Goldman Sachs Annual Report 2020

FY2020 Annual Report · Goldman Sachs

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The Goldman Sachs Group, Inc.

Annual Report

2020

(from left to right) Stephen M. Scherr, Chief Financial Officer; David M. Solomon, Chairman and Chief Executive Officer;
John E. Waldron, President and Chief Operating Officer

Fellow Shareholders:

Last year was extraordinary in so many ways. Throughout my more-than-35-year
career, there have always been disruptions, but this year saw a healthcare crisis that had
a personal impact on millions. The contrast between the hardship imposed on all those
affected by COVID-19 and the very high level of market activity created a stark and
complex environment for all of us at Goldman Sachs to navigate.

The pandemic put enormous strain on everyone, from families caring for relatives they couldn’t visit in person to
small-business owners forced to cut back their livelihoods. And though I was pleased to see central banks and
governments take swift action to support their economies, no amount of monetary or fiscal stimulus could make
up for the millions of lives lost or upended by the virus.

As I write this letter, we’re still working to get past the pandemic, but we feel encouraged by what we see. Several
vaccines have been approved for use, and though the rollout was slow at first, we continue to make headway.
Public-health officials are closely monitoring the spread of more contagious variants. But the global economy has
recovered considerably since its decline last spring, and now life after the pandemic is coming into view.

Many times in our 152-year history, we’ve adapted, with remarkable speed, to the new and unexpected, but I was truly
amazed by our people in 2020. Time and again, they showed the creativity and resilience that make Goldman Sachs
unique. As a result, I’m proud to report that, even during a tumultuous and at times deeply trying year, our firm
delivered strong financial performance, while also supporting the larger COVID-19 relief effort for the communities
in which we live and work around the world.

For all of this year’s upheaval, we distinguished ourselves by staying the course. We never lost sight of our purpose:
to advance sustainable economic growth and financial opportunity. And when our clients turned to us in need,
we demonstrated the core values that have always guided us: partnership, client service, integrity, and excellence.

I was also determined to resolve the matter surrounding 1Malaysia Development Berhad (1MDB). Although I am
glad to have put it behind us, I see many lessons for the future. Notably, the behavior of a few can do harm to our
franchise, and we are responsible for each other’s actions. And so our organization will continue to make sure all
of us operate at the highest level of integrity.

Goldman Sachs 2020 Annual Report

Letter to Shareholders

For our people, overcoming the immense challenges of
2020 was all-consuming, and so I owe them a great deal
of gratitude. My thanks go out to our leadership, including
our president and chief operating officer, John Waldron;
our chief financial officer, Stephen Scherr; our entire
Management Committee; and, most of all, to the people
at every level who make Goldman Sachs such an
extraordinary firm.

Putting People First

Speaking of our people, they truly went above and beyond
in 2020. The numbers alone don’t tell the full story
of what they accomplished, because they mask the deep
uncertainty our people faced.

Investor Day
On January 29, 2020, we held our first-ever Investor Day,
where we laid out to the public our strategy as well as
our medium- and long-term performance goals. It was
well received, but alongside the positive reviews, we
began seeing reports of a mysterious new virus that was
spreading rapidly around the globe. I remember looking
at our financial results one Friday night at the end of
February 2020 and thinking that we were on track to have
a very strong quarter. As you well know, the first quarter

of 2020 was, in fact, historic. It just didn’t look anything
like what I had expected halfway through.

Our preparation for Investor Day served us well. In
January, we stressed repeatedly that we had assumed
a normal operating environment in setting our targets.
And yet we made good progress on nearly all of our
goals during 2020. As I look back, it’s clear that because
we had a strategy in place well before the pandemic hit,
it gave our efforts a focus during the turmoil that ensued.
Our performance this year proved the old adage that
plans are worthless, but planning is everything.

Our People, Our Clients, and Our Communities
That was just one of the lessons I learned in 2020, or
perhaps I should say “relearned.” The distinction is
important because, to me, a lot of what I saw in 2020
wasn’t some bold departure from all that had come
before, so much as an acceleration of trends already
underway. For instance, where in previous years more
and more employers had given their employees the
option to work remotely, in 2020 far more of them did.

Likewise, when people ask me how we did it, how we showed
such adaptability in the early months, setting the stage
for the performance that followed, I find myself citing an
old principle that, though it may seem trite, I know to be

P 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 more than 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

Goldman Sachs 2020 Annual Report

true: We put people first. From the moment we activated
our business-continuity plan, we made sure to give our
people the tools and resources they needed to take care
of themselves, their families, our clients during the
market volatility, and our communities as they responded
to COVID-19.

First, we took care of our people. Within a few weeks,
98 percent of our nearly 40,000 employees were working
remotely. To help them cope with the demands of working
from home while also homeschooling their children and
taking care of sick loved ones, we gave 10 days of family
leave and began offering telemedicine free of charge.
And to give them a much-needed mental break every now
and then, our Wellness teams organized dozens of Zoom
classes throughout the year that our people joined by
the hundreds: fitness classes, yoga classes, even virtual
story time for their families.

And while our leadership responded immediately, what was
inspiring was how our people looked out for each other.
I heard so many stories of our people pitching in, working
together, and staying in touch through virtual tea sessions,
cooking classes, and even singalongs. And while we
adapted and formed new traditions, we also made sure to
pass on our culture to the next generation when in July,
we welcomed more than 2,700 summer analysts and 120
associates from more than 480 universities to Goldman
Sachs, this time for a five-week remote experience.

Second, we were there for our clients, no matter what
happened. That was perhaps most dramatically evident
in March when an earthquake hit Salt Lake City and
our colleagues in Bengaluru worked around the clock to
process any incomplete transactions. Just because we
couldn’t meet face to face didn’t mean we’d stop working
with our clients one-on-one — even in an era of Zoom
fatigue. And I know how much our clients appreciated it.
I remember in the summer exchanging messages with
a client just before a meeting to discuss potential capital-
raising options; they told me they were looking forward
to it because they knew they would get candid and
thoughtful advice.

Being there for our clients also meant giving them
the help they needed, whether it was the liquidity our
Global Markets teams provided or the customer-
assistance program we created for our Marcus and Apple
Card consumers. We allowed consumers to skip several

months’ payments with no interest. And we partnered
with clients in New York to offer interest-free loans of
up to $75,000 to small businesses in the area to help them
get through the tough early months of the pandemic.

Third, we helped take care of our communities, starting
with our first responders and healthcare workers. We
donated over 2.5 million surgical masks and 700,000
N95 masks from our own supplies, and we developed a
dashboard for the United Kingdom and its National Health
Service to monitor the spread of COVID-19. We also
partnered with the Northwell Hospital System and local
restaurants to set up hydration stations and provide food
for frontline healthcare workers in the U.S. I had to see it
for myself, so in May I went to Plainview, Long Island,
and spent time making sandwiches at Coliseum Caterers
before delivering them to Plainview Hospital, where I was
deeply moved to see our healthcare workers’ steadfast
devotion to their patients.

Perhaps our most vital project was helping our hardest-
hit communities. We committed $775 million to providing
loans through the Paycheck Protection Program (PPP),
as we sought to push money through Community
Development Financial Institutions and into the hands
of small businesses — particularly in communities of color.
Nearly half of the PPP loans funded with Goldman Sachs
capital in round 1 went to communities of color.

Among our leadership team, we felt putting people
first meant that, especially in those early months when
information was scarce, we needed to place an even
greater emphasis on communication. Every month, we
held a virtual town hall, where we updated our people on
what we were doing to address the crisis, and I sent to our
team around the globe voice notes that I recorded from
my desk phone on numerous Sunday nights, so our people
could hear from me in my own words. I also realized that
sometimes the strongest message you can send is just
by showing up, so I continued to go in to the office at
200 West Street in New York, even during the grim months
of March and April. I felt it was good for our people to
know our leadership was in control and ensuring that
we would navigate the challenges of the pandemic.

Now, our focus is on making sure all of our people can safely
return to the office. In giving our people the flexibility to
work remotely, we did what we had to do.

Goldman Sachs 2020 Annual Report

Letter to Shareholders

But I am keenly aware of the impact that a prolonged
absence from the office is having on our people,
our culture, and our ability to move forward as a firm.

The culture of our organization is deeply rooted in
apprenticeship, collaboration, and innovation, all of
which occur far more naturally when we work together,
in person, on a regular basis. We owe it to the people
who have just joined the firm to ensure that, as we
continue on this journey together, we will find ways for
them to develop and grow, whether it’s through the
opportunity to network, find a mentor, or simply benefit
from being around so many other smart, creative people.
It’s the best way to learn our culture and the business,
especially if you’re an intern or a recent hire. Now, making
sure all of our people can return to the office safely will
be a priority of mine in the months ahead.

So when you widen the lens a bit, it becomes even more
clear just how much we accomplished in 2020, and also
how much further we have to go. This is a marathon, not a
sprint, and though progress is never a straight line, this
year more than any other taught us that, when your strategy
is clear — even in a crisis — you’ve got to stay the course.

2020 Financial Performance

In 2020, economic activity dropped suddenly in the first
half of the year before largely recovering in the second,
causing turmoil in financial markets, especially in the spring.

per share (EPS) was $24.74, the second highest ever.
Return on average common shareholders’ equity (ROE)
was 11.1 percent, and return on average tangible common
shareholders’ equity was 11.8 percent. During 2020,
the firm recorded net provisions for litigation and
regulatory proceedings, driven by the 1MDB matter,
of $3.42 billion, which reduced diluted EPS by $9.51
and ROE by 3.9 percentage points.

Amid significant market volatility, not only did the industry
wallet grow, but we gained market share across our capital
markets businesses. In Investment Banking, we generated
net revenues of $9.4 billion, 24 percent higher than in
2019, as we held the #1 ranking in both announced and
completed M&A and in equity and equity-related offerings.1
We also ranked in the top 4 for wallet share in debt
underwriting.2 In Global Markets, we earned net revenues
of $21.2 billion, our strongest in a decade, and ranked #2
both in Fixed Income, Currency and Commodities (FICC) and
in Equities.3 Asset Management generated net revenues of
$8.0 billion as we saw record management and other fees.
And Consumer & Wealth Management generated record
net revenues of $6.0 billion, as Wealth management
produced record net revenues and Consumer banking net
revenues were significantly higher than in 2019. The firm
ended the year with record assets under supervision and, in
Consumer & Wealth Management, total client assets4
exceeded $1 trillion.

Through it all, we stood by our clients. We provided
liquidity, credit, and relief to corporates, institutions,
and consumers as much as possible during this most
challenging time. Net revenues grew by 22 percent to
$44.6 billion, our highest in 11 years. Diluted earnings

Staying the Course

We learned a lot about humility in 2020 because so much
of what happened was out of our control, but the progress
we made on our performance goals is a testament to the
strength of our people and our strategy. As described on

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

>13% / >14%

Efficiency Ratio

~60%

CET1 Ratio

13-13.5%

Goldman Sachs 2020 Annual Report

Investor Day, we continue to build a firm capable of
generating mid-teen or higher returns over the long term.
And in the medium term — that is, by 2022 — we are
confident that we will reach our targets: In 2020, our
ROE was 11.1 percent, notwithstanding a nearly four
percentage-point impact of litigation expense, compared
with our 13 percent medium-term target. Our efficiency
ratio was 65 percent, above our target of around 60
percent, but that included a nearly 800 basis-point impact
from litigation expense. And our standardized Common
Equity Tier 1 ratio stands at 14.7 percent, versus
our targeted range of 13 percent to 13.5 percent.

So while Investor Day seems like a long time ago, the
pillars of our long-term strategy remain the same,
and I’m proud to report we are seeing early success
in each category:

• First, to grow and strengthen our existing franchise

and capture higher wallet share across a wider range
of clients;

• Second, to diversify our products and services in order

to build a more durable source of earnings;

• Third, to operate more efficiently so that we can drive
higher margins and returns across the organization.

Grow and Strengthen Our Existing Businesses

We’ve helped steer clients through stormy market
conditions for decades, and though the economic waters
were especially choppy in 2020, by putting our clients
first, all four of our core businesses not only weathered
the downturn, but saw real growth.

Investment Banking
We remained the advisor of choice and continued to
grow our businesses, as our announced M&A deal count
was up, along with our equity underwriting wallet share.
We also continued to seek out opportunities for growth,
especially among companies we haven’t covered as much
in the past. Thanks to our footprint-expansion efforts,
we added approximately 300 clients and generated more
than $800 million in revenue in 2020. With our year-end
investment-banking-transaction backlog near record
levels — and significantly higher than it was at the end
of 2019 — we feel our franchise has momentum going

“...when people ask me how we
did it, how we showed such
adaptability in the early months,
setting the stage for the
performance that followed,
I find myself citing an old
principle that, though it may
seem trite, I know to be true:
We put people first.”

David Solomon

into 2021, as M&A, among other strategic activity,
continue to pick up steam from the slump they hit in
the middle of 2020.

Global Markets
When our new management team took their seats,
there were calls to downsize our Global Markets business,
but we believe its performance in 2020 shows it was wise
to stay the course. Our teams worked diligently to serve
our clients, providing liquidity across asset classes,
intermediating risk, and engaging in structured solutions
while also supporting significant volumes across expanding
digital platforms. We improved returns by pursuing
expense and resource optimization and made progress
toward the growth targets we set last year. We are now
in the top 3 across 64 of the top 100 institutional clients,
up from 51 a year ago.5 We earned record financing
revenues in FICC and also ended the year with record
balances in our prime services business.

Asset Management
Our reputation as a leading global asset manager served
us well during this tumultuous year. Clients turned to us
for advice, and we grew firmwide assets under supervision
by $286 billion during the year to an all-time high of
$2.15 trillion, earning record management and other fees.
Our business continues to provide offerings across the
spectrum from liquidity to alternatives, and we continue

Goldman Sachs 2020 Annual Report

Letter to Shareholders

to distinguish ourselves by offering holistic advice,
investment solutions, and portfolio implementation.

equity investments in 2020 with a related $2 billion
in expected reduction of required capital.

Consumer & Wealth Management
We also saw growth in our Consumer & Wealth
Management business, as total client assets rose
by approximately $180 billion to a record of more than
$1 trillion. Even in the midst of a volatile market,
our clients stayed largely invested, and net revenues in
Wealth Management grew by 10 percent year-over-year
to a record $4.8 billion. We’ve once again seen just how
much clients trust our franchise, which became even more
important as COVID-19 limited face-to-face interaction.

Diversify Our Products and Services

Despite the turmoil in financial markets, we continued to
serve our clients well, and we made progress in our effort
to build more durable revenues, increase capital efficiency,
and enhance our funding mix by forging ahead on our
four new business initiatives.

Transaction Banking
After we formally launched our transaction banking
platform in June, we saw tremendous growth. We ended
2020 with roughly 225 corporate clients and nearly
$30 billion in deposits — more than half of our five-year
target of $50 billion. Now, we will continue to expand
services to transform these deposits to be operational.
The most promising are the partnerships we’ve formed
with other companies, such as Stripe, which embed our
transaction banking, payment, and deposit solutions
directly into their own platforms, making them available
to their millions of customers.

Third-Party Alternatives
In alternatives, we have raised approximately $40 billion
in gross commitments across asset classes, including
private equity, private credit, and real estate. This is good
progress toward our goal of $150 billion in gross
fundraising over five years. In addition, we are seeing our
list of clients grow constantly. Many pension funds
and international institutions participating in recent fund
offerings are new investing clients of the firm. And to
optimize capital consumption within Asset Management,
we sold or announced the sale of over $4 billion of

High-Net-Worth Wealth Management
Even while we slowed down our hiring efforts because
of the pandemic, we added more than 100 client-facing
professionals and continued to expand our high-net-worth
platform through our Personal Financial Management
business, formerly known as United Capital, and Ayco.
Ayco continues to earn praise for its corporate-employee
financial-planning services and gained 33 new corporate
clients this year. In a demonstration of the power of
our One Goldman Sachs approach, synergies across and
connectivity with these channels resulted in over
4,000 internal referrals, representing an opportunity to
gather over $7 billion in assets under supervision.6
Today, we have integrated offerings for corporates
from the executive suite on down.

Digital Consumer Banking
We saw strong growth in our digital consumer bank, as
consumer deposits rose by $37 billion to $97 billion in
total, and in April we reached our one-millionth deposit
customer in Marcus. Not long after, I picked up the phone
and called this customer — and was delighted to hear how
satisfied he was with our service. We saw early success
with our online savings, lending, and credit card offerings,
and in 2020, we launched four partnerships with Amazon,
Walmart, JetBlue, and AARP. We also recently announced
our second co-branded credit card with General Motors,
another sign of our ability to be the banking partner
of choice for leading corporations across a variety of
industries. In 2021, with the benefit of a strong team,
we plan to launch in the U.S. new digital checking accounts
and have already launched our new Marcus Invest
platform, which brings the investing expertise of Goldman
Sachs directly to mass affluent customers. We plan
to expand the platform to the U.K. later in the year.

Operate More Efficiently

On Investor Day, we set a target of $1.3 billion of annual
run-rate expense efficiencies over the medium term, and
we achieved approximately half of that goal in 2020.
With the money saved, we partially offset the investments
made in our business and our people in 2020.

Goldman Sachs 2020 Annual Report

Our experience over the past year has given us even
greater confidence in several of the key elements of
our plan. In particular, we are already seeing important
benefits from our investments in automation and
consolidation of platforms, including increased straight-
through processing rates and reduced cost per trade.
In addition, we continue to generate efficiencies from
structural adjustments to our employee base through
our front-to-back realignment, location strategy, and the
reshaping of our pyramid structure.

The transition to remote work has also increased our focus
on our location strategy. Last January, we expected that
40 percent of our employees would ultimately work from
one of our strategic locations, and we will continue to
evaluate the potential for that number to grow over time.
We will also look to expand into new strategic locations
around the globe, as well as consolidate our footprint,
where appropriate.

Sustainable Finance

The uncertainty and dislocation of the healthcare crisis
amplified how important it is that we invest in the fabric
of our society, make it more sustainable, and advance
inclusive growth. While some feared the crisis would
soften sustainability ambitions or slow investment, in
fact investors and companies set bold new ambitions
and redoubled their efforts.

Climate Transition and Inclusive Growth
In December 2019, we announced our commitment of
$750 billion over 10 years to financing, investing, and
advisory activity across two core pillars of sustainable
finance: climate transition and inclusive growth.

A little more than a year later, we have made good progress.
We have fully integrated our approach throughout our
businesses. For example, we have launched partner-led
sustainability councils within each of our divisions. We
contributed over $150 billion in sustainable-finance
activity over the course of 2020, including over $90 billion
toward climate transition. And to show our clients we
believe in these solutions just as much as they do, we
issued our first-ever sustainability bond in February 2021.

Still, the challenge of climate change is massive; it
cannot be addressed by one company alone. That is why
we have long advocated for the United States to rejoin

S 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 :
O U R P R O G R E S S

2030 Target:
$750B

$750B

commitment in financing,
investing, and advisory
activity across two core
pillars of sustainable
finance: climate transition
and inclusive growth

2020 Activity:

$150B+

the Paris Agreement and are committed to delivering on
its ambitious goals, including by aligning our financing
activities with a net-zero-by-2050 pathway.

And while long-term aspirations are important, business
leaders must not lose sight of what we can do in the here
and now to accelerate climate transition. For our part,
in addition to driving capital to climate solutions and
accelerating the climate transition of our clients, we’re
advancing on three separate fronts.

First, we’re working to develop more comprehensive
climate data and to promote more thorough disclosure.
We have joined the OS-Climate initiative as its founding
U.S. bank member to develop an open-source data
commons and net-zero alignment tools that can be
used across industries.

Second, on top of the long-term goals we’ve set, we’re
developing near-term goals to further speed up progress.
We’ve joined the U.N. Principles for Responsible Banking
to make sure our strategy is in line with the Paris
Agreement goals.

And third, we continue to weave climate-risk
considerations into how we do our business. Later this
year, we will issue our second annual Taskforce on
Climate-related Financial Disclosure (TCFD) report, in

Goldman Sachs 2020 Annual Report

Letter to Shareholders

which we will lay out in detail how we’re taking climate-
risk considerations into account both in our business
practices and our business selection.

I’m proud of the firm’s leadership in this area, and we
will continue to deliver integrated sustainable solutions
to help our clients navigate the transition.

Diversity and Inclusion
Just as vital to our business is advancing diversity and
inclusion, not only at our firm, but also among our clients
and in the world at large. In a demonstration of how
essential we believe this effort to be both to our strategy
and to our financial performance, we continued to make
progress on our aspirational goals in 2020.

First, we attracted more diverse talent to Goldman Sachs
than ever before. In our 2020 campus analyst class in
the Americas, we achieved a historic first: 55 percent
were women. Black talent made up 11 percent of the class,
Hispanic/Latinx talent made up 17 percent, and Asian
talent made up 31 percent.

But it’s not enough to recruit talent; we also need to
make sure they can realize their potential, so we’ve set
additional goals to hold ourselves accountable. By 2025,
we aim for 7 percent of our vice presidents in both the
Americas and the U.K. to be Black, 9 percent of our vice

O U R P R O G R E S S W I T H C A M P U S
A N A LY S T R E C R U I T I N G

2020 Americas Campus Analyst Class

White
Asian
Hispanic/Latinx
Black
Other

Global Campus
Analyst Class — Women

2019
2020

Figures as of December 31, 2020

37%
31%
17%
11%
4%

49%
52%

Goldman Sachs 2020 Annual Report

presidents in the Americas to be Hispanic/Latinx, and
40 percent of our vice presidents across the world to be
women. In addition, we were pleased to announce that
our most recent partner and managing director classes
were the most diverse in our firm’s history.

Second, we embraced our responsibility as a leader in
our industry to promote change. In July 2020, we began
a new policy to only underwrite initial public offerings for
companies domiciled in Western Europe and the U.S. that
have at least one diverse board member. The feedback
we’ve received from clients and investors has been
overwhelmingly positive, and in July 2021, we will raise
that figure to two.

Third, we added our voices to calls for racial equity. In
the wake of senseless acts of racism against Black people,
I issued a statement reiterating that discrimination has
no place at Goldman Sachs. We also developed training
to cultivate allies for racial equity. I, along with every
member of our Management Committee, have experienced
the ongoing benefit of one-on-one reverse mentoring
from our Black leaders. And to do our part in the
wider community, we created the $10 million Fund for
Racial Equity to support the work of leading organizations
fighting racial injustice and structural inequity.

Advancing diversity and inclusion is a priority of mine,
and all of our people are committed to making even
further progress in the year ahead.

One Million Black Women
Building on our commitment to advance sustainable and
inclusive economic growth, as well as our 20-year history
of investing significant capital in Black communities,
we were excited to launch in March 2021 our newest
initiative, One Million Black Women. We will make a unique
contribution to advancing racial equity by investing
$10 billion through the lens of Black women and
narrowing opportunity gaps for 1 million Black women.
Our investments will focus on increasing opportunity
at key moments in Black women’s lives, whether it’s by
expanding access to quality healthcare, modernizing
daycare and primary school facilities in Black communities,
or providing access to capital to grow a business,
among other things.

This effort can’t succeed without advice and counsel
from the broadest range of Black voices possible, so we’ve

L I V I N G O U R P U R P O S E : C O M M U N I T Y I M PA C T A N D E N G A G E M E N T

Committed $775 million
to provide loans

Created the
Fund for Racial Equity

Launched 10,000 Small
Businesses Voices

through the Paycheck Protection
Program to help our
hardest-hit communities

with $10 million to help
fight racial injustice
and structural inequity

to help alumni of 10,000 Small Businesses
advocate for policy changes to help their
businesses, employees, and communities

created a new advisory council of prominent Black leaders
from a wide range of fields. There has never been an
investment of this size focused on Black women, and we
are proud to bring people together in this historic effort.

Goldman Sachs 10,000 Small Businesses
As part of our investment in communities, we are also
helping the entrepreneurs who create the long-term
economic growth we need. Our signature entrepreneurship
initiative, Goldman Sachs 10,000 Small Businesses,
reached a milestone in 2020, surpassing our goal of
serving 10,000 business owners through our education
program. Over the past 10 years, our graduates have
taken the knowledge they’ve acquired from our program
and applied it to their businesses, creating jobs and
opportunity in the communities where they live and work.
To redouble our support for small businesses, we
announced an additional $250 million commitment in
2020 to serve an additional 10,000 entrepreneurs.

We have also been helping small-business owners drive
change through advocacy. In 2020, we launched 10,000
Small Businesses Voices, a new initiative that helps alumni
of 10,000 Small Businesses advocate for policy changes
that will help their businesses, their employees, and their
communities. We provide the 10,000 Small Businesses
Voices community with the tools, resources, and training
needed to make their voices heard and have a direct
impact on critical issues.

The Path Ahead

After a difficult year, we are cautiously optimistic about
2021. Much depends on the effort to slow the spread of
the virus, how quickly vaccines are distributed, whether
monetary and fiscal stimulus is maintained, and whether
geopolitical risks intensify. But Goldman Sachs will
continue to help an ever-widening range of clients and
develop more durable revenue sources.

I am incredibly proud of the progress we made in 2020,
and we never would have done it without the extraordinary
efforts of our people. I am humbled by the commitment
I see across our firm every day. This year had its fair share
of challenges, but I am optimistic about the potential
for Goldman Sachs in the coming years. I believe in our
strategic plan, our leadership team, our culture, and in
the raw talent of our people. Together, they will all help
us achieve higher and more sustainable returns for
our shareholders.

David M. Solomon
Chairman and Chief Executive Officer

Goldman Sachs 2020 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 expense savings. You should read the
cautionary notes on forward-looking statements in our
Form 10-K for the period ended December 31, 2020.

10 Goldman Sachs 2020 Annual Report

Endnotes
1 Source: Dealogic – January 1, 2020, through December 31, 2020.
2 Measured by reported revenues, per peer filings as of December 31, 2020. Peers include JPM, BAC, C, MS, CS, DB, and BARC.
3 Source: McKinsey institutional client analytics for 3Q20 YTD. Analysis excluded captive wallets.
4 Total client assets includes assets under supervision, brokerage assets, and consumer deposits.
5 Sources: Client Ranking/Scorecard/Feedback and/or McKinsey revenue ranking (data as of 1H20 or 3Q20, as applicable).
6 Represents bilateral referrals between Private Wealth Management and Personal Financial Management and eligible

Corporate employees referred to Personal Financial Management.

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, 2020

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

NYSE
Common stock, par value $.01 per share
GS PrA NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate Non-Cumulative Preferred Stock, Series A
GS PrC NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate Non-Cumulative Preferred Stock, Series C
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate Non-Cumulative Preferred Stock, Series D
GS PrD NYSE
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
GS/43PF NYSE
Floating Rate Normal Automatic Preferred Enhanced Capital Securities of Goldman Sachs Capital III
GS/21F NYSE
Medium-Term Notes, Series E, Callable Fixed Rate Notes due 2021 of GS Finance Corp.
FRLG NYSE Arca
Medium-Term Notes, Series E, Index-Linked Notes due 2028 of GS Finance Corp.

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. ‘ Yes È 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. È

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, 2020, the aggregate market value of the common stock of the registrant held by non-affiliates of the registrant was approximately $67.6 billion.

As of February 5, 2021, there were 345,794,361 shares of the registrant’s common stock outstanding.

Documents incorporated by reference: Portions of The Goldman Sachs Group, Inc.’s Proxy Statement for its 2021 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 2 0

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 and Other Matters

Off-Balance Sheet Arrangements and Contractual Obligations 83

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

100

109

111

Quantitative and Qualitative Disclosures About Market Risk 112

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

Goldman Sachs 2020 Form 10-K

Page No.

Supplemental Financial Information

Common Stock Performance

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

214

219

Directors, Executive Officers and Corporate Governance

219

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 Accountant Fees and Services

PART IV

Item 15

Exhibit and Financial Statement Schedules

SIGNATURES

219

220

226

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

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

112

113

116

117

Consolidated Statements of Changes in Shareholders’ Equity 118

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

119

120

121

126

131

132

134

144

149

159

163

167

170

171

174

175

177

180

184

187

195

196

199

201

202

210

212

Goldman Sachs 2020 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

includes

financial

Goldman Sachs is a leading global financial institution that
delivers a broad range of
services across
investment banking, securities,
investment management
and consumer banking to a large and diversified client base
that
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.

corporations,

financial

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, 2020. All references to 2020, 2019 and 2018
refer to our years ended, or the dates, as the context
requires, December 31, 2020, December 31, 2019 and
December 31, 2018, 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.

Our Business Segments

revenues

in four business segments:
We report our activities
Investment Banking, Global Markets, Asset Management,
and Consumer & Wealth Management.
Investment
Banking generates
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 from management and
other fees, incentive fees, equity investments, and lending
and debt investments. 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 and debt investments

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:

Goldman Sachs 2020 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

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
and
worldwide
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.

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

corporate

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).

the capital markets.

Goldman Sachs 2020 Form 10-K

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 saving surplus cash.

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
receiving orders and distributing
with our
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
trading. Marquee provides institutional
investors with
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
research on
December 2020, provided fundamental
approximately
and
3,000
approximately 50 national economies, as well as on
industries, currencies and commodities.

companies worldwide

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).

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

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 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 and high-yield
corporate 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,
and
securities,
(including U.S.
derivatives
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 purchased under agreements to
resell (resale agreements), as well as through structured
credit, warehouse lending (including residential and
commercial mortgage lending) and asset-backed lending,
which are typically longer term in nature.

securities,

options,

futures

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
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.

Goldman Sachs 2020 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

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.

investments. Alternative

We manage client assets across a broad range of investment
strategies and asset classes, including equity, fixed income
investments
and alternative
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
to implement solutions for
our proprietary offerings,
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.

‰ 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 and debt investments. We invest in corporate
debt and provide financing for real estate and other
assets. These activities include investments in mezzanine
debt, senior debt and distressed debt securities.

Goldman Sachs 2020 Form 10-K

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 foundations and endowments. Our
relationships are established directly or introduced through
corporations that sponsor financial wellness programs for
their employees.

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 Ayco Personal Finance Management, and
executing brokerage transactions for wealth management
clients.

‰ Incentive fees. In certain circumstances, we also receive
incentive fees from wealth management clients 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.

‰ Private banking and lending. Includes net interest
interest
for wealth

income allocated to deposit-taking and net
income
management clients.

earned on lending

activities

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 Banking. We engage in consumer-oriented
businesses. We issue unsecured loans, through our digital
platform, Marcus by Goldman Sachs (Marcus), and credit
cards, to finance the purchases of goods or services. We also
accept deposits through Marcus, in 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.

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

and

Business continuity and information security,
including
cyber security, are high priorities for us. Their importance
has been highlighted by (i) the coronavirus (COVID-19)
arrangements
the work-from-home
pandemic
implemented by companies worldwide
in response,
including us, (ii) numerous highly publicized events in
recent years,
financial
institutions, governmental agencies, large consumer-based
companies and other organizations that resulted in the
unauthorized disclosure of personal information and other
sensitive or confidential
the theft and
destruction of corporate information and requests for
ransom payments, and (iii) extreme weather events.

including cyber attacks against

information,

technology

resilience, business

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
continuity,
recovery,
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. For further
the Business Continuity Planning
information about
to the
implemented in response
strategy we have
COVID-19 pandemic, see “Management’s Discussion and
Analysis
of
Operations — Regulatory and Other Matters — Impact of
COVID-19 Pandemic” in Part II, Item 7 of this Form 10-K.

Financial Condition

and Results

Human Capital Management

Our people are our greatest asset. We believe that a major
strength and principal reason for our success is the quality,
dedication, determination and collaboration of our people,
which enables us to serve our clients, generate long-term value
for our
to the broader
community. We invest heavily in developing and supporting
our people throughout their careers, and we strive to maintain
a work environment that fosters professionalism, excellence,
high standards of business ethics, diversity, teamwork and
cooperation among our employees worldwide.

shareholders and contribute

Diversity and Inclusion
The strength of our culture, our ability to execute our
strategy, and our relationships with clients all depend on a
diverse workforce and an inclusive work environment that
encourages a wide range of perspectives. We believe that
employee diversity at all levels of our businesses, from
entry-level analysts to senior management, is essential to
our sustainability. Our management team works closely
with our Global Inclusion and Diversity Committee to
continue to increase diversity of our global workforce at all
levels. In addition, we also have regional Inclusion and
Diversity Committees which promote an environment that
conventional
values different perspectives,
thinking and maximizes the potential of all our people.

challenges

race,

gender

identity,

ethnicity,

We believe that increased diversity, including diversity of
experience,
sexual
orientation, disability and veteran status, in addition to
being a social imperative, is vital to our commercial success
through the creativity that it fosters. For this reason, we
have established a comprehensive action plan with
aspirational diversity hiring goals which are set forth below
and are focused on cultivating an inclusive environment for
all our colleagues.

Diverse leadership is crucial to our long-term success and to
driving innovation, and we have implemented and expanded
outreach and career advancement programs for rising diverse
executive talent. A prime example is our Managing Director
Retention Initiative, which includes sponsorship and the
creation of career development plans for newly promoted
diverse managing directors. We are also focused on
providing diverse vice presidents the necessary coaching,
sponsorship and advocacy to support their career trajectories
and strengthen their leadership platforms, including through
programs such as our Asian Talent Initiative. Many other
career development initiatives are aimed at fostering diverse
talent at the analyst and associate level, including the Black
the Hispanic/Latinx
Analyst and Associate Initiative,
Analysts Initiative and the Women’s Career Strategies
Initiative. We have also established Inclusion Networks and
Interest Forums that are open to all professionals at
Goldman Sachs to promote and advance connectivity,
understanding, inclusion and diversity.

Goldman Sachs 2020 Form 10-K

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Reflecting our efforts to increase diversity, the composition
of our most recent partnership class was 27% women, 17%
Asian, 7% Black and 5% Hispanic/Latinx, and our most
recent managing director class was 29% women, 26%
Asian, 4% Black and 2% Hispanic/Latinx. In addition, our
2020 campus analyst class in the Americas was 55%
women, 31% Asian, 17% Hispanic/Latinx and 11% Black.
These metrics are based on self-identification.

set

the

following

Aspirational Goals. We have
aspirational goals:
‰ We aim for analyst and associate hiring (which accounts
to achieve
for over 70% of our annual hiring)
representation of 50% women, 11% Black professionals
and 14% Hispanic/Latinx professionals in the Americas,
and 9% Black professionals in the U.K.

‰ We aim for women to represent 40% of our vice
presidents globally by 2025 and 50% of all our
employees globally over time, while also endeavoring for
women to comprise 30% of senior talent (vice presidents
and above) in the U.K. by 2023.

‰ We aim for Black professionals to represent 7% of our
vice president population in the Americas and in the U.K.,
and for Hispanic/Latinx professionals to represent 9% of
our vice president population in the Americas, both by
2025.

‰ We aim to double the number of campus hires in the U.S.
recruited from historically Black colleges and universities
by 2025.

Talent Development and Retention
We seek to help our people achieve their full potential by
investing in them and supporting a culture of continuous
development. Our goals are to maximize individual
capabilities,
and
innovation, reinforce our culture, expand professional
opportunities, and help our people contribute positively to
their communities.

effectiveness

commercial

increase

Instilling our culture in all employees is a continuous
process, in which training plays an important part. We offer
our employees the opportunity to participate in ongoing
educational offerings and periodic seminars
through
Goldman Sachs University (GSU). To accelerate their
integration into the firm and our culture, new hires have the
opportunity to receive training before they start working
and orientation programs with an emphasis on culture and
networking, and nearly all employees participate in at least
one training event each year. For our more senior
employees, we provide guidance and training on how to
manage people and projects effectively, exhibit strong
leadership and exemplify the firm’s culture. We are also
focused on developing a high performing, diverse
leadership pipeline and career planning for our next
generation of leaders.

Goldman Sachs 2020 Form 10-K

Another important part of instilling our culture is our
employee performance review process. Employees are
reviewed by supervisors, co-workers and employees whom
they supervise in a 360-degree review process that is integral
to our team approach and includes an evaluation of an
employee’s performance with respect to risk management,
protecting our reputation, adherence to our code of conduct,
compliance, and diversity and inclusion principles. Our
approach to evaluating employee performance centers on
providing robust,
timely and actionable feedback that
facilitates professional development. We have directed our
managers, as leaders at the firm, to take an active coaching
role with their teams. In 2021, we implemented “The Three
Conversations at GS” through which managers establish
goals with their team members at the start of the year, check
in mid-year on progress and then close out the year with a
conversation on performance against goals.

We believe that our people value opportunities to contribute
to their communities and that these opportunities enhance
their job satisfaction. We also believe that being able to
together with colleagues and participate in
volunteer
community organizations working on local service projects
strengthens our people’s bond with us. Community
TeamWorks, our signature volunteering initiative, enables
team-based
our people to participate in high-impact,
volunteer opportunities, including projects coordinated with
hundreds of nonprofit partner organizations worldwide.
During 2019, our people volunteered over 150,000 hours of
service globally through Community TeamWorks, with
more than 26,000 employees partnering with approximately
900 nonprofit organizations on over 1,800 community
projects. To respond to the interest of our people in helping
with the response to the COVID-19 pandemic, we developed
a series of opportunities during 2020 to support vulnerable
populations remotely,
including small business owners,
students and the elderly.

Wellness
We recognize that for our people to be successful in the
workplace they need support in their personal, as well as
their professional lives. We have created a strong support
framework for wellness, which is intended to enable
employees to better balance their roles at work and their
responsibilities at home. We have recently made significant
additions to this framework, including increasing parental
leave to 20 weeks for all employees. We also continue to
advance our resilience programs, offering our people a
range of counseling, coaching, medical advisory and
personal wellness
increased the
these resources during the COVID-19
availability of
pandemic, and we have continued to evolve and strengthen
virtual offerings with the aim of maintaining the physical
and mental well-being of our employees, enhancing their
effectiveness and cohesiveness and providing them with
greater opportunities to access support.

services. We have

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 also introduced a COVID-19 10-day family leave
policy, available to our people globally to care for family
members due to COVID-19 related illness or meet childcare
needs, including homeschooling.

Global Reach and Strategic Locations
As a firm with a global client base, we take a strategic
approach to attracting, developing and managing a global
workforce. Our clients are located worldwide and we are
an active participant in financial markets around the world.
As of December 2020, we had headcount of 40,500, offices
in over 35 countries and 53% of our headcount was based
in the Americas, 19% in EMEA and 28% in Asia. Our
employees come from over 160 countries and speak more
than 110 languages as of December 2020.

In addition to maintaining offices in major financial centers
around the world, we have established key strategic
locations, including in Bengaluru, Salt Lake City, Dallas,
Singapore and Warsaw. We continue to evaluate the
expanded use of strategic locations,
including cities in
which we do not currently have a presence.

As of December 2020, 36% of our employees were
working in one of these key strategic locations, and our
goal is to increase this percentage to approximately 40% by
the end of 2022. We believe our investment in these
strategic locations enables us to build centers of excellence
around specific capabilities that support our business
initiatives.

Competition

services,

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,
commercial and/or
investment management
consumer
lending, deposit-taking and other banking
products and services, as well as those entities that make
investments in securities, commodities, derivatives, real
loans and other financial assets. These entities
estate,
investment banking firms,
include brokers and dealers,
commercial
insurance
card
credit
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
including
transaction execution, client experience, products and
services, innovation, reputation and price.

factors,

issuers,

banks,

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
capitalize on 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.

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, lending 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. The increasing prevalence of passive
investment strategies that typically have lower fees than
other strategies we offer has affected the competitive and
pricing dynamics for our asset management products and
services. 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.

Goldman Sachs 2020 Form 10-K

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. The effects of any changes to the regulations
affecting our businesses,
the
proposals described below, are uncertain and will not be
known until such changes are finalized and market
revised
practices and structures develop under
regulations.

including as a result of

the

Our principal subsidiaries operating in Europe include
Goldman Sachs International (GSI), GSIB and Goldman
Sachs Asset Management International (GSAMI), which are
incorporated and headquartered in the U.K., and Goldman
Sachs Bank Europe SE (GSBE), which is incorporated and
headquartered in Germany. As a result of
the U.K.’s
withdrawal from the E.U. (Brexit), the regulatory framework
that governs transactions and business undertaken by our
U.K. subsidiaries has changed, especially in connection with
transactions and business relating to the E.U.

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 also compete on the basis of the types of financial
products and client
that we and our
experiences
competitors offer. In some circumstances, our competitors
may offer financial products that we do not offer and that
our clients may prefer, or our competitors may develop
technology platforms
client
experience.

that provide

a better

not

implemented

(Dodd-Frank Act),

The provisions of the U.S. Dodd-Frank Wall Street Reform
the
and Consumer Protection Act
requirements promulgated by the Basel Committee on
Banking Supervision (Basel Committee) and other financial
regulations could affect our competitive position to the
increased fees and
extent that limitations on activities,
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. Likewise,
the obligations with respect to derivative transactions under
Title VII of the Dodd-Frank Act depend, in part, on the
location of the counterparties to the transaction.

uniformly

across

The impact of 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 evolving 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 regulators inside and outside the U.S.,
including the 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 subject
to regulatory oversight. See
“Regulation — Compensation Practices” and “Risk
Factors — Competition — 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.

Goldman Sachs 2020 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

and

clients

Effective

state of

infrastructure.

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 ended on December 31, 2020. During the
transition period, the U.K. was treated as if it were a
member
the E.U. and therefore our U.K.
subsidiaries benefitted from non-discriminatory access to
on
E.U.
December 31, 2020, and notwithstanding the Trade and
Cooperation Agreement between the E.U. and the U.K.
reached at the end of 2020, firms established in the U.K.,
including our U.K. subsidiaries, have lost their pan-E.U.
“passports” and are generally treated as any other entities
in countries outside the E.U., whose access to the E.U. is
governed by E.U. and national law and depends on the
making of E.U. equivalence decisions or on their obtaining
licenses or exemptions under national regimes. The U.K.
has adopted E.U. financial services legislation that was in
effect at December 31, 2020. This means that the U.K.
financial services regime will remain substantially the same
as under E.U. financial services legislation, but in the future
the U.K. may diverge from E.U. legislation and may decide
not to adopt rules that correspond to E.U. legislation not
already operative in the U.K. We have strengthened the
capabilities of our operating subsidiaries in E.U. countries,
particularly GSBE, and have moved certain activities there,
including moving a number of relationships with clients of
our Investment Banking, Global Markets and Wealth
Management businesses from GSI and GSIB to GSBE, and
clients of our Asset Management business from GSAMI to
GSBE; establishing access for GSBE to exchanges, clearing
houses and depositories and other market infrastructure in
the E.U.; establishing branches of GSBE in nine E.U.
member states and in the U.K.; and strengthening the
capital, personnel and other resources at GSBE.

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.

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). GS
Bank USA also has a branch in London, which is regulated
by the FCA and PRA. A number of our activities are
conducted partially or entirely through GS Bank USA and
(including
its
leveraged lending); consumer loans (including installment
and credit card loans) and wealth management loans
(including mortgages); interest rate, credit, currency and
other derivatives; deposit-taking; and agency lending.

including: corporate loans

subsidiaries,

Goldman Sachs 2020 Form 10-K

GSBE is 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. GSBE is subject to liquidity
requirements established by E.U. authorities, which are
similar to those applicable to GS Bank USA and us.
Following the end of the Brexit transition period, from
December 31, 2020, GSI and GSIB have become subject to
framework, which is predominantly
the U.K. capital
aligned with the E.U. capital framework.

Amendments to the CRR and CRD IV (respectively, CRR II
and CRD V) were finalized in June 2019. CRR II, which
includes changes to the market risk, large exposures and
leverage
from
June 2021 in the E.U., and from January 2022 in the U.K.
GSI and GSAMI will be subject to a new prudential regime
firms which is expected to be
for U.K.
introduced on January 1, 2022.

ratio frameworks will be applicable

investment

Risk-Based Capital Ratios. The Capital Framework
provides for additional capital ratio requirements for
Group Inc., consisting of the capital conservation buffer
requirements, comprised of a 2.5% buffer (under the
Advanced Capital Rules), a stress capital buffer (under the
Standardized Capital Rules), and a countercyclical buffer
and the G-SIB surcharge (under both Capital Rules). For GS
Bank USA, the capital conservation buffer requirements
include a 2.5% buffer and the countercyclical capital
buffer. These additional requirements must be satisfied
entirely with capital that qualifies as Common Equity
Tier 1 (CET1) capital.

The SCB is based on the results of the Federal Reserve’s
supervisory stress tests, and our planned common stock
dividends. 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. As a result, the minimum
capital ratios to which we are subject are likely to change
over time.

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

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Certain of our subsidiaries are regulated by the banking and
securities regulatory authorities of the countries in which
they operate. 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 U.K. government bonds
and is involved in lending (including securities lending) and
deposit-taking activities. As described below, our E.U.
subsidiaries are subject to various E.U. regulations, as well
as national laws, including those implementing European
directives. GSI maintains branches as a non-E.U.
investment firm in Madrid, Paris and Stockholm and GSIB
maintains a branch in Frankfurt. GSIB also maintains a
branch in Johannesburg, South Africa, which is regulated
by the Prudential Authority, the Financial Surveillance
Department of the South African Reserve Bank and the
Financial Sector Conduct Authority. GSBE is directly
supervised by the European Central Bank (ECB) and
additionally by BaFin and Deutsche Bundesbank in the
context of the E.U. Single Supervisory Mechanism (SSM).
Goldman Sachs Paris Inc. et Cie (GSPIC), an investment
firm regulated by the French Prudential Supervision and
Resolution Authority and Financial Markets Regulator,
may, among other activities, conduct activities that GSBE is
prevented from undertaking. Certain of our non-E.U.
subsidiaries
licenses or
also maintain cross-border
exemptions as non-E.U. institutions in E.U. jurisdictions
where permitted by domestic legislation.

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
Capital Framework is
largely based on the Basel
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
Bank USA are
banking
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

Goldman Sachs 2020 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

During 2020, the U.S. federal bank regulatory agencies
adopted a rule that allows banking organizations, including
us and GS Bank USA, to elect to temporarily delay the
estimated effects of adopting the Current Expected Credit
Losses (CECL) accounting standard on regulatory capital
until January 2022 and to subsequently phase-in the effects
through January 2025. The FRB has also stated 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
important
to
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

In January 2019, the Basel Committee finalized revisions to
the framework for calculating capital requirements for
market risk, which is expected to increase market risk
capital requirements for most banking organizations and
large broker-dealers subject to bank capital requirements.
The revised framework, among other things, revises the
standardized and internal models approaches used to
calculate market risk requirements and clarifies the scope of
positions subject to market risk capital requirements. The
Basel Committee framework contemplates that national
regulators
by
January 1, 2023. CRR II, which became effective in
June 2019 and establishes a reporting standard, will become
applicable in the third quarter of 2021. The U.K. has
adopted the reporting standard set out in CRR II but has
not stated when it will become applicable. E.U. financial
institutions are to report their market risk 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.

framework

implement

revised

the

The Basel Committee published standards 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 capital
requirements under the standardized approach. They also
revise the Basel Committee’s standardized and internal
model-based approaches for credit risk, provide a new
standardized approach for operational risk capital and revise
the frameworks for credit valuation adjustment (CVA) risk.
The Basel Committee framework contemplates that national
regulators implement these standards by January 1, 2023,
and that the new floor be phased in through January 1, 2028.
In July 2020, the Basel Committee finalized further revisions
to the framework for CVA risk, which are intended to align
that framework with the market risk framework.

