and liabilities, and certain
investments and loans, the firm accounts for certain of its
other
fair value,
substantially all under the fair value option. The primary
reasons for electing the fair value option are to:
‰ Reflect economic events in earnings on a timely basis;
‰ Mitigate volatility in earnings from using different
measurement attributes (e.g., transfers of financial assets
accounted for as financings are recorded at fair value,
whereas the related secured financing would be recorded
on an accrual basis absent electing the fair value option);
and

‰ Address simplification and cost-benefit considerations
(e.g., accounting for hybrid financial instruments at fair
value in their entirety versus bifurcation of embedded
derivatives and hedge accounting for debt hosts).

Hybrid financial instruments are instruments that contain
bifurcatable embedded derivatives and do not require
settlement by physical delivery of nonfinancial assets (e.g.,
physical commodities). If the firm elects to bifurcate the
embedded derivative from the associated debt,
the
derivative is accounted for at fair value and the host
contract is accounted for at amortized cost, adjusted for the
effective portion of any fair value hedges. If the firm does
not elect to bifurcate, the entire hybrid financial instrument
is accounted for at fair value under the fair value option.

Other financial assets and liabilities accounted for at fair
value under the fair value option include:
‰ Repurchase agreements and substantially all

resale

agreements;

‰ Securities borrowed and loaned in FICC financing;
‰ Substantially all other secured financings,
transfers of assets accounted for as financings;

including

‰ Certain unsecured short- and long-term borrowings,
all of which are hybrid financial

substantially
instruments;

‰ Certain customer and other receivables, including certain

margin loans; and

‰ Certain time deposits (deposits with no stated maturity
are not eligible for a fair value option election), including
structured certificates of deposit, which are hybrid
financial instruments.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Fair Value of Other Financial Assets and Liabilities by
Level
The table below presents, by level within the fair value
hierarchy, other financial assets and liabilities at fair value,
substantially all of which are accounted for at fair value
under the fair value option.

Resale and Repurchase Agreements and Securities
Borrowed and Loaned. As of both December 2019 and
December 2018, the firm had no level 3 resale agreements,
securities borrowed or securities loaned. As of both
December 2019 and December 2018, the firm’s level 3
repurchase agreements were not material.

$ in millions

Level 1

Level 2

Level 3

Total

As of December 2019

Assets
Resale agreements
Securities borrowed
Customer and other receivables
Total

Liabilities
Deposits
Repurchase agreements
Securities loaned
Other secured financings
Unsecured borrowings:

Short-term
Long-term
Other liabilities
Total

As of December 2018

Assets
Resale agreements
Securities borrowed
Customer and other receivables
Total

Liabilities
Deposits
Repurchase agreements
Securities loaned
Other secured financings
Unsecured borrowings:

Short-term
Long-term
Other liabilities
Total

$ – $ 85,691 $

–
–

26,279
53

$ – $ 112,023 $

– $ 85,691
26,279
–
–
53
– $ 112,023

$ – $ (13,742) $ (4,023) $ (17,765)
(117,756)
(714)
(18,071)

(117,726)
(714)
(17,685)

(30)
–
(386)

–
–
–

(20,300)
(32,920)
(1)

(26,007)
(43,661)
(150)
$ – $(203,088) $(21,036) $(224,124)

(5,707)
(10,741)
(149)

$ – $ 139,220 $

–
–

23,142
154

$ – $ 162,516 $

– $ 139,220
23,142
–
6
160
6 $ 162,522

$ – $ (17,892) $ (3,168) $ (21,060)
(78,723)
(3,241)
(20,904)

(78,694)
(3,241)
(20,734)

(29)
–
(170)

–
–
–

(12,887)
(34,761)
(1)

(16,963)
(46,584)
(132)
$ – $(168,210) $(19,397) $(187,607)

(4,076)
(11,823)
(131)

In the table above, other financial assets are shown as
positive amounts and other financial liabilities are shown as
negative amounts.

See Note 4 for an overview of the firm’s fair value
measurement policies and the valuation techniques and
significant inputs used to determine the fair value of other
financial assets and liabilities.

Significant Inputs
See below for information about the significant inputs
(including the significant unobservable inputs) used to
value other financial assets and liabilities at fair value.

and

Other

Customer
of
December 2019, the firm had no level 3 customer and other
receivables. As of December 2018, the firm’s level 3
customer and other receivables were not material.

Receivables.

instruments. As

Deposits. The firm’s deposits that are classified in level 3
the significant
are hybrid financial
unobservable inputs used to value such instruments
primarily relate to the embedded derivative component of
these deposits, these unobservable inputs are incorporated
in the firm’s derivative disclosures in Note 7.

Other Secured Financings. The ranges and weighted
averages of significant unobservable inputs used to value
level 3 other secured financings as of December 2019 are
presented below. These ranges and weighted averages
exclude unobservable inputs that are only relevant to a
single instrument, and therefore are not meaningful.
‰ Yield: 3.3% to 4.2% (weighted average: 3.5%)
‰ Duration: 0.6 to 2.1 years (weighted average: 1.0 year)

Generally, increases in yield or duration, in isolation, would
have resulted in a lower fair value measurement as of
December 2019. Due to the distinctive nature of each of
level 3 other secured financings, the interrelationship of
inputs is not necessarily uniform across such financings. As
of December 2018, level 3 other secured financings were
not material.

Unsecured Short- and Long-Term Borrowings. Certain
of the firm’s unsecured short- and long-term borrowings
are classified in level 3, substantially all of which are hybrid
financial
instruments. As the significant unobservable
inputs used to value hybrid financial instruments primarily
relate to the embedded derivative component of these
borrowings, these unobservable inputs are incorporated in
the firm’s derivative disclosures in Note 7.

Other Liabilities. As of both December 2019 and
December 2018, the firm’s level 3 other liabilities were not
material.

Goldman Sachs 2019 Form 10-K 145

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Level 3 Rollforward
The table below presents a summary of the changes in fair
value for level 3 other financial assets and liabilities
accounted for at fair value.

The table below presents information, by the consolidated
balance sheet line items, for liabilities included in the
summary table above.

Year Ended December

2019

2018

$ in millions

Year Ended December

2019

2018

Deposits
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Issuances
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Repurchase agreements
Beginning balance
Net unrealized gains/(losses)
Settlements
Ending balance

Other secured financings
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Issuances
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Unsecured short-term borrowings
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Issuances
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Unsecured long-term borrowings
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Issuances
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Other liabilities
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Issuances
Ending balance

$ (3,168)
(3)
(473)
(932)
452
(28)
129
$ (4,023)

(29)
(4)
3
(30)

(170)
36
(52)
(28)
19
(191)
–
(386)

$ (4,076)
(120)
(484)
(5,410)
4,333
(173)
223
$ (5,707)

$(11,823)
(278)
(1,223)
(3,494)
6,297
(485)
265
$(10,741)

(131)
28
(18)
(28)
(149)

$ (2,968)
(25)
272
(796)
298
(8)
59
$ (3,168)

(37)
2
6
(29)

(389)
(15)
11
(8)
157
(10)
84
(170)

$ (4,594)
(125)
558
(4,564)
4,481
(72)
240
$ (4,076)

$ (7,434)
(349)
1,262
(6,545)
2,068
(1,326)
501
$(11,823)

(40)
23
(92)
(22)
(131)

$ in millions

Total other financial assets
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Settlements
Ending balance

Total other financial liabilities
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Issuances
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

6
5
(6)
(5)
–

$(19,397)
(337)
(2,254)
(9,892)
11,104
(877)
617
$(21,036)

4
–
2
–
6

$(15,462)
(491)
2,013
(11,935)
7,010
(1,416)
884
$(19,397)

In the table above:
‰ Changes in fair value are presented for all other financial
assets and liabilities that are classified in level 3 as of the
end of the period.

‰ Net unrealized gains/(losses) relates to instruments that

were still held at period-end.

‰ Transfers between levels of the fair value hierarchy are
reported at the beginning of the reporting period in which
they occur. If a financial asset or liability was transferred
to level 3 during a reporting period, its entire gain or loss
for the period is classified in level 3.

‰ For level 3 other financial assets, increases are shown as
positive amounts, while decreases are shown as negative
amounts. For level 3 other financial liabilities, increases
are shown as negative amounts, while decreases are
shown as positive amounts.

‰ Level 3 other financial assets and liabilities are frequently
economically hedged with trading assets and liabilities.
Accordingly, gains or losses that are classified in level 3
can be partially offset by gains or losses attributable to
level 1, 2 or 3 trading assets and liabilities. As a result,
gains or losses included in the level 3 rollforward below
do not necessarily represent the overall impact on the
firm’s results of operations, liquidity or capital resources.

146 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Level 3 Rollforward Commentary
Year Ended December 2019. The net realized and
unrealized losses on level 3 other financial liabilities of
$2.59 billion (reflecting $337 million of net realized losses
for 2019
and $2.25 billion of net unrealized losses)
included losses of $1.98 billion reported in market making,
$10 million reported in other principal transactions and
$9 million reported in interest expense in the consolidated
statements of earnings, and $595 million reported in debt
valuation adjustment in the consolidated statements of
comprehensive income.

The unrealized losses on level 3 other financial liabilities for
2019 primarily reflected losses on certain hybrid financial
instruments included in unsecured long- and short-term
borrowings, principally due to an increase in global equity
prices, and losses on certain hybrid financial instruments
included in deposits, due to the impact of an increase in the
market value of the underlying assets.

Transfers into level 3 other financial liabilities during 2019
primarily reflected transfers of certain hybrid financial
instruments included in unsecured long- and short-term
borrowings and other secured financings from level 2,
principally due to reduced price transparency of certain
volatility and correlation inputs used to value these
instruments.

Transfers out of level 3 other financial liabilities during
2019 primarily reflected transfers of certain hybrid
instruments included in unsecured long- and
financial
short-term borrowings to level 2, principally due to
increased price transparency of certain volatility and
correlation inputs used to value these instruments.

Year Ended December 2018. The net realized and
unrealized gains on level 3 other financial liabilities of
$1.52 billion (reflecting $491 million of net realized losses
and $2.01 billion of net unrealized gains) for 2018 included
gains/(losses) of $883 million reported in market making,
$(1) million reported in other principal transactions and
$(1) million reported in interest expense in the consolidated
statements of earnings, and $641 million reported in debt
valuation adjustment in the consolidated statements of
comprehensive income.

The net unrealized gains on level 3 other financial liabilities
for 2018 primarily reflected gains on certain hybrid
financial
instruments included in unsecured long-term
borrowings, principally due to the impact of wider credit
spreads and increases in interest rates, and gains on certain
hybrid financial instruments included in unsecured short-
term borrowings, principally due to a decrease in global
equity prices.

Transfers into level 3 other financial liabilities during 2018
primarily reflected transfers of certain hybrid financial
instruments included in unsecured long-term borrowings
from level 2, principally due to reduced transparency of
certain inputs used to value these instruments as a result of
a lack of market transactions in similar instruments.

Transfers out of level 3 other financial liabilities during
2018 primarily reflected transfers of certain hybrid
instruments included in unsecured long- and
financial
short-term borrowings to level 2, principally due to
increased transparency of certain volatility and correlation
inputs used to value these instruments.

Gains and Losses on Other Financial Assets and
Liabilities Accounted for at Fair Value Under the
Fair Value Option
The table below presents the gains and losses recognized in
earnings as a result of the election to apply the fair value
option to certain financial assets and liabilities.

$ in millions

Unsecured short-term borrowings
Unsecured long-term borrowings
Other
Total

Year Ended December

2019

2018

2017

$(3,365)
(5,251)
(883)
$(9,499)

$1,443
926
308
$2,677

$(2,585)
(1,357)
(272)
$(4,214)

In the table above:
‰ Gains/(losses) were substantially all included in market

making.

‰ Gains/(losses) exclude contractual

interest, which is
included in interest income and interest expense, for all
instruments other than hybrid financial instruments. See
Note 23 for further information about interest income
and interest expense.

‰ Gains/(losses) included in unsecured short- and long-term
borrowings were substantially all related to the embedded
derivative component of hybrid financial instruments for
2019, 2018 and 2017. These gains and losses would have
been recognized under other U.S. GAAP even if the firm
had not elected to account for the entire hybrid financial
instrument at fair value.

‰ Other primarily consists of gains/(losses) on customer and
other receivables, deposits, other secured financings and
other liabilities.

‰ Other financial assets and liabilities at fair value are
frequently economically hedged with trading assets and
liabilities. Accordingly, gains or losses on such other
financial assets and liabilities can be partially offset by
gains or losses on trading assets and liabilities. As a result,
gains or losses on other financial assets and liabilities do
not necessarily represent the overall impact on the firm’s
results of operations, liquidity or capital resources.

Goldman Sachs 2019 Form 10-K 147

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

See Note 8 for information about gains/(losses) on equity
securities and Note 9 for information about gains/(losses)
on loans which are accounted for at fair value under the fair
value option. Gains/(losses) on trading assets and liabilities
accounted for at fair value under the fair value option are
included in market making. See Note 5 for further
information about gains/(losses) from market making.

Long-Term Debt Instruments
The difference between the aggregate contractual principal
amount and the related fair value of long-term other
secured financings for which the fair value option was
elected was not material as of both December 2019 and
December 2018.

The fair value of unsecured long-term borrowings exceeded
the aggregate contractual principal amount by $199 million
as of December 2019, and the aggregate contractual
principal amount exceeded the related fair value by
$3.47 billion as of December 2018. The amounts above
include both principal-protected and non-principal-
protected long-term borrowings.

Debt Valuation Adjustment
The firm calculates the fair value of financial liabilities for
which the fair value option is elected by discounting future
cash flows at a rate which incorporates the firm’s credit
spreads.

The table below presents information about the net debt
valuation adjustment (DVA) gains/(losses) on financial
liabilities for which the fair value option was elected.

$ in millions

DVA (pre-tax)
DVA (net of tax)

Year Ended December

2019

2018

2017

$(2,763)
$(2,079)

$3,389
$2,553

$(1,232)
$ (807)

In the table above:
‰ DVA (net of tax) is included in debt valuation adjustment
in the consolidated statements of comprehensive income.

‰ The

gains/(losses)

from
reclassified
accumulated other comprehensive income/(loss) upon
extinguishment of such financial
liabilities were not
material for 2019, 2018 or 2017.

earnings

Loans and Lending Commitments
The table below presents the difference between the
aggregate fair value and the aggregate contractual principal
amount for loans (included in trading assets and loans on
the consolidated balance sheets) for which the fair value
option was elected.

$ in millions

As of December

2019

2018

Performing loans
Aggregate contractual principal in excess of fair value $ 809 $1,830
Loans on nonaccrual status and/or more than 90 days past due
Aggregate contractual principal in excess of fair value $6,703 $5,260
$2,776 $2,010
Aggregate fair value

In the table above, the aggregate contractual principal
amount of loans on nonaccrual status and/or more than
90 days past due (which excludes loans carried at zero fair
value and considered uncollectible) exceeds the related fair
value primarily because the firm regularly purchases loans,
such as distressed loans, at values significantly below the
contractual principal amounts.

The fair value of unfunded lending commitments for which
the fair value option was elected was a liability of
$373 million as of December 2019 and $45 million as of
December 2018, and the related total contractual amount
of these lending commitments was $1.55 billion as of
December 2019 and $1.89 billion as of December 2018. See
Note
lending
commitments.

information

further

about

for

Impact of Credit Spreads on Loans and Lending
Commitments
The estimated net gain attributable to changes
in
instrument-specific credit spreads on loans and lending
commitments for which the fair value option was elected
was $134 million for 2019, $211 million for 2018 and
$268 million for 2017. The firm generally calculates the fair
value of loans and lending commitments for which the fair
value option is elected by discounting future cash flows at a
rate which incorporates the instrument-specific credit
spreads. For floating-rate loans and lending commitments,
substantially all changes in fair value are attributable to
changes in instrument-specific credit spreads, whereas for
fixed-rate loans and lending commitments, changes in fair
value are also attributable to changes in interest rates.

148 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 11.
Collateralized Agreements and Financings

borrowed. Collateralized

Collateralized agreements are resale agreements and
are
securities
repurchase agreements, securities loaned and other secured
financings. The firm enters into these transactions in order
to, among other things, facilitate client activities, invest
excess cash, acquire securities to cover short positions and
finance certain firm activities.

financings

Collateralized agreements and financings are presented on a
net-by-counterparty basis when a legal right of setoff exists.
Interest on collateralized agreements, which is included in
interest income, and collateralized financings, which is
included in interest expense, is recognized over the life of
the transaction. See Note 23 for further information about
interest income and interest expense.

The table below presents the carrying value of resale and
repurchase agreements and securities borrowed and loaned
transactions.

$ in millions

Resale agreements
Securities borrowed
Repurchase agreements
Securities loaned

As of December

2019

2018

$ 85,691
$136,071
$117,756
$ 14,985

$139,258
$135,285
$ 78,723
$ 11,808

In the table above:
‰ Substantially all resale agreements and all repurchase
agreements are carried at fair value under the fair value
option. See Note 4 for further information about the
inputs used to
valuation techniques and significant
determine fair value.

‰ Securities

$26.28

borrowed

of
December 2019 and $23.14 billion as of December 2018,
of
of
and
December 2019 and $3.24 billion as of December 2018
were at fair value.

$714 million

securities

loaned

billion

Resale and Repurchase Agreements
A resale agreement is a transaction in which the firm
purchases financial instruments from a seller, typically in
exchange for cash, and simultaneously enters into an
agreement to resell the same or substantially the same
financial instruments to the seller at a stated price plus
accrued interest at a future date.

A repurchase agreement is a transaction in which the firm
sells financial instruments to a buyer, typically in exchange
for cash, and simultaneously enters into an agreement to
repurchase the same or substantially the same financial
instruments from the buyer at a stated price plus accrued
interest at a future date.

the

involve

Even though repurchase and resale agreements (including
“repos- and reverses-to-maturity”)
legal
transfer of ownership of financial instruments, they are
accounted for as financing arrangements because they
require the financial
instruments to be repurchased or
resold before or at the maturity of the agreement. The
financial
instruments purchased or sold in resale and
repurchase agreements typically include U.S. government
and agency, and investment-grade sovereign obligations.

The firm receives financial instruments purchased under
financial
resale agreements and makes delivery of
instruments sold under repurchase agreements. To mitigate
credit exposure, the firm monitors the market value of these
financial
instruments on a daily basis, and delivers or
obtains additional collateral due to changes in the market
instruments, as appropriate. For
value of the financial
resale agreements, the firm typically requires collateral with
a fair value approximately equal to the carrying value of the
relevant assets in the consolidated balance sheets.

Securities Borrowed and Loaned Transactions
In a securities borrowed transaction, the firm borrows
securities from a counterparty in exchange for cash or
the
securities. When the firm returns the securities,
counterparty returns the cash or securities. Interest is
generally paid periodically over the life of the transaction.

In a securities loaned transaction, the firm lends securities
to a counterparty in exchange for cash or securities. When
the counterparty returns the securities, the firm returns the
cash or securities posted as collateral. Interest is generally
paid periodically over the life of the transaction.

The firm receives securities borrowed and makes delivery of
securities loaned. To mitigate credit exposure, the firm
monitors the market value of these securities on a daily
basis, and delivers or obtains additional collateral due to
the securities, as
changes
appropriate. For securities borrowed transactions, the firm
typically requires collateral with a fair value approximately
equal to the carrying value of the securities borrowed
transaction.

in the market value of

Goldman Sachs 2019 Form 10-K 149

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Securities borrowed and loaned within FICC financing are
recorded at fair value under the fair value option. See
Note 10 for further information about securities borrowed
and loaned accounted for at fair value.

Securities borrowed and loaned within Equities financing are
recorded based on the amount of cash collateral advanced or
received plus accrued interest. As these agreements generally
can be terminated on demand, they exhibit little, if any,
sensitivity to changes in interest rates. Therefore, the carrying
value of such agreements approximates fair value. As these
agreements are not accounted for at fair value, they are not
included in the firm’s fair value hierarchy in Notes 4 through
10. Had these agreements been included in the firm’s fair
value hierarchy, they would have been classified in level 2 as
of both December 2019 and December 2018.

Offsetting Arrangements
The table below presents resale and repurchase agreements
and securities borrowed and loaned transactions included
in the consolidated balance sheets, as well as the amounts
not offset in the consolidated balance sheets.

Assets

Liabilities

Resale
agreements

Securities
borrowed

Repurchase
agreements

Securities
loaned

$ in millions

As of December 2019

Included in the consolidated balance sheets
$ 152,982 $ 140,677
Gross carrying value
(4,606)
Counterparty netting
Total
136,071
Amounts not offset
Counterparty netting
Collateral
Total

(2,211)
(127,901)
5,959

(67,291)
85,691

(3,058)
(78,528)

4,105 $

$ 185,047 $ 19,591
(4,606)
14,985

(67,291)
117,756

(3,058)
(114,065)

633 $

(2,211)
(12,614)
160

As of December 2018

Included in the consolidated balance sheets
$ 246,284 $ 139,556
Gross carrying value
(4,271)
Counterparty netting
135,285
Total

(107,026)
139,258

$ 185,749 $ 16,079
(4,271)
11,808

(107,026)
78,723

Amounts not offset
Counterparty netting
Collateral
Total

(5,870)
(130,707)

2,681 $

(1,104)
(127,340)
6,841

(5,870)
(70,691)

2,162 $

(1,104)
(10,491)
213

In the table above:
‰ Substantially all of the gross carrying values of these
to enforceable netting

subject

are

arrangements
agreements.

‰ Where the firm has received or posted collateral under
credit support agreements, but has not yet determined
such agreements are enforceable, the related collateral has
not been netted.

‰ Amounts not offset includes counterparty netting that
does not meet the criteria for netting under U.S. GAAP
and the fair value of collateral received or posted subject
to enforceable credit support agreements.

150 Goldman Sachs 2019 Form 10-K

Gross Carrying Value of Repurchase Agreements
and Securities Loaned
The table below presents the gross carrying value of
repurchase agreements and securities loaned by class of
collateral pledged.

$ in millions

As of December 2019

Repurchase
agreements

Securities
loaned

Money market instruments
U.S. government and agency obligations
Non-U.S. government and agency obligations
Securities backed by commercial real estate
Securities backed by residential real estate
Corporate debt securities
State and municipal obligations
Other debt obligations
Equity securities
Total

As of December 2018

158
112,903
55,575
210
1,079
6,857
242
196
7,827
$185,047

100
88,060
84,443
3
221
5,495
25
7,402
$185,749

–
–
1,051
–
–
122
–
–
18,418
$19,591

–
–
2,438
–
–
195
–
13,446
$16,079

The table below presents the gross carrying value of
repurchase agreements and securities loaned by maturity.

$ in millions

No stated maturity and overnight
2 - 30 days
31 - 90 days
91 days - 1 year
Greater than 1 year
Total

As of December 2019

Repurchase
agreements

Securities
loaned

$ 70,260
81,440
12,874
16,266
4,207
$185,047

$14,467
3,117
841
1,166
–
$19,591

In the table above:
‰ Repurchase agreements and securities loaned that are
repayable prior to maturity at the option of the firm are
reflected at their contractual maturity dates.

‰ Repurchase agreements and securities loaned that are
redeemable prior to maturity at the option of the holder
are reflected at the earliest dates such options become
exercisable.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Other Secured Financings
In addition to repurchase agreements and securities loaned
transactions, the firm funds certain assets through the use of
other secured financings and pledges financial instruments
and other assets as collateral in these transactions. These
other secured financings consist of:
‰ Liabilities of consolidated VIEs;
‰ Transfers of assets accounted for as financings rather than
sales (e.g., collateralized central bank financings, pledged
commodities, bank loans and mortgage whole loans); and

‰ Other structured financing arrangements.

secured

financings

Other
nonrecourse
arrangements. Nonrecourse other secured financings were
$10.91 billion as of December 2019 and $8.47 billion as of
December 2018.

included

The firm has elected to apply the fair value option to
substantially all other secured financings because the use of
fair value eliminates non-economic volatility in earnings
that would arise from using different measurement
attributes. See Note 10 for further information about other
secured financings that are accounted for at fair value.

Other secured financings that are not recorded at fair value
are recorded based on the amount of cash received plus
accrued interest, which generally approximates fair value.
As these financings are not accounted for at fair value, they
are not included in the firm’s fair value hierarchy in Notes 4
through 10. Had these financings been included in the
firm’s fair value hierarchy, they would have been primarily
classified in level 2 as of both December 2019 and
December 2018.

The table below presents information about other secured
financings.

$ in millions

As of December 2019
Other secured financings (short-term):

At fair value
At amortized cost

Other secured financings (long-term):

At fair value
At amortized cost

Total other secured financings

U.S.
Dollar

Non-U.S.
Dollar

Total

$ 2,754
129

$4,441 $ 7,195
129

–

7,402
397
$10,682

3,474
680

10,876
1,077
$8,595 $19,277

Other secured financings collateralized by:

Financial instruments
Other assets

$ 5,506
$ 5,856

$6,509 $12,015
$1,406 $ 7,262

As of December 2018
Other secured financings (short-term):

At fair value
At amortized cost

Other secured financings (long-term):

At fair value
At amortized cost

Total other secured financings

$ 3,528
–

$6,027 $ 9,555
–

–

9,010
529
$13,067

2,339
–

11,349
529
$8,366 $21,433

Other secured financings collateralized by:

Financial instruments
Other assets

$ 8,960
$ 4,107

$7,550 $16,510
$ 816 $ 4,923

In the table above:
‰ Short-term other secured financings includes financings
maturing within one year of the financial statement date
and financings that are redeemable within one year of the
financial statement date at the option of the holder.

‰ U.S. dollar-denominated short-term other

secured
financings at amortized cost had a weighted average
interest rate of 4.32% as of December 2019. These rates
include the effect of hedging activities.

‰ U.S.

long-term other

dollar-denominated

secured
financings at amortized cost had a weighted average
interest rate of 1.28% as of December 2019 and 4.02%
as of December 2018. These rates include the effect of
hedging activities.

‰ Total other secured financings included $2.16 billion as of
December 2019 and $2.40 billion as of December 2018
related to transfers of financial assets accounted for as
financings
than sales. Such financings were
collateralized by financial assets of $2.21 billion as of
December 2019 and $2.41 billion as of December 2018,
both primarily included in trading assets.

rather

‰ Other secured financings collateralized by financial
instruments included $9.09 billion as of December 2019
and $12.41 billion as of December 2018 of other secured
financings collateralized by trading assets and loans, and
included $2.93 billion as of December 2019 and
$4.10 billion as of December 2018 of other secured
financings collateralized by financial instruments received
as collateral and repledged.

Goldman Sachs 2019 Form 10-K 151

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents other secured financings by
maturity.

The table below presents financial instruments at fair value
received as collateral that were available to be delivered or
repledged and were delivered or repledged.

$ in millions

As of December

2019

2018

Collateral available to be delivered or repledged
Collateral that was delivered or repledged

$661,490
$558,634

$681,516
$565,625

In the table above, collateral available to be delivered or
repledged excluded $6.15 billion as of December 2019 and
$14.10 billion as of December 2018 of securities received
under
borrowed
transactions that contractually had the right to be delivered
or repledged, but were segregated for regulatory and other
purposes.

agreements

securities

resale

and

The table below presents information about assets pledged.

$ in millions

As of December

2019

2018

Pledged to counterparties that had the right to deliver or repledge

Trading assets
Investments

$ 47,371
$ 7,710
Pledged to counterparties that did not have the right to deliver or repledge
$ 67,683
$
617
$ 5,240
$ 8,037

Trading assets
Investments
Loans
Other assets

$101,578
$
849
$ 6,628
$ 12,337

$ 66,605
$ 10,968

The firm also segregated securities included in trading
assets of $20.61 billion as of December 2019 and
$23.03 billion as of December 2018 for regulatory and
other purposes. See Note 3 for
information about
segregated cash.

$ in millions

Other secured financings (short-term)
Other secured financings (long-term):
2021
2022
2023
2024
2025 - thereafter
Total other secured financings (long-term)
Total other secured financings

As of
December 2019

$ 7,324

3,683
1,842
1,399
1,358
3,671
11,953
$19,277

In the table above:
‰ Long-term other secured financings that are repayable
prior to maturity at the option of the firm are reflected at
their contractual maturity dates.

‰ Long-term other secured financings that are redeemable
prior to maturity at the option of the holder are reflected
at the earliest dates such options become exercisable.

Collateral Received and Pledged
The firm receives cash and securities (e.g., U.S. government
and agency obligations, other sovereign and corporate
obligations, as well as equity securities) as collateral,
primarily in connection with resale agreements, securities
borrowed, derivative transactions and customer margin
loans. The firm obtains cash and securities as collateral on
an upfront or contingent basis for derivative instruments
and collateralized agreements to reduce its credit exposure
to individual counterparties.

repurchase

agreements

In many cases, the firm is permitted to deliver or repledge
financial instruments received as collateral when entering
into
loaned
transactions, primarily in connection with secured client
financing activities. The firm is also permitted to deliver or
repledge these financial instruments in connection with
other
derivative
transactions and firm or customer settlement requirements.

collateralized

financings,

securities

secured

and

The firm also pledges certain trading assets in connection
with repurchase agreements, securities loaned transactions
and other secured financings, and other assets (substantially
all real estate and cash) in connection with other secured
financings to counterparties who may or may not have the
right to deliver or repledge them.

152 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 12.
Other Assets

The table below presents other assets by type.

$ in millions

As of December

2019

2018

Property, leasehold improvements and equipment $21,886
4,837
Goodwill and identifiable intangible assets
2,360
Operating lease right-of-use assets
2,068
Income tax-related assets
3,731
Miscellaneous receivables and other
$34,882
Total

$18,317
4,082
–
1,529
5,067
$28,995

Property, Leasehold Improvements and Equipment
Property, leasehold improvements and equipment is net of
accumulated depreciation and amortization of $9.95 billion
as of December 2019 and $9.08 billion as of
December 2018. Property, leasehold improvements and
equipment included $6.16 billion as of December 2019 and
$5.57 billion as of December 2018 that the firm uses in
connection with its operations, and $521 million as of
December 2019 and $896 million as of December 2018 of
foreclosed real estate primarily related to PCI loans. The
remainder is held by investment entities, including VIEs,
consolidated by the firm. Substantially all property and
equipment is depreciated on a straight-line basis over the
useful
the asset. Leasehold improvements are
amortized on a straight-line basis over the shorter of the
useful life of the improvement or the term of the lease.
Capitalized costs of software developed or obtained for
internal use are amortized on a straight-line basis over three
years.

life of

leasehold improvements and
The firm tests property,
equipment for impairment whenever events or changes in
circumstances suggest that an asset’s or asset group’s
carrying value may not be fully recoverable. To the extent
the carrying value of an asset or asset group exceeds the
projected undiscounted cash flows expected to result from
the use and eventual disposal of the asset or asset group, the
firm determines the asset or asset group is impaired and
records an impairment equal to the difference between the
estimated fair value and the carrying value of the asset or
asset group.
the firm will recognize an
impairment prior to the sale of an asset or asset group if the
carrying value of the asset or asset group exceeds its
estimated fair value.

In addition,

There were no material impairments during 2019, 2018 or
2017.

Goodwill and Identifiable Intangible Assets
Goodwill. Goodwill is the cost of acquired companies in
excess of the fair value of net assets, including identifiable
intangible assets, at the acquisition date.

During the fourth quarter of 2019, in connection with the
changes to the firm’s business segments, the firm reassigned
the goodwill to its new reporting units.

The table below presents the carrying value of goodwill by
reporting unit.

$ in millions

Investment Banking
Global Markets:

FICC
Equities

Asset Management
Consumer & Wealth Management:

Consumer banking
Wealth management

Total

As of December

2019

2018

$ 281

269
2,508
390

48
700
$4,196

269
2,508
244

48
408
$3,758

In the table above:
‰ Goodwill

in Investment Banking and FICC was not
reassigned as no businesses were transferred in or out of
these reporting units. The Securities services reporting
including its goodwill, was combined with the
unit,
Equities reporting unit in the new segment structure.