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
these Basel Committee frameworks or the December 2017
standards for purposes of risk-based capital ratios.

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 things, require FHCs to hold additional capital
in connection with covered physical commodity activities.

below,

Goldman Sachs 2020 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
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
in
December 2017.

the Basel Committee

to 50% of

The Basel Committee standards provide for the public
disclosure of average daily balances for certain components
of leverage ratio calculations.

bank

federal

The U.S.
rule
implementing SA-CCR allows for greater recognition of
collateral
leverage exposure
relating to client-cleared derivative contracts.

in the calculation of total

regulatory

agencies’

for

certain E.U.

CRR II establishes a 3% minimum leverage ratio
institutions,
requirement
including GSBE. This requirement will be applicable
beginning in June 2021. Following Brexit, GSI and GSIB
will become subject to a similar PRA-required leverage
ratio that is expected to become effective in January 2022.

financial

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 and GS Bank USA’s Tier 1 leverage
ratios and SLRs, and GSI’s leverage ratio.

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.
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 2020 Form 10-K

The LCR rule issued by the European Commission, which
was incorporated into the U.K. prudential framework and
is applicable to GSI, GSIB and GSBE, is also generally
consistent with the Basel Committee’s framework.

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%.

In October 2020, the U.S. federal bank regulatory agencies
issued a final rule implementing the NSFR for large U.S.
banking organizations, including us and GS Bank USA. The
final rule will become effective on July 1, 2021, and we will
be
required to publicly disclose our NSFR levels
semiannually beginning in 2023. CRR II implements the
including
NSFR for certain E.U. financial
GSBE. This requirement will be applicable beginning in
June 2021. Following the U.K.’s withdrawal from the E.U.
on December 31, 2020, GSI and GSIB have become subject
to the NSFR requirement implemented in the U.K., which is
expected to become effective in January 2022.

institutions,

and overall

The FRB’s enhanced prudential standards require BHCs
with $100 billion or more in total consolidated assets to
risk
comply with enhanced liquidity
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. GSI and GSIB have
their own liquidity planning process, which incorporates
internally designed stress tests developed in accordance
with the guidelines of
Internal Liquidity
Adequacy Assessment Process (ILAAP). GSBE also has its
own liquidity planning process, which incorporates
internally designed stress tests and those required under
German regulatory requirements and the ECB Guide to
ILAAP.

the PRA’s

and Results

See “Management’s Discussion and Analysis of Financial
of Operations — Risk
Condition
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.

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

Stress Tests. As required by the FRB’s Comprehensive
Capital Analysis and Review (CCAR) rules, we submit an
annual capital plan for review by the FRB. In June 2020, all
BHCs participating in CCAR 2020, including us, were
required by the FRB to resubmit their capital plans in
November 2020 in light of the ongoing economic effects of
the COVID-19 pandemic. 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.

In March 2020, the FRB approved a final rule replacing the
static 2.5% component of the capital conservation buffer,
under the Standardized approach capital rules, with the
SCB for BHCs with $100 billion or more in total
consolidated assets. The SCB reflects stressed losses in the
supervisory severely adverse scenario of the FRB’s CCAR
stress tests and includes four quarters of planned common
stock dividends. The SCB is subject to a 2.5% floor and is
generally effective on October 1 of each year and remains in
effect until October 1 of the following year, unless the SCB
is reset in connection with a resubmission of a capital plan.
Our first SCB requirement of 6.6% took effect on
October 1, 2020.

not

institutions

2022. Depository

Depository institutions with total consolidated assets of
$250 billion or more that are subsidiaries of U.S. G-SIBs are
required to submit annual company-run stress test results to
the FRB. Based on growth in its balance sheet, GS Bank
USA will be required to submit its annual stress test results
to
in
company-run stress testing requirements are still required
to have their own capital planning process. GSI and GSIB
have their own capital planning and stress testing process,
tests
which incorporates
developed in accordance with the guidelines of the PRA’s
Internal Capital Adequacy Assessment Process (ICAAP).
GSBE also has its own capital and stress testing process,
which incorporates internally designed stress tests and
those required under German regulatory requirements and
the ECB Guide to ICAAP.

internally designed stress

subject

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

The final rule implementing the SCB provides that a BHC
must receive prior approval
for any dividend, stock
repurchase or other capital distribution, other than a
capital distribution on a newly issued capital instrument, if
the BHC is required to resubmit its capital plan. In
connection with the November 2020 resubmission
described above under “Stress Tests,” the FRB required
those BHCs to suspend stock repurchases during the third
and fourth quarters of 2020 and not to increase common
stock dividends or pay common stock dividends in excess of
their average net income over the prior four quarters. In
December 2020, the FRB announced that it would require
BHCs not to increase common stock dividends and would
permit common stock dividends and stock repurchases
that, in the aggregate, do not exceed a BHC’s average net
income over the prior four quarters, as well as stock
repurchases equal to the amount of share issuances related
to expensed employee compensation. We suspended stock
repurchases during the first quarter of 2020 and, consistent
with the FRB’s requirement for all large BHCs, extended
the suspension of stock repurchases through the fourth
quarter of 2020. We resumed stock repurchases in the first
quarter of 2021.

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). In addition, as a result of GS Bank USA’s election
to exclude holdings of U.S. Treasury securities and deposits
at the Federal Reserve from its total leverage exposure, in
calculating the supplementary leverage ratio, any dividend
by GS Bank USA through March 31, 2021 is subject to the
prior approval of the FRB.

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.

Goldman Sachs 2020 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

to limit

significant banks
Given the COVID-19 pandemic,
established in the E.U., such as GSBE, are currently subject
to an ECB recommendation not to distribute any cash
dividends or
through
September 2021, and in any event to limit dividends to 15%
of their total profits for 2019-2020 and 20 basis points of
their CET1 capital ratio, whichever is lower. According to
this recommendation, banks that intend to pay dividends or
buy back shares need to be profitable and have robust
capital.

such distributions

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 times
when BHCs might otherwise determine not to provide it.
Capital loans by a BHC to a subsidiary bank are subordinate
to deposits and to certain other
in right of payment
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.

and

securities

borrowing

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, including credit exposure arising from resale
derivative
agreements,
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.
Similarly, PRA rules and German regulatory requirements
provide that transactions between GSI, GSIB, GSBE and
their respective affiliates, including Group Inc. and GS
Bank USA, must be on market terms and are subject to
special internal approval requirements.

Goldman Sachs 2020 Form 10-K

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
the depository institution and impose
divestiture of
operating restrictions pending the divestiture.

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
restrictions on growth, activities or
requirements 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
required
full and targeted submissions). Our next
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.
Although the rulemaking process is still pending,
in
January 2021, the FDIC announced its intention to resume
requiring resolution plan submissions
IDIs with
$100 billion or more in assets, including GS Bank USA.

for

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 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
in January 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.

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
GSBE. The BRRD II provides national
supervisory
authorities with tools and powers to pre-emptively address
potential financial crises in order to promote financial
stability and minimize taxpayers’ exposure to losses. The
BRRD II requires E.U. member states to grant certain
resolution powers to national and, where relevant, E.U.
resolution authorities, including the power to impose a
temporary stay and 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 governed by non-E.U. law recognize those
temporary stay and bail-in powers unless doing so would be
impracticable. Regulatory authorities in the E.U. may
including
require
subsidiaries of non-E.U. groups, to submit recovery plans
and to assist
resolution authority in
constructing resolution plans for the E.U. entities. The U.K.
Special Resolution Regime confers substantially the same
powers on the Bank of England, as the U.K. resolution
authority, and substantially the same requirements on U.K.
financial
financial
institutions. Further, certain U.K.
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.

in the E.U.,

institutions

financial

relevant

the

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;
subsidiaries;
(ii)
(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.

Goldman Sachs 2020 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

rule

In October 2020, the FRB, the OCC and the FDIC issued a
final
requiring “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 rule will become effective April 1, 2021.

The BRRD II and the U.K. resolution regime subject
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 it
determines 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.

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 E.U. 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.

intermediate holding company (E.U.

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.
IHC) by
December 30, 2023 if it has, as in our case, two or more of
certain types of E.U. financial
institution subsidiaries,
including broker-dealers and banks, and an E.U. group can
request to have a second E.U. IHC. CRR II requires E.U.
IHCs to satisfy capital, liquidity, MREL and certain other
prudential requirements at a consolidated level. The U.K.
has not implemented the requirement for an E.U. IHC.

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;

Goldman Sachs 2020 Form 10-K

‰ 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.

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.
branches and claims of debtholders of the IDI,
in the
“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 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 applicable regulators, the U.S. 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.

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.

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

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 U.K. Financial Services Compensation Scheme and
deposits at GSBE are covered by the German statutory
deposit protection scheme and a voluntary top-up scheme,
in each case 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
guarantee
the undercapitalized
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

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

requirements

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
amending
and
definitions,
exemptions. Compliance with these amendments became
effective in January 2021. In addition, in June 2020 the
Volcker Rule regulators finalized their previously proposed
amendments to the Volcker Rule’s regulations relating to
covered funds. These amendments
established new
exclusions from the covered fund definition for certain
types of investment vehicles, modified the eligibility criteria
for certain existing exclusions, and clarified and modified
other provisions governing banking entities’ investments in
and other transactions and relationships involving covered
funds,
investments alongside
covered funds are not treated as investments in covered
funds subject to the 3% limitation noted above if certain
conditions are met. These amendments became effective in
October 2020.

including clarifying that

Goldman Sachs 2020 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

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
includes
activities
range of permissible
underwriting, dealing and making markets in securities and
making investments in non-FHCs (merchant banking
activities). In addition, certain FHCs, including us, 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.

including, among other

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,
things,
stringent quantitative
additional capital
limits on permissible physical trading activity, and new
In addition,
public
in a
reporting
September 2016 report,
the FRB recommended that
Congress repeal authorities for FHCs to engage in merchant
banking activities and for certain FHCs to engage in certain
otherwise impermissible commodities activities.

requirements.

requirements,

Goldman Sachs 2020 Form 10-K

like us, have been
Since January 2020, U.S. G-SIBs,
required to comply with a rule
regarding single
counterparty credit limits, which imposes more stringent
requirements for credit exposures among major financial
institutions. In addition, in 2011, the FRB 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.

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.

As a German credit institution, GSBE will become subject
in Germany on
to Volcker Rule-type prohibitions
“proprietary trading” as well as lending and guarantee
businesses with hedge funds and other highly-leveraged
funds once its assets exceed certain thresholds.

U.K. banks that have over £25 billion of core retail deposits
are required to separate their retail banking services from
their
investment and international banking activities,
commonly known as “ring-fencing.” GSIB is not currently
subject to the ring-fencing requirement and if it were to
become subject to it, GSIB would need to make significant
operational and structural changes.

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
funds and securities, capital structure, record-
clients’
keeping,
the financing of clients’ purchases, and the
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.

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

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. 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.

that are subject

In Europe, we provide broker-dealer services, including
through GSI, GSBE and GSPIC,
to
oversight by national
regulators. These services are
regulated in accordance with U.K., E.U. and national laws
and regulations. These laws require, among other things,
compliance with certain capital adequacy and liquidity
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 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
Exchange,
the Japan
the Tokyo Financial Exchange,
the Tokyo Commodity
Securities Dealers Association,
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. and the U.K., 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 financial instruments. In equities, MiFID II
introduced volume caps on non-transparent
liquidity
trading for trading venues, limited the use of broker-dealer
crossing networks and created a new regime for systematic
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 position 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, rules limiting the
payment and receipt of soft commissions and other forms
of inducements, and mandatory unbundling for broker-
dealers between execution and other major services.

electronic

trading

direct

and

The SEC 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.
these rules became effective in
Requirements under
June 2020. Several states have adopted or 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.

initiates

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.
Certain of our non-U.S. subsidiaries, including GSI, are
subject to risk retention requirements in connection with
securitization activities.

Goldman Sachs 2020 Form 10-K

The CFTC has adopted rules relating to cross-border
regulation of swaps, business conduct and registration
requirements. 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 with certain non-U.S.
regulations, including E.U. regulations, related to certain
business 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.

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. and the U.K. have
established regulatory requirements relating to portfolio
reconciliation and reporting,
clearing certain OTC
derivatives and margining for uncleared derivatives
activities under
Infrastructure
Regulation (EMIR).

the European Market

(ii)

reporting

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
certain of our
October 2021. We anticipate
subsidiaries will register with the SEC as security-based
swap dealers and become subject to the SEC’s regulations
regarding security-based swaps.

that

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

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 futures,
commodity options and swaps
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, GSBE
and J. Aron & Company LLC (J. Aron), are registered with
the CFTC as swap dealers. In July 2020, the CFTC adopted
final rules establishing capital requirements for swap
dealers that are not subject to the capital rules of a
prudential regulator, such as the FRB. The CFTC also
adopted financial reporting requirements for covered swap
entities and amended existing capital rules for CFTC-
registered futures commission merchants to provide explicit
capital requirements for proprietary positions in swaps and
security-based swaps that are not cleared by a clearing
organization. Compliance with the final rules is required by
October 6, 2021. Certain of our registered swap dealers,
including J. Aron, will be subject to the CFTC’s capital
requirements.

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 and GSBE). The rules for variation margin have
become effective, and those for initial margin will phase in
through September 2022 depending on certain activity
levels of the swap dealer and the relevant counterparty.
Inter-affiliate transactions under the CFTC margin rules are
generally exempt from initial margin requirements. In
June 2020, the FRB adopted a final rule that exempts inter-
affiliate swaps from its initial margin requirements subject
to certain thresholds.

Goldman Sachs 2020 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 CFTC has adopted 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.
However, effective in 2023, the new rules will eliminate the
risk management exemption, which allowed swap dealers
to claim an exemption for the hedging of swap-related
risks. The new CFTC position limits will apply to certain
positions in swaps, as well as futures and options on
futures, on physical commodities, and limits will apply to
both physically and cash settled positions. Currently,
position limits on futures on physical commodities are
administered by the relevant exchanges, with the exception
of futures on certain agricultural commodities, which are
administered by the CFTC. Under the CFTC’s position
limit rules, all futures and options on futures on an
enumerated list of physical commodities, including certain
agricultural, energy and metals commodities, as well as
related swaps, will be subject to the CFTC’s position limits.
The new position limit rules impose limits in the spot
month only (i.e., during the delivery period for the physical
commodities, which is typically a period of several days),
although the CFTC may in the future impose limits in
non-spot months as well. CFTC spot and non-spot month
limits will continue to apply to futures on certain legacy
agricultural commodities.

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

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 fair treatment of
clients, 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 in
the U.K. and GSBE in the E.U., are subject to MiFID II and/
or related regulations (including the U.K.
legislation
making such regulations part of U.K. law), which govern
the approval, organizational, marketing and reporting
requirements of U.K. or E.U.-based investment managers
and the ability of investment fund managers located outside
the E.U. or the U.K. to access those markets. Our asset
management business in the U.K. and the E.U. significantly
depends on our ability to delegate parts of our activities to
other affiliates.

Consumer Regulation
Our U.S. consumer-oriented activities are subject
to
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. Many of
these laws, rules and regulations also apply to our small
business lending activities which are subject to supervision
and regulation by federal and state regulators as well. Our
U.K. consumer deposit-taking activities are also subject to
consumer protection regulations.

things,

laws,

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

Goldman Sachs 2020 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

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.

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 governance. The
guidance provides that supervisory 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 notes that enforcement actions may be taken
against a banking organization if its incentive compensation
arrangements or related risk management, control or
governance processes pose a risk to the organization’s safety
and soundness.

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 in the U.K. and, among other things,
limit the ratio of variable to fixed compensation of all
employees at GSBE and certain employees at our other
operating subsidiaries in the E.U. and in the U.K., including
those employees identified as having a material impact on
the risk profile of regulated entities. CRR II and CRD V
amend certain aspects of these rules, including, among
increasing minimum variable
other
similar
compensation deferral periods.
requirements apply in the U.K. in relation to GSI and GSIB.

Substantially

things,

Goldman Sachs 2020 Form 10-K

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
obligations to monitor client
transactions and report
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 January 2021, the Anti-Money Laundering Act of 2020
(AMLA), which amends the BSA, was enacted. The AMLA
is intended to comprehensively reform and modernize U.S.
anti-money laundering laws. Among other things, the
AMLA codifies a risk-based approach to anti-money
laundering compliance for financial institutions; requires
the development of standards by the U.S. Department of the
Treasury for evaluating technology and internal processes
for BSA compliance; and expands enforcement- and
investigation-related authority,
including a significant
expansion in the available sanctions for certain BSA
violations and instituting BSA whistleblower incentives and
protections. Many of the statutory provisions in the AMLA
will require additional rulemakings, reports and other
measures, and the impact of the AMLA will depend on,
among other
things, rulemaking and implementation
guidance.

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 politically exposed
persons,
information by
regulatory authorities and law enforcement agencies, and to
share information with other financial
institutions, has
required the implementation and maintenance of internal
practices, procedures and controls.

to respond to requests

for

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

Privacy and Cyber Security Regulation
Our businesses are subject to laws and regulations enacted
by U.S. federal and state governments, the E.U., the U.K. 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 U.K.’s Data Protection Act 2018,
the Japanese Personal Information Protection Act, the
Hong Kong Personal Data (Privacy) Ordinance,
the
Australian Privacy Act, the Brazilian Bank Secrecy Law,
and the California Consumer Privacy Act of 2018 (CCPA).
The GDPR has heightened our privacy compliance
obligations, impacted certain of our businesses’ collection,
processing and retention of personal data and imposed
strict standards for reporting data breaches. The GDPR
also provides for significant penalties for non-compliance.
In addition, the CCPA imposes compliance obligations with
regard to the collection, use and disclosure of personal
information. The substantive obligations under the 2020
on
amendments
January 1, 2023. In addition, several other states and
non-U.S.
jurisdictions have enacted, or are proposing,
privacy and data protection laws similar to the GDPR and
the CCPA.

the CCPA become

effective

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
integrity and
designed to ensure the confidentiality,
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.

the protection of

the U.S.

In December 2020,
federal bank regulatory
agencies released a proposed rule regarding notification
related to
for banking organizations
requirements
significant computer security incidents. Under the proposal,
a BHC or state member bank, such as Group Inc. or GS
Bank USA, would be required to notify the FRB within
36 hours of incidents that could result in the banking
organization’s inability to deliver services to a material
portion of its customer base, jeopardize the viability of key
operations of the banking organization, or impact the
stability of the financial sector.

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, 45
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, 49
since
Ms. Hammack has been Global Treasurer
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, 54
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, 64
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, 56
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, 59
Ms. Seymour has been an Executive Vice President, General
Counsel and Secretary since
January 2018. 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.

Goldman Sachs 2020 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

David M. Solomon, 59
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
from
and Chief
January 2017 and Co-Head of the Investment Banking
Division from July 2006 to December 2016.

or Co-Chief Operating Officer

Laurence Stein, 53
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, 51
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.

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, our Code of Business Conduct and
Ethics governing our directors, officers and employees and
our Sustainability Report. 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.

Goldman Sachs 2020 Form 10-K

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.

Investor Relations can be contacted at The Goldman Sachs
Group, Inc., 200 West Street, 29th Floor, New York, New York
10282, Attention: Investor Relations, telephone: 212-902-0300,
e-mail: gs-investor-relations@gs.com. We use our website, our
Twitter account (twitter.com/GoldmanSachs), our Instagram
account
social
(instagram.com/GoldmanSachs) and other
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.

By identifying these statements for you in this manner, we
are alerting you to the possibility that our actual results,
financial condition, liquidity and capital actions may differ,
possibly materially, from the anticipated results, financial
forward-looking
condition
statements. Important factors that could cause our results,
financial condition, liquidity 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.

liquidity

these

and

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

future compensation expense,

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) trends in or growth opportunities for our
including the timing, costs, profitability,
businesses,
benefits and other aspects of business and strategic
initiatives and their impact on our efficiency ratio, (iii) our
level of
including as a
percentage of both operating expenses and revenues net of
provision for credit losses, (iv) our investment banking
transaction backlog, (v) our expected interest income and
interest expense, (vi) our expense savings and strategic
locations initiatives, (vii) expenses we may incur, including
future litigation expense and expenses from investing in our
consumer and transaction banking businesses, (viii) the
projected growth of our deposits and other funding, asset
liability management and funding strategies and related
interest expense savings,
(ix) our business initiatives,
including transaction banking and new consumer financial
products,
(x) our planned 2021 parent vanilla debt
issuances, (xi) the amount, composition and location of
GCLA we expect to hold, (xii) our credit exposures,
(xiii) our expected provisions for credit losses (including
those related to our co-branded credit card relationship
with General Motors), (xiv) the adequacy of our allowance
the projected growth of our
losses,
for credit
installment
(xvi) the
loan and credit card businesses,
objectives and effectiveness of our business continuity plan
(BCP), information security program, risk management and
liquidity policies, (xvii) our resolution plan and strategy and
their implications for stakeholders, (xviii) the design and
effectiveness of our resolution capital and liquidity models
and triggers and alerts framework, (xix) the results of stress
tests, (xx) the effect of changes to regulations, and our
future status, activities or reporting under banking and
financial regulation, (xxi) our NSFR, (xxii) our expected
tax rate, (xxiii) the future state of our liquidity and
regulatory capital ratios, and our prospective capital
distributions (including dividends and repurchases), (xxiv)
legal
our expected SCB and G-SIB surcharge,
proceedings,
other
investigations
governmental
contingencies, (xxvi) the 1MDB settlements, including the
asset recovery guarantee and our remediation activities,
(xxvii) the effectiveness of our strategy with respect to
Brexit, (xxviii) the replacement of IBORs and our transition
to alternative risk-free reference rates, (xxix) the impact of
the COVID-19 pandemic on our business, results, financial
position and liquidity,
the effectiveness of our
(xxx)
management of our human capital, including our diversity
goals and (xxxi) our plans for our people to return to our
offices.

(xxv)
or

(xv)

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, profitability, benefits
and other aspects 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 the level of future compensation expense,
including as a percentage of both operating expenses and
losses, and our
revenues net of provision for credit
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.

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, an 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
regulatory
information about other
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

Goldman Sachs 2020 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

Statements about the projected growth of our deposits and
other funding, asset liability management and funding
strategies and related interest expense savings, and our
installment loan and credit card businesses, are subject to
the risk that actual growth and savings 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 planned 2021 parent vanilla debt
issuances and the amount, composition and location of
GCLA we expect to hold are subject to the risk that actual
issuances and GCLA levels may differ, possibly materially,
from that currently expected due to changes in market
conditions, business opportunities or our funding and
projected liquidity needs.

Statements about our expected provisions for credit losses
(including those related to our co-branded credit card
relationship with General Motors) are subject to the risk
that actual credit losses may differ and our expectations
from that currently
may change, possibly materially,
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 our NSFR and SCB are based on our
current interpretation and expectations of the relevant
rules, and reflect significant assumptions about how our
NSFR and SCB are calculated. Our actual SCB will depend
on 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.

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 the tax rates applicable to us,
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 any corporate
tax legislation that may be enacted or any guidance that may
be issued by the U.S. Internal Revenue Service.

Statements about the future state of our liquidity and
regulatory capital ratios (including our SCB and G-SIB
surcharge), and our prospective capital distributions
(including dividends and repurchases), are subject to the
risk that our actual liquidity, regulatory capital ratios and
capital distributions may differ, possibly materially, from
what is currently expected due to, among other things, the
need to use capital to support clients, increased regulatory
requirements and changes to the composition of our
balance sheet.

Goldman Sachs 2020 Form 10-K

Statements about the risk exposure related to the asset
recovery guarantee provided to the Government of
Malaysia are subject to the risk that the actual value of
assets and proceeds from assets seized and returned to the
Government of Malaysia may be less than currently
anticipated. Statements about
the application for and
pursuit of exemptions and authorizations from regulatory
authorities, including the U.S. Department of Labor, in
connection with the settlements relating to 1Malaysia
Development Berhad (1MDB) and the progress or the
status of remediation activities relating to 1MDB are based
on our expectations regarding the prospects for receiving
the exemptions and authorizations and the current
remediation plans. Accordingly, our ability to receive the
exemptions
the
remediation activities may change, possibly materially,
from what is currently expected.

authorizations

complete

and

Statements about our objectives in management of our
human capital, including our diversity goals, are based on
our current expectations and are subject to the risk that we
may not achieve these objectives and goals due to, among
other things, competition in recruiting and attracting
diverse candidates and unsuccessful efforts in retaining
diverse employees.

Statements about our plans for our people to return to our
offices are based on our current expectations and that
return may be delayed due to, among other factors, future
events that are unpredictable, including the course of the
COVID-19
governmental
authorities and the availability, use and effectiveness of
vaccines.

pandemic,

responses

Item 1A. Risk Factors

We face a variety of risks that are substantial and inherent
in our businesses.

The following is a summary of some of the more important
factors that could affect our businesses:

Market
‰ Our businesses have been and may in the future be
adversely affected by conditions in the global financial
markets and broader economic conditions.

‰ Our businesses have been and may in the future be
adversely affected by declining asset values, particularly
where we have net “long” positions, receive fees based on
the value of assets managed, or receive or post collateral.
‰ Our market-making activities have been and may in the
future be affected by changes in the levels of market
volatility.

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 investment banking, client intermediation, 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 declines in economic
activity and other unfavorable economic, geopolitical or
market conditions.

‰ Our

asset management

and wealth management
businesses have been and may in the future be adversely
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.

Liquidity
‰ Our

liquidity, profitability and businesses may be
adversely affected by an inability to access the debt capital
markets or to sell assets.

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

‰ Reductions in our credit ratings or an increase in our
credit spreads may adversely affect our liquidity and cost
of funding.

‰ Group Inc. is a holding company and its liquidity depends
on payments from its subsidiaries, many of which are
subject to legal, regulatory and other restrictions on
providing funds or assets to Group Inc.

Credit
‰ Our businesses, profitability and liquidity may be
adversely affected by deterioration in the credit quality of
or defaults by third parties.

‰ Concentration of

for
risk increases
significant losses in our market-making, underwriting,
investing and financing activities.

the potential

‰ Derivative transactions and delayed documentation or
settlements may expose us to credit risk, unexpected risks
and potential losses.

and General Business

Market Developments
Environment
‰ Our businesses, financial condition, liquidity and results
of operations have been and may in the future be
adversely affected by the COVID-19 pandemic.

‰ Our strategy with respect to Brexit may not be effective.
‰ Certain of our businesses, our funding instruments and
financial products may be adversely affected by changes
in or the discontinuance of Interbank Offered Rates
(IBORs), in particular LIBOR.

‰ Certain of our businesses and our funding instruments
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.

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

Operational
‰ 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, result in the disclosure of confidential
information, damage our reputation and cause losses.
‰ 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 disclosure, theft or
information, damage our
destruction of confidential
reputation and cause losses.

‰ We may incur losses as a result of ineffective risk

management processes and strategies.

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

including pandemics,

events,

‰ Climate change concerns could disrupt our businesses,
adversely affect client activity levels, adversely affect the
creditworthiness of our counterparties and damage our
reputation.

Legal and Regulatory
‰ Our businesses and those of our clients are subject to

extensive and pervasive regulation around the world.

‰ A failure to appropriately identify and address potential
conflicts of interest could adversely affect our businesses.
‰ We may be adversely affected by increased governmental

and regulatory scrutiny or negative publicity.

‰ Substantial civil or criminal

significant
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.

liability or

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

Goldman Sachs 2020 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 regulatory strategies and 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.

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

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

potential

involve

certain

risks,

Competition
‰ Our results have been and may in the future be adversely

affected by the composition of our client base.

‰ The financial services industry is highly competitive.
‰ The growth of electronic trading and the introduction of

new trading technology has increased competition.

‰ Our businesses would be adversely affected if we are

unable to hire and retain qualified employees.

The following are detailed descriptions of our Risk Factors
summarized above:

Market

Our businesses have been and may in the future be
adversely affected by conditions in the global
financial markets and broader economic conditions.

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, business,
consumer and investor confidence, stable geopolitical
conditions and strong business earnings.

Goldman Sachs 2020 Form 10-K

Unfavorable or uncertain economic and market conditions
can be caused by: low levels of or declines in economic
growth, business activity or investor, business or consumer
confidence; pandemics; 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 rates; concerns about
sovereign defaults; uncertainty concerning fiscal or
monetary policy, government shutdowns, debt ceilings or
funding; the extent of and uncertainty about potential
increases in tax rates and other regulatory changes; the
imposition of tariffs or other limitations on international
trade and travel; outbreaks of domestic or international
tensions or hostilities,
terrorism, nuclear proliferation,
cyber security threats or attacks and other forms of
disruption to or curtailment of global communication,
energy transmission or transportation networks or other
geopolitical instability or uncertainty; corporate, political
or other scandals that reduce investor confidence in capital
markets; extreme weather events or other natural disasters;
or a combination of these or other factors.

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 the COVID-19 pandemic, European sovereign debt
risk and its impact on the European banking system, the
impact of Brexit, the imposition of tariffs and actions taken
by other countries in response, and potential 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.

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 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 evolving
regulatory frameworks.

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 have been and may in the future be
adversely affected by declining asset values,
particularly where 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.

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
the assets. Sudden declines and significant
values of
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 that supports the obligations of our clients and
counterparties. 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.

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
recipient of
the collateral due to delays in receiving
In cases where we foreclose on
adequate collateral.
collateral, sudden declines in the value or liquidity of the
collateral may,
over-
collateralization, the ability to call for additional collateral
the underlying
or the ability to force repayment of
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 market-making activities have been and may in
the future 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.

Goldman Sachs 2020 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 investment banking, client intermediation, 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
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 uncertain 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 adversely
affect our client intermediation 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.

Goldman Sachs 2020 Form 10-K

Our asset management and wealth management
businesses have been and may in the future be
adversely
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.

affected

poor

the

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 (AUS) 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 continue to invest in products
that generate lower fees (e.g., passively managed or fixed
income products), our average effective management fee
would continue to decline and our asset management and
wealth management businesses could be adversely affected.

Liquidity

Our liquidity, profitability and businesses may be
adversely affected by an inability to access the debt
capital markets or to sell assets.

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 raise deposits, an inability to access funds from our
subsidiaries or otherwise allocate liquidity optimally, an
inability to sell assets or redeem our investments, lack of
timely settlement of transactions, unusual deposit outflows,
or other unforeseen outflows of cash or collateral, such as
in March 2020, when corporate clients drew on revolving
credit facilities in response to the COVID-19 pandemic.
This situation may arise due to circumstances that we may
be unable to control, such as a general market or economic
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.

funding,

Regulatory changes relating to liquidity may also negatively
impact our results of operations and competitive position.
Numerous regulations have been adopted to introduce
more stringent liquidity requirements for large financial
institutions. These regulations address, among other
testing, minimum liquidity
matters,
liquidity stress
requirements, wholesale
limitations on the
issuance of
short-term debt and structured notes,
deductions for holdings of TLAC 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 financial
institutions. Given the overlap and complex 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.

Our businesses have been and may in the future be
adversely affected by disruptions or lack of liquidity 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 and commercial paper, by
raising deposits at our bank subsidiaries, by issuing hybrid
financial instruments and 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.

Goldman Sachs 2020 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

Reductions in our credit ratings or an increase in our
credit spreads may adversely affect our liquidity and
cost of funding.

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
these
and collateralized financing contracts. Under
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

As of December 2020, 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 $481 million in the event of a one-notch
downgrade of our credit ratings and $1.39 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 and Results of Operations —
Risk Management — Liquidity Risk Management — Credit
Ratings” in Part II, Item 7 of this Form 10-K.

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.

Goldman Sachs 2020 Form 10-K

Group Inc. is a holding company and its liquidity
depends on payments from its subsidiaries, many of
which are subject to legal, regulatory and other
restrictions on providing funds or assets to Group Inc.

Group Inc. is a holding company and, therefore, depends
on dividends, distributions and other payments from its
subsidiaries
to fund share repurchases and dividend
payments and to fund 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
reorganization is subject
the
subsidiary’s creditors.

to the prior claims of

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, or to Group Inc.,
including in times of liquidity stress, thereby increasing the
overall level of capital and liquidity required by us on a
consolidated basis.

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

other

to certain exceptions.

Furthermore, Group Inc. has guaranteed the payment
obligations of certain of its subsidiaries, including GS&Co.
and GS Bank USA, subject
In
addition, Group Inc. guarantees many of the obligations of
a
its
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
additional
long-term debt at Group Inc. or particular
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
efficient. Furthermore, arrangements
to facilitate our
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.

Credit

Our businesses, profitability and liquidity may be
adversely affected by deterioration in the credit
quality of or defaults by third parties.

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.

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 have limits and regularly review credit
exposures to specific clients and counterparties and to
specific industries, countries and regions that we believe
may present credit concerns, default risk may arise from
events or circumstances that are difficult to detect or
foresee.

Concentration of risk increases the potential
in
significant
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
these
financing activities. The number and size of
transactions has affected and may in the future affect our
results of operations in a given period. Moreover, because
of concentrated 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.

Goldman Sachs 2020 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

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

Derivative transactions and delayed documentation
or settlements may expose us to credit
risk,
unexpected risks and potential losses.

are

negotiated

We are party to a large number of derivative transactions,
these derivative
including credit derivatives. Many of
and
individually
instruments
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.

Goldman Sachs 2020 Form 10-K

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.
regulations
regulators
contemplated by the ISDA Universal Protocol, and those
implementing
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.

regulations may

proposed

adopted

result

have

Derivative contracts and other transactions,
including
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
the
other
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 has increased our credit exposure to
central clearing platforms.

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

Market Developments and General Business
Environment

Our businesses,
liquidity and
results of operations have been and may in the future
be adversely affected by the COVID-19 pandemic.

financial condition,

The COVID-19 pandemic has created economic and
financial disruptions that have in the past adversely affected
and may in the future adversely affect our business,
financial condition, liquidity and results of operations. The
extent to which the COVID-19 pandemic will negatively
affect our businesses, financial condition,
liquidity and
results of operations will depend on future developments,
including the widespread availability, use and effectiveness
of vaccines, which are highly uncertain and cannot be
predicted.

economic

conditions

financial markets have

rebounded from the
While
significant declines that occurred earlier in the pandemic
and global
showed signs of
improvement during the second half of 2020, many of the
circumstances that arose or became more pronounced after
the onset of the COVID-19 pandemic persisted at the end of
the year, including (i) muted levels of business activity
across many sectors of the economy, relatively weak
consumer confidence and high unemployment; (ii) elevated
levels of market volatility; (iii) the federal funds rate and
yields on U.S. Treasury securities near zero; (iv) substantial
uncertainty about whether previously announced merger
and acquisition deals will be completed or restructured;
(v) heightened credit risk with regard to industries that have
been most severely impacted by the pandemic, including oil
and gas, gaming and lodging, and airlines; (vi) greater
emphasis by investors on liquidity products, which generate
lower fees, relative to risk assets, resulting in these products
comprising a higher share of AUS as compared to the
pre-pandemic composition; and (vii) higher cyber security,
information security and operational risks as a result of
work-from-home arrangements.

Depending on the duration and severity of the pandemic
going forward, as well as the effects of the pandemic on
consumer and corporate confidence, the conditions noted
above could continue for an extended period and other
adverse developments may occur or reoccur, including (i) a
repeat, or worse, of the decline in the valuation of equity,
fixed-income and commodity markets that occurred at the
outset of the pandemic; (ii) further declines in U.S. interest
rates, to zero or below; (iii) market dislocations that may
make hedging strategies less effective or ineffective; (iv) a
reduction in fees on AUS due to declines in the valuation of
assets or a protracted trend toward asset classes that
generate lower fees; (v) disruption in the new issuance
markets for debt and equity, leading to a decline in activity;
(vi) a deterioration in the liquidity profile of corporate
borrowers, resulting in additional draws on credit lines;
(vii) defaults by consumers or corporate clients on loans;
and (viii) greater challenges in valuing derivative positions
and associated collateral, leading to significant increases in
collateral calls and valuation disputes.

The effects of the COVID-19 pandemic on economic and
market conditions have in the past and may in the future
also increase demands on our liquidity as we meet client
needs. Likewise, these adverse developments have in the
past and may in the future affect our capital and leverage
ratios. We suspended repurchases of our common stock
during the first quarter of 2020 and, consistent with the
FRB’s requirement
large BHCs, extended this
suspension through the fourth quarter of 2020 enabling us
to deploy more capital and liquidity to meet the needs of
our clients. The effects of the COVID-19 pandemic and
FRB requirements have limited and in the future may
further limit capital distributions.

for all

Governmental authorities worldwide have taken increased
measures to stabilize the markets and support economic
growth. The continued success of
these measures is
unknown and they may not be sufficient to address future
severe and prolonged
market dislocations or avert
reductions in economic activity. We also face an increased
risk of client disputes, litigation and governmental and
regulatory scrutiny as a result of
the
COVID-19 pandemic on economic and market conditions.

the effects of

Goldman Sachs 2020 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 pandemic and the efficacy of

the
The length of
extraordinary measures that have been put in place to
address it are unknown. Until the pandemic subsides, we
may experience draws on lines of credit, reduced activity
levels in investment banking, reduced revenues in our asset
management and wealth management businesses and
increased client defaults, including defaults in unsecured
loans. Even after the pandemic subsides, the U.S. economy,
as well as most other major economies, may continue to
experience a recession, and we anticipate our businesses
would be materially and adversely affected by a prolonged
recession in the U.S. and other major markets.

Our strategy with respect to Brexit may not be
effective.

in the

On January 31, 2020, the U.K. left the E.U., and, on
the transition period under the
December 31, 2020,
withdrawal agreement between the U.K. and the E.U.
ended. As discussed in “Business — Regulation” in Part I,
Item 1 of this Form 10-K, we have experienced considerable
regulatory framework that governs
change
transactions and business undertaken by our U.K.
subsidiaries in the E.U. The U.K. has adopted E.U. financial
services
on
December 31, 2020, which means that the U.K. financial
services regime will remain substantially the same as under
E.U. financial services legislation. However, in the future
the U.K. may diverge from E.U. legislation and may decide
not to adopt rules that correspond to E.U. legislation not
already operative in the U.K. As a result, we face numerous
risks that could adversely affect how we conduct our
businesses or our profitability and liquidity.

legislation

effect

that

was

legislation,

Certain of our principal subsidiaries, including GSI, GSIB
and GSAMI, are incorporated and headquartered in the
U.K. During the transition period, they benefitted from
non-discriminatory access to E.U. clients and infrastructure
including
based on E.U. treaties and E.U.
arrangements for cross-border “passporting” and the
establishment
Effective
December 31, 2020, and notwithstanding the Trade and
Cooperation Agreement between the E.U. and U.K. reached
at the end of 2020, firms established in the U.K., including
our U.K. subsidiaries, have lost their pan-E.U. “passports”
and are generally treated as any other entities in countries
outside the E.U. whose access to the E.U. is governed by
E.U. and national law.

branches.

E.U.

Goldman Sachs 2020 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 has
assumed 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
subsidiary-level capital and
compliance costs, higher
liquidity
on
additional
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. In addition, as we increase our operations
in jurisdictions with higher tax rates, our tax rate will
increase.

requirements,

restrictions

We have strengthened the capabilities of our operating
subsidiaries in E.U. countries and other member states of
the Agreement on the European Economic Area,
particularly GSBE, and have moved certain activities there.
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.

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

have

issued

agencies

guidance

The administrator of LIBOR has proposed to extend
publication of the most commonly used U.S. Dollar LIBOR
settings to June 30, 2023 and to cease publishing other
LIBOR settings on December 31, 2021. The U.S. federal
banking
strongly
encouraging banking organizations to cease using the
U.S. Dollar LIBOR as a reference rate in new contracts as
soon as practicable and in any event by December 31, 2021.
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 developments have occurred with
respect to other IBORs.

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 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.

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
services
the discontinuance of
designated rates in contracts and financial instruments or
such designated rates ceasing to be acceptable reference
rates. This uncertainty could ultimately result in client
disputes
proper
interpretation of our IBOR-based contracts and financial
instruments. Although we have adhered to the ISDA IBOR
Fallbacks Protocol, the protocol is applicable to derivatives
when both parties adhere to the protocol or otherwise agree
for it to apply to their derivatives.

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.

funding
Certain of our businesses
instruments 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.

and our

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,
an index or ETF sponsor materially alters the composition
of an index or ETF, or stocks in a basket are delisted or
become impermissible to be included in the 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.

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

A number of our recent and planned business initiatives and
expansions of existing businesses,
including through
acquisitions and partnership arrangements, 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, and we expect this trend to continue. Various
emerging and growth market countries have experienced
severe economic and financial disruptions,
including
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. The possible effects of any of these
conditions include an adverse impact on our businesses and
increased volatility in financial markets generally.

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 2020 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.

Operational

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

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, business partners,
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
clients, business partners,
we
regulatory and
counterparties and investors. Legal,
reputational risks may also exist
in connection with
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.

interact with these

Goldman Sachs 2020 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

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. Such risks are exacerbated in times of
increased volatility. 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
in negative publicity,
reputational damage and governmental and regulatory
scrutiny.

regulation, can result

Our
financial, accounting, data processing or other
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
including in
systems, as well as the requisite training,
connection with the integration of new businesses, entail
significant
associated with
implementing new systems and integrating them with
existing ones.

and create

costs

risks

and

service

providers

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
vendors. Their
importance has continued to increase, in particular in light
of work-from-home arrangements implemented in response
to the COVID-19 pandemic. Computers and computer
networks are subject to various risks, including, among
others, cyber attacks, inherent technological defects, system
failures and human error. 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, including through
our facilitation of clients’ activities involving financial
products linked to distributed ledger technology, such as
blockchain or
in
cryptocurrencies, our
companies that seek to develop platforms based on
distributed ledger technology, and the use of distributed
clients,
ledger
counterparties,
financial
intermediaries.

third-party
clearing houses and other

technology by

investments

vendors,

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 are not
always caught immediately by our 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
laws, rules or
ignore or circumvent applicable policies,
and other
procedures. Human errors, malfeasance
misconduct,
including the intentional misuse of client
information in connection with insider trading or for other
purposes, even if promptly discovered and remediated, can
losses and
result in reputational damage and material
liabilities for us.

Goldman Sachs 2020 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

There has been significant consolidation among clearing
agents, exchanges and clearing houses and an increasing
number of derivative transactions are cleared on exchanges,
which has increased our exposure to operational failure or
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
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.

among market

participants

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. Interconnectivity of
financial institutions with other companies through, among
other things, application programming interfaces or APIs
presents similar risks. 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 2020 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, including in
connection with our new business initiatives. We may not be
able to effectively monitor or mitigate operational risks
relating to our vendors’ use of common service providers.

Aside from work-from-home arrangements during the
COVID-19 pandemic, 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. Notwithstanding our efforts to maintain
business 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
including a terrorist attack,
metropolitan area offices,
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 or successfully work remotely, 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, work-
from-home arrangements 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
disclosure,
theft or destruction of confidential
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, as
those
do work-from-home
implemented in response to the COVID-19 pandemic. 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
event, which could,
interrupt certain of our
businesses.

arrangements

in turn,

such

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
software and networks may be
computer
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, as can work-
from-home arrangements. 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.
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.

In addition,

Goldman Sachs 2020 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.

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 and risk mitigation techniques, those techniques
and the judgments that accompany their 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.

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.

Goldman Sachs 2020 Form 10-K

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.

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.

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

The occurrence of unforeseen or catastrophic events,
including pandemics,
such as COVID-19, or other
widespread health emergencies (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
and limitations on occupancy in our offices) that could
impair our ability to manage our 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

change

concerns

our
Climate
businesses, adversely affect client activity levels,
adversely
creditworthiness of our
the
counterparties and damage our reputation.

disrupt

affect

could

investments,

including our

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
real estate
value of our
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 and client
relationships may be damaged as a result of our
involvement, or our clients’
in certain
associated with causing or
industries or projects
exacerbating climate change, as well as any decisions we
make to continue to conduct or change our activities in
response to considerations relating to climate change. New
regulations or guidance relating to climate change, as well
as the perspectives of shareholders, employees and other
stakeholders regarding climate change, may affect whether
and on what terms and conditions we engage in certain
activities or offer certain products.

involvement,

Legal and Regulatory

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.
intervention by law
We face the risk of significant
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
requirements; or
activities,
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 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.

Our revenues and profitability and those of our competitors
have been and will continue to be impacted by requirements
relating to capital, additional
loss-absorbing capacity,
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.

financial

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 stock transfers and other
financial transactions, could adversely impact levels of
market activity more broadly, and thus impact our
businesses. Changes to laws or regulations, such as tax
laws, could also have a disproportionate impact on us,
based on the way those laws or regulations are applied to
financial services and financial
firms or due to our
corporate structure. For example, during the recent
presidential election, the new U.S. administration offered
tax policy ideas that if enacted would, among other things,
increase the corporate tax rate and the U.S. tax rate on
Global
Intangible Low Taxed Income (GILTI). Any
increase in the corporate tax rate or the U.S. tax on GILTI
would increase our effective tax rate and provision for
taxes, possibly materially.

Goldman Sachs 2020 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

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 adversely
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
limitations on
derivatives markets and transactions;
incentive
affiliate
limitations
compensation;
transactions; requirements 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
advisers in dealing with clients. The implementation of
higher capital requirements, more stringent requirements
relating to liquidity,
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. We
may also become subject to higher and more stringent
capital and other regulatory requirements as a result of the
implementation of Basel Committee standards, including
those published in December 2017.

long-term debt and total

Goldman Sachs 2020 Form 10-K

As described in “Business — Regulation — Banking
Supervision and Regulation” in Part I, Item 1 of this
Form 10-K, the SCB has replaced the capital conservation
buffer under the Standardized Capital Rules and resulted in
higher Standardized capital ratio requirements. Failure to
comply with these requirements could limit our ability to,
among other things, repurchase shares, pay dividends and
make certain discretionary compensation payments. In
addition, if, as in 2020, we are required to resubmit our
capital plan, we generally may not make
capital
distributions, such as share repurchases or dividends,
without the prior approval of the FRB. Dividends and
repurchases are also subject to oversight by the FRB, which
can result in limitations. Limitations on our ability to make
capital distributions could, among other things, prevent us
from returning capital 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
surcharge. Our G-SIB surcharge is updated annually based
on financial data from the prior year. Expansion of our
businesses, growth in our balance sheet and increased
reliance on short-term wholesale funding have resulted in
increases and in the future may result in further increases in
our G-SIB surcharge and a corresponding increase in our
capital requirements.

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
potential
liability for non-compliance and reporting
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

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 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 have not historically
applied to us. 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

Increasingly, regulators and courts have sought to hold
financial
institutions liable for the misconduct of their
clients where they have determined that the financial
institution should have detected that the client was engaged
in wrongdoing, even though the financial institution had no
direct knowledge of 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 controlled by financial
institutions have an investment, but which they do not
regulators and courts
actively manage.
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, prime brokerage, investing and
other similar activities 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 individual,
institutional, sovereign or
investment fund clients, any breach, or even an alleged
breach, of such obligations could have materially negative
legal, regulatory and reputational consequences.

In addition,

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.

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.

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 adversely 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.