‰ Goodwill

related to Consumer banking previously
included in Investing & Lending was transferred in its
entirety as the consumer banking business had not been
integrated with other activities in Investing & Lending.
The remaining goodwill previously in Investing &
Lending was
entirety to Asset
Management and Wealth management based on
underlying business activities.

transferred in its

‰ Goodwill previously in Investment Management was
and Wealth
to Asset Management
reassigned
management based on the relative fair value of the
businesses.

‰ The increase in total goodwill from December 2018 to
December 2019 included $398 million related to the
acquisition of United Capital Financial Partners, Inc.
(United Capital) in the third quarter of 2019.

Goldman Sachs 2019 Form 10-K 153

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Goodwill is assessed for impairment annually in the fourth
quarter or more frequently if events occur or circumstances
change that indicate an impairment may exist. When
assessing goodwill
first, a qualitative
for impairment,
assessment can be made to determine whether it is more
likely than not that the estimated fair value of a reporting
unit is less than its estimated carrying value. If the results of
the qualitative assessment are not conclusive, a quantitative
goodwill test is performed. Alternatively, a quantitative
goodwill test can be performed without performing a
qualitative assessment.

The quantitative goodwill test compares the estimated fair
value of each reporting unit with its estimated net book
value (including goodwill and identifiable intangible
assets). If the reporting unit’s estimated fair value exceeds
its estimated net book value, goodwill is not impaired. An
impairment is recognized if the estimated fair value of a
reporting unit is less than its estimated net book value.

During the fourth quarter of 2019, goodwill was tested for
impairment using a quantitative test (both prior to and
following the firm’s changes to its business segments) and
the qualitative assessment was not performed. For each test,
the estimated fair value of each of the reporting units
exceeded its respective net carrying value, and therefore,
goodwill was not impaired.

To estimate the fair value of each reporting unit, other than
Consumer banking, a relative value technique was used
because the firm believes market participants would use this
technique to value these reporting units. The relative value
technique applies observable price-to-earnings multiples or
price-to-book multiples of comparable competitors to
reporting units’ net earnings or net book value. To estimate
the fair value of Consumer banking, a discounted cash flow
valuation approach was used because the firm believes
market participants would use this technique to value that
reporting unit given its early stage of development. The
estimated net carrying value of each reporting unit reflects
an allocation of total shareholders’ equity and represents
the estimated amount of total shareholders’ equity required
the reporting unit under
to support
currently applicable regulatory capital requirements.

the activities of

154 Goldman Sachs 2019 Form 10-K

Identifiable Intangible Assets. The table below presents
identifiable intangible assets by reporting unit and type.

$ in millions

By Reporting Unit

Global Markets:

FICC
Equities

Asset Management
Consumer & Wealth Management:

Consumer banking
Wealth management

Total

By Type

Customer lists
Gross carrying value
Accumulated amortization
Net carrying value

Acquired leases and other
Gross carrying value
Accumulated amortization
Net carrying value

Total gross carrying value
Total accumulated amortization
Total net carrying value

As of December

2019

2018

3
–
265

7
366
641

10
37
219

10
48
$ 324

$ 1,427
(1,044)
383

$ 1,117
(970)
147

790
(532)
258

636
(459)
177

2,217
(1,576)
641

1,753
(1,429)
$ 324

The firm acquired $515 million of intangible assets during
2019, primarily related to customer lists, with a weighted
average amortization period of 10 years. This amount
included $354 million of
intangible assets that were
acquired in connection with the acquisition of United
Capital. The firm acquired $137 million of intangible assets
during 2018, primarily related to acquired leases, with a
weighted average amortization period of 4 years.

Substantially all of the firm’s identifiable intangible assets
lives and are amortized over their
have finite useful
estimated useful
lives generally using the straight-line
method.

tables below present

The
amortization of identifiable intangible assets.

information about

the

$ in millions

Amortization

$ in millions

Estimated future amortization
2020
2021
2022
2023
2024

Year Ended December

2019

$173

2018

$152

2017

$150

As of
December 2019

$122
$ 91
$ 77
$ 71
$ 59

For leases where the firm will derive no economic benefit
from leased space that it has vacated or where the firm has
shortened the term of a lease when space is no longer
needed, the firm will record an impairment or accelerated
amortization of right-of-use assets. There were no material
impairments or accelerated amortizations during 2019.

Miscellaneous Receivables and Other
Miscellaneous receivables and other included:
‰ Investments in qualified affordable housing projects of
$606 million as of December 2019 and $653 million as of
December 2018.

‰ Assets classified as held for sale of $470 million as of
December 2019 and $365 million as of December 2018
related to the firm’s consolidated investments within its
Asset Management segment, substantially all of which
consisted of property and equipment. In addition, assets
classified as held for sale also included assets of
$1.01 billion as of December 2018, related to the firm’s
new European headquarters in London. This property
was sold in January 2019 pursuant to a sale and leaseback
agreement and the firm recognized a right-of-use asset
upon the leaseback.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The firm tests intangible assets for impairment whenever
events or changes in circumstances suggest that an asset’s or
asset group’s carrying value may not be fully recoverable.
To the extent the carrying value of an asset or asset group
exceeds the projected undiscounted cash flows expected to
result from the use and eventual disposal of the asset or
asset group, the firm determines the asset or asset group is
impaired and records an impairment equal to the difference
between the estimated fair value and the carrying value of
the asset or asset group. In addition, the firm will recognize
an impairment prior to the sale of an asset or asset group if
the carrying value of the asset or asset group exceeds its
estimated fair value. There were no material impairments
during 2019, 2018 or 2017.

Operating Lease Right-of-Use Assets
The firm enters into operating leases for real estate, office
equipment and other assets, substantially all of which are
used in connection with its operations. The firm adopted
ASU No. 2016-02 in January 2019, which required the firm
to recognize, for leases longer than one year, a right-of-use
asset representing the right to use the underlying asset for
the lease term, and a lease liability representing the liability
to make payments. The lease term is generally determined
based on the contractual maturity of the lease. For leases
where the firm has the option to terminate or extend the
lease, an assessment of the likelihood of exercising the
option is incorporated into the determination of the lease
term. Such assessment is initially performed at the inception
of the lease and is updated if events occur that impact the
original assessment.

An operating lease right-of-use asset is initially determined
based on the operating lease liability, adjusted for initial
direct costs, lease incentives and amounts paid at or prior to
lease commencement. This amount is then amortized over
the lease term. The firm recognized $963 million (primarily
related to the firm’s new European headquarters in
London) of right-of-use assets and operating lease liabilities
in non-cash transactions for leases entered into or assumed
during 2019. See Note 15 for information about operating
lease liabilities.

Goldman Sachs 2019 Form 10-K 155

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 13.
Deposits

The table below presents the types and sources of deposits.

The table below presents the location of deposits.

$ in millions

U.S. offices
Non-U.S. offices
Total

As of December

2019

2018

$150,759
39,260
$190,019

$126,444
31,813
$158,257

In the table above, U.S. deposits were held at Goldman
Sachs Bank USA (GS Bank USA) and substantially all
Sachs
deposits were
non-U.S.
International Bank (GSIB).

at Goldman

held

The table below presents maturities of time deposits held in
U.S. and non-U.S. offices.

$ in millions

2020
2021
2022
2023
2024
2025 - thereafter
Total

As of December 2019

U.S.

Non-U.S.

Total

$28,260
8,741
8,059
5,936
4,233
3,584
$58,813

$10,736
459
81
57
125
998
$12,456

$38,996
9,200
8,140
5,993
4,358
4,582
$71,269

As of December 2019, deposits in U.S. offices included
$8.81 billion and non-U.S. offices included $12.45 billion
of time deposits in denominations that met or exceeded the
applicable insurance limits, or were otherwise not covered
by insurance.

The firm’s savings and demand deposits are recorded based
on the amount of cash received plus accrued interest, which
approximates fair value. In addition, the firm designates
certain derivatives as fair value hedges to convert a portion
of its time deposits not accounted for at fair value from
fixed-rate obligations into floating-rate obligations. The
carrying value of time deposits not accounted for at fair
value approximated fair value as of both December 2019
and December 2018. As these savings and demand deposits
and time deposits are not accounted for at fair value, they
are not included in the firm’s fair value hierarchy in Notes 4
through 10. Had these deposits been included in the firm’s
fair value hierarchy, they would have been classified in
level 2 as of both December 2019 and December 2018.

$ in millions

As of December 2019

Savings and
Demand

Time

Total

Private bank deposits
Consumer deposits
Brokered certificates of deposit
Deposit sweep programs
Institutional deposits
Total

$ 53,726
44,973
–
17,760
2,291
$118,750

As of December 2018

Private bank deposits
Consumer deposits
Brokered certificates of deposit
Deposit sweep programs
Institutional deposits
Total

$ 52,028
27,987
–
15,903
1
$ 95,919

$ 2,087
15,023
39,449
–
14,710
$71,269

$ 2,311
7,641
35,876
–
16,510
$62,338

$ 55,813
59,996
39,449
17,760
17,001
$190,019

$ 54,339
35,628
35,876
15,903
16,511
$158,257

In the table above:
‰ Substantially all deposits are interest-bearing.
‰ Savings and demand accounts consist of money market
deposit accounts, negotiable order of withdrawal
accounts and demand deposit accounts that have no
stated maturity or expiration date.

‰ Time

$17.77

deposits

included

of
December 2019 and $21.06 billion as of December 2018
of deposits accounted for at fair value under the fair value
option. See Note 10 for further information about
deposits accounted for at fair value.

billion

‰ Time deposits had a weighted average maturity of
approximately 1.7 years as of December 2019 and
1.8 years as of December 2018.

‰ Deposit sweep programs represent long-term contractual
agreements with U.S. broker-dealers who sweep client
cash to FDIC-insured deposits. As of December 2019, the
firm had 12 such deposit sweep program agreements.
‰ Deposits insured by the FDIC were $103.98 billion as of
December 2019 and $86.27 billion as of December 2018.

‰ Deposits

insured by the U.K.’s Financial Services
Compensation Scheme were $15.86 billion as of
December 2019 and $6.05 billion as of December 2018.

156 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 14.
Unsecured Borrowings

The table below presents information about unsecured
borrowings.

$ in millions

Unsecured short-term borrowings
Unsecured long-term borrowings
Total

As of December

2019

2018

$ 48,287
207,076
$255,363

$ 40,502
224,149
$264,651

Unsecured Short-Term Borrowings
Unsecured short-term borrowings includes the portion of
unsecured long-term borrowings maturing within one year
of the financial statement date and unsecured long-term
borrowings that are redeemable within one year of the
financial statement date at the option of the holder.

unsecured

information

The firm accounts for certain hybrid financial instruments
at fair value under the fair value option. See Note 10 for
short-term
about
further
borrowings that are accounted for at fair value. In addition,
the firm designates certain derivatives as fair value hedges
to convert a portion of its unsecured short-term borrowings
not accounted for at fair value from fixed-rate obligations
into floating-rate obligations. The carrying value of
unsecured short-term borrowings that are not recorded at
fair value generally approximates fair value due to the
short-term nature of the obligations. As these unsecured
short-term borrowings are not accounted for at fair value,
they are not included in the firm’s fair value hierarchy in
Notes 4 through 10. Had these borrowings been included in
the firm’s fair value hierarchy, substantially all would have
been classified in level 2 as of both December 2019 and
December 2018.

The table below presents information about unsecured
short-term borrowings.

$ in millions

As of December

2019

2018

Current portion of unsecured long-term borrowings
Hybrid financial instruments
Other unsecured short-term borrowings
Total unsecured short-term borrowings

$30,636
15,814
1,837
$48,287

$27,476
10,908
2,118
$40,502

Weighted average interest rate

2.71%

2.51%

In the table above:
‰ The current portion of unsecured long-term borrowings
included $21.27 billion as of December 2019 and
$20.91 billion as of December 2018 issued by Group Inc.
‰ The weighted average interest rates for these borrowings
include the effect of hedging activities and exclude
unsecured short-term borrowings accounted for at fair
value under the fair value option. See Note 7 for further
information about hedging activities.

Unsecured Long-Term Borrowings
The table below presents information about unsecured
long-term borrowings.

$ in millions

As of December 2019

Fixed-rate obligations:

Group Inc.
Subsidiaries

Floating-rate obligations:

Group Inc.
Subsidiaries

Total

As of December 2018

Fixed-rate obligations:

Group Inc.
Subsidiaries

Floating-rate obligations:

Group Inc.
Subsidiaries

Total

U.S.
Dollar

Non-U.S.
Dollar

Total

$ 91,256
1,590

$33,631
2,554

$124,887
4,144

25,318
22,532
$140,696

18,383
11,812
$66,380

43,701
34,344
$207,076

$ 97,354
2,581

$34,030
2,624

$131,384
5,205

30,565
23,756
$154,256

21,157
12,082
$69,893

51,722
35,838
$224,149

In the table above:
‰ Unsecured long-term borrowings consists principally of
senior borrowings, which have maturities extending
through 2067.

‰ Floating-rate obligations

includes equity-linked and
indexed instruments. Floating interest rates are generally
based on LIBOR or Euro Interbank Offered Rate.

‰ U.S. dollar-denominated debt had interest rates ranging
from 2.00% to 10.04% (with a weighted average rate of
3.82%) as of December 2019 and 2.00% to 10.04% (with
a weighted average rate of 4.22%) as of December 2018.
These rates exclude unsecured long-term borrowings
accounted for at fair value under the fair value option.

‰ Non-U.S. dollar-denominated debt had interest rates
ranging from 0.13% to 13.00% (with a weighted average
rate of 2.33%) as of December 2019 and 0.31% to
13.00% (with a weighted average rate of 2.43%) as of
December 2018. These rates exclude unsecured long-term
borrowings accounted for at fair value under the fair value
option.

Goldman Sachs 2019 Form 10-K 157

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents unsecured long-term borrowings
by maturity.

The table below presents unsecured long-term borrowings,
after giving effect to such hedging activities.

As of December 2019

Group Inc.

Subsidiaries

Total

$ in millions

Group Inc.

Subsidiaries

Total

As of December 2019

Fixed-rate obligations:

At fair value
At amortized cost

Floating-rate obligations:

At fair value
At amortized cost

Total

As of December 2018

Fixed-rate obligations:

At fair value
At amortized cost

Floating-rate obligations:

At fair value
At amortized cost

Total

678
44,631

14,920
108,359
$168,588

–
71,221

16,387
95,498
$183,106

47
2,946

725
47,577

28,016
7,479
$38,488

42,936
115,838
$207,076

28
3,331

28
74,552

30,169
7,515
$41,043

46,556
103,013
$224,149

In the table above, the aggregate amounts of unsecured
long-term borrowings had weighted average interest rates
of 2.87% (3.77% related to fixed-rate obligations and
2.48% related to floating-rate obligations)
as of
December 2019 and 3.21% (3.79% related to fixed-rate
obligations and 2.79% related to floating-rate obligations)
as of December 2018. These rates exclude unsecured long-
term borrowings accounted for at fair value under the fair
value option.

As of both December 2019 and December 2018, the
carrying value of unsecured long-term borrowings for
which the firm did not elect
the fair value option
approximated fair value. As these borrowings are not
accounted for at fair value, they are not included in the
firm’s fair value hierarchy in Notes 4 through 10. Had these
borrowings been included in the firm’s fair value hierarchy,
substantially all would have been classified in level 2 as of
both December 2019 and December 2018.

$ in millions

2021
2022
2023
2024
2025 - thereafter
Total

$ 20,334
21,874
21,644
15,083
89,653
$168,588

$ 6,003
3,413
5,048
4,061
19,963
$38,488

$ 26,337
25,287
26,692
19,144
109,616
$207,076

In the table above:
‰ Unsecured long-term borrowings maturing within one
year of the financial statement date and unsecured long-
term borrowings that are redeemable within one year of
the financial statement date at the option of the holder are
excluded as they are included in unsecured short-term
borrowings.

‰ Unsecured long-term borrowings that are repayable prior
to maturity at the option of the firm are reflected at their
contractual maturity dates.

‰ Unsecured long-term borrowings that are redeemable
prior to maturity at the option of the holder are reflected
at the earliest dates such options become exercisable.

‰ Unsecured long-term borrowings included $7.69 billion
of adjustments to the carrying value of certain unsecured
long-term borrowings resulting from the application of
hedge accounting by year of maturity as follows:
$257 million in 2021, $(44) million in 2022, $83 million
in 2023, $355 million in 2024, and $7.04 billion in 2025
and thereafter.

The firm designates certain derivatives as fair value hedges
to convert a portion of fixed-rate unsecured long-term
borrowings not accounted for at fair value into floating-
rate obligations. See Note 7 for further information about
hedging activities.

158 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Subordinated Borrowings
Unsecured long-term borrowings includes subordinated
debt and junior subordinated debt. Junior subordinated
debt is junior in right of payment to other subordinated
to senior borrowings.
borrowings, which are junior
Subordinated debt had maturities ranging from 2021 to
2045 as of both December 2019 and December 2018.
Subordinated debt that matures within one year is included
in unsecured short-term borrowings.

The table below presents information about subordinated
borrowings.

$ in millions

As of December 2019

Subordinated debt
Junior subordinated debt
Total

As of December 2018

Subordinated debt
Junior subordinated debt
Total

Par
Amount

Carrying
Value

$14,041
976
$15,017

$16,980
1,328
$18,308

Rate

3.46%
2.85%
3.42%

$14,023
1,140
$15,163

$15,703
1,425
$17,128

4.09%
3.19%
4.02%

In the table above:
‰ The par amount of subordinated debt issued by Group
Inc. was $14.04 billion as of December 2019 and
$14.02 billion as of December 2018, and the carrying
value of subordinated debt issued by Group Inc. was
$16.98 billion as of December 2019 and $15.70 billion as
of December 2018.

‰ The rate is the weighted average interest rate for these
borrowings (excluding borrowings accounted for at fair
value under the fair value option), including the effect of
fair value hedges used to convert fixed-rate obligations
into floating-rate obligations. See Note 7 for further
information about hedging activities.

issued $2.84 billion of

Junior Subordinated Debt
In 2004, Group Inc.
junior
subordinated debt to Goldman Sachs Capital I (Trust), a
Delaware statutory trust. The Trust issued $2.75 billion of
guaranteed preferred beneficial interests (Trust Preferred
securities) to third parties and $85 million of common
beneficial interests to Group Inc. As of December 2019, the
outstanding par amount of junior subordinated debt held
by the Trust was $976 million and the outstanding par
amount of Trust Preferred securities and common
beneficial interests issued by the Trust was $947 million
and $29 million, respectively. As of December 2018, the
outstanding par amount of junior subordinated debt held
by the Trust was $1.14 billion and the outstanding par
amount of Trust Preferred securities and common
beneficial interests issued by the Trust was $1.11 billion
and $34.1 million, respectively.

The firm purchased Trust Preferred securities with a par
amount and a carrying value of $159 million and
$206 million in 2019, $28 million and $35 million in 2018,
and $186 million and $237 million in 2017, respectively.
These securities were delivered to the Trust, along with
common beneficial
interests of $5 million in 2019,
$1 million in 2018 and $6 million in 2017, in a non-cash
exchange for junior subordinated debt with a par amount
and carrying value of $164 million and $231 million in
2019, $29 million and $36 million in 2018, and
$192 million and $254 million in 2017, respectively.
Following the exchanges, these Trust Preferred securities,
common beneficial interests and junior subordinated debt
were extinguished. The Trust is a wholly-owned finance
subsidiary of the firm for regulatory and legal purposes but
is not consolidated for accounting purposes.

interest

semi-annually on the junior
The firm pays
subordinated debt at an annual rate of 6.345% and the debt
matures on February 15, 2034. The coupon rate and the
payment dates applicable to the beneficial interests are the
same as the interest rate and payment dates for the junior
subordinated debt. The firm has the right, from time to time,
to defer payment of interest on the junior subordinated debt,
and therefore cause payment on the Trust’s preferred
beneficial interests to be deferred, in each case up to ten
consecutive semi-annual periods. During any such deferral
period, the firm will not be permitted to, among other things,
pay dividends on or make certain repurchases of its common
stock. The Trust is not permitted to pay any distributions on
the common beneficial interests held by Group Inc. unless all
dividends payable on the preferred beneficial interests have
been paid in full.

debt

subordinated

6.345% junior

The firm has covenanted in favor of the holders of Group
Inc.’s
due
February 15, 2034, that, subject to certain exceptions, the
firm will not redeem or purchase the capital securities issued
by Goldman Sachs Capital II and Goldman Sachs Capital III
(APEX Trusts) or
shares of Group Inc.’s Perpetual
Non-Cumulative Preferred Stock, Series E (Series E Preferred
Stock), Perpetual Non-Cumulative Preferred Stock, Series F
(Series F Preferred Stock) or Perpetual Non-Cumulative
Preferred Stock, Series O, if the redemption or purchase
results in less than $253 million aggregate liquidation
preference of that series outstanding, prior to specified dates
in 2022 for a price that exceeds a maximum amount
determined by reference to the net cash proceeds that the firm
has received from the sale of qualifying securities.

The APEX Trusts hold Group Inc.’s Series E Preferred
Stock and Series F Preferred Stock. These trusts are
Delaware statutory trusts sponsored by the firm and
wholly-owned finance
firm for
regulatory and legal purposes but are not consolidated for
accounting purposes.

subsidiaries of

the

Goldman Sachs 2019 Form 10-K 159

Operating lease liabilities include obligations for office
space held in excess of current requirements. Operating
lease costs relating to space held for growth is included in
occupancy expenses. Total occupancy expenses for space
held in excess of the firm’s current requirements were not
material for both 2019 and 2018.

Lease payments relating to operating lease arrangements
that were signed, but had not yet commenced as of
December 2019, were not material.

Note 16.
Securitization Activities

The firm securitizes residential and commercial mortgages,
corporate bonds, loans and other types of financial assets
by selling these assets to securitization vehicles (e.g., trusts,
corporate entities and limited liability companies) or
through a resecuritization. The firm acts as underwriter of
the beneficial interests that are sold to investors. The firm’s
residential mortgage
securitizations are primarily in
connection with government agency securitizations.

The firm accounts for a securitization as a sale when it has
relinquished control over the transferred financial assets.
Prior to securitization, the firm generally accounts for assets
pending transfer at fair value and therefore does not
typically recognize significant gains or losses upon the
transfer of assets. Net revenues from underwriting activities
the
are recognized in connection with the sales of
underlying beneficial interests to investors.

also have

The firm generally receives cash in exchange for the
transferred assets but may
continuing
involvement with the transferred financial assets, including
ownership of beneficial interests in securitized financial
assets, primarily in the form of debt instruments. The firm
may also purchase senior or subordinated securities issued
by securitization vehicles (which are typically VIEs) in
connection with secondary market-making activities.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 15.
Other Liabilities

The table below presents other liabilities by type.

$ in millions

Compensation and benefits
Income tax-related liabilities
Operating lease liabilities
Noncontrolling interests
Employee interests in consolidated funds
Accrued expenses and other
Total

As of December

2019

2018

$ 6,889
2,947
2,385
1,713
81
7,636
$21,651

$ 6,834
2,864
–
1,568
122
6,219
$17,607

In the table above, accrued expenses and other includes
contract liabilities, which represent consideration received
by the firm, in connection with its contracts with clients,
prior to providing the service. As of both December 2019
and December 2018, the firm’s contract liabilities were not
material.

Operating Lease Liabilities
The firm adopted ASU No. 2016-02 in January 2019,
which required the firm to recognize, for leases longer than
one year, a right-of-use asset representing the right to use
the underlying asset for the lease term, and a lease liability
representing the liability to make payments. See Note 12 for
information about operating lease right-of-use assets.

The table below presents information about operating lease
liabilities.

$ in millions

2020
2021
2022
2023
2024
2025 - thereafter
Total undiscounted lease payments
Imputed interest
Total operating lease liabilities

Weighted average remaining lease term
Weighted average discount rate

As of
December 2019

384
308
268
235
219
2,566
3,980
(1,595)
$ 2,385

18 years
5.02%

In the table above, the weighted average discount rate
represents the firm’s incremental borrowing rate as of
January 2019 for leases existing on the date of adoption of
ASU No. 2016-02 and at the lease inception date for leases
entered into subsequent to the adoption of this ASU.

Operating lease costs were $538 million for 2019,
$409 million for 2018 and $390 million for 2017. Variable
lease costs, which are included in operating lease costs,
were not material for 2019, 2018 and 2017.

160 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

the performance of

The primary risks included in beneficial interests and other
interests from the firm’s continuing involvement with
securitization vehicles are
the
underlying collateral, the position of the firm’s investment
in the capital structure of the securitization vehicle and the
market yield for the security. These interests are primarily
accounted for at fair value and classified in level 2 of the fair
value hierarchy. Interests not accounted for at fair value are
carried at amounts that approximate fair value. See Notes 4
through 10 for further information about
fair value
measurements.

The table below presents the amount of financial assets
securitized and the cash flows received on retained interests
in securitization entities in which the firm had continuing
involvement as of the end of the period.

Year Ended December

$ in millions

2019

2018

2017

$15,124
Residential mortgages
12,741
Commercial mortgages
1,252
Other financial assets
Total financial assets securitized $29,117

$21,229
8,745
1,914
$31,888

$18,142
7,872
481
$26,495

Retained interests cash flows

286

296

264

In the table above, financial assets securitized included
assets of $601 million for 2019, $882 million for 2018 and
$572 million for 2017, which were securitized in a
non-cash exchange
and held-to-maturity
securities.

loans

for

table

below presents

The
about
nonconsolidated securitization entities to which the firm
sold assets and had continuing involvement as of the end of
the period.

information

In the table above:
‰ The outstanding principal amount is presented for the
purpose of providing information about the size of the
securitization entities and is not representative of the
firm’s risk of loss.

‰ The firm’s risk of loss from retained or purchased
interests is limited to the carrying value of these interests.
‰ Purchased interests represent senior and subordinated
interests, purchased in connection with secondary
market-making activities,
in securitization entities in
which the firm also holds retained interests.

‰ Substantially all of the total outstanding principal amount
and total retained interests relate to securitizations during
2014 and thereafter.

‰ The fair value of retained interests was $3.35 billion as of
December 2019 and $3.28 billion as of December 2018.

and

with

commitments

In addition to the interests in the table above, the firm had
other continuing involvement in the form of derivative
certain
transactions
nonconsolidated VIEs. The carrying value of
these
derivatives and commitments was a net asset of $57 million
as of December 2019 and $75 million as of
December 2018, and the notional amount of
these
derivatives and commitments was $1.20 billion as of
December 2019 and $1.09 billion as of December 2018.
and
of
The
commitments are included in maximum exposure to loss in
the nonconsolidated VIE table in Note 17.

derivatives

amounts

notional

these

$ in millions

As of December 2019

Outstanding
Principal
Amount

Retained
Interests

Purchased
Interests

U.S. government agency-issued

collateralized mortgage obligations

Other residential mortgage-backed
Other commercial mortgage-backed
Corporate debt and other asset-backed
Total

$14,328
24,166
25,588
3,612
$67,694

$1,530
1,078
615
149
$3,372

As of December 2018

U.S. government agency-issued

collateralized mortgage obligations

Other residential mortgage-backed
Other commercial mortgage-backed
Corporate debt and other asset-backed
Total

$24,506
19,560
15,088
3,311
$62,465

$1,758
941
448
133
$3,280

$ 3
24
6
–
$33

$29
15
10
3
$57

Goldman Sachs 2019 Form 10-K 161

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents information about the weighted
average key economic assumptions used in measuring the
fair value of mortgage-backed retained interests.

$ in millions

Fair value of retained interests
Weighted average life (years)
Constant prepayment rate
Impact of 10% adverse change
Impact of 20% adverse change
Discount rate
Impact of 10% adverse change
Impact of 20% adverse change

As of December

2019

2018

$3,198
6.0
12.9%
$ (22)
$ (42)
4.7%
$ (59)
$ (117)

$ 3,151
7.2
11.9%
(27)
(53)
4.7%
(75)
(147)

$
$

In the table above:
‰ Amounts do not reflect the benefit of other financial
instruments that are held to mitigate risks inherent in
these retained interests.

‰ Changes in fair value based on an adverse variation in
assumptions generally cannot be extrapolated because the
relationship of the change in assumptions to the change in
fair value is not usually linear.

‰ The impact of a change in a particular assumption is
calculated independently of changes
in any other
in
In practice,
assumption.
changes
assumptions might magnify or counteract the sensitivities
disclosed above.

simultaneous

‰ The constant prepayment rate is included only for
is a key assumption in the

positions for which it
determination of fair value.

‰ The discount rate for retained interests that relate to U.S.
collateralized mortgage
government
obligations does not include any credit loss. Expected
credit loss assumptions are reflected in the discount rate
for the remainder of retained interests.

agency-issued

The firm has other retained interests not reflected in the
table above with a fair value of $149 million and a
weighted average life of 3.3 years as of December 2019, and
a fair value of $133 million and a weighted average life of
4.2 years as of December 2018. Due to the nature and fair
value of certain of these retained interests, the weighted
average assumptions for constant prepayment and discount
rates and the related sensitivity to adverse changes are not
meaningful as of both December 2019 and December 2018.
The firm’s maximum exposure to adverse changes in the
value of these interests is the carrying value of $149 million
as of December 2019 and $133 million as of
December 2018.

162 Goldman Sachs 2019 Form 10-K

Note 17.
Variable Interest Entities

A variable interest in a VIE is an investment (e.g., debt or
equity) or other interest (e.g., derivatives or loans and
lending commitments) that will absorb portions of the
VIE’s expected losses and/or receive portions of the VIE’s
expected residual returns.

The firm’s variable interests in VIEs include senior and
subordinated debt; loans and lending commitments; limited
and general partnership interests; preferred and common
equity; derivatives that may include foreign currency,
equity and/or credit risk; guarantees; and certain of the fees
the firm receives from investment funds. Certain interest
rate, foreign currency and credit derivatives the firm enters
into with VIEs are not variable interests because they
create, rather than absorb, risk.

VIEs generally finance the purchase of assets by issuing debt
and equity securities that are either collateralized by or
indexed to the assets held by the VIE. The debt and equity
securities issued by a VIE may include tranches of varying
levels of subordination. The firm’s involvement with VIEs
includes securitization of financial assets, as described in
Note 16, and investments in and loans to other types of
VIEs, as described below. See Note 3 for the firm’s
consolidation policies, including the definition of a VIE.

VIE Consolidation Analysis
The enterprise with a controlling financial interest in a VIE
is known as the primary beneficiary and consolidates the
VIE. The firm determines whether it
is the primary
beneficiary of a VIE by performing an analysis that
principally considers:
‰ Which variable interest holder has the power to direct the
activities of the VIE that most significantly impact the
VIE’s economic performance;

‰ Which variable interest holder has the obligation to
absorb losses or the right to receive benefits from the VIE
that could potentially be significant to the VIE;

‰ The VIE’s purpose and design, including the risks the VIE
was designed to create and pass through to its variable
interest holders;

‰ The VIE’s capital structure;
‰ The terms between the VIE and its variable interest

holders and other parties involved with the VIE; and

‰ Related-party relationships.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The firm reassesses its evaluation of whether an entity is a
VIE when certain reconsideration events occur. The firm
reassesses its determination of whether it is the primary
beneficiary of a VIE on an ongoing basis based on current
facts and circumstances.

VIE Activities
The firm is principally involved with VIEs through the
following business activities:

Mortgage-Backed VIEs. The firm sells residential and
commercial mortgage loans and securities to mortgage-
backed VIEs and may retain beneficial interests in the assets
sold to these VIEs. The firm purchases and sells beneficial
interests issued by mortgage-backed VIEs in connection
with market-making activities. In addition, the firm may
enter into derivatives with certain of these VIEs, primarily
interest rate swaps, which are typically not variable
interests. The firm generally enters into derivatives with
other counterparties to mitigate its risk.