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

regarding

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.
Political
financial
institutions has in the past and may in the future result in a
significant amount of adverse press coverage, as well as
adverse statements or charges by regulators or other
government officials. Press coverage and other public
statements that assert some form of 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.

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
the financial services industry.
legislation targeted at
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.

Goldman Sachs 2020 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 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
posted on social media or other internet
forums or
published by news organizations. Postings on these types of
forums may also adversely impact risk positions of our
clients and other parties that owe us money, securities or
other assets and increase the chance that they will not
perform their obligations to us or reduce the revenues we
receive from their use of our services. The speed and
pervasiveness with which information can be disseminated
through these channels, in particular social media, may
magnify risks relating to negative publicity.

Substantial civil or criminal
liability or significant
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 of our legal and
regulatory proceedings and investigations. We have seen legal
claims by consumers and clients increase in a market
downturn and employment-related claims increase following
periods
reduced our headcount.
Additionally, governmental entities have been plaintiffs and
are parties in certain of our legal proceedings, 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.

in which we have

Significant settlements by several large financial institutions,
including, in some cases, us, with governmental entities have
been publicly announced. The trend of large settlements with
governmental entities may adversely affect the outcomes for
institutions in similar actions, especially
other financial
where 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.

regulatory

uncertain

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.

Goldman Sachs 2020 Form 10-K

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 have in the past resulted in and could in
the future result in significant monetary penalties. Such
violations could also result in severe restrictions on our
activities and damage to our reputation.

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 institutions or their employees. See for example,
“1MDB-Related Matters” in Note 27 to the consolidated
financial statements in Part II, Item 8 of this Form 10-K.
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. Further, as a result of the
1MDB settlement, we are no longer a “well-known
seasoned issuer,” which could place limitations on the
manner in which we can market our securities.
In conducting our businesses around the world, we
are subject to political, legal, regulatory and other
risks that are inherent in operating in many countries.

restrictive governmental actions. For

In conducting our businesses and supporting our global
operations, we are subject to risks of possible nationalization,
expropriation, price controls, capital controls, exchange
controls, communications and other content restrictions, and
other
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. We are also
subject to the risk that our businesses may be subject to
divergent laws and regulations across markets and that the
jurisdictions in which we operate may implement laws and
regulations that directly conflict with those of another
jurisdiction. 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 reputation generally. Further, in
some jurisdictions a 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 and other sanctions. We are also subject to
the enhanced risk that transactions we structure might not be
legally enforceable in all cases.

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

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. See for example, “1MDB-
Related Matters” in Note 27 to the consolidated financial
statements in Part II, Item 8 of this Form 10-K.

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, as reflected by the settlements relating to 1MDB.

regulatory

application of

The
and
requirements in the U.S. and non-U.S. jurisdictions to
large financial
facilitate the orderly resolution of
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 our
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.

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
losses at the subsidiary level would be
remain solvent,
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 security holders (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.

Goldman Sachs 2020 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, 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”
the intercompany
powers in certain circumstances.
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

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
intercompany indebtedness and the extension of
of
additional
strategy were
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.
and
transferred
substantially all of its global core liquid assets (GCLA) to
Funding IHC, and agreed to transfer additional GCLA
above prescribed thresholds.

intercompany

receivables

certain

Goldman Sachs 2020 Form 10-K

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
unsecured
will
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.

its guarantee obligations

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
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 of Group Inc.’s major subsidiaries.

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.

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

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.

Our commodities activities, particularly our physical
commodities activities, subject us to extensive
regulation and involve certain potential
risks,
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

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
reasonable prices or
store
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.

Competition

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.

Goldman Sachs 2020 Form 10-K

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.

The growth of electronic trading and the introduction
of new trading technology has increased competition.

transactions are

Technology is fundamental
to our business and our
industry. The growth of electronic trading and the
introduction of new technologies is changing our businesses
and presenting us with new challenges. Securities, futures
and options
increasingly occurring
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
these alternative
compete with us,
trading systems
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.

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, particularly given the generally lower commissions
arising from electronic trades.

into

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

less

result

future

simply

in the

and may

favorable or

adverse
Correspondingly,
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
in our
the past
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.
Similarly, we have not historically engaged in retail equities
intermediation to the same extent as other financial
institutions, which has in the past and could in the future
adversely affect our market share in equities execution.

The financial services industry is highly competitive.

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.

forward various proposals

Governments and regulators have adopted regulations,
imposed taxes, adopted compensation restrictions or
otherwise put
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.

Goldman Sachs 2020 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 would 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.

Our operating expenses and efficiency ratio depend, in part,
on our overall headcount and the proportion of our
employees 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.

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 6.6 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.

In Europe, the Middle East and Africa, we have offices
consisting of approximately 1.5 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. 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.

Goldman Sachs 2020 Form 10-K

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 2020.

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
November
December
Total

–
–
–
–

–
–
–

49,693,762
49,693,762
49,693,762

–
–
–
–

We suspended stock repurchases during the first quarter of
2020 and, consistent with the FRB’s requirement for all
large BHCs, extended the suspension of stock repurchases
through the fourth quarter of 2020.

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.

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.

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 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 may 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
Registrant’s
Item 5. Market
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, 2015 through December 31, 2020 is set forth
in “Supplemental Financial Information — Common Stock
Performance” in Part II, Item 8 of this Form 10-K. As of
February 5, 2021, there were 6,491 holders of record of our
common stock.

Goldman Sachs 2020 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

banking,

securities,

investment

The Goldman Sachs Group, Inc. (Group Inc. or parent
company), a Delaware corporation,
together with its
consolidated subsidiaries,
is a leading global financial
institution that delivers a broad range of financial services
across
investment
management and consumer banking to a large 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.

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, 2020. All references to “the consolidated
financial
Financial
Information” are to Part II, Item 8 of this Form 10-K. All
references to 2020, 2019 and 2018 refer to our years ended,
or the dates, as the context requires, December 31, 2020,
December 31, 2019 and December 31, 2018, respectively.
Any reference to a future year refers to a year ending on
December 31 of that year.

“Supplemental

statements”

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.

and

savings

strategic

locations

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) trends in or growth opportunities for our
businesses, including the timing, costs, profitability, benefits
and other aspects of business and strategic initiatives and
their impact on our efficiency ratio, (iii) our level of future
compensation expense, including as a percentage of both
operating expenses and revenues net of provision for credit
losses, (iv) our investment banking transaction backlog,
(v) our expected interest income and interest expense, (vi) our
initiatives,
expense
(vii) expenses we may incur,
including future litigation
expense and expenses from investing in our consumer and
transaction banking businesses, (viii) the projected growth of
our deposits and other funding, asset liability management
and funding strategies and related interest expense savings,
(ix) our business initiatives, including transaction banking
and new consumer financial products, (x) our planned 2021
parent vanilla debt issuances, (xi) the amount, composition
and location of GCLA we expect to hold, (xii) our credit
exposures, (xiii) our expected provisions for credit losses
(including those related to our co-branded credit card
relationship with General Motors), (xiv) the adequacy of our
allowance for credit losses, (xv) the projected growth of our
installment
the
loan and credit card businesses,
objectives and effectiveness of our business continuity plan
(BCP), information security program, risk management and
liquidity policies, (xvii) our resolution plan and strategy and
their implications for stakeholders, (xviii) the design and
effectiveness of our resolution capital and liquidity models
and triggers and alerts framework, (xix) the results of stress
tests, (xx) the effect of changes to regulations, and our future
status, activities or reporting under banking and financial
regulation, (xxi) our NSFR, (xxii) our expected tax rate,
(xxiii) the future state of our liquidity and regulatory capital
ratios, and our prospective capital distributions (including
dividends and repurchases), (xxiv) our expected SCB and
G-SIB surcharge, (xxv) legal proceedings, governmental
investigations or other contingencies, (xxvi) the 1MDB
settlements, including the asset recovery guarantee and our
remediation activities, (xxvii) the effectiveness of our strategy
with respect to Brexit, (xxviii) the replacement of IBORs and
transition to alternative risk-free reference rates,
our
(xxix) the impact of the COVID-19 pandemic on our
business, results, financial position and liquidity, (xxx) the
effectiveness of our management of our human capital,
including our diversity goals and (xxxi) our plans for our
people to return to our offices.

(xvi)

Goldman Sachs 2020 Form 10-K

Operating expenses were $28.98 billion for 2020, 16%
higher than 2019, primarily reflecting significantly higher
net provisions for litigation and regulatory proceedings,
higher compensation and benefits expenses (reflecting
improved financial performance) and higher transaction
based expenses (reflecting an increase in activity levels).
Our efficiency ratio (total operating expenses divided by
total net revenues) for 2020 was 65.0%, compared with
68.1% for 2019. Net provisions
litigation and
regulatory proceedings increased our efficiency ratio for
2020 by 7.6 percentage points and for 2019 by 3.4
percentage points.

for

During 2020, we returned $3.72 billion of capital to
common shareholders, including $1.93 billion of common
share repurchases, all during the first quarter, and
$1.80 billion in common stock dividends. As of
December 2020, our Common Equity Tier 1 (CET1) capital
ratio was 14.7% under the Standardized Capital Rules and
13.4% under the Advanced Capital Rules. See Note 20 to
the
further
information about our capital ratios.

consolidated

statements

financial

for

In the beginning of 2020, we announced strategic initiatives
related to expense efficiencies and funding optimization
with an emphasis on improving profitability and
shareholder returns. We estimated that by year-end 2022
we will generate (i) $1.3 billion of annual run-rate expense
efficiencies, which will create capacity to fund growth, and
(ii) $1.0 billion of annual run-rate interest expense savings
through funding optimization from the growth of deposits
and the reduction of wholesale unsecured funding. During
2020, we achieved approximately half of the expense
efficiencies target of $1.3 billion, which enabled us to
partially offset the cost of investment in our business and
our people in 2020. While we did not achieve interest
expense savings during 2020, we remain focused on
achieving the $1.0 billion interest expense savings by
year-end 2022, based on the current pricing of our
consumer deposits, as well as higher 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

Executive Overview

We generated net earnings of $9.46 billion for 2020, an
increase of 12% compared with $8.47 billion for 2019.
Diluted earnings per common share (EPS) was $24.74 for
2020, an increase of 18% compared with $21.03 for 2019.
Return on average common shareholders’ equity (ROE)
was 11.1% for 2020, compared with 10.0% for 2019.
Book value per common share was $236.15 as of
compared with
8.1% higher
December
December 2019.

2020,

During 2020, we recorded net provisions for litigation and
regulatory proceedings of $3.42 billion, which reduced
diluted EPS by $9.51 and reduced ROE by 3.9 percentage
points. During 2019, we recorded net provisions for
litigation and regulatory proceedings of $1.24 billion,
which reduced diluted EPS by $3.16 and reduced ROE by
1.5 percentage points.

Net revenues were $44.56 billion for 2020, 22% higher
than 2019. Net revenues were significantly higher in both
Fixed Income, Currency and Commodities (FICC) and
Equities within Global Markets, driven by strong client
activity, and in Investment Banking, reflecting significantly
higher net revenues in both Equity and Debt underwriting.
Net revenues in Consumer & Wealth Management were
higher, reflecting growth in Wealth management and
Consumer banking. These increases were partially offset by
lower net
in Asset Management, due to
significantly lower net revenues in Equity investments and
Lending and debt investments, which reflected the impact
of a challenging environment earlier this year.

revenues

Provision for credit losses was $3.10 billion for 2020,
compared with $1.07 billion for 2019. This increase was
primarily due to significantly higher provisions related to
wholesale loans as a result of individual impairments and
ratings downgrades during the year, as well as deterioration
and uncertainty in the broader economic environment
(incorporating the accounting for credit losses under the
standard)
Current Expected Credit Losses
reflecting the impact of
the
coronavirus (COVID-19) pandemic. The increase also
included higher provisions related to credit card loans, due
to growth in the portfolio. See Note 3 to the consolidated
financial statements for further information about ASU
No. 2016-13, “Financial Instruments — Credit Losses
(Topic 326) — Measurement of Credit Losses on Financial
Instruments.”

the global outbreak of

(CECL)

Goldman Sachs 2020 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

Business Environment

In the beginning of 2020, the spread of COVID-19 across
the globe and the accompanying temporary closures of
non-essential businesses and stay-at-home requirements
caused a sharp contraction in global economic activity,
widespread unemployment, high levels of volatility across
most financial assets and global markets, an unprecedented
decline in global equity prices, and a significant widening of
credit spreads. Global central banks responded quickly
with accommodative monetary policy by reducing policy
interest rates and increasing large scale asset purchases, and
the establishment of a number of facilities to support the
functioning of markets and to provide liquidity to markets.
In addition, governments globally intervened with fiscal
policy to mitigate the impact, including the Coronavirus
Aid, Relief, and Economic Security (CARES) Act in the
U.S., which provided economic relief to businesses and
individuals. These monetary and fiscal
interventions,
combined with the reopening of businesses and relaxation
of earlier lockdowns, contributed to a sharp rebound in
global economic activity during the second half of 2020. As
a result, investors became more optimistic towards the
prospect of a quicker economic recovery and a return to
pre-pandemic levels, effecting sharp increases in equity
prices and tighter credit spreads. Late in the year, medical
professionals developed effective COVID-19 vaccines and
governments began to distribute them globally, which is
expected to reduce virus spread and further aid economic
recovery. Additionally, the U.S. concluded a presidential
election, and a second pandemic-aid bill was passed that
included additional unemployment benefits and direct
payments to individuals.

Despite broad improvements in the overall economy since
the pandemic began, there continues to be uncertainty
related to the prospects for economic growth, virus
resurgence, vaccine distribution, further fiscal stimulus and
geopolitical risks. 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
losses generally recognized in our
related gains or
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.

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.

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 both December 2020 and December 2019, of our total
assets. See Notes 4 through 10 to the consolidated financial
statements for further information about level 3 financial
assets, including changes in level 3 financial assets and related
fair value measurements. Absent evidence to the 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 valuation adjustments, including
those related to illiquidity or counterparty credit quality.

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

Goldman Sachs 2020 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

in independent

Instruments.
Controls Over Valuation of Financial
Market makers and investment professionals in our revenue-
producing units are responsible for pricing our financial
instruments. Our control infrastructure is independent of the
revenue-producing units and is fundamental to ensuring that
all of our financial 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
risk oversight and control
functions. This independent price verification is critical to
ensuring that our financial instruments are properly valued.
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
significant inputs which cannot be corroborated by external
market data are classified in level 3 of the fair value
hierarchy. Price verification 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.

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

IHS Markit, Bloomberg,

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

Goldman Sachs 2020 Form 10-K

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.

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 market developments in pricing
See “Risk Management — Model Risk
theories.
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 that are accounted for at
amortized cost. We adopted ASU No. 2016-13 in
January 2020, which replaced the probable incurred credit loss
model for recognizing credit losses with the CECL model. As a
result, our allowance for credit losses effective January 2020,
reflects our estimate of credit losses over the remaining expected
life of such loans and also takes into account forecasts of future
economic conditions. See Note 3 to the consolidated financial
statements for further information about adoption of ASU
No. 2016-13. To determine the allowance for credit losses, we
classify our loans accounted for at amortized cost into wholesale
and consumer portfolios. These portfolios represent the level at
which we have developed and documented our methodology to
determine the allowance for credit losses. The allowance for
credit losses is measured on a collective basis for loans that
exhibit similar risk characteristics using a modeled approach
and asset-specific basis for loans that do not share similar risk
characteristics. The allowance for credit losses also includes
qualitative components which allow management to reflect the
uncertain nature of economic forecasting, capture uncertainty
regarding model inputs, and account for model imprecision and
concentration risk. The determination of allowance for credit
losses entails significant judgment on various risk factors. Risk
factors for wholesale loans include internal credit ratings,
industry default and loss data, expected life, macroeconomic
indicators (e.g., unemployment rates and GDP), the borrower’s
capacity to meet its financial obligations, the borrower’s country
of risk and industry, 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 installment and credit card loans include Fair
Isaac Corporation (FICO) credit scores, delinquency status, loan
vintage and macroeconomic indicators.

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

losses entails judgment about
Our estimate of credit
collectability at
the reporting dates, and there are
uncertainties inherent in those judgments. The allowance
for credit losses is subject to a governance process that
involves review and approval by senior management within
our independent risk oversight and control functions.
Personnel within our independent risk oversight and
control
functions are responsible for forecasting the
economic variables that underlie the economic scenarios
that are used in the modeling of expected credit losses.
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.

We also record an allowance for credit losses on lending
commitments which are held for investment that are
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 whether such
commitments are cancellable by us. 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 consolidated
financial statements for further information about goodwill.

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

Identifiable intangible assets are tested for impairment
when 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 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 statements for further information
about identifiable intangible assets.

intangible assets for impairment,

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
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, the progress of
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.

final

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.

Goldman Sachs 2020 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

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. For a discussion of our 2019 financial
results
Item 7
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in our Annual Report
on Form 10-K for the year ended December 31, 2019.
Financial Overview
The table below presents an overview of our financial
results and selected financial ratios.

compared with 2018,

see Part

II,

Year Ended December

$ in millions, except per share amounts

2020

2019

2018

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

$44,560 $36,546 $36,616
$12,479 $10,583 $12,481
$ 9,459 $ 8,466 $10,459
$ 8,915 $ 7,897 $ 9,860
$ 24.74 $ 21.03 $ 25.27
11.1% 10.0% 13.3%
11.8% 10.6% 14.1%
0.9%
1.1%
9.4% 12.3%
8.8%
9.3%
20.2% 19.7% 12.5%

0.8%
10.3%
8.2%

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 EPS.

‰ ROE is calculated by dividing net earnings to common by
average monthly common shareholders’ equity. Tangible
common shareholders’ equity is calculated as
total
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 shareholders’ equity is calculated by dividing net
earnings by average monthly shareholders’ equity.

Goldman Sachs 2020 Form 10-K

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

2020

2019

2018

$ 91,779
Total shareholders’ equity
(11,203)
Preferred stock
80,576
Common shareholders’ equity
(4,238)
Goodwill
Identifiable intangible assets
(617)
Tangible common shareholders’ equity $ 75,721

$ 90,297
(11,203)
79,094
(3,965)
(499)
$ 74,630

$ 85,238
(11,253)
73,985
(3,739)
(351)
$ 69,895

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

Year Ended December

$ in millions

2020

2019

2018

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

$ 9,141
6,923
3,548
15,546
4,651
39,809
13,689
8,938
4,751
$44,560

$ 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

In the table above:
‰ Investment banking consists of revenues (excluding net
from financial advisory and underwriting
included in our

interest)
assignments. These activities are
Investment Banking segment.

‰ 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 in
interest
credit products, mortgages,
currencies, commodities and equity products. These
activities are included in our Global Markets segment.

rate products,

‰ Other principal

transactions

consists of

revenues
(excluding net interest) 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).

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 Environment. During 2020, the COVID-19
pandemic broadly impacted the operating environment,
contributing to lower global equity prices and wider credit
spreads earlier in the year. The ensuing financial market
volatility and negative impact to global economic activity
were counteracted, in part, by monetary and fiscal support
from central banks and governments globally, which
contributed to a sharp rebound in global equity prices and
tighter credit spreads. Market-making activities benefitted
from higher levels of volatility, higher client activity, and
wider bid-ask spreads.
Investment banking activities
benefitted from high levels of industry-wide underwriting
volumes, while industry-wide completed mergers and
acquisitions volumes decreased, reflecting the impact of the
COVID-19 pandemic on announcements in the first half of
2020.

the
the ongoing efforts to mitigate the impact of
If
COVID-19 pandemic turn out to be ineffective, it may lead
to a decline in market-making activity levels, a continued
decline in industry-wide completed mergers and acquisitions
volumes, or a decline in industry-wide underwriting volumes,
and declines in global equity markets or widening of credit
spreads, and net revenues and the provision for credit losses
would likely be negatively impacted. See “Segment
Operating Results” for information about the operating
environment and material trends and uncertainties that may
impact our results of operations.

2020 versus 2019. Net revenues in the consolidated
statements of earnings were $44.56 billion for 2020, 22%
higher than 2019, reflecting significantly higher market
making and investment banking revenues, and higher
investment management revenues, commissions and fees
and net interest income, partially offset by significantly
lower other principal transactions revenues.

Non-Interest Revenues. Investment banking revenues in
the consolidated statements of earnings were $9.14 billion
for 2020, 34% higher than 2019, due to significantly higher
revenues in both equity and debt underwriting, reflecting an
increase in industry-wide volumes. These increases were
partially offset by slightly lower revenues in financial
advisory, reflecting a decrease in industry-wide completed
merger and acquisitions transactions.

Investment management revenues in the consolidated
statements of earnings were $6.92 billion for 2020, 12%
higher than 2019, primarily due to higher management and
other fees, reflecting the impact of higher average assets
under supervision (AUS) and the impact of the full-year
consolidation of GS Personal Financial Management,
partially offset by a lower average effective management fee
due to shifts in the mix of client assets and strategies. In
addition, incentive fees were significantly higher, primarily
driven by performance.

Commissions and fees in the consolidated statements of
earnings were $3.55 billion for 2020, 19% higher than
2019, reflecting an increase in our listed cash equity
volumes, generally consistent with market volumes.

Market making revenues in the consolidated statements of
earnings were $15.55 billion for 2020, 53% higher than
2019, primarily due to significantly higher revenues in
equity products (both derivatives and cash products), credit
and
rate products,
products,
currencies.

commodities

interest

Other principal transactions revenues in the consolidated
statements of earnings were $4.65 billion for 2020, 23%
lower than 2019, reflecting significantly lower net gains
from investments in private equities and net losses from
debt investments, partially offset by significantly higher net
gains from investments in public equities.

interest

Interest

Income. Net

related to other

Net
income in the
consolidated statements of earnings was $4.75 billion for
2020, 9% higher than 2019, reflecting a decrease in interest
interest-bearing
expense primarily
liabilities, collateralized financings, long-term borrowings
and deposits, each reflecting the impact of lower interest
rates, partially offset by the impact of higher average
balances for deposits. The decrease in interest expense was
largely offset by a decrease in interest income primarily
related to collateralized agreements, other interest-earning
assets and deposits with banks, each reflecting the impact of
rates. See “Statistical Disclosures —
lower
Distribution of Assets, Liabilities and Shareholders’
Equity” for further information about our sources of net
interest income.

interest

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

Provision for credit losses

Year Ended December

2020

2019

$3,098

$1,065

2018

$674

Goldman Sachs 2020 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

2020 versus 2019. Provision for credit losses in the
consolidated statements of earnings was $3.10 billion for
2020, compared with $1.07 billion for 2019. This increase
was primarily due to significantly higher provisions related
to wholesale loans as a result of individual impairments
related to
(approximately $1.15 billion primarily
technology,
borrowers
in the diversified industrials,
media & telecommunications and natural
resources
industries) and ratings downgrades during the year, as well
as deterioration and uncertainty in the broader economic
environment (incorporating the accounting for credit losses
under the CECL standard) reflecting the impact of the
COVID-19 pandemic. The increase also included higher
provisions related to credit card loans, due to growth in the
portfolio. See Note 3 to the consolidated financial
statements
about ASU
No. 2016-13.

information

further

for

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
financial
factors,
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.

Year Ended December

$ in millions

2020

2019

2018

Compensation and benefits
Transaction based
Market development
Communications and technology
Depreciation and amortization
Occupancy
Professional fees
Other expenses
Total operating expenses

$13,309
4,141
401
1,347
1,902
960
1,306
5,617
$28,983

$12,353
3,513
739
1,167
1,704
1,029
1,316
3,077
$24,898

$12,328
3,492
740
1,023
1,328
809
1,214
2,527
$23,461

Headcount at period-end

40,500

38,300

36,600

In the table above, brokerage, clearing, exchange and
distribution fees has been renamed transaction based and
additionally includes expenses resulting from completed
transactions, which are directly related to client revenues.
Such expenses were previously reported in other expenses
and were $314 million for 2020 ($55 million for the first
quarter of 2020, $69 million for the second quarter of
2020, $100 million for the third quarter of 2020 and
$90 million for the fourth quarter of 2020), $261 million
for 2019 and $292 million for 2018. Previously reported
amounts have been conformed to the current presentation.

Goldman Sachs 2020 Form 10-K

2020 versus 2019. Operating expenses in the consolidated
statements of earnings were $28.98 billion for 2020, 16%
higher than 2019. Our efficiency ratio (total operating
expenses divided by total net revenues) for 2020 was
65.0%, compared with 68.1% for 2019. Net provisions for
litigation and regulatory proceedings
increased our
efficiency ratio for 2020 by 7.6 percentage points and for
2019 by 3.4 percentage points.

and

regulatory

proceedings

In addition,

The increase in operating expenses compared with 2019
primarily reflected significantly higher net provisions for
litigation
higher
compensation and benefits expenses (reflecting improved
transaction based
financial performance).
expenses were higher (reflecting an increase in activity
levels), technology expenses were higher and expenses
related to consolidated investments, including impairments,
were also higher (increase was primarily in depreciation
and amortization and occupancy expenses). The increase
also reflected higher charitable contributions (included in
other
approximately
$300 million to Goldman Sachs Gives and approximately
$125 million to The Goldman Sachs Foundation during
2020. These increases were partially offset by significantly
lower travel and entertainment expenses (included in
market development expenses) and lower occupancy-
related expenses.

expenses), which

included

Net provisions for litigation and regulatory proceedings for
2020 were $3.42 billion compared with $1.24 billion for
2019.

Headcount increased 6% compared with December 2019,
reflecting investments in new business initiatives and an
increase in technology professionals.

Provision for Taxes
The effective income tax rate for 2020 was 24.2%, up from
the full year income tax rate of 20.0% for 2019, primarily
due to an increase in provisions for non-deductible
litigation.

The CARES Act was enacted in March 2020. The CARES
Act includes retroactive and prospective provisions enacted
to provide income tax relief and liquidity to businesses
affected by the COVID-19 pandemic. The legislation
includes corporate income tax provisions that temporarily
allow for the carryback of net operating losses and remove
increase
limitations on the use of loss carryforwards,
interest
allow
deduction
accelerated depreciation deductions on certain asset
improvements. The CARES Act did not have a material
impact on our effective income tax rate for 2020.

limitations

expense

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

In July 2020, the U.S. Internal Revenue Service and the U.S.
Department of the Treasury released final regulations that
include an election to exempt income that is subject to a
high rate of tax from Global Intangible Low Taxed Income
(GILTI) and proposed regulations that would conform the
high-tax elections for purposes of GILTI and Subpart F.
These final and proposed regulations did not have a
material impact on our effective tax rate for 2020. In
September 2020, Base Erosion and Anti-Abuse Tax
regulations were released finalizing proposed regulations
and supplementing final regulations that were released in
2019. These final regulations did not have a material
impact on our effective tax rate for 2020.

Additionally, in July 2020, the U.K. Finance Act 2020
(Finance Act) was enacted. The Finance Act includes a
repeal of a two percentage point decrease in the U.K.
corporate income tax rate that was scheduled to become
effective in April 2020. The impact of this legislation did
not have a material impact on our effective income tax rate
for 2020.

We expect our 2021 income tax rate to be approximately
21%, excluding the impact of income tax benefits on
employee share-based awards and any potential changes in
current income tax rates.

Segment Assets and Operating Results
Segment Assets. The table below presents assets by
segment.

$ in millions

Investment Banking
Global Markets
Asset Management
Consumer & Wealth Management
Total

As of December

2020

2019

$ 116,242
844,606
95,751
106,429
$1,163,028

$ 92,009
725,060
92,102
83,797
$992,968

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

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

Year Ended December

2020

2019

2018

$ 9,423
1,624
6,134
$ 1,665
$ 1,193
$11,313
10.5%

$21,157
274
12,806
$ 8,077
$ 5,766
$40,760
14.1%

$ 7,984
442
5,142
$ 2,400
$ 1,740
$20,491
8.5%

$ 5,996
758
4,901
337
$
$
216
$ 8,012
2.7%

$44,560
3,098
28,983
$12,479
$ 8,915
$80,576
11.1%

$ 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%

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.

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. Net
earnings for each segment is calculated by applying the
firmwide tax rate to each segment’s pre-tax earnings.

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.

Goldman Sachs 2020 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

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
Includes
clients, including through relationship lending, middle-
market
lending and acquisition financing. We also
provide transaction banking services to certain of our
corporate clients.

The table below presents our Investment Banking assets.

$ in millions

Cash and cash equivalents
Collateralized agreements
Customer and other receivables
Trading assets
Investments
Loans
Other assets
Total

As of December

2020

2019

$ 34,730
20,242
2,465
29,493
1,078
26,544
1,690
$116,242

$25,301
13,376
3,576
20,737
854
26,565
1,600
$92,009

The table below presents our Investment Banking operating
results.

$ 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

Year Ended December

2020

2019

2018

$ 3,065

$ 3,197

$3,444

3,406
2,670
6,076

282
9,423
1,624
6,134
1,665
403
1,262
69
$ 1,193

1,482
2,119
3,601

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

1,628
2,358
3,986

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

Average common equity
Return on average common equity

$11,313
10.5%

$11,167

$8,737
17.9% 33.5%

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

$ in billions

Year Ended December

2020

2019

2018

Announced mergers and acquisitions $
983
Completed mergers and acquisitions $ 1,018
115
Equity and equity-related offerings
352
Debt offerings

$
$

$ 1,354
$ 1,270
67
$
246
$

$1,272
$1,168
67
$
$ 256

Goldman Sachs 2020 Form 10-K

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.

industry-wide

and acquisitions,

Operating Environment. During the year, the COVID-19
pandemic broadly impacted the economic environment and
had a mixed impact on investment banking activity. In
mergers
announced
transactions were negatively impacted by the pandemic,
primarily in the middle of the year, contributing to a year-
over-year decline in industry-wide completed transactions.
In underwriting, equity valuations and a desire by clients to
raise cash to strengthen their balance sheets, combined with
the lower rate environment, contributed to high levels of
activity across equity underwriting, including initial public
offerings, and higher volumes
in debt underwriting.
Corporate clients increased borrowing under revolving
lines of credit to address liquidity needs in the beginning of
the pandemic, but have since paid down borrowed funds
following the stabilization of credit markets.

In the future, if industry-wide announced and completed
mergers and acquisitions volumes continue to decline, or if
industry-wide equity and debt underwriting volumes
decline, or credit spreads related to hedges on our
relationship lending portfolio continue to tighten, net
revenues in Investment Banking would likely be negatively
the
impacted.
creditworthiness of borrowers would negatively impact the
provision for credit losses.

deterioration

addition,

2020 versus 2019. Net revenues in Investment Banking
were $9.42 billion for 2020, 24% higher than 2019,
reflecting significantly higher net revenues in Underwriting.
This increase was partially offset by significantly lower net
revenues in Corporate lending and slightly lower net
revenues in Financial advisory.

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 increase in Underwriting net revenues was due to
significantly higher net revenues in both Equity and Debt
underwriting,
reflecting an increase in industry-wide
volumes. The decrease in Corporate lending net revenues
primarily reflected net mark-downs on corporate loans in
2020 compared to net gains in 2019. The decrease in
Financial advisory net revenues reflected a decrease in
industry-wide
acquisitions
transactions, primarily in the middle of the year.

completed mergers

and

Provision for credit losses was $1.62 billion for 2020,
compared with $333 million for 2019, reflecting higher
impairments related to relationship lending and middle-
market lending and reserve increases as a result of the
impact of
the COVID-19 pandemic on the broader
economic environment (incorporating the accounting for
credit losses under the CECL standard). See Note 3 to the
consolidated financial statements for further information
about ASU No. 2016-13.

for

Operating expenses were $6.13 billion for 2020, 31%
higher than 2019, primarily due to significantly higher net
provisions
litigation and regulatory proceedings.
Pre-tax earnings were $1.67 billion for 2020, 35% lower
than 2019. Net provisions for litigation and regulatory
proceedings reduced ROE by 11.5 percentage points for
2020.

increased

compared

significantly

As of December 2020, our investment banking transaction
backlog
with
December 2019, due to significantly higher estimated net
revenues from potential equity underwriting transactions,
primarily from initial public offerings, and higher estimated
net
transactions.
Estimated net revenues from potential debt underwriting
transactions were essentially unchanged.

from potential

revenues

advisory

Our backlog represents an estimate of our net revenues
from future transactions where we believe that future
revenue realization is more likely than not. We believe
changes in our 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, which could occur in light of the impact of
the COVID-19 pandemic on mergers and acquisitions. In
addition, our 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
underwriting
transactions for which the time frame from discussion to
completion has shortened in the current environment.

including

occur,

also

Global Markets
Our Global Markets segment consists of:

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

Credit Products.
Investment-grade and high-yield
corporate 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,
(including U.S.
derivatives
and
securities,
government
collateralized mortgage
agency-issued
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.

agricultural

coal,

and

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

Goldman Sachs 2020 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

options,

securities,

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. We also
structure and make markets in derivatives on indices,
industry sectors,
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. In
addition, 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. 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 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 2020 Form 10-K

are

results

affecting

economic

and market

combination of
influenced by
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.
The amount and composition of our net revenues vary over
time as these drivers are impacted by multiple interrelated
conditions,
factors
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.
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 our Global Markets assets.

$ in millions

Cash and cash equivalents
Collateralized agreements
Customer and other receivables
Trading assets
Investments
Loans
Other assets
Total

As of December

2020

2019

$ 86,663
212,711
110,473
339,349
52,929
33,214
9,267
$844,606

$ 82,819
196,278
63,277
316,242
25,937
31,111
9,396
$725,060

The table below presents our Global Markets operating results.

$ 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

2020

2019

2018

$ 9,991
1,593
11,584
6,989
2,584
9,573
21,157
274
12,806
8,077
1,955
6,122
356
$ 5,766

$ 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

Average common equity
Return on average common equity

$40,760
14.1%

$ 40,060
6.8%

$ 41,237
6.8%

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 Global Markets net revenues
by line item in the consolidated statements of earnings.

2020 versus 2019. Net revenues in Global Markets were
$21.16 billion for 2020, 43% higher than 2019.

$ in millions

FICC

Equities

Year Ended December 2020

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

Year Ended December 2019

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

Year Ended December 2018

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

$ 8,972
–
53
2,559
$11,584

$ 5,813
–
1
1,574
$ 7,388

$ 5,531
–
19
1,435
$ 6,985

$6,574
3,347
(18)
(330)
$9,573

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

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

Global
Markets

$15,546
3,347
35
2,229
$21,157

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

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

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, other
principal transactions revenues 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 2020, Global Markets
operated in an environment characterized by strong client
activity, higher volatility, and wider bid-ask spreads compared
with 2019, as clients reacted to economic uncertainty amid the
COVID-19 pandemic by repositioning investment portfolios
and hedging risks across asset classes. During the initial stages
of the pandemic, equity prices decreased sharply and credit
spreads widened as global economic activity declined. In
response, central banks and governments globally intervened
with monetary easing and fiscal stimulus. This support, in
conjunction with improved sentiment regarding the pace of
the economic recovery, contributed to a sharp rebound in
global equity prices and tighter credit spreads. At the end of
2020, the S&P 500 Index was 16% higher and the MSCI
World Index was 14% higher than the end of 2019. U.S.
investment-grade credit spreads were approximately 5 basis
points tighter compared with the end of 2019. Additionally,
market volatility was elevated as the average daily VIX was 29
for 2020, compared with an average of 15 for 2019. If
macroeconomic conditions lead to a decline in activity levels,
bid-ask spreads or volatility, net revenues in Global Markets
would likely be negatively impacted.

Net revenues in FICC were $11.58 billion, 57% higher than
2019, primarily due to significantly higher net revenues in
FICC intermediation, reflecting significantly higher net
revenues across all major businesses. In addition, net revenues
in FICC financing were higher, driven by resale agreements.

The increase in FICC intermediation net revenues reflected
significantly higher client activity. The following provides
information about our FICC intermediation net revenues
by business, compared with 2019 results:
‰ Net revenues in credit products, interest rate products,
currencies and mortgages reflected higher client activity.
‰ Net revenues in commodities reflected the impact of
improved market-making conditions on our inventory
and higher client activity.

Net revenues in Equities were $9.57 billion, 30% higher
than 2019, due to significantly higher net revenues in
Equities intermediation, reflecting significantly higher net
revenues in both derivatives and cash products. This
increase was partially offset by lower net revenues in
Equities financing, primarily reflecting higher net funding
costs, including the impact of lower yields on our global
core liquid assets.

Provision for credit losses was $274 million for 2020,
compared with $35 million for 2019, reflecting loan growth
and reserve increases as a result of the impact of the
COVID-19 pandemic on the broader economic environment
(incorporating the accounting for credit losses under the
CECL standard). See Note 3 to the consolidated financial
statements for further information about ASU No. 2016-13.

Operating expenses were $12.81 billion for 2020, 18%
higher than 2019, primarily reflecting significantly higher
net provisions for litigation and regulatory proceedings,
higher compensation and benefits expenses (reflecting
improved financial performance) and higher transaction
based expenses. Pre-tax earnings were $8.08 billion for
2020, compared with $3.89 billion for 2019. Net
provisions
litigation and regulatory proceedings
reduced ROE by 4.0 percentage points for 2020.

for

Goldman Sachs 2020 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

including equity,

Asset Management
We manage client assets across a broad range of investment
strategies and asset classes for 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 corporate equity, credit, real estate
and infrastructure assets.

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 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.

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

Goldman Sachs 2020 Form 10-K

The table below presents our Asset Management assets.

$ in millions

Cash and cash equivalents
Collateralized agreements
Customer and other receivables
Trading assets
Investments
Loans
Other assets
Total

As of December

2020

2019

$ 8,635
4,749
1,261
6,819
34,386
16,558
23,343
$95,751

$ 6,756
3,433
1,579
5,266
37,096
17,101
20,871
$92,102

The table below presents our Asset Management operating
results.

$ in millions

Management and other fees
Incentive fees
Equity investments
Lending and debt investments
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

2020

2019

2018

$ 2,785
287
4,095
817
7,984
442
5,142
2,400
581
1,819
79
$ 1,740

$ 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

Average common equity
Return on average common equity

$20,491
8.5%

$21,575

$19,061
14.0% 19.2%

The table below presents our Equity investments net
revenues by equity type and asset class.

$ in millions

Equity Type
Private equity
Public equity
Total

Asset Class
Real estate
Corporate
Total

Year Ended December

2020

2019

2018

$ 2,417
1,678
$ 4,095

$ 4,288
477
$ 4,765

$ 4,390
(183)
$ 4,207

$ 1,621
2,474
$ 4,095

$ 2,384
2,381
$ 4,765

$ 1,816
2,391
$ 4,207

Operating Environment. Early in 2020, macroeconomic
concerns from the COVID-19 pandemic led to lower global
equity prices and wider credit spreads. These trends reversed
during the remainder of the year as widespread intervention
by central banks and governments globally, combined with
improving economic conditions, contributed to a sharp
rebound in global equity prices and tighter credit spreads,
which provided a more favorable backdrop for asset
management activities and investments. If the ongoing efforts
to mitigate the impact of the COVID-19 pandemic turn out
to be ineffective, it may lead to a decline in asset prices,
widening of credit spreads, and investors continuing to
transition to asset classes that typically generate lower fees or
investors withdrawing their assets, and net revenues in Asset
Management would likely be negatively impacted.

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

2020 versus 2019. Net revenues in Asset Management
were $7.98 billion for 2020, 11% lower than 2019,
reflecting significantly lower net
in Equity
investments and Lending and debt investments. Incentive
fees were significantly higher, and Management and other
fees (from our institutional and third-party distribution
asset management clients) were higher.

revenues

The decrease in Equity investments net revenues reflected
significantly lower net gains from investments in private
equities, partially offset by significantly higher net gains
from investments in public equities. Net gains from
investments in private equities for 2020 were primarily
driven by company-specific events, such as sales and capital
raises, partially offset by net mark-downs driven by
corporate performance.

losses

The decrease in Lending and debt investments primarily
reflected net
in 2020
from debt
compared with net gains in 2019. Lending and debt
investments
approximately
$1.05 billion of net interest income for 2020.

investments

revenues

included

net

The increase in Incentive fees was primarily driven by
performance, and the increase in Management and other
fees reflected the impact of higher average assets under
supervision, partially offset by a lower average effective
management fee due to shifts in the mix of client assets and
strategies.

Provision for credit losses was $442 million for 2020, 61%
higher than 2019, reflecting higher impairments related to
the private credit and real estate portfolios and reserve
increases as a result of the impact of the COVID-19
pandemic
environment
(incorporating the accounting for credit losses under the
CECL standard). See Note 3 to the consolidated financial
statements
about ASU
No. 2016-13.

information

economic

broader

further

the

for

Operating expenses were $5.14 billion for 2020, 7% higher
than 2019, due to higher compensation and benefits
expenses and higher expenses related to consolidated
investments, including impairments. Pre-tax earnings were
$2.40 billion for 2020, 38% lower than 2019.

During the year, we sold or announced the sale of over
$4 billion of gross equity investments, with a related
$2 billion expected reduction in required capital.

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

structuring,

leverage a broad, open-architecture

revenues

generates

from the

‰ Private banking and lending. Includes net interest
interest
for wealth

income allocated to deposit-taking and net
income
management clients.

earned on lending

activities

Goldman Sachs 2020 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

Consumer Banking. Our Consumer banking business
issues unsecured loans,
through our digital platform,
Marcus by Goldman Sachs (Marcus), and credit cards, to
finance the purchases of goods or services. We also accept
deposits through Marcus, in Goldman Sachs Bank USA (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.

The table below presents our Consumer & Wealth
Management assets.

$ in millions

Cash and cash equivalents
Collateralized agreements
Customer and other receivables
Trading assets
Investments
Loans
Other assets
Total

As of December

2020

2019

$ 25,814
12,518
7,132
17,969
52
39,799
3,145
$106,429

$18,670
8,675
6,173
13,087
50
34,127
3,015
$83,797

The table below presents our Consumer & Wealth
Management operating results.

Year Ended December

$ 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

2020

$3,889
114
780
4,783

1,213
5,996
758
4,901
337
81
256
40
$ 216

Average common equity
Return on average common equity

$8,012
2.7%

2019

3,475
81
783
4,339

864
5,203
423
4,545
235
47
188
29
159

6,292
2.5%

2018

$ 3,282
446
826
4,554

611
5,165
338
4,224
603
97
506
34
472

$ 4,950
9.5%

Goldman Sachs 2020 Form 10-K

globally

Operating Environment. During 2020, the COVID-19
pandemic initially negatively impacted economic activity
and financial markets. In response, central banks and
governments
intervened with widespread
monetary and fiscal stimulus to support the economy and
financial markets. As a result, global equity prices
rebounded sharply and finished the year higher than at the
end of 2019.
In addition, unemployment and retail
spending improved throughout the year after the initial
effects of the pandemic. If the ongoing efforts to mitigate
the impact of the COVID-19 pandemic turn out to be
ineffective, it may lead to a decline in asset prices, investors
continuing to favor asset classes that typically generate
lower
investors withdrawing their assets and
consumers withdrawing their deposits or deterioration in
consumer credit, and net revenues and the provision for
credit losses in Consumer & Wealth Management would
likely be negatively impacted.

fees,

2020 versus 2019. Net revenues in Consumer & Wealth
Management were $6.00 billion for 2020, 15% higher than
2019.

Net revenues in Wealth management were $4.78 billion,
10% higher
than 2019, primarily reflecting higher
Management and other fees, primarily reflecting the impact
of higher average AUS, higher transaction volumes and the
impact of
the full-year consolidation of GS Personal
Financial Management, partially offset by a lower average
effective management fee due to shifts in the mix of client
assets and strategies.

Net revenues in Consumer banking were $1.21 billion,
40% higher than 2019, reflecting higher credit card loan
and deposit balances.

Provision for credit losses was $758 million for 2020, 79%
higher than 2019, reflecting growth in credit card loans and
the impact of the COVID-19 pandemic on the broader
economic environment (incorporating the accounting for
credit losses under the CECL standard). See Note 3 to the
consolidated financial statements for further information
about ASU No. 2016-13.

Operating expenses were $4.90 billion for 2020, 8% higher
than 2019, primarily due to higher expenses related to the
impact of
the full-year consolidation of GS Personal
Financial Management and our credit card activities.
Pre-tax earnings were $337 million for 2020, 43% higher
than 2019.

Total client assets (which includes AUS, brokerage assets
and consumer deposits) exceeded $1 trillion at the end of
2020.

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

Assets Under Supervision
AUS 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’ assets (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 managed accounts
for institutional and individual investors. AUS also includes
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. AUS does not include the self-
directed brokerage assets of our clients.

The table below presents information about our firmwide
period-end AUS by segment, asset class, distribution
channel, region and vehicle.

$ in billions

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

As of December

2020

2019

2018

$1,530
615
$2,145

$1,298
561
$1,859

$1,087
455
$1,542

$ 191
475
896
1,562
583
$2,145

$ 761
615
769
$2,145

$1,656
318
171
$2,145

$1,186
707
252
$2,145

$ 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

$ 167
301
677
1,145
397
$1,542

$ 575
455
512
$1,542

$1,151
239
152
$1,542

$ 867
506
169
$1,542

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 29 basis points for
2020 and 32 basis points for 2019. This decrease 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 estimated
unrecognized incentive fees were $1.79 billion as of
December 2020 and $1.63 billion as of December 2019. Such
amounts are based on the completion of the funds’ financial
statements, which is generally one quarter in arrears. 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.

The table below presents changes in our AUS.

$ 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

Year Ended December

2020

2019

2018

$1,298

$1,087

$1,036

(3)
(12)
53
38
107
145
87
$1,530

2
34
35
71
52
123
88
$1,298

6
6
14
26
51
77
(26)
$1,087

$ 561

$ 455

$ 458

2
8
(6)
4
14
18
36
$ 615

9
11
17
37
13
50
56
$ 561

(5)
7
9
11
1
12
(15)
$ 455

$1,859

$1,542

$1,494

(1)
(4)
47
42
121
163
123
$2,145

11
45
52
108
65
173
144
$1,859

1
13
23
37
52
89
(41)
$1,542

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), GS Personal Financial Management and
Rocaton Investment Advisors
(Rocaton). SPIAS and
Rocaton were included in the Asset Management segment
and GS Personal Financial Management was included in the
Consumer & Wealth Management segment.

Goldman Sachs 2020 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 average
monthly firmwide AUS by segment and asset class.

Average for the
Year Ended December

$ in billions

2020

2019

2018

Segment
Asset Management
Consumer & Wealth Management
Total AUS

$1,429
565
$1,994

$1,182
505
$1,687

$1,050
467
$1,517

Asset Class
Alternative investments
Equity
Fixed income
Total long-term AUS
Liquidity products
Total AUS

$ 183
409
829
1,421
573
$1,994

$ 176
364
746
1,286
401
$1,687

$ 171
329
665
1,165
352
$1,517

In addition to our AUS, 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 AUS for
alternative assets, non-fee-earning alternative assets and
total alternative assets.