Real Estate, Credit- and Power-Related and Other
Investing VIEs. The firm purchases equity and debt
securities issued by and makes loans to VIEs that hold real
estate, performing and nonperforming debt, distressed
loans, power-related assets and equity securities. The firm
generally does not sell assets to, or enter into derivatives
with, these VIEs.

Corporate Debt and Other Asset-Backed VIEs. The
firm structures VIEs that issue notes to clients, purchases
and sells beneficial interests issued by corporate debt and
other asset-backed VIEs in connection with market-making
activities, and makes loans to VIEs that warehouse
corporate debt. Certain of these VIEs synthetically create
interests they issue by
the exposure for the beneficial
entering into credit derivatives with the firm, rather than
purchasing the underlying assets. In addition, the firm may
enter into derivatives, such as total return swaps, with
certain corporate debt and other asset-backed VIEs, under
which the firm pays the VIE a return due to the beneficial
interest holders and receives the return on the collateral
owned by the VIE. The collateral owned by these VIEs is
primarily other asset-backed loans and securities. The firm
generally can be removed as the total return swap
counterparty and enters
into derivatives with other
counterparties to mitigate its risk related to these swaps.
The firm may sell assets to the corporate debt and other
asset-backed VIEs it structures.

Principal-Protected Note VIEs. The firm structures VIEs
that issue principal-protected notes to clients. These VIEs
own portfolios of assets, principally with exposure to hedge
funds. Substantially all of the principal protection on the
notes issued by these VIEs is provided by the asset portfolio
rebalancing that is required under the terms of the notes.
The firm enters into total return swaps with these VIEs
under which the firm pays the VIE the return due to the
principal-protected note holders and receives the return on
the assets owned by the VIE. The firm may enter into
derivatives with other counterparties to mitigate its risk.
The firm also obtains funding through these VIEs.

Investments in Funds. The firm makes equity investments
in certain investment fund VIEs it manages and is entitled to
receive fees from these VIEs. The firm has generally not sold
assets to, or entered into derivatives with, these VIEs.

Nonconsolidated VIEs
The table below presents a summary of the nonconsolidated
VIEs in which the firm holds variable interests.

$ in millions

As of December

2019

2018

Total nonconsolidated VIEs
$128,069
Assets in VIEs
9,526
$
Carrying value of variable interests — assets
Carrying value of variable interests — liabilities $
619
Maximum exposure to loss:

Retained interests
Purchased interests
Commitments and guarantees
Derivatives
Debt and equity

Total maximum exposure to loss

3,372
901
2,697
9,010
4,806
$ 20,786

$118,186
9,543
$
478
$

3,280
983
2,745
8,975
4,728
$ 20,711

In the table above:
‰ The nature of the firm’s variable interests is described in

the rows under maximum exposure to loss.

‰ The firm’s exposure to the obligations of VIEs is generally
In certain
limited to its interests in these entities.
instances,
including
firm provides guarantees,
derivative guarantees, to VIEs or holders of variable
interests in VIEs.

the

‰ The maximum exposure to loss excludes the benefit of
offsetting financial instruments that are held to mitigate
the risks associated with these variable interests.

‰ The maximum exposure to loss from retained interests,
purchased interests, and debt and equity is the carrying
value of these interests.

‰ The maximum exposure to loss from commitments and
guarantees, and derivatives is the notional amount, which
does not represent anticipated losses and has not been
reduced by unrealized losses. As a result, the maximum
recorded for
exposure
commitments and guarantees, and derivatives.

liabilities

to loss

exceeds

Goldman Sachs 2019 Form 10-K 163

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents information, by principal business
activity, for nonconsolidated VIEs included in the summary
table above.

$ in millions

Mortgage-backed
Assets in VIEs
Carrying value of variable interests — assets
Maximum exposure to loss:

Retained interests
Purchased interests
Commitments and guarantees
Derivatives

Total maximum exposure to loss

Real estate, credit- and power-related and other investing
Assets in VIEs
Carrying value of variable interests — assets
Carrying value of variable interests — liabilities
Maximum exposure to loss:

$19,602
$ 3,243
7
$

As of December

2019

2018

$75,354
$ 3,830

$73,262
$ 4,090

$ 3,223
607
50
66
$ 3,946

$ 1,213
92
3,238
$ 4,543

$16,248
$ 2,040
612
$

149
294
1,374
8,849
1,155
$11,821

$ 3,147
941
35
77
$ 4,200

$18,851
$ 3,601
20
$

$ 1,543
113
3,572
$ 5,228

$15,842
$ 1,563
458
$

133
42
1,113
8,782
867
$10,937

$16,865
413
$

$10,231
289
$

60
3
413
476

54
3
289
346

Commitments and guarantees
Derivatives
Debt and equity

Total maximum exposure to loss

Corporate debt and other asset-backed
Assets in VIEs
Carrying value of variable interests — assets
Carrying value of variable interests — liabilities
Maximum exposure to loss:

Retained interests
Purchased interests
Commitments and guarantees
Derivatives
Debt and equity

Total maximum exposure to loss

Investments in funds
Assets in VIEs
Carrying value of variable interests — assets
Maximum exposure to loss:

Commitments and guarantees
Derivatives
Debt and equity

Total maximum exposure to loss

164 Goldman Sachs 2019 Form 10-K

As of both December 2019 and December 2018, the
carrying values of
in
nonconsolidated VIEs are included in the consolidated
balance sheets as follows:
‰ Mortgage-backed: Assets were primarily included in

firm’s variable

interests

the

trading assets and loans.

‰ Real estate, credit- and power-related and other investing:
Assets were primarily included in loans and investments
and liabilities were included in trading liabilities and
other liabilities.

‰ Corporate debt and other asset-backed: Assets were
primarily included in loans and liabilities were included in
trading liabilities.

‰ Investments
investments.

in funds: Assets were

included in

Consolidated VIEs
The table below presents a summary of the carrying value
and balance sheet classification of assets and liabilities in
consolidated VIEs.

$ in millions

Total consolidated VIEs
Assets
Cash and cash equivalents
Trading assets
Investments
Loans
Other assets
Total

Liabilities
Other secured financings
Customer and other payables
Trading liabilities
Unsecured short-term borrowings
Unsecured long-term borrowings
Other liabilities
Total

As of December

2019

2018

$ 112
27
835
2,392
1,084
$4,450

$1,163
9
10
48
214
959
$2,403

84
264
943
1,148
1,261
$3,700

$1,204
–
20
45
207
1,100
$2,576

In the table above:
‰ Assets and liabilities are presented net of intercompany
eliminations and exclude the benefit of offsetting financial
instruments that are held to mitigate the risks associated
with the firm’s variable interests.

‰ VIEs in which the firm holds a majority voting interest are
excluded if (i) the VIE meets the definition of a business
and (ii) the VIE’s assets can be used for purposes other
than the settlement of its obligations.

‰ Substantially all assets can only be used to settle

obligations of the VIE.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents information, by principal business
activity, for consolidated VIEs included in the summary
table above.

$ in millions

Real estate, credit-related and other investing
Assets
Cash and cash equivalents
Trading assets
Investments
Loans
Other assets
Total

Liabilities
Other secured financings
Customer and other payables
Trading liabilities
Other liabilities
Total

Mortgage-backed and other asset-backed
Assets
Trading assets
Loans
Other assets
Total

Liabilities
Other secured financings
Total

Principal-protected notes
Assets
Trading assets
Total

Liabilities
Other secured financings
Unsecured short-term borrowings
Unsecured long-term borrowings
Total

As of December

2019

2018

$ 112
26
835
2,392
1,084
$4,449

$ 684
9
10
959
$1,662

$
$

–
–
–
–

–
–

1
1

$ 479
48
214
$ 741

84
45
943
1,096
1,258
$3,426

$ 596
–
20
1,100
$1,716

$ 210
52
3
$ 265

$ 140
$ 140

$
$

9
9

$ 468
45
207
$ 720

In the table above:
‰ The majority of the assets in principal-protected notes
in

intercompany

eliminated

and

are

VIEs
consolidation.

‰ Creditors and beneficial interest holders of real estate,
credit-related and other investing VIEs, and mortgage-
backed and other asset-backed VIEs do not have recourse
to the general credit of the firm.

Note 18.
Commitments, Contingencies and Guarantees

Commitments
The table below presents commitments by type.

$ in millions

Commitment Type

Commercial lending:
Investment-grade
Non-investment-grade

Warehouse financing
Credit card
Total lending
Collateralized agreement
Collateralized financing
Letters of credit
Investment
Other
Total commitments

As of December

2019

2018

$ 89,276
58,718
5,581
13,669
167,244
62,093
10,193
456
7,879
6,135
$254,000

$ 81,729
51,793
4,060
–
137,582
54,480
15,429
445
7,595
4,892
$220,423

The table below presents commitments by expiration.

$ in millions

Commitment Type

Commercial lending:
Investment-grade
Non-investment-grade

Warehouse financing
Credit card
Total lending
Collateralized agreement
Collateralized financing
Letters of credit
Investment
Other
Total commitments

As of December 2019

2020

2021 -
2022

2023 -
2024

2025 -
Thereafter

$ 13,921
6,130
1,644
13,669
35,364
61,588
10,193
409
3,623
6,051
$117,228

$31,099
15,810
2,320
–
49,229
505
–
7
1,434
84
$51,259

$43,303
26,379
1,596
–
71,278
–
–
–
1,002
–
$72,280

953
10,399
21
–
11,373
–
–
40
1,820
–
$13,233

Lending Commitments
The firm’s commercial and warehouse financing lending
commitments are agreements to lend with fixed termination
dates and depend on the satisfaction of all contractual
conditions to borrowing. These commitments are presented
net of amounts syndicated to third parties. The total
commitment amount does not necessarily reflect actual
future cash flows because the firm may syndicate all or
substantial portions of these commitments. In addition,
commitments can expire unused or be reduced or cancelled
at the counterparty’s request. The firm also provides credit
to consumers by issuing credit card lines.

Goldman Sachs 2019 Form 10-K 165

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents information about
commitments.

lending

$ in millions

Held for investment
Held for sale
At fair value
Total

As of December

2019

2018

$150,100
15,245
1,899
$167,244

$120,997
14,912
1,673
$137,582

for

losses

$361 million)

In the table above:
‰ Held for investment lending commitments are accounted
for on an accrual basis. The carrying value of lending
commitments was a liability of $527 million (including
allowance
of
of
December 2019 and $443 million (including allowance
for losses of $286 million) as of December 2018. The
estimated fair value of such lending commitments was a
liability of $3.05 billion as of December 2019 and
$3.78 billion as of December 2018. Had these lending
commitments been carried at fair value and included in
the
of
December 2019 and $1.12 billion as of December 2018
would have been classified in level 2, and $1.27 billion as
of December
of
as
and
December 2018 would have been classified in level 3.

hierarchy,

billion

$1.78

$2.66

value

2019

fair

‰ Held for sale lending commitments are accounted for at
the lower of cost or fair value. The carrying value of
lending commitments held for sale was a liability of
$60 million as of December 2019 and $155 million as of
December 2018. The estimated fair value of such lending
commitments approximates the carrying value. Had these
lending commitments been included in the fair value
hierarchy, they would have been primarily classified in
level 2 as of both December 2019 and December 2018.
‰ Gains or losses related to lending commitments at fair
value, if any, are generally recorded net of any fees in
other principal transactions.

Commercial Lending. The firm’s commercial
lending
commitments were primarily extended to investment-grade
corporate borrowers. Such commitments primarily included
$102.50 billion as of December 2019 and $93.99 billion as
of December 2018, related to relationship lending activities
(principally used for operating and general corporate
purposes) and $33.47 billion as of December 2019 and
$27.92 billion as of December 2018, related to other
investment banking activities
(generally extended for
contingent acquisition financing and are often intended to be
short-term in nature, as borrowers often seek to replace them
with other funding sources). The firm also extends lending
commitments in connection with other types of corporate
lending, as well as commercial real estate financing. See
Note 9 for further information about funded loans.

166 Goldman Sachs 2019 Form 10-K

Sumitomo Mitsui Financial Group, Inc. (SMFG) provides
the firm with credit loss protection on certain approved
loan commitments (primarily investment-grade commercial
lending commitments). The notional amount of such loan
commitments was $5.74 billion as of December 2019 and
$15.52 billion as of December 2018. The credit loss
protection on loan commitments provided by SMFG is
generally limited to 95% of the first loss the firm realizes on
such commitments, up to a maximum of approximately
$950 million. In addition, subject to the satisfaction of
certain conditions, upon the firm’s request, SMFG will
provide protection for 70% of additional losses on such
commitments, up to a maximum of $750 million, of which
no protection had been provided as of December 2019 and
$550 million was provided as of December 2018. The firm
also uses other financial instruments to mitigate credit risks
related to certain commitments not covered by SMFG.
These instruments primarily include credit default swaps
that reference the same or similar underlying instrument or
entity, or credit default swaps that reference a credit index.

Warehouse Financing. The firm provides financing to
clients who warehouse financial assets. These arrangements
are secured by the warehoused assets, primarily consisting
of consumer and corporate loans.

Credit Card. The firm’s credit card lending commitments
represents credit card lines issued by the firm to consumers.
These credit card lines are cancelable by the firm.

Agreement

Commitments/

Collateralized
Collateralized Financing Commitments
Collateralized agreement commitments includes forward
starting resale and securities borrowing agreements, and
collateralized financing commitments includes forward
starting repurchase and secured lending agreements that
settle at a future date, generally within three business days.
Collateralized agreement
commitments also includes
transactions where the firm has entered into commitments
to provide
clients and
counterparties
through resale agreements. The firm’s
funding of these commitments depends on the satisfaction
of all contractual conditions to the resale agreement and
these commitments can expire unused.

financing to its

contingent

Letters of Credit
The firm has commitments under letters of credit issued by
various banks which the firm provides to counterparties in
lieu of securities or cash to satisfy various collateral and
margin deposit requirements.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Investment Commitments
Investment commitments includes commitments to invest in
private equity, real estate and other assets directly and
through funds that the firm raises and manages. Investment
commitments included $2.06 billion as of December 2019
and $2.42 billion as of December 2018, related to
commitments to invest in funds managed by the firm. If
these commitments are called, they would be funded at
market value on the date of investment.

Contingencies
Legal Proceedings. See Note 27 for information about
legal proceedings,
including certain mortgage-related
matters.

Certain Mortgage-Related Contingencies. During the
period 2005 through 2008 in connection with both sales
and securitizations of loans, the firm provided loan-level
representations
loan-level
representations from the party from whom the firm
purchased the loans.

assigned

and/or

the

Based on the large number of defaults in residential
mortgages, including those sold or securitized by the firm,
there is a potential for repurchase claims. However, the
firm is not in a position to make a meaningful estimate of
that exposure at this time. The firm’s exposure to claims for
repurchase of residential mortgage loans based on alleged
breaches of representations will depend on a number of
factors, such as the extent to which these claims are made
within the statute of limitations, taking into consideration
the agreements to toll the statute of limitations the firm
entered into with trustees representing certain trusts.

Other Contingencies. In connection with the sale of
the firm
Metro International Trade Services (Metro),
agreed to provide indemnities to the buyer, which primarily
relate to fundamental representations and warranties, and
potential
liabilities for legal or regulatory proceedings
arising out of the conduct of Metro’s business while the
firm owned it.

In connection with the settlement agreement with the
Residential Mortgage-Backed Securities Working Group of
the U.S. Financial Fraud Enforcement Task Force, the firm
agreed to provide $1.80 billion in consumer relief by
January 2021. As of December 2019, approximately
$1.55 billion of such relief was provided. This relief was
provided in the
for
form of principal
underwater homeowners
and distressed borrowers;
financing for construction, rehabilitation and preservation
of affordable housing; and support for debt restructuring,
foreclosure prevention and housing quality improvement
programs, as well as land banks.

forgiveness

Guarantees
The table below presents derivatives
definition
a
indemnifications and certain other financial guarantees.

that meet

guarantee,

securities

the
lending

$ in millions

Derivatives

As of December 2019

Securities
lending
indemnifications

Other
financial
guarantees

3,817

$
Carrying Value of Net Liability $
Maximum Payout/Notional Amount by Period of Expiration
2020
2021 - 2022
2023 - 2024
2025 - thereafter
Total

$ 91,814
76,693
19,377
36,317
$224,201

$17,891
–
–
–
$17,891

–

$2,044
1,714
2,219
149
$6,126

As of December 2018

4,105

Carrying Value of Net Liability
$
Maximum Payout/Notional Amount by Period of Expiration
2019
2020 - 2021
2022 - 2023
2024 - thereafter
Total

$101,169
77,955
17,813
67,613
$264,550

$27,869
–
–
–
$27,869

–

$1,379
2,252
2,021
241
$5,893

In the table above:
‰ The maximum payout is based on the notional amount of
the contract and does not represent anticipated losses.
‰ Amounts exclude certain commitments to issue standby
letters of credit that are included in lending commitments.
See the tables in “Commitments” above for a summary of
the firm’s commitments.

‰ The carrying value for derivatives included derivative
assets of $1.56 billion as of December 2019 and
$1.48 billion as of December 2018, and derivative
liabilities of $5.38 billion as of December 2019 and
$5.59 billion as of December 2018.

Goldman Sachs 2019 Form 10-K 167

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Derivative Guarantees. The firm enters into various
derivatives that meet the definition of a guarantee under
U.S. GAAP, including written equity and commodity put
options, written currency contracts and interest rate caps,
floors and swaptions. These derivatives are risk managed
together with derivatives that do not meet the definition of
a guarantee, and therefore the amounts in the table above
do not reflect the firm’s overall risk related to derivative
activities. Disclosures about derivatives are not required if
they may be cash settled and the firm has no basis to
conclude it is probable that the counterparties held the
underlying instruments at inception of the contract. The
firm has concluded that these conditions have been met for
commercial and
certain large,
clearing
counterparties,
investment
central
counterparties,
other
funds
counterparties. Accordingly, the firm has not included such
contracts in the table above. See Note 7 for information
about credit derivatives that meet the definition of a
guarantee, which are not included in the table above.

internationally active

certain

hedge

bank

and

Derivatives are accounted for at fair value and therefore the
carrying value is considered the best indication of payment/
performance risk for individual contracts. However, the
carrying values in the table above exclude the effect of
counterparty and cash collateral netting.

Securities Lending Indemnifications. The firm, in its
capacity as an agency lender,
indemnifies most of its
securities lending customers against losses incurred in the
event that borrowers do not return securities and the
collateral held is insufficient to cover the market value of
the securities borrowed. Collateral held by the lenders in
connection with securities lending indemnifications was
$19.14 billion as of December 2019 and $28.75 billion as
of December 2018. Because the contractual nature of these
arrangements requires the firm to obtain collateral with a
market value that exceeds the value of the securities lent to
the borrower, there is minimal performance risk associated
with these guarantees.

168 Goldman Sachs 2019 Form 10-K

Other Financial Guarantees. In the ordinary course of
business, the firm provides other financial guarantees of the
obligations of third parties (e.g., standby letters of credit
to complete
and other guarantees
These
fund-related
transactions
guarantees represent obligations to make payments to
beneficiaries if the guaranteed party fails to fulfill
its
obligation under a contractual arrangement with that
beneficiary.

to enable clients

guarantees).

and

Guarantees of Securities Issued by Trusts. The firm has
established trusts, including Goldman Sachs Capital I, the
APEX Trusts and other entities for the limited purpose of
issuing securities to third parties, lending the proceeds to
the firm and entering into contractual arrangements with
the firm and third parties related to this purpose. The firm
does not consolidate these entities. See Note 14 for further
information about the transactions involving Goldman
Sachs Capital I and the APEX Trusts.

The firm effectively provides for the full and unconditional
guarantee of the securities issued by these entities. Timely
payment by the firm of amounts due to these entities under
the guarantee, borrowing, preferred stock and related
contractual arrangements will be sufficient
to cover
payments due on the securities issued by these entities.

that

Management believes
is unlikely that any
circumstances will occur, such as nonperformance on the
part of paying agents or other service providers, that would
make it necessary for the firm to make payments related to
these entities other than those required under the terms of
the guarantee, borrowing, preferred stock and related
contractual arrangements and in connection with certain
expenses incurred by these entities.

Indemnities and Guarantees of Service Providers. In
the ordinary course of business, the firm indemnifies and
guarantees certain service providers, such as clearing and
trustees and administrators, against
custody agents,
specified potential losses in connection with their acting as
an agent of, or providing services to, the firm or its
affiliates.

third-party service providers,

The firm may also be liable to some clients or other parties
for losses arising from its custodial role or caused by acts or
omissions of
including
sub-custodians and third-party brokers. In certain cases, the
firm has the right to seek indemnification from these third-
party service providers for certain relevant losses incurred
by the firm. In addition, the firm is a member of payment,
clearing and settlement networks, as well as securities
exchanges around the world that may require the firm to
meet the obligations of such networks and exchanges in the
event of member defaults and other loss scenarios.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

In connection with the firm’s prime brokerage and clearing
businesses, the firm agrees to clear and settle on behalf of its
clients the transactions entered into by them with other
brokerage firms. The firm’s obligations in respect of such
transactions are secured by the assets in the client’s account,
as well as any proceeds received from the transactions
cleared and settled by the firm on behalf of the client. In
connection with joint venture investments, the firm may
issue loan guarantees under which it may be liable in the
event of fraud, misappropriation, environmental liabilities
and certain other matters involving the borrower.

The firm is unable to develop an estimate of the maximum
these guarantees and indemnifications.
payout under
However, management believes that it is unlikely the firm
will have to make any material payments under these
arrangements, and no material liabilities related to these
guarantees and indemnifications have been recognized in
the consolidated balance sheets as of both December 2019
and December 2018.

Warranties

Representations,

and
Other
Indemnifications. The firm provides representations and
warranties to counterparties in connection with a variety of
commercial transactions and occasionally indemnifies them
losses caused by the breach of those
against potential
representations and warranties. The firm may also provide
indemnifications protecting against changes in or adverse
application of certain U.S. tax laws in connection with
ordinary-course transactions, such as securities issuances,
borrowings or derivatives.

In addition, the firm may provide indemnifications to some
counterparties to protect them in the event additional taxes
are owed or payments are withheld, due either to a change
in or an adverse application of certain non-U.S. tax laws.

These indemnifications generally are standard contractual
terms and are entered into in the ordinary course of
there are no stated or notional
business. Generally,
amounts included in these indemnifications, and the
contingencies triggering the obligation to indemnify are not
expected to occur. The firm is unable to develop an estimate
the maximum payout under these guarantees and
of
indemnifications. However, management believes that it is
unlikely the firm will have to make any material payments
under these arrangements, and no material liabilities related
to these arrangements have been recognized in the
consolidated balance sheets as of both December 2019 and
December 2018.

Guarantees of Subsidiaries. Group Inc.
fully and
unconditionally guarantees the securities issued by GS
Finance Corp., a wholly-owned finance subsidiary of the
firm. Group Inc. has guaranteed the payment obligations of
Goldman Sachs & Co. LLC (GS&Co.) and GS Bank USA,
subject to certain exceptions.

Group Inc. guarantees many of the obligations of its other
consolidated subsidiaries on a transaction-by-transaction
basis, as negotiated with counterparties. Group Inc. is unable
to develop an estimate of the maximum payout under its
subsidiary guarantees; however, because these obligations
are also obligations of consolidated subsidiaries, Group Inc.’s
liabilities as guarantor are not separately disclosed.

Note 19.
Shareholders’ Equity

Common Equity
As of both December 2019 and December 2018, the firm
had 4.00 billion authorized shares of common stock and
200 million authorized shares of nonvoting common stock,
each with a par value of $0.01 per share.

The firm’s share repurchase program is intended to help
maintain the appropriate level of common equity. The share
repurchase program is effected primarily through regular
open-market purchases (which may include repurchase plans
designed to comply with Rule 10b5-1), the amounts and
timing of which are determined primarily by the firm’s current
and projected capital position, and capital deployment
opportunities, but which may also be influenced by general
market conditions and the prevailing price and trading
volumes of the firm’s common stock. Prior to repurchasing
common stock, the firm must receive confirmation that the
FRB does not object to such capital action.

The table below presents information about common stock
repurchases.

in millions, except per share amounts

2019

2018

2017

Year Ended December

29.0
Common share repurchases
Average cost per share
$206.56 $236.22 $231.87
Total cost of common share repurchases $ 5,335 $ 3,294 $ 6,721

25.8

13.9

share-based awards

Pursuant to the terms of certain share-based compensation
plans, employees may remit shares to the firm or the firm
to satisfy statutory
may cancel
employee tax withholding requirements and the exercise
price of stock options. Under these plans, 7,490 shares in
2019, 1,120 shares in 2018 and 12,165 shares in 2017 were
remitted with a total value of $2 million in 2019,
$0.3 million in 2018 and $3 million in 2017, and the firm
cancelled 3.8 million share-based awards
in 2019,
5.0 million in 2018 and 12.7 million in 2017 with a total
value of $743 million in 2019, $1.24 billion in 2018 and
$3.03 billion in 2017.

Goldman Sachs 2019 Form 10-K 169

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents common stock dividends declared.

Year Ended December

2019

2018

2017

Dividends declared per common share

$4.15

$3.15

$2.90

On January 14, 2020, the Board of Directors of Group Inc.
declared a dividend of $1.25 per common share. The
dividend will be paid on March 30, 2020 to common
shareholders of record on March 2, 2020.

Preferred Equity
The tables below present information about the perpetual
preferred stock issued and outstanding as of December 2019.

Series

A
C
D
E
F
J
K
L
M
N
O
P
Q
R
Total

Shares
Authorized

Shares
Issued

Shares
Outstanding

Depositary Shares
Per Share

50,000
25,000
60,000
17,500
5,000
46,000
32,200
52,000
80,000
31,050
26,000
66,000
20,000
24,000
534,750

30,000
8,000
54,000
7,667
1,615
40,000
28,000
14,000
80,000
27,000
26,000
60,000
20,000
24,000
420,282

29,999
8,000
53,999
7,667
1,615
40,000
28,000
14,000
80,000
27,000
26,000
60,000
20,000
24,000
420,280

1,000
1,000
1,000
N/A
N/A
1,000
1,000
25
25
1,000
25
25
25
25

Series

Earliest Redemption Date

Liquidation
Preference

Redemption
Value
($ in millions)

A
C
D
E
F
J
K
L
M
N
O
P
Q
R
Total

Currently redeemable
Currently redeemable
Currently redeemable
Currently redeemable
Currently redeemable
May 10, 2023
May 10, 2024
Currently redeemable
May 10, 2020
May 10, 2021
November 10, 2026
November 10, 2022
August 10, 2024
February 10, 2025

$ 25,000
$ 25,000
$ 25,000
$100,000
$100,000
$ 25,000
$ 25,000
$ 25,000
$ 25,000
$ 25,000
$ 25,000
$ 25,000
$ 25,000
$ 25,000

750
200
1,350
767
161
1,000
700
350
2,000
675
650
1,500
500
600
$11,203

In the tables above:
‰ All shares have a par value of $0.01 per share and, where
applicable, each share is represented by the specified
number of depositary shares.

‰ The earliest redemption date represents the date on which
each share of non-cumulative Preferred Stock is
redeemable at the firm’s option.

‰ Prior to redeeming preferred stock, the firm must receive
confirmation that the FRB does not object to such action.
‰ In June 2019, the firm issued 20,000 shares of Series Q
5.50% Fixed-Rate Reset Non-Cumulative Preferred
Stock (Series Q Preferred Stock).

170 Goldman Sachs 2019 Form 10-K

‰ In November 2019, the firm issued 24,000 shares of
Series R 4.95% Fixed-Rate Reset Non-Cumulative
Preferred Stock (Series R Preferred Stock).

‰ The redemption price per share for Series A through F and
Series Q and R Preferred Stock is the liquidation
preference plus declared and unpaid dividends. The
redemption price per share for Series J through P
Preferred Stock is the liquidation preference plus accrued
and unpaid dividends. Each share of Series E and Series F
Preferred Stock is redeemable at the firm’s option, subject
to certain covenant restrictions governing the firm’s
ability to redeem the preferred stock without issuing
common stock or other instruments with equity-like
characteristics. See Note 14 for information about the
replacement capital covenants applicable to the Series E
and Series F Preferred Stock.

‰ All series of preferred stock are pari passu and have a
preference over the firm’s common stock on liquidation.
‰ The firm’s ability to declare or pay dividends on, or
purchase, redeem or otherwise acquire, its common stock
is subject to certain restrictions in the event that the firm
fails to pay or set aside full dividends on the preferred
stock for the latest completed dividend period.

In January 2020, the firm issued 14,000 shares of Series S
perpetual 4.40% Fixed-Rate Reset Non-Cumulative
Preferred Stock (Series S Preferred Stock). Each share of
Series S Preferred Stock issued and outstanding has a
liquidation preference of $25,000,
represented by
25 depositary shares and is redeemable at the firm’s option
beginning February 10, 2025 at a redemption price equal to
$25,000 plus declared and unpaid dividends. Dividends on
Series S Preferred Stock,
if declared, are payable semi-
annually at (i) 4.40% per annum from the issuance date to,
but excluding, February 10, 2025 and, thereafter, (ii) 2.85%
per annum plus the five-year treasury rate. In January 2020,
the firm issued a notice that it would redeem the remaining
its Series L 5.70%
14,000 outstanding shares of
Non-Cumulative Preferred Stock (Series L Preferred Stock)
with
on
February 24, 2020. The difference between the redemption
value and net carrying value at the time of the issuance of this
notice was $1 million, which was recorded as an addition to
preferred stock dividends in 2020.
In 2019, the firm redeemed 38,000 shares of its outstanding
Series L Preferred Stock with a redemption value of
$950 million ($25,000 per share), plus accrued and unpaid
dividends. In addition,
in 2019, the firm redeemed the
remaining 6,000 outstanding shares of its Series B 6.20%
Non-Cumulative Preferred Stock (Series B Preferred Stock)
with a redemption value of $150 million ($25,000 per share).
The difference between the redemption value and net
carrying value at
these redemptions was
$9 million, which was recorded as an addition to preferred
stock dividends in 2019.

$350 million

the time of

redemption

value

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

In 2018, the firm redeemed 26,000 shares of Series B
Preferred Stock with a redemption value of $650 million
($25,000 per share). The difference between the redemption
value of the Series B Preferred Stock and the net carrying
value at the time of redemption was $15 million, which was
recorded as an addition to preferred stock dividends in 2018.
In 2017, the firm redeemed the 34,000 shares of Series I
5.95% Non-Cumulative Preferred Stock (Series I Preferred
Stock) for the stated redemption price of $850 million
($25,000 per share), plus accrued and unpaid dividends.
The difference between the redemption value of the Series I
Preferred Stock and the net carrying value at the time of
redemption was $14 million, which was recorded as an
addition to preferred stock dividends in 2017.
The table below presents the dividend rates of perpetual
preferred stock as of December 2019.
Series

Per Annum Dividend Rate

A
C
D
E
F

3 month LIBOR + 0.75%, with floor of 3.75%, payable quarterly
3 month LIBOR + 0.75%, with floor of 4.00%, payable quarterly
3 month LIBOR + 0.67%, with floor of 4.00%, payable quarterly
3 month LIBOR + 0.7675%, with floor of 4.00%, payable quarterly
3 month LIBOR + 0.77%, with floor of 4.00%, payable quarterly
5.50% to, but excluding, May 10, 2023;
3 month LIBOR + 3.64% thereafter, payable quarterly
6.375% to, but excluding, May 10, 2024;
3 month LIBOR + 3.55% thereafter, payable quarterly
5.70%, payable semi-annually, from issuance date to, but excluding,
May 10, 2019; 3 month LIBOR + 3.884%, payable quarterly, thereafter
5.375%, payable semi-annually, from issuance date to, but excluding,
May 10, 2020; 3 month LIBOR + 3.922%, payable quarterly, thereafter
6.30%, payable quarterly
5.30%, payable semi-annually, from issuance date to, but excluding,
November 10, 2026; 3 month LIBOR + 3.834%, payable quarterly, thereafter
5.00%, payable semi-annually, from issuance date to, but excluding,
November 10, 2022; 3 month LIBOR + 2.874%, payable quarterly, thereafter
5.50%, payable semi-annually, from issuance date to, but excluding,
August 10, 2024; 5 year treasury rate + 3.623%, payable semi-annually, thereafter
4.95%, payable semi-annually, from issuance date to, but excluding,
February 10, 2025; 5 year treasury rate + 3.224%, payable semi-annually, thereafter

In the table above, dividends on each series of preferred
stock are payable in arrears for the periods specified.
The table below presents preferred stock dividends declared.

Year Ended December

2019

2018

2017

per
share

$ in
millions

per
share

$ in
millions

per
share

$ in
millions

$ 947.92
$ 775.00
$1,011.11
$1,011.11
$4,044.44
$4,044.44
$
–
$1,375.00
$1,593.76
$1,519.67
$1,343.76
$1,575.00
$1,325.00
$1,250.00

$ 28
5
8
54
31
7
–
55
45
68
107
43
34
75
$560

$ 958.33
$1,550.00
$1,022.23
$1,022.23
$4,077.78
$4,077.78
$
–
$1,375.00
$1,593.76
$1,425.00
$1,343.76
$1,575.00
$1,325.00
$1,281.25

$ 29
19
8
55
31
7
–
55
45
74
107
43
34
77
$584

$ 950.51
$1,550.00
$1,013.90
$1,013.90
$4,055.55
$4,055.55
$1,487.52
$1,375.00
$1,593.76
$1,425.00
$1,343.76
$1,575.00
$1,325.00
–
$

$ 29
50
8
55
31
6
51
55
45
74
107
42
34
–
$587

Series

A
B
C
D
E
F
I
J
K
L
M
N
O
P
Total

On January 10, 2020, Group Inc. declared dividends of
$234.38 per share of Series A Preferred Stock, $250.00 per
share of Series C Preferred Stock, $250.00 per share of
Series D Preferred Stock, $343.75 per share of Series J
Preferred Stock, $398.44 per share of Series K Preferred
Stock, $361.54 per share of Series L Preferred Stock,
$393.75 per share of Series N Preferred Stock, and $889.93
per share of Series Q Preferred Stock to be paid on
February 10, 2020 to preferred shareholders of record on
January 26, 2020. In addition, the firm declared dividends
of $1,011.11 per share of Series E Preferred Stock and
Series F Preferred Stock to be paid on March 2, 2020 to
preferred shareholders of record on February 16, 2020.

Accumulated Other Comprehensive Income/(Loss)
The table below presents changes in the accumulated other
comprehensive income/(loss), net of tax, by type.

Other
comprehensive
income/(loss)
adjustments,
net of tax

Ending
balance

Beginning
balance

$ in millions

Year Ended December 2019

Currency translation
Debt valuation adjustment
Pension and postretirement liabilities
Available-for-sale securities
Total

$ (621)
1,507
(81)
(112)
$ 693

Year Ended December 2018

Currency translation
Debt valuation adjustment
Pension and postretirement liabilities
Available-for-sale securities
Total

$ (625)
(1,046)
(200)
(9)
$(1,880)

Year Ended December 2017

Currency translation
Debt valuation adjustment
Pension and postretirement liabilities
Available-for-sale securities
Total

$ (647)
(239)
(330)
–
$(1,216)

(2,079)
(261)
158

5 $ (616)
(572)
(342)
46
$(2,177) $(1,484)

4 $ (621)
1,507
(81)
(112)
693

2,553
119
(103)
$ 2,573 $

22 $ (625)
(1,046)
(200)
(9)
$ (664) $(1,880)

(807)
130
(9)

Goldman Sachs 2019 Form 10-K 171

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 20.
Regulation and Capital Adequacy

The FRB is the primary regulator of Group Inc., a bank
holding company (BHC) under the U.S. Bank Holding
Company Act of 1956 and a financial holding company
under amendments to this Act. The firm is subject to
consolidated regulatory capital requirements which are
calculated in accordance with the regulations of the FRB
(Capital Framework).

The capital requirements are expressed as risk-based capital
and leverage ratios that compare measures of regulatory
capital to risk-weighted assets (RWAs), average assets and
off-balance-sheet exposures. Failure to comply with these
capital requirements could result
in restrictions being
imposed by the firm’s regulators and could limit the firm’s
ability to repurchase shares, pay dividends and make
certain discretionary compensation payments. The firm’s
capital levels are also subject to qualitative judgments by
the regulators about components of capital, risk weightings
the firm’s
and other factors. Furthermore, certain of
subsidiaries are subject to separate regulations and capital
requirements.

Capital Framework
The regulations under the Capital Framework are largely
based on the Basel Committee on Banking Supervision’s
(Basel Committee) capital framework for strengthening
international
III) and also
standards
capital
(Basel
the Dodd-Frank Act.
implement certain provisions of
Under the Capital Framework, the firm is an “Advanced
approach” banking organization and has been designated
as a global systemically important bank (G-SIB).

The capital requirements calculated in accordance with the
Capital Framework include the minimum risk-based capital
and leverage ratios. In addition, the risk-based capital
include the capital conservation buffer,
requirements
countercyclical capital buffer and the G-SIB surcharge, all
of which must consist entirely of capital that qualifies as
Common Equity Tier 1 (CET1) capital.

The firm calculates its CET1 capital, Tier 1 capital and
Total capital ratios in accordance with (i) the Standardized
approach and market risk rules set out in the Capital
Framework (together, the Standardized Capital Rules) and
(ii) the Advanced approach and market risk rules set out in
the Capital Framework (together, the Advanced Capital
Rules). The lower of each risk-based capital ratio calculated
in (i) and (ii) is the ratio against which the firm’s compliance
with its risk-based capital requirements is assessed. Under
the Capital Framework, the firm is also subject to leverage
requirements which consist of a minimum Tier 1 leverage
ratio and a minimum supplementary leverage ratio (SLR),
as well as the SLR buffer.

172 Goldman Sachs 2019 Form 10-K

Consolidated Regulatory Risk-Based Capital and
Leverage Ratios
The table below presents the risk-based capital and leverage
requirements.

Risk-based capital requirements
CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

Leverage requirements
Tier 1 leverage ratio
SLR

As of December

2019

2018

9.5%
11.0%
13.0%

8.3%
9.8%
11.8%

4.0%
5.0%

In the table above:
‰ As of December 2019,

the CET1 capital

ratio
requirement included a minimum of 4.5%, the Tier 1
capital ratio requirement included a minimum of 6.0%,
and the Total capital ratio requirement
included a
minimum of 8.0%. The requirements also included the
capital conservation buffer of 2.5%, the G-SIB surcharge
of 2.5% (Method 2) and the countercyclical capital
buffer, which the FRB has set to zero percent.

‰ As of December 2018,

the CET1 capital

ratio
requirement included a minimum of 4.5%, the Tier 1
capital ratio requirement included a minimum of 6.0%,
and the Total capital ratio requirement
included a
minimum of 8.0%. The requirements also included the
75% phase-in of the capital conservation buffer of 2.5%,
the 75% phase-in of the G-SIB surcharge of 2.5%
(Method 2) and the countercyclical capital buffer, which
the FRB has set to zero percent.

‰ The capital conservation buffer, countercyclical capital
buffer and G-SIB surcharge phased in ratably from
January 1, 2016 through January 1, 2019.

‰ The G-SIB surcharge is updated annually based on
financial data from the prior year and is generally
applicable for the following year. The G-SIB surcharge is
calculated using two methodologies, the higher of which
is reflected in the firm’s risk-based capital requirements.
The first calculation (Method 1) is based on the Basel
Committee’s methodology which, among other factors,
relies upon measures of the size, activity and complexity
of each G-SIB. The second calculation (Method 2) uses
similar inputs but includes a measure of reliance on short-
term wholesale funding.

‰ The Tier 1 leverage ratio requirement is a minimum of
4%. The SLR requirement of 5% as of both
December 2019 and December 2018 includes a minimum
of 3% and a 2% buffer applicable to G-SIBs.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents information about risk-based
capital ratios.

In the table above:
‰ Average total assets represents the average daily assets for

$ in millions

As of December 2019

CET1 capital
Tier 1 capital
Tier 2 capital
Total capital
RWAs

CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

As of December 2018

CET1 capital
Tier 1 capital
Tier 2 capital
Total capital
RWAs

CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

Standardized

Advanced

$ 74,850
$ 85,440
$ 14,925
$100,365
$563,575

13.3%
15.2%
17.8%

$ 73,116
$ 83,702
$ 14,926
$ 98,628
$547,910

13.3%
15.3%
18.0%

$ 74,850
$ 85,440
$ 13,473
$ 98,913
$544,653

13.7%
15.7%
18.2%

$ 73,116
$ 83,702
$ 13,743
$ 97,445
$558,111

13.1%
15.0%
17.5%

In the table above:
‰ In accordance with the risk-based Capital Rules, the
lower of the Standardized or Advanced ratio is the ratio
against which the firm’s compliance with the capital
requirements is assessed, and therefore, the Standardized
ratios applied to the firm as of December 2019 and the
Advanced ratios applied to the firm as of December 2018.
‰ Beginning in the fourth quarter of 2019, the firm made
changes to the calculation of the loss given default for
certain wholesale exposures. At the date of adoption, the
estimated impact of these changes was an increase in the
firm’s Advanced CET1 capital ratio of approximately
1 percentage point.

The table below presents information about leverage ratios.

$ in millions

Tier 1 capital

For the Three Months
Ended or as of December

2019

2018

85,440

83,702

Average total assets
Deductions from Tier 1 capital
Average adjusted total assets
Average off-balance-sheet exposures
Total leverage exposure

983,909
(5,275)
978,634
396,833
$1,375,467

Tier 1 leverage ratio
SLR

8.7%
6.2%

945,961
(4,754)
941,207
401,699
$1,342,906

8.9%
6.2%

the quarter.

‰ Average off-balance-sheet

the
monthly average and consists of derivatives, securities
financing transactions, commitments and guarantees.
‰ Tier 1 leverage ratio is calculated as Tier 1 capital divided

represents

exposures

by average adjusted total assets.

‰ SLR is calculated as Tier 1 capital divided by total

leverage exposure.

Risk-Based Capital. The table below presents information
about risk-based capital.

$ in millions

Common shareholders’ equity
Deduction for goodwill
Deduction for identifiable intangible assets
Other adjustments
CET1 capital
Preferred stock
Deduction for investments in covered funds
Other adjustments
Tier 1 capital

Standardized Tier 2 and Total capital
Tier 1 capital
Qualifying subordinated debt
Junior subordinated debt
Allowance for credit losses
Other adjustments
Standardized Tier 2 capital
Standardized Total capital

Advanced Tier 2 and Total capital
Tier 1 capital
Standardized Tier 2 capital
Allowance for credit losses
Other adjustments
Advanced Tier 2 capital
Advanced Total capital

As of December

2019

2018

$ 79,062
(3,529)
(604)
(79)
74,850
11,203
(610)
(3)
$ 85,440

$ 85,440
12,847
284
1,802
(8)
14,925
$100,365

$ 85,440
14,925
(1,802)
350
13,473
$ 98,913

$78,982
(3,097)
(297)
(2,472)
73,116
11,203
(615)
(2)
$83,702

$83,702
13,147
442
1,353
(16)
14,926
$98,628

$83,702
14,926
(1,353)
170
13,743
$97,445

Goldman Sachs 2019 Form 10-K 173

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

In the table above:
‰ Deduction for goodwill was net of deferred tax liabilities
of $667 million as of December 2019 and $661 million as
of December 2018.

tax

liabilities

$37 million

‰ Deduction for identifiable intangible assets was net of
of

deferred
December 2019 and $27 million as of December 2018.
‰ Deduction for investments in covered funds represents the
firm’s aggregate investments in applicable covered funds,
excluding investments that are subject to an extended
conformance period. See Note 8 for further information
about the Volcker Rule.

‰ Other adjustments within CET1 capital and Tier 1 capital
primarily include
credit valuation adjustments on
derivative liabilities, the overfunded portion of the firm’s
defined benefit pension plan obligation net of associated
deferred tax liabilities, disallowed deferred tax assets,
debt valuation adjustments and other required credit risk-
based deductions. Other adjustments within Advanced
Tier 2 capital include eligible credit reserves.

‰ Qualifying subordinated debt is subordinated debt issued
by Group Inc. with an original maturity of five years or
greater. The outstanding amount of subordinated debt
qualifying for Tier 2 capital is reduced upon reaching a
remaining maturity of five years. See Note 14 for further
information about the firm’s subordinated debt.

‰ Junior subordinated debt is debt issued to a Trust. As of
December 2019, 30% of this debt was included in Tier 2
capital and 70% was phased out of regulatory capital. As
of December 2018, 40% of this debt was included in
Tier 2 capital and 60% was phased out of regulatory
capital. Junior subordinated debt is reduced by the
amount of Trust Preferred securities purchased by the
firm and will be fully phased out of Tier 2 capital by 2022
at a rate of 10% per year. See Note 14 for further
information about the firm’s junior subordinated debt
and Trust Preferred securities.

174 Goldman Sachs 2019 Form 10-K

The table below presents changes in CET1 capital, Tier 1
capital and Tier 2 capital.

$ in millions

Year Ended December 2019
CET1 capital
Beginning balance
Change in:

Common shareholders’ equity
Deduction for goodwill
Deduction for identifiable intangible assets
Other adjustments

Ending balance
Tier 1 capital
Beginning balance
Change in:

CET1 capital
Deduction for investments in covered funds
Other adjustments

Ending balance
Tier 2 capital
Beginning balance
Change in:

Qualifying subordinated debt
Junior subordinated debt
Allowance for credit losses
Other adjustments

Ending balance
Total capital

Year Ended December 2018
CET1 capital
Beginning balance
Change in:

Common shareholders’ equity
Transitional provisions
Deduction for goodwill
Deduction for identifiable intangible assets
Other adjustments

Ending balance
Tier 1 capital
Beginning balance
Change in:

CET1 capital
Transitional provisions
Deduction for investments in covered funds
Preferred stock
Other adjustments

Ending balance
Tier 2 capital
Beginning balance
Change in:

Qualifying subordinated debt
Junior subordinated debt
Allowance for credit losses
Other adjustments

Ending balance
Total capital

Standardized

Advanced

$ 73,116

$73,116

80
(432)
(307)
2,393
$ 74,850

80
(432)
(307)
2,393
$74,850

$ 83,702

$83,702

1,734
5
(1)
85,440

14,926

13,743

(300)
(158)
449
8
14,925
$100,365

(300)
(158)
–
188
13,473
$98,913

$ 67,110

$67,110

8,592
(117)
(86)
26
(2,409)
$ 73,116

8,592
(117)
(86)
26
(2,409)
$73,116

$ 78,331

$78,331

6,006
13
(25)
(650)
27
83,702

14,977

13,899

(213)
(125)
275
12
14,926
$ 98,628

(213)
(125)
–
182
13,743
$97,445

RWAs. RWAs are calculated in accordance with both the
Standardized and Advanced Capital Rules.
Credit Risk
Credit RWAs are calculated based on measures of
exposure, which are then risk weighted under
the
Standardized and Advanced Capital Rules:
‰ The Standardized Capital Rules apply prescribed risk-
weights, which depend largely on the
type of
counterparty. The exposure measure for derivatives and
securities financing transactions are based on specific
formulas which take certain factors into consideration.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

‰ Under the Advanced Capital Rules, the firm computes
risk-weights for wholesale and retail credit exposures in
accordance with the Advanced Internal Ratings-Based
approach. The exposure measures for derivatives and
securities financing transactions are computed utilizing
internal models.

‰ For both Standardized and Advanced credit RWAs, the
risk-weights for securitizations and equities are based on
specific required formulaic approaches.

Market Risk
RWAs for market risk in accordance with the Standardized
and Advanced Capital Rules are generally consistent.
Market RWAs are calculated based on measures of
exposure which include the following:
‰ Value-at-Risk (VaR) is the potential loss in value of trading
assets and liabilities, as well as certain investments, loans,
and other financial assets and liabilities accounted for at
fair value, due to adverse market movements over a defined
time horizon with a specified confidence level.

For both risk management purposes and regulatory
capital calculations the firm uses a single VaR model
which captures risks including those related to interest
rates, equity prices, currency rates and commodity prices.
However, VaR used for regulatory capital requirements
(regulatory VaR) differs from risk management VaR due
to different time horizons and confidence levels (10-day
and 99% for regulatory VaR vs. one-day and 95% for
risk management VaR), as well as differences in the scope
of positions on which VaR is calculated. In addition, the
daily net revenues used to determine risk management
VaR exceptions (i.e., comparing the daily net revenues to
the VaR measure calculated as of the end of the prior
business day) include intraday activity, whereas the FRB’s
regulatory capital rules require that intraday activity be
excluded from daily net revenues when calculating
regulatory VaR exceptions. Intraday activity includes bid/
offer net revenues, which are more likely than not to be
positive by their nature. As a result, there may be
differences in the number of VaR exceptions and the
amount of daily net revenues calculated for regulatory
VaR compared to the amounts calculated for risk
management VaR.

The firm’s positional losses observed on a single day
exceeded its 99% one-day regulatory VaR on one
occasion during 2019 and exceeded its 99% one-day
regulatory VaR on two occasions during 2018. There was
no change in the VaR multiplier used to calculate Market
RWAs;

‰ Stressed VaR is the potential loss in value of trading assets
and liabilities, as well as certain investments, loans, and
other financial assets and liabilities accounted for at fair
value, during a period of significant market stress;

‰ Incremental

risk is

in value of
the potential
non-securitized positions due to the default or credit
migration of issuers of financial
instruments over a
one-year time horizon;

loss

‰ Comprehensive risk is the potential loss in value, due to
price risk and defaults, within the firm’s credit correlation
positions; and

‰ Specific risk is the risk of loss on a position that could
result from factors other than broad market movements,
including event risk, default risk and idiosyncratic risk.
The standardized measurement method is used to
determine specific risk RWAs, by applying supervisory
defined risk-weighting factors after applicable netting is
performed.

Operational Risk
Operational RWAs are only required to be included under
the Advanced Capital Rules. The firm utilizes an internal
risk-based model to quantify Operational RWAs.

The table below presents information about RWAs.

$ in millions

As of December 2019

Credit RWAs
Derivatives
Commitments, guarantees and loans
Securities financing transactions
Equity investments
Other
Total Credit RWAs
Market RWAs
Regulatory VaR
Stressed VaR
Incremental risk
Comprehensive risk
Specific risk
Total Market RWAs
Total Operational RWAs
Total RWAs

As of December 2018

Standardized

Advanced

$120,906
179,740
65,867
56,814
75,660
498,987

8,933
30,911
4,308
1,393
19,043
64,588
–
$563,575

$122,511
160,305
66,363
53,563
70,596
473,338

7,782
27,952
10,469
2,770
25,599
74,572
–
$547,910

$ 72,631
134,456
13,834
61,892
78,266
361,079

8,933
30,911
4,308
1,191
19,043
64,386
119,188
$544,653

$ 82,301
143,356
18,259
55,154
69,681
368,751

7,782
27,952
10,469
2,770
25,599
74,572
114,788
$558,111

Goldman Sachs 2019 Form 10-K 175

Advanced Credit RWAs as of December 2019 decreased by
$7.67 billion compared with December 2018. Beginning in
the fourth quarter of 2019, the firm made changes to the
calculation of the loss given default for certain wholesale
exposures which resulted in a decrease in credit RWAs,
primarily in commitments, guarantees and loans and
derivatives. This decrease was partially offset by an increase
in other credit RWAs, principally due to the recognition of
operating lease right-of-use assets upon adoption of ASU
No. 2016-02 and an increase in corporate debt exposures.
Advanced Market RWAs as of December 2019 decreased
by $10.19 billion compared with December 2018,
primarily reflecting a decrease in specific risk, principally
due to reduced exposures, and a decrease in incremental
risk, principally due to reduced exposures and changes in
risk measurements. Advanced Operational RWAs as of
December 2019 increased by $4.40 billion compared with
December 2018, associated with litigation and regulatory
proceedings.

Year Ended December 2018. Standardized Credit RWAs
as of December 2018 increased by $5.11 billion compared
with December 2017, primarily reflecting an increase in
commitments, guarantees and loans, principally due to an
increase in lending activity. This increase was partially
offset by a decrease in securities financing transactions,
principally due to reduced exposures. Standardized Market
RWAs as of December 2018 decreased by $12.81 billion
compared with December 2017, primarily reflecting a
decrease in specific risk on positions for which the firm
obtained increased transparency into the underliers and as a
result utilized a modeled approach to calculate RWAs.

Advanced Credit RWAs as of December 2018 decreased by
$44.57 billion compared with December 2017. Beginning
in the fourth quarter of 2018, the firm’s default experience
was incorporated into the determination of probability of
default, which resulted in a decrease in credit RWAs,
primarily in commitments, guarantees and loans and
derivatives. Advanced Market RWAs as of December 2018
decreased
with
December 2017, primarily reflecting a decrease in specific
risk on positions for which the firm obtained increased
transparency into the underliers and as a result utilized a
modeled approach to calculate RWAs.

compared

$12.28

billion

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

In the table above:
‰ Securities financing transactions represents resale and
repurchase agreements and securities borrowed and
loaned transactions.

‰ Other includes receivables, certain debt securities, cash

and cash equivalents and other assets.
The table below presents changes in RWAs.

$ in millions

Year Ended December 2019
RWAs
Beginning balance
Credit RWAs
Change in:

Derivatives
Commitments, guarantees and loans
Securities financing transactions
Equity investments
Other

Change in Credit RWAs
Market RWAs
Change in:

Regulatory VaR
Stressed VaR
Incremental risk
Comprehensive risk
Specific risk

Change in Market RWAs
Change in Operational RWAs
Ending balance

Year Ended December 2018
RWAs
Beginning balance
Credit RWAs
Change in:

Transitional provisions
Derivatives
Commitments, guarantees and loans
Securities financing transactions
Equity investments
Other

Change in Credit RWAs
Market RWAs
Change in:

Regulatory VaR
Stressed VaR
Incremental risk
Comprehensive risk
Specific risk

Change in Market RWAs
Change in Operational RWAs
Ending balance

Standardized

Advanced

$547,910

$558,111

(1,605)
19,435
(496)
3,251
5,064
25,649

(9,670)
(8,900)
(4,425)
6,738
8,585
(7,672)

1,151
2,959
(6,161)
(1,377)
(6,556)
(9,984)
–
$563,575

1,151
2,959
(6,161)
(1,579)
(6,556)
(10,186)
4,400
$544,653

$555,611

$617,646

7,766
(3,565)
15,201
(11,599)
(2,241)
(454)
5,108

8,232
(20,685)
(20,019)
(1,103)
(4,580)
(6,411)
(44,566)

250
(4,801)
2,028
373
(10,659)
(12,809)
–
$547,910

250
(4,801)
2,028
900
(10,659)
(12,282)
(2,687)
$558,111

RWAs Rollforward Commentary
Year Ended December 2019. Standardized Credit RWAs as
of December 2019 increased by $25.65 billion compared with
December 2018, primarily reflecting an increase
in
commitments, guarantees and loans, principally due to an
increase in lending activity, and an increase in other credit
RWAs, principally due to the recognition of operating lease
right-of-use assets upon adoption of ASU No. 2016-02 and an
increase in corporate debt exposures. Standardized Market
RWAs as of December 2019 decreased by $9.98 billion
compared with December 2018, primarily reflecting a
decrease in specific risk, principally due to reduced exposures,
and a decrease in incremental risk, principally due to reduced
exposures and changes in risk measurements.

176 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Bank Subsidiaries
Regulatory Capital Ratios. GS Bank USA, the firm’s
primary U.S. bank subsidiary, is an FDIC-insured, New
York State-chartered bank and a member of the Federal
Reserve System, is supervised and regulated by the FRB, the
FDIC,
the New York State Department of Financial
Services and the Consumer Financial Protection Bureau,
and is subject to regulatory capital requirements that are
calculated in substantially the same manner as those
applicable to BHCs. For purposes of assessing the adequacy
of its capital, GS Bank USA calculates its risk-based capital
and leverage ratios in accordance with the regulatory
capital requirements applicable to state member banks.
Those requirements are based on the Capital Framework
described above. GS Bank USA is an Advanced approach
banking organization under the Capital Framework.

Under the regulatory framework for prompt corrective
action applicable to GS Bank USA, in order to meet the
quantitative requirements for being a “well-capitalized”
depository institution, GS Bank USA must also meet the
“well-capitalized” requirements in the table below.

GS Bank USA’s capital levels and prompt corrective action
classification are also subject to qualitative judgments by
the regulators about components of capital, risk weightings
and other factors. Failure to comply with these capital
requirements, including a breach of the buffers described
above, could result in restrictions being imposed by GS
Bank USA’s regulators.

Similar to the firm, GS Bank USA is required to calculate
each of the CET1 capital, Tier 1 capital and Total capital
ratios in accordance with both the Standardized and
Advanced Capital Rules. The lower of each risk-based
capital ratio calculated in accordance with the Standardized
and Advanced Capital Rules is the ratio against which GS
Bank USA’s compliance with its
risk-based capital
requirements is assessed.

The table below presents GS Bank USA’s risk-based capital,
leverage and “well-capitalized” requirements.

As of December

2019

2018

“Well-capitalized”
Requirements

Risk-based capital requirements
CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

7.0% 6.4%
8.5% 7.9%
10.5% 9.9%

Leverage requirements
Tier 1 leverage ratio
SLR

4.0% 4.0%
3.0% 3.0%

6.5%
8.0%
10.0%

5.0%
6.0%

In the table above:
‰ As of December 2019,

the CET1 capital

conservation

2.5% and

the CET1 capital

‰ As of December 2018,

ratio
requirement included a minimum of 4.5%, the Tier 1
capital ratio requirement included a minimum of 6.0%,
and the Total capital ratio requirement
included a
minimum of 8.0%. The requirements also included the
75% phase-in of the capital conservation buffer of 2.5%
and the countercyclical capital buffer of zero percent.
‰ The “well-capitalized” requirements were the binding
requirements
as of
December 2018 and were the binding requirements for
leverage
ratios as of both December 2019 and
December 2018.

risk-based capital

ratios

for

The table below presents information about GS Bank USA’s
risk-based capital ratios.

$ in millions

As of December 2019

CET1 capital
Tier 1 capital
Tier 2 capital
Total capital
RWAs

CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

As of December 2018

CET1 capital
Tier 1 capital
Tier 2 capital
Total capital
RWAs

CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

Standardized

Advanced

$ 29,176
$ 29,176
$
5,293
$ 34,469
$258,541

11.3%
11.3%
13.3%

$ 27,467
$ 27,467
$
5,069
$ 32,536
$248,356

11.1%
11.1%
13.1%

$ 29,176
$ 29,176
$
4,486
$ 33,662
$135,596

21.5%
21.5%
24.8%

$ 27,467
$ 27,467
$
4,446
$ 31,913
$149,019

18.4%
18.4%
21.4%

Goldman Sachs 2019 Form 10-K 177

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

In the table above:
‰ In accordance with the Capital Rules, the lower of the
Standardized or Advanced ratio is the ratio against which
GS Bank USA’s compliance with the capital requirements
is assessed, and therefore, the Standardized ratios applied
to GS Bank USA as of both December 2019 and
December 2018.

‰ Beginning in the fourth quarter of 2019, GS Bank USA
made changes to the calculation of the loss given default
for certain wholesale exposures. At the date of adoption,
the estimated impact of these changes was an increase in
ratio of
GS Bank USA’s Advanced CET1 capital
approximately 2.2 percentage points.

‰ The Standardized risk-based capital ratios increased from
December 2018 to December 2019, reflecting an increase
in capital, principally due to net earnings, partially offset
by an increase in credit RWAs. The Advanced risk-based
capital
increased from December 2018 to
December 2019, reflecting a decrease in credit RWAs,
principally due to updates to the loss given default
calculation for certain wholesale exposures.

ratios

The table below presents information about GS Bank USA’s
leverage ratios.

$ in millions

Tier 1 capital
Average adjusted total assets
Total leverage exposure

Tier 1 leverage ratio
SLR

For the Three Months
Ended or as of December

2019

$ 29,176
$220,974
$413,852

13.2%
7.0%

2018

$ 27,467
$188,606
$368,062

14.6%
7.5%

In the table above:
‰ Tier 1 leverage ratio is calculated as Tier 1 capital divided

by average adjusted total assets.

‰ SLR is calculated as Tier 1 capital divided by total

leverage exposure.

institution,

The firm’s principal non-U.S. bank subsidiary, GSIB, is a
wholly-owned credit
the
Prudential Regulation Authority and the Financial Conduct
Authority and is subject to regulatory capital requirements.
As of both December 2019 and December 2018, GSIB was
in compliance with its regulatory capital requirements.

regulated by

178 Goldman Sachs 2019 Form 10-K

Other. The deposits of GS Bank USA are insured by the
FDIC to the extent provided by law. The FRB requires that
GS Bank USA maintain cash reserves with the Federal
Reserve Bank of New York. The amount deposited by GS
Bank USA at the Federal Reserve Bank of New York was
$50.55 billion as of December 2019 and $29.20 billion as
of December 2018, which exceeded required reserve
amounts by $50.29 billion as of December 2019 and
$29.03 billion as of December 2018.

limitations

Restrictions on Payments
Group Inc. may be limited in its ability to access capital held
at certain subsidiaries as a result of regulatory, tax or other
include provisions of
constraints. These
applicable law and regulations and other regulatory
restrictions that limit the ability of those subsidiaries to
declare and pay dividends without prior
regulatory
approval (e.g., dividends that may be paid by GS Bank USA
are limited to the lesser of the amounts calculated under a
recent earnings test and an undivided profits test) even if the
relevant
subsidiary would satisfy the equity capital
requirements applicable to it after giving effect to the
dividend. For example, the FRB, 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 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.

In addition, subsidiaries not subject to separate regulatory
capital requirements may hold capital to satisfy local tax
and legal guidelines, rating agency requirements (for
entities with assigned credit ratings) or internal policies,
including policies concerning the minimum amount of
capital a subsidiary should hold based on its underlying
level of risk.

in subsidiaries was
Group Inc.’s equity investment
$95.68 billion as of December 2019 and $90.22 billion as
of December 2018, of which Group Inc. was required to
maintain $57.58 billion as of December 2019 and
$52.92 billion as of December 2018, of minimum equity
capital in its regulated subsidiaries in order to satisfy the
regulatory requirements of such subsidiaries.

capital

exposed to foreign exchange

Group Inc.’s
invested in certain non-U.S.
risk,
subsidiaries
substantially all of which is managed through a
combination of derivatives and non-U.S. denominated debt.
See Note 7 for information about the firm’s net investment
hedges used to hedge this risk.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 21.
Earnings Per Common Share

Note 22.
Transactions with Affiliated Funds

Basic earnings per common share (EPS) is calculated by
dividing net earnings to common by the weighted average
number of common shares outstanding and restricted stock
units (RSUs) for which the delivery of the underlying
common stock is not subject to satisfaction of future service
or performance conditions (collectively, basic shares).
Diluted EPS includes the determinants of basic EPS and, in
addition, reflects the dilutive effect of the common stock
deliverable for stock options and for RSUs for which the
delivery of the underlying common stock is subject to
satisfaction of future service or performance conditions.

The table below presents information about basic and
diluted EPS.

The firm has formed nonconsolidated investment funds
with third-party investors. As the firm generally acts as the
investment manager for these funds, it is entitled to receive
management fees and, in certain cases, advisory fees or
incentive fees from these funds. Additionally, the firm
invests alongside the third-party investors in certain funds.

The tables below present information about affiliated
funds.