$ in billions

As of December 2020

Corporate equity
Credit
Real estate
Hedge funds and multi-asset
Other
Total

As of December 2019
Corporate equity
Credit
Real estate
Hedge funds and multi-asset
Other
Total

As of December 2018
Corporate equity
Credit
Real estate
Hedge funds and multi-asset
Other
Total

AUS

$ 80
19
18
74
–
$191

$ 81
14
13
77
–
$185

$ 72
11
10
74
–
$167

Non-fee-earning
alternative assets

Total
alternative
assets

$ 51
72
44
1
1
$169

$ 38
51
43
1
1
$134

$ 35
47
38
1
1
$122

$131
91
62
75
1
$360

$119
65
56
78
1
$319

$107
58
48
75
1
$289

Goldman Sachs 2020 Form 10-K

In the table above:
‰ Substantially all corporate equity is private equity.
‰ Total alternative assets included uncalled capital that is
available for future investing of $44 billion as of
December 2020, $32 billion as of December 2019 and
$27 billion as of December 2018.

‰ 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.

In the beginning of 2020, we announced a strategic
objective of growing our third-party alternatives business,
and established targets of achieving net
inflows of
$100 billion and gross inflows of $150 billion for
alternative assets over five years. During 2020, we raised
approximately $40 billion in third-party commitments for
alternative assets. As of December 2020, approximately
$13 billion of these commitments were included in AUS, as
they were generating fees. The remaining approximately
$27 billion of
such commitments were included in
non-fee-earning alternative assets in the table above,
approximately $20 billion of which will begin to earn fees
(and become AUS), if and when the commitments are
drawn and assets are invested.

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 2020

Corporate equity
Credit
Real estate
Other
Total

As of December 2019
Corporate equity
Credit
Real estate
Other
Total

As of December 2018
Corporate equity
Credit
Real estate
Other
Total

Loans

Debt
securities

Equity
securities

CIE
investments
and other

Total

$ –
8
9
–
$17

$ –
6
8
–
$14

$ –
11
2
–
$13

$ –
12
2
–
$14

$ –
8
2
–
$10

$16
–
4
–
$20

$17
–
5
–
$22

$17
–
4
–
$21

$ –
–
19
1
$20

$ –
–
17
1
$18

$ –
–
13
1
$14

$16
19
34
1
$70

$17
20
33
1
$71

$17
14
27
1
$59

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

Loans and Debt Securities. The table below presents the
concentration of loans and debt securities within our
alternative investments by accounting classification, region
and industry.

$ in billions

Loans
Debt securities
Total

Accounting Classification
Debt securities at fair value
Loans at amortized cost
Loans at fair value
Total

Region
Americas
EMEA
Asia
Total

Industry
Consumers
Financial Institutions
Healthcare
Industrials
Natural Resources & Utilities
Real Estate
Technology, Media & Telecommunications
Other
Total

As of
December 2020

$17
13
$30

44%
43%
13%
100%

45%
33%
22%
100%

5%
7%
9%
15%
4%
36%
14%
10%
100%

Equity. The table below presents the concentration of
equity securities within our alternative investments by
vintage, region and industry.

$ in billions

Equity securities

Vintage
2013 or earlier
2014 - 2016
2017 - thereafter
Total

Region
Americas
EMEA
Asia
Total

Industry
Financial Institutions
Healthcare
Industrials
Natural Resources & Utilities
Real Estate
Technology, Media & Telecommunications
Other
Total

As of
December 2020

$20

33%
34%
33%
100%

51%
18%
31%
100%

25%
8%
5%
7%
18%
31%
6%
100%

In the table above:
‰ Equity securities included $17 billion of private equity
positions and $3 billion of public equity positions that
converted from private equity upon the initial public
offering of the underlying company.

‰ Real estate equity securities consisted of 3% of
multifamily, 3% of office, 5% of mixed use and 7% of
other real estate equity securities.

CIE Investments and Other. CIE investments and other
included assets held by CIEs of $19 billion, which were
funded with liabilities of approximately $10 billion as of
December 2020. Substantially all such liabilities were
nonrecourse, thereby reducing our equity at risk.

The table below presents the concentration of CIE assets,
net of financings, within our alternative investments by
vintage, region and asset class.

$ in billions

CIE assets, net of financings

Vintage
2013 or earlier
2014 - 2016
2017 - thereafter
Total

Region
Americas
EMEA
Asia
Total

Asset Class
Hospitality
Industrials
Multifamily
Office
Retail
Senior Housing
Student Housing
Other
Total

As of
December 2020

1%
17%
82%
100%

63%
22%
15%
100%

4%
10%
23%
28%
6%
13%
7%
9%
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.

Goldman Sachs 2020 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

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 2020 Form 10-K

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
maximum risk appetite,
in order to ensure prompt
escalation and discussion among our revenue-producing
units, Treasury and our independent risk oversight and
control functions on a routine basis. 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
risk oversight and control
functions.

independent

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.

conduct various

Scenario Analyses. We
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 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
sheet
management strategy, including the level and 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.

longer-term balance

developing

our

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

customer

receivables

Balance Sheet Analysis and Metrics
As of December 2020, total assets in our consolidated
balance
sheets were $1.16 trillion, an increase of
$170.06 billion from December 2019, primarily reflecting
of
and
increases
$46.73 billion (primarily reflecting higher client activity),
trading assets of $38.30 billion (primarily due to increases
in derivative instruments reflecting the impact of changes in
interest rates and equity prices and increases in non-U.S.
government and agency obligations reflecting our and our
clients’
of
$28.46 billion (reflecting the impact of our and our clients’
investments of $24.51 billion (primarily
activities),
reflecting an increase in U.S. government obligations
accounted for as available-for-sale), and cash and cash
equivalents of $22.30 billion (primarily reflecting the
activity). As of December 2020,
impact of our
approximately 25% of our total assets were held in our
bank subsidiaries.

collateralized

agreements

activities),

As of December 2020, total liabilities in our consolidated
sheets were $1.07 trillion, an increase of
balance
$164.39 billion from December 2019, primarily reflecting
increases in deposits of $69.94 billion (reflecting increases
in consumer,
transaction banking and private bank
deposits), trading liabilities of $44.89 billion (primarily due
to increases
in equities and government obligations
reflecting higher client activity and increases in derivative
instruments reflecting the impact of changes in interest rate
and equity price movements), collateralized financings of
$21.93 billion (reflecting the impact of our and our clients’
activities),
of
$15.84 billion (primarily reflecting higher client activity).

customer

payables

other

and

Our total securities sold under agreements to repurchase
(repurchase agreements), accounted for as collateralized
financings, were $126.57 billion as of December 2020 and
$117.76 billion as of December 2019, which were 24%
higher as of December 2020 and 32% higher as of
December 2019 than the average daily amount of
repurchase agreements over the respective quarters, and
31% higher as of December 2020 and 40% higher as of
December 2019 than the average daily amount of
repurchase agreements over the respective years. As of
December 2020, 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’ activities 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.

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

2020

2019

$1,163,028
$ 213,481
95,932
$
12.1x
2.2x

$992,968
$207,076
$ 90,265
11.0x
2.3x

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

2020

2019

Total shareholders’ equity
Preferred stock
Common shareholders’ equity
Goodwill
Identifiable intangible assets
Tangible common shareholders’ equity

Book value per common share
Tangible book value per common share

$ 95,932
(11,203)
84,729
(4,332)
(630)
$ 79,767

$ 236.15
$ 222.32

$ 90,265
(11,203)
79,062
(4,196)
(641)
$ 74,225

$ 218.52
$ 205.15

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 358.8 million as of
December 2020 and 361.8 million as of December 2019.
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.

Goldman Sachs 2020 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

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

As of December

2020

2019

$259,962
173,947
52,870
213,481
95,932

28%
22%
7%
30%
13%
$796,192 100% $687,665 100%

33% $190,019
22% 152,018
48,287
27% 207,076
90,265
12%

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 2020.

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
funds and individuals. We have
companies, mutual
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.
We raise deposits, including savings, demand and time
deposits, from private bank clients, consumers, transaction
banking clients, other institutional clients, and through
internal and third-party broker-dealers. Substantially all of
our deposits are raised through GS Bank USA and 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 2020 Form 10-K

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-
non-investment-grade
securities,
backed
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
the use of unsecured long-term
information about
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
Loan Bank. We had no outstanding borrowings against the
Federal Home Loan Bank as of December 2020 and
$527 million as of December 2019. Additionally, we have
access to funding through the Federal Reserve discount
window. However, we do not rely on this funding in our
liquidity planning and stress testing.

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 and commercial paper, to finance liquid assets
and for other cash management purposes. In accordance
with regulatory requirements, Group Inc. does not issue
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.

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

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
issue in different
tenors, currencies and products to
maximize the diversification of our investor base.

The table below presents our quarterly unsecured long-term
borrowings maturity profile.

$ in millions

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total

As of December 2020

2022
2023
2024
2025
2026 - thereafter
Total

$ 8,839
$10,344
$ 6,200
$ 7,469

$6,762
$6,860
$4,735
$8,890

$6,965
$8,638
$6,094
$5,892

$6,403
$7,451
$3,302
$4,925

$ 28,969
33,293
20,331
27,176
103,712
$213,481

The weighted average maturity of our unsecured long-term
borrowings as of December 2020 was approximately seven
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
perpetual
funding. See Note 19 to the
consolidated financial statements for further information
about our shareholders’ equity.

source of

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 issue, redeem 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 such redemptions or
repurchases, we must receive approval from the Board of
Governors of
the Federal Reserve System (FRB). 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 by the FRB, and are
designed to capture our specific 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.

Goldman Sachs 2020 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

for making capital planning decisions.

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.
The FRB determines the stress capital buffer (SCB)
applicable to us based on its own annual stress test. The
SCB under the Standardized approach is calculated as
(i)
the difference between our starting and minimum
projected CET1 capital ratios under the supervisory
severely adverse scenario and (ii) our planned common
stock dividends for each of the fourth through seventh
quarters of the planning horizon, expressed as a percentage
of risk-weighted assets (RWAs).

capital, across

the

We submitted our 2020 CCAR capital plan in April 2020
and published a summary of our annual DFAST results in
June 2020. See “Business — Available Information” in
Part I, Item 1 of this Form 10-K. With respect to our 2020
CCAR submission, the FRB notified us that our SCB
beginning on October 1, 2020 is 6.6%, bringing our
Standardized CET1 capital ratio requirement to 13.6%. In
light of the impact of the COVID-19 pandemic on the
economy,
large bank holding
companies (BHCs) to suspend stock repurchases through
the fourth quarter of 2020 and not to increase common
stock dividends or pay common stock dividends in excess of
their average net income over the prior four quarters. The
FRB also required large BHCs, including us, to resubmit
their capital plans in November 2020 under the updated
scenarios provided by the FRB, and released the results of
the resubmissions in December 2020.

the FRB required all

The FRB did not change our SCB as a result of our
resubmission, but has extended the period to recalculate it
to March 31, 2021. The FRB also modified the existing
restrictions on capital actions by permitting stock
repurchases and common stock dividends,
in
aggregate, do not exceed the average net income over the
prior four quarters and requiring large BHCs to not
increase their common stock dividend in the first quarter of
2021. We plan to maintain both common and preferred
dividends, and resumed common stock repurchases in the
first quarter of 2021, while complying with these capital
restrictions. In addition, we will continue deploying capital
to our businesses where returns are accretive and otherwise
return it to our shareholders as permitted by the FRB.

that

Goldman Sachs 2020 Form 10-K

GS Bank USA has its own capital planning process, but was
not required to submit its annual stress test results to the
FRB in 2020. Based on growth in GS Bank USA’s average
balance sheet, it will be required to submit its annual stress
test results in 2022. Goldman Sachs International (GSI),
GSIB and Goldman Sachs Bank Europe SE (GSBE) also
have their own capital planning and stress testing process,
tests
which incorporates
internally designed stress
their
developed in accordance with the guidelines of
respective regulators.

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
actual capital deficiency,
including, but not limited to,
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 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, which includes 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. Effective on
January 1, 2021, we adjusted the attributed equity
framework in line with the impact of the SCB Rule and our
SCB of 6.6%, which became effective on October 1, 2020
under the Standardized approach.

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
Rule 10b5-1 and accelerated share repurchases),
the
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.

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 2020, the remaining share authorization
under our existing repurchase program was 49.7 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

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., Goldman Sachs Asset
(GSAMI) and GSBE) have
Management
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.

International

In addition, we have established a triggers and alerts
framework, which is designed to provide the Board of
Directors of Group Inc. (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- and
short-term issuer ratings by certain credit rating agencies.
GS Bank USA, GSIB and GSBE have also been assigned
long- and short-term issuer ratings, as well as ratings on
their long- 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
than a single calculation. See “Risk
factors
Management — Liquidity Risk Management — Credit
Ratings” for further information about credit ratings of
Group Inc., GS Bank USA, GSIB, GSBE, 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

The capital requirements calculated under the Capital
conservation buffer
Framework include
requirements, comprised of a 2.5% buffer (under the
Advanced Capital Rules), a stress capital buffer (under the
Standardized Capital Rules), and a countercyclical buffer
and the G-SIB surcharge (under both Capital Rules). Our
G-SIB surcharge is 2.5% for 2020, 2021 and 2022. We
expect that our G-SIB surcharge will be 3.0% beginning in
2023. The G-SIB surcharge and countercyclical buffer in
the future may differ due to additional guidance from our
regulators and/or positional changes, and our SCB is likely
to change from year to year based on the results of the
annual supervisory stress tests. Our target Standardized
CET1 capital ratio over the medium term is between 13.0%
and 13.5% (including management buffers) based upon the
execution of our previously announced strategic initiatives
and achievement of capital efficiencies.

See Note 20 to the consolidated financial statements for
further information about our risk-based capital ratios and
leverage ratios, and the Capital Framework.

Total Loss-Absorbing Capacity (TLAC)
We are also subject to the FRB’s TLAC and related
requirements. 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 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 leverage exposure requirement includes
the 2.0% leverage

the 7.5% minimum and (ii)

(i)
exposure buffer.

‰ The external

long-term debt

to RWAs requirement
includes (i) the 6% minimum and (ii) the 2.5% G-SIB
surcharge (Method 2).

Goldman Sachs 2020 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 external long-term debt to total leverage exposure is

the 4.5% minimum.

The table below presents information about our TLAC and
external long-term debt ratios.

$ in millions

TLAC
External long-term debt
RWAs
Leverage exposure

As of December

2020

2019

$ 242,730
$ 139,200
$ 609,750
$1,332,937

$ 236,850
$ 141,770
$ 563,575
$1,375,467

TLAC to RWAs
TLAC to leverage exposure
External long-term debt to RWAs
External long-term debt to leverage exposure

39.8%
18.2%
22.8%
10.4%

42.0%
17.2%
25.2%
10.3%

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 represent Advanced RWAs as of December 2020
and Standardized RWAs as of December 2019.
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.

‰ Leverage exposure consists of average adjusted total
assets and certain off-balance sheet exposures. As of
December 2020,
leverage exposure excluded average
holdings of U.S. Treasury securities and average deposits
at the Federal Reserve as permitted by the FRB under a
temporary amendment. This temporary amendment is
effective through March 31, 2021.

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

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 and GSBE are our primary
non-U.S. banking subsidiaries. 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 2020 Form 10-K

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 $22.38 billion as of December 2020 and
$20.88 billion as of December 2019, which exceeded the
amount required by $18.45 billion as of December 2020 and
$18.15 billion as of December 2019. 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 2020 and December 2019, GS&Co. had
tentative net capital and net capital in excess of both the
minimum and the notification requirements.

Non-U.S. Regulated Broker-Dealer Subsidiaries. Our
principal non-U.S. regulated broker-dealer subsidiaries
include GSI and GSJCL.

GSI, our U.K. broker-dealer, is regulated by the Prudential
Regulation Authority (PRA) and the Financial Conduct
Authority (FCA). GSI is subject to the capital 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 the Basel Committee on
capital
Banking
capital
framework
standards (Basel III).

(Basel Committee)
international

strengthening

Supervision’s

for

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

2020

2019

8.1%
10.0%
12.5%

8.8%
10.8%
13.4%

In the table above, the risk-based capital requirements
incorporate capital guidance received from the PRA and
could change 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

The table below presents information about GSI’s risk-
based capital ratios.

$ in millions

As of December

2020

2019

Risk-based capital and risk-weighted assets
CET1 capital
Tier 1 capital
Tier 2 capital
Total capital
RWAs

$ 26,394
$ 34,694
$
5,377
$ 40,071
$252,355

$ 24,142
$ 32,442
$
5,374
$ 37,816
$206,669

Risk-based capital ratios
CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

10.5%
13.7%
15.9%

11.7%
15.7%
18.3%

In the table above, CET1 capital, Tier 1 capital and Total
capital as of December 2020 excluded GSI’s undistributed
profits from October 2020 through December 2020, as
such profits have not yet been approved to be included as
regulatory capital by the PRA.

transactions,

commitments

In June 2019, the European Commission finalized an
amendment to the CRR that establishes 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
financing
guarantees),
less Tier 1 capital deductions. Following
Brexit, GSI will become subject to a similar PRA-required
leverage ratio that is expected to become effective in
January 2022. GSI had a leverage ratio of 4.6% as of both
December 2020 and December 2019. GSI’s leverage ratio
as of December 2020 excluded GSI’s undistributed profits
from October 2020 through December 2020, as such
profits have not yet been approved to be included as
regulatory capital by the PRA. 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.

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 2019 and will become fully
effective beginning in January 2022. As of December 2020,
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 2020 and
December 2019, these subsidiaries were in compliance with
their local capital requirements.

also subject

are

Regulatory and Other Matters

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.

Other Matters
Brexit. The E.U. and the U.K. agreed to a withdrawal
agreement (the Withdrawal Agreement), which became
effective on January 31, 2020. The transition period under
the Withdrawal Agreement ended on December 2020, after
which E.U.
law ceased to apply to the U.K. Effective
December 31, 2020, and notwithstanding the Trade and
Cooperation Agreement between the E.U. and U.K. reached
at the end of 2020, firms established in the U.K., including
our U.K. subsidiaries, have lost their pan-E.U. “passports”
and are generally treated as any other entities in countries
outside the E.U. whose access to the E.U. is governed by the
E.U. and national law.

The U.K. has adopted E.U. financial services legislation that
was in effect on December 31, 2020, which means that the
U.K. financial services regime will remain substantially the
same as under E.U. financial services legislation. However,
in the future the U.K. may diverge from E.U. legislation and
may decide not to adopt rules that correspond to E.U.
legislation not already operative in the U.K.

We had prepared for a scenario where the U.K. financial
services firms lost access to E.U. markets. Accordingly, we
have managed to continue servicing our E.U. client base in
the following manner:
‰ Our German bank subsidiary, GSBE, acts as our main
operating subsidiary in the E.U. and has assumed certain
functions that can no longer be efficiently and effectively
performed by our U.K. operating subsidiaries, including
GSI, GSIB and GSAMI.

Goldman Sachs 2020 Form 10-K

Market-led working groups in major jurisdictions, noted
above, have already selected their preferred alternative risk-
free reference rates. They 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.

In October 2020, the International Swaps and Derivatives
Association (ISDA) launched the IBOR Fallbacks Protocol,
which became effective in January 2021 and provides
derivatives market participants with new fallbacks for
legacy and new derivatives contracts. Both counterparties
will have to adhere to the Fallbacks Protocol or engage in
bilateral amendments for the terms to be effective for
derivative contracts. We have adhered to the Fallbacks
Protocol for our eligible derivative contracts.

We are facilitating an orderly transition from IBORs to
alternative risk-free reference rates for us and our clients.
Our centralized LIBOR transition program continues to
make progress with a focus on:
‰ Evaluating and monitoring the impacts across our

businesses, including transactions and products;

‰ Ensuring that

financial

instruments and contracts
impacted by the transition already contain appropriate
fallback language or are being amended, 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;

‰ Ensuring operational readiness to offer and support

various alternative risk-free reference rate products;

‰ Active participation in central bank and sector working
groups, including responding to industry consultations;
and

‰ Client education and communication.

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 have moved a number of relationships with clients of
our Investment Banking, Global Markets and Wealth
Management businesses from GSI and GSIB to GSBE,
and clients of our Asset Management business from
GSAMI to GSBE. A meaningful portion of our Global
Markets and Investment Banking clients may choose to
continue being serviced by, and to transact with, our U.K.
entities under arrangements provided by individual
member states. We expect to continue providing products
and services in this manner to the extent that clients prefer
such coverage and it is available. We have received
applicable cross-border licenses and exemptions for GSI
where these are available. We have also set up authorized
branches of GSI in the E.U. which will be used for our
Global Markets business with domestic clients in France,
Spain and Sweden.

‰ 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.
‰ We intend to use Goldman Sachs Paris Inc. et Cie 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.

‰ The

internal

infrastructure build-out and external
connectivity to financial market infrastructure required
for our new E.U. entities is complete. GSBE is connected
and operational with E.U. exchange, clearing and
settlement platforms.

from the

received approval

‰ In order to service our Asset Management clients, we
Irish Financial
have
Regulator, the Central Bank of Ireland, for a Collective
Investment Fund and Alternative Investment Fund
Manager in Ireland, which has replaced the similar
existing London-based Alternative Investment Fund
Manager.

Replacement of
Interbank Offered Rates (IBORs),
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 administrator of LIBOR has
proposed to extend the publication of the most commonly
used U.S. Dollar LIBOR settings to June 30, 2023 and to
cease
on
December 31, 2021. The U.S. federal banking agencies have
issued
banking
organizations to cease using the U.S. Dollar LIBOR as a
reference rate in new contracts as soon as practicable and in
any event by December 31, 2021.

encouraging

publishing

guidance

strongly

settings

LIBOR

other

Goldman Sachs 2020 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

As part of this program, we have sought to systematically
identify the risks inherent in this transition,
including
financial risks (for example, earnings volatility under stress
due to widening swap spreads and the loss of funding
reluctance to
sources as a result of counterparties’
participate
and
nonfinancial risks (for example, the inability to negotiate
fallbacks with clients and/or counterparties, the potential
and
to
disputes
for
implementation of
fallback provision and operational
impediments to the transition).

interpretation

transitioning

positions)

relating

their

the

The markets
for alternative risk-free reference rates
continue to develop and, where liquidity allows, we have
begun participating in alternative risk-free reference rate
markets. In particular, during 2020 we have:
‰ Issued debt and deposits linked to the Secured Overnight
Financing Rate (SOFR) and Sterling Overnight Index
Average (SONIA).

‰ 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
rate exposures.

the

In addition,
industry,
in 2020, we, alongside
successfully transitioned the discounting conventions of
centrally cleared Euro interest rate derivatives from the
Euro Overnight Index Average to the Euro Short-Term
Rate and centrally cleared U.S. Dollar
rate
derivatives from Federal Funds to SOFR at Chicago
Mercantile Exchange, London Clearing House and Eurex
Exchange.

interest

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, the
Federal Reserve’s Alternative Reference Rates Committee
and the Canadian Alternative Reference Rate Working
Group) and will continue to engage with our clients and
to facilitate an orderly transition to
counterparties
alternative risk-free reference rates.

Impact of COVID-19 Pandemic. The resurgence in the
spread of COVID-19 toward the end of 2020 and into 2021
has created greater uncertainty regarding the economic
outlook for the near term, even as early efforts to distribute
vaccines are underway. While governments and central
banks continued to be aggressive in providing fiscal and
monetary stimulus, the global economic recovery remains
fragile.

We have continued to successfully execute on our Business
Continuity Planning (BCP) strategy since initially activating
it in the first quarter of 2020 in response to the emergence
of the COVID-19 pandemic. Our priority has been to
safeguard our employees and to seek to ensure continuity of
business operations on behalf of our clients. Our business
continuity response to the COVID-19 pandemic is managed
by a central team, which is led by our chief administrative
officer and chief medical officer, and includes senior
management within Risk and the chief operating officers
across all regions and businesses. As a result of our BCP
strategy, the majority of our employees worked remotely
during most of 2020 and continue to do so in
January 2021. In order to re-open our offices to employees
after initial restrictions began to ease in the second quarter
of 2020, we established policies and protocols to address
safety considerations, taking into account the readiness of
people, communities and facilities. Over the course of the
pandemic, the extent to which our employees have worked
from our offices has varied based on how circumstances in
each location have evolved. We are in constant dialogue
with key stakeholders to assess health and safety conditions
across all of our office locations and to have robust
procedures in place to protect the well-being of employees,
such as controls around building access, strict physical
distancing measures, enhanced cleaning regimes and on-site
COVID-19 testing.

Our
systems and infrastructure have been robust
the COVID-19 pandemic, enabling us to
throughout
conduct our activities without disruption. We continue to
maintain regular and active communication among our
senior management, the rest of our employees and the
Board, and our decision-making processes have remained
disciplined and rigorous throughout the pandemic. Since
the beginning of
the COVID-19 pandemic, our
Management Committee and other senior leaders have met
regularly and our executive officers have provided regular
and enhanced communications to promote connectivity
with our clients and employees worldwide. In addition, as
part of our vendor management processes, we have ongoing
dialogues with third-party service providers, which are
intended to ensure that they continue to meet our criteria
for business continuity.

Goldman Sachs 2020 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 liquidity position during 2020 remained strong, as our
GCLA averaged $283 billion for the year. We have
continued to access our traditional funding sources in the
normal course and service our debt and other obligations
on a timely basis. Our CET1 capital ratios under the
Standardized approach increased to 14.7% as of
December 2020, up 140 basis points compared with
December 2019, as we continued to support our clients,
suspended stock
while managing our
repurchases during the first quarter of 2020 and, consistent
with the FRB’s requirement for all large BHCs, extended
the suspension of stock repurchases through the fourth
quarter of 2020. We resumed stock repurchases in the first
quarter of 2021. See “Balance Sheet and Funding Sources,”
“Equity Capital Management and Regulatory Capital” and
“Liquidity Risk Management” for further information.

capital. We

As a result of the COVID-19 pandemic, we have had to
apply a greater degree of judgment in making certain
accounting estimates and assumptions. The process of
estimating the allowance for credit losses is inherently
judgmental in nature, given that it involves forecasts of
future economic conditions. The uncertainty as to the
severity and duration of the impact of the COVID-19
pandemic has made this process more challenging, as it has
resulted in greater subjectivity in our economic forecasts.
This uncertainty also impacts the estimation of the fair
value for less liquid financial instruments that lack price
transparency, where valuation involves judgment regarding
significant
estimated future
unobservable inputs. See Note 9 to the consolidated
financial statements for further information about our
allowance for credit losses and Note 4 to the consolidated
financial statements for further information about fair
value measurements. In addition, we assessed goodwill for
impairment as of December 2020 and determined that it
was not impaired. See Note 12 to the consolidated financial
statements for further information about goodwill.

cash flows or other

Goldman Sachs 2020 Form 10-K

and

sheet,

average

unpredictable

unprecedented

necessary. Our

The COVID-19 pandemic gave rise to higher volatility
levels in financial markets and correspondingly higher
client activity levels. We have assisted clients in navigating
the
operating
environment by providing complex risk intermediation,
financing solutions and bespoke advice, utilizing our
balance
daily
Value-at-Risk (VaR) for 2020 was $94 million, $38 million
higher than 2019. We have maintained our proactive
approach to managing market risk levels, which entails
ongoing review and monitoring of exposures and focusing
on ways to mitigate risk. With respect to credit risk, the
improvement in economic conditions in the second half of
2020 from the significant contraction in the second quarter
of 2020 has, in general, helped to stabilize conditions in the
credit markets. In relationship lending, the drawn balance
on credit lines, which spiked early in the pandemic, was
back to pre-pandemic levels as of December 2020. While
borrowers, in general, faced less challenging circumstances
in the second half of the year, credit risk remains high for
borrowers in industries that continue to face significant
disruptions due to the COVID-19 pandemic, such as
companies in the oil and gas, gaming and lodging, and
airlines
this crisis, we have
remained highly focused on monitoring of credit exposures
and management of margin calls and disputes. Our risk
positions remained balanced, controlled and adequately
provisioned for, both in terms of counterparty risk and
sector exposure. See “Market Risk Management” and
“Credit Risk Management” for further information.

industries. Throughout

Our actions in response to the COVID-19 pandemic have
included granting forbearance to certain corporate and
to defer
other borrowers who have made requests
payments. We had approximately $880 million of
corporate loans and approximately $155 million of
commercial real estate loans under forbearance as of
December 2020. We have continued to provide relief to
consumers through programs to help them manage the
financial challenges that they face as a result of the
COVID-19 pandemic. The accommodations under these
programs include providing borrowers of installment and
credit card loans the ability to modify or defer payments
without incurring interest charges and permitting Marcus
depositors to access certificates of deposit early without a
penalty. As of December 2020, installment and credit card
loans with a gross carrying value of approximately
$120 million were enrolled in such programs. In aggregate,
loans under forbearance or relief programs represented
approximately 1% of total loans.

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 unpredictability of the trajectory of the COVID-19
pandemic has significantly diminished visibility into the
future operating environment. A sustained period of weak
economic conditions as a result of the pandemic would be
detrimental to our businesses as it would negatively affect
factors that are important to our operating performance,
such as the level of client activity, creditworthiness of
counterparties and borrowers, and the amount of our AUS.
We are monitoring the ongoing developments as the
COVID-19
and
administered, and will take further action that are in the
best interests of our employees, clients and counterparties.
For further information about the risks associated with the
COVID-19 pandemic, see “Business — Risk Factors” in
Part II, Item 1A of this Form 10-K.

distributed

vaccines

being

are

Off-Balance Sheet Arrangements
Contractual Obligations

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.

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.

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

2020

2019

$ 26,433

$ 32,273

$ 12,537
$213,481
$ 44,073
3,268
$

$ 11,953
$207,076
$ 47,649
3,980
$

Goldman Sachs 2020 Form 10-K

Risk Management

Risks are inherent in our businesses and include liquidity,
market, credit, operational, model,
legal, compliance,
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
structure
components:
around three
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,
including
risk
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.

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 contractual obligations by
expiration.

$ in millions

Time deposits
Financings and borrowings:

As of December 2020

2021

2022 -
2023

2024 -
2025

2026 -
Thereafter

–

$16,673

$ 6,646

3,114

Secured long-term
Unsecured long-term

–
$
–
$
Interest payments
$5,486
Operating lease payments $ 342

$ 6,394
$62,262
$ 9,568
565
$

$ 2,670
$47,507
$ 6,976
462
$

$
3,473
$103,712
$ 22,043
1,899
$

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 2020, unsecured long-term borrowings
had maturities extending through 2065, consisted
principally
included
$12.04 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 2020, the difference between 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 2020, the fair value of unsecured long-
term borrowings for which the fair value option was
elected, exceeded the aggregate contractual principal
amount by $445 million.

‰ Interest payments represents estimated future contractual
interest payments
related to unsecured long-term
borrowings, secured long-term financings and time deposits
based on applicable interest rates as of December 2020, and
includes stated coupons, if any, on structured notes.

‰ Operating lease payments includes 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.

Goldman Sachs 2020 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 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 Compliance, on
legal and regulatory enforcement matters from the general
counsel, and on other matters impacting our reputation
from the chair of our Firmwide Client and Business
Standards Committee and our Firmwide 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.

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
responsible
risk
for
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

Our
revenue-producing units, as well as Treasury,
Engineering, Human Capital Management, Operations,
and Corporate and Workplace Solutions, 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
second line of defense and provide
considered our
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
include Compliance, Conflicts
and control
Resolution, Controllers, Legal, 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
and industry experience,
including risk management
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

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
leverages subject
profile and business environment,
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 transparent and realistic insight
into our
inventory exposures.

to 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.

and funding, operational

combining

financial

liquidity

risks

Goldman Sachs 2020 Form 10-K

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 performance review
process, we assess reputational excellence, including how
exercises good risk management and
an employee
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.

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

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 2020 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

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.

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 Platform Engineering for the Global
Markets Division, who are appointed as chairs by the
chairs of the Firmwide Enterprise Risk Committee.

‰ Firmwide Operational

and

Risk

assist

resilience. To

Resilience
Committee. The Firmwide Operational Risk and
Resilience Committee is
responsible for overseeing
operational risk, and for ensuring our business and
Firmwide
operational
Operational Risk and Resilience Committee in carrying
out its mandate, other risk committees with dedicated
oversight for technology-related risks, including cyber
security matters, report into the Firmwide Operational
Risk and Resilience Committee. This committee is
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.

the

Goldman Sachs 2020 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

‰ Firmwide Conduct Committee. The

Firmwide
Conduct Committee is 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. This committee is chaired by the head of
Regulatory Affairs, who is appointed as chair 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,
related to our core risk
policies and parameters
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
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.

compliance

report

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.

Goldman Sachs 2020 Form 10-K

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, who is appointed as chair by the chief executive
officer, and the vice-chairs are the head of Regulatory
Affairs and the head of Conflicts Resolution, who are
appointed as vice-chairs by the chair of the Firmwide
Reputational Risk Committee.
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 our
chief compliance officer, and the co-head of EMEA FICC
sales, who are appointed as chairs by the chair of the
Firmwide Client and Business Standards Committee.

This

‰ Firmwide Investment Policy Committee. The
Firmwide Investment Policy Committee periodically
reviews our investing and lending activities on a portfolio
basis, including review of risk management and controls,
and sets business standards and policies for these types of
investments. This committee is co-chaired by a co-head of
our Asset Management Division, a co-head of our Global
Markets Division and the chief risk officer, who are
appointed as chairs by our president and chief operating
officer and our chief financial officer.

‰ 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 Market Risk, and a co-head of the Financing
Group, who are appointed as chairs by the chairs of the
Firmwide Enterprise Risk Committee.

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

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.

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.

We have a multilayered approach to resolving conflicts and
addressing reputational risk. Our senior management
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
resolution of
judgments
particular
conflicts
necessarily depends on the facts and circumstances of a
particular situation and the application of experienced and
informed judgment.

regarding
conflicts. Resolving

appropriate

potential

the

have

transaction

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
oversight
various
committees, such as the Firmwide Capital, Commitments
and Suitability Committees and other committees that also
review new underwritings,
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.

investments

loans,

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
Compliance, assesses our compliance, regulatory and
reputational risk; monitors for compliance with new or
rules and regulations; designs and
amended laws,
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 2020 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

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

Goldman Sachs 2020 Form 10-K

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
unencumbered securities and have
funding
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
broker-dealer and bank subsidiaries, asset
types and
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
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

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

‰ 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 provides 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.

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 2020,
Group Inc. had $34.54 billion of equity and subordinated
its principal U.S.
indebtedness
registered broker-dealer; $42.12 billion invested in GSI, a
regulated U.K. broker-dealer; $3.32 billion invested in
GSJCL, a regulated Japanese broker-dealer; $34.30 billion
invested in GS Bank USA, a regulated New York State-
chartered bank; $4.13 billion invested in GSIB, a regulated
U.K. bank; and $4.06 billion invested in GSBE, a regulated
German bank. Group Inc. also provided, directly or
indirectly, $111.96 billion of unsubordinated loans
(including
and
$16.65 billion of collateral and cash deposits to these
entities, substantially all of which was to GS&Co., GSI and
In addition, as of
GSJCL, as of December 2020.
December 2020, Group Inc. had significant amounts of
capital
invested in and loans to its other regulated
subsidiaries.

secured

billion)

$47.98

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
if our
describes
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
responsibilities, which include
individuals and their
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 2020 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

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, which includes
low consumer and corporate confidence, financial and
political instability, and adverse changes in market values,
including potential declines
in equity markets and
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,
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.

Goldman Sachs 2020 Form 10-K

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.

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.

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

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

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 2020 and December 2019 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

Three Months
Ended December

Year Ended
December

2020

2019

2020

2019

107,106

$190,735 $150,455 $181,949 $146,751
86,899
$297,841 $237,116 $283,131 $233,650

101,182

86,661

125,060
7,059
57,377

$108,345 $ 66,327 $100,489 $ 68,733
94,500
14,005
56,412
$297,841 $237,116 $283,131 $233,650

113,531
12,017
57,094

99,798
14,081
56,910

100,891
92,835
160,213 105,177

$ 36,737 $ 39,104 $ 41,705 $ 40,043
95,281
98,326
$297,841 $237,116 $283,131 $233,650

99,798
141,628

unencumbered U.S.

In the table above:
‰ The U.S. dollar-denominated GCLA consists of
agency
(i)
agency
obligations
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.

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 $214.06 billion for the three
months ended December 2020, $206.01 billion for the
three months ended December 2019, $207.60 billion for
the year ended December 2020 and $202.03 billion for the
year ended December 2019. We do not consider these assets
liquid enough to be eligible for our GCLA.

Liquidity Regulatory Framework
As a 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 2020 Form 10-K

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 2020

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)

A-2
A BBB+
A- BBB-
BB
BB
Stable Negative Under Review Stable Stable

P-2
A3
Baa2
Baa3 N/A
Ba1 N/A

F1
A
BBB+
BBB-
BBB-

a-1

In the table above:
‰ The ratings and outlook are by DBRS, Inc. (DBRS), Fitch,
Inc. (Fitch), Moody’s Investors Service (Moody’s), Rating
and Investment Information, Inc. (R&I), and Standard &
Poor’s Ratings Services (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.

In January 2021, Moody’s upgraded Group Inc.’s long-
term debt ratings (from A3 to A2) and short-term debt
ratings (from P-2 to P-1), and has returned the outlook
from ratings under review to stable.

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 average
daily LCR.

$ in millions

Total HQLA
Eligible HQLA
Net cash outflows

Average for the
Three Months Ended

December
2020

$291,393
$212,614
$166,551

September
2020

$299,050
$213,689
$165,109

December
2019

$229,029
$170,371
$134,436

LCR

128%

130%

127%

In October 2020, the U.S. federal bank regulatory agencies
issued a final rule that establishes a net stable funding ratio
(NSFR) requirement for large U.S. banking organizations.
This rule will become effective on July 1, 2021 and requires
banking organizations to ensure they have access to stable
funding over a one-year time horizon. The rule also requires
disclosure of the ratio on a semi-annual basis and a
description of the banking organization’s stable funding
sources beginning in 2023.

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 2020,
GS Bank USA’s LCR exceeded the minimum requirement.
The NSFR requirement described above will 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.
GSI’s average monthly LCR for the trailing twelve-month
period ended December 2020 exceeded the minimum
requirement.

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’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.

Goldman Sachs 2020 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 the unsecured credit ratings and
outlook of GS Bank USA, GSIB, GSBE, GS&Co. and GSI.

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
GSBE
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 2020

Fitch

Moody’s

S&P

F1
A+
F1+
AA-
Negative

F1
A+
F1
A+
Negative

F1
A
N/A
N/A
Negative

F1
A+
Negative

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.

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 2020. Our cash and cash
equivalents increased by $22.30 billion to $155.84 billion
at the end of 2020, primarily due to net cash provided by
financing activities, partially offset by net cash used for
investing activities and operating activities. The net cash
provided by financing activities primarily reflected an
increase in net deposits, reflecting increases in consumer,
transaction banking and private bank deposits. The net
cash used for investing activities primarily reflected an
increase in net purchases of investments, reflecting an
increase in U.S. government obligations accounted for as
available-for-sale and an increase in net lending activities.
The net cash used for operating activities primarily reflected
an increase in trading assets, net customer and other
receivables and payables, and collateralized transactions
(an increase in collateralized agreements, partially offset by
an increase in collateralized financings), partially offset by
an increase in trading liabilities as a result of our and our
clients’ activities.

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.

the year ended
For an analysis of cash flows
December 2018, see Part
Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results
of Operations” in our Annual Report on Form 10-K for the
year ended December 31, 2019.

for

II,

Goldman Sachs 2020 Form 10-K

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 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
losses for both moderate and more extreme
potential
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.

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

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.

Goldman Sachs 2020 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

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.

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 2020 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 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

2020

2019

$ 71
55
23
20
(75)
$ 94

$ 46
27
11
12
(40)
$ 56

Our average daily VaR increased to $94 million in 2020
from $56 million in 2019, due to increases in the equity
prices, interest rates, currency rates and commodity prices
categories, partially offset by an increase
in the
diversification effect. The overall increase was primarily
due to higher levels of volatility.

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

2020

2019

$ 60
50
11
16
(46)
$ 91

$ 54
24
10
10
(28)
$ 70

During 2020, the firmwide VaR risk limit was exceeded on
16 occasions (all of which occurred during the first half of
2020), primarily due to higher levels of volatility. There
were no permanent changes to the firmwide VaR risk limit
there were temporary
during this period. However,
increases to the firmwide VaR risk limit as a result of the
market environment. During 2019, 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

2020

2019

High

Low

High

Low

$120
$116
$ 53
$ 54

$46
$23
$ 8
$ 9

$64
$38
$22
$16

$35
$20
$ 6
$ 9

$195

$58

$77

$43

The chart below presents our daily VaR for 2020.

R
a
V
y

l
i

a
D

)
s
n
o

i
l
l
i

m
n
i
(

210

180

150

120

First Quarter
2020

Second Quarter
2020

Third Quarter
2020

Fourth Quarter
2020

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

2020

2019

50
37
48
51
43
11
8
3
2
253

16
17
45
71
72
26
5
–
–
252

Our period-end VaR increased to $91 million as of
December 2020 from $70 million as of December 2019,
due to increases in the interest rates, equity prices, currency
rates and commodity prices categories, partially offset by
an increase in the diversification effect. The overall increase
was primarily due to increased exposures.

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 exceeded our 95% one-day VaR (i.e., a VaR
exception) on two occasions during 2020 and did not
exceed our 95% one-day VaR during 2019.

Goldman Sachs 2020 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

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

2020

2019

$1,854
2,516
$4,370

$1,865
2,368
$4,233

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.

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 $3 million as of December 2020 and
$2 million as of December 2019. 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 $22 million as of
December 2020 and $29 million as of December 2019.
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 $99.69 billion as of December 2020
and $89.20 billion as of December 2019, substantially all of
which had floating interest rates. The estimated sensitivity
to a 100 basis point increase in interest rates on such loans
was $737 million as of December 2020 and $681 million as
of December 2019 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
We make investments in securities that are accounted for as
available-for-sale, held-to-maturity or under the equity
in the
method which are
consolidated balance sheets. See Note 8 to the consolidated
financial statements for further information.

included in investments

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 2020 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

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

Customer and other receivables, at fair value 10% Sensitivity Measures

Trading assets

Investments, at fair value

Loans

Deposits, at fair value

VaR
Credit Spread Sensitivity

VaR
10% Sensitivity Measures

VaR
10% Sensitivity Measures
Interest Rate Sensitivity

VaR
Credit Spread Sensitivity

Collateralized financings, at fair value

VaR

Trading liabilities

Unsecured borrowings, at fair value

VaR
Credit Spread Sensitivity

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

100 Goldman Sachs 2020 Form 10-K

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. 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
counterparty credit
review is an
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, FICO
credit scores and other risk factors.

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

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.

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 2020 Form 10-K 101

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

internally determined public

Credit Exposures
As of December 2020, our aggregate credit exposure
increased as compared with December 2019, primarily
reflecting increases in cash deposits with central banks and
OTC derivatives. The percentage of our credit exposures
arising from non-investment-grade counterparties (based
on our
rating agency
equivalents) increased as compared with December 2019,
primarily reflecting an increase in non-investment-grade
credit exposure related to OTC derivatives and loans and
lending
to
counterparties that defaulted during 2020 was higher as
compared with our credit exposure to counterparties that
defaulted during 2019, and such exposure was primarily
related to loans and lending commitments. Our credit
exposure to counterparties that defaulted during 2020
remained low, representing approximately 1% of our total
credit exposure. Estimated losses associated with these
defaults have been recognized in earnings. Our credit
exposures are described further below.

commitments. Our

exposure

credit

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 internally determined
public rating agency equivalents.

$ in millions

Cash and Cash Equivalents

As of December

2020

2019

$131,324

$110,774

Industry
Financial Institutions
Sovereign
Total

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
AAA
AA
A
BBB
Total

11%
89%
100%

45%
41%
14%
100%

44%
38%
17%
1%
100%

12%
88%
100%

50%
31%
19%
100%

66%
11%
22%
1%
100%

The table above excludes cash segregated for regulatory
and other purposes of $24.52 billion as of December 2020
and $22.78 billion as of December 2019.

102 Goldman Sachs 2020 Form 10-K

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

2020

2019

$ 64,850
(18,990)
$ 45,860

$ 43,011
(15,420)
$ 27,591

6%
23%
12%
12%
6%
11%
14%
12%
4%
100%

62%
30%
8%
100%

4%
7%
13%
11%
8%
15%
25%
9%
8%
100%

44%
48%
8%
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
(counterparty netting) and are
netting agreement
accounted for at fair value, net of cash collateral received
under enforceable credit
(cash
collateral netting).

support agreements

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.

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 distribution of our net credit
exposure from OTC derivatives by tenor.

$ in millions

As of December 2020

Less than 1 year
1 - 5 years
Greater than 5 years
Total
Netting
Net credit exposure

As of December 2019

Less than 1 year
1 - 5 years
Greater than 5 years
Total
Netting
Net credit exposure

Investment-
Grade

Non-Investment-
Grade / Unrated

Total

$ 22,332
23,927
77,653
123,912
(101,691)
$ 22,221

$ 18,764
18,674
60,190
97,628
(78,081)
$ 19,547

$ 12,507
16,486
8,958
37,951
(14,312)
$ 23,639

$ 4,247
6,879
5,896
17,022
(8,978)
$ 8,044

$ 34,839
40,413
86,611
161,863
(116,003)
$ 45,860

$ 23,011
25,553
66,086
114,650
(87,059)
$ 27,591

In the table above:
‰ Tenor is based on remaining contractual maturity.
‰ Netting includes counterparty netting across

tenor
categories and collateral
consider when
determining credit risk (including collateral that is not
eligible for netting under U.S. GAAP). Counterparty
netting within the same tenor category is included within
such tenor category.

that we

The tables below present the distribution of our net credit
exposure from OTC derivatives by tenor and internally
determined public rating agency equivalents.
Investment-Grade

$ in millions

AAA

BBB

Total

As of December 2020
532 $ 4,146
Less than 1 year
4,189
1 - 5 years
7,403
Greater than 5 years
15,738
Total
Netting
(11,230)
Net credit exposure $ 3,787 $ 4,508

1,069
16,550
18,151
(14,364)

10,976
28,410
50,826
(44,529)

$ 11,440 $ 6,214 $ 22,332
23,927
7,693
77,653
25,290
123,912
39,197
(31,568)
(101,691)
$ 6,297 $ 7,629 $ 22,221

As of December 2019
Less than 1 year
1 - 5 years
Greater than 5 years
Total
Netting
Net credit exposure

$ in millions

As of December 2020
Less than 1 year
1 - 5 years
Greater than 5 years
Total
Netting
Net credit exposure

As of December 2019
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

8,635
22,324
40,961
(35,932)

$ 10,002 $ 6,414 $ 18,764
18,674
6,174
60,190
19,715
97,628
32,303
(25,730)
(78,081)
$ 5,029 $ 6,573 $ 19,547

Non-Investment-Grade / Unrated

BB or lower

Unrated

Total

$ 11,541 $
16,274
8,844
36,659
(14,114)

966 $ 12,507
16,486
212
8,958
114
37,951
1,292
(14,312)
(198)
$ 22,545 $ 1,094 $ 23,639

$ 3,964 $
6,772
5,835
16,571
(8,811)
$ 7,760 $

283 $
107
61
451
(167)
284 $

4,247
6,879
5,896
17,022
(8,978)
8,044

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.