$ in millions

Year Ended December

2019

2018

2017

Fees earned from funds

$2,967

$3,571

$2,932

Year Ended December

$ in millions

in millions, except per share amounts

2019

2018

2017

Net earnings to common
Weighted average basic shares
Effect of dilutive securities:

RSUs
Stock options
Dilutive securities
Weighted average diluted shares

Basic EPS
Diluted EPS

$7,897
371.6

$9,860
385.4

$3,685
401.6

3.9
–
3.9
375.5

3.9
0.9
4.8
390.2

5.3
2.2
7.5
409.1

$21.18
$21.03

$25.53
$25.27

$ 9.12
$ 9.01

In the table above:
‰ Net earnings

to common represents net earnings
applicable to common shareholders, which is calculated
as net earnings less preferred stock dividends.

‰ Unvested share-based awards that have non-forfeitable
rights to dividends or dividend equivalents are treated as a
separate class of securities under the two-class method.
Distributed earnings allocated to these securities reduce
net earnings to common to calculate basic EPS. The
impact of applying this methodology was a reduction in
basic EPS of $0.07 for 2019, $0.05 for 2018 and $0.06
for 2017.

‰ Diluted EPS does not

include antidilutive RSUs of
0.1 million for 2019, of less than 0.1 million for 2018 and
0.1 million for 2017.

As of December

2019

2018

$ 780
$5,490

$ 610
$4,994

Fees receivable from funds
Aggregate carrying value of interests in funds

The firm may periodically determine to waive certain
management
funds.
Management fees waived were $44 million for 2019 and
$51 million for 2018 and $98 million for 2017.

fees on selected money market

The Volcker Rule restricts the firm from providing financial
support to covered funds (as defined in the rule) after the
expiration of the conformance period. As a general matter,
in the ordinary course of business, the firm does not expect
to provide additional voluntary financial support to any
covered funds, but may choose to do so with respect to
funds that are not subject to the Volcker Rule. However, in
the event that such support is provided, the amount is not
expected to be material.

The firm had an outstanding guarantee, as permitted under
the Volcker Rule, on behalf of its funds of $87 million as of
December 2019 and $154 million as of December 2018.
The firm has voluntarily provided this guarantee in
connection with a financing agreement with a third-party
lender executed by one of the firm’s real estate funds that is
not
the Volcker Rule. As of both
December 2019 and December 2018, except as noted
above, the firm has not provided any additional financial
support to its affiliated funds.

covered by

In addition, in the ordinary course of business, the firm may
also engage in other activities with its affiliated funds
including,
trade
execution, market-making, custody, and acquisition and
bridge financing. See Note 18 for the firm’s investment
commitments related to these funds.

among others,

securities

lending,

Goldman Sachs 2019 Form 10-K 179

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 23.
Interest Income and Interest Expense

Note 24.
Income Taxes

Provision for Income Taxes
Income taxes are provided for using the asset and liability
method under which deferred tax assets and liabilities are
recognized for temporary differences between the financial
reporting and tax bases of assets and liabilities. The firm
reports interest expense related to income tax matters in
provision for taxes and income tax penalties in other
expenses.

The table below presents information about the provision
for taxes.

$ in millions

Year Ended December

2019

2018

2017

Current taxes
U.S. federal
State and local
Non-U.S.
Total current tax expense
Deferred taxes
U.S. federal
State and local
Non-U.S.
Total deferred tax (benefit)/expense
Provision for taxes

$1,113
388
950
2,451

(383)
(20)
69
(334)
$2,117

$ 2,986
379
1,302
4,667

(2,711)
58
8
(2,645)
$ 2,022

$ 320
64
1,004
1,388

5,083
157
218
5,458
$6,846

In the table above:
‰ State and local current taxes in 2017 includes the impact

of settlements of state and local examinations.

‰ U.S. federal current tax expense and U.S. federal deferred
tax expense in 2018 and 2017 includes the impact of Tax
Legislation.

The table below presents a reconciliation of the U.S. federal
statutory income tax rate to the effective income tax rate.

Year Ended December

2019

2018

2017

U.S. federal statutory income tax rate
State and local taxes, net of U.S. federal benefit
Settlement of employee share-based awards
Non-U.S. operations
Tax credits
Tax-exempt income, including dividends
Tax Legislation
Non-deductible legal expenses
Other
Effective income tax rate

21.0% 21.0% 35.0%
1.5
2.0
(6.4)
(2.2)
(6.3)
(0.7)
(2.1)
(1.4)
(0.2)
(0.6)
39.5
(3.9)
0.5
1.2
–
0.8
20.0% 16.2% 61.5%

2.9
(0.6)
(3.6)
(1.8)
(1.0)
–
2.1
1.0

Interest is recorded over the life of the instrument on an
accrual basis based on contractual interest rates.

The table below presents sources of interest income and
interest expense.

$ in millions

2019

2018

2017

Year Ended December

Deposits with banks
Collateralized agreements
Trading assets
Investments
Loans
Other interest
Total interest income
Deposits
Collateralized financings
Trading liabilities
Short-term borrowings
Long-term borrowings
Other interest
Total interest expense
Net interest income

$ 1,211
4,397
5,899
1,457
5,411
3,363
21,738
3,568
2,658
1,213
668
5,359
3,910
17,376
$ 4,362

$ 1,418
3,852
5,157
1,215
4,689
3,348
19,679
2,606
2,051
1,554
695
5,555
3,451
15,912
$ 3,767

819
1,661
4,667
704
3,222
2,040
13,113
1,380
863
1,388
698
4,599
1,253
10,181
$ 2,932

In the table above:
‰ Collateralized agreements includes rebates paid and

interest income on securities borrowed.

‰ Loans excludes interest on loans held for sale that are
accounted for at the lower of cost or fair value. Such
interest is included within other interest.

‰ Other

interest

income includes

income on
customer debit balances, other interest-earning assets and
loans held for sale that are accounted for at the lower of
cost or fair value.

interest

‰ Collateralized

financings

consists

repurchase

agreements and securities loaned.

‰ Short- and long-term borrowings include both secured

and unsecured borrowings.

‰ Other interest expense includes rebates received on other
expense on

interest-bearing liabilities and interest
customer credit balances.

180 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

In the table above:
‰ Non-U.S. operations in 2019 and 2018 include the
impact of the Base Erosion and Anti-Abuse Tax and
Global Intangible Low Taxed Income (GILTI).

‰ Non-U.S. operations in 2017 includes the impact of
the

permanently reinvested earnings and excludes
estimated impact of Tax Legislation.

‰ State and local taxes in 2017, net of U.S. federal income
tax effects, includes the impact of settlements of state and
local examinations.

the net

Deferred Income Taxes
Deferred income taxes reflect
tax effects of
temporary differences between the financial reporting and
tax bases of assets and liabilities. These temporary
differences result in taxable or deductible amounts in future
years and are measured using the tax rates and laws that
will be in effect when such differences are expected to
reverse. Valuation allowances are established to reduce
deferred tax assets to the amount that more likely than not
will be realized and primarily relate to the ability to utilize
losses in various tax jurisdictions. Tax assets are included in
other assets and tax liabilities are included in other
liabilities.

The table below presents information about deferred tax
assets and liabilities, excluding the impact of netting within
tax jurisdictions.

$ in millions

Deferred tax assets
Compensation and benefits
ASC 740 asset related to unrecognized tax benefits
Non-U.S. operations
Net operating losses
Occupancy-related
Other comprehensive income-related
Tax credits carryforward
Operating lease liabilities
Allowance for credit losses
Other, net
Subtotal
Valuation allowance
Total deferred tax assets

Deferred tax liabilities
Depreciation and amortization
Unrealized gains
Operating lease right-of-use assets
Other comprehensive income-related
Total deferred tax liabilities

As of December

2019

2018

$1,351
279
472
411
178
407
59
559
433
160
4,309
(467)
$3,842

$1,022
1,196
560
–
$2,778

$1,296
152
264
688
71
–
62
–
326
42
2,901
(245)
$2,656

$ 930
1,290
–
84
$2,304

The firm has recorded deferred tax assets of $411 million as
of December 2019 and $688 million as of December 2018,
in connection with U.S. federal, state and local and foreign
net operating loss carryforwards. The firm also recorded a
valuation allowance of $79 million as of December 2019
and $81 million as of December 2018, related to these net
operating loss carryforwards.

As of December 2019, the U.S. federal net operating loss
carryforward was $327 million, the state and local net
operating loss carryforward was $1.46 billion, and the
foreign net operating loss carryforward was $1.24 billion. If
not utilized, the U.S. federal net operating loss carryforward
will begin to expire in 2025 and the state and local, and
foreign net operating loss carryforwards will begin to expire
in 2020. If these carryforwards expire, they will not have a
material impact on the firm’s results of operations. As of
December 2019, the firm has recorded deferred tax assets of
$5 million in connection with general business credit
carryforwards and $29 million in connection with state and
local tax credit carryforwards. If not utilized, the general
business credit carryforward will begin to expire in 2021 and
the state and local tax credit carryforward will begin to
expire in 2020. As of December 2019, the firm did not have
any foreign tax credit carryforwards.

As of both December 2019 and December 2018, the firm had
no U.S. capital loss carryforwards and no related net deferred
income tax assets. As of December 2019, the firm had
deferred tax assets of $181 million in connection with foreign
capital loss carryforwards and a valuation allowance of
$181 million related to these capital loss carryforwards.

The valuation allowance increased by $222 million during
2019 and increased by $89 million during 2018. The
increases in both 2019 and 2018 were primarily due to an
increase in deferred tax assets from which the firm does not
expect to realize any benefit.

The firm permanently reinvested eligible earnings of certain
foreign subsidiaries. As of both December 2019 and
December 2018, all U.S. taxes were accrued on these
subsidiaries’ distributable earnings, substantially all of
which resulted from the Tax Legislation repatriation tax
and GILTI.

Unrecognized Tax Benefits
The firm recognizes tax positions in the consolidated
financial statements only when it is more likely than not
that the position will be sustained on examination by the
relevant taxing authority based on the technical merits of
the position. A position that meets this standard is
measured at the largest amount of benefit that will more
likely than not be realized on settlement. A liability is
established for differences between positions taken in a tax
recognized in the consolidated
return and amounts
financial statements.

Goldman Sachs 2019 Form 10-K 181

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The accrued liability for interest expense related to income
tax matters and income tax penalties was $198 million as of
December 2019 and $107 million as of December 2018.
The firm recognized interest expense and income tax
penalties of $60 million for 2019, $18 million for 2018 and
$63 million for 2017.
is reasonably possible that
unrecognized tax benefits could change significantly during
the twelve months subsequent to December 2019 due to
potential audit settlements. However, at this time it is not
possible to estimate any potential change.

New York State and City examinations (excluding GS Bank
USA) of 2011 through 2014 began in 2017. New York
State and City examinations for GS Bank USA have been
completed through 2014.

All years including and subsequent to the years in the table
above remain open to examination by the taxing
authorities. The firm believes
the liability for
unrecognized tax benefits it has established is adequate in
relation to the potential for additional assessments.

that

The table below presents the changes in the liability for
unrecognized tax benefits, which is included in other
liabilities.

Note 25.
Business Segments

Year Ended or as of December

$ in millions

2019

2018

Beginning balance
Increases based on current year tax positions
Increases based on prior years’ tax positions
Decreases based on prior years’ tax positions
Decreases related to settlements
Exchange rate fluctuations
Ending balance

$1,051
131
441
(54)
(125)
1
$1,445

$ 665
197
232
(39)
(3)
(1)
$1,051

Related deferred income tax asset
Net unrecognized tax benefit

279
$1,166

152
$ 899

2017

$ 852
94
101
(128)
(255)
1
$ 665

75
$ 590

Regulatory Tax Examinations
The firm is subject to examination by the U.S. Internal
Revenue Service (IRS) and other taxing authorities in
jurisdictions where the firm has
significant business
operations, such as the United Kingdom, Japan, Hong
Kong and various states, such as New York. The tax years
under examination vary by jurisdiction. The firm does not
expect completion of these audits to have a material impact
on the firm’s financial condition, but it may be material to
operating results for a particular period, depending, in part,
on the operating results for that period.

The table below presents the earliest tax years that remain
subject to examination by major jurisdiction.

The firm reports its activities in the following four business
segments:
Investment Banking, Global Markets, Asset
Management and Consumer & Wealth Management. See
Note 1 for information about the firm’s business segments.

Compensation and benefits expenses in the firm’s segments
reflect, among other factors, the overall performance of the
firm, as well as the performance of individual businesses.
Consequently, pre-tax margins in one segment of the firm’s
business may be significantly affected by the performance
of the firm’s other business segments.

The firm allocates assets (including allocations of global
core liquid assets and cash, secured client financing and
other assets), revenues and expenses among the four
business segments. Due to the integrated nature of these
segments, estimates and judgments are made in allocating
certain assets, revenues and expenses. The allocation
process is based on the manner in which management
currently views the performance of the segments.

The allocation of common shareholders’ equity and
preferred stock dividends to each segment is based on the
estimated amount of equity required to support
the
activities of the segment under relevant regulatory capital
requirements.

As of
December 2019

Net earnings for each segment is calculated by applying the
firmwide tax rate to each segment’s pre-tax earnings.

2011
2011
2017
2014
2013

Management believes that
this allocation provides a
reasonable representation of each segment’s contribution to
consolidated net earnings to common, return on average
common equity and total assets. Transactions between
segments are based on specific criteria or approximate
third-party rates.

Jurisdiction

U.S. Federal
New York State and City
United Kingdom
Japan
Hong Kong

U.S. Federal examinations of 2011 and 2012 began in
2013. The firm has been accepted into the Compliance
Assurance Process program by the IRS for each of the tax
from 2013 through 2019 and submitted an
years
application for 2020. This program allows the firm to work
with the IRS to identify and resolve potential U.S. Federal
tax issues before the filing of tax returns. The 2013 through
2018 tax years remain subject to post-filing review.

182 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Segment Results
The table below presents a summary of the firm’s segment
results.

$ in millions

2019

2018

2017

Year Ended December

Investment Banking
Non-interest revenues
Net interest income
Total net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Net earnings
Net earnings to common
Average common equity
Return on average common equity

Global Markets
Non-interest revenues
Net interest income
Total net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Net earnings
Net earnings to common
Average common equity
Return on average common equity

Asset Management
Non-interest revenues
Net interest income
Total net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Net earnings
Net earnings to common
Average common equity
Return on average common equity

$ 7,079
520
7,599
333
4,685
$ 2,581
$ 2,065
$ 1,996
$11,167
17.9%

$13,109
1,670
14,779
35
10,851
$ 3,893
$ 3,114
$ 2,729
$40,060
6.8%

$ 8,454
511
8,965
274
4,817
$ 3,874
$ 3,099
$ 3,013
$21,575
14.0%

Consumer & Wealth Management
Non-interest revenues
Net interest income
Total net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Net earnings
Net earnings to common
Average common equity
Return on average common equity

$ 3,542
1,661
5,203
423
4,545
235
$
188
$
$
159
$ 6,292
2.5%

Total
Non-interest revenues
Net interest income
Total net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Net earnings
Net earnings to common
Average common equity
Return on average common equity

$32,184
4,362
36,546
1,065
24,898
$10,583
$ 8,466
$ 7,897
$79,094
10.0%

$ 7,856
322
8,178
124
4,473
$ 3,581
$ 3,001
$ 2,924
$ 8,737
33.5%

$12,831
1,607
14,438
52
10,585
$ 3,801
$ 3,185
$ 2,796
$41,237
6.8%

$ 8,353
482
8,835
160
4,179
$ 4,496
$ 3,767
$ 3,668
$19,061
19.2%

$ 3,809
1,356
5,165
338
4,224
603
$
506
$
$
472
$ 4,950
9.5%

$32,849
3,767
36,616
674
23,461
$12,481
$10,459
$ 9,860
$73,985
13.3%

$ 7,158
301
7,459
34
3,613
$ 3,812
$ 1,468
$ 1,394
$ 8,753
15.9%

$10,853
1,442
12,295
178
9,981
$ 2,136
823
$
$
397
$44,448
0.9%

$ 8,491
39
8,530
322
3,773
$ 4,435
$ 1,707
$ 1,639
$16,904
9.7%

$ 3,296
1,150
4,446
123
3,574
749
$
288
$
$
255
$ 4,616
5.5%

$29,798
2,932
32,730
657
20,941
$11,132
$ 4,286
$ 3,685
$74,721
4.9%

In the table above:
‰ Revenues and expenses directly associated with each
segment are included in determining pre-tax earnings.
‰ Net revenues in the firm’s segments include allocations of
interest income and expense to specific positions in
relation to the cash generated by, or funding requirements
of, such positions. Net interest is included in segment net
revenues as it is consistent with how management assesses
segment performance.

‰ Overhead expenses not directly allocable to specific
segments are allocated ratably based on direct segment
expenses.

‰ Operating expenses

related to corporate charitable
contributions, previously not allocated to the segments,
have now been allocated. This allocation reflects a change
in the manner in which management measures the
performance of the firm’s segments. As a result of this
change, all operating expenses are now allocated to
segments. Reclassifications have been made to previously
reported segment amounts to conform to the current
presentation.

‰ Total operating expenses included net provisions for
litigation and regulatory proceedings of $1.24 billion for
2019, $844 million for 2018 and $188 million for 2017.
The net provisions for 2019 and 2018 were primarily
reflected in Investment Banking and Global Markets.

‰ Net earnings

included an income tax benefit of
$487 million in 2018 and estimated income tax expense
of $4.40 billion in 2017 related to Tax Legislation.

The table below presents depreciation and amortization
expense by segment.

$ in millions

Investment Banking
Global Markets
Asset Management
Consumer & Wealth Management
Total

Year Ended December

2019

2018

2017

$ 139
646
618
301
$1,704

$ 114
563
450
201
$1,328

$ 123
514
365
150
$1,152

Segment Assets
The table below presents assets by segment.

$ in millions

Investment Banking
Global Markets
Asset Management
Consumer & Wealth Management
Total

As of December

2019

2018

$ 92,009
725,060
92,102
83,797
$992,968

$ 89,451
683,702
85,003
73,640
$931,796

Goldman Sachs 2019 Form 10-K 183

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

The table below presents gross loans by segment and loan
type.

The table below presents total net revenues, pre-tax
earnings and net earnings by geographic region.

$ in millions

2019

2018

2017

Year Ended December

Americas
EMEA
Asia
Total net revenues

Americas
EMEA
Asia
Total pre-tax earnings

Americas
EMEA
Asia
Total net earnings

$22,148
9,745
4,653

60%
25%
15%
$36,546 100% $36,616 100% $32,730 100%

61% $19,737
25% 8,168
14% 4,825

60% $22,339
27% 9,244
13% 5,033

$ 6,623
3,349
611

63%
23%
14%
$10,583 100% $12,481 100% $11,132 100%

65% $ 7,014
26% 2,561
9% 1,557

62% $ 8,125
32% 3,244
6% 1,112

$ 5,514
2,600
352

25%
48%
27%
$ 8,466 100% $10,459 100% $ 4,286 100%

68% $ 1,059
24% 2,048
8% 1,179

65% $ 7,092
31% 2,522
845

In the table above:
‰ Americas net earnings included an income tax benefit of
$487 million in 2018 and estimated income tax expense
of $4.40 billion in 2017 related to Tax Legislation.

‰ Asia pre-tax earnings and net earnings for 2019 were
impacted by net provisions for litigation and regulatory
proceedings.

‰ Charitable contributions, previously not allocated across
geographic regions for pre-tax earnings and net earnings,
have now been allocated. Reclassifications have been
made to previously reported amounts to conform to the
current presentation.
‰ Substantially all of

the amounts in Americas were

attributable to the U.S.

‰ Asia includes Australia and New Zealand.

$ in millions

Corporate
Investment Banking

Corporate
Real estate
Other
Global Markets

Corporate
Real estate
Other
Asset Management

Wealth Management
Consumer
Credit cards
Consumer & Wealth Management
Total

As of December

2019

2018

$ 27,035
27,035

$26,375
26,375

11,852
15,671
3,756
31,279

7,420
9,030
1,036
17,486

27,940
4,747
1,858
34,545
$110,345

11,147
14,231
3,636
29,014

4,853
8,248
1,109
14,210

24,768
4,536
–
29,304
$98,903

The table below presents the allowance for loan losses by
segment.

$ in millions

Investment Banking
Global Markets
Asset Management
Consumer & Wealth Management
Total

As of December

2019

2018

$ 470
168
385
418
$1,441

$ 355
138
254
319
$1,066

See Note 9 for further information about loans.

Geographic Information
Due to the highly integrated nature of international financial
markets, the firm manages its businesses based on the
profitability of the enterprise as a whole. The methodology for
allocating profitability to geographic regions is dependent on
estimates and management judgment because a significant
cross-border
portion of
coordination in order to facilitate the needs of the firm’s
clients. Geographic results are generally allocated as follows:
‰ Investment Banking: location of the client and investment

firm’s activities

require

the

banking team.

‰ Global Markets: FICC and Equities intermediation:
location of the market-making desk; FICC and Equities
financing (excluding prime brokerage financing): location
of the desk; prime brokerage financing: location of the
primary market for the underlying security.

‰ Asset Management (excluding Equity investments and
lending): location of the sales team; Equity investments:
location of the investment; Lending: location of the client.
‰ Consumer & Wealth Management: Wealth management:
location of the sales team; Consumer banking: location of
the client.

184 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 26.
Credit Concentrations

the

and

transactions,

collateralized

The firm’s concentrations of credit risk arise from its
market making, client facilitation, investing, underwriting,
lending
cash
management activities, and may be impacted by changes in
industry or political factors. These activities
economic,
industries and
firm to many different
expose
counterparties, and may also subject
the firm to a
concentration of credit risk to a particular central bank,
counterparty, borrower or issuer,
including sovereign
issuers, or to a particular clearing house or exchange. The
firm seeks to mitigate credit risk by actively monitoring
exposures and obtaining collateral from counterparties as
deemed appropriate.

The firm measures and monitors its credit exposure based
on amounts owed to the firm after taking into account risk
mitigants that management considers when determining
credit risk. Such risk mitigants include netting and collateral
such as credit
arrangements and economic hedges,
derivatives, futures and forward contracts. Netting and
collateral agreements permit the firm to offset receivables
and payables with such counterparties and/or enable the
firm to obtain collateral on an upfront or contingent basis.

The table below presents the credit concentrations included
in trading cash instruments and investments.

Collateral obtained by the firm related to derivative assets is
principally cash and is held by the firm or a third-party
custodian. Collateral obtained by the firm related to resale
agreements and securities borrowed transactions
is
primarily U.S. government and agency obligations and
non-U.S. government and agency obligations. See Note 11
for further information about collateralized agreements and
financings.

The table below presents U.S. government and agency
and non-U.S.
obligations
and agency
obligations
resale agreements and
collateralize
that
securities borrowed transactions.

government

$ in millions

As of December

2019

2018

U.S. government and agency obligations
Non-U.S. government and agency obligations

$49,396
$55,889

$78,828
$76,745

In the table above:
‰ Non-U.S. government and agency obligations primarily
consists of securities issued by the governments of Japan,
France, the U.K. and Germany.

‰ Given that the firm’s primary credit exposure on such
transactions is to the counterparty to the transaction, the
firm would be exposed to the collateral issuer only in the
event of counterparty default.

$ in millions

As of December

2019

2018

Note 27.
Legal Proceedings

$167,097
U.S. government and agency obligations
Percentage of total assets
16.8%
Non-U.S. government and agency obligations $ 44,875
4.5%
Percentage of total assets

$111,114
11.9%
$ 43,607
4.7%

the

In addition,
firm had $96.97 billion as of
December 2019 and $90.47 billion as of December 2018 of
cash deposits held at central banks (included in cash and
cash equivalents), of which $50.55 billion as of
December 2019 and $29.20 billion as of December 2018
was held at the Federal Reserve Bank of New York.

As of both December 2019 and December 2018, the firm
did not have credit exposure to any other counterparty that
exceeded 2% of total assets.

The firm is involved in a number of judicial, regulatory and
arbitration proceedings (including those described below)
concerning matters arising in connection with the conduct
of the firm’s businesses. Many of these proceedings are in
early stages, and many of these cases seek an indeterminate
amount of damages.

Under ASC 450, an event is “reasonably possible” if “the
chance of the future event or events occurring is more than
remote but less than likely” and an event is “remote” if “the
chance of the future event or events occurring is slight.”
Thus, references to the upper end of the range of reasonably
possible loss for cases in which the firm is able to estimate a
range of reasonably possible loss mean the upper end of the
range of loss for cases for which the firm believes the risk of
loss is more than slight.

Goldman Sachs 2019 Form 10-K 185

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

to matters described below for which
With respect
management has been able to estimate a range of
reasonably possible loss where (i) actual or potential
plaintiffs have claimed an amount of money damages,
(ii) the firm is being, or threatened to be, sued by purchasers
in a securities offering and is not being indemnified by a
party that the firm believes will pay the full amount of any
judgment, or (iii) the purchasers are demanding that the
firm repurchase securities, management has estimated the
upper end of the range of reasonably possible loss as being
equal to (a) in the case of (i), the amount of money damages
claimed, (b) in the case of (ii), the difference between the
initial sales price of the securities that the firm sold in such
offering and the estimated lowest subsequent price of such
securities prior to the action being commenced and (c) in
the case of (iii), the price that purchasers paid for the
if any, as of
securities
December 2019 of the relevant securities, in each of cases
(i), (ii) and (iii), taking into account any other factors
believed to be relevant to the particular matter or matters of
that type. As of the date hereof, the firm has estimated the
upper end of the range of reasonably possible aggregate loss
for such matters and for any other matters described below
where management has been able to estimate a range of
reasonably possible aggregate loss to be approximately
$3.3 billion in excess of the aggregate reserves for such
matters.

estimated value,

less

the

Management is generally unable to estimate a range of
reasonably possible loss for matters other than those
included in the estimate above, including where (i) actual or
potential plaintiffs have not claimed an amount of money
damages, except in those instances where management can
otherwise determine an appropriate amount, (ii) matters
are in early stages,
(iii) matters relate to regulatory
investigations or reviews, except in those instances where
management can otherwise determine an appropriate
amount, (iv) there is uncertainty as to the likelihood of a
class being certified or the ultimate size of the class, (v) there
is uncertainty as to the outcome of pending appeals or
motions, (vi) there are significant factual
issues to be
resolved, and/or (vii) there are novel legal issues presented.
For example, the firm’s potential liabilities with respect to
the
investigations and reviews described below in
“Regulatory Investigations and Reviews and Related
Litigation” generally are not included in management’s
estimate
loss. However,
management does not believe, based on currently available
information, that the outcomes of such other matters will
have a material adverse effect on the firm’s financial
condition, though the outcomes could be material to the
firm’s operating results
for any particular period,
depending, in part, upon the operating results for such
information about
period. See Note 18 for
mortgage-related contingencies.

reasonably

possible

further

186 Goldman Sachs 2019 Form 10-K

received subpoenas and requests

1Malaysia Development Berhad (1MDB)-Related
Matters
The firm has
for
documents and information from various governmental
and regulatory bodies and self-regulatory organizations as
part of investigations and reviews relating to financing
transactions and other matters
involving 1MDB, a
sovereign wealth fund in Malaysia. Subsidiaries of the firm
acted as arrangers or purchasers of approximately
$6.5 billion of debt securities of 1MDB.

state, among other

On November 1, 2018, the U.S. Department of Justice
(DOJ) unsealed a criminal information and guilty plea by
Tim Leissner, a former participating managing director of
the firm, and an indictment against Ng Chong Hwa, a
former managing director of the firm, and Low Taek Jho.
Leissner pleaded guilty to a two-count criminal information
charging him with conspiring to launder money and
conspiring to violate the U.S. Foreign Corrupt Practices
Act’s (FCPA) anti-bribery and internal accounting controls
provisions. Low and Ng were charged in a three-count
indictment with conspiring to launder money and
conspiring to violate the FCPA’s anti-bribery provisions.
On August 28, 2018, Leissner’s guilty plea was accepted by
the U.S. District Court for the Eastern District of New York
and Leissner was adjudicated guilty on both counts. Ng was
also charged in this indictment with conspiring to violate
the FCPA’s internal accounting controls provisions. The
charging documents
that
Leissner and Ng participated in a conspiracy to
misappropriate proceeds of
for
themselves and to pay bribes to various government
officials to obtain and retain 1MDB business for the firm.
The plea and charging documents indicate that Leissner and
Ng knowingly and willfully circumvented the firm’s system
of internal accounting controls, in part by repeatedly lying
to control personnel and internal committees that reviewed
these offerings. The indictment of Ng and Low alleges that
the firm’s system of internal accounting controls could be
easily circumvented and that the firm’s business culture,
particularly in Southeast Asia, at
times prioritized
consummation of deals ahead of the proper operation of its
compliance functions. On May 6, 2019, Ng pleaded not
guilty to the DOJ’s criminal charges. On February 4, 2020,
the FRB disclosed that Andrea Vella, a former participating
managing director whom the DOJ had previously referred
to as an unindicted co-conspirator, had agreed, without
admitting or denying the FRB’s allegations, to a consent
order that prohibited him from participating in the banking
industry. No other penalties were imposed by the consent
order.

the 1MDB offerings

things,

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

On December 17, 2018, the Attorney General of Malaysia
filed criminal charges in Malaysia against Goldman Sachs
International (GSI), as the arranger of three offerings of
debt
securities of 1MDB, aggregating approximately
$6.5 billion in principal amount, for alleged disclosure
deficiencies in the offering documents relating to, among
other things, the use of proceeds for the debt securities, as
well as against Goldman Sachs (Asia) LLC (GS Asia) and
Goldman Sachs (Singapore) PTE (GS Singapore). Criminal
charges have also been filed against Leissner, Low, Ng and
Jasmine Loo Ai Swan. In a related press release, the
Attorney General of Malaysia indicated that prosecutors in
Malaysia will seek criminal fines against the accused in
excess of $2.7 billion plus the $600 million of fees received
in connection with the debt offerings. On August 9, 2019,
the Attorney General of Malaysia announced that criminal
charges had also been filed against seventeen current and
former directors of GSI, GS Asia and GS Singapore.

The Malaysia Securities Commission issued notices to show
cause against Goldman Sachs (Malaysia) Sdn Bhd (GS
in December 2018 and March 2019 that
Malaysia)
(i) allege possible violations of Malaysian securities laws
and (ii) indicate that the Malaysia Securities Commission is
considering whether to revoke GS Malaysia’s license to
conduct corporate finance and fund management activities
in Malaysia.

The firm has received multiple demands, beginning in
from alleged shareholders under
November 2018,
Section 220 of the Delaware General Corporation Law for
books and records relating to, among other things, the
firm’s involvement with 1MDB and the firm’s compliance
procedures. On December 13, 2019, an alleged shareholder
filed a lawsuit in the Court of Chancery of the State of
Delaware seeking books and records relating to, among
other things, the firm’s involvement with 1MDB and the
firm’s compliance procedures.

On February 19, 2019, a purported shareholder derivative
action relating to 1MDB was filed in the U.S. District Court
for the Southern District of New York against Group Inc.
and the directors at the time and a former chairman and
chief executive officer of the firm. The amended complaint
filed on July 12, 2019, which seeks unspecified damages,
disgorgement and injunctive relief, alleges breaches of
including in connection with alleged
fiduciary duties,
insider trading by certain current and former directors,
unjust
the anti-fraud
provisions of the Exchange Act, including in connection
common stock repurchases and
with Group Inc.’s
solicitation of proxies. Defendants moved to dismiss this
action on September 12, 2019.

enrichment and violations of

Beginning in March 2019, the firm has also received
demands from alleged shareholders to investigate and
pursue claims against certain current and former directors
and executive officers based on their oversight and public
disclosures regarding 1MDB and related internal controls.

On November 21, 2018, a summons with notice was filed
in New York Supreme Court, County of New York, by
International Petroleum Investment Company, which
guaranteed certain debt securities issued by 1MDB, and its
subsidiary Aabar Investments PJS. The summons with
notice makes unspecified claims relating to 1MDB and
seeks unspecified compensatory and punitive damages and
other relief against Group Inc., GSI, GS Asia, GS Singapore,
GS Malaysia, Leissner, Ng, and Vella, as well as individuals
(who are not current or former employees of the firm)
previously associated with the plaintiffs.