In the fourth quarter of 2020, we conformed the
classification of our lending portfolio with Note 9 of the
consolidated financial statements. Prior period amounts
have been conformed to the current presentation.

table below presents our

The
commitments.

loans and lending

$ in millions

As of December 2020

Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer:

Installment
Credit cards

Other
Total, gross
Allowance for loan losses
Total

As of December 2019

Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer:

Installment
Credit cards

Other
Total, gross
Allowance for loan losses
Total

Loans

Lending
Commitments

Total

$ 48,659
33,023
20,290
5,750

3,823
4,270
4,174
119,989
(3,874)
$116,115

$ 46,307
27,940
17,743
6,958

4,747
1,858
4,792
110,345
(1,441)
$108,904

$135,818
3,103
4,268
1,900

4
21,640
4,842
171,575
(557)
$171,018

$136,122
2,728
3,530
885

12
13,669
3,144
160,090
(361)
$159,729

$184,477
36,126
24,558
7,650

3,827
25,910
9,016
291,564
(4,431)
$287,133

$182,429
30,668
21,273
7,843

4,759
15,527
7,936
270,435
(1,802)
$268,633

Goldman Sachs 2020 Form 10-K 103

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

Corporate. Corporate loans and lending commitments
include term 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.

The table below presents our credit exposure from
corporate loans and lending commitments, and the
concentration by industry, region, internally determined
public rating agency equivalents and other credit metrics.

$ in millions

As of December 2020

Corporate

Industry
Consumer & Retail
Diversified Industrials
Financial Institutions
Funds
Healthcare
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
Other/unrated
Total

As of December 2019

Corporate

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
AAA
AA
A
BBB
BB or lower
Total

104 Goldman Sachs 2020 Form 10-K

Lending
Commitments

Loans

Total

$48,659

$135,818 $184,477

7%
17%
10%
13%
7%
12%
8%
17%
9%
100%

60%
31%
9%
100%

–
–
6%
13%
80%
1%
100%

14%
17%
6%
3%
12%
18%
6%
19%
5%
100%

70%
28%
2%
100%

1%
5%
19%
36%
38%
1%
100%

12%
17%
7%
6%
11%
16%
6%
19%
6%
100%

67%
29%
4%
100%

1%
4%
15%
30%
49%
1%
100%

$46,307

$136,122 $182,429

7%
17%
10%
9%
8%
12%
7%
17%
13%
100%

60%
31%
9%
100%

–
1%
6%
16%
77%
100%

12%
17%
6%
2%
13%
21%
5%
20%
4%
100%

78%
20%
2%
100%

1%
7%
17%
35%
40%
100%

11%
17%
7%
4%
12%
19%
5%
19%
6%
100%

73%
23%
4%
100%

1%
6%
14%
30%
49%
100%

In the table above, credit exposure excludes $3.20 billion as
of December 2020 and $4.10 billion as of December 2019
relating to issued letters of credit which are classified as
guarantees in our consolidated financial statements. See
Note 18 to the consolidated financial statements for further
information about guarantees.

Wealth Management. Wealth management loans and
lending commitments are extended to private bank clients,
including 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.

The table below presents our credit exposure from wealth
management loans and lending commitments, and the
concentration by region,
internally determined public
rating agency equivalents and other credit metrics.

$ in millions

As of December 2020

Wealth Management

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
Investment-grade
Non-investment-grade
Other/unrated
Total

As of December 2019

Wealth Management

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
Investment-grade
Non-investment-grade
Other/unrated
Total

Lending
Commitments

Loans

Total

$33,023

$3,103 $36,126

88%
10%
2%
100%

67%
16%
17%
100%

99%
1%
–

89%
9%
2%
100% 100%

58%
21%
21%

66%
17%
17%
100% 100%

$27,940

$2,728 $30,668

88%
9%
3%
100%

71%
13%
16%
100%

96%
3%
1%

89%
9%
2%
100% 100%

68%
17%
15%

71%
13%
16%
100% 100%

In the table above, other/unrated loans primarily include
loans backed by residential real estate. Our risk assessment
process for such loans include reviewing certain key
metrics, such as loan-to-value ratio and delinquency status.

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

Commercial Real Estate. Commercial real estate loans
and lending commitments include originated loans and
lending commitments (other than those extended to private
bank clients) that are directly or indirectly secured by
hotels, retail stores, multifamily housing complexes and
commercial and industrial properties. Commercial real
estate loans and lending commitments also includes loans
and lending commitments extended to clients who
warehouse assets that are directly or indirectly backed by
commercial real estate. In addition, commercial real estate
includes loans purchased by us.

The table below presents our credit exposure from
commercial real estate loans and lending commitments, and
the concentration by region, internally determined public
rating agency equivalents and other credit metrics.

$ in millions

As of December 2020

Commercial Real Estate

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
Investment-grade
Non-investment-grade
Other/unrated
Total

Lending
Commitments

Loans

Total

$20,290

$4,268 $24,558

71%
19%
10%
100%

9%
86%
5%
100%

65%
10%
25%

70%
18%
12%
100% 100%

13%
87%
–

10%
86%
4%
100% 100%

As of December 2019

Commercial Real Estate

$17,743

$3,530 $21,273

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
Investment-grade
Non-investment-grade
Other/unrated
Total

69%
21%
10%
100%

2%
90%
8%
100%

60%
11%
29%

67%
20%
13%
100% 100%

2%
94%
4%

2%
91%
7%
100% 100%

In the table above, credit exposure includes loans and
lending commitments of $7.88 billion as of December 2020
and $5.41 billion as of December 2019 which are extended
to clients who warehouse assets that are directly or
indirectly backed by commercial real estate.

In addition, we also have credit exposure to certain
commercial real estate loans held for securitization of
$503 million as of December 2020 and $1.55 billion as of
December 2019. Such loans are included in trading assets in
our consolidated balance sheets.

Residential Real Estate. Residential real estate loans and
lending commitments are extended to clients (other than
those extended to private bank clients) who warehouse
assets that are directly or indirectly secured by residential
real estate and also includes loans purchased by us.

The table below presents our credit exposure from
residential real estate loans and lending commitments, and
the concentration by region, internally determined public
rating agency equivalents and other credit metrics.

$ in millions

As of December 2020

Residential Real Estate

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
Investment-grade
Non-investment-grade
Other/unrated
Total

Lending
Commitments

Loans

Total

$5,750

$1,900 $7,650

88%
9%
3%
100%

11%
67%
22%
100%

98% 91%
7%
2%
100% 100%

2%
–

9%
93% 73%
5% 18%
100% 100%

As of December 2019

Residential Real Estate

$6,958

$ 885 $7,843

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
Investment-grade
Non-investment-grade
Other/unrated
Total

90%
9%
1%
100%

4%
66%
30%
100%

96% 90%
9%
1%
100% 100%

3%
1%

–

3%
86% 68%
14% 29%
100% 100%

In the table above:
‰ Credit exposure includes loans and lending commitments
of $5.71 billion as of December 2020 and $4.17 billion as
of December 2019 which are extended to clients who
warehouse assets that are directly or indirectly secured by
residential real estate.

‰ Other/unrated primarily includes loans purchased by us.
Our risk assessment process for such loans includes
reviewing certain key metrics, such as loan-to-value ratio,
delinquency status, collateral values, expected cash flows
and other risk factors.

In addition, we also have exposure to residential real estate
loans held for securitization of $5.57 billion as of
December 2020 and $4.70 billion as of December 2019.
Such loans are
in our
consolidated balance sheets.

included in trading assets

Goldman Sachs 2020 Form 10-K 105

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

Installment and Credit Card Lending. We originate
unsecured installment loans and credit card loans (pursuant
to revolving lines of credit) to consumers in the Americas.
The credit card lines are cancellable by us and therefore do
not result in credit exposure.

The table below presents our credit exposure from
originated installment and credit card funded loans, and the
concentration by the five most concentrated U.S. states.

$ in millions

Installment

California
Texas
New York
Florida
Illinois
Other
Total

Credit Cards

California
Texas
New York
Florida
Illinois
Other
Total

As of December

2020

2019

$3,823

$4,747

11%
9%
7%
7%
4%
62%
100%

12%
9%
7%
7%
4%
61%
100%

$4,270

$1,858

19%
9%
8%
8%
4%
52%
100%

21%
9%
8%
8%
4%
50%
100%

See Note 9 to the consolidated financial statements for
further information about the credit quality indicators of
installment and credit card loans.

Other. Other loans and lending commitments are extended
to clients who warehouse assets that are directly or
indirectly secured by consumer loans, including auto loans
and private student
loans. Other loans also includes
unsecured consumer and credit card loans purchased by us.

106 Goldman Sachs 2020 Form 10-K

The table below presents our credit exposure from other
loans and lending commitments, and the concentration by
region internally determined public
agency
equivalents and other credit metrics.

rating

$ in millions

As of December 2020

Other

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
Investment-grade
Non-investment-grade
Other/unrated
Total

As of December 2019

Other

Region
Americas
EMEA
Asia
Total

Credit Quality (Credit Rating Equivalent)
Investment-grade
Non-investment-grade
Other/unrated
Total

Lending
Commitments

Loans

Total

$4,174

$4,842 $9,016

81%
17%
2%
100%

44%
23%
33%
100%

98% 90%
8%
2%
100% 100%

–
2%

94% 71%
6% 14%
15%
100% 100%

–

$4,792

$3,144 $7,936

87%
12%
1%
100%

49%
23%
28%
100%

96% 90%
9%
1%
100% 100%

3%
1%

76% 60%
16% 20%
8% 20%
100% 100%

In the table above:
‰ Credit exposure includes loans and lending commitments
extended to clients who warehouse assets of $7.28 billion
as of December 2020 and $6.09 billion as of
December 2019.

‰ Other/unrated primarily includes consumer and credit
card loans purchased by us. Our risk assessment process
for such loans includes reviewing certain key metrics,
such as expected cash flows, delinquency status and other
risk factors.

In addition, we also have exposure to other loans held for
securitization of $420 million as of December 2020 and
$347 million as of December 2019. Such loans are included
in trading assets in our consolidated balance sheets.

Credit Hedges
To mitigate the credit risk associated with our lending
activities, we obtain credit protection on certain loans and
lending commitments through credit default swaps, both
single-name and index-based contracts, and through the
issuance of credit-linked notes. In addition, Sumitomo
Mitsui Financial Group, Inc. provides us with credit loss
protection on certain approved loan commitments.

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

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 counterparty exceeds the value of
the collateral
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
these
Securities
collateral
transactions primarily
and non-U.S.
government and agency obligations.

includes U.S.

collateral

received.

for

The table below presents our credit exposure from
securities financing transactions and the concentration by
industry, region and internally determined public rating
agency equivalents.

$ in millions

2020

2019

Securities Financing Transactions

$30,190

$26,958

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

39%
24%
5%
30%
2%
100%

33%
46%
21%
100%

15%
28%
40%
10%
5%
2%
100%

37%
27%
5%
28%
3%
100%

38%
39%
23%
100%

15%
27%
39%
9%
6%
4%
100%

The table above reflects both netting agreements and
collateral that we consider when determining credit risk.

As of December

Other Credit Exposures

$ in millions

receivables

from brokers, dealers

Other Credit Exposures. We are exposed to credit risk from
our
and clearing
organizations and customers and counterparties. Receivables
from brokers, dealers and clearing 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 securities transactions and generally have minimal
credit risk due to both the value of the collateral received and
the short-term nature of these receivables.

The table below presents our other credit exposures and the
concentration by industry, region and internally determined
public rating agency equivalents.

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

2020

2019

$56,429

$44,931

85%
9%
2%
4%
100%

54%
35%
11%
100%

5%
48%
27%
8%
11%
1%
100%

86%
8%
1%
5%
100%

49%
41%
10%
100%

2%
56%
23%
7%
11%
1%
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 given 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.

Goldman Sachs 2020 Form 10-K 107

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

Country Exposures. Liquidity pressures prompted the
Argentine government to default and restructure local and
foreign obligations in 2020. Economic challenges persist
and the country still needs to secure new financial terms
with the IMF. As of December 2020, our total credit
exposure to Argentina was $164 million, which was with
non-sovereign counterparties or borrowers, and was
primarily related to loans and lending commitments. Our
total market exposure to Argentina as of December 2020
was not material.

The restructuring of Lebanon’s sovereign debt and sharp
currency depreciation have led to concerns about
its
financial and political stability. As of December 2020, our
total credit exposure to Lebanon was $196 million, all of
which related to loans and lending commitments with
non-sovereign borrowers. Our total market exposure to
Lebanon as of December 2020 was not material.

Zambia’s sovereign debt default and ongoing liquidity
pressures aggravated by the COVID-19 pandemic have led
to concerns about Zambia’s financial stability. As of
December 2020, our total credit and market exposure for
Zambia was not material.

political

Venezuela has delayed payments on its sovereign debt and
of
its
December 2020, 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.

108 Goldman Sachs 2020 Form 10-K

Such

exposure

and gas

in the oil

commitments).

Industry Exposures. The decline in oil prices has led to
market concerns regarding the creditworthiness of certain
companies
industry. As of
December 2020, our credit exposure to oil and gas
companies related to loans and lending commitments was
$11.30 billion ($2.98 billion of loans and $8.32 billion of
lending
included
$4.96 billion of
to non-investment-grade
($2.11 billion related to loans and
counterparties
$2.85 billion related to lending commitments), of which
76% was secured. In addition, we have exposure to our
clients in the oil and gas industry arising from derivatives.
As of December 2020, our credit exposure related to
derivatives and receivables with oil and gas companies was
$2.22 billion ($455 million with investment-grade
counterparties and $1.77 billion with non-investment-
grade counterparties). After taking into consideration the
benefit of $800 million of hedges, our net credit exposure
was $12.72 billion. As of December 2020, our market
exposure
companies was
$(1.37) billion, which was primarily to investment-grade
issuers or underliers.
consisted of
$317 million related to debt, $(1.71) billion related to credit
derivatives and $24 million related to equities.

related to oil

Such exposure

and gas

$1.69

billion

included

exposure

The sharp decline in economic activity as a result of the
COVID-19 pandemic has resulted in a significant impact to
the gaming and lodging industry. As of December 2020,
our credit exposure to gaming and lodging companies
(including hotel owners and operators) related to loans and
lending commitments was $2.14 billion ($863 million of
loans and $1.28 billion of lending commitments). Such
exposure
to
non-investment-grade counterparties ($709 million related
to loans and $977 million related to lending commitments),
of which 84% was secured. In addition, we extend loans
that are secured by hotel properties. As of December 2020,
related to such loans and lending
exposure
our
commitments was
to
non-investment-grade counterparties. In addition, we have
exposure to our clients in the gaming and lodging industry
arising from derivatives. As of December 2020, our credit
exposure related to derivatives and receivables with gaming
companies was $232 million, with
and lodging
non-investment-grade
of
December 2020, our market exposure related to gaming
and lodging companies was $95 million, which was
primarily to non-investment-grade issuers or underliers.
Such exposure consisted of $103 million related to debt,
and
to
$(175) million
$167 million related to equities.

counterparties.

and was

derivatives

billion

$1.31

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

arising

industry

lending commitments)

from derivatives. As

Concerns surrounding the COVID-19 pandemic have
resulted in a sharp decline in travel which has significantly
impacted the airline industry. As of December 2020, our
credit exposure to airline companies related to loans and
lending commitments was $1.54 billion ($1.12 billion of
loans and $416 million of
to
non-investment-grade counterparties, of which 84% was
secured. In addition, we have exposure to our clients in the
of
airline
December 2020, our credit exposure related to derivatives
and receivables with airline companies was $401 million
($152 million with investment-grade counterparties and
$249 million with non-investment-grade counterparties).
After taking into consideration the benefit of $278 million
of hedges, our net credit exposure was $1.66 billion. As of
December 2020, our market exposure related to airline
companies was $(210) million, which was substantially all
to non-investment-grade
issuers or underliers. Such
exposure consisted of $114 million related to debt,
$(307) million
and
to
$(17) million related to equities.

derivatives

credit

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 Operational Risk and
Resilience Committee
for overseeing
operational risk, and for ensuring our business and
operational resilience.

responsible

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.

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
report and escalate operational
risk events. When
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.

Goldman Sachs 2020 Form 10-K 109

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.
These risks may include legal, regulatory,
information
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
across multiple risk domains,
including information
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.

facilities, systems,

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
third
parties, data and/or personnel. We approach 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 comprehensive, consistent
firmwide and up-to-date, incorporating new information,
techniques and 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 “Regulatory
and Other Matters — Other Matters” for information
the COVID-19 pandemic. See
about
“Business — Business Continuity and Information
Security” in Part I, Item 1 of this Form 10-K for further
information about business continuity.

the impact 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

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.

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.

110 Goldman Sachs 2020 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
and
of
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 2020 Form 10-K 111

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

2020

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 113 to 115, which expresses an unqualified
opinion on the effectiveness of the firm’s internal control
over financial reporting as of December 31, 2020.

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, 2020, 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, 2020 was
effective.

(COSO). Based

this

112 Goldman Sachs 2020 Form 10-K

Report of Independent Registered Public
Accounting Firm

To the Board of Directors and 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, 2020 and
2019, and the related consolidated statements of earnings,
of comprehensive income, of changes in shareholders’
equity and of cash flows for each of the three years in the
period ended December 31, 2020, 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, 2020,
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, 2020
and 2019, and the results of its operations and its cash
flows for each of the three years in the period ended
December 31, 2020 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, 2020, based on criteria
established in Internal Control — Integrated Framework
(2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial
statements, the Company changed the manner in which it
accounts for credit losses on certain financial instruments in
2020.

Basis for Opinions

The Company’s management
is responsible for these
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 112. 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
required to be
(PCAOB) and are
(United States)
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 statements are free of
material misstatement, whether due to error or fraud, and
whether effective internal control over financial reporting
was maintained in all material respects.

the

the consolidated financial

Our audits of
statements
included performing procedures to assess the risks of
material misstatement of
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.

Goldman Sachs 2020 Form 10-K 113

Definition and Limitations of
Financial Reporting

Internal Control over

Valuation of Certain Level 3 Financial Instruments

Report of Independent Registered Public
Accounting Firm

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;
that
to permit
transactions
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.

recorded as necessary

reasonable

assurance

provide

are

(ii)

not

reporting may

Because of its inherent limitations, internal control over
detect
financial
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.

prevent

Critical Audit Matters

The critical audit matters communicated below are matters
arising from the current period audit of the consolidated
financial statements that were communicated or required to
be 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
taken as a whole, and we are not, by
statements,
communicating the critical audit matters below, providing
separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.

114 Goldman Sachs 2020 Form 10-K

As described in Notes 4 through 10 to the consolidated
financial statements, as of December 31, 2020,
the
Company carries financial instruments at fair value, which
includes $26.3 billion of financial assets and $32.9 billion
of financial liabilities classified in Level 3 of the fair value
hierarchy as one or more inputs
to the financial
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.

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 significant judgment by management in valuing the
financial instruments, which in turn led to a high degree of
auditor judgment and subjectivity in performing procedures
related to the valuation of certain Level 3 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 in the
valuation of certain Level 3 financial
instruments, and
(iii) the audit effort involved the use of professionals with
specialized skill and knowledge.

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 financial instruments,
including controls over
the methods and significant
unobservable inputs used in the valuation of certain Level 3
financial
instruments. These procedures also included,
among others, for a sample of financial instruments, the
involvement of professionals with specialized skill and
in (i) developing an independent
knowledge to assist
estimate of fair value or (ii) testing management’s process to
determine the fair value of these financial instruments.
Developing the independent estimate involved (i) testing the
and accuracy of data provided by
completeness
management, (ii) evaluating and utilizing management’s
significant unobservable inputs or developing independent
significant unobservable
comparing
management’s estimate to the independently developed
fair value. Testing management’s process
estimate of
included
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.

inputs, and (iii)

fair value of

reasonableness

evaluating

the

Report of Independent Registered Public
Accounting Firm

Allowance for Loan Losses — Wholesale Loan Portfolio

for

that

loans

similar

exhibit

As described in Note 9 to the consolidated financial
statements,
the Company’s allowance for loan losses
related to wholesale loans reflects management’s estimate
of loan losses over the remaining expected life of the loans
and also considers forecasts of future economic conditions.
As of December 31, 2020, $2.6 billion of the allowance for
loan losses and $95.5 billion of the loans accounted for at
amortized cost related to the wholesale loan portfolio. The
allowance for wholesale loan losses is measured on a
collective basis
risk
characteristics using a modeled approach and asset-specific
basis for loans that do not share similar risk characteristics.
In addition, it includes qualitative components to reflect the
uncertain nature of
capture
economic
uncertainty regarding model inputs, and account for model
imprecision and concentration risk. The wholesale models
determine the probability of default and loss given default
based on various risk factors,
including internal credit
ratings,
industry default and loss data, expected life,
macroeconomic indicators, the borrower’s capacity to meet
its financial obligations, the borrower’s country of risk and
industry,
loan seniority and collateral type. The most
significant inputs to the forecast model for wholesale loans
include forecasted U.S. unemployment rates, GDP, credit
spreads, commercial and industrial delinquency rates,
short- and long-term interest rates, and oil prices.

forecasting,

The principal considerations for our determination that
performing procedures relating to the allowance for loan
losses for the wholesale loan portfolio is a critical audit
matter are (i) the significant judgment and estimation by
management in the determinations of internal credit ratings
and the forecasted U.S. unemployment rates, which in turn
led to a high degree of auditor judgment, subjectivity, and
effort
in performing procedures and evaluating audit
evidence related to management’s determinations, and
(ii) the audit effort involved the use of professionals with
specialized skill and knowledge.

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 Company’s allowance for loan
losses for the wholesale loan portfolio, including controls
over the model, certain data, and significant assumptions.
These procedures also included, among others, testing
management’s process for estimating the allowance for loan
losses for wholesale loans using a modeled approach, which
involved evaluating the appropriateness of the model and
methodology and testing the completeness and accuracy of
certain data used in estimating the allowance for loan
losses. The procedures
also included the use of
professionals with specialized skill and knowledge to assist
in evaluating (i) the appropriateness of the model and
methodology and (ii) the reasonableness of the internal
credit ratings and the forecasted U.S. unemployment rates
used in estimating the allowance for wholesale loan losses.

/s/ PricewaterhouseCoopers LLP

New York, New York
February 19, 2021

We have served as the Company’s auditor since 1922.

Goldman Sachs 2020 Form 10-K 115

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
Transaction based
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

The accompanying notes are an integral part of these consolidated financial statements.

116 Goldman Sachs 2020 Form 10-K

Year Ended December

2020

2019

2018

$ 9,141
6,923
3,548
15,546
4,651
39,809

13,689
8,938
4,751
44,560

$ 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

3,098

1,065

674

13,309
4,141
401
1,347
1,902
960
1,306
5,617
28,983

12,479
3,020
9,459
544
$ 8,915

12,353
3,513
739
1,167
1,704
1,029
1,316
3,077
24,898

10,583
2,117
8,466
569
$ 7,897

12,328
3,492
740
1,023
1,328
809
1,214
2,527
23,461

12,481
2,022
10,459
599
$ 9,860

$ 24.94
$ 24.74

$ 21.18
$ 21.03

$ 25.53
$ 25.27

356.4
360.3

371.6
375.5

385.4
390.2

Year Ended December

2020

2019

2018

$ 9,459

$ 8,466

$10,459

(80)
(261)
(26)
417
50
$ 9,509

5
(2,079)
(261)
158
(2,177)
$ 6,289

4
2,553
119
(103)
2,573
$13,032

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 (at fair value)
Securities borrowed (includes $28,898 and $26,279 at fair value)
Customer and other receivables (includes $82 and $53 at fair value)
Trading assets (at fair value and includes $69,031 and $66,605 pledged as collateral)
Investments (includes $82,778 and $57,827 at fair value, and $13,375 and $10,968 pledged as collateral)
Loans (net of allowance of $3,874 and $1,441, and includes $13,625 and $14,386 at fair value)
Other assets
Total assets

Liabilities and shareholders’ equity
Deposits (includes $16,176 and $17,765 at fair value)
Collateralized financings:

Securities sold under agreements to repurchase (at fair value)
Securities loaned (includes $1,053 and $714 at fair value)
Other secured financings (includes $24,126 and $18,071 at fair value)

Customer and other payables
Trading liabilities (at fair value)
Unsecured short-term borrowings (includes $26,750 and $26,007 at fair value)
Unsecured long-term borrowings (includes $40,911 and $43,661 at fair value)
Other liabilities (includes $263 and $150 at fair value)
Total liabilities

Commitments, contingencies and guarantees

As of December

2020

2019

$ 155,842 $133,546

108,060
142,160
121,331
393,630
88,445
116,115
37,445

85,691
136,071
74,605
355,332
63,937
108,904
34,882
$1,163,028 $992,968

$ 259,962 $190,019

126,571
21,621
25,755
190,658
153,727
52,870
213,481
22,451
1,067,096

117,756
14,985
19,277
174,817
108,835
48,287
207,076
21,651
902,703

Shareholders’ equity
Preferred stock; aggregate liquidation preference of $11,203 and $11,203
Common stock; 901,692,039 and 896,782,650 shares issued, and 344,088,725 and 347,343,184 shares outstanding
Share-based awards
Nonvoting common stock; no shares issued and outstanding
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Stock held in treasury, at cost; 557,603,316 and 549,439,468 shares
Total shareholders’ equity
Total liabilities and shareholders’ equity

11,203
9
3,468
–
55,679
112,947
(1,434)
(85,940)
95,932

11,203
9
3,195
–
54,883
106,465
(1,484)
(84,006)
90,265
$1,163,028 $992,968

The accompanying notes are an integral part of these consolidated financial statements.

Goldman Sachs 2020 Form 10-K 117

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
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
Other
Ending balance
Retained earnings
Beginning balance, as previously reported
Cumulative effect of change in accounting principle for:

Current expected credit losses, net of tax
Leases, net of tax
Revenue recognition from contracts with clients, 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

2020

2019

2018

$ 11,203
350
(350)
11,203

$ 11,203
1,100
(1,100)
11,203

$ 11,853
–
(650)
11,203

9
–
9

3,195
1,967
(1,601)
(93)
–
3,468

54,883
1,619
(829)
–
6
55,679

9
–
9

2,845
2,073
(1,623)
(100)
–
3,195

54,005
1,617
(743)
4
–
54,883

9
–
9

2,777
1,355
(1,175)
(80)
(32)
2,845

53,357
1,751
(1,118)
15
–
54,005

106,465

100,100

91,519

(638)
–
–
105,827
9,459
(1,795)
(543)
(1)
112,947

(1,484)
50
(1,434)

–
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

(84,006)
(1,928)
11
(17)
(85,940)
$ 95,932

(78,670)
(5,335)
12
(13)
(84,006)
$ 90,265

(75,392)
(3,294)
21
(5)
(78,670)
$ 90,185

The accompanying notes are an integral part of these consolidated financial statements.

118 Goldman Sachs 2020 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 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 (excluding loans held for sale), net
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
Other financing, net
Net cash provided by financing activities
Net increase 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

2020

2019

2018

9,459

8,466

$ 10,459

1,902
(833)
1,920
(1)
3,098

(30,895)
(13,007)
(33,405)
44,892
1,820
1,322
(13,728)

(6,309)
2,970
(231)
(48,670)
29,057
(11,173)
(34,356)

7,707
2,861
8,073
(4,137)
(11)
47,250
(55,040)
1,037
67,343
(350)
(1,928)
(830)
(2,336)
349
–
392
70,380
22,296
133,546
$155,842

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

$
$

9,091
2,754

$ 18,645
1,266
$

$ 16,721
1,271
$

The accompanying notes are an integral part of these consolidated financial statements.

Goldman Sachs 2020 Form 10-K 119

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

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 financial institution that delivers a broad range of
financial services across investment banking, securities,
investment management and consumer banking to a large
includes corporations,
and diversified client base that
financial
and individuals.
institutions,
Founded in 1869, the firm is headquartered in New York
and maintains offices in all major financial centers around
the world.

governments

The firm reports its activities in four business segments:

Investment Banking
The firm provides a broad range of investment banking
services to a diverse group of corporations, financial
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 relationship lending, middle-market lending and
acquisition financing. The firm also provides transaction
banking services to certain corporate clients.

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
including securities lending, margin
financing activities,
lending and swaps. The firm also provides financing to
clients through securities purchased under agreements to
resell (resale agreements), as well as through structured
credit, warehouse and asset-backed lending.

120 Goldman Sachs 2020 Form 10-K

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 include alternative investing activities
in
related to public and private equity investments
corporate, real estate and infrastructure assets, as well as
investments
through consolidated investment entities,
substantially all of which are engaged in real estate
investment activities. The firm also invests in corporate
debt and provides financing for real estate and other assets.

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 2020, 2019 and 2018 refer to the firm’s
the dates, as the context requires,
years ended, or
December
and
2020, December
December 31, 2018, respectively. Any reference to a future
year refers to a year ending on December 31 of that year.

2019

31,

In the fourth quarter of 2020, brokerage, clearing,
exchange and distribution fees was renamed transaction
based and additionally includes expenses resulting from
completed transactions, which are directly related to client
revenues. Such expenses were previously reported in other
expenses. Previously
reported amounts have been
conformed to the current presentation.

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

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.

Goldman Sachs 2020 Form 10-K 121

Revenue from Contracts with Clients. The firm
recognizes revenue earned from contracts with clients for
services,
investment
investment
management, and execution and clearing (contracts with
clients), when the performance obligations related to the
underlying transaction are completed.

banking,

such

clients

from contracts with

Revenues
represent
approximately 45% of total non-interest revenues for 2020
investment banking
(including approximately 90% of
revenues, approximately 95% of investment management
revenues and all commissions and fees), and approximately
45% of total non-interest revenues for 2019 (including
investment banking revenues,
approximately 85% of
approximately 95% of investment management revenues
and all commissions and fees). 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
and milestone
assignment. Non-refundable deposits
payments
advisory
assignments are recognized in revenues upon completion of
the underlying transaction or when the assignment is
otherwise concluded.

connection with

financial

Expenses associated with financial advisory assignments
are recognized when incurred and are included in
transaction based 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 transaction based expenses for completed
assignments.

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.

122 Goldman Sachs 2020 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

Investment Management
The firm earns management fees and incentive fees for
investment management services, which are included in
investment management
firm makes
payments to brokers and advisors related to the placement
of the firm’s investment funds (distribution fees), which are
included in transaction based expenses.

revenues. The

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 transaction based expenses.

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
investments held by the fund or separately
value of
managed account. Therefore,
incentive fees recognized
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.

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. Revenues associated with remaining
performance obligations relating to financial advisory
assignments cannot be determined until the outcome of the
transaction. For
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.

firm’s

the

The firm is able to determine the future revenues associated
with management fees calculated based on committed
capital. As of December 2020, substantially all future net
revenues associated with such remaining performance
obligations will be recognized through 2028. Annual
revenues associated with such performance obligations
average less than $250 million through 2028.

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.

Goldman Sachs 2020 Form 10-K 123

included payables

Customer and Other Payables
Customer and other payables
to
customers and counterparties of $183.57 billion as of
December 2020 and $170.21 billion as of December 2019,
and payables to brokers, dealers and clearing organizations
of $7.09 billion as of December 2020 and $4.61 billion as
of December 2019. 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
approximates
these payables 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
payables been included in the firm’s fair value hierarchy,
substantially all would have been classified in level 2 as of
both December 2020 and December 2019. 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.

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

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
$11.95 billion as of December 2020 and $12.57 billion as
of December 2019. Cash and cash equivalents also included
interest-bearing deposits with banks of $143.89 billion as
of December
of
December 2019.

$120.98

billion

2020

and

The firm segregates cash for regulatory and other purposes
related to client activity. Cash and cash equivalents
segregated for
regulatory and other purposes were
$24.52 billion as of December 2020 and $22.78 billion as
of December 2019.
the firm segregates
In addition,
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 $82.39 billion as of
December 2020 and $50.90 billion as of December 2019,
and receivables
from brokers, dealers and clearing
organizations of $38.94 billion as of December 2020 and
$23.71 billion as of December 2019. Such receivables
primarily consist of customer margin loans, receivables
resulting from unsettled transactions and collateral posted
in connection with certain derivative transactions.

Substantially all of these receivables are accounted for at
amortized cost net of any allowance for credit losses, which
generally approximates fair value. As 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 2020 and December 2019. 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.

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 $2.60 billion as of
December 2020 and $2.27 billion as of December 2019. As
of both December 2020 and December 2019 contract assets
were not material.

124 Goldman Sachs 2020 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

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. Resale agreements and
securities sold under agreements to repurchase (repurchase
agreements)
loaned
transactions with the same term and currency are presented
on a net-by-counterparty basis in the consolidated balance
sheets when such transactions meet certain settlement
criteria and are subject to netting agreements.

borrowed

securities

and

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
and pledged,
including rights to deliver or repledge
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.
losses on
Foreign currency remeasurement gains or
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
in the consolidated statements of
hedges and taxes,
comprehensive income.

Recent Accounting Developments
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.

credit

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 reflects 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, are recognized in earnings. These
expected credit losses are 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 $638 million (net of tax).

Goldman Sachs 2020 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

Facilitation of the Effects of Reference Rate Reform on
Financial Reporting (ASC 848). In March 2020, the FASB
issued ASU No. 2020-04, “Reference Rate Reform —
Facilitation of the Effects of Reference Rate Reform on
Financial Reporting.” This ASU provides optional relief
from applying generally accepted accounting principles to
contracts, hedging relationships and other transactions
affected by reference
in
January 2021 the FASB issued ASU No. 2021-01
“Reference Rate Reform — Scope,” which clarified the
scope of ASC 848 relating to contract modifications. The
firm adopted these ASUs upon issuance and elected to apply
the relief available to certain modified derivatives. The
adoption of these ASUs did not have a material impact on
the firm’s consolidated financial statements.

In addition,

reform.

rate

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

126 Goldman Sachs 2020 Form 10-K

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 money market instruments 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
money market instruments, 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.

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 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.

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.

level 3 instruments vary by
Valuation techniques of
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
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

underlying

collateral

the

‰ Timing of expected future cash flows (duration) which, in
certain cases, may incorporate the impact of any loan
forbearances and other unobservable
(e.g.,
prepayment speeds).

inputs

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;

‰ 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;

Goldman Sachs 2020 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

‰ 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.

state

agency

obligations,

Other Trading Cash Instruments, Investments and Loans
The significant inputs to the valuation of other instruments,
such as non-U.S. government obligations and U.S. and
non-U.S.
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
for which observable prices or broker
same issuer
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
Interest rate derivatives that
tight bid/offer spreads.
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.

128 Goldman Sachs 2020 Form 10-K

swaps

reference indices,

‰ Credit. Price transparency for credit default swaps,
including both single names and baskets of credits, varies
by market and underlying reference entity or obligation.
Credit default
large
that
corporates and major sovereigns generally exhibit 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
the underlying
obligations, and the availability of
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,
those sensitive to the
correlation between two or more underlying reference
obligations, generally have less price transparency.

such as

‰ 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.

‰ Commodity.

derivatives

Commodity

include
transactions referenced to energy (e.g., oil and natural
gas), metals
(e.g., precious and base) and soft
commodities (e.g., 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.

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 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
judgment because outputs of
significant management
models can be calibrated to market-clearing levels.

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) and
specific interest rate and currency volatilities.

‰ 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 entities, and recovery rates.

‰ 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
differ
In
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
individual
the price
performance for a basket of stocks to another asset class,
such as commodities.

the correlation of

stocks or

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
derivative portfolios. The firm also makes
funding
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

include significant
In addition,
unobservable inputs, the firm makes model or exit price
adjustments to account
for the valuation uncertainty
present in the transaction.

that

Goldman Sachs 2020 Form 10-K 129

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 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 receivables, including certain margin loans; certain
time deposits, including structured certificates of deposit,
which are hybrid financial instruments; substantially all
including transfers of assets
other secured financings,
accounted for as financings; certain unsecured short- and
long-term borrowings, substantially all of which are hybrid
financial
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.

instruments;

other

and

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
other secured financings.

130 Goldman Sachs 2020 Form 10-K

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. 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.

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

Total liabilities

As of December

2020

2019

$ 263,999
410,275
26,305
3,664
(77,170)
$ 627,073

$242,562
325,259
23,068
4,206
(55,527)
$539,568

$1,163,028

$992,968

2.3%
4.2%
85,120
331,824
32,930
(60,297)
$ 389,577

2.3%
4.3%
$ 54,790
293,902
25,938
(41,671)
$332,959

$1,067,096

$902,703

Total level 3 financial liabilities divided by:

Total liabilities
Total financial liabilities at fair value

3.1%
8.5%

2.9%
7.8%

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.

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 a summary of level 3 financial
assets.

Gains and Losses from Market Making
The table below presents market making revenues by major
product type.

$ in millions

Trading assets:

Trading cash instruments
Derivatives
Investments
Loans
Total

As of December

2020

2019

1,237
5,967
16,423
2,678
$ 26,305

1,242
4,654
15,282
1,890
$ 23,068

$ in millions

Interest rates
Credit
Currencies
Equities
Commodities
Total

Year Ended December

2020

2019

2018

$ 6,191
3,250
(3,257)
6,757
2,605
$15,546

$ 3,272
682
2,902
2,946
355
$10,157

$(1,917)
1,268
4,646
5,264
463
$ 9,724

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
the firm’s longer-term
types. For example, most of
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.

Level 3 financial assets as of December 2020 increased
compared with December 2019, primarily reflecting an
increase in level 3 derivatives, investments and loans. 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).

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 2020

Trading cash instruments
Derivatives
Total

As of December 2019

Trading cash instruments
Derivatives
Total

Trading
Assets

Trading
Liabilities

$324,049
69,581
$393,630

$ 95,136
58,591
$153,727

$310,080
45,252
$355,332

$ 65,033
43,802
$108,835

See Note 6 for further information about trading cash
instruments and Note 7 for further information about
derivatives.

Goldman Sachs 2020 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

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,

Level 1

Level 2 Level 3

Total

‰ Equity securities includes public equities and exchange-

traded funds.

‰ Other debt obligations

includes other asset-backed

securities and money market instruments.

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.

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.

As of December 2020

As of December 2019

$ in millions

Amount or
Range

Weighted
Average

Amount or
Range

Weighted
Average

$191

9.0% 2.7% to 21.7% 13.5%
57.7% 11.4% to 81.1% 55.6%
2.8

0.3 to 6.6

5.0

$203
1.7% to 22.0%
5.1% to 94.9%
1.1 to 9.1

Loans and securities backed by commercial real estate
Level 3 assets
Yield
Recovery rate
Duration (years)
Loans and securities backed by residential real estate
$131
Level 3 assets
Yield
0.6% to 15.7%
Cumulative loss rate 3.4% to 45.6%
Duration (years)
0.9 to 16.1
Corporate debt instruments
Level 3 assets
Yield
Recovery rate
Duration (years)

$797
0.6% to 30.6%
0.0% to 73.6%
0.3 to 25.5

$231
6.3% 1.2% to 12.0%

5.8%
20.8% 5.4% to 30.4% 16.3%
5.7

2.3 to 12.4

6.5

$692
9.5% 0.1% to 20.4%

7.2%
58.7% 0.0% to 69.7% 54.9%
5.1

1.7 to 16.6

4.0

Level 3 government and agency obligations, other debt
obligations and equity securities were not material as of
both December 2020 and December 2019, and therefore
are not included in the table above.

$ in millions

As of December 2020

Assets
Government and agency obligations:

U.S.
Non-U.S.

$ 93,670 $ 44,863 $

46,147

11,261

– $138,533
57,423

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

–
–
915
–
338
75,300
–

800
7,079
31,351
200
1,412
77,877
9,374
$216,370 $106,442 $1,237 $324,049

597
6,948
29,639
200
1,055
2,505
9,374

203
131
797
–
19
72
–

Liabilities
Government and agency obligations:

U.S.
Non-U.S.

$ (16,880) $
(22,092)

(13) $

(1,792)

– $ (16,893)
(23,884)
–

Loans and securities backed by:

Commercial real estate
Residential real estate
Corporate debt instruments
State and municipal obligations
Other debt obligations
Equity securities
Total

–
–
(2)
–
–
(45,734)

(18)
(1)
(8,022)
(5)
(2)
(46,311)
$ (84,708) $ (10,348) $ (80) $ (95,136)

(17)
(1)
(7,970)
(5)
–
(550)

(1)
–
(50)
–
(2)
(27)

As of December 2019

Assets
Government and agency obligations:

U.S.
Non-U.S.

$108,200 $ 34,714 $

33,709

11,108

21 $142,935
44,839
22

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

–
–
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
–

Liabilities
Government and agency obligations:

U.S.
Non-U.S.

$ (9,914) $
(21,213)

(47) $

(2,205)

– $ (9,961)
(23,424)
(6)

Loans and securities backed by:

Commercial real estate
Residential real estate
Corporate debt instruments
State and municipal obligations
Equity securities
Commodities
Total

–
–
(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)
–

132 Goldman Sachs 2020 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:
‰ Ranges represent the significant unobservable inputs that
were used in the valuation of each type of trading cash
instrument.

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.

‰ Weighted averages are calculated by weighting each input
by the relative fair value of the trading cash instruments.
‰ 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 2020 and
December 2019. 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

2020

2019

$1,242
66
(143)
796
(411)
(266)
156
(203)
$1,237

$ (273)
–
(15)
34
(38)
9
(27)
230
$ (80)

$1,689
89
(35)
522
(885)
(252)
256
(142)
$1,242

(49)
10
(236)
56
(35)
–
(24)
5
$ (273)

Goldman Sachs 2020 Form 10-K 133

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

2020

2019

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

$ 191
11
(33)
110
(19)
(64)
25
(18)
$ 203

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

$ 231
11
23
69
(80)
(40)
5
(88)
$ 131

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

$ 692
47
(118)
551
(233)
(146)
96
(92)
$ 797

$ 128
(3)
(15)
66
(79)
(16)
30
(5)
$ 106

$ 332
5
(17)
49
(153)
(48)
37
(14)
$ 191

$ 348
14
28
111
(223)
(37)
19
(29)
$ 231

$ 912
58
(27)
291
(458)
(134)
142
(92)
$ 692

$ 97
12
(19)
71
(51)
(33)
58
(7)
$ 128

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 2020. The net realized and
unrealized losses on level 3 trading cash instrument assets of
$77 million (reflecting $66 million of net realized gains and
$143 million of net unrealized losses) for 2020 included
gains/(losses) of $(193) million reported in market making
and $116 million reported in interest income.

The net unrealized losses on level 3 trading cash instrument
assets for 2020 primarily reflected losses on certain
corporate debt instruments, principally driven by wider
credit spreads.

134 Goldman Sachs 2020 Form 10-K

Transfers into level 3 trading cash instrument assets during
2020 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.

Transfers out of level 3 trading cash instrument assets
during 2020 primarily reflected transfers of certain
corporate debt instruments, and loans and securities backed
by residential real estate to level 2, principally due to
increased price transparency as a result of market evidence,
including market transactions in these instruments.

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

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.

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

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 of certain fixed-rate unsecured borrowings and
deposits, as well as to manage foreign exchange risk of
certain available-for-sale securities and the net investment
in certain non-U.S. operations.

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
specified rates,
commodities,
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
ended
December 2020 and December 2019, substantially all of the
firm’s derivatives were included in the Global Markets
segment.

earnings. For both the years

in the

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 2020

As of December 2019

Derivative
Assets

Derivative
Liabilities

Derivative
Assets

Derivative
Liabilities

665 $

476 $

660 $

16,809
304,370
321,839
4,517
11,551
16,068
22
631
102,676
103,329
4,177
187
13,691
18,055
31,944
49,072
81,016
540,307

18,832
337,998
357,495
4,137
12,418
16,555
133
401
101,830
102,364
4,476
195
9,320
13,991
29,006
47,867
76,873
567,278

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

856
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

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
1
Bilateral OTC
1
Total interest rates
57
OTC-cleared
153
Bilateral OTC
210
Total currencies
Subtotal
211
Total gross fair value $ 568,629 $ 540,766 $ 441,896 $ 426,590

–
3,182
3,182
16
16
32
3,214

1
1,346
1,347
–
4
4
1,351

–
–
–
87
372
459
459

Offset in the consolidated balance sheets
$ (29,549) $ (29,549) $ (14,159) $ (14,159)
Exchange-traded
(15,565)
(21,315)
OTC-cleared
(310,920)
Bilateral OTC
(372,142)
(340,644)
Counterparty netting (423,006)
(526)
(1,926)
OTC-cleared
(41,618)
(74,116)
Bilateral OTC
Cash collateral netting (76,042)
(42,144)
Total amounts offset $(499,048) $(482,175) $(396,644) $(382,788)

(21,315)
(372,142)
(423,006)
(720)
(58,449)
(59,169)

(15,565)
(310,920)
(340,644)
(1,302)
(54,698)
(56,000)

Included in the consolidated balance sheets
Exchange-traded
OTC-cleared
Bilateral OTC
Total

5,955
147
37,700
$ 69,581 $ 58,591 $ 45,252 $ 43,802

7,254 $
196
51,141

2,241 $
249
42,762

4,731 $
325
64,525

Not offset in the consolidated balance sheets
$
Cash collateral
Securities collateral
Total

(1,603)
(9,252)
$ 51,305 $ 46,221 $ 30,452 $ 32,947

(2,427) $
(9,943)

(17,297)

(14,196)

(979) $

(604) $

Goldman Sachs 2020 Form 10-K 135

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 2020

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 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

$ 297 $ 357,568 $

–
–
–
75
372
(135)

3,451
147
706
1,744
7,025
(1,058)

13,104
102,221
13,285
75,054
561,232
(420,685)

977 $ 358,842
16,555
102,368
13,991
76,873
568,629
(421,878)
$ 237 $ 140,547 $ 5,967 $ 146,751
(1,128)
(76,042)
$ 69,581

–
–
–
(318)
(547)
135

(1,673)
(485)
(406)
(2,576)
(5,850)
1,058

(14,395)
(103,303)
(17,649)
(78,122)
(534,369)
420,685

$(229) $(320,900) $ (710) $(321,839)
(16,068)
(103,788)
(18,055)
(81,016)
(540,766)
421,878
$(412) $(113,684) $(4,792) $(118,888)
1,128
59,169
$ (58,591)

3,525
187
490
687
5,446
(792)

17,204
80,178
10,648
48,953
436,426
(340,325)

3 $ 279,443 $
–
–
–
21
24
–

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

(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)
(26)
(426,590)
(29)
341,117
–
$ (29) $ (80,815) $(4,629) $ (85,473)
(473)
42,144
$ (43,802)

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 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

2020

2019

$ 3,722,558
13,789,571
11,076,460
28,588,589
515,197
558,813
1,074,010
7,413
157,687
6,041,663
6,206,763
242,193
2,315
206,253
450,761
948,937
1,126,572
2,075,509
38,395,632

182,311
6,641
188,952
1,767
14,055
15,822
204,774
$38,600,406

$ 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

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 $20.60 billion as of December 2020 and
$9.15 billion as of December 2019, and derivative
liabilities of $22.98 billion as of December 2020 and
$14.88 billion as of December 2019, which are not
subject to an enforceable netting agreement or are subject
the firm has not yet
that
to a netting agreement
determined to be enforceable.