On December 20, 2018, a putative securities class action
lawsuit was filed in the U.S. District Court for the Southern
District of New York against Group Inc. and certain former
officers of the firm alleging violations of the anti-fraud
provisions of the Exchange Act with respect to Group Inc.’s
disclosures concerning 1MDB and seeking unspecified
damages. The plaintiffs filed the second amended complaint
on October 28, 2019, which the defendants moved to
dismiss on January 9, 2020.

The firm is cooperating with the DOJ and all other
governmental and regulatory investigations relating to
1MDB. The firm is also engaged in discussions with certain
governmental and regulatory authorities with respect to
potential resolution of their investigations and proceedings.
There can be no assurance that the discussions will lead to
resolution of any of those matters. Any such resolution, as
well as proceedings by the DOJ or other governmental or
regulatory authorities, could result in the imposition of
significant fines, penalties and other sanctions against the
firm, including restrictions on the firm’s activities.

Mortgage-Related Matters
Beginning in April 2010, a number of purported securities
law class actions were filed in the U.S. District Court for the
Southern District of New York challenging the adequacy of
Group Inc.’s public disclosure of, among other things, the
firm’s activities in the collateralized debt obligation market,
and the firm’s conflict of interest management.

Goldman Sachs 2019 Form 10-K 187

Currencies-Related Litigation
GS&Co. and Group Inc. are among the defendants named
in putative class actions filed in the U.S. District Court for
the Southern District of New York beginning in
September 2016 on behalf of putative indirect purchasers of
foreign exchange instruments. On August 5, 2019, the
plaintiffs filed a third consolidated amended complaint
generally alleging a conspiracy to manipulate the foreign
currency exchange markets, asserting claims under various
state antitrust laws and state consumer protection laws and
seeking treble damages in an unspecified amount.

GS&Co. and Group Inc. are among the defendants named
in an action filed in the U.S. District Court for the Southern
District of New York on November 7, 2018 by certain
direct purchasers of foreign exchange instruments that
opted out of a class settlement reached with, among others,
GS&Co. and Group Inc. The second amended complaint,
filed on June 11, 2019, generally alleges that the defendants
violated federal antitrust law and state common law in
connection with an alleged conspiracy to manipulate the
foreign currency exchange markets and seeks declaratory
and injunctive relief, as well as unspecified amounts of
compensatory, punitive,
treble and other damages.
Defendants moved to dismiss on July 25, 2019.

civil

to various

Financial Advisory Services
Group Inc. and certain of its affiliates are from time to time
parties
litigation and arbitration
proceedings and other disputes with clients and third
parties relating to the firm’s financial advisory activities.
These
things,
claims generally seek, among other
compensatory damages and,
in some cases, punitive
damages, and in certain cases allege that the firm did not
appropriately disclose or deal with conflicts of interest.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

filed

amended

complaint

consolidated

on
The
July 25, 2011, which names as defendants Group Inc. and
certain current and former officers and employees of Group
Inc. and its affiliates, generally alleges violations of Sections
10(b) and 20(a) of the Exchange Act and seeks unspecified
damages. The defendants have moved for
summary
judgment. On December 11, 2018, the Second Circuit
Court of Appeals granted the defendants’ petition for
interlocutory review of the district court’s August 14, 2018
grant of class certification. On January 23, 2019, the
district court stayed proceedings pending the appellate
court’s decision.

Beginning on February 15, 2019, a summons with notice
and a complaint were filed against Goldman Sachs
Mortgage Company and GS Mortgage Securities Corp. by
U.S. Bank National Association, as trustee for two
that
residential mortgage-backed securitization trusts
issued $1.7 billion of securities, and the cases are pending in
the U.S. District Court for the Southern District of New
York. The summons with notice and complaint generally
allege that mortgage loans in the trusts failed to conform to
applicable representations and warranties and seek specific
performance or, alternatively, compensatory damages and
other relief. Defendants moved to dismiss the complaint on
September 23, 2019.

The firm continues to receive requests for information,
including from certain regulators, relating to mortgage-
related activities.

without

prejudice

dismissed

Director Compensation-Related Litigation
On May 9, 2017, Group Inc. and certain of its current and
former directors were named as defendants in a purported
direct and derivative shareholder action in the Court of
Chancery of the State of Delaware (a similar purported
derivative action, filed in June 2015, alleging excessive
director compensation over the period 2012 to 2014 was
in
voluntarily
December 2016). The complaint alleges that excessive
compensation has been paid to the non-employee director
defendants since 2015, and that certain disclosures in
connection with soliciting shareholder approval of the
stock incentive plans were deficient. The complaint asserts
claims for breaches of fiduciary duties and seeks, among
other things, rescission or in some cases rescissory damages,
disgorgement, and shareholder votes on several matters. On
October 23, 2018, the court declined to approve the
parties’ proposed settlement. On May 31, 2019, the court
dismissed the disclosure-related claims, but permitted the
non-employee director compensation claim to proceed.

188 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Underwriting Litigation
Firm affiliates are among the defendants in a number of
proceedings in connection with securities offerings. In these
proceedings, including those described below, the plaintiffs
assert class action or individual claims under federal and
state securities laws and in some cases other applicable
laws, allege that the offering documents for the securities
that they purchased contained material misstatements and
omissions, and generally seek compensatory and rescissory
damages
these
proceedings involve additional allegations.

in unspecified amounts. Certain of

equity

sponsor. As

consolidated complaint,

Adeptus Health Inc. GS&Co. is among the underwriters
named as defendants in several putative securities class
actions, filed beginning in October 2016 and consolidated
in the U.S. District Court for the Eastern District of Texas.
In addition to the underwriters, the defendants include
certain former directors and officers of Adeptus Health Inc.
to the
(Adeptus), as well as Adeptus’
underwriters,
filed on
the
November 21, 2017, relates to the $124 million June 2014
the $154 million May 2015
initial public offering,
secondary equity offering, the $411 million July 2015
secondary equity offering, and the $175 million June 2016
secondary
underwrote
1.69 million shares of common stock in the June 2014
initial public offering representing an aggregate offering
price of approximately $37 million, 962,378 shares of
common stock in the May 2015 offering representing an
aggregate offering price of approximately $61 million,
1.76 million shares of common stock in the July 2015
offering representing an aggregate offering price of
approximately $185 million, and all the shares of common
stock in the June 2016 offering representing an aggregate
offering price of approximately $175 million. On
April 19, 2017, Adeptus filed for Chapter 11 bankruptcy.
On January 9, 2020, the court preliminarily approved a
settlement among the parties. The firm has reserved the full
amount of its proposed contribution to the settlement.

offering. GS&Co.

Inc. GS&Co.

SunEdison,
is among the underwriters
named as defendants in several putative class actions and
individual actions filed beginning in March 2016 relating to
the August 2015 public offering of $650 million of
SunEdison, Inc. (SunEdison) convertible preferred stock.
The defendants also include certain of SunEdison’s
directors and officers. On April 21, 2016, SunEdison filed
for Chapter 11 bankruptcy. The pending cases were
transferred to the U.S. District Court for the Southern
District of New York and on March 17, 2017, plaintiffs in
the putative class action filed a consolidated amended
complaint. GS&Co., as underwriter, sold 138,890 shares of
SunEdison convertible preferred stock in the offering,
representing an aggregate offering price of approximately
$139 million. On April 10, 2018 and April 17, 2018,
certain plaintiffs in the individual actions filed amended
complaints. The defendants have reached a settlement with
certain plaintiffs in the individual actions and a settlement
of
the class action, which the court approved on
October 25, 2019. The firm has paid the full amount of its
contribution to the settlement. Defendants moved to
dismiss
on
December 18, 2019.

remaining

individual

actions

the

Inc.

International,

Valeant Pharmaceuticals International, Inc. GS&Co.
and Goldman Sachs Canada Inc. (GS Canada) are among
the underwriters and initial purchasers named as
defendants in a putative class action filed on March 2, 2016
in the Superior Court of Quebec, Canada. In addition to the
underwriters and initial purchasers, the defendants include
Valeant Pharmaceuticals
(Valeant),
certain directors and officers of Valeant and Valeant’s
auditor. As to GS&Co. and GS Canada, the complaint
relates to the June 2013 public offering of $2.3 billion of
common stock, the June 2013 Rule 144A offering of
$3.2 billion principal amount of senior notes, and the
November 2013 Rule 144A offering of $900 million
principal amount of senior notes. The complaint asserts
claims under the Quebec Securities Act and the Civil Code
of Quebec. On August 29, 2017, the court certified a class
that includes only non-U.S. purchasers in the offerings.
Defendants’ motion for leave to appeal the certification was
denied on November 30, 2017.

GS&Co. and GS Canada, as sole underwriters, sold
5,334,897 shares of common stock in the June 2013
offering to non-U.S. purchasers representing an aggregate
offering price of approximately $453 million and, as initial
purchasers, had a proportional share of sales to non-U.S.
purchasers of approximately CAD14.2 million in principal
amount of
June 2013 and
in the
November 2013 Rule 144A offerings.

senior notes

Goldman Sachs 2019 Form 10-K 189

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Snap Inc. GS&Co. is among the underwriters named as
defendants in putative securities class actions pending in
California Superior Court, County of Los Angeles and the
U.S. District Court for the Central District of California
beginning in May 2017, relating to Snap Inc.’s $3.91 billion
March 2017 initial public offering. In addition to the
underwriters, the defendants include Snap Inc. and certain
of
its officers and directors. GS&Co. underwrote
57,040,000 shares of common stock representing an
aggregate offering price of approximately $970 million.
The underwriter defendants,
including GS&Co., were
voluntarily dismissed from the district court action on
September 18, 2018. In the district court action, defendants
moved for summary judgment on December 19, 2019,
following the court’s November 20, 2019 order approving
plaintiffs’ motion for class certification. The state court
actions have been stayed. On January 17, 2020, the parties
to the federal action reached a settlement in principle,
subject to documentation and court approval.

Sea Limited. GS Asia is among the underwriters named as
defendants in a putative securities class action filed on
November 1, 2018 in New York Supreme Court, County of
New York,
relating to Sea Limited’s $989 million
October 2017 initial public offering of American depositary
shares. In addition to the underwriters, the defendants
include Sea Limited and certain of its officers and directors.
GS Asia underwrote 28,026,721 American depositary
shares
representing an aggregate offering price of
approximately $420 million. On January 25, 2019, the
plaintiffs filed an amended complaint. Defendants moved
to dismiss on March 26, 2019.

Inc. GS&Co.

Altice USA,
is among the underwriters
named as defendants in putative securities class actions
pending in New York Supreme Court, County of Queens
and the U.S. District Court for the Eastern District of New
York beginning in June 2018, relating to Altice USA, Inc.’s
(Altice) $2.15 billion June 2017 initial public offering. In
addition to the underwriters, the defendants include Altice
its officers and directors. GS&Co.
and certain of
underwrote
stock
of
representing an aggregate offering price of approximately
$368 million. On May 10, 2019, plaintiffs in the district
court filed an amended complaint, and on June 27, 2019,
plaintiffs in the state court action filed a consolidated
amended complaint. On July 23, 2019, defendants moved
to dismiss the amended complaint in the state court action.
On October 14, 2019, defendants moved to dismiss the
complaint in the district court action.

12,280,042

common

190 Goldman Sachs 2019 Form 10-K

include Camping World Holdings,

Illinois, Chancery Division, beginning

Camping World Holdings, Inc. GS&Co. is among the
underwriters named as defendants in several putative
securities class actions pending in the U.S. District Court for
the Northern District of Illinois, New York Supreme Court,
County of New York, and the Circuit Court of Cook
County,
in
December 2018. In addition to the underwriters, the
defendants
Inc.
(Camping World) and certain of its officers and directors,
as well as certain of its stockholders. As to the underwriters,
the complaints relate to three offerings of Camping World
common stock, a $261 million October 2016 initial public
offering, a $303 million May 2017 offering and a
$310 million October 2017 offering. GS&Co. underwrote
4,267,214 shares of common stock in the October 2016
initial public offering representing an aggregate offering
price of approximately $94 million, 4,557,286 shares of
common stock in the May 2017 offering representing an
aggregate offering price of approximately $126 million and
3,525,348 shares of common stock in the October 2017
offering representing an aggregate offering price of
approximately $143 million. GS&Co. and the other
defendants moved to dismiss the New York state court
action on February 28, 2019, the Illinois state court action
on April 19, 2019 and the Illinois district court action on
May 17, 2019. The Illinois state court action has been
stayed pending resolution of the motions to dismiss in the
Illinois district court action.

Inc.’s

Alnylam Pharmaceuticals, Inc. GS&Co. is among the
underwriters named as defendants in a putative securities
class action filed on September 12, 2019 in New York
Supreme Court, County of New York, relating to Alnylam
$805 million
Pharmaceuticals,
November 2017 public offering of common stock. In
addition to the underwriters,
the defendants include
Alnylam and certain of its officers and directors. GS&Co.
stock
underwrote
representing an aggregate offering price of approximately
$322 million. On December 20, 2019, defendants moved to
dismiss the amended complaint filed on November 7, 2019.

2,576,000

(Alnylam)

common

Inc. GS&Co.

Uber Technologies,
is among the
underwriters named as defendants in several putative
securities class actions filed beginning in September 2019 in
California Superior Court, County of San Francisco and the
U.S. District Court for the Northern District of California,
relating to Uber Technologies, Inc.’s (Uber) $8.1 billion
May 2019 initial public offering.
In addition to the
underwriters, the defendants include Uber and certain of its
officers and directors. GS&Co. underwrote 35,864,408
shares of common stock representing an aggregate offering
price of approximately $1.6 billion. On January 30, 2020,
plaintiffs in the state court action filed a consolidated
amended complaint.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

among

In addition to the underwriters,

Venator Materials PLC. GS&Co.
the
underwriters named as defendants in putative securities
class actions in Texas District Court, Dallas County, and
the U.S. District Court for the Southern District of Texas,
filed beginning in February 2019, relating to Venator
Materials PLC’s (Venator) $522 million August 2017 initial
public offering and $534 million December 2017 secondary
equity offering.
the
defendants include Venator, certain of its officers and
directors and certain of
shareholders. GS&Co.
underwrote 6,351,347 shares of common stock in the
August 2017 initial public offering representing an
aggregate offering price of approximately $127 million and
5,625,768 shares of common stock in the December 2017
secondary equity offering representing an aggregate
offering price of approximately $127 million. On
January 21, 2020, the Texas Court of Appeals reversed the
Texas District Court and dismissed the claims against the
underwriter defendants, including GS&Co., in the state
court action for
jurisdiction. On
lack of personal
February 18, 2020, defendants moved to dismiss the
consolidated complaint in the federal action.

its

Investment Management Services
Group Inc. and certain of its affiliates are parties to various
litigation and arbitration proceedings and other
civil
disputes with clients relating to losses allegedly sustained as
a result of the firm’s investment management services.
These claims generally seek, among other things, restitution
in some cases,
or other compensatory damages and,
punitive damages.

Securities Lending Antitrust Litigation
Group Inc. and GS&Co. are among the defendants named
in a putative antitrust class action and three individual
actions relating to securities lending practices filed in the
U.S. District Court for the Southern District of New York
beginning in August 2017. The complaints generally assert
claims under federal and state antitrust law and state
common law in connection with an alleged conspiracy
among the defendants to preclude the development of
electronic platforms for securities lending transactions. The
individual complaints also assert claims for tortious
interference with business relations and under state trade
practices law and,
in the second and third individual
actions, unjust enrichment under state common law. The
complaints seek declaratory and injunctive relief, as well as
unspecified amounts of compensatory, treble, punitive and
other damages. Group Inc. was voluntarily dismissed from
the putative class action on January 26, 2018. Defendants’
motion to dismiss the class action complaint was denied on
September 27, 2018. Defendants moved to dismiss the
second individual action on December 21, 2018.
Defendants’ motion to dismiss the first individual action
was granted on August 7, 2019.

Interest Rate Swap Antitrust Litigation
Group Inc., GS&Co., GSI, GS Bank USA and Goldman
Sachs Financial Markets, L.P. (GSFM) are among the
defendants named in a putative antitrust class action
relating to the trading of interest rate swaps, filed in
November 2015 and consolidated in the U.S. District Court
for the Southern District of New York. The same Goldman
Sachs entities also are among the defendants named in two
antitrust actions relating to the trading of interest rate
swaps, commenced in April 2016 and June 2018,
respectively, in the U.S. District Court for the Southern
District of New York by three operators of swap execution
facilities and certain of their affiliates. These actions have
been consolidated for pretrial proceedings. The complaints
generally assert claims under federal antitrust law and state
common law in connection with an alleged conspiracy
among the defendants to preclude exchange trading of
interest rate swaps. The complaints in the individual actions
also assert claims under state antitrust law. The complaints
seek declaratory and injunctive relief, as well as treble
damages in an unspecified amount. Defendants moved to
dismiss the class and the first individual action and the
district court dismissed the state common law claims
asserted by the plaintiffs in the first individual action and
otherwise limited the state common law claim in the
putative class action and the antitrust claims in both actions
to the period from 2013 to 2016. On November 20, 2018,
the court granted in part and denied in part the defendants’
motion to dismiss the second individual action, dismissing
the state common law claims for unjust enrichment and
tortious interference, but denying dismissal of the federal
and state antitrust claims. On March 13, 2019, the court
denied the plaintiffs’ motion in the putative class action to
amend their complaint to add allegations related to 2008-
2012 conduct, but granted the motion to add limited
allegations from 2013-2016, which the plaintiffs added in a
fourth
on
amended
March 22, 2019. The plaintiffs in the putative class action
moved for class certification on March 7, 2019.

consolidated

complaint

filed

Goldman Sachs 2019 Form 10-K 191

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

filed

amended

complaint,

GSE Bonds Antitrust Litigation
GS&Co. is among the dealers named as defendants in
numerous putative antitrust class actions relating to debt
securities issued by Federal National Mortgage Association,
Federal Home Loan Mortgage Corporation, Federal Farm
Credit Banks Funding Corporation and Federal Home
Loan Banks (collectively, the GSEs), filed beginning in
February 2019 and consolidated in the U.S. District Court
the Southern District of New York. The third
for
consolidated
on
September 10, 2019, asserts claims under federal antitrust
law in connection with an alleged conspiracy among the
defendants to manipulate the secondary market for debt
securities
seeks
declaratory and injunctive relief, as well as treble damages
in unspecified amounts. On December 12, 2019, the court
preliminarily approved a settlement between the firm and
class plaintiffs. The firm has reserved the full amount of its
contribution
in
September 2019, the State of Louisiana and the City of
Baton Rouge filed complaints in the U.S. District Court for
the Middle District of Louisiana against
the class
defendants and a number of dealers alleging the same
claims as in the class action. In January 2020, the State of
Louisiana and City of Baton Rouge voluntarily dismissed
their actions with prejudice against GS&Co. in favor of
participating in the class settlement.

issued by the GSEs. The complaint

settlement.

Beginning

the

Variable Rate Demand Obligations Antitrust
Litigation
GS&Co. is among the defendants named in a putative class
action relating to variable rate demand obligations
(VRDOs), filed beginning in February 2019 under separate
complaints and consolidated in the U.S. District Court for
the Southern District of New York. The consolidated
amended complaint, filed on May 31, 2019, generally
asserts claims under federal antitrust law and state common
law in connection with an alleged conspiracy among the
defendants to manipulate the market for VRDOs. The
complaint seeks declaratory and injunctive relief, as well as
unspecified amounts of compensatory, treble and other
damages. Defendants moved to dismiss on July 30, 2019.

192 Goldman Sachs 2019 Form 10-K

Commodities-Related Litigation
GSI is among the defendants named in putative class actions
relating to trading in platinum and palladium, filed beginning
on November 25, 2014 and most recently amended on
May 15, 2017, in the U.S. District Court for the Southern
District of New York. The amended complaint generally
alleges that the defendants violated federal antitrust laws and
the Commodity Exchange Act in connection with an alleged
conspiracy to manipulate a benchmark for physical platinum
and palladium prices and seek declaratory and injunctive
relief, as well as treble damages in an unspecified amount.
Defendants moved to dismiss
the third consolidated
amended complaint on July 21, 2017.

GS&Co., GSI, J. Aron & Company and Metro, a
previously consolidated subsidiary of Group Inc. that was
sold in the fourth quarter of 2014, are among the
defendants in a number of putative class and individual
actions filed beginning on August 1, 2013 and consolidated
in the U.S. District Court for the Southern District of New
York. The complaints generally allege violations of federal
antitrust laws and state laws in connection with the storage
of aluminum and aluminum trading. The complaints seek
declaratory, injunctive and other equitable relief, as well as
unspecified monetary damages, including treble damages.
In December 2016, the district court granted defendants’
motions to dismiss as to all remaining claims. Certain
plaintiffs subsequently appealed in December 2016. On
August 27, 2019, the Second Circuit vacated the district
court’s dismissals and remanded the case to district court
for further proceedings.

the defendants violated antitrust

U.S. Treasury Securities Litigation
GS&Co. is among the primary dealers named as defendants
in several putative class actions relating to the market for
U.S. Treasury securities, filed beginning in July 2015 and
consolidated in the U.S. District Court for the Southern
District of New York. GS&Co. is also among the primary
dealers named as defendants in a similar individual action
filed in the U.S. District Court for the Southern District of
New York on August 25, 2017. The consolidated class
action complaint, filed on December 29, 2017, generally
laws in
alleges that
connection with an alleged conspiracy to manipulate the
when-issued market and auctions
for U.S. Treasury
securities and that certain defendants, including GS&Co.,
colluded to preclude trading of U.S. Treasury securities on
electronic trading platforms in order to impede competition
in the bidding process. The individual action alleges a
similar conspiracy regarding manipulation of the when-
issued market and auctions, as well as related futures and
options in violation of the Commodity Exchange Act. The
complaints seek declaratory and injunctive relief, treble
damages
in an unspecified amount and restitution.
Defendants moved to dismiss on February 23, 2018.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Employment-Related Matters
On September 15, 2010, a putative class action was filed in
the U.S. District Court for the Southern District of New
York by three female former employees. The complaint, as
that Group Inc. and
subsequently amended, alleges
GS&Co. have systematically discriminated against female
employees in respect of compensation, promotion and
performance evaluations. The complaint alleges a class
consisting of all female employees employed at specified
levels in specified areas by Group Inc. and GS&Co. since
July 2002, and asserts claims under federal and New York
City discrimination laws. The complaint seeks class action
injunctive relief and unspecified amounts of
status,
compensatory, punitive and other damages.

On March 30, 2018, the district court certified a damages
class as to the plaintiffs’ disparate impact and treatment
claims. On September 4, 2018, the Second Circuit Court of
Appeals denied defendants’ petition for interlocutory
review of the district court’s class certification decision and
subsequently denied defendants’ petition for rehearing. On
September 27, 2018, plaintiffs advised the district court
that they would not seek to certify a class for injunctive and
declaratory relief. On April 12, 2019, Group Inc. and
GS&Co. filed a motion to compel arbitration as to certain
class members who are parties to agreements with Group
Inc. and/or GS&Co. in which they agreed to arbitrate
employment-related disputes, and plaintiffs filed a motion
challenging the enforceability of arbitration agreements
executed after the filing of the class action.

Regulatory Investigations and Reviews and Related
Litigation
Group Inc. and certain of its affiliates are subject to a
number of other investigations and reviews by, and in some
cases have received subpoenas and requests for documents
and information from,
and
regulatory bodies and self-regulatory organizations and
litigation and shareholder requests relating to various
matters relating to the firm’s businesses and operations,
including:
‰ The public offering process;
‰ The

investment management and financial

governmental

various

firm’s
advisory services;
‰ Conflicts of interest;

‰ Research practices, including research independence and
interactions between research analysts and other firm
personnel, including investment banking personnel, as
well as third parties;

‰ Transactions involving government-related financings
and other matters, municipal securities, including wall-
cross procedures and conflict of interest disclosure with
respect to state and municipal clients, the trading and
in
structuring of municipal derivative
connection with municipal
political
contribution rules, municipal advisory services and the
possible impact of credit default swap transactions on
municipal issuers;

instruments

offerings,

and

securities,

government

‰ The offering, auction, sales, trading and clearance of
corporate
currencies,
commodities and other financial products and related
sales and other communications and activities, as well as
the firm’s supervision and controls relating to such
activities, including compliance with applicable short sale
rules, algorithmic, high-frequency and quantitative
trading, the firm’s U.S. alternative trading system (dark
pool),
futures trading, options trading, when-issued
trading, transaction reporting, technology systems and
trading and
controls,
clearance of credit derivative instruments and interest rate
swaps, commodities activities and metals storage, private
placement practices, allocations of and trading in
securities, and trading activities and communications in
connection with the establishment of benchmark rates,
such as currency rates;

lending practices,

securities

‰ Compliance with the FCPA;
‰ The firm’s hiring and compensation practices;
‰ The firm’s system of risk management and controls; and
‰ Insider trading, the potential misuse and dissemination of
material nonpublic information regarding corporate and
governmental developments and the effectiveness of the
firm’s insider trading controls and information barriers.

The firm is cooperating with all such governmental and
regulatory investigations and reviews.

Goldman Sachs 2019 Form 10-K 193

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 28.
Employee Benefit Plans

Note 29.
Employee Incentive Plans

The firm sponsors various pension plans and certain other
postretirement benefit plans, primarily healthcare and life
insurance. The firm also provides certain benefits to former
or inactive employees prior to retirement.

Defined Benefit Pension Plans and Postretirement
Plans
Employees of certain non-U.S. subsidiaries participate in
various defined benefit pension plans. These plans generally
provide benefits based on years of credited service and a
percentage of eligible compensation. The firm maintains a
defined benefit pension plan for certain U.K. employees. As
of April 2008, the U.K. defined benefit plan was closed to
new participants and frozen for existing participants as of
March 31, 2016. The non-U.S. plans do not have a material
impact on the firm’s consolidated results of operations.

prior

hired

all U.S.

employees

The firm also maintains a defined benefit pension plan for
to
substantially
November 1, 2003. As of November 2004, this plan was
closed to new participants and frozen for existing
participants. In addition, the firm maintains unfunded
postretirement benefit plans that provide medical and life
insurance for eligible retirees and their dependents covered
under these programs. These plans do not have a material
impact on the firm’s consolidated results of operations.

The firm recognizes the funded status of its defined benefit
pension and postretirement plans, measured as
the
difference between the fair value of the plan assets and the
benefit obligation, in the consolidated balance sheets. As of
December 2019, other assets included $257 million (related
to overfunded pension plans) and other liabilities included
$415 million, related to these plans. As of December 2018,
other assets included $462 million (related to overfunded
pension plans) and other liabilities included $344 million,
related to these plans.

Defined Contribution Plans
The firm contributes to employer-sponsored U.S. and
firm’s
non-U.S.
contribution to these plans was $254 million for 2019,
$240 million for 2018 and $257 million for 2017.

plans. The

contribution

defined

194 Goldman Sachs 2019 Form 10-K

The cost of employee services received in exchange for a
share-based award is generally measured based on the
grant-date fair value of the award. Share-based awards that
do not require future service (i.e., vested awards, including
awards granted to retirement-eligible employees) are
expensed immediately. Share-based awards that require
future service are amortized over the relevant service
period. Forfeitures are recorded when they occur.

Cash dividend equivalents paid on RSUs are charged to
retained earnings. If RSUs that require future service are
the related dividend equivalents originally
forfeited,
charged
to
earnings
to
compensation expense in the period in which forfeiture
occurs.

reclassified

retained

are

The firm generally issues new shares of common stock upon
delivery of share-based awards. In certain cases, primarily
(as outlined in the
related to conflicted employment
applicable award agreements), the firm may cash settle
share-based compensation awards accounted for as equity
instruments. For these awards, whose terms allow for cash
settlement, additional paid-in capital is adjusted to the
extent of the difference between the value of the award at
the time of cash settlement and the grant-date value of the
award.

Stock Incentive Plan
The firm sponsors a stock incentive plan, The Goldman
Sachs Amended and Restated Stock Incentive Plan (2018)
(2018 SIP), which provides for grants of RSUs, restricted
stock, dividend equivalent rights, incentive stock options,
nonqualified stock options, stock appreciation rights, and
other share-based awards, each of which may be subject to
performance conditions. On May 2, 2018, shareholders
approved the 2018 SIP. The 2018 SIP replaced The
Goldman Sachs Amended and Restated Stock Incentive
Plan (2015) (2015 SIP) previously in effect, and applies to
awards granted on or after the date of approval. The 2015
SIP had previously replaced The Goldman Sachs Amended
and Restated Stock Incentive Plan (2013) (2013 SIP).

As of December 2019, 60.6 million shares were available
for grant under the 2018 SIP. If any shares of common
stock underlying awards granted under the 2018 SIP, 2015
SIP or 2013 SIP are not delivered due to forfeiture,
termination or cancellation or are surrendered or withheld,
those shares will become available to be delivered under the
2018 SIP. Shares available for grant are also subject to
adjustment for certain changes in corporate structure as
permitted under the 2018 SIP. The 2018 SIP is scheduled to
terminate on the date of the annual meeting of shareholders
that occurs in 2022.

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Restricted Stock Units
The firm grants RSUs (including RSUs subject to performance
conditions) to employees, which are generally valued based on
the closing price of the underlying shares on the date of grant
for any
after taking into account a liquidity discount
applicable post-vesting and delivery transfer restrictions. RSUs
generally vest and underlying shares of common stock deliver
(net of required withholding tax) as outlined in the applicable
award agreements. Award agreements generally provide that
vesting is accelerated in certain circumstances, such as on
retirement, death, disability and conflicted employment.
Delivery of the underlying shares of common stock, which
generally occurs over a three-year period, is conditioned on the
grantees satisfying certain vesting and other requirements
outlined in the award agreements.

The table below presents the 2019 activity related to RSUs.

Restricted Stock
Units Outstanding

Future
Service
Required

No Future
Service
Required

3,761,839
4,770,662
(468,754)
–
(3,550,271)
4,513,476

13,328,995
7,307,148
(265,510)
(9,222,049)
3,550,271
14,698,855

Weighted Average
Grant-Date Fair Value of
Restricted Stock
Units Outstanding

Future
Service
Required

$217.85
$178.76
$196.13
$
–
$195.09
$196.69

No Future
Service
Required

$187.27
$176.54
$184.36
$175.54
$195.09
$191.25

Beginning balance
Granted
Forfeited
Delivered
Vested
Ending balance

In the table above:
‰ The weighted average grant-date fair value of RSUs
granted was $177.42 during 2019, $218.06 during 2018
and $206.88 during 2017. The fair value of the RSUs
granted included a liquidity discount of 10.5% during
2019, 11.9% during 2018 and 10.7% during 2017, to
reflect post-vesting and delivery transfer restrictions,
generally of up to 4 years.

‰ The aggregate fair value of awards that vested was
$2.00 billion during 2019, $1.79 billion during 2018 and
$2.14 billion during 2017.

‰ The ending balance included restricted stock subject to
future service requirements of 23,068 shares as of
December 2019 and 1,649 shares as of December 2018.

‰ The

ending

balance

included RSUs

to
performance conditions and future service requirements
of 224,898 RSUs as of December 2019, and represents
the maximum amount of such RSUs that may be earned
as of December 2019.

subject

‰ The ending balance also included RSUs subject

to
performance conditions but not subject to future service
requirements of 268,433 RSUs as of December 2019 and
174,579 RSUs as of December 2018, and the maximum
amount of
that may be earned was
402,650 RSUs as of December 2019 and 261,869 RSUs as
of December 2018.

such RSUs

In relation to 2019 year-end, during the first quarter of
2020, the firm granted to its employees 8.3 million RSUs, of
which 2.9 million RSUs require future service as a condition
of delivery for the related shares of common stock. These
awards are subject to additional conditions as outlined in
the award agreements. Generally, shares underlying these
awards, net of required withholding tax, deliver over a
three-year period, but are subject to post-vesting and
delivery transfer restrictions through January 2025. These
grants are not included in the table above.