‰ During the first quarter of 2020, consistent with the rules
of a clearing organization, the firm elected to consider its
transactions with that clearing organization as settled each
day. The impact of this change would have been a
reduction in gross credit derivative assets of $3.97 billion
and liabilities of $4.15 billion as of December 2019, and a
corresponding decrease in counterparty and cash collateral
netting, with no impact to the consolidated balance sheets.

136 Goldman Sachs 2020 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:
‰ 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.

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.

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.

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.

As of December 2020

As of December 2019

‰ Volatility was not significant to the valuation of level 3

$ in millions, except inputs

Amount or
Range

Average/
Median

Amount or
Range

Average/
Median

Interest rates, net
Correlation
Volatility (bps)
Credit, net
Credit spreads (bps)
Upfront credit points
Recovery rates
Currencies, net
Correlation
Volatility
Commodities, net
Volatility

Natural gas spread

Oil spread

Equities, net
Correlation
Volatility

$267

$89

(8)% to 81% 56%/60% (42)% to 81% 52%/60%
70/61

65/53

31 to 150
$1,778
2 to 699
7 to 90

31 to 150
$1,877
1 to 559
2 to 90

N/A
$247

96/53
38/32
25% to 90% 46%/40% 10% to 60% 31%/25%

109/74
40/30

$(338)

$(211)

20% to 70% 39%/41% 20% to 70% 37%/36%
N/A
18% to 18% 18%/18%

$300

15% to 87% 32%/30% 9% to 57% 26%/25%

$(1.00) to
$2.13

$8.30 to
$11.20
$(832)

$(0.13)/
$(0.09)

$9.73/
$9.55

$(1.93) to
$1.69

$(4.86) to
$19.77
$(1,977)

$(0.16)/
$(0.17)

$9.82/
$11.15

(70)% to 100% 52%/55% (70)% to 99% 42%/45%
3% to 129% 14%/7% 2% to 72% 14%/7%

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.

currency derivatives as of December 2019.

‰ 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 provides 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

Goldman Sachs 2020 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

‰ 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.

138 Goldman Sachs 2020 Form 10-K

Level 3 Rollforward
The table below presents a summary of the changes in fair
value for level 3 derivatives.

$ 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

Year Ended December

2020

2019

25
226
612
319
(724)
750
(40)
7
$1,175

$ 590
118
(454)
444
(668)
236
7
(248)
$ 25

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.

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
derivatives included in the summary table above.

$ in millions

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

Year Ended December

2020

2019

89
12
226
12
(28)
(34)
(13)
3
267

$ 1,877
28
110
39
(50)
(229)
47
(44)
$ 1,778

$ (211)
(8)
(210)
1
(20)
117
(2)
(5)
$ (338)

247
(12)
159
37
(22)
(60)
(27)
(22)
300

$(1,977)
206
327
230
(604)
956
(45)
75
$ (832)

$ (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)

The net unrealized gains on level 3 derivatives for 2020
were primarily attributable to gains on certain equity
derivatives (primarily reflecting the impact of an increase in
equity prices), gains on certain interest rate derivatives
(primarily reflecting the impact of a decrease in interest
rates and changes in foreign exchange rates), gains on
certain commodity derivatives (primarily reflecting the
impact of changes in commodity prices), and gains on
certain credit derivatives (primarily reflecting the impact of
a decrease in interest rates), partially offset by losses on
certain currency derivatives (primarily reflecting the impact
of changes in foreign exchange rates and a decrease in
interest rates).

The drivers of both transfers into level 3 derivatives and
transfers out of level 3 derivatives during 2020 were not
material.

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), and 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.

Level 3 Rollforward Commentary
Year Ended December 2020. The net realized and
unrealized gains on level 3 derivatives of $838 million
(reflecting $226 million of net
realized gains and
$612 million of net unrealized gains) for 2020 included
gains of $900 million reported in market making and losses
of $62 million reported in other principal transactions.

Goldman Sachs 2020 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

OTC Derivatives
The table below presents OTC derivative assets and
liabilities by tenor and major product type.

$ in millions

As of December 2020

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 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

Less than
1 Year

1 - 5
Years

Greater than
5 Years

Total

822
13,887
2,998

$ 8,913 $20,145
3,270
7,400
1,466
12,182 12,590
(4,458)
(3,963)
$34,839 $40,413

$ 5,687 $11,967
3,462
1,268
7,575
18,770
3,455
1,545
9,702 14,095
(4,458)
(3,963)
$34,919 $34,186

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

3,302
9,303
488
1,807
(3,182)

$74,893 $103,951
7,394
30,590
4,952
26,579
(11,603)
$86,611 $161,863
(20,971)
(76,042)
$ 64,850

2,177
5,775
4,315
3,986
(3,182)

$49,301 $ 66,955
6,907
32,120
9,315
27,783
(11,603)
$62,372 $131,477
(20,971)
(59,169)
$ 51,337

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

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

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.

140 Goldman Sachs 2020 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

‰ 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
losses exceed the notional amount of
these junior
tranches, any excess loss is covered by the next most
senior tranche.

‰ 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
institutions and are subject to stringent
with financial
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 2020, written credit derivatives had a total
gross notional amount of $515.85 billion and purchased
credit derivatives had a total gross notional amount of
$558.18 billion, for total net notional purchased protection
of $42.33 billion. 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. The firm’s
written and purchased credit derivatives primarily consist
of credit default swaps.

The table below presents
derivatives.

information about credit

Credit Spread on Underlier (basis points)

$ in millions

0 - 250

As of December 2020

251 -
500

501 -
1,000

Greater
than
1,000

Total

Maximum Payout/Notional Amount of Written Credit Derivatives by Tenor
$ 96,049 $ 5,826 $ 450 $ 2,403 $104,728
Less than 1 year
362,791
8,801
1 – 5 years
Greater than 5 years
48,331
272
$471,326 $27,578 $9,523 $ 7,423 $515,850
Total

331,145
44,132

17,913
3,839

4,932
88

$407,315 $19,822 $8,679 $ 7,091 $442,907
776 $115,271
$103,604 $ 7,272 $3,619 $

Maximum Payout/Notional Amount of Purchased Credit Derivatives
Offsetting
Other
Fair Value of Written Credit Derivatives
Asset
Liability
Net asset/(liability)

118 $ 11,314
4,619
$ 9,190 $ (481) $ (131) $ (1,883) $ 6,695

$ 10,302 $
1,112

638 $ 256 $

1,119

2,001

387

As of December 2019

Maximum Payout/Notional Amount of Written Credit Derivatives by Tenor
$143,566 $ 7,155 $ 759 $ 2,953 $154,433
Less than 1 year
316,786
5,482
1 – 5 years
Greater than 5 years
51,350
427
$484,119 $19,540 $6,668 $12,242 $522,569
Total

292,444
48,109

10,125
2,260

8,735
554

$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)

202 $ 13,911
5,549
(2) $ (212) $ (3,288) $ 8,362

$ 13,103 $
1,239
$ 11,864 $

446 $ 160 $
448

3,490

372

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.

Goldman Sachs 2020 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

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

2020

2019

2018

$(143)
173
$ 30

$(289)
485
$ 196

$ 371
(194)
$ 177

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 asset/(liability)

Notional amount

As of December

2020

2019

$ 1,450
(1,220)
230

$ 1,148
(1,717)
(569)

$12,548

$11,003

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, as well as other secured
financings, 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
assesses the impact of
these bilateral agreements by
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.

142 Goldman Sachs 2020 Form 10-K

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

2020

2019

Net derivative liabilities under bilateral agreements $43,368
Collateral posted
$35,296
Additional collateral or termination payments:

$32,800
$28,510

One-notch downgrade
Two-notch downgrade

$
481
$ 1,388

$
358
$ 1,268

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-
and short-term
borrowings and certain fixed-rate certificates of deposit,
(ii) foreign exchange forward contracts used to manage the
foreign exchange risk of certain available-for-sale securities
and (iii) certain foreign currency forward contracts and
foreign currency-denominated debt used to manage foreign
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- 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), Secured Overnight Financing Rate
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 these 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
in fair value
highly effective in offsetting changes
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%.

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 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

2020

2019

2018

Interest rate hedges
Hedged borrowings and deposits
Interest expense

$ 3,862
$(4,557)
$ 8,938

$ 3,196
$ (3,657)
$17,376

$ (1,854)
$ 1,295
$15,912

The table below presents the carrying value of deposits and
unsecured borrowings that are designated in a hedging
relationship and the related cumulative hedging adjustment
from current and prior hedging
(increase/(decrease))
relationships included in such carrying values.

$ in millions

As of December 2020

Deposits
Unsecured short-term borrowings
Unsecured long-term borrowings

As of December 2019

Deposits
Unsecured short-term borrowings
Unsecured long-term borrowings

Carrying
Value

Cumulative
Hedging
Adjustment

$ 17,303
$
5,976
$115,242

$ 19,634
$
6,008
$ 87,874

649
$
$
53
$11,624

200
$
$
28
$ 7,292

In the table above, cumulative hedging adjustment included
$6.34 billion as of December 2020 and $3.48 billion as of
December 2019 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
$489 million as of December 2020 and $425 million as of
December 2019 and substantially all were related to
unsecured long-term borrowings.

risk of

certain available-for-sale

During 2020, the firm designated certain foreign exchange
forward contracts as fair value hedges of the foreign
exchange
securities
included in investments. The carrying value of such
securities was $2.09 billion as of December 2020. The
effectiveness of such hedges is assessed based on changes in
spot rates. The losses on the hedges (relating to both spot
and forward points) were $112 million and the gains on the
related available-for-sale securities were $110 million, and
were included in market making for 2020.

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.

The table below presents the gains/(losses)
investment hedging.

from net

$ in millions

Hedges:

Year Ended December

2020

2019

2018

Foreign currency forward contract
Foreign currency-denominated debt

$(126)
$(297)

$ 6
$(19)

$577
$ (50)

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 for 2020
was $61 million (reflecting a gain of $214 million related to
hedges and a loss of $153 million on the related net
investments in non-U.S. operations). The gross and net
gains and losses reclassified to earnings from accumulated
other comprehensive income were not material for both
2019 and 2018.

The firm had designated $4.97 billion as of December 2020
and $3.05 billion as of December 2019 of foreign currency-
denominated debt, included in unsecured long- and short-
term borrowings, as hedges of net investments in non-U.S.
subsidiaries.

Goldman Sachs 2020 Form 10-K 143

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 $7.14 billion as of December 2020 and
$8.23 billion as of December 2019. Gains recognized as a
result of changes in the fair value of equity securities for
which the fair value option was elected were $573 million
for 2020 and $1.29 billion for 2019. These gains are
in the
included in other principal
consolidated statements of earnings.

transactions

‰ Equity securities, at fair value included $2.35 billion as of
December 2020 and $3.22 billion as of December 2019
of investments in funds that are measured at NAV.

Debt Instruments, at Fair Value. Debt instruments, at
fair value primarily includes mezzanine,
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
Money market instruments
Other
Total

As of December

2020

2019

$10,991
1,940
2,185
1,865
$16,981

$10,838
2,619
1,681
1,432
$16,570

In the table above:
‰ Money market

time deposits,
investments in money market funds, commercial paper
and certificates of deposit.

instruments

includes

‰ Other included $1.31 billion as of December 2020 and
$983 million as of December 2019 of investments in
credit funds that are measured at NAV.

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 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.

$ in millions

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

2020

2019

$19,781
16,981
46,016
82,778
5,301
366
$88,445

$22,163
16,570
19,094
57,827
5,825
285
$63,937

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

As of December

2020

2019

$19,781

$22,163

15%
85%
100%

83%
17%
100%

11%
89%
100%

79%
21%
100%

144 Goldman Sachs 2020 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

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.

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
including
leveraged buyouts,
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
invest globally,
corporate issuers. Real estate funds
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.

The table below presents the fair value of investments in
funds at NAV and the related unfunded commitments.

$ in millions

As of December 2020
Private equity funds
Credit funds
Hedge funds
Real estate funds
Total

As of December 2019
Private equity funds
Credit funds
Hedge funds
Real estate funds
Total

Fair Value of
Investments

Unfunded
Commitments

$2,042
1,312
102
208
$3,664

$2,767
983
125
331
$4,206

$ 557
680
–
213
$1,450

$ 765
820
–
196
$1,781

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)
unless designated in a fair value hedging relationship. See
Note 7 for information about available-for-sale securities
that are designated in a hedging relationship.

table

The
available-for-sale securities by tenor.

below presents

information

about

$ in millions

As of December 2020

Amortized
Cost

Weighted
Average
Yield

Fair
Value

Less than 1 year
1 year to 5 years
5 years to 10 years
Total U.S. government obligations

25 $

25
35,831 36,158
7,732
43,310 43,915

7,454

5 years to 10 years
Greater than 10 years
Total non-U.S. government obligations
Total available-for-sale securities

1,739
353
2,092

1,744
357
2,101
$45,402 $46,016

As of December 2019

Less than 1 year
1 year to 5 years
5 years to 10 years
Greater than 10 years
Total U.S. government obligations
Total available-for-sale securities

25 $

3,505
1,469

25
14,038 14,016
3,510
1,543
19,037 19,094
$19,037 $19,094

0.08%
0.70%
1.19%
0.78%

0.10%
0.74%
0.21%
0.76%

0.10%
1.53%
1.85%
2.65%
1.68%
1.68%

In the table above:
‰ Available-for-sale securities were classified in level 1 of
the fair value hierarchy as of both December 2020 and
December 2019.

‰ The firm sold available-for-sale securities of $4.49 billion
(realized gains of $319 million) during 2020 and
$9.58 billion (realized gains of $181 million) during
2019. Such gains were included in the consolidated
statements of earnings.

Goldman Sachs 2020 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

‰ The gross unrealized gains included in accumulated other
comprehensive income/(loss) were $631 million as of
December 2020 and $137 million as of December 2019.
The gross unrealized losses included in accumulated other
comprehensive income/(loss) were not material as of both
December 2020 and December 2019.

‰ Beginning in January 2020, available-for-sale securities
are reviewed to determine if an allowance for credit losses
should be recorded in the consolidated statements of
earnings. The firm considers various factors in such
determination, including market conditions, changes in
issuer credit ratings, severity of the unrealized losses, and
the intent and ability to hold the security until recovery.
See Note 3 for further information about the adoption of
CECL. Prior to January 2020, such securities were
reviewed for other-than-temporary impairment. The firm
did not record any provision for credit losses on such
securities during 2020 and there was no other-than-
temporary impairment during 2019.

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 2020
Government and agency obligations:

U.S.
Non-U.S.

Corporate debt securities
Securities backed by real estate
Money market instruments
Other debt obligations
Equity securities
Subtotal
Investments in funds at NAV
Total investments

– $

48
5,635
942
1,404
–
7,270

$43,915 $
2,109
70
–
781
–
517

– $43,915
2,157
–
10,991
5,286
1,940
998
2,185
–
497
497
17,429
9,642
$47,392 $15,299 $16,423 $79,114
3,664
$82,778

As of December 2019
Government and agency obligations:

U.S.
Non-U.S.

Corporate debt securities
Securities backed by real estate
Money market instruments
Other debt obligations
Equity securities
Subtotal
Investments in funds at NAV
Total investments

– $

$19,094 $

–
48
–
732
–
251

36
7,325
2,024
949
94
7,786

– $19,094
36
–
10,838
3,465
2,619
595
1,681
–
413
319
18,940
10,903
$20,125 $18,214 $15,282 $53,621
4,206
$57,827

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.

146 Goldman Sachs 2020 Form 10-K

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

As of December 2020

As of December 2019

$ in millions

Amount or
Range

Weighted
Average

Amount or
Range

Weighted
Average

Corporate debt securities
$5,286
Level 3 assets
4.5% to 19.5%
Yield
10.0% to 70.0%
Recovery rate
3.0 to 7.7
Duration (years)
Multiples
0.6x to 29.3x
Securities backed by real estate
Level 3 assets
$998
8.2% to 52.4%
Yield
21.6% to 57.8%
Recovery rate
Duration (years)
0.4 to 3.6
Other debt obligations
Level 3 assets
Yield
Duration (years)
Equity securities
$9,642
Level 3 assets
Multiples
0.6x to 27.9x
Discount rate/yield 4.0% to 38.5%
Capitalization rate 3.7% to 14.1%

$497
1.7% to 6.2%
0.2 to 10.3

$3,465
10.2%
5.5% to 29.8% 12.0%
50.7% 25.0% to 100.0% 68.5%
5.0
7.0x

2.9 to 5.9
0.6x to 24.4x

4.2
6.9x

$595
17.5%
9.4% to 20.3% 16.0%
33.7% 33.1% to 34.4% 33.5%
0.9

0.4 to 3.0

2.7

3.5%
6.4

9.0x
13.5%
6.3%

$319
3.4% to 5.2%
4.0 to 8.0

4.5%
6.7

$10,903
0.8x to 36.0x

8.0x
2.1% to 20.3% 13.4%
6.1%
3.6% to 15.1%

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 2020 and December 2019. Due to the
the
distinctive nature of each level 3 investment,
interrelationship of inputs is not necessarily uniform
within each product type.

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

‰ 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.

‰ 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.

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

2020

$15,282
215
(443)
1,815
(1,550)
(1,570)
4,708
(2,034)
$16,423

2019

$13,548
252
1,295
1,322
(986)
(1,192)
2,646
(1,603)
$15,282

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 investments 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.

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

Other debt obligations
Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Purchases
Sales
Settlements
Transfers into 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

Year Ended December

2020

2019

$ 3,465
110
(96)
636
(302)
(678)
2,661
(510)
$ 5,286

595
22
(96)
233
–
(83)
327
–
998

319
15
1
113
–
(45)
94
497

$10,903
68
(252)
833
(1,248)
(764)
1,626
(1,524)
$ 9,642

$ 2,540
64
198
297
(43)
(274)
1,106
(423)
$ 3,465

457
27
–
238
(82)
(98)
63
(10)
595

216
1
1
118
(9)
(8)
–
319

$10,335
160
1,096
669
(852)
(812)
1,477
(1,170)
$10,903

Level 3 Rollforward Commentary
Year Ended December 2020. The net realized and
unrealized losses on level 3 investments of $228 million
realized gains and
(reflecting $215 million of net
$443 million of net unrealized losses) for 2020 included
losses of $428 million reported in other principal
transactions and $200 million reported in interest income.

The net unrealized losses on level 3 investments for 2020
reflected losses on certain private equity, corporate debt
securities and securities backed by real estate, principally
driven by corporate performance.

Goldman Sachs 2020 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

Transfers into level 3 investments during 2020 primarily
reflected transfers of certain 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, and certain unobservable
yield and duration inputs becoming significant to the
valuation of these instruments) and transfers of certain
private equity securities from level 2 (principally due to
reduced price transparency as a result of a lack of market
evidence,
these
instruments).

transactions

including

fewer

Transfers out of level 3 investments during 2020 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 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 investments 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,
these
instruments).

transactions

including

fewer

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).

148 Goldman Sachs 2020 Form 10-K

Held-to-Maturity Securities
Held-to-maturity securities are accounted for at amortized
cost.

table

The
held-to-maturity securities by type and tenor.

below presents

information

about

$ in millions

As of December 2020

Less than 1 year
1 year to 5 years
5 years to 10 years
Total U.S. government obligations

5 years to 10 years
Greater than 10 years
Total securities backed by real estate
Total held-to-maturity securities

As of December 2019

1 year to 5 years
5 years to 10 years
Total U.S. government obligations

Less than 1 year
Greater than 10 years
Total securities backed by real estate
Total held-to-maturity securities

Amortized
Cost

Fair
Value

Weighted
Average
Yield

$ 501
2,529
1,531
4,561

4
736
740
$5,301

$3,534
1,534
5,068

6
751
757
$5,825

$ 513
2,695
1,675
4,883

3
751
754
$5,637

$3,613
1,576
5,189

6
769
775
$5,964

2.53%
2.34%
2.25%
2.33%

2.56%
1.08%
1.08%
2.15%

2.40%
2.25%
2.35%

4.16%
1.67%
1.69%
2.27%

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
fair value hierarchy, U.S. government
the
obligations would have been classified in level 1 and
securities backed by real estate would have been primarily
classified in level 2 of the fair value hierarchy as of both
December 2020 and December 2019.

firm’s

‰ The gross unrealized gains were $340 million as of
December 2020 and $141 million as of December 2019.
The gross unrealized losses were not material as of both
December 2020 and December 2019.

‰ Beginning in January 2020, held-to-maturity securities
are reviewed to determine if an allowance for credit losses
should be recorded in the consolidated statements of
earnings. The firm considers various factors in such
determination, including market conditions, changes in
issuer credit ratings, historical credit losses and sovereign
guarantees. See Note 3 for further information about the
adoption of CECL. Prior to January 2020, such securities
were reviewed for other-than-temporary impairment.
Provision for credit losses on such securities was not
material during 2020 and there was no other-than-
temporary impairment during 2019.

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 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.

Amortized
Cost

Fair
Value

Held For
Sale

Total

$ in millions

As of December 2020

Loan Type
Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer:

Installment
Credit cards

Other
Total loans, gross
Allowance for loan losses
Total loans

$ 44,778
25,151
17,096
5,236

3,823
4,270
3,211
103,565
(3,874)
$ 99,691

As of December 2019

Loan Type
Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer:

Installment
Credit cards

Other
Total loans, gross
Allowance for loan losses
Total loans

$ 41,129
20,116
13,258
6,132

4,747
1,858
3,396
90,636
(1,441)
$ 89,195

$ 2,751
7,872
1,961
494

–
–
547
13,625
–
$13,625

$ 3,224
7,824
1,876
792

–
–
670
14,386
–
$14,386

$1,130
–
1,233
20

–
–
416
2,799
–
$2,799

$1,954
–
2,609
34

–
–
726
5,323
–
$5,323

$ 48,659
33,023
20,290
5,750

3,823
4,270
4,174
119,989
(3,874)
$116,115

$ 46,307
27,940
17,743
6,958

4,747
1,858
4,792
110,345
(1,441)
$108,904

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 to private bank clients, including
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.

‰ Commercial Real Estate. Commercial real estate loans
include originated loans (other than those extended to
private bank clients) 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 extended to clients
who warehouse assets that are directly or indirectly
backed by
In addition,
commercial real estate includes loans purchased by the
firm.

commercial

estate.

real

‰ Residential Real Estate. Residential real estate loans
primarily includes loans extended by the firm to clients
(other than those extended to private bank clients) who
warehouse assets that are directly or indirectly secured by
residential real estate and loans purchased by the firm.
‰ Installment. Installment 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
that are directly or
clients who warehouse assets
indirectly secured by consumer loans,
including auto
loans and private student loans. Other loans also includes
unsecured consumer and credit card loans purchased by
the firm.

Loans accounted for at amortized cost included PCI loans
with a carrying value of $1.62 billion (outstanding
principal balance of $3.23 billion and accretable yield of
$220 million) as of December 2019, which were secured by
commercial and residential real estate. In January 2020, the
firm elected the fair value option for these PCI loans in
accordance with ASU No. 2016-13. These loans were
primarily transferred to trading assets. See Note 3 for
further information about adoption of this ASU.

Credit Quality
Risk Assessment. The firm’s risk assessment process
includes evaluating the credit quality of its loans. For
corporate loans and a majority of wealth management, real
estate and other loans, 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 and is performed
on an annual basis or more frequently if circumstances
change that indicate that a review may be necessary. 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.

Goldman Sachs 2020 Form 10-K 149

the Fair

credit-quality indicator

In the table above, other/unrated loans include installment
and credit card loans of $8.09 billion as of December 2020
and $6.61 billion as of December 2019 for which an
important
Isaac
score (which measures a
Corporation (FICO) credit
borrower’s creditworthiness by considering factors such as
payment and credit history). FICO credit scores are
periodically refreshed by the firm to assess the updated
creditworthiness of the borrower. See “Vintage” below for
information about installment and credit card loans by
FICO credit scores. The vast majority of the remaining
loans of $9.73 billion as of December 2020 and
$9.54 billion as of December 2019 included in the other/
unrated category are secured. These loans primarily consist
of wealth management loans backed by residential real
estate and securities, and purchased real estate-backed
loans. The firm’s risk assessment process for such loans
includes
as
loan-to-value ratio, delinquency status, collateral values,
expected cash flows and other risk factors.

key metrics,

reviewing

certain

such

The firm also assigns a regulatory risk rating to its loans
based on the definitions provided by the U.S. federal bank
regulatory agencies. Total loans included 85% of loans as
of December 2020 and 91% of loans as of December 2019
that were rated pass/non-criticized.

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 an internally
determined public rating agency equivalent or other credit
metrics and the concentration of secured and unsecured
loans.

$ in millions

As of December 2020

Accounting Method
Amortized cost
Fair value
Held for sale
Total

Loan Type
Corporate
Wealth management
Real estate:

Commercial
Residential

Consumer:

Installment
Credit cards

Other
Total

Secured
Unsecured
Total

As of December 2019

Accounting Method
Amortized cost
Fair value
Held for sale
Total

Loan Type
Corporate
Wealth management
Real estate:

Commercial
Residential

Consumer:

Installment
Credit cards

Other
Total

Secured
Unsecured
Total

Investment-
Grade

Non-Investment-
Grade

Other/
Unrated

Total

$33,532
2,084
224
$35,840

$ 9,478
22,098

1,792
636

–
–
1,836
$35,840

83%
17%
100%

$30,266
2,844
323
$33,433

$58,250 $11,783 $103,565
13,625
5,616
2,799
423
$66,327 $17,822 $119,989

5,925
2,152

$38,704 $
5,331

477 $ 48,659
33,023

5,594

17,480
3,852

1,018
1,262

20,290
5,750

–
–
960

3,823
3,823
4,270
4,270
4,174
1,378
$66,327 $17,822 $119,989

90%
10%

46%
54%
100% 100%

82%
18%
100%

$51,222 $ 9,148 $ 90,636
14,386
6,368
5,323
632
$60,764 $16,148 $110,345

5,174
4,368

$10,507
20,001

$35,509 $
3,576

291 $ 46,307
27,940

4,363

306
244

–
–
2,375
$33,433

83%
17%
100%

15,997
4,600

1,440
2,114

17,743
6,958

–
–
1,082

4,747
4,747
1,858
1,858
4,792
1,335
$60,764 $16,148 $110,345

91%
9%

54%
46%
100% 100%

83%
17%
100%

150 Goldman Sachs 2020 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

Vintage. The table below presents gross loans accounted
for at amortized cost (excluding installment and credit card
loans) by an internally determined public rating agency
equivalent or other credit metrics and origination year for
term loans.

$ in millions

Investment-
Grade

Non-Investment-
Grade

Other/
Unrated

Total

As of December 2020

2020
2019
2018
2017
2016
2015 or earlier
Revolving
Corporate
2020
2019
2018
2017
2016
2015 or earlier
Revolving
Wealth management
2020
2019
2018
2017
2016
2015 or earlier
Revolving
Commercial real estate
2020
2019
2018
2017
2016
2015 or earlier
Revolving
Residential real estate
2020
2019
2018
2017
Revolving
Other
Total

$ 1,978
889
2,076
851
268
351
2,662
9,075
497
723
298
377
22
531
18,077
20,525
848
76
137
26
–
–
461
1,548
402
–
–
9
–
–
225
636
242
–
–
–
1,506
1,748
$33,532

–
–
–
–
–

–
–
–
–
–
–

6,106
3,555
3,083
1,262
2,073
11,891
35,515
313
403
87
30
20
264
2,085
3,202
3,071
1,965
2,164
1,734
165
775
5,047
14,921
976
90
123
83
1
–
2,470
3,743
84
67
46
8
664
869

$ 7,545 $ 140 $ 9,663
6,995
5,631
3,934
1,530
2,424
48 14,601
188 44,778
810
1,126
385
407
42
795
1,424 21,586
1,424 25,151
3,974
2,041
2,326
1,772
174
1,301
5,508
627 17,096
1,493
115
361
271
372
249
244
152
1
–
70
70
2,695
–
5,236
857
792
466
96
29
46
–
8
–
2,269
99
3,211
594
$58,250 $3,690 $95,472

55
–
25
12
9
526
–

Percentage of total

35%

61%

4% 100%

In the table above, revolving loans which converted to term
loans were not material as of December 2020.

loans by
The table below presents gross installment
refreshed FICO credit scores and origination year and gross
credit card loans by refreshed FICO credit scores.

$ in millions

2020
2019
2018
2017
2016
Installment
Credit cards
Total consumer

Percentage of total:
Installment
Credit cards
Total consumer

As of December 2020

Greater than or
equal to 660

Less than 660

Total

$1,321
1,225
792
128
6
3,472
3,398
$6,870

91%
80%
85%

38
132
150
30
1
351
872
$1,223

9%
20%
15%

$1,359
1,357
942
158
7
3,823
4,270
$8,093

100%
100%
100%

In the table above, credit card loans consist of revolving
lines of credit.

Credit Concentrations. The table below presents the
concentration of gross loans by region.

$ in millions

As of December 2020

Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer:

Installment
Credit cards

Other
Total

As of December 2019

Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer:

Installment
Credit cards

Other
Total

Carrying
Value

$ 48,659
33,023
20,290
5,750

3,823
4,270
4,174
$119,989

$ 46,307
27,940
17,743
6,958

4,747
1,858
4,792
$110,345

Americas

EMEA

Asia

Total

60%
88%
71%
88%

100%
100%
81%
75%

9% 100%
31%
10%
2% 100%
19% 10% 100%
3% 100%

–
–
17%
19%

–
–

100%
100%
2% 100%
6% 100%

60% 31% 9% 100%
88%
9% 3% 100%
69% 21% 10% 100%
9% 1% 100%
90%

–
–

100%
100%

100%
100%
87% 12% 1% 100%
73% 21% 6% 100%

–
–

In the table above:
‰ EMEA represents Europe, Middle East and Africa.
‰ The top five industry concentrations for corporate loans as
of December 2020 were 17% for diversified industrials
(17% as of December 2019), 17% for technology,
media & telecommunications (17% as of December 2019),
13% for funds (9% as of December 2019), 12% for
natural resources & utilities (12% as of December 2019),
and 10% for
(10% as of
December 2019).

institutions

financial

Goldman Sachs 2020 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

Nonaccrual and Past Due Loans. Loans accounted for at
amortized cost (other than credit card loans) are placed on
nonaccrual status when it is probable that the firm will not
collect all principal and interest due under the contractual
terms, regardless of the delinquency status or if a loan is
past due for 90 days or more, unless the loan is both well
collateralized and in the process of collection. At that time,
all accrued but uncollected interest is reversed against
income and interest subsequently collected is
interest
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. Credit card loans
are not placed on nonaccrual status and accrue interest
until the loan is paid in full or is charged-off.

In certain circumstances, the firm may modify the original
terms of a loan agreement by granting a concession to a
borrower experiencing financial difficulty, typically in the
form of a modification of loan covenants, but may also
interest or principal, payment
include forbearance of
extensions or interest rate reductions. These modifications,
to the extent significant, are considered troubled debt
restructurings (TDRs). Loan modifications that extend
payment terms for a period of less than 90 days are
generally considered insignificant and therefore not
reported as TDRs.

In response to the global outbreak of the coronavirus
(COVID-19) pandemic, the firm adopted the relief issued
under the Coronavirus Aid, Relief, and Economic Security
(CARES) Act, as amended, and certain interpretive
guidance issued by the U.S. banking agencies that provides
for certain modified loans that would otherwise meet the
definition of a TDR to not be classified as such. As of
December 2020, the firm had $184 million of loans
accounted for at amortized cost that were not classified as
TDRs as a result of this relief and interpretive guidance.

152 Goldman Sachs 2020 Form 10-K

The table below presents information about past due loans.

$ in millions

As of December 2020

Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer:

Installment
Credit cards

Other
Total

Total divided by gross loans at amortized cost

As of December 2019

Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer:

Installment
Credit cards

Other
Total

$197
13
54
19

71
35
6
$395

Total divided by gross loans at amortized cost

30-89 days

90 days
or more

–
58
49
4

42
46
20
$219

$294
34
183
23

16
31
4
$585

$ 42
15
123
18

29
4
1
$232

Total

$294
92
232
27

58
77
24
$804

0.8%

$239
28
177
37

100
39
7
$627

0.7%

The table below presents information about nonaccrual
loans.

$ in millions

Corporate
Wealth management
Commercial real estate
Residential real estate
Installment
Other
Total

As of December

2020

2019

$2,651
61
649
25
44
122
$3,552

$1,122
52
175
143
38
–
$1,530

Total divided by gross loans at amortized cost

3.4%

1.7%

In the table above:
‰ Nonaccrual

loans

included $533 million as of
December 2020 and $429 million as of December 2019 of
loans that were 30 days or more past due.

‰ Loans that were 90 days or more past due and still
accruing were not material as of both December 2020
and December 2019.

‰ Nonaccrual

loans

included $315 million as of
December 2020 and $251 million as of December 2019 of
corporate and commercial real estate 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 2020 and December 2019.
Installment loans that were modified in a troubled debt
restructuring were
both
December 2020 and December 2019.

not material

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

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.

loss model

The firm adopted ASU No. 2016-13 in January 2020,
for
which replaced the incurred credit
recognizing credit losses with the CECL model. As a result,
the firm’s allowance for credit losses effective January 2020
reflects management’s estimate of credit losses over the
remaining expected life of such loans and also considers
forecasts of
to
economic
January 2020, the allowance for credit losses reflected
probable incurred credit losses. See Note 3 for further
information about the adoption of CECL.

conditions. Prior

future

To determine the allowance for credit losses, the firm
classifies its loans and lending commitments accounted for
at amortized cost into wholesale and consumer portfolios.
Prior to January 2020, the firm also had PCI loans which
were classified as a separate portfolio. These portfolios
represent the level at which the firm has developed and
documented its methodology to determine the allowance
for credit losses. The allowance for credit losses is measured
on a collective basis for loans that exhibit similar risk
characteristics using a modeled approach and asset-specific
basis for loans that do not share similar risk characteristics.

Under CECL, the allowance for credit losses takes into
account the weighted average of a range of forecasts of
future economic conditions over the expected life of the
loan and lending commitments. The expected life of each
loan or lending commitment is determined based on the
contractual term adjusted for extension options or demand
features. The forecasts include baseline, favorable and
adverse economic scenarios over a three-year period. For
loans with expected lives beyond three years, the model
reverts to historical loss information based on a non-linear
modeled approach. The forecasted economic scenarios
consider a number of risk factors relevant to the wholesale
and consumer portfolios described below. The firm applies
judgment in weighing individual scenarios each quarter
based on a variety of factors, including the firm’s internally
recent
derived economic outlook, market consensus,
macroeconomic conditions and industry trends.

The allowance for credit losses also includes qualitative
components which allow management
the
uncertain nature of
capture
economic
uncertainty regarding model inputs, and account for model
imprecision and concentration risk.

forecasting,

to reflect

inherent

in those

functions. Personnel within the

Management’s estimate of credit losses entails judgment
about loan collectability at the reporting dates, and there
judgments. The
are uncertainties
allowance for credit losses is subject to a governance
process that
involves review and approval by senior
management within the firm’s independent risk oversight
firm’s
and control
independent risk oversight and control
functions are
responsible for forecasting the economic variables that
underlie the economic scenarios that are used in the
modeling of expected credit losses. While management uses
the best information available to determine this estimate,
future adjustments to the allowance may be necessary based
on, among other
in the economic
things, changes
environment or variances between actual results and the
original assumptions used.

The table below presents gross
loans and lending
commitments accounted for at amortized cost by portfolio.

As of December

2020

2019

$ in millions

Lending
Commitments

Loans

Lending
Commitments

Loans

Wholesale
$ 44,778
Corporate
Wealth management
25,151
Commercial real estate 17,096
5,236
Residential real estate
Other
3,211
Consumer
Installment
Credit cards
PCI
Total

3,823
4,270
–
$103,565

$127,756 $41,129
20,116
12,803
4,965
3,396

2,314
4,154
1,804
4,841

4,747
4
1,858
21,640
1,622
–
$162,513 $90,636

$127,226
2,198
3,207
759
3,029

12
13,669
–
$150,100

Goldman Sachs 2020 Form 10-K 153

Consumer. The allowance for credit losses for consumer
loans that exhibit similar risk characteristics is calculated
using a modeled approach which classifies consumer loans
into pools based on borrower-related and exposure-related
characteristics that differentiate a pool’s risk characteristics
from other pools. The factors considered in determining a
pool are generally consistent with the risk characteristics
used for internal credit risk measurement and management
and include key metrics, such as FICO credit scores,
delinquency status,
loan vintage and macroeconomic
indicators. The most significant inputs to the forecast
model for consumer loans include unemployment rates and
delinquency rates. The expected life of revolving credit card
loans is determined by modeling expected future draws and
the timing and amount of repayments allocated to the
funded balance. The firm does not recognize an allowance
for credit losses on credit card lending commitments as they
are cancellable by the firm.

The allowance for credit losses for consumer loans that do
not share similar risk characteristics, such as loans in a
troubled debt restructuring, is calculated using the present
value of expected future cash flows discounted at the loan’s
original effective rate.

Installment loans are charged-off when they are 120 days
past due. Credit card loans are charged-off when they are
180 days past due.

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

loans

In the table above, wholesale loans included $3.51 billion
as of December 2020 and $1.49 billion as of
December 2019 of nonaccrual
for which the
allowance for credit losses was measured on an asset-
specific basis. The allowance for credit losses on these loans
was $649 million as of December 2020 and $207 million as
of December 2019. These loans included $584 million as of
December 2020 and $754 million as of December 2019 of
loans which did not require a reserve as the loan was
deemed to be recoverable.

See Note 18 for
commitments.

further information about

lending

The following is a description of the methodology used to
calculate the allowance for credit losses:

Wholesale. The allowance for credit losses for wholesale
loans and lending commitments that exhibit similar risk
characteristics is measured using a modeled approach.
These models determine the probability of default and loss
given default based on various risk factors,
including
industry default and loss data,
internal credit ratings,
expected life, macroeconomic indicators, the borrower’s
capacity to meet its financial obligations, the borrower’s
country of risk and industry, loan seniority and collateral
type. For lending commitments, the methodology also
considers probability of drawdowns or
In
addition, for loans backed by real estate, risk factors
include the loan-to-value ratio, debt service ratio and home
price index. The most significant inputs to the forecast
for wholesale loans and lending commitments
model
include unemployment
spreads,
rates, GDP,
commercial and industrial delinquency rates, short- and
long-term interest rates, and oil prices.

funding.

credit

The allowance for loan losses for wholesale loans that do
not share similar risk characteristics, such as nonaccrual
loans or loans in a troubled debt restructuring, is calculated
using the present value of expected future cash flows
discounted at
the
observable market price of the loan or the fair value of the
collateral.

the loan’s original effective rate,

Wholesale loans are charged-off against the allowance for
loan losses when deemed to be uncollectible.

154 Goldman Sachs 2020 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

Allowance for Credit Losses Rollforward
The table below presents information about the allowance
for credit losses.

$ in millions

Wholesale

Consumer

PCI

Total

Year Ended December 2020

Allowance for loan losses
Beginning balance, reported
Impact of CECL adoption
Beginning balance, adjusted
Net charge-offs
Provision
Other
Ending balance

$ 879
452
1,331
(615)
2,108
(240)
$2,584

$ 393
444
837
(292)
745
–
$1,290

$ 169
(169)
–
–
–
–
–

15.9%
4.2%

2.7%
0.6%

Allowance ratio
Net charge-off ratio
Allowance for losses on lending commitments
Beginning balance, reported
Impact of CECL adoption
Beginning balance, adjusted
Provision
Ending balance

$ 361
(48)
313
244
$ 557

–
–
–
–
–

–
–

–
–
–
–
–

$1,441
727
2,168
(907)
2,853
(240)
$3,874

3.7%
0.9%

$ 361
(48)
313
244
$ 557

Year Ended December 2019

Allowance for loan losses
Beginning balance
Net charge-offs
Provision
Other
Ending balance

$ 658
(121)
469
(127)
$ 879

$ 292
(317)
418
–
$ 393

$ 116
(52)
103
2
$ 169

$1,066
(490)
990
(125)
$1,441

1.1%
0.2%

Allowance ratio
Net charge-off ratio
Allowance for losses on lending commitments
Beginning balance
Provision
Ending balance

$ 286
75
$ 361

6.0% 10.4% 1.6%
6.2% 3.2% 0.6%

–
–
–

$ 286
75
$ 361

In the table above:
‰ Other represents the reduction to the allowance related to
loans and lending commitments transferred to held for
sale.

‰ The allowance ratio is calculated by dividing the
allowance for loan losses by gross loans accounted for at
amortized cost.

‰ The net charge-off ratio is calculated by dividing net
charge-offs by average gross loans accounted for at
amortized cost.

for

Credit

Allowance
Commentary
Year Ended December 2020. The allowance for credit
losses increased by $2.63 billion during 2020.

Rollforward

Losses

The impact of CECL adoption for wholesale and consumer
loans was driven by the fact that the allowance under CECL
covers expected credit losses over the full expected life of
the loan portfolios and also considers forecasts of expected
future economic conditions. The impact of CECL adoption
for PCI loans was as a result of the firm electing to apply the
fair value option for such loans.

loan losses

The provision for credit losses for wholesale and consumer
loans reflected the continued impact of the COVID-19
pandemic on economic conditions, which resulted in higher
modeled expected losses and lower
recoveries. The
ratio for wholesale loans
allowance for
increased to 2.7% as of December 2020 compared with
1.1% as of December 2019, while the allowance for loan
losses ratio for consumer loans increased to 15.9% as of
of
compared with
December
December 2019. The increase in the allowance for loan
losses ratios reflected both the impact of adopting the
CECL standard, as well as higher provision for credit
losses.

6.0% as

2020

and favorable

When modeling expected credit losses, the firm employs a
weighted, multivariate forecast, which includes baseline,
adverse
scenarios. As of
December 2020, the forecasted economic scenarios were
most heavily weighted towards the baseline and adverse
scenarios. The forecast model incorporated adjustments to
reflect the impact of COVID-19-related economic support
programs provided by national governments.

economic

Goldman Sachs 2020 Form 10-K 155

Year Ended December 2019. The allowance for credit
losses increased by $450 million during the year ended
December 2019.

The provision for credit losses for wholesale loans was
substantially all related to corporate loans for the year
ended December 2019. The provision for credit losses
related to consumer
loans was primarily related to
installment loans for the year ended December 2019.

Net charge-offs for wholesale loans were primarily related
to corporate loans for the year ended December 2019. Net
charge-offs for consumer loans were substantially all
ended
loans
related to installment
December 2019.

year

the

for

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 2020
Loan Type
Corporate
Wealth management
Commercial real estate
Residential real estate
Other
Total

As of December 2019
Loan Type
Corporate
Wealth management
Commercial real estate
Residential real estate
Other
Total

$ –
–
–
–
–
$ –

$ 1,822
7,809
857
234
225
$10,947

$ 2,472
7,764
1,285
571
404
$12,496

$ 929
63
1,104
260
322
$2,678

$ 752
60
591
221
266
$1,890

$ 2,751
7,872
1,961
494
547
$13,625

$ 3,224
7,824
1,876
792
670
$14,386

The gains as a result of changes in the fair value of loans
held for investment for which the fair value option was
elected were $151 million for 2020 and $355 million for
2019. 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.

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 forecasted range (across the
baseline, adverse and favorable scenarios) of the U.S.
unemployment and U.S. GDP growth rates used in the
forecast model as of December 2020.

U.S. Unemployment
Rate

Growth/(Decline)
in U.S. GDP

Forecast for the quarter ended:
June 2021
December 2021
June 2022

6.0% to 12.0% (0.2)% to (8.1)%
5.3% to 8.3% 2.7% to (4.1)%
4.9% to 6.9% 4.4% to (1.8)%

In the table above:
‰ U.S. unemployment rate represents the rate forecasted as

of the respective quarter-end.

‰ Growth/(decline) in U.S. GDP represents the change in
quarterly U.S. GDP relative to the U.S. GDP for the
fourth quarter of 2019 (pre-pandemic levels).

‰ Recovery of quarterly U.S. GDP to its pre-pandemic levels
in the three scenarios ranges from the quarters ending
September 2021 to March 2023.

‰ While the U.S. unemployment and U.S. GDP growth rates
are significant inputs to the forecast model, the model
contemplates a variety of other inputs across a range of
future economic
scenarios to provide a forecast of
conditions. Given the complex nature of the forecasting
process, no single economic variable can be viewed in
isolation and independently of other inputs.

In addition, the provision for credit losses for wholesale loans
was impacted by asset-specific provisions and ratings
downgrades primarily related to borrowers in the diversified
technology, media & communications and
industrials,
natural resources industries. Besides the weaker economic
outlook related to the COVID-19 pandemic, the provision
for credit losses for consumer loans for 2020 was also
impacted by the growth of the credit card portfolio.

Net charge-offs
for 2020 for wholesale loans were
substantially all related to corporate loans and net charge-
offs
loans were primarily related to
installment loans.

for consumer

156 Goldman Sachs 2020 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

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 Rollforward
The table below presents a summary of the changes in fair
value for level 3 loans.

As of December 2020

As of December 2019

$ 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

2020

$1,890
72
87
670
(50)
(727)
836
(100)
$2,678

2019

$1,990
46
85
249
(14)
(795)
444
(115)
$1,890

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.

$ in millions

Amount or
Range

Weighted
Average

Amount or
Range

Weighted
Average

$929
1.1% to 45.2%
15.0% to 58.0%
1.5 to 5.3

Corporate
Level 3 assets
Yield
Recovery rate
Duration (years)
Commercial real estate
Level 3 assets
Yield
Recovery rate
Duration (years)
Residential real estate
$260
Level 3 assets
2.0% to 14.0%
Yield
Duration (years)
0.6 to 2.6
Wealth management and other
$385
Level 3 assets
2.8% to 18.7%
Yield
0.9 to 5.5
Duration (years)

$1,104
4.5% to 19.3%
3.0% to 99.8%
0.3 to 4.8

$752
12.4%
9.5%
1.9% to 26.3%
31.0% 13.5% to 78.0% 44.4%
3.9

3.7 to 5.8

3.4

11.0%
66.5%
2.6

12.1%
1.7

8.0%
4.1

$591
7.0% to 16.0%
9.3%
5.9% to 85.2% 48.6%
3.5

0.2 to 5.3

$221
1.1% to 14.0% 11.5%
4.0

1.1 to 4.8

$326
3.9% to 16.0%
1.6 to 6.7

9.9%
3.7

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

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 2020 and December 2019. 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.

Goldman Sachs 2020 Form 10-K 157

level 3 loans during 2020 reflected
Transfers out of
transfers of certain corporate loans to level 2, principally
due to duration and yield inputs no longer being significant
to the valuation of
these loans and increased price
transparency as a result of increased market evidence,
including market transactions in these instruments.

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.

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 2020

Carrying
Value

Estimated Fair Value

Level 2

Level 3

Total

Amortized cost
Held for sale

$99,691
$ 2,799

$52,793
$ 1,541

$48,512
$ 1,271

$101,305
2,812
$

As of December 2019

Amortized cost
Held for sale

$89,195
$ 5,323

$52,091
$ 4,157

$37,095
$ 1,252

$ 89,186
5,409
$

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 loan type, for
loans included in the summary table above.

$ in millions

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
Ending balance

Year Ended December

2020

2019

$ 752
22
(22)
277
(38)
(125)
163
(100)
$ 929

$ 591
24
60
334
(5)
(366)
466
–
$1,104

$ 221
13
10
48
(2)
(78)
48
–
$ 260

$ 326
13
39
11
(5)
(158)
159
$ 385

$ 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

Level 3 Rollforward Commentary
Year Ended December 2020. The net realized and
unrealized gains on level 3 loans of $159 million (reflecting
$72 million of net realized gains and $87 million of net
unrealized gains) for 2020 included gains of $135 million
reported in other principal transactions and $24 million
reported in interest income.

The drivers of the net unrealized gains on level 3 loans for
2020 were not material.

Transfers into level 3 loans during 2020 reflected transfers
of certain loans backed by commercial
real estate,
corporate loans, and wealth management and other loans
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.

158 Goldman Sachs 2020 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 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 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.

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.

$ in millions

Level 1

Level 2

Level 3

Total

As of December 2020

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 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

$ – $ 108,060 $

–
–

28,898
82

$ – $ 137,040 $

– $ 108,060
28,898
–
–
82
– $ 137,040

$ – $ (11,955) $ (4,221) $ (16,176)
(126,571)
(1,053)
(24,126)

(126,569)
(1,053)
(20,652)

(2)
–
(3,474)

–
–
–

(19,227)
(28,335)
(1)

(26,750)
(40,911)
(263)
$ – $(207,792) $(28,058) $(235,850)

(7,523)
(12,576)
(262)

$ – $ 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)

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 Unobservable Inputs
See below for
significant
information about
unobservable inputs used to value level 3 other financial
assets and liabilities at fair value as of both December 2020
and December 2019.

the

Goldman Sachs 2020 Form 10-K 159

Level 3 Rollforward
The table below presents a summary of the changes in fair
value for level 3 other financial liabilities accounted for at
fair value.

$ in millions

Beginning balance
Net realized gains/(losses)
Net unrealized gains/(losses)
Issuances
Settlements
Transfers into level 3
Transfers out of level 3
Ending balance

Year Ended December

2020

$(21,036)
(317)
(1,301)
(18,123)
15,373
(3,575)
921
$(28,058)

2019

$(19,397)
(337)
(2,254)
(9,892)
11,104
(877)
617
$(21,036)

In the table above:
‰ Changes in fair value are presented for all other financial
liabilities that are classified in level 3 as of the end of the
period.

‰ Net unrealized gains/(losses) relates to other financial

liabilities 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 liability was transferred to level 3
during a reporting period, its entire gain or loss for the
period is classified in level 3.

financial

‰ For level 3 other financial liabilities, increases are shown
as negative amounts, while decreases are shown as
positive amounts.
‰ Level 3 other

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.

liabilities are

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. The ranges and weighted
averages of significant unobservable inputs used to value
level 3 other secured financings are presented below. These
ranges and weighted averages exclude unobservable inputs
that are only relevant to a single instrument, and therefore
are not meaningful.

As of December 2020:
‰ Yield: 1.4% to 7.1% (weighted average: 2.7%)
‰ Duration: 1.4 to 8.0 years (weighted average: 4.0 years)

As of December 2019:
‰ 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
period-end. Due to the distinctive nature of each of level 3
other secured financings, the interrelationship of inputs is
not necessarily uniform across such financings. See Note 11
for further information about other secured financings.

Borrowings

and Other
Deposits, Unsecured
Liabilities. Substantially all of
the firm’s deposits,
unsecured short- and long-term borrowings, and other
liabilities that are classified in level 3 are hybrid financial
instruments. As the significant unobservable inputs used to
value hybrid financial instruments primarily relate to the
embedded derivative
these deposits,
these
and
unsecured
unobservable inputs are incorporated in the firm’s
derivative disclosures in Note 7. See Note 13 for further
information about deposits, Note 14 for
further
information about unsecured borrowings and Note 15 for
further information about other liabilities.

component of

borrowings

liabilities,

other

Repurchase Agreements. As of both December 2020 and
December 2019, the firm’s level 3 repurchase agreements
were not material.

160 Goldman Sachs 2020 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 the consolidated
balance sheet line items, for liabilities included in the
summary table above.

$ in millions

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
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

Year Ended December

2020

2019

$ (4,023)
1
(319)
(4,049)
4,168
(57)
58
$ (4,221)

(30)
(2)
30
(2)

(386)
13
(142)
(1,195)
368
(2,132)
$ (3,474)

$ (5,707)
(132)
(215)
(6,634)
5,029
(629)
765
$ (7,523)

$(10,741)
(229)
(510)
(6,215)
5,778
(757)
98
$(12,576)

(149)
30
(113)
(30)
(262)

$ (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)

Level 3 Rollforward Commentary
Year Ended December 2020. The net realized and
unrealized losses on level 3 other financial liabilities of
$1.62 billion (reflecting $317 million of net realized losses
for 2020
and $1.30 billion of net unrealized losses)
included losses of $1.44 billion reported in market making,
$28 million reported in other principal transactions and
$15 million reported in interest expense in the consolidated
statements of earnings, and $139 million reported in debt
valuation adjustment in the consolidated statements of
comprehensive income.

The unrealized losses on level 3 other financial liabilities for
2020 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, principally due to an increase in the
market value of the underlying assets.

Transfers into level 3 other financial liabilities during 2020
primarily reflected transfers of certain other secured
financings from level 2, principally due to reduced price
transparency of certain yield and duration inputs used to
value these instruments, and certain hybrid financial
instruments included in unsecured long- and short-term
borrowings 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
2020 primarily reflected transfers of certain hybrid
financial
instruments included in unsecured 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 2019. The net realized and
unrealized losses on level 3 other financial liabilities of
$2.59 billion (reflecting $337 million of net realized losses
and $2.25 billion of net unrealized losses)
for 2019
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
financial
instruments included in unsecured long- and
short-term borrowings to level 2, principally due to
increased price transparency of certain volatility and
correlation inputs used to value these instruments.

Goldman Sachs 2020 Form 10-K 161

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 2020 and
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 $445 million as
of December 2020 and $199 million as of December 2019.
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

2020

$(347)
$(261)

2019

2018

$(2,763)
$(2,079)

$3,389
$2,553

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
liabilities were not
extinguishment of such financial
material for 2020, 2019 and 2018.

earnings

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

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

2020

2019

206
(2,804)
(563)
$(3,161)

$(3,365)
(5,251)
(883)
$(9,499)

2018

$1,443
926
308
$2,677

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
2020, 2019 and 2018. 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.

162 Goldman Sachs 2020 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

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 in
the consolidated balance sheets) for which the fair value
option was elected.

$ in millions

As of December

2020

2019

Performing loans
Aggregate contractual principal in excess of fair value $

958 $ 809

Loans on nonaccrual status and/or more than 90 days past due
Aggregate contractual principal in excess of fair value $10,526 $6,703
$ 3,519 $2,776
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
$25 million as of December 2020 and $24 million as of
December 2019, and the related total contractual amount
of these lending commitments was $1.64 billion as of
December 2020 and $1.55 billion as of December 2019. See
lending
Note
commitments.

information

further

about

for

Impact of Credit Spreads on Loans and Lending
Commitments
The estimated net gain/(loss) attributable to changes in
instrument-specific credit spreads on loans and lending
commitments for which the fair value option was elected
was $(106) million for 2020, $134 million for 2019 and
$211 million for 2018. 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.

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.

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
instruments to be repurchased or
require the financial
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
resale agreements and makes delivery of
financial
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
value of the financial
instruments, as appropriate. For
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.

Goldman Sachs 2020 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

Securities Borrowed and Loaned Transactions
In a securities borrowed transaction, the firm borrows
securities from a counterparty in exchange for cash or
securities. When the firm returns the securities,
the
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

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. The firm also
reviews securities borrowed to determine if an allowance
for credit
losses should be recorded by taking into
consideration the fair value of collateral received. As these
agreements generally can be terminated on demand, they
exhibit little, if any, sensitivity to changes in interest rates.
Therefore,
such agreements
carrying value of
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 2020 and December 2019.

the

164 Goldman Sachs 2020 Form 10-K

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 2020

$205,817 $ 147,593 $ 224,328 $ 27,054
(5,433)
21,621

(5,433)
142,160

(97,757)
126,571

(97,757)
108,060

Included in the consolidated balance sheets
Gross carrying value
Counterparty netting
Total
Amounts not offset
Counterparty netting
Collateral
Total

(8,920)
(96,140)

(3,525)
(132,893)

3,000 $

(8,920)
(116,819)

(3,525)
(17,693)
403

5,742 $

832 $

As of December 2019

$152,982 $ 140,677 $ 185,047 $ 19,591
(4,606)
14,985

(4,606)
136,071

(67,291)
117,756

(67,291)
85,691

Included in the consolidated balance sheets
Gross carrying value
Counterparty netting
Total
Amounts not offset
Counterparty netting
Collateral
Total

(3,058)
(78,528)

(2,211)
(127,901)

4,105 $

5,959 $

(3,058)
(114,065)

633 $

(2,211)
(12,614)
160

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.

‰ Resale agreements and repurchase agreements are carried
at fair value under the fair value option. See Note 4 for
further information about the valuation techniques and
significant inputs used to determine fair value.

‰ Securities borrowed included in the consolidated balance
sheets of $28.90 billion as of December 2020 and
$26.28 billion as of December 2019, and securities loaned
of $1.05 billion as of December 2020 and $714 million as
of December 2019 were at fair value under the fair value
option. See Note 10 for further information about
securities borrowed and securities loaned accounted for
at fair 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

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 2020

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 2019

Repurchase
agreements

Securities
loaned

88
121,751
79,159
65
121
6,364
92
20
16,668

–
–
1,634
–
–
46
–
–
25,374
$224,328 $27,054

158
112,903
55,575
210
1,079
6,857
242
196
7,827

–
–
1,051
–
–
122
–
–
18,418
$185,047 $19,591

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 2020

Repurchase
agreements

Securities
loaned

$117,623 $18,533
3,781
21
4,719
–
$224,328 $27,054

66,570
17,479
20,339
2,317

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.

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 include:
‰ Liabilities of consolidated VIEs;
‰ Transfers of assets accounted for as financings rather than
(e.g., pledged commodities, bank loans and

sales
mortgage whole loans); and

‰ Other structured financing arrangements.

secured

financings

Other
nonrecourse
arrangements. Nonrecourse other secured financings were
$12.31 billion as of December 2020 and $10.91 billion as
of December 2019.

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 3 as of December 2020 and primarily
classified in level 2 as of December 2019.

Goldman Sachs 2020 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 other secured
financings.

$ in millions

As of December 2020

U.S.
Dollar

Non-U.S.
Dollar

Total

Other secured financings (short-term):

At fair value
At amortized cost

$ 6,371
–

$ 6,847
–

$13,218
–

Other secured financings (long-term):

At fair value
At amortized cost

Total other secured financings

6,632
914
$13,917

4,276
715
$11,838

10,908
1,629
$25,755

Other secured financings collateralized by:
$ 6,841
$ 7,076

Financial instruments
Other assets

$10,068
$ 1,770

$16,909
$ 8,846

As of December 2019

Other secured financings (short-term):

At fair value
At amortized cost

$ 2,754
129

$ 4,441
–

$ 7,195
129

Other secured financings (long-term):

At fair value
At amortized cost

Total other secured financings

7,402
397
$10,682

3,474
680
$ 8,595

10,876
1,077
$19,277

Other secured financings collateralized by:

Financial instruments
Other assets

$ 4,826
$ 5,856

$ 7,189
$ 1,406

$12,015
$ 7,262

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 1.27% as of December 2020 and 2.79%
as of December 2019. These rates include the effect of
hedging activities.

‰ Non-U.S. dollar-denominated long-term other secured
financings at amortized cost had a weighted average
interest rate of 0.40% as of December 2020 and 0.39%
as of December 2019. These rates include the effect of
hedging activities.

2020

‰ Total other secured financings included $2.05 billion as
of December
of
and
December 2019 related to transfers of financial assets
accounted for as financings rather than sales. Such
financings were
collateralized by financial assets,
primarily included in trading assets, of $2.26 billion as of
December 2020 and $2.21 billion as of December 2019.

billion

$2.16

166 Goldman Sachs 2020 Form 10-K

‰ Other secured financings collateralized by financial
instruments included $11.28 billion as of December 2020
and $9.09 billion as of December 2019 of other secured
financings collateralized by trading assets, investments
of
and
December 2020 and $2.93 billion as of December 2019 of
other
secured financings collateralized by financial
instruments received as collateral and repledged.

included

billion

loans,

$5.63

and

The table below presents other secured financings by
maturity.

$ in millions

Other secured financings (short-term)
Other secured financings (long-term):
2022
2023
2024
2025
2026 - thereafter
Total other secured financings (long-term)
Total other secured financings

As of
December 2020

$13,218

4,292
2,102
1,384
1,286
3,473
12,537
$25,755

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

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 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.

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

2020

2019

Collateral available to be delivered or repledged
Collateral that was delivered or repledged

$864,494 $661,490
$723,409 $558,634

The table below presents information about assets pledged.

$ in millions

As of December

2020

2019

Pledged to counterparties that had the right to deliver or repledge

Trading assets
Investments

$ 69,031 $ 66,605
$ 13,375 $ 10,968

Pledged to counterparties that did not have the right to deliver or repledge

Trading assets
Investments
Loans
Other assets

$ 99,142 $101,578
$ 2,331 $
849
$ 8,320 $ 6,628
$ 14,144 $ 12,337

The firm also segregates securities for regulatory and other
purposes related to client activity. Such securities are
segregated from trading assets and investments, as well as
from securities
resale
agreements and securities borrowed transactions. Securities
segregated by the firm were $32.97 billion as of
December 2020 and $26.76 billion as of December 2019.

collateral under

received as

Note 12.
Other Assets

The table below presents other assets by type.

$ in millions

As of December

2020

2019

Property, leasehold improvements and equipment $23,147 $21,886
4,196
Goodwill
641
Identifiable intangible assets
2,360
Operating lease right-of-use assets
2,068
Income tax-related assets
Miscellaneous receivables and other
3,731
$37,445 $34,882
Total

4,332
630
2,280
2,960
4,096

and

depreciation

amortization

Property, Leasehold Improvements and Equipment
Property, leasehold improvements and equipment is net of
accumulated
of
$10.12 billion as of December 2020 and $9.95 billion as of
December 2019. Property, leasehold improvements and
equipment included $6.54 billion as of December 2020 and
$6.16 billion as of December 2019 that the firm uses in
connection with its operations, and $318 million as of
December 2020 and $521 million as of December 2019 of
foreclosed real estate primarily related to distressed loans
that were purchased by the firm. 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 life of the
asset. Leasehold improvements are amortized on a straight-
the
line basis over the shorter of
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.

the useful

life of

leasehold improvements and
The firm tests property,
equipment for impairment when 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,

During 2020, there were $171 million of impairments,
primarily relating to properties held by the firm’s
investment entities. There were no material impairments
during 2019 or 2018.

Goldman Sachs 2020 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

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.

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

2020

2019

$ 281

269
2,644
390

48
700
$4,332

269
2,508
390

48
700
$4,196

In the table above, the increase in goodwill in Equities from
December 2019 to December 2020 reflects the acquisition
of Folio Financial, Inc. during 2020.

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.

To estimate the fair value of each reporting unit, other than
Consumer banking, a relative value technique is 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 is 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
to support
the reporting unit under
currently applicable regulatory capital requirements.

the activities of

the year. As a result,

During 2020, the outbreak of the COVID-19 pandemic
broadly impacted the operating environment. Uncertainty
about the COVID-19 pandemic and its continued impact
the firm
persisted throughout
performed a qualitative assessment in each of the first,
second and third quarters of 2020 with respect to each of
the firm’s reporting units to determine whether it was more
likely than not that the estimated fair value of any of these
reporting units was less than its estimated carrying value.
Based on these qualitative assessments, the firm determined
that it was more likely than not that the estimated fair value
of each of the reporting units exceeded its respective
estimated carrying value, and that the impact of the
COVID-19 pandemic, in each quarter, was not a triggering
event to perform a quantitative test.

In the fourth quarter of 2020, the firm performed its annual
assessment of goodwill for impairment, for each of its
reporting units, by performing a qualitative assessment.
Multiple factors were assessed with respect to each of the
firm’s reporting units to determine whether it was more
likely than not that the estimated fair value of any of these
reporting units was less than its estimated carrying value.
The qualitative assessment also considered changes since
the quantitative test performed in the fourth quarter of
2019.

168 Goldman Sachs 2020 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 firm considered the following factors in the qualitative
annual assessment when evaluating whether it was more
likely than not that the estimated fair value of a reporting
unit was less than its estimated carrying value:
‰ Performance Indicators. During 2020, the firm’s net
revenues, diluted earnings per common share (EPS),
return on average common shareholders’ equity (ROE)
and book value per common share all
increased
compared with 2019. The firm’s operating expenses
increased, primarily reflecting significantly higher net
provisions for litigation and regulatory proceedings and
higher compensation and benefits expenses (reflecting
improved financial performance). Despite the increase in
expenses, the efficiency ratio (total operating expenses
divided by total net revenues) improved compared with
2019 and the pre-tax margin remained stable. In addition,
with the exception of net provisions for litigation and
regulatory proceedings, there were no significant changes
to the firm’s overall cost structure since the prior
quantitative goodwill test was performed.

impact of

‰ Macroeconomic Indicators. The

the
COVID-19 pandemic caused a sharp contraction in
economic activity in early 2020. However, intervention
by central banks and governments, which undertook
significant monetary and fiscal policy actions, allowed the
global economy to make progress towards recovery
during the second half of 2020. The global economy is
expected to continue to recover in 2021 and beyond,
although there remains significant uncertainty related to
the impact and duration of the COVID-19 pandemic.
‰ Firm and Industry Events. Aside from the impact of the
COVID-19 pandemic on the firm and its peers’ operating
environment, there were no events, entity-specific or
otherwise, that would have had a significant negative
impact on the valuation of the firm’s reporting units.

‰ Fair Value Indicators. Since the 2019 quantitative
goodwill test, fair value indicators in the market generally
declined as of the third quarter of 2020, as global equity
prices were lower, credit spreads were wider, and the firm
and its peers’ stock prices and price-to-book multiples
were lower. However, in the fourth quarter of 2020, the
improving global economic outlook, investor sentiment
and positive developments
for COVID-19 vaccines
resulted in higher global equity prices and tighter credit
spreads compared to the levels at the end of 2019.
Similarly,
the firm’s stock price and price-to-book
multiple ended the year higher compared with the end of
2019.

As a result of the qualitative assessment, the firm determined
that it was more likely than not that the estimated fair value
of each of
the reporting units exceeded its respective
estimated carrying value. Therefore, the firm determined that
goodwill for each reporting unit was not impaired and that a
quantitative goodwill test was not required.

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

2020

2019

2
45
274

6
303
630

3
–
265

7
366
$ 641

$ 1,478
(1,089)
389

$ 1,427
(1,044)
383

710
(469)
241

790
(532)
258

2,188
(1,558)
630

2,217
(1,576)
$ 641

The firm acquired $155 million of intangible assets during
2020, primarily related to acquired leases and customer
lists, with a weighted average amortization period of
10 years. The firm acquired $515 million of intangible
assets during 2019, primarily related to customer lists, with
a weighted average amortization period of 10 years.

Substantially all of the firm’s identifiable intangible assets
have finite useful lives and are amortized over their 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
2021
2022
2023
2024
2025

Year Ended December

2020

$147

2019

$173

2018

$152

As of
December 2020

$111
$ 94
$ 84
$ 68
$ 49

Goldman Sachs 2020 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 firm tests intangible assets for impairment when 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 2020, 2019 or 2018.

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. For leases longer
than one year, the firm recognizes 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 $182 million for 2020
and $963 million (primarily related to the firm’s new
European headquarters in London) for 2019 of right-of-use
in non-cash
lease
assets
transactions for leases entered into or assumed. See Note 15
for information about operating lease liabilities.

and operating

liabilities

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 2020 and
2019. See Note 3 for further information about ASU
No. 2016-02 which was adopted in January 2019.

170 Goldman Sachs 2020 Form 10-K

Miscellaneous Receivables and Other
Miscellaneous receivables and other included:
‰ Investments in qualified affordable housing projects of
$678 million as of December 2020 and $606 million as of
December 2019.

‰ Assets classified as held for sale of $437 million as of
December 2020 and $470 million as of December 2019
related to the firm’s consolidated investments within the
Asset Management segment, substantially all of which
consisted of property and equipment.

Note 13.
Deposits

The table below presents the types and sources of deposits.

$ in millions

As of December 2020

Consumer deposits
Private bank deposits
Brokered certificates of deposit
Deposit sweep programs
Transaction banking
Other deposits
Total

As of December 2019

Consumer deposits
Private bank deposits
Brokered certificates of deposit
Deposit sweep programs
Transaction banking
Other deposits
Total

Savings and
Demand

Time

Total

$ 67,395
67,185
–
22,987
28,852
–
$186,419

$ 44,973
53,726
–
17,760
2,291
–
$118,750

$29,530
1,183
30,060
–
–
12,770
$73,543

$15,023
2,087
39,449
–
235
14,475
$71,269

$ 96,925
68,368
30,060
22,987
28,852
12,770
$259,962

$ 59,996
55,813
39,449
17,760
2,526
14,475
$190,019

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

$16.18

deposits

included

of
December 2020 and $17.77 billion as of December 2019
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 1.3 years as of December 2020 and
1.7 years as of December 2019.

‰ Deposit sweep programs include long-term contractual
agreements with U.S. broker-dealers who sweep client
cash to FDIC-insured deposits. As of December 2020, the
firm had 12 such deposit sweep program agreements.

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

‰ Transaction banking deposits consists of deposits that the
firm raised through its cash management services business
for corporate and other institutional clients.

‰ Other deposits represent deposits from institutional

clients.

‰ Deposits insured by the FDIC were $123.03 billion as of
of

$103.98

billion

2020

and

December
December 2019.

‰ Deposits insured by non-U.S. insurance programs were
$27.52 billion as of December 2020 and $15.86 billion as
of December 2019.

The table below presents the location of deposits.

$ in millions

U.S. offices
Non-U.S. offices
Total

As of December

2020

2019

$206,356
53,606
$259,962

$150,759
39,260
$190,019

In the table above, U.S. deposits were held at Goldman
Sachs Bank USA (GS Bank USA) and substantially all
non-U.S.
Sachs
deposits were
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

2021
2022
2023
2024
2025
2026 - thereafter
Total

As of December 2020

U.S.

Non-U.S.

Total

$35,115
9,685
6,377
4,138
2,089
2,119
$59,523

$11,995
485
126
138
281
995
$14,020

$47,110
10,170
6,503
4,276
2,370
3,114
$73,543

As of December 2020, deposits in U.S. offices included
$11.71 billion and deposits in non-U.S. offices included
$12.25 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 2020
and December 2019. 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 2020 and December 2019.

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

2020

2019

$ 52,870
213,481
$266,351

$ 48,287
207,076
$255,363

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
further
short-term
about
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 2020 and
December 2019.

Goldman Sachs 2020 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

The table below presents information about unsecured
short-term borrowings.

$ in millions

As of December

2020

2019

Current portion of unsecured long-term borrowings $25,914 $30,636
15,814
Hybrid financial instruments
–
Commercial paper
Other unsecured short-term borrowings
1,837
$52,870 $48,287
Total unsecured short-term borrowings

18,823
6,085
2,048

Weighted average interest rate

1.84% 2.71%

In the table above:
‰ The current portion of unsecured long-term borrowings
included $17.06 billion as of December 2020 and
$21.27 billion as of December 2019 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 2020

Fixed-rate obligations:

Group Inc.
Subsidiaries

Floating-rate obligations:

Group Inc.
Subsidiaries

Total

As of December 2019

Fixed-rate obligations:

Group Inc.
Subsidiaries

Floating-rate obligations:

Group Inc.
Subsidiaries

Total

U.S.
Dollar

Non-U.S.
Dollar

Total

$ 98,858
1,700

$35,614
3,145

$134,472
4,845

18,579
23,440
$142,577

18,871
13,274
$70,904

37,450
36,714
$213,481

$ 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

In the table above:
‰ Unsecured long-term borrowings consists principally of
senior borrowings, which have maturities extending
through 2065.

‰ Floating-rate obligations includes equity-linked, credit-
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 0.63% to 9.30% (with a weighted average rate of
4.07%) as of December 2020 and 2.00% to 10.04% (with
a weighted average rate of 3.82%) as of December 2019.
These rates exclude unsecured long-term borrowings
accounted for at fair value under the fair value option.

172 Goldman Sachs 2020 Form 10-K

‰ Non-U.S. dollar-denominated debt had interest rates
ranging from 0.13% to 13.00% (with a weighted average
rate of 2.20%) as of December 2020 and 0.13% to
13.00% (with a weighted average rate of 2.33%) as of
December 2019. These rates exclude unsecured long-term
borrowings accounted for at fair value under the fair
value option.

The table below presents unsecured long-term borrowings
by maturity.

$ in millions

2022
2023
2024
2025
2026 - thereafter
Total

As of December 2020

Group Inc.

Subsidiaries

Total

$ 22,637
26,961
15,551
21,405
85,368
$171,922

$ 6,332
6,332
4,780
5,771
18,344
$41,559

$ 28,969
33,293
20,331
27,176
103,712
$213,481

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 $12.04 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:
$(11) million in 2022, $224 million in 2023, $680 million
in 2024, $901 million in 2025, and $10.25 billion in 2026
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.

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,
after giving effect to such hedging activities.

The table below presents information about subordinated
borrowings.

$ in millions

Group Inc.

Subsidiaries

Total

As of December 2020

Fixed-rate obligations:

At fair value
At amortized cost

Floating-rate obligations:

At fair value
At amortized cost

Total

As of December 2019

Fixed-rate obligations:

At fair value
At amortized cost

Floating-rate obligations:

At fair value
At amortized cost

Total

1,407
27,482

9,721
133,312
$171,922

678
44,631

14,920
108,359
$168,588

114
3,345

1,521
30,827

29,669
8,431
$41,559

39,390
141,743
$213,481

47
2,946

725
47,577

28,016
7,479
$38,488

42,936
115,838
$207,076

In the table above, the aggregate amounts of unsecured
long-term borrowings had weighted average interest rates
of 2.01% (3.34% related to fixed-rate obligations and
1.70% related to floating-rate obligations)
as of
December 2020 and 2.87% (3.77% related to fixed-rate
obligations and 2.48% related to floating-rate obligations)
as of December 2019. These rates exclude unsecured long-
term borrowings accounted for at fair value under the fair
value option.

The carrying value of unsecured long-term borrowings for
which the firm did not elect the fair value option was
$172.57 billion as of December 2020 and $163.42 billion
as of December 2019. The estimated fair value of such
unsecured long-term borrowings was $183.29 billion as of
December 2020 and $168.60 billion as of December 2019.
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 2020 and
December 2019.

Subordinated Borrowings
Unsecured long-term borrowings includes subordinated
debt and junior subordinated debt. Subordinated debt that
matures within one year is included in unsecured short-term
borrowings. Junior subordinated debt is junior in right of
payment to other subordinated borrowings, which are
junior to senior borrowings. Long-term subordinated debt
had maturities
ranging from 2025 to 2045 as of
December 2020 and 2021 to 2045 as of December 2019.

$ in millions

As of December 2020

Subordinated debt
Junior subordinated debt
Total

As of December 2019

Subordinated debt
Junior subordinated debt
Total

Par
Amount

Carrying
Value

$14,136
968
$15,104

$18,529
1,430
$19,959

Rate

1.83%
1.32%
1.80%

$14,041
976
$15,017

$16,980
1,328
$18,308

3.46%
2.85%
3.42%

In the table above:
‰ The par amount of subordinated debt issued by Group
Inc. was $14.14 billion as of December 2020 and
$14.04 billion as of December 2019, and the carrying
value of subordinated debt issued by Group Inc. was
$18.53 billion as of December 2020 and $16.98 billion as
of December 2019.

‰ 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
junior
In 2004, Group Inc.
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 2020, the
outstanding par amount of junior subordinated debt held
by the Trust was $968 million and the outstanding par
amount of Trust Preferred securities and common
beneficial interests issued by the Trust was $939 million
and $29 million, respectively. 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.

Goldman Sachs 2020 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

The firm purchased Trust Preferred securities with a par
amount and a carrying value of $7.9 million and
$11.0 million in 2020, $159 million and $206 million in
2019 and $28 million and $35 million in 2018, respectively.
These securities were delivered to the Trust, along with
common beneficial
interests of $0.2 million in 2020,
$5 million in 2019 and $1 million in 2018, in a non-cash
exchange for junior subordinated debt with a par amount
and carrying value of $8.1 million and $12.5 million in 2020,
$164 million and $231 million in 2019, and $29 million and
$36 million in 2018, respectively. Following the exchange,
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.

III

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
(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 subsidiaries of the firm for regulatory and legal
purposes but are not consolidated for accounting purposes.

174 Goldman Sachs 2020 Form 10-K

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

2020

2019

$ 7,896
3,155
2,283
1,640
34
7,443
$22,451

$ 6,889
2,947
2,385
1,713
81
7,636
$21,651

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 2020
and December 2019, the firm’s contract liabilities were not
material.

Operating Lease Liabilities
For leases longer than one year, the firm recognizes a
right-of-use asset
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.

representing the right

The table below presents information about operating lease
liabilities.

$ in millions

As of December 2020

2021
2022
2023
2024
2025
2026 - thereafter
Total undiscounted lease payments
Imputed interest
Total operating lease liabilities

Weighted average remaining lease term
Weighted average discount rate

As of December 2019

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

Operating
lease liabilities

$ 342
301
264
247
215
1,899
3,268
(985)
$ 2,283

16 years
4.02%

$ 384
308
268
235
219
2,566
3,980
(1,595)
$ 2,385

18 years
5.02%

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, the weighted average discount rate
represents the firm’s incremental borrowing rate as of
January 2019 for operating 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 $458 million for 2020,
$538 million for 2019 and $409 million for 2018. Variable
lease costs, which are included in operating lease costs,
were not material
for 2020, 2019 and 2018. Total
occupancy expenses for space held in excess of the firm’s
current requirements were not material for both 2020 and
2019.

Lease payments relating to operating lease arrangements
that were signed, but had not yet commenced as of
December 2020, 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
are recognized in connection with the sales of
the
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.

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. Interests accounted for at fair
value are primarily 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

2020

2019

2018

$20,167
Residential mortgages
14,904
Commercial mortgages
1,775
Other financial assets
Total financial assets securitized $36,846

$15,124
12,741
1,252
$29,117

$21,229
8,745
1,914
$31,888

Retained interests cash flows

331

286

296

In the table above, financial assets securitized included
assets of $551 million for 2020, $601 million for 2019 and
$882 million for 2018, which were securitized in a
non-cash exchange for loans and investments.

Goldman Sachs 2020 Form 10-K 175

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

table

below presents

about
The
nonconsolidated securitization entities to which the firm
sold assets and had continuing involvement as of the end of
the period.

information

$ in millions

Outstanding
Principal
Amount

Retained
Interests

Purchased
Interests

As of December 2020
U.S. government agency-issued CMOs
Other residential mortgage-backed
Other commercial mortgage-backed
Corporate debt and other asset-backed
Total

24,262
38,340
4,299

$20,841 $ 906
1,170
914
192
$87,742 $3,182

As of December 2019

U.S. government agency-issued CMOs
Other residential mortgage-backed
Other commercial mortgage-backed
Corporate debt and other asset-backed
Total

24,166
25,588
3,612

$14,328 $1,530
1,078
615
149
$67,694 $3,372

$ 4
23
39
–
$66

$ 3
24
6
–
$33

In the table above:
‰ CMOs represents collateralized mortgage obligations.
‰ 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 $3.19 billion as of
December 2020 and $3.35 billion as of December 2019.

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 $52 million
as of December 2020 and $57 million as of
these
December 2019, and the notional amount of
derivatives and commitments was $1.43 billion as of
December 2020 and $1.20 billion as of December 2019.
The
and
of
commitments are included in maximum exposure to loss in
the nonconsolidated VIE table in Note 17.

derivatives

amounts

notional

these

176 Goldman Sachs 2020 Form 10-K

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

2020

2019

$2,993
4.7
15.0%
$ (25)
$ (50)
6.1%
$ (42)
$ (82)

$3,198
6.0
12.9%
(22)
$
(42)
$
4.7%
$
(59)
$ (117)

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.
government agency-issued CMOs does not include any
credit loss. Expected credit loss assumptions are reflected
in the discount rate for the remainder of retained
interests.

The firm has other retained interests not reflected in the
table above with a fair value of $192 million and a
weighted average life of 3.9 years as of December 2020, and
a fair value of $149 million and a weighted average life of
3.3 years as of December 2019. 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 2020 and December 2019.
The firm’s maximum exposure to adverse changes in the
value of these interests is the carrying value of $192 million
as of December 2020 and $149 million as of
December 2019.

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 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 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.

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.

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
the exposure for the beneficial
interests they issue by
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
may be removed as the total return swap counterparty and
may enter 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.

Goldman Sachs 2020 Form 10-K 177

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

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:

$20,934
$ 3,288
14
$

Commitments and guarantees
Derivatives
Debt and equity

Total

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

Investments in funds
Assets in VIEs
Carrying value of variable interests — assets
Maximum exposure to loss:

Commitments and guarantees
Derivatives
Debt and equity

As of December

2020

2019

$99,353
$ 4,014

$75,354
$ 3,830

$ 2,990
1,024
47
394
$ 4,455

$ 1,374
84
3,288
$ 4,746

$14,077
913
$
874
$

192
17
989
7,862
323
$ 9,383

$ 3,223
607
50
66
$ 3,946

$19,602
$ 3,243
7
$

$ 1,213
92
3,238
$ 4,543

$16,248
$ 2,040
612
$

149
294
1,374
8,849
1,155
$11,821

$14,301
409
$

$16,865
413
$

45
3
409
457

60
3
413
476

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

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.

table

Nonconsolidated VIEs
The
the
nonconsolidated VIEs in which the firm holds variable
interests.

below presents

summary

$ in millions

As of December

2020

2019

Total nonconsolidated VIEs
$148,665
Assets in VIEs
8,624
Carrying value of variable interests — assets
$
Carrying value of variable interests — liabilities $
888
Maximum exposure to loss:

Retained interests
Purchased interests
Commitments and guarantees
Derivatives
Debt and equity

Total

3,182
1,041
2,455
8,343
4,020
$ 19,041

$128,069
9,526
$
619
$

3,372
901
2,697
9,010
4,806
$ 20,786

In the table above:
‰ The nature of the firm’s variable interests is described in

the rows under maximum exposure to loss.

Total

firm provides guarantees,

‰ The firm’s exposure to the obligations of VIEs is generally
limited to its interests in these entities. In certain instances,
the
including derivative
guarantees, to VIEs or holders of variable interests in VIEs.
‰ 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

178 Goldman Sachs 2020 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

As of both December 2020 and December 2019, 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
included in trading assets and 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

2020

2019

$ 312
96
880
2,099
989
$4,376

$1,891
28
296
43
226
948
$3,432

$ 112
27
835
2,392
1,084
$4,450

$1,163
9
10
48
214
959
$2,403

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.

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

Corporate debt and other asset-backed
Assets
Cash and cash equivalents
Total

Liabilities
Other secured financings
Total

Principal-protected notes
Assets
Trading assets
Total

Liabilities
Other secured financings
Trading liabilities
Unsecured short-term borrowings
Unsecured long-term borrowings
Total

As of December

2020

2019

$ 229
8
880
2,099
989
$4,205

$ 649
28
46
948
$1,671

$
$

83
83

$ 679
$ 679

$
$

88
88

$ 563
250
43
226
$1,082

$ 112
26
835
2,392
1,084
$4,449

$ 684
9
10
959
$1,662

$
$

–
–

1
1

$ 479
–
48
214
$ 741

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 do not have
recourse to the general credit of the firm.

Goldman Sachs 2020 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 18.
Commitments, Contingencies and Guarantees

Commitments
The table below presents commitments by type.

The table below presents information about
commitments.

lending

As of December

2020

2019

$ in millions

Held for investment
Held for sale
At fair value
Total

As of December

2020

2019

$162,513
6,594
2,468
$171,575

$150,100
8,091
1,899
$160,090

In the table above:
‰ Held for investment lending commitments are accounted
for at amortized cost. The carrying value of lending
commitments was a liability of $775 million (including
losses of $557 million) as of
allowance for credit
December 2020 and $527 million (including allowance
for credit losses of $361 million) as of December 2019.
The estimated fair value of such lending commitments
was a liability of $4.05 billion as of December 2020 and
$3.05 billion as of December 2019. Had these lending
commitments been carried at fair value and included in
the
of
December 2020 and $1.78 billion as of December 2019
would have been classified in level 2, and $1.62 billion as
of December
of
as
and
December 2019 would have been classified in level 3.

hierarchy,

billion

$2.43

$1.27

value

2020

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
$68 million as of December 2020 and $60 million as of
December 2019. 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 3 as of December 2020 and primarily classified in
level 2 as of December 2019.

‰ Gains or losses related to lending commitments at fair
value, if any, are generally recorded net of any fees in
other principal transactions.

$ in millions

Commitment Type
Commercial lending:
Investment-grade
Non-investment-grade

Warehouse financing
Credit cards
Total lending
Risk participations
Collateralized agreement
Collateralized financing
Letters of credit
Investment
Other
Total commitments

$ 83,801
56,757
9,377
21,640
171,575
8,054
55,278
35,402
367
6,456
7,836
$284,968

$ 87,105
53,735
5,581
13,669
160,090
7,154
62,093
10,193
456
7,879
6,135
$254,000

The table below presents commitments by expiration.

$ in millions

Commitment Type
Commercial lending:
Investment-grade
Non-investment-grade

Warehouse financing
Credit cards
Total lending
Risk participations
Collateralized agreement
Collateralized financing
Letters of credit
Investment
Other
Total commitments

As of December 2020

2021

2022 -
2023

2024 -
2025

2026 -
Thereafter

$ 14,088
3,791
2,306
21,640
41,825
776
55,278
35,402
319
2,309
7,392
$143,301

$34,054
21,631
4,165
–
59,850
4,706
–
–
7
1,484
84
$66,131

$34,207
22,578
2,906
–
59,691
2,448
–
–
–
1,230
95
$63,464

$ 1,452
8,757
–
–
10,209
124
–
–
41
1,433
265
$12,072

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 portions
In addition, commitments can
of
expire unused or be reduced or cancelled at
the
counterparty’s request. The firm also provides credit to
consumers by issuing credit card lines.

these commitments.

180 Goldman Sachs 2020 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

and

general

activities

borrowers.

commitments

Commercial Lending. The firm’s commercial
lending
commitments were primarily extended to investment-grade
corporate
primarily
Such
included $110.31 billion as of December 2020 and
related to
$101.31 billion as of December 2019,
(principally used for
relationship lending
operating
and
purposes)
$15.81 billion as of December 2020 and $27.71 billion as
of December 2019, 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.

corporate

lending activities,

To mitigate the credit risk associated with the firm’s
commercial
the firm obtains credit
protection on certain loans and lending commitments
through credit default swaps, both single-name and index-
based contracts, and through the issuance of credit-linked
notes. In addition, Sumitomo Mitsui Financial Group, Inc.
provides the firm with credit loss protection on certain
approved loan commitments.

Warehouse Financing. The firm provides financing to
clients who warehouse financial assets. These arrangements
are secured by the warehoused assets, primarily consisting
of residential real estate, consumer and corporate loans.

Credit Cards. The firm’s credit card lending commitments
represents credit card lines issued by the firm to consumers.
These credit card lines are cancellable by the firm. In
January 2021, the firm entered into a co-branded credit
card relationship with General Motors and agreed to
acquire the related credit card portfolio from Capital One.
The purchase price for this portfolio will depend on the
outstanding balance of credit card loans at the time that the
acquisition
in
September 2021. As of December 2020, this portfolio had
outstanding credit card loans of approximately $2.0 billion.
In connection with this acquisition, the firm’s results will
include a provision for credit losses in the first quarter of
2021, currently estimated at $180 million.

closes, which

expected

Risk Participations
The firm also risk participates certain of its commercial
lending commitments to other financial institutions. In the
event of a risk participant’s default, the firm will be
responsible to fund the borrower.

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.
commitments also includes
Collateralized agreement
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.

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 $1.69 billion as of December 2020
and $2.06 billion as of December 2019, 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
including certain mortgage-related
legal proceedings,
matters.

Goldman Sachs 2020 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

Other Contingencies. 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 January 2021, the
firm has provided consumer relief that it expects to satisfy
this requirement, subject to validation by the independent
monitor overseeing the firm’s compliance with its consumer
relief obligations. This relief was provided in the form of
forgiveness for underwater homeowners and
principal
distressed
construction,
rehabilitation and preservation of affordable housing; and
support for debt restructuring, foreclosure prevention and
housing quality improvement programs, as well as land
banks.

borrowers;

financing

for

Guarantees
the
The table below presents derivatives
definition of a guarantee, securities lending and clearing
guarantees and certain other financial guarantees.

that meet

$ in millions

As of December 2020

Securities
lending and
clearing

Other
financial
guarantees

Derivatives

4,357

Carrying Value of Net Liability
Maximum Payout/Notional Amount by Period of Expiration
2021
2022 - 2023
2024 - 2025
2026 - thereafter
Total

$ 89,202
56,204
23,389
32,244
$201,039

$21,352
–
–
–
$21,352

–

$ 253

$1,263
3,304
2,787
268
$7,622

As of December 2019
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

3,817

–

$2,044
1,714
2,219
149
$6,126

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 $1.66 billion as of December 2020 and
$1.56 billion as of December 2019, and derivative
liabilities of $6.02 billion as of December 2020 and
$5.38 billion as of December 2019.

182 Goldman Sachs 2020 Form 10-K

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.

and

clearing

Securities Lending and Clearing Guarantees. Securities
lending
the
indemnifications and guarantees that the firm provides in
its capacity as an agency lender and in its capacity as a
sponsoring member of
the Fixed Income Clearing
Corporation.

guarantees

include

As an agency lender, the firm 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. The maximum payout of such
indemnifications was $19.86 billion as of December 2020
and $17.89 billion as of December 2019. Collateral held by
the
lending
indemnifications was $20.39 billion as of December 2020
and $19.14 billion as of December 2019. 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 indemnifications.

in connection with securities

lenders

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 guarantees the performance of

In the fourth quarter of 2020, the firm became a sponsoring
member of the Government Securities Division of the Fixed
Income Clearing Corporation in connection with certain
resale and repurchase agreements. As a sponsoring
its
member,
sponsored member clients to the Fixed Income Clearing
Corporation. To minimize potential
losses on such
guarantees, the firm obtains a security interest in the
collateral that the sponsored client placed with the Fixed
Income Clearing Corporation. Therefore, the risk of loss on
such guarantees is minimal. As of December 2020, the
maximum payout on this guarantee was $1.49 billion and
the related collateral held was $1.50 billion.

and

guarantees).

to enable clients

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
transactions
These
fund-related
guarantees represent obligations to make payments to
beneficiaries if the guaranteed party fails to fulfill
its
obligation under a contractual arrangement with that
beneficiary. Other financial guarantees also include a
guarantee that the firm has provided to the Government of
Malaysia that it will receive at least $1.4 billion in assets
seized by governmental
and proceeds
authorities around the world related to 1Malaysia
Development Berhad, a sovereign wealth fund in Malaysia
(1MDB). See Note 27 for further information. The firm will
toward satisfying the
periodically evaluate progress
$1.4 billion obligation based on information to be received
on a semi-annual basis, expected in February and August.

from assets

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

is unlikely that any
Management believes
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
custody agents,
trustees and administrators, against
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.

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
payout under
these guarantees and 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
guarantees and indemnifications have been recognized in
the consolidated balance sheets as of both December 2020
and December 2019.

Goldman Sachs 2020 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

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
business. Generally,
there are no stated or notional
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
of
the maximum payout under these guarantees and
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 2020 and
December 2019.

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.), GS Bank USA and
Goldman Sachs Paris Inc. et Cie, subject
to certain
exceptions.
In addition, Group Inc. has provided a
guarantee to GS Bank USA related to assets that GS Bank
USA has acquired from certain subsidiaries and affiliated
funds of Group Inc., and Group Inc. has provided
guarantees to Goldman Sachs International (GSI) and
Goldman Sachs Bank Europe SE (GSBE) related to
agreements that each entity has entered into with certain of
its counterparties.

Group Inc. guarantees many of the obligations of its other
consolidated subsidiaries on a transaction-by-transaction
is
basis, as negotiated with counterparties. Group Inc.
unable to develop an estimate of the maximum payout
under its subsidiary guarantees. However, because these
obligations
consolidated
subsidiaries, Group Inc.’s liabilities as guarantor are not
separately disclosed.

obligations

also

are

184 Goldman Sachs 2020 Form 10-K

Note 19.
Shareholders’ Equity

Common Equity
As of both December 2020 and December 2019, 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 and
accelerated share repurchases), 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. The firm suspended
stock repurchases during the first quarter of 2020 and,
consistent with the FRB’s requirement for all large bank
holding companies (BHCs), extended the suspension of
stock repurchases through the fourth quarter of 2020. The
firm resumed stock repurchases in the first quarter of 2021.

The table below presents information about common stock
repurchases.

in millions, except per share amounts

2020

2019

2018

Year Ended December

13.9
Common share repurchases
Average cost per share
$236.35 $206.56 $236.22
Total cost of common share repurchases $ 1,928 $ 5,335 $ 3,294

25.8

8.2

share-based awards

Pursuant to the terms of certain share-based compensation
plans, employees may remit shares to the firm or the firm
may cancel
to satisfy statutory
employee tax withholding requirements and the exercise
price of stock options. Under these plans, 3,476 shares in
2020, 7,490 shares in 2019 and 1,120 shares in 2018 were
remitted with a total value of $0.9 million in 2020,
$2 million in 2019 and $0.3 million in 2018, and the firm
cancelled 3.4 million share-based awards
in 2020,
3.8 million in 2019 and 5.0 million in 2018 with a total
value of $829 million in 2020, $743 million in 2019 and
$1.24 billion in 2018.

The table below presents common stock dividends
declared.

Year Ended December

2020

2019

2018

Dividends declared per common share

$5.00

$4.15

$3.15

On January 15, 2021, the Board of Directors of Group Inc.
(Board) declared a dividend of $1.25 per common share to
be paid on March 30, 2021 to common shareholders of
record on March 2, 2021.

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

Preferred Equity
The tables below present information about the perpetual
preferred
of
December 2020.

outstanding

issued

stock

and

Series

A
C
D
E
F
J
K
M
N
O
P
Q
R
S
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
80,000
31,050
26,000
66,000
20,000
24,000
14,000
496,750

30,000
8,000
54,000
7,667
1,615
40,000
28,000
80,000
27,000
26,000
60,000
20,000
24,000
14,000
420,282

29,999
8,000
53,999
7,667
1,615
40,000
28,000
80,000
27,000
26,000
60,000
20,000
24,000
14,000
420,280

1,000
1,000
1,000
N/A
N/A
1,000
1,000
25
1,000
25
25
25
25
25

Series

Earliest Redemption Date

Liquidation
Preference

Redemption
Value
($ in millions)

A
C
D
E
F
J
K
M
N
O
P
Q
R
S
Total

Currently redeemable
Currently redeemable
Currently redeemable
Currently redeemable
Currently redeemable
May 10, 2023
May 10, 2024
Currently redeemable
May 10, 2021
November 10, 2026
November 10, 2022
August 10, 2024
February 10, 2025
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
2,000
675
650
1,500
500
600
350
$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

approval from the FRB.