As of December 2019, there was $467 million of total
unrecognized compensation cost related to non-vested
is
share-based compensation arrangements. This cost
expected to be recognized over a weighted average period
of 1.79 years.

Stock Options
Stock options generally vested as outlined in the applicable
stock option agreement. In general, options expired on the
tenth anniversary of the grant date, although they may have
been subject to earlier termination or cancellation under
certain circumstances in accordance with the terms of the
applicable stock option agreement and the SIP in effect at
the time of grant.

There were no options outstanding as of both December
2019 and December 2018.

During 2019, no options were exercised. During 2018,
2.10 million options were exercised with a weighted
average exercise price of $78.78. The total intrinsic value of
options exercised was $288 million during 2018 and
$589 million during 2017.

The table below presents the share-based compensation and
the related excess tax benefit.

$ in millions

Year Ended December

2019

2018

2017

$2,120 $1,850 $1,812
Share-based compensation
64 $ 139
Excess net tax benefit for options exercised
$
63 $ 269 $ 719
Excess net tax benefit for share-based awards $

– $

In the table above, excess net tax benefit for share-based
awards includes the net tax benefit on dividend equivalents
paid on RSUs and the delivery of common stock underlying
share-based awards, as well as the excess net tax benefit for
options exercised.

Goldman Sachs 2019 Form 10-K 195

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Note 30.
Parent Company

Group Inc. – Condensed Statements of Earnings

Group Inc. – Condensed Balance Sheets

$ in millions

Revenues
Dividends from subsidiaries and other affiliates:

Year Ended December

2019

2018

2017

63 $

102 $

Bank
Nonbank

Other revenues
Total non-interest revenues
Interest income
Interest expense
Net interest loss
Total net revenues

Operating expenses
Compensation and benefits
Other expenses
Total operating expenses
Pre-tax earnings
Provision/(benefit) for taxes
Undistributed earnings/(loss) of subsidiaries

and other affiliates

Net earnings
Preferred stock dividends
Net earnings applicable to common

4,199
335
4,597
7,575
8,545
(970)
3,627

331
1,365
1,696
1,931
(538)

5,997
8,466
569

16,368
(1,376)
15,094
6,617
8,114
(1,497)
13,597

299
1,192
1,491
12,106
(1,173)

(2,820)
10,459
599

550
11,016
(384)
11,182
4,638
5,978
(1,340)
9,842

330
428
758
9,084
3,404

(1,394)
4,286
601

shareholders

$7,897 $ 9,860 $ 3,685

Supplemental Disclosures:
In the condensed statements of earnings above, revenues
and expenses included the following with subsidiaries and
other affiliates:
‰ Dividends from bank subsidiaries included cash dividends
of $60 million for 2019, $76 million for 2018 and
$525 million for 2017.

‰ Dividends from nonbank subsidiaries and other affiliates
included cash dividends of $4.18 billion for 2019,
$10.78 billion for 2018 and $7.98 billion for 2017.

‰ Other

revenues

included $1.29 billion for 2019,

$(1.69) billion for 2018 and $661 million for 2017.

‰ Interest

income

included $7.26 billion for 2019,

$6.33 billion for 2018 and $4.65 billion for 2017.

‰ Interest expense included $3.15 billion for 2019,

$2.39 billion for 2018 and $1.05 billion for 2017.

‰ Other

expenses

included $138 million for 2019,

$159 million for 2018 and $45 million for 2017.

$ in millions

Assets
Cash and cash equivalents:
With third-party banks
With subsidiary bank

As of December

2019

2018

33 $
7

103
–

Loans to and receivables from subsidiaries:

Bank
Nonbank (includes $6,460 and $5,461 at fair value)

2,398

1,019
239,241 225,471

Investments in subsidiaries and other affiliates:

Bank
Nonbank

30,376
65,301
Trading assets (at fair value)
691
Investments (includes $16,930 and $12,824 at fair value) 20,499
Other assets
4,262
Total assets

28,737
61,481
717
12,824
3,653
$362,808 $334,005

Liabilities and shareholders’ equity
Payables to subsidiaries
Trading liabilities (at fair value)
Secured borrowings with subsidiary
Unsecured short-term borrowings:

With third parties (includes $4,751 and $2,615

at fair value)
With subsidiaries

Unsecured long-term borrowings:

With third parties (includes $15,611 and $16,395

at fair value)
With subsidiaries

Other liabilities
Total liabilities

Commitments, contingencies and guarantees

Shareholders’ equity
Preferred stock
Common stock
Share-based awards
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income/(loss)
Stock held in treasury, at cost
Total shareholders’ equity
Total liabilities and shareholders’ equity

640 $
417
42,083

702
281
6,899

25,635
917

25,060
659

28,576
5,673

168,602 183,121
23,343
3,755
272,543 243,820

11,203
9
3,195
54,883

11,203
9
2,845
54,005
106,465 100,100
693
(78,670)
90,185
$362,808 $334,005

(1,484)
(84,006)
90,265

Supplemental Disclosures:
Goldman Sachs Funding LLC (Funding IHC), a wholly-
owned, direct subsidiary of Group Inc., has provided
Group Inc. with a committed line of credit that allows
Group Inc. to draw sufficient funds to meet its cash needs in
the ordinary course of business.

assets

Trading
contracts with
subsidiaries of $584 million for December 2019 and
$683 million as of December 2018.

derivative

included

Group Inc.’s other comprehensive income/(loss) was
$(2.18) billion for 2019, $2.57 billion for 2018 and
$(664) million for 2017.

Trading liabilities
included derivative contracts with
subsidiaries of $365 million as of December 2019 and
$280 million as of December 2018.

In February 2020, GS&Co. made a cash dividend
distribution of $4.00 billion to Group Inc.

As of December 2019, unsecured long-term borrowings
with subsidiaries by maturity date are $26.87 billion in
2021, $311 million in 2022, $107 million in 2023,
$154 million in 2024 and $1.13 billion in 2025-thereafter.

196 Goldman Sachs 2019 Form 10-K

I N C . A N D S U B S I D I A R I E S
T H E G O L D M A N S A C H S G R O U P ,
Notes to Consolidated Financial Statements

Group Inc. – Condensed Statements of Cash Flows

$ in millions

Cash flows from operating activities
Net earnings
Adjustments to reconcile net earnings to net

cash provided by operating activities:
Undistributed (earnings)/loss of

subsidiaries and other affiliates

Depreciation and amortization
Deferred income taxes
Share-based compensation
Gain related to extinguishment of

unsecured borrowings

Changes in operating assets and liabilities:

Trading assets
Trading liabilities
Other, net

Net cash provided by operating activities
Cash flows from investing activities
Purchase of property, leasehold
improvements and equipment

Repayments/(issuances) of short-term loans

to subsidiaries, net

Issuance of term loans to subsidiaries
Repayments of term loans by subsidiaries
Purchase of investments
Proceeds from sales and paydowns of

investments

Capital distributions from/(contributions to)

subsidiaries, net

Net cash provided by/(used for) investing

Year Ended December

2019

2018

2017

$ 8,466 $ 10,459 $ 4,286

(5,997)
26
(210)
118

2,820
51
(2,817)
105

1,394
56
4,358
152

(20)

(160)

(114)

(1,431)
5,145
27
136
(1,131)
1,639
6,533 10,693

(508)
(521)
(1,154)
7,949

(34)

(63)

(66)

2,079 10,829 (14,415)
(7,374) (30,336) (42,234)
1,894 25,956 22,039
(6,491)
(3,141)

(16,776)

9,768

–

(415)

1,807

596

388

activities

(10,858)

5,052 (40,183)

Cash flows from financing activities
Secured borrowings with subsidiary

(short-term), net

26,398 (12,853) 16,035

Unsecured short-term borrowings, net:

With third parties
With subsidiaries

Proceeds from issuance of unsecured long-term

borrowings

Repayment of unsecured long-term borrowings,

including the current portion

Purchase of Trust Preferred securities
Preferred stock redemption
Common stock repurchased
Settlement of share-based awards in

(22)

(1,541)
4,649 11,855

(424)
7,043

8,804 26,157 43,917

(27,172) (32,429) (27,028)
(237)
(850)
(6,772)

(206)
(1,100)
(5,335)

(35)
(650)
(3,294)

satisfaction of withholding tax requirements

(745)

(1,118)

(2,223)

Dividends and dividend equivalents paid on

common stock, preferred stock and
share-based awards

Proceeds from issuance of preferred stock,

(2,104)

(1,810)

(1,769)

net of issuance costs

1,098

–

1,495

Proceeds from issuance of common stock,
including exercise of share-based awards

Cash settlement of share-based awards
Other financing, net
Net cash provided by/(used for) financing

–
–
(3)

38
–
–

7
(3)
–

activities

4,262 (15,680) 29,191

Net increase/(decrease) in cash and cash

equivalents

Cash and cash equivalents, beginning balance
Cash and cash equivalents, ending balance $

(63)
103

40 $

65
38
103 $

(3,043)
3,081
38

Supplemental Disclosures:
Cash payments for interest, net of capitalized interest, were
$9.53 billion for 2019, $9.83 billion for 2018 and
$6.31 billion for 2017, and included $3.01 billion for 2019,
$3.05 billion for 2018 and $160 million for 2017 of
payments to subsidiaries.

Cash payments/(refunds)
for income taxes, net, were
$272 million for 2019, $(98) million for 2018 and
$297 million for 2017.

Cash flows related to common stock repurchased includes
common stock repurchased in the prior period for which
settlement occurred during the current period and excludes
common stock repurchased during the current period for
which settlement occurred in the following period.

Non-cash activities during the year ended December 2019:
‰ Group Inc. acquired $8.50 billion of deposits with
GS Bank USA from Funding IHC in exchange for
borrowings.

‰ Group Inc. exchanged $211 million of Trust Preferred
beneficial
for
the Group Inc.’s junior

securities
and
$231 million of certain of
subordinated debt.

common

interests

Non-cash activities during the year ended December 2018:
‰ Group Inc. restructured funding for Goldman Sachs
Group UK Limited and Goldman Sachs International,
both wholly-owned subsidiaries of Group Inc., which
resulted in a net increase in loans to subsidiaries of
$5.71 billion and a decrease in equity interest of
$5.71 billion.

‰ Group Inc. exchanged $150 million of liabilities and
$46 million of related deferred tax assets for $104 million
of equity interest in GS&Co., a wholly-owned subsidiary
of Group Inc.

‰ Group Inc. exchanged $36 million of Trust Preferred
securities and common beneficial interests for $36 million
of certain of the Group Inc.’s junior subordinated debt.

Non-cash activities during the year ended December 2017:
‰ Group Inc. exchanged $84.00 billion of certain loans to
and receivables from subsidiaries for an $84.00 billion
from Funding IHC
unsecured subordinated note
(included in loans to and receivables from subsidiaries).
‰ Group Inc. exchanged $750 million of its equity interest
in Goldman Sachs (UK) L.L.C. (GS UK), a wholly-owned
subsidiary of Group Inc., for a $750 million loan to
GS UK.

‰ Group Inc. exchanged $243 million of Trust Preferred
for

securities
$254 million of Group Inc.’s junior subordinated debt.

beneficial

common

interests

and

Goldman Sachs 2019 Form 10-K 197

T H E G O L D M A N S A C H S G R O U P ,
Supplemental Financial Information

I N C . A N D S U B S I D I A R I E S

Quarterly Results (unaudited)

Common Stock Performance

the

firm’s

The graph and table below compare the performance of an
investment
from
December 31, 2014 (the last trading day before the firm’s
2015 fiscal year) through December 31, 2019, with the
S&P 500 Index (S&P 500) and the S&P 500 Financials
Index (S&P 500 Financials).

common

stock

$300

$250

$200

$150

$100

$50

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

The Goldman Sachs Group, Inc.

S&P 500 Index

S&P 500 Financials Index

As of December

2014

2015

2016

2017

2018

2019

Group Inc.
$100.00 $ 94.21 $127.10 $136.94 $ 91.04 $127.87
$100.00 $101.37 $113.48 $138.25 $132.18 $173.79
S&P 500
S&P 500 Financials $100.00 $ 98.44 $120.84 $147.59 $128.34 $169.53

The graph and table above assume $100 was invested on
December 31, 2014 in each of the firm’s common stock, the
S&P 500 and the S&P 500 Financials, and the dividends
were reinvested without payment of any commissions. The
performance shown represents past performance and
future
should not be
performance.

considered an indication of

The tables below present the unaudited quarterly results.

Three Months Ended

$ in millions, except per
share amounts

December
2019

September
2019

June
2019

March
2019

Non-interest revenues
Interest income
Interest expense
Net interest income
Total net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Provision for taxes
Net earnings
Preferred stock dividends
Net earnings to common

$8,890
4,922
3,857
1,065
9,955
336
7,298
2,321
404
1,917
193
$1,724

5,459
4,451
1,008
8,323
291
5,616
2,416
539
1,877
84

$7,315 $8,390 $ 7,589
5,597
5,760
4,379
4,689
1,218
1,071
8,807
9,461
224
214
5,864
6,120
2,719
3,127
468
706
2,251
2,421
69
223
$1,793 $2,198 $ 2,182

Per common share amounts:

Basic earnings
Diluted earnings
Dividends declared

$ 4.74
$ 4.69
$ 1.25

$ 4.83 $ 5.86 $
$ 4.79 $ 5.81 $
$ 1.25 $ 0.85 $

5.73
5.71
0.80

$ in millions, except per
share amounts

December
2018

September
2018

June
2018

March
2018

Three Months Ended

$7,089
5,468
4,477
991
8,080
222
5,150
2,708
170
2,538
216
$2,322

5,061
4,205
856
8,820
174
5,568
3,078
554
2,524
71

$7,964 $8,634 $ 9,162
4,230
4,920
3,312
3,918
918
1,002
10,080
9,636
44
234
6,617
6,126
3,419
3,276
587
711
2,832
2,565
95
217
$2,453 $2,348 $ 2,737

Per common share amounts:

Basic earnings
Diluted earnings
Dividends declared

$ 6.11
$ 6.04
$ 0.80

$ 6.35 $ 6.04 $
$ 6.28 $ 5.98 $
$ 0.80 $ 0.80 $

7.02
6.95
0.75

In the tables above:
‰ Net earnings

to common represents net earnings
applicable to common shareholders, which is calculated
as net earnings less preferred stock dividends.

‰ These quarterly results were prepared in accordance with
U.S. GAAP and reflect all adjustments that are, in the
opinion of management, necessary for a fair statement of
the results. These adjustments are of a normal, recurring
nature. The timing and magnitude of changes in the firm’s
in
discretionary
operating expenses) can have a significant effect on results
in a given quarter.

compensation

(included

accruals

198 Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Supplemental Financial Information

I N C . A N D S U B S I D I A R I E S

Selected Financial Data

Statistical Disclosures

Year Ended or as of December

2019

2018

2017

2016

2015

Income statement data ($ in millions)
Non-interest revenues
Interest income
Interest expense
Net interest income
Total net revenues
Provision for credit losses
Operating expenses
Pre-tax earnings
Balance sheet data ($ in millions)
Total assets
Deposits
Other secured financings

21,738
17,376
4,362
36,546
1,065
24,898

$ 32,184 $ 32,849 $ 29,798 $ 28,203 $ 31,045
8,452
5,388
3,064
34,109
289
25,042
$ 10,583 $ 12,481 $ 11,132 $ 10,304 $ 8,778

9,691
7,104
2,587
30,790
182
20,304

19,679
15,912
3,767
36,616
674
23,461

13,113
10,181
2,932
32,730
657
20,941

$992,968 $931,796 $916,776 $860,165 $861,395
$190,019 $158,257 $138,604 $124,098 $ 97,519

(long-term)

$ 11,953 $ 11,878 $ 9,892 $ 8,405 $ 10,520

Unsecured long-term

$207,076 $224,149 $217,687 $189,086 $175,422
borrowings
Total liabilities
$902,703 $841,611 $834,533 $773,272 $774,667
Total shareholders’ equity $ 90,265 $ 90,185 $ 82,243 $ 86,893 $ 86,728
Common share data (in millions, except per share amounts)
Per common share amounts:

Basic earnings
Diluted earnings
Dividends declared
Book value
Basic shares
Average common shares:

9.12 $ 16.53 $ 12.35
$ 21.18 $ 25.53 $
9.01 $ 16.29 $ 12.14
$ 21.03 $ 25.27 $
$
2.55
2.60 $
2.90 $
3.15 $
$ 218.52 $ 207.36 $ 181.00 $ 182.47 $ 171.03
441.6

4.15 $

414.8

380.9

361.8

388.9

Basic
Diluted

371.6
375.5

385.4
390.2

401.6
409.1

427.4
435.1

448.9
458.6

Selected data (unaudited)
ROE
Headcount
Americas
Non-Americas
Total headcount
AUS by asset class ($ in billions)
Alternative investments $
Equity
Fixed income
Long-term AUS
Liquidity products
Total AUS

10.0% 13.3%

4.9%

9.4%

7.4%

20,800
17,500
38,300

19,700
16,900
36,600

18,100
15,500
33,600

17,400
15,000
32,400

18,000
16,000
34,000

185 $
423
789
1,397
462

148
252
546
946
306
$ 1,859 $ 1,542 $ 1,494 $ 1,379 $ 1,252

154 $
266
601
1,021
358

168 $
321
660
1,149
345

167 $
301
677
1,145
397

In the table above, basic shares represent common shares
outstanding and restricted stock units granted to employees
with no future service requirements and not subject to
performance conditions.

Distribution of Assets, Liabilities and Shareholders’
Equity
The tables below present
balances, interest and average interest rates.

information about average

$ in millions

Assets
U.S.
Non-U.S.
Total deposits with banks
U.S.
Non-U.S.
Total collateralized agreements
U.S.
Non-U.S.
Total trading assets
U.S.
Non-U.S.
Total investments
U.S.
Non-U.S.
Total loans
U.S.
Non-U.S.
Total other interest-earning assets
Total interest-earning assets
Cash and due from banks
Other non-interest-earning assets
Total assets

Average Balance for the
Year Ended December

2019

2018

2017

$ 41,250 $ 65,888 $ 66,838
49,161
42,353
52,773
90,411 118,661 109,191
156,769 161,783 159,829
123,069 140,411 133,156
279,838 302,194 292,985
157,266 127,771 132,961
118,086 105,105
99,010
275,352 232,876 231,971
22,605
32,619
11,714
12,729
34,319
45,348
62,040
77,884
7,476
9,246
69,516
87,130
37,353
41,854
39,199
42,292
76,552
84,146
874,104 870,355 814,534
11,056
11,380
84,014
85,846
$971,239 $967,581 $909,604

38,419
15,100
53,519
84,416
13,839
98,255
39,961
36,768
76,729

10,998
86,137

34,993

Liabilities
U.S.
Non-U.S.
Total interest-bearing deposits
U.S.
Non-U.S.
Total collateralized financings
U.S.
Non-U.S.
Total trading liabilities
U.S.
Non-U.S.
Total short-term borrowings
U.S.
Non-U.S.
Total long-term borrowings
U.S.
Non-U.S.
Total other interest-bearing liabilities
Total interest-bearing liabilities
Non-interest-bearing deposits
Other non-interest-bearing liabilities
Total liabilities
Shareholders’ equity
11,238
Preferred stock
74,721
Common stock
Total shareholders’ equity
85,959
Total liabilities and shareholders’ equity $971,239 $967,581 $909,604

$131,937 $117,121 $101,109
24,356
30,071
166,930 147,192 125,465
56,614
59,129
65,170
39,029
31,875
45,747
95,643
97,045 104,876
34,422
33,193
29,333
41,507
49,295
45,816
75,929
82,488
75,149
38,615
40,360
34,284
13,318
16,909
17,323
51,933
57,269
51,607
205,324 212,200 199,569
15,000
24,173
233,403 236,373 214,569
128,846 124,657 135,804
60,986
63,428
183,947 188,085 196,790
808,081 816,283 760,329
3,630
4,273
59,686
61,787
880,942 882,343 823,645

11,203
79,094
90,297

11,253
73,985
85,238

5,503
67,358

28,079

55,101

Percentage of interest-earning assets and interest-bearing liabilities

attributable to non-U.S. operations

Assets
Liabilities

40.73% 41.67% 40.88%
26.38% 28.13% 25.54%

Goldman Sachs 2019 Form 10-K 199

T H E G O L D M A N S A C H S G R O U P ,
Supplemental Financial Information

I N C . A N D S U B S I D I A R I E S

$ in millions

2019

2018

2017

Interest for the
Year Ended December

Average Rate for the
Year Ended December

2019

2018

2017

918
293
1,211
3,925
472
4,397
3,622
2,277
5,899
972
485
1,457
4,655
756
5,411
2,313
1,050
3,363
$21,738

$ 3,099
469
3,568
2,374
284
2,658
466
747
1,213
642
26
668
5,234
125
5,359
4,048
(138)
3,910
$17,376

542
3,820
$ 4,362

$ 1,247
171
1,418
3,340
512
3,852
3,200
1,957
5,157
807
408
1,215
4,166
523
4,689
2,382
966
3,348
$19,679

$ 2,317
289
2,606
1,760
291
2,051
803
751
1,554
672
23
695
5,474
81
5,555
3,245
206
3,451
$15,912

871
2,896
$ 3,767

760
59
819
1,335
326
1,661
3,094
1,573
4,667
437
267
704
2,817
405
3,222
1,519
521
2,040
$13,113

$ 1,205
175
1,380
735
128
863
682
706
1,388
660
38
698
4,539
60
4,599
991
262
1,253
$10,181

$ 1,150
1,782
$ 2,932

200 Goldman Sachs 2019 Form 10-K

Interest rate spread
U.S.
Non-U.S.
Net yield on interest-earning assets

2.23%
0.60%
1.34%
2.50%
0.38%
1.57%
2.30%
1.93%
2.14%
2.53%
3.21%
2.72%
5.51%
5.46%
5.51%
5.79%
2.86%
4.38%
2.49%

2.35%
1.34%
2.14%
3.64%
0.89%
2.74%
1.59%
1.63%
1.61%
1.87%
0.15%
1.29%
2.55%
0.45%
2.30%
3.14%
(0.25)%
2.13%
2.15%

0.34%
0.10%
1.07%
0.50%

1.89% 1.14%
0.32% 0.14%
1.20% 0.75%
2.06% 0.84%
0.36% 0.24%
1.27% 0.57%
2.50% 2.33%
1.86% 1.59%
2.21% 2.01%
2.47% 1.93%
3.21% 2.28%
2.68% 2.05%
5.35% 4.54%
5.66% 5.42%
5.38% 4.63%
5.69% 4.07%
2.28% 1.33%
3.98% 2.66%
2.26% 1.61%

1.98% 1.19%
0.96% 0.72%
1.77% 1.10%
2.98% 1.30%
0.64% 0.33%
1.96% 0.90%
2.42% 1.98%
1.52% 1.70%
1.88% 1.83%
1.67% 1.71%
0.14% 0.29%
1.21% 1.34%
2.58% 2.27%
0.34% 0.40%
2.35% 2.14%
2.60% 0.73%
0.32% 0.43%
1.83% 0.64%
1.95% 1.34%

0.31% 0.27%
0.17% 0.24%
0.80% 0.54%
0.43% 0.36%

In the tables above:
‰ Assets, liabilities and interest are classified as U.S. and
non-U.S. based on the location of the entity in which the
assets and liabilities are held.

‰ Derivative instruments and commodities are included in
other non-interest-earning assets and other non-interest-
bearing liabilities.

‰ Total other interest-earning assets primarily consists of
certain receivables from customers and counterparties.

‰ Collateralized

financings

consists

repurchase

agreements and securities loaned.

‰ Substantially all of

the total other interest-bearing
liabilities consists of certain payables to customers and
counterparties.

‰ Interest rates for borrowings include the effects of interest

rate swaps accounted for as hedges.

T H E G O L D M A N S A C H S G R O U P ,
Supplemental Financial Information

I N C . A N D S U B S I D I A R I E S

‰ Total loans exclude loans held for sale that are accounted
for at the lower of cost or fair value. Such loans are
included within other interest-earning assets.

‰ Total short- and long-term borrowings include both

secured and unsecured borrowings.

Changes in Net Interest Income, Volume and Rate
Analysis
The tables below present the effect on net interest income of
volume and rate changes. In this analysis, changes due to
volume/rate variance have been allocated to volume.

Year Ended December 2019
versus December 2018

Increase (decrease)
due to change in:

$ in millions

Volume

Rate

Interest-earning assets
U.S.
Non-U.S.
Total deposits with banks
U.S.
Non-U.S.
Total collateralized agreements
U.S.
Non-U.S.
Total trading assets
U.S.
Non-U.S.
Total investments
U.S.
Non-U.S.
Total loans
U.S.
Non-U.S.
Total other interest-earning assets
Change in interest income
Interest-bearing liabilities
U.S.
Non-U.S.
Total interest-bearing deposits
U.S.
Non-U.S.
Total collateralized financings
U.S.
Non-U.S.
Total trading liabilities
U.S.
Non-U.S.
Total short-term borrowings
U.S.
Non-U.S.
Total long-term borrowings
U.S.
Non-U.S.
Total other interest-bearing liabilities
Change in interest expense
Change in net interest income

$(548)
(22)
(570)
(126)
(67)
(193)
679
250
929
147
76
223
360
251
611
(110)
(158)
(268)
732

348
66
414
220
(124)
96
(61)
(57)
(118)
(114)
1
(113)
(175)
17
(158)
132
21
153
274
$ 458

$ 219
144
363
711
27
738
(257)
70
(187)
18
1
19
129
(18)
111
41
242
283
1,327

434
114
548
394
117
511
(276)
53
(223)
84
2
86
(65)
27
(38)
671
(365)
306
1,190
$ 137

Net
Change

$ (329)
122
(207)
585
(40)
545
422
320
742
165
77
242
489
233
722
(69)
84
15
2,059

782
180
962
614
(7)
607
(337)
(4)
(341)
(30)
3
(27)
(240)
44
(196)
803
(344)
459
1,464
$ 595

Year Ended December 2018
versus December 2017

Increase (decrease)
due to change in:

$ in millions

Volume

Rate

(18)
34
16
40
26
66
(130)
113
(17)
248
33
281
847
100
947
256
71
327
1,620

317
55
372
75
43
118
(30)
119
89
29
5
34
326
31
357
(290)
8
(282)
688
$ 932

$ 505
78
583
1,965
160
2,125
236
271
507
122
108
230
502
18
520
607
374
981
4,946

795
59
854
950
120
1,070
151
(74)
77
(17)
(20)
(37)
609
(10)
599
2,544
(64)
2,480
5,043
(97)

Net
Change

$ 487
112
599
2,005
186
2,191
106
384
490
370
141
511
1,349
118
1,467
863
445
1,308
6,566

1,112
114
1,226
1,025
163
1,188
121
45
166
12
(15)
(3)
935
21
956
2,254
(56)
2,198
5,731
$ 835

Goldman Sachs 2019 Form 10-K 201

T H E G O L D M A N S A C H S G R O U P ,
Supplemental Financial Information

I N C . A N D S U B S I D I A R I E S

Deposits
The table below presents information about
bearing deposits.

interest-

$ in millions

2019

2018

2017

Year Ended December

In the table above:
‰ These borrowings generally mature within one year of the
financial statement date and include borrowings that are
redeemable at the option of the holder within one year of
the financial statement date.

Average balances
U.S.
Savings and demand
Time
Total U.S.
Non-U.S.
Demand
Time
Total non-U.S.
Total
Average interest rates
U.S.
Savings and demand
Time
Total U.S.
Non-U.S.
Demand
Time
Total non-U.S.
Total

$ 86,108
45,829
131,937

$ 76,428
40,693
117,121

$ 68,819
32,290
101,109

20,733
14,260
34,993
$166,930

9,579
20,492
30,071
$147,192

8,443
15,913
24,356
$125,465

2.23%
2.58%
2.35%

1.51%
1.09%
1.34%
2.14%

1.85%
2.21%
1.98%

1.29%
0.81%
0.96%
1.77%

0.98%
1.64%
1.19%

0.68%
0.75%
0.72%
1.10%

In the table above, deposits are classified as U.S. and
non-U.S. based on the location of the entity in which such
deposits are held.

As of December 2019, deposits in U.S. offices included
$14.39 billion and non-U.S. offices included $8.07 billion
of time deposits that were greater than $100,000.

The table below presents maturities of these time deposits
held in U.S. offices.

$ in millions

3 months or less
3 to 6 months
6 to 12 months
Greater than 12 months
Total

As of
December 2019

$ 2,582
3,952
5,460
2,399
$14,393

Short-Term and Other Borrowed Funds
The table below presents information about securities loaned
and repurchase agreements, and short-term borrowings.

year-end for

‰ Amounts outstanding

short-term
borrowings included short-term secured financings of
$7.32 billion as of December 2019, $9.56 billion as of
December 2018 and $14.90 billion as of December 2017.
‰ The weighted average interest rates for these borrowings

include the effect of hedging activities.

Loan Portfolio
The table below presents information about loans.

$ in millions

2019

2018

2017

2016

2015

As of December

Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer
Credit card
Other
Total U.S.
Corporate
Wealth management
Commercial real estate
Residential real estate
Other
Total non-U.S.
Total loans, gross
Allowance for loan losses
U.S.
Non-U.S.
Total allowance for loan losses
Total loans

6,290
4,747
1,858
4,186

3,604
4,305
208
–
3,428

$ 37,161 $37,518 $32,616 $28,889 $26,523
24,783 22,649 21,591 19,225 19,044
4,975
8,239
12,836 11,052
2,890
7,299
7,820
–
1,912
4,536
–
–
–
3,749
5,014
4,461
91,861 88,036 76,671 59,659 57,181
3,243
3,686
1,137
2,102
3,332
3,149
522
600
53
32
8,287
9,569
110,345 98,903 86,240 67,012 65,468

4,857
2,119
3,126
481
284
18,484 10,867

2,529
1,442
2,805
556
21
7,353

9,146
3,157
4,907
668
606

1,146
295
1,441

381
33
414
$108,904 $97,837 $85,437 $66,503 $65,054

848
218
1,066

604
199
803

476
33
509

In the table above, loans are classified as U.S. and non-U.S.
based on the location of the entity in which such loans are
held.

Allowance for Loan Losses
The table below presents changes in the allowance for loan
losses.

$ in millions

2019

2018

2017

$ in millions

2019

2018

2017

2016

2015

As of December

Allowance for loan losses
Beginning balance
Net charge-offs
Provision for loan losses
Other
Ending balance

$1,066
(490)
990
(125)
$1,441

$ 803
(337)
654
(54)
$1,066

$ 509
(203)
574
(77)
$ 803

$414
(8)
138
(35)
$509

$228
(1)
187
–
$414

$ 90,531
$104,876
$123,805

Securities loaned and securities sold under agreements to repurchase
$ 99,511
$132,741
Amounts outstanding at year-end
$ 95,643
Average outstanding during the year $ 97,045
Maximum month-end outstanding
$103,359
$132,741
Weighted average interest rate
During the year
At year-end
Short-term borrowings
Amounts outstanding at year-end
$ 55,611
Average outstanding during the year $ 51,607
Maximum month-end outstanding
$ 57,209
Weighted average interest rate
During the year
At year-end

$ 61,818
$ 51,933
$ 61,818

$ 50,057
$ 57,269
$ 63,743

0.90%
1.16%

1.34%
1.22%

1.96%
3.31%

1.21%
1.30%

2.74%
1.61%

1.29%
1.24%

202 Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,
Supplemental Financial Information

I N C . A N D S U B S I D I A R I E S

In the table above:
‰ Allowance for loan losses as of both 2019 and 2018
primarily related to corporate loans and consumer loans
that were held in entities located in the U.S. Allowance for
loan losses as of 2017 and earlier primarily related to
corporate and wealth management loans that were held
in entities located in the U.S.

‰ Net charge-offs for 2019 were primarily related to
consumer loans held in entities located in the U.S. Net
charge-offs for 2018 were primarily related to consumer
loans held in entities located in the U.S. and commercial
real estate PCI loans held in entities located outside of the
U.S. Net charge-offs for 2017 and earlier were primarily
related to corporate loans held in entities located in the U.S.
Maturities and Sensitivity to Changes in Interest
Rates
The table below presents gross loans by tenor and a distribution
of such loans between fixed and floating interest rates.

$ in millions

Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer
Credit card
Other
Total U.S.
Corporate
Wealth management
Commercial real estate
Residential real estate
Other
Total non-U.S.
Total loans, gross
Loans at fixed interest rates
Loans at variable interest rates
Total

Maturities and Sensitivity to Changes
in Interest Rates as of December 2019

Less
than
1 year

1 - 5
years

Greater
than 5
years

Total

7,791
1,054
2,071
333
–
510
16,648
2,957
–
1,034
127
47
4,165

2,923
10,186
2,251
4,330
–
2,961
51,053
4,808
37
3,049
507
553
8,954

14,069
1,596
1,968
84
1,858
715
24,160
1,381
3,120
824
34
6
5,365

$ 3,870 $28,402 $ 4,889 $ 37,161
24,783
12,836
6,290
4,747
1,858
4,186
91,861
9,146
3,157
4,907
668
606
18,484
$29,525 $60,007 $20,813 $110,345
424 $ 4,844 $ 8,977 $ 14,245
$
96,100
$29,525 $60,007 $20,813 $110,345

55,163

11,836

29,101

information and represent

Cross-border Outstandings
Cross-border outstandings are based on the Federal Financial
Institutions Examination Council’s (FFIEC) guidelines for
reporting cross-border
the
amounts that the firm may not be able to obtain from a
foreign country due to country-specific events, including
unfavorable economic and political conditions, economic
and social instability, and changes in government policies.
Credit exposure represents the potential for loss due to the
default or deterioration in credit quality of a counterparty
or an issuer of securities or other instruments and is
measured based on the potential
loss in an event of
non-payment by a counterparty. Credit exposure is reduced
through the effect of risk mitigants, such as netting
agreements with counterparties that permit the firm to
offset receivables and payables with such counterparties or
obtaining collateral from counterparties. The table below
does not include all the effects of such risk mitigants and
does not represent the firm’s credit exposure.

The table below presents cross-border outstandings and
commitments for each country in which cross-border
outstandings exceed 0.75% of consolidated assets in
accordance with the FFIEC guidelines.

$ in millions

Banks Governments

Other

Total Commitments

As of December 2019

Cayman Islands
Germany
France
Canada
Ireland
Japan
China
U.K.
South Korea
Luxembourg

$
7
$1,790
$1,311
$3,079
$ 733
$7,203
$3,103
$1,776
$ 150
40
$

$
2 $35,920 $35,929
$22,828 $ 7,058 $31,676
$ 1,910 $15,146 $18,367
192 $14,609 $17,880
$
96 $15,083 $15,912
$
132 $ 6,889 $14,224
$
251 $ 9,834 $13,188
$
$
18 $ 8,421 $10,215
$ 1,021 $ 8,775 $ 9,946
92 $ 7,984 $ 8,116
$

As of December 2018

Germany
Cayman Islands
France
Japan
Ireland
Canada
Luxembourg
U.K.
China
South Korea

$2,028
27
$
$1,193
$9,106
$ 146
$2,383
$
22
$1,101
$1,952
$ 162

$43,730 $ 4,755 $50,513
2 $47,595 $47,624
$
$ 5,094 $11,549 $17,836
$ 1,686 $ 6,146 $16,938
55 $12,390 $12,591
$
470 $ 7,845 $10,698
$
41 $ 9,799 $ 9,862
$
77 $ 8,458 $ 9,636
$
$
66 $ 6,882 $ 8,900
$ 2,935 $ 3,989 $ 7,086

As of December 2017

Cayman Islands
Germany
France
Canada
Japan
Ireland
China
Italy
U.K.
Singapore
Luxembourg

$
6
$4,241
$3,569
$2,562
$8,827
$ 143
$2,550
$2,306
$1,300
$ 372
59
$

$
– $34,624 $34,630
$22,765 $ 6,916 $33,922
$ 1,574 $19,048 $24,191
311 $17,358 $20,231
$
69 $ 7,220 $16,116
$
65 $11,490 $11,698
$
$
687 $ 7,838 $11,075
$ 3,986 $ 2,586 $ 8,878
$
– $ 7,480 $ 8,780
$ 5,462 $ 1,873 $ 7,707
324 $ 7,320 $ 7,703
$

$ 5,014
$ 6,562
$24,497
$ 1,743
$ 1,238
$13,930
$ 1,059
$14,074
60
$
$ 4,136

$ 3,834
$ 4,207
$10,307
$12,553
$
822
$ 1,513
$ 2,838
$20,336
271
$
10
$

$ 4,940
$ 7,015
$14,549
$ 2,388
$18,079
895
$
$
–
$ 1,649
$14,966
$
48
$ 2,438

In the table above:
‰ Cross-border outstandings includes cash, receivables,
collateralized agreements and cash financial instruments,
but exclude derivative instruments.

‰ Collateralized agreements are presented gross, without

reduction for related securities collateral held.

‰ Margin loans (included in receivables) are presented
based on the amount of collateral advanced by the
counterparty.

‰ Substantially all commitments consists of commitments
agreement

collateralized

credit

and

extend

to
commitments.

Goldman Sachs 2019 Form 10-K 203

PART III
Item 10. Directors, Executive Officers
and Corporate Governance

this Form 10-K.

Information about our executive officers is included on
page 20 of
Information about our
directors,
including our audit committee and audit
committee financial experts and the procedures by which
shareholders can recommend director nominees, and our
executive officers will be in our definitive Proxy Statement
for our 2020 Annual Meeting of Shareholders, which will
be filed within 120 days of the end of 2019 (2020 Proxy
Statement) and is incorporated in this Form 10-K by
reference. Information about our Code of Business Conduct
and Ethics, which applies to our senior financial officers, is
included in “Business — Available Information” in Part I,
Item 1 of this Form 10-K.

Item 11. Executive Compensation

Information relating to our executive officer and director
compensation and the compensation committee of the
Board will be in the 2020 Proxy Statement and is
incorporated in this Form 10-K by reference.

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure

in or disagreements with
There were no changes
accountants on accounting and financial disclosure during
the last two years.

Item 9A. Controls and Procedures

controls and procedures

As of the end of the period covered by this report, an
evaluation was carried out by Goldman Sachs management,
with the participation of our Chief Executive Officer and
the effectiveness of our
Chief Financial Officer, of
disclosure
(as defined in
Rule 13a-15(e) under the Exchange Act). Based upon that
evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that
these disclosure controls and
procedures were effective as of the end of the period
covered by this report. In addition, no change in our
internal control over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act) occurred during
the fourth quarter of our year ended December 31, 2019
that has materially affected, or is reasonably likely to
materially affect, our
financial
reporting.

internal control over

Management’s Report on Internal Control over Financial
Reporting and the Report of Independent Registered Public
Accounting Firm are set forth in Part II, Item 8 of this
Form 10-K.

Item 9B. Other Information

Not applicable.

204 Goldman Sachs 2019 Form 10-K

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

Item 12. Security Ownership of Certain
Beneficial Owners and Management
and Related Stockholder Matters

Item 13. Certain Relationships and
Related Transactions, and Director
Independence

Information relating to security ownership of certain
beneficial owners of our common stock and information
relating to the security ownership of our management will
be in the 2020 Proxy Statement and is incorporated in this
Form 10-K by reference.

Information regarding certain relationships and related
transactions and director independence will be in the 2020
Proxy Statement and is incorporated in this Form 10-K by
reference.

table

below presents

The
of
December 31, 2019 regarding securities to be issued
pursuant to outstanding restricted stock units (RSUs) and
securities remaining available for issuance under our equity
compensation plans that were in effect during 2019.

information

Securities
to be Issued
Upon
Exercise of
Outstanding
Options and
Rights (a)

Weighted
Average
Exercise
Price of
Outstanding
Options (b)

Securities
Available
For Future
Issuance
Under Equity
Compensation
Plans (c)

19,323,480

N/A

60,558,073

–
19,323,480

–

–
60,558,073

Plan Category

Equity compensation plans

approved by security holders
Equity compensation plans not
approved by security holders

Total

In the table above:
‰ Securities to be Issued Upon Exercise of Outstanding
Options and Rights includes 19,323,480 shares that may
be issued pursuant to outstanding RSUs. These awards
are subject to vesting and other conditions to the extent
set forth in the respective award agreements, and the
underlying shares will be delivered net of any required tax
withholding. As of December 31, 2019, there were no
outstanding options.

‰ Shares underlying RSUs are deliverable without

the
payment of any consideration, and therefore these awards
have not been taken into account in calculating the
weighted average exercise price.

‰ Securities Available For Future Issuance Under Equity
Compensation Plans represents shares remaining to be
issued under our current stock incentive plan (SIP),
excluding shares reflected in column (a). If any shares of
common stock underlying awards granted under our
current SIP, our SIP adopted in 2015 or our SIP adopted
in 2013 are not delivered due to forfeiture, termination or
cancellation or are surrendered or withheld, those shares
will again become available to be delivered under our
current SIP. Shares available for grant are also subject to
adjustment for certain changes in corporate structure as
permitted under our current SIP.

Item 14. Principal Accounting Fees
and Services

Information regarding principal accounting fees and
services will be in the 2020 Proxy Statement and is
incorporated in this Form 10-K by reference.

PART IV
Item 15. Exhibits, Financial Statement
Schedules

(a) Documents filed as part of this Report:

1. Consolidated Financial Statements

The consolidated financial statements required to be filed in
this Form 10-K are included in Part II, Item 8 hereof.

2. Exhibits

2.1

3.1

3.2

3.3

Incorporation

Plan
by
reference to Exhibit 2.1 to the Registrant’s
Registration
Form S-1
(No. 333-74449)).

(incorporated

Statement

Restated Certificate of Incorporation of The
Goldman Sachs Group, Inc., amended as of
November 25, 2019.

Certificate of Designations of The Goldman
Sachs Group,
Inc. relating to the Series S
Preferred Stock (incorporated by reference to
Exhibit 3.1 to the Registrant’s Current Report
on Form 8-K, filed on January 28, 2020).

Amended and Restated By-Laws of The
Goldman Sachs Group, Inc., amended as of
February 18, 2016 (incorporated by reference
to Exhibit 3.2 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended
December 31, 2015).

4.1 Description of The Goldman Sachs Group,
Inc.’s
to
Section 12 of the Securities Exchange Act of
1934.

registered

Securities

pursuant

Goldman Sachs 2019 Form 10-K 205

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

4.2

4.3

Indenture, dated as of May 19, 1999, between
The Goldman Sachs Group, Inc. and The Bank of
New York, as trustee (incorporated by reference
to Exhibit 6 to the Registrant’s Registration
Statement on Form 8-A, filed on June 29, 1999).

Subordinated Debt
Indenture, dated as of
February 20, 2004, between The Goldman Sachs
Group, Inc. and The Bank of New York, as
trustee (incorporated by reference to Exhibit 4.2
to the Registrant’s Annual Report on Form 10-K
for the fiscal year ended November 28, 2003).

4.4 Warrant

dated

Indenture,

of
February 14, 2006, between The Goldman Sachs
Group, Inc. and The Bank of New York, as
trustee (incorporated by reference to Exhibit 4.34
to the Registrant’s Post-Effective Amendment
No. 3 to Form S-3, filed on March 1, 2006).

4.5

4.6

4.7

4.8

4.9

Debt

dated

Senior
of
Indenture,
December 4, 2007, among GS Finance Corp., as
issuer, The Goldman Sachs Group,
Inc., as
guarantor, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.69 to the
Registrant’s Post-Effective Amendment No. 10 to
Form S-3, filed on December 4, 2007).

Senior Debt Indenture, dated as of July 16, 2008,
between The Goldman Sachs Group, Inc. and The
Bank of New York Mellon, as trustee (incorporated
by reference to Exhibit 4.82 to the Registrant’s Post-
Effective Amendment No. 11 to Form S-3
(No. 333-130074), filed on July 17, 2008).

Fourth Supplemental
Indenture, dated as of
December 31, 2016, between The Goldman Sachs
Group, Inc. and The Bank of New York Mellon, as
trustee, with respect to the Senior Debt Indenture,
dated as of July 16, 2008 (incorporated by
reference to Exhibit 4.1 to the Registrant’s Current
Report on Form 8-K, filed on January 6, 2017).

Debt

dated

Indenture,

Senior
of
October 10, 2008, among GS Finance Corp., as
Inc., as
issuer, The Goldman Sachs Group,
guarantor, and The Bank of New York Mellon, as
trustee (incorporated by reference to Exhibit 4.70 to
the Registrant’s Registration Statement on Form S-3
(No. 333-154173), filed on October 10, 2008).

First Supplemental
Indenture, dated as of
February 20, 2015, among GS Finance Corp.,
as issuer, The Goldman Sachs Group, Inc., as
guarantor, and The Bank of New York Mellon,
as trustee, with respect
to the Senior Debt
Indenture, dated as of October 10, 2008
(incorporated by reference to Exhibit 4.7 to the
Registrant’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2014).

206 Goldman Sachs 2019 Form 10-K

4.10 Fourth Supplemental

Indenture, dated as of
August 21, 2018, among GS Finance Corp., as
issuer, The Goldman Sachs Group,
Inc., as
guarantor, and The Bank of New York Mellon
(incorporated by reference to Exhibit 4.1 to the
Registrant’s Quarterly Report on Form 10-Q
for the period ended September 30, 2018).

4.11 Ninth

Supplemental

Subordinated Debt
Indenture, dated as of May 20, 2015, between
The Goldman Sachs Group, Inc. and The Bank
of New York Mellon, as trustee, with respect to
the Subordinated Debt Indenture, dated as of
February 20, 2004 (incorporated by reference
to Exhibit 4.1 to the Registrant’s Current
Report on Form 8-K, filed on May 22, 2015).

4.12 Tenth Supplemental Subordinated Debt Indenture,
dated as of July 7, 2017, between The Goldman
Sachs Group, Inc. and The Bank of New York
Mellon, as trustee, with respect to the Subordinated
Debt Indenture, dated as of February 20, 2004
(incorporated by reference to Exhibit 4.89 to the
Registrant’s Registration Statement on Form S-3
(No. 333-219206), filed on July 10, 2017).

subsidiaries

Certain instruments defining the rights of holders
of long-term debt securities of the Registrant and
its
to
Item 601(b)(4)(iii) of Regulation S-K. The
Registrant hereby undertakes to furnish to the
SEC, upon request, copies of any such instruments.

pursuant

omitted

are

10.1

10.2

10.3

10.4

10.5

The Goldman Sachs Amended and Restated
Stock Incentive Plan (2018) (incorporated by
reference to Exhibit 10.1 to the Registrant’s
Annual Report on Form 10-K for the fiscal year
ended December 31, 2018). †

The Goldman Sachs Partner Compensation Plan
(incorporated by reference to Exhibit 10.18 to
the Registrant’s Registration Statement on
Form S-1 (No. 333-74449)). †

Partner

The Goldman Sachs Amended and Restated
Plan
Restricted
(incorporated by reference to Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q for
the period ended February 24, 2006). †

Compensation

Agreement

Employment

Form of
for
Participating Managing Directors (applicable to
executive officers) (incorporated by reference to
Exhibit 10.19 to the Registrant’s Registration
Statement on Form S-1 (No. 333-75213)). †

Form of Agreement Relating to Noncompetition
and Other Covenants (incorporated by reference
to Exhibit 10.20 to the Registrant’s Registration
Statement on Form S-1 (No. 333-75213)). †

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

10.6

10.7

10.8

10.9

and

Restated

Shareholders’
Amended
Agreement, effective as of December 31, 2019,
among The Goldman Sachs Group, Inc. and
various parties.

Instrument of Indemnification (incorporated by
reference to Exhibit 10.27 to the Registrant’s
Registration
Form S-1
(No. 333-75213)).

Statement

Form of Indemnification Agreement (incorporated
by reference to Exhibit 10.28 to the Registrant’s
Annual Report on Form 10-K for the fiscal year
ended November 26, 1999).

Form of Indemnification Agreement (incorporated
by reference to Exhibit 10.44 to the Registrant’s
Annual Report on Form 10-K for the fiscal year
ended November 26, 1999).

10.10 Form of Indemnification Agreement, dated as
of July 5, 2000 (incorporated by reference to
Exhibit 10.1 to the Registrant’s Quarterly
Report on Form 10-Q for the period ended
August 25, 2000).

10.11 Amendment No. 1, dated as of September 5, 2000,
to the Tax Indemnification Agreement, dated as of
May 7, 1999 (incorporated by reference to
Exhibit 10.3 to the Registrant’s Quarterly Report
on
ended
August 25, 2000).

Form 10-Q for

period

the

10.12 Form of Amendment, dated November 27, 2004,
to Agreement Relating to Noncompetition and
Other Covenants,
1999
(incorporated by reference to Exhibit 10.32 to the
Registrant’s Annual Report on Form 10-K for the
fiscal year ended November 26, 2004). †

dated May

10.13 The Goldman Sachs Group, Inc. Non-Qualified
Deferred
U.S.
Compensation
Participating Managing Directors (terminated
as of December 15, 2008) (incorporated by
reference to Exhibit 10.36 to the Registrant’s
Annual Report on Form 10-K for the fiscal year
ended November 30, 2007). †

Plan

for

10.14 Form of Year-End Option Award Agreement
(incorporated by reference to Exhibit 10.36 to
the Registrant’s Annual Report on Form 10-K
for the fiscal year ended November 28, 2008). †

10.15 Form of Non-Employee Director Option Award
Agreement
to
(incorporated
Exhibit 10.34 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended
December 31, 2009). †

reference

10.16 Form of Non-Employee Director RSU Award
Agreement
by
(pre-2015)
reference to Exhibit 10.21 to the Registrant’s
Annual Report on Form 10-K for the fiscal year
ended December 31, 2014). †

(incorporated

10.17 Ground Lease, dated August 23, 2005, between
Battery Park City Authority d/b/a/ Hugh L.
Carey Battery
as
Landlord, and Goldman Sachs Headquarters
LLC, as Tenant (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K, filed on August 26, 2005).

Park City Authority,

10.18 General

Guarantee

Agreement,

dated
January 30, 2006, made by The Goldman Sachs
Group, Inc. relating to certain obligations of
Goldman Sachs & Co. LLC (incorporated by
reference to Exhibit 10.45 to the Registrant’s
Annual Report on Form 10-K for the fiscal year
ended November 25, 2005).

10.19 Goldman Sachs & Co. LLC Executive Life
and
Certificate with
Insurance
Policy
Metropolitan Life
Insurance Company for
Participating Managing Directors (incorporated
by reference to Exhibit 10.1 to the Registrant’s
Quarterly Report on Form 10-Q for the period
ended August 25, 2006). †

10.20 Form of Goldman Sachs & Co. LLC Executive
Life Insurance Policy with Pacific Life &
Annuity Company for Participating Managing
Directors,
including policy specifications and
form of restriction on Policy Owner’s Rights
(incorporated by reference to Exhibit 10.2 to
on
the
Form 10-Q for
ended
August 25, 2006). †

Registrant’s Quarterly

Report

period

the

10.21 Form of

Second

Amendment,

dated
November 25, 2006, to Agreement Relating to
Noncompetition and Other Covenants, dated
May
effective
as
November 27, 2004 (incorporated by reference
to Exhibit 10.51 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended
November 24, 2006). †

amended

1999,

Goldman Sachs 2019 Form 10-K 207

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

10.22 Description of PMD Retiree Medical Program
(incorporated by reference to Exhibit 10.25 to
the Registrant’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2018). †

10.23 Letter, dated June 28, 2008,

from The
Goldman Sachs Group, Inc. to Mr. Lakshmi N.
Mittal
to
Exhibit 99.1 to the Registrant’s Current Report
on Form 8-K, filed on June 30, 2008). †

(incorporated

reference

10.24 General

Guarantee

Agreement,

dated
December 1, 2008, made by The Goldman
Sachs Group, Inc. relating to certain obligations
of Goldman Sachs Bank USA (incorporated by
reference to Exhibit 4.80 to the Registrant’s
Post-Effective Amendment No. 2 to Form S-3,
filed on March 19, 2009).

10.25 Form of One-Time RSU Award Agreement
(pre-2015)
to
(incorporated
Exhibit 10.32 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended
December 31, 2014). †

reference

10.26 Amendments

to
Equity

Certain Non-Employee
Director
Agreements
(incorporated by reference to Exhibit 10.69 to
the Registrant’s Annual Report on Form 10-K
for the fiscal year ended November 28, 2008). †

Award

vested)

10.27 Form of Year-End RSU Award Agreement (not
fully
(incorporated by
reference to Exhibit 10.36 to the Registrant’s
Annual Report on Form 10-K for the fiscal year
ended December 31, 2014). †

(pre-2015)

10.28 Form of Year-End RSU Award Agreement (fully
vested) (pre-2015) (incorporated by reference to
Exhibit 10.37 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended
December 31, 2014). †

10.29 Form of Year-End RSU Award Agreement (Base
and/or Supplemental) (pre-2015) (incorporated
by reference to Exhibit 10.38 to the Registrant’s
Annual Report on Form 10-K for the fiscal year
ended December 31, 2014). †

10.30 Form of Year-End Restricted Stock Award
Agreement
(pre-2015)
(incorporated by reference to Exhibit 10.41 to
the Registrant’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2013). †

vested)

(fully

10.31 Form of Year-End Restricted Stock Award
Agreement (Base and/or Supplemental) (pre-2015)
(incorporated by reference to Exhibit 10.41 to the
Registrant’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2014). †

208 Goldman Sachs 2019 Form 10-K

Fixed Allowance RSU Award
10.32 Form of
Agreement
by
reference to Exhibit 10.43 to the Registrant’s
Annual Report on Form 10-K for the fiscal year
ended December 31, 2014). †

(incorporated

(pre-2015)

10.33 Form of Deed of Gift

(incorporated by
reference to Exhibit 10.1 to the Registrant’s
Quarterly Report on Form 10-Q for the period
ended June 30, 2010). †

10.34 The Goldman Sachs Long-Term Performance
Incentive Plan, dated December 17, 2010
(incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K,
filed on December 23, 2010). †

10.35 Form of Performance-Based Restricted Stock
(pre-2015)
Unit
(incorporated by reference to Exhibit 10.2 to
the Registrant’s Current Report on Form 8-K,
filed on December 23, 2010). †

Agreement

Award

10.36 Form of Performance-Based Option Award
Agreement
to
(incorporated
Exhibit 10.3 to the Registrant’s Current Report
on Form 8-K, filed on December 23, 2010). †

reference

10.37 Form of Performance-Based Cash Compensation
Award Agreement (pre-2015) (incorporated by
reference to Exhibit 10.4 to the Registrant’s
Current Report on Form 8-K,
filed on
December 23, 2010). †

10.38 Amended and Restated General Guarantee
Agreement, dated November 21, 2011, made by
The Goldman Sachs Group, Inc. relating to
certain obligations of Goldman Sachs Bank
USA (incorporated by reference to Exhibit 4.1
to
on
the Registrant’s Current Report
Form 8-K, filed on November 21, 2011).

10.39 Form of Aircraft Time Sharing Agreement
(incorporated by reference to Exhibit 10.61 to
the Registrant’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2011). †

10.40 Description of Compensation Arrangements
with Executive Officer
by
reference to Exhibit 10.1 to the Registrant’s
Quarterly Report on Form 10-Q for the period
ended June 30, 2012). †

(incorporated

10.41 The Goldman Sachs Group,

effective

Inc. Clawback
Policy,
January 1, 2015
(incorporated by reference to Exhibit 10.53 to
the Registrant’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2014).

as of

10.42 Form of Non-Employee Director RSU Award

Agreement. †

T H E G O L D M A N S A C H S G R O U P ,

I N C . A N D S U B S I D I A R I E S

10.43 Form of One-Time RSU Award Agreement. †

10.44 Form of Year-End RSU Award Agreement (not

fully vested). †

10.45 Form of Year-End RSU Award Agreement (fully

vested). †

10.46 Form of Year-End RSU Award Agreement (Base
(not fully vested) and/or Supplemental). †

10.47 Form of Year-End Short-Term RSU Award

Agreement. †

10.48 Form of Year-End Restricted Stock Award

Agreement (not fully vested). †

10.49 Form of Year-End Restricted Stock Award
Agreement
(incorporated by
(fully vested)
reference to Exhibit 10.53 to the Registrant’s
Annual Report on Form 10-K for the fiscal year
ended December 31, 2017). †

10.50 Form of Year-End Short-Term Restricted Stock
Award Agreement (incorporated by reference to
Exhibit 10.57 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended
December 31, 2015). †

10.51 Form of

Fixed Allowance RSU Award

Agreement. †

10.52 Form of Fixed Allowance Restricted Stock

Award Agreement. †

10.53 Form of Fixed Allowance Deferred Cash Award
Agreement
to
(incorporated
Exhibit 10.59 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended
December 31, 2015). †

reference

10.54 Form of Performance-Based Restricted Stock

Unit Award Agreement. †

10.55 Form of Performance-Based Restricted Stock

Unit Award Agreement (not fully vested). †

10.56 Form of Performance-Based Cash Compensation
Award Agreement (incorporated by reference to
Exhibit 10.61 to the Registrant’s Annual Report
on Form 10-K for
ended
December 31, 2015). †

fiscal year

the

10.57 Form of Signature Card for Equity Awards. †

10.58 Amended and Restated General Guarantee
Agreement, dated September 28, 2018, made by
The Goldman Sachs Group, Inc. relating to
certain obligations of Goldman Sachs Bank
USA (incorporated by reference to Exhibit 4.1
to
on
the Registrant’s Current Report
Form 8-K, filed on September 28, 2018).

10.59 Amended and Restated General Guarantee
Agreement, dated September 28, 2018, made by
The Goldman Sachs Group, Inc. relating to
certain obligations of Goldman Sachs & Co.
LLC (incorporated by reference to Exhibit 99.1
to
on
the Registrant’s Current Report
Form 8-K, filed on September 28, 2018).

Limited

Partners
(Nominee) Limited,

10.60 Lease, dated August 17, 2018, between
and
Street
Farringdon
Farringdon Street
as
Landlord, and Goldman Sachs International, as
Tenant
to
Exhibit 10.3 to the Registrant’s Quarterly
Report on Form 10-Q for the period ended
September 30, 2018).

(incorporated

reference

21.1

23.1

List of significant subsidiaries of The Goldman
Sachs Group, Inc.

Consent of
Accounting Firm.

Independent Registered Public

31.1

Rule 13a-14(a) Certifications.

32.1

99.1

101

Section 1350 Certifications (This information is
furnished and not filed for purposes of Sections 11
and 12 of the Securities Act of 1933 and Section 18
of the Securities Exchange Act of 1934).

Report
Accounting Firm on Selected Financial Data.

Independent Registered

Public

the

31,

years

Consolidated

Pursuant to Rules 405 and 406 of Regulation S-T,
the following information is formatted in iXBRL
(Inline eXtensible Business Reporting Language):
(i) the Consolidated Statements of Earnings for
the
2019,
ended December
December 31, 2018 and December 31, 2017,
Statements
(ii)
of
the years ended
Comprehensive Income for
December 31, 2019, December 31, 2018 and
December 31, 2017,
the Consolidated
Balance Sheets as of December 31, 2019 and
the Consolidated
December 31, 2018,
Statements of Changes in Shareholders’ Equity for
the
2019,
ended December
December 31, 2018 and December 31, 2017,
(v) the Consolidated Statements of Cash Flows for
the
2019,
ended December
December 31, 2018 and December 31, 2017,
(vi)
the notes to the Consolidated Financial
Statements and (vii) the cover page.

years

(iii)

(iv)

31,

104

Cover Page Interactive Data File (formatted in
iXBRL in Exhibit 101).

† This exhibit is a management contract or a compensatory plan or

arrangement.

Goldman Sachs 2019 Form 10-K 209

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

THE GOLDMAN SACHS GROUP, INC.

By:
Name:
Title:
Date:

/s/

Stephen M. Scherr
Stephen M. Scherr
Chief Financial Officer
February 20, 2020

Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and
on the dates indicated.

By:
Name:
Capacity:

Date:

By:
Name:
Capacity:
Date:

/s/ David M. Solomon
David M. Solomon
Director, Chairman and Chief Executive
Officer (Principal Executive Officer)
February 20, 2020

/s/ M. Michele Burns
M. Michele Burns
Director
February 20, 2020

/s/ Drew G. Faust
Drew G. Faust
Director
February 20, 2020

/s/ Mark A. Flaherty
Mark A. Flaherty
Director
February 20, 2020

/s/ Ellen J. Kullman
Ellen J. Kullman
Director
February 20, 2020

By:
Name:
Capacity:
Date:

By:
Name:
Capacity:

Date:

By:
Name:
Capacity:

Date:

/s/ Lakshmi N. Mittal
Lakshmi N. Mittal
Director
February 20, 2020

/s/ Adebayo O. Ogunlesi
Adebayo O. Ogunlesi
Director
February 20, 2020

/s/ Peter Oppenheimer
Peter Oppenheimer
Director
February 20, 2020

/s/

Jan E. Tighe
Jan E. Tighe
Director
February 20, 2020

/s/ David A. Viniar
David A. Viniar
Director
February 20, 2020

/s/ Mark O. Winkelman
Mark O. Winkelman
Director
February 20, 2020

/s/

Stephen M. Scherr
Stephen M. Scherr
Chief Financial Officer
(Principal Financial Officer)
February 20, 2020

Sheara Fredman
Sheara Fredman
Chief Accounting Officer
(Principal Accounting Officer)
February 20, 2020

210 Goldman Sachs 2019 Form 10-K

Shareholder Information

Executive Offices

The Goldman Sachs Group, Inc.
200 West Street
New York, New York 10282
1-212-902-1000
www.goldmansachs.com

Common Stock

The common stock of The Goldman Sachs Group, Inc. is
listed on the New York Stock Exchange and trades under
the ticker symbol “GS.”

Shareholder Inquiries

Information about the firm, including all quarterly earnings
releases and financial filings with the U.S. Securities and
Exchange Commission, can be accessed via our Web site
at www.goldmansachs.com.

Shareholder inquiries can also be directed to Investor
Relations via email at gs-investor-relations@gs.com
or by calling 1-212-902-0300.

2019 Annual Report on Form 10-K

Copies of the firm’s 2019 Annual Report on
Form 10-K as filed with the U.S. Securities and Exchange
Commission can be accessed via our Web site at
www.goldmansachs.com/investor-relations.

Copies can also be obtained by
contacting Investor Relations via email at
gs-investor-relations@gs.com
or by calling 1-212-902-0300.

Transfer Agent and Registrar for Common Stock

Questions from registered shareholders of The Goldman
Sachs Group, Inc. regarding lost or stolen stock certificates,
dividends, changes of address and other issues related
to registered share ownership should be addressed
(by regular mail or phone) to:

Computershare
P.O. Box 505000
Louisville, KY 40233-5000
U.S. and Canada: 1-800-419-2595
International: 1-201-680-6541
www.computershare.com

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP
300 Madison Avenue
New York, New York 10017

The papers used in the printing of this Annual Report are certified by
the Forest Stewardship Council®®,, which promotes environmentally
appropriate, socially beneficial and economically viable management
of the world’s forests. These papers contain a mix of pulp that is derived
from FSC®® certified well-managed forests; post-consumer recycled paper
fibers and other controlled sources. Sandy Alexander Inc FSC®® “Chain
of Custody” certification is BVQI-C020268.

4350-19-102

goldmansachs.com