‰ In January 2020, the firm issued 14,000 shares of Series S
4.40% Fixed-Rate Reset Non-Cumulative Preferred
Stock (Series S Preferred Stock).

‰ The redemption price per share for Series A through F and
Series Q through S 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 February 2021, the firm redeemed all outstanding shares
of its Series M 5.375% Fixed-to-Floating Rate Non-
Cumulative Preferred Stock (Series M Preferred Stock) with
a redemption value of $2 billion. The difference between
the redemption value and net carrying value at the time of
this redemption was $21 million, which will be treated as
an addition to preferred stock dividends in the first quarter
of 2021.

In the first quarter of 2020,
the firm redeemed the
remaining 14,000 outstanding shares of its Series L 5.70%
Non-Cumulative Preferred Stock (Series L Preferred Stock)
with a redemption value of $350 million ($25,000 per
share), plus accrued and unpaid dividends. The difference
between the redemption value and net carrying value at the
time of this redemption 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 the time of these redemptions was
$9 million, which was recorded as an addition to preferred
stock dividends in 2019.

Goldman Sachs 2020 Form 10-K 185

On January 13, 2021, Group Inc. declared dividends of
$239.58 per share of Series A Preferred Stock, $255.56 per
share of Series C Preferred Stock, $255.56 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, $393.75 per share of Series N Preferred Stock,
$687.50 per share of Series Q Preferred Stock, $618.75 per
share of Series R Preferred Stock and $550.00 per share of
Series S Preferred Stock to be paid on February 10, 2021 to
preferred shareholders of record on January 26, 2021. In
addition, the firm declared dividends of $1,000.00 per
share of Series E Preferred Stock and $1,000.00 per share of
Series F Preferred Stock to be paid on March 1, 2021 to
preferred shareholders of record on February 14, 2021.

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

Beginning
balance

Ending
balance

$ in millions

Year Ended December 2020

Currency translation
Debt valuation adjustment
Pension and postretirement liabilities
Available-for-sale securities
Total

$ (616)
(572)
(342)
46
$(1,484)

(80) $ (696)
(833)
(368)
463
$(1,434)

(261)
(26)
417
50

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

5
(2,079)
(261)
158

$ (616)
(572)
(342)
46
$(2,177) $(1,484)

Currency translation
Debt valuation adjustment
Pension and postretirement liabilities
Available-for-sale securities
Total

$ (625)
(1,046)
(200)
(9)
$(1,880)

4
2,553
119
(103)
$ 2,573

$ (621)
1,507
(81)
(112)
693

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 dividend rates of perpetual
preferred stock as of December 2020.

Series

Per Annum Dividend Rate

A
C
D
E
F

M
N

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
3 month LIBOR + 3.922%, payable quarterly
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
4.40%, payable semi-annually, from issuance date to, but excluding,
February 10, 2025; 5 year treasury rate + 2.85%, 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

2020

2019

2018

per
share

$ in
millions

per
share

$ in
millions

per
share

$ in
millions

$ 947.92
–
$
$1,011.12
$1,011.12
$4,055.55
$4,055.55
$1,375.00
$1,593.76
$ 361.54
$1,217.16
$1,575.00
$1,325.00
$1,250.00
$1,577.43
$ 910.94
$ 586.67

$ 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
–
8
55
31
6
55
45
4
97
43
34
75
32
22
8
$543

$ 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

Series

A
B
C
D
E
F
J
K
L
M
N
O
P
Q
R
S
Total

186 Goldman Sachs 2020 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 20.
Regulation and Capital Adequacy

The FRB is the primary regulator of Group Inc., a 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
and other factors. Furthermore, certain of
the firm’s
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
(Basel
international
III) and also
standards
capital
implement certain provisions of
the Dodd-Frank Act.
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 Framework includes the minimum risk-based
capital and the capital conservation buffer requirements.
The buffer must consist entirely of capital that qualifies as
Common Equity Tier 1 (CET1) capital.

Prior to October 1, 2020, the capital conservation buffer
requirements under both the Standardized and Advanced
Capital Rules were comprised of (i) a 2.5% buffer, (ii) the
countercyclical capital buffer and (iii) the G-SIB surcharge.
Beginning on October 1, 2020, the 2.5% buffer was
replaced with the
the
Standardized Capital Rules. The components of the capital
conservation buffer requirements under the Advanced
Capital Rules remain unchanged.

capital buffer under

stress

Rules.

Capital

Beginning

Advanced

The firm calculates its CET1 capital, Tier 1 capital and
Total capital ratios in accordance with the Standardized
and
on
October 1, 2020, each of the ratios calculated under the
Standardized and Advanced Capital Rules must meet the
respective capital requirements. Prior to October 1, 2020,
the lower of each risk-based capital ratio calculated under
the Standardized and Advanced Capital Rules was the ratio
against which the firm’s compliance with its risk-based
capital requirements was 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.

Consolidated Regulatory Capital Requirements
Risk-Based Capital Ratios. The table below presents the
risk-based capital requirements.

Standardized

Advanced

As of December 2020

CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

As of December 2019

CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

13.6%
15.1%
17.1%

9.5%
11.0%
13.0%

the CET1 capital

In the table above:
‰ As of December 2020, under both the Standardized and
ratio
Advanced Capital Rules,
requirement includes a minimum of 4.5%, the Tier 1
capital ratio requirement includes a minimum of 6.0%
and the Total capital ratio requirement
includes a
minimum of 8.0%. These requirements also include the
capital conservation buffer requirements, consisting of
the G-SIB surcharge of 2.5% (Method 2) and the
countercyclical capital buffer, which the FRB has set to
zero percent. In addition, the capital conservation buffer
requirements include the stress capital buffer of 6.6%
under the Standardized Capital Rules and a buffer of
2.5% under the Advanced Capital Rules.

the CET1 capital

‰ As of December 2019, under both the Standardized and
Advanced Capital Rules,
ratio
requirement includes a minimum of 4.5%, the Tier 1
capital ratio requirement includes a minimum of 6.0%
includes a
and the Total capital ratio requirement
minimum of 8.0%. These requirements also include the
capital conservation buffer requirements, consisting of a
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.

Goldman Sachs 2020 Form 10-K 187

Leverage Ratios. The table below presents the leverage
requirements.

Tier 1 leverage ratio
SLR

Requirements

4.0%
5.0%

In the table above, the SLR requirement of 5% includes a
minimum of 3% and a 2% buffer applicable to G-SIBs.

The table below presents information about leverage ratios.

$ in millions

Tier 1 capital

Average total assets
Deductions from Tier 1 capital
Average adjusted total assets
Impact of SLR temporary amendment
Average off-balance sheet exposures
Total leverage exposure

Tier 1 leverage ratio
SLR

For the Three Months
Ended or as of December

2020

2019

92,730

85,440

$1,152,785
(4,948)
1,147,837
(202,748)
387,848
$1,332,937

$ 983,909
(5,275)
978,634
–
396,833
$1,375,467

8.1%
7.0%

8.7%
6.2%

for

the

and,

three months

In the table above:
‰ Average total assets represents the average daily assets for
the quarter
ended
December 2020, reflected the impact of CECL transition.
‰ Impact of SLR temporary amendment represents the
exclusion of average holdings of U.S. Treasury securities
and average deposits at the Federal Reserve as permitted
by the FRB. The impact of this temporary amendment
was an increase in the firm’s SLR by approximately
1.0 percentage points for the three months ended
December 2020. This temporary amendment is effective
through March 31, 2021.

‰ Average off-balance sheet exposures

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

by average adjusted total assets.

‰ SLR is calculated as Tier 1 capital divided by total

leverage exposure.

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 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 table below presents information about risk-based
capital ratios.

$ in millions

As of December 2020

CET1 capital
Tier 1 capital
Tier 2 capital
Total capital
RWAs

CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

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

Standardized

Advanced

$ 81,641
$ 92,730
$ 15,424
$108,154
$554,162

14.7%
16.7%
19.5%

$ 74,850
$ 85,440
$ 14,925
$100,365
$563,575

13.3%
15.2%
17.8%

$ 81,641
$ 92,730
$ 13,279
$106,009
$609,750

13.4%
15.2%
17.4%

$ 74,850
$ 85,440
$ 13,473
$ 98,913
$544,653

13.7%
15.7%
18.2%

In the table above:
‰ As of December 2019, the lower of the Standardized or
Advanced ratios were the ratios against which the firm’s
compliance with the capital requirements was assessed
under the risk-based Capital Rules, and therefore, the
Standardized ratios applied to the firm.

‰ As permitted by the FRB,

the firm has elected to
temporarily delay the estimated effects of adopting CECL
on regulatory capital until
January 2022 and to
subsequently phase-in the effects through January 2025.
In addition, during 2020 and 2021, the firm has elected to
increase regulatory capital by 25% of the increase in the
allowance for credit losses since January 1, 2020, as
permitted by the rules issued by the FRB. The impact of
this increase will also be phased in over the three-year
transition period. Reflecting the full impact of CECL as of
December 2020 would not have had a material impact on
the firm’s capital ratios.

188 Goldman Sachs 2020 Form 10-K

‰ 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 2020, 20% of this debt was included in Tier 2
capital and 80% was phased out of regulatory capital. As
of December 2019, 30% of this debt was included in
Tier 2 capital and 70% 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.

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

Risk-Based Capital. The table below presents information
about risk-based capital.

$ in millions

Common shareholders’ equity
Impact of CECL transition
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

2020

2019

$ 84,729
1,126
(3,652)
(601)
39
81,641
11,203
(106)
(8)
$ 92,730

$ 92,730
12,196
188
3,095
(55)
15,424
$108,154

$ 92,730
15,424
(3,095)
950
13,279
$106,009

$ 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

In the table above:
‰ Impact of CECL transition represents the impact of
adoption as of January 1, 2020 and the impact of
increasing regulatory capital by 25% of the increase in
allowance for credit losses since January 1, 2020. The
allowance for credit losses within Standardized and
Advanced Tier 2 capital also reflects the impact of these
adjustments.

‰ Deduction for goodwill was net of deferred tax liabilities
of $680 million as of December 2020 and $667 million as
of December 2019.

tax

liabilities

$29 million

‰ Deduction for identifiable intangible assets was net of
of

deferred
December 2020 and $37 million as of December 2019.
‰ 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.

Goldman Sachs 2020 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

The table below presents changes in CET1 capital, Tier 1
capital and Tier 2 capital.

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-
type of
weights, which depend largely on the
counterparty. The exposure measure for derivatives and
securities financing transactions are based on specific
formulas which take certain factors into consideration.
‰ 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
certain
trading assets and liabilities, as well as
investments,
financial assets and
loans, and other
liabilities accounted for at fair value, due to adverse
market movements over a defined time horizon with a
specified confidence level.

$ in millions

Standardized

Advanced

Year Ended December 2020

CET1 capital
Beginning balance
Change in:

Common shareholders’ equity
Impact of CECL transition
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 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

$ 74,850

5,667
1,126
(123)
3
118
$ 81,641

$ 85,440

6,791
504
(5)
92,730

14,925

13,473

(651)
(96)
1,293
(47)
15,424
$108,154

(651)
(96)
–
553
13,279
$106,009

$ 73,116

80
(432)
(307)
2,393
$ 74,850

$ 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

190 Goldman Sachs 2020 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

regulatory capital

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 risk management purposes differs
from VaR used for
requirements
(regulatory VaR) due to differences in time horizons,
confidence levels and the scope of positions on which VaR
is calculated. For risk management purposes, a 95%
one-day VaR is used, whereas for regulatory capital
requirements, a 99% 10-day VaR is used to determine
Market RWAs and a 99% one-day VaR is used to
determine regulatory VaR exceptions. 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
the Capital
day)
Framework requires that intraday activity be excluded from
revenues when calculating regulatory VaR
daily net
exceptions.
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.

include intraday activity, whereas

Intraday

activity

The firm’s positional
losses observed on a single day
exceeded its 99% one-day regulatory VaR on six occasions
during 2020 (all of which occurred during March 2020)
and exceeded its 99% one-day regulatory VaR on one
occasion during 2019. As permitted by the FRB, the firm
has permanently excluded the six exceptions that occurred
in March 2020 in determining the firm’s 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
instruments over a
migration of issuers of financial
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 2020

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 2019

Standardized

Advanced

$120,292
176,501
71,427
46,944
70,274
485,438

14,913
31,978
7,882
1,758
12,193
68,724
–
$554,162

$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

$111,691
151,587
16,568
49,268
83,599
412,713

14,913
31,978
7,882
1,758
12,193
68,724
128,313
$609,750

$ 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

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.

Goldman Sachs 2020 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

The table below presents changes in RWAs.

$ in millions

Year Ended December 2020

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 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

Standardized

Advanced

$563,575

$544,653

(614)
(3,239)
5,560
(9,870)
(5,386)
(13,549)

39,060
17,131
2,734
(12,624)
5,333
51,634

5,980
1,067
3,574
365
(6,850)
4,136
–
$554,162

5,980
1,067
3,574
567
(6,850)
4,338
9,125
$609,750

$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

RWAs Rollforward Commentary
Year Ended December 2020. Standardized Credit RWAs
as of December 2020 decreased by $13.55 billion compared
with December 2019, primarily reflecting a decrease in
equity investments, principally due to the sale of certain
equity positions, and a decrease in other, principally due to
decreased receivables as a result of changes in risk
measurements. These decreases were partially offset by an
increase in securities financing transactions, principally due
to increased funding exposures. Standardized Market
RWAs as of December 2020 increased by $4.14 billion
compared with December 2019, primarily reflecting an
increase in regulatory VaR, principally due to increased
market volatility, and an increase in incremental risk,
principally due to increased exposures in equities held for
market-making purposes. These increases were partially
offset by a decrease in specific risk, principally due to
changes in risk measurements on certain exposures.

192 Goldman Sachs 2020 Form 10-K

Advanced Credit RWAs as of December 2020 increased by
$51.63 billion compared with December 2019, primarily
reflecting an increase in derivatives, principally due to the
impact of higher levels of volatility and counterparty credit
risk and an increase in commitments, guarantees and loans,
principally due to increased lending activity. These increases
were partially offset by a decrease in equity investments,
principally due to the sale of certain equity positions.
Advanced Market RWAs as of December 2020 increased by
$4.34 billion compared with December 2019, primarily
reflecting an increase in regulatory VaR, principally due to
increased market volatility, and an increase in incremental
risk, principally due to increased exposures in equities held
for market-making purposes. These increases were partially
offset by a decrease in specific risk, principally due to changes
in risk measurements on certain exposures. Advanced
Operational RWAs as of December 2020 increased by
$9.13 billion compared with December 2019. The vast
majority of this increase was associated with litigation and
regulatory proceedings.

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.

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.

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 (NYDFS) and the Consumer Financial Protection
Bureau, and is subject to regulatory capital requirements
that are calculated under the Capital Framework. GS Bank
USA is an Advanced approach banking organization under
the Capital Framework.

The Capital Framework includes the minimum risk-based
capital and the capital conservation buffer requirements
(consisting of a 2.5% buffer and the countercyclical capital
buffer). The buffer must consist entirely of capital that
qualifies as CET1 capital.
the Capital
Framework includes the leverage ratio requirement.

In addition,

ratio under

each risk-based capital

GS Bank USA is required to calculate the CET1 capital,
Tier 1 capital and Total capital ratios in accordance with
both the Standardized and Advanced Capital Rules. The
lower of
the
Standardized and Advanced Capital Rules is the ratio
against which GS Bank USA’s compliance with its risk-
based capital requirements is assessed. In addition, under
the regulatory framework for prompt corrective action
applicable to GS Bank USA,
the
quantitative
“well-capitalized”
for
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 the capital
requirements, including a breach of the buffers described
below, could result in restrictions being imposed by the
regulators.

in order to meet

requirements

The table below presents GS Bank USA’s risk-based capital,
leverage and “well-capitalized” requirements.

Requirements

“Well-capitalized”
Requirements

Risk-based capital requirements
CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

Leverage requirements
Tier 1 leverage ratio
SLR

7.0%
8.5%
10.5%

4.0%
3.0%

6.5%
8.0%
10.0%

5.0%
6.0%

In the table above:
‰ The CET1 capital ratio requirement includes a minimum
of 4.5%, the Tier 1 capital ratio requirement includes a
minimum of 6.0% and the Total
ratio
requirement
includes a minimum of 8.0%. These
requirements also include the capital conservation buffer
requirements consisting of a 2.5% buffer and the
countercyclical capital buffer, which the FRB has set to
zero percent.

capital

‰ The “well-capitalized” requirements are the binding

requirements for leverage ratios.

The table below presents information about GS Bank USA’s
risk-based capital ratios.

$ in millions

As of December 2020

CET1 capital
Tier 1 capital
Tier 2 capital
Total capital
RWAs

CET1 capital ratio
Tier 1 capital ratio
Total capital ratio

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

Standardized

Advanced

$ 30,656
$ 30,656
$
6,288
$ 36,944
$266,153

11.5%
11.5%
13.9%

$ 29,176
$ 29,176
$
5,293
$ 34,469
$258,541

11.3%
11.3%
13.3%

$ 30,656
$ 30,656
$
4,903
$ 35,559
$165,799

18.5%
18.5%
21.4%

$ 29,176
$ 29,176
$
4,486
$ 33,662
$135,596

21.5%
21.5%
24.8%

In the table above:
‰ The lower of the Standardized or Advanced ratio is the
ratio against which GS Bank USA’s compliance with the
capital requirements is assessed under the risk-based
Capital Rules, and therefore, the Standardized ratios
applied to GS Bank USA as of both December 2020 and
December 2019.

‰ As permitted by the FRB, GS Bank USA has elected to
temporarily delay the estimated effects of adopting CECL
on regulatory capital until
January 2022 and to
subsequently phase-in the effects through January 2025.
In addition, during 2020 and 2021, GS Bank USA has
elected to increase regulatory capital by 25% of the
increase in the allowance for credit
since
January 1, 2020, as permitted by the rules issued by the
FRB. The impact of this increase will also be phased in
over the three-year transition period. Reflecting the full
impact of CECL as of December 2020 would not have
had a material impact on GS Bank USA’s Standardized
risk-based capital ratios.

losses

Goldman Sachs 2020 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

‰ The

unchanged

from December

Standardized risk-based capital

ratios were
essentially
to
2019
December 2020. The Advanced risk-based capital ratios
decreased from December 2019 to December 2020,
reflecting an increase in both Credit and Market RWAs,
partially offset by an increase in capital, principally due to
net earnings.

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

2020

$ 30,656
$283,869
$343,198

10.8%
8.9%

2019

$ 29,176
$220,974
$413,852

13.2%
7.0%

In the table above:
‰ Average adjusted total assets represents the average daily
assets for the quarter adjusted for deductions from Tier 1
capital, and for the three months ended December 2020,
reflected the impact of CECL transition.

‰ Total

leverage exposure, for the three months ended
December 2020, excluded average holdings of U.S.
Treasury securities and average deposits at the Federal
Reserve as permitted by the FRB. The impact of this
temporary amendment was an increase in GS Bank USA’s
SLR by approximately 2.4 percentage points for the three
months
temporary
amendment is effective through March 31, 2021.

ended December 2020. This

‰ 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.

The firm’s principal non-U.S. bank subsidiaries, GSIB and
GSBE, are also subject to regulatory capital requirements.
GSIB is regulated by the Prudential Regulation Authority
(PRA) and the Financial Conduct Authority (FCA), and
GSBE is directly supervised by the European Central Bank
and additionally by BaFin and Deutsche Bundesbank in the
context of the E.U. Single Supervisory Mechanism. As of
both December 2020 and December 2019, GSIB and GSBE
were
capital
requirements.

in compliance with their

regulatory

194 Goldman Sachs 2020 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. The amount deposited by GS Bank USA at the
Federal Reserve was $52.71 billion as of December 2020
and $50.55 billion as of December 2019, which exceeded
required reserve amounts by $52.71 billion as of
December 2020 (as the FRB reduced reserve requirement
ratios to zero percent in 2020) and $50.29 billion as of
December 2019.

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
constraints. These
include provisions of
applicable law and regulations and other regulatory
restrictions that limit the ability of those subsidiaries to
regulatory
declare and pay dividends without prior
approval. Also, as a result of GS Bank USA’s election to
exclude holdings of U.S. Treasury securities and deposits at
the Federal Reserve from its total leverage exposure, any
dividend by GS Bank USA during the period from
July 1, 2020 through March 31, 2021 is subject to the prior
approval of the FRB. Furthermore, the amount of 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. The FRB, the FDIC and the
NYDFS 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 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
$103.80 billion as of December 2020 and $95.68 billion as
of December 2019, of which Group Inc. was required to
maintain $63.68 billion as of December 2020 and
$57.58 billion as of December 2019, 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

2020

2019

2018

Fees earned from funds

$3,393

$2,967

$3,571

Year Ended December

$ in millions

in millions, except per share amounts

2020

2019

2018

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

$8,915
356.4

$7,897
371.6

$9,860
385.4

3.9
–
3.9
360.3

3.9
–
3.9
375.5

3.9
0.9
4.8
390.2

$24.94
$24.74

$21.18
$21.03

$25.53
$25.27

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 EPS under this
method. The impact of applying this methodology was a
reduction in basic EPS of $0.07 for both 2020 and 2019,
and $0.05 for 2018.
‰ Diluted EPS does not

include antidilutive RSUs of
0.1 million for both 2020 and 2019, and less than
0.1 million for 2018.

As of December

2020

2019

$ 803
$5,068

$ 780
$5,490

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 $109 million for 2020,
$44 million for 2019 and $51 million for 2018.

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,
any such support is not expected to be material to the
results of operations of the firm.

In March 2020, GS Bank USA and unaffiliated entities
purchased certificates of deposit and commercial paper
from two money market funds managed by the firm. These
funds are not covered funds under the Volcker Rule. GS
Bank USA’s purchase price of
these securities was
$1.84 billion, of which $321 million was outstanding as of
December 2020. These purchases were made to promote
liquidity in the short-term credit markets and to increase the
funds’ weekly liquid assets. These securities are included
within investments in the consolidated balance sheets.
Group Inc. has provided a guarantee to GS Bank USA in
connection with these
securities. See Note 18 for
information about guarantees provided by Group Inc. to
subsidiaries.

Goldman Sachs 2020 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

both December

In addition, the firm had an outstanding guarantee, as
permitted under the Volcker Rule, on behalf of its funds of
$87 million
and
December 2019. 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 covered by the Volcker Rule. Except as
noted above, the firm has not provided any additional
financial support to its affiliated funds during 2020 and
2019.

2020

In addition, in the ordinary course of business, the firm may
also engage in other activities with its affiliated funds,
trade
including,
execution, market-making, custody, and acquisition and
bridge financing. See Note 18 for information about the
firm’s investment commitments related to these funds.

among others,

securities

lending,

Note 23.
Interest Income and Interest Expense

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

2020

2019

2018

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

245
282
5,210
1,627
4,883
1,442
13,689
2,386
599
1,238
542
4,153
20
8,938
$ 4,751

$ 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

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.

196 Goldman Sachs 2020 Form 10-K

‰ 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.

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

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
Provision for taxes

Year Ended December

2020

2019

2018

$1,759
555
1,539
3,853

(798)
(42)
7
(833)
$3,020

$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

In the table above, U.S. federal current tax expense and U.S.
federal deferred tax benefit in 2018 includes the impact of
the Tax Cuts and Jobs Act (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

2020

2019

2018

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% 21.0%
2.0
(2.2)
(0.7)
(1.4)
(0.6)
(3.9)
1.2
0.8
24.2% 20.0% 16.2%

3.1
(1.0)
(2.4)
(1.2)
(0.6)
–
5.6
(0.3)

2.9
(0.6)
(3.6)
(1.8)
(1.0)
–
2.1
1.0

In the table above, Non-U.S. operations include the impact
of the Base Erosion and Anti-Abuse Tax and Global
Intangible Low Taxed Income (GILTI).

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 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

As of December

2020

2019

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

$1,609
200
737
510
138
282
34
618
1,054
333
5,515
(551)
$4,964

$1,351
279
472
411
135
407
59
637
433
160
4,344
(467)
$3,877

Deferred tax liabilities
Depreciation and amortization
Unrealized gains
Operating lease right-of-use assets
Total deferred tax liabilities

$1,153
1,120
581
$2,854

$1,022
1,196
595
$2,813

The firm has recorded deferred tax assets of $510 million as
of December 2020 and $411 million as of December 2019,
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 both
December 2020 and December 2019, related to these net
operating loss carryforwards.

As of December 2020, the U.S. federal net operating loss
carryforward was $1.00 billion, the state and local net
operating loss carryforward was $1.07 billion, and the
foreign net operating loss carryforward was $1.06 billion.
If not utilized, the U.S. federal, the state and local, and
foreign net operating loss carryforwards will begin to
expire in 2021. If these carryforwards expire, they will not
have a material impact on the firm’s results of operations.
As of December 2020, the firm has recorded deferred tax
assets of $14 million in connection with general business
credit carryforwards and $20 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 2023. As of December 2020, the firm did
not have any foreign tax credit carryforwards.

As of both December 2020 and December 2019, the firm
had no U.S. capital loss carryforwards and no related net
deferred income tax assets. As of December 2020, the firm
had deferred tax assets of $258 million in connection with
foreign capital
carryforwards and a valuation
allowance of $258 million related to these capital loss
carryforwards.

loss

The valuation allowance increased by $84 million during
2020 and increased by $222 million during 2019. The
increases in both 2020 and 2019 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 2020 and
December 2019, all U.S. taxes were accrued on these
subsidiaries’ distributable earnings, substantially all of
which resulted from the Tax Legislation repatriation tax
and GILTI.

Goldman Sachs 2020 Form 10-K 197

The table below presents the earliest tax years that remain
subject to examination by major jurisdiction.

Jurisdiction

U.S. Federal
New York State and City
United Kingdom
Japan
Hong Kong

As of
December 2020

2011
2015
2017
2015
2014

The firm has been accepted into the Compliance Assurance
Process program by the IRS for each of the tax years from
2013 through 2020 and submitted an application for 2021.
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 fieldwork for tax years 2011
through 2017 has been completed. During 2020, the firm
reached an agreement with the IRS on certain items related
to tax years through 2017, which did not have a material
impact on the effective tax rate. The final resolution of the
audit for tax years 2011 through 2017 is not expected to
have a material impact on the effective tax rate. The 2018
and 2019 tax years remain subject to post-filing review.

During 2020, New York State and City examinations
(excluding GS Bank USA) of 2011 through 2014 were
completed. The resolution of these examinations did not
have a material impact on the effective tax rate. New York
State and City examinations for GS Bank USA through
2014 were completed in 2016. New York State and City
examinations of 2015 through 2018 are expected to
commence in 2021.

All years, including and subsequent to the years in the table
remain open to examination by the taxing
above,
authorities. The firm believes
the liability for
unrecognized tax benefits it has established is adequate in
relation to the potential for additional assessments.

that

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

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
return and amounts
recognized in the consolidated
financial statements.

The accrued liability for interest expense related to income
tax matters and income tax penalties was $129 million as of
December 2020 and $198 million as of December 2019.
The firm recognized interest expense and income tax
penalties of $41 million for 2020, $60 million for 2019 and
is reasonably possible that
$18 million for 2018.
unrecognized tax benefits could change significantly during
the twelve months subsequent to December 2020 due to
potential audit settlements. However, at this time it is not
possible to estimate any potential change.

The table below presents the changes in the liability for
unrecognized tax benefits, which is included in other
liabilities.

$ in millions

Year Ended or as of December

2020

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

$1,445
164
209
(205)
(367)
5
$1,251

$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

200
$1,051

279
$1,166

152
$ 899

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.

198 Goldman Sachs 2020 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 25.
Business Segments

The firm reports its activities in 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
the
estimated amount of equity required to support
activities of the segment under relevant regulatory capital
requirements.

Net earnings for each segment is calculated by applying the
firmwide tax rate to each segment’s pre-tax earnings.

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.

Segment Results
The table below presents a summary of the firm’s segment
results.

$ in millions

2020

2019

2018

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

$ 9,158
265
9,423
1,624
6,134
$ 1,665
$ 1,262
$ 1,193
$11,313
10.5%

$18,928
2,229
21,157
274
12,806
$ 8,077
$ 6,122
$ 5,766
$40,760
14.1%

$ 7,743
241
7,984
442
5,142
$ 2,400
$ 1,819
$ 1,740
$20,491
8.5%

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

$ 3,980
2,016
5,996
758
4,901
337
$
256
$
$
216
$ 8,012
2.7%

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

$39,809
4,751
44,560
3,098
28,983
$12,479
$ 9,459
$ 8,915
$80,576
11.1%

$ 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%

$ 3,542
1,661
5,203
423
4,545
235
$
188
$
$
159
$ 6,292
2.5%

$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%

Goldman Sachs 2020 Form 10-K 199

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:
‰ 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.

‰ Total operating expenses included net provisions for
litigation and regulatory proceedings of $3.42 billion for
2020, $1.24 billion for 2019 and $844 million for 2018,
primarily reflected in Investment Banking and Global
Markets.

‰ Net earnings

included an income tax benefit of

$487 million in 2018 related to Tax Legislation.

‰ Overhead expenses not directly allocable to specific
segments are allocated ratably based on direct segment
expenses.

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

2020

2019

2018

$ 174
611
740
377
$1,902

$ 139
646
618
301
$1,704

$ 114
563
450
201
$1,328

Segment Assets
The table below presents assets by segment.

$ in millions

Investment Banking
Global Markets
Asset Management
Consumer & Wealth Management
Total

As of December

2020

2019

$ 116,242
844,606
95,751
106,429
$1,163,028

$ 92,009
725,060
92,102
83,797
$992,968

200 Goldman Sachs 2020 Form 10-K

The table below presents gross loans by segment and loan
type, and allowance for loan losses by segment.

$ in millions

Investment Banking
Corporate
Loans, gross
Allowance for loan losses
Loans

Global Markets
Corporate
Real estate
Other
Loans, gross
Allowance for loan losses
Loans

Asset Management
Corporate
Real estate
Other
Loans, gross
Allowance for loan losses
Loans

Consumer & Wealth Management
Wealth management
Installment
Credit cards
Loans, gross
Allowance for loan losses
Loans

Total
Loans, gross
Allowance for loan losses
Loans

As of December

2020

2019

$ 27,866
27,866
(1,322)
26,544

$ 27,035
27,035
(470)
26,565

13,248
16,915
3,499
33,662
(448)
33,214

7,545
9,125
675
17,345
(787)
16,558

33,023
3,823
4,270
41,116
(1,317)
39,799

11,852
15,671
3,756
31,279
(168)
31,111

7,420
9,030
1,036
17,486
(385)
17,101

27,940
4,747
1,858
34,545
(418)
34,127

119,989
(3,874)
$116,115

110,345
(1,441)
$108,904

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 enterprise as a whole. The
the profitability of
methodology for allocating profitability to geographic
is dependent on estimates and management
regions
judgment because a significant portion of
the firm’s
activities require cross-border 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

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 and debt investments): location of the sales team;
Equity investments: location of the investment; Lending
and debt investments: location of the client.

‰ Consumer & Wealth Management: Wealth management:
location of the sales team; Consumer banking: location of
the client.

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 total net revenues, pre-tax
earnings and net earnings by geographic region.

$ in millions

2020

2019

2018

Year Ended December

Americas
EMEA
Asia
Total net revenues

$27,508
10,868
6,184

61%
25%
14%
$44,560 100% $36,546 100% $36,616 100%

60% $22,339
27% 9,244
13% 5,033

62% $22,148
9,745
24%
4,653
14%

65%
72% $ 6,623
Americas
26%
3,349
25%
EMEA
Asia
9%
611
3%
Total pre-tax earnings $12,479 100% $10,583 100% $12,481 100%

62% $ 8,125
32% 3,244
6% 1,112

$ 9,019
3,041
419

Americas
EMEA
Asia
Total net earnings

$ 7,468
2,090
(99)

68%
24%
8%
$ 9,459 100% $ 8,466 100% $10,459 100%

65% $ 7,092
31% 2,522
845

79% $ 5,514
2,600
22%
352
(1)%

In the table above:
‰ Americas net earnings included an income tax benefit of

$487 million in 2018 related to Tax Legislation.

‰ Asia pre-tax earnings and net earnings for 2020 and 2019
were impacted by net provisions for litigation and
regulatory proceedings.

‰ Substantially all of

the amounts in Americas were

attributable to the U.S.

‰ Asia includes Australia and New Zealand.

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 the firm 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.

$ in millions

As of December

2020

2019

$187,009
U.S. government and agency obligations
Percentage of total assets
16.1%
Non-U.S. government and agency obligations $ 59,580
5.1%
Percentage of total assets

$167,097
16.8%
$ 44,875
4.5%

the

In addition,
firm had $116.63 billion as of
December 2020 and $96.97 billion as of December 2019 of
cash deposits held at central banks (included in cash and
cash equivalents), of which $52.71 billion as of
December 2020 and $50.55 billion as of December 2019
was held at the Federal Reserve.

As of both December 2020 and December 2019, the firm
did not have credit exposure to any other counterparty that
exceeded 2% of total assets.

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.
and agency
obligations
obligations
resale agreements and
collateralize
that
securities borrowed transactions.

government

$ in millions

As of December

2020

2019

U.S. government and agency obligations
Non-U.S. government and agency obligations

$60,158
$68,001

$49,396
$55,889

In the table above:
‰ Non-U.S. government and agency obligations primarily
consists of securities issued by the governments of the
U.K. and Japan.

‰ 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.

Goldman Sachs 2020 Form 10-K 201

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 27.
Legal Proceedings

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.

With respect
to matters described below for which
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
securities
if any, as of
December 2020 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
$0.9 billion in excess of the aggregate reserves for such
matters.

estimated value,

less

the

202 Goldman Sachs 2020 Form 10-K

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
period. See Note 18 for
information about
mortgage-related contingencies.

reasonably

possible

further

Justice

1MDB-Related Matters
Between 2012 and 2013, subsidiaries of the firm acted as
arrangers or purchasers of approximately $6.5 billion of
debt securities of 1MDB. On November 1, 2018, the U.S.
Department of
(DOJ) unsealed a criminal
information and guilty plea by Tim Leissner, a former
the firm, and an
participating managing director of
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. On May 6, 2019,
Ng pleaded not guilty to the DOJ’s criminal charges.

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 August 18, 2020, the firm announced that it entered
into a settlement agreement with the Government of
Malaysia to resolve the criminal and regulatory proceedings
in Malaysia involving the firm, which includes a guarantee
least
the Government of Malaysia receives at
that
$1.4 billion in assets and proceeds from assets seized by
governmental authorities around the world related to
1MDB.

the PRA,

the FCA,

On October 22, 2020, the firm announced that it reached
settlements of governmental and regulatory investigations
relating to 1MDB with the DOJ, the SEC, the FRB, the
NYDFS,
the Singapore Attorney
General’s Chambers, the Singapore Commercial Affairs
Department, the Monetary Authority of Singapore and the
Hong Kong Securities and Futures Commission. Group Inc.
entered into a three-year deferred prosecution agreement
with the DOJ, in which a charge against the firm, one count
of conspiracy to violate the FCPA, was filed and will later
be dismissed if the firm abides by the terms of the
agreement. In addition, GS Malaysia pleaded guilty to one
count of conspiracy to violate the FCPA.

The firm has been working to secure necessary exemptions
and authorizations from regulators so that these settlements
do not impact the firm’s activities or the services that it
provides to clients. In October 2020, the firm submitted its
application to the U.S. Department of Labor (DOL) to
maintain its status as a qualified professional asset manager
(QPAM) and in January 2021 the DOL published for
public comment a notice of proposed exemption. The firm
expects to obtain the exemption before the sentencing of GS
Malaysia.

The firm has received multiple demands, beginning in
November 2018,
from alleged shareholders under
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. The parties have agreed to
stay proceedings pending resolution of the books and
records demand.

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 second amended
complaint filed on November 13, 2020, alleges breaches of
fiduciary duties,
including in connection with alleged
insider trading by certain current and former directors,
the anti-fraud
unjust
provisions of the Exchange Act, including in connection
with Group Inc.’s
common stock repurchases and
solicitation of proxies and seeks unspecified damages,
disgorgement and injunctive relief. Defendants moved to
dismiss this action on January 15, 2021.

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 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.

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.

filed

amended

complaint

consolidated

on
The
July 25, 2011, which named 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
monetary damages. The defendants have moved for
summary judgment. On April 7, 2020, the Second Circuit
Court
court’s
affirmed
of Appeals
certification. On
August 14, 2018 grant of
December 11, 2020, the United States Supreme Court
granted defendants’ petition for writ of certiorari seeking
review of
the Second Circuit Court of Appeals’
April 7, 2020 decision.

the
class

district

Goldman Sachs 2020 Form 10-K 203

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

Complaints were filed in the U.S. District Court for the
Southern District of New York on July 25, 2019 and
May 29, 2020 against Goldman Sachs Mortgage Company
and GS Mortgage Securities Corp. by U.S. Bank National
Association, as trustee for two residential mortgage-backed
securitization trusts that issued $1.7 billion of securities.
The complaints generally allege that mortgage loans in the
trusts failed to conform to applicable representations and
warranties and seek specific performance or, alternatively,
compensatory
relief. On
November 23, 2020, the court granted in part and denied in
part defendants’ motion to dismiss the complaint in the first
action and denied defendants’ motion to dismiss the
complaint in the second action. On January 14, 2021,
amended complaints were filed in both actions.

damages

other

and

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 November 28, 2018, the
plaintiffs filed a second-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. On
November 19, 2020, the court approved a settlement
among the parties. The firm has reserved the full amount of
its contribution to the settlement.

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, and Group
Inc., GSI, GSIB, GS&Co., Goldman Sachs Group UK
Limited (GSG UK) and GS Bank USA are among the
defendants named in an action filed in the High Court of
England and Wales on November 11, 2020, in each case 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 third amended
complaint
filed on
in the U.S. district court action,
August 3, 2020, 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. The
summary claim form filed in the U.K. action indicates the
action is for breach of U.K. and E.U. competition rules from
2003 to 2013 and alleges manipulation of foreign exchange
rates and bid/offer spreads, the exchange of commercially
sensitive information among defendants and collusive
trading.

204 Goldman Sachs 2020 Form 10-K

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.

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

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. On December 31, 2020, the
parties informed the court that they had reached an
agreement in principle, subject to documentation, to resolve
the remaining individual actions. The firm has reserved the
full amount of its proposed contribution to the settlement.

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

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. On November 16, 2020,
the court approved a settlement agreement among the
parties. Under the terms of the agreement, the firm will not
be required to contribute to the settlement.

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
June 2013 and
in the
amount of
November 2013 Rule 144A offerings.

senior notes

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.
including GS&Co., were
The underwriter defendants,
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 April 27, 2020, the district
court preliminarily approved a settlement among the
parties, and on November 13, 2020, the state court
preliminarily approved a settlement among the parties.
Under the terms of the federal and state court preliminary
settlements, the firm will not be required to contribute to
either settlement.

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
representing an aggregate offering price of
shares
approximately $420 million. On January 25, 2019, the
plaintiffs filed an amended complaint. Defendants moved
to dismiss on March 26, 2019. On December 1, 2020, the
court preliminarily approved a settlement agreement
among the parties. Under the terms of the agreement, the
firm will not be required to contribute to the settlement.

12,280,042

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 June 26, 2020, the court dismissed the
amended complaint in the state court action, and on
September 4, 2020, plaintiffs moved for leave to file a
consolidated amended complaint. Plaintiffs in the district
court action filed a second amended complaint on
October 7, 2020. On December 21, 2020, the parties
informed the court in the district court action that they were
finalizing the terms of a settlement in principle that would
resolve the district court and state court actions.

common

Goldman Sachs 2020 Form 10-K 205

its

among

shareholders. GS&Co.

Venator Materials PLC. GS&Co.
the
underwriters named as defendants in putative securities
class actions in Texas District Court, Dallas County, New
York Supreme Court, New York 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. In addition to the underwriters, the defendants
include Venator, certain of its officers and directors and
certain
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
the underwriter
defendants, including GS&Co., in the Texas state court
jurisdiction. On
action
February 18, 2020, defendants moved to dismiss the
consolidated complaint
action. On
July 31, 2020, defendants filed a motion to dismiss the New
York state court action.

claims against

personal

in the

federal

lack

for

XP Inc. GS&Co. is among the underwriters named as
defendants in putative securities class actions pending in
New York Supreme Court, County of New York, and the
U.S. District Court for the Eastern District of York, filed
beginning March 19, 2020, relating to XP Inc.’s (XP)
$2.3 billion December 2019 initial public offering. In
addition to the underwriters, the defendants include XP,
certain of its officers and directors and certain of its
shareholders. GS&Co. underwrote 19,326,218 shares of
common stock in the December 2019 initial public offering
representing an aggregate offering price of approximately
$522 million. On August 5, 2020, defendants’ motion to
stay the state court action in favor of the federal court
action was denied, and on August 21, 2020, defendants
moved to dismiss the amended complaint filed in the state
court action. On September 14, 2020, defendants moved to
dismiss the consolidated amended complaint filed in the
federal court action.

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

Inc.’s

(Alnylam)

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 October 30, 2020, the court denied the
defendants’ motion to dismiss the amended complaint filed
on November 7, 2019. On November 12, 2020, defendants
appealed the denial to the Appellate Division of the
Supreme Court of the State of New York for the First
Department.

2,576,000

common

and

GS&Co.

directors.

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
underwrote
officers
35,864,408 shares of common stock representing an
aggregate offering price of approximately $1.6 billion. On
November 16, 2020, the court in the state court action
granted defendants’ motion to dismiss the consolidated
amended complaint filed on February 11, 2020, and on
December
appealed. On
August 7, 2020, defendants’ motion to dismiss the district
court action was denied. On September 25, 2020, the
plaintiffs in the district court action moved for class
certification. On December 5, 2020, the plaintiffs in the
state court action filed a complaint in the district court,
which was consolidated with the existing district court
action on January 25, 2021.

plaintiffs

2020,

16,

206 Goldman Sachs 2020 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

GoHealth, Inc. GS&Co. is among the underwriters named
as defendants in putative securities class actions filed
beginning on September 21, 2020 and consolidated in the
U.S. District Court for the Northern District of Illinois
Inc.’s (GoHealth) $914 million
relating to GoHealth,
July 2020 initial public offering.
In addition to the
underwriters, the defendants include GoHealth, certain of
its officers and directors and certain of its shareholders.
GS&Co. underwrote 11,540,550 shares of common stock
representing an aggregate offering price of approximately
$242 million.

Investment Management Services
Group Inc. and certain of its affiliates are parties to various
civil
litigation and arbitration proceedings and other
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
or other compensatory damages and,
in some cases,
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. 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
their affiliates. These actions have been
certain of
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 2020 Form 10-K 207

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

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. On November 2, 2020, the court granted in part
and denied in part the defendants’ motion to dismiss,
dismissing the state common law claims against GS&Co.,
but denying dismissal of the federal antitrust law claims.

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. On March 29, 2020,
the court granted the defendants’ motions to dismiss and
for reconsideration, resulting in the dismissal of all claims.
On April 27, 2020, plaintiffs appealed to the Second Circuit
Court of Appeals.

federal antitrust

GS&Co., GSI, J. Aron & Company and Metro International
Trade Services (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
laws and state laws in
violations of
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 and on
August 27, 2019, the Second Circuit vacated the district
court’s dismissals and remanded the case to district court for
further proceedings. On July 23, 2020, the district court
denied the class plaintiffs’ motion for class certification, and
on December 16, 2020 the Second Circuit denied leave to
appeal the denial. On February 17, 2021, the district court
granted defendants’ motion for summary judgment with
respect to the claims of most of the individual plaintiffs.

208 Goldman Sachs 2020 Form 10-K

Group Inc., GS&Co., GSI, J. Aron & Company and Metro
are among the defendants
in an action filed on
February 27, 2020 in the High Court of Justice, Business
and Property Courts of England and Wales. The particulars
of claim seeks unspecified compensatory and exemplary
damages based on alleged violations of U.K. and E.U.
competition laws in connection with the storage and
trading of aluminum.

In connection with the sale of Metro, the firm agreed to
provide indemnities to the buyer,
including for any
potential
liabilities for legal or regulatory proceedings
arising out of the conduct of Metro’s business while the
firm owned it.

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.

Corporate Bonds Antitrust Litigation
Group Inc. and GS&Co. are among the dealers named as
defendants in a putative class action relating to the
secondary market for odd-lot corporate bonds, filed on
April 21, 2020 in the U.S. District Court for the Southern
District of New York. The amended consolidated
complaint, filed on October 29, 2020, asserts claims under
federal antitrust law in connection with alleged anti-
competitive conduct by the defendants in the secondary
market
for odd-lots of corporate bonds, and seeks
declaratory and injunctive relief, as well as unspecified
monetary damages, including treble and punitive damages
and restitution. Defendants moved to dismiss on
December 15, 2020.

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 March 26, 2020, the Magistrate
Judge in the district court granted in part a motion to
compel arbitration as to class members who are parties to
certain agreements with Group Inc. and/or GS&Co. in
which they agreed to arbitrate
employment-related
disputes. On April 16, 2020, plaintiffs submitted objections
to the Magistrate Judge’s order and defendants submitted
conditional objections in the event that the district judge
overturns any portion of the Magistrate Judge’s order.

various

governmental

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
and information from,
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

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;

investment management and financial

‰ 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,

‰ Credit cards, unsecured installment and residential
servicing and securitization, and

mortgage lending,
compliance with related consumer laws;

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
controls,
trading and
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 2020 Form 10-K 209

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 2020, other assets included $343 million (related
to overfunded pension plans) and other liabilities included
$478 million, related to these plans. As of December 2019,
other assets included $257 million (related to overfunded
pension plans) and other liabilities included $415 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 $261 million for 2020,
$254 million for 2019 and $240 million for 2018.

plans. The

contribution

defined

210 Goldman Sachs 2020 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 generally
charged to retained earnings. If RSUs that require future
service are forfeited,
the related dividend equivalents
originally charged to retained earnings are reclassified to
compensation expense in the period in which forfeiture
occurs.

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 2020, 55.5 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

subject

(net of

(including RSUs

common stock deliver

Restricted Stock Units
The firm grants RSUs
to
performance conditions) to employees, which are generally
valued based on the closing price of the underlying shares
on the date of grant after taking into account a liquidity
discount
for any applicable post-vesting and delivery
transfer restrictions. RSUs generally vest and underlying
shares 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, in certain cases, conflicted
employment. Delivery of the underlying shares of common
stock is conditioned on the grantees satisfying certain
vesting and other requirements outlined in the award
agreements. RSUs not subject to performance conditions
generally deliver over a three-year period. RSUs that are
subject to performance conditions generally deliver after
the end of a three-year performance period. For these
awards, based on performance, the final award is adjusted
from zero to 150% of the original grant. Dividends that
accrue during the performance period are paid at
settlement.

The table below presents the 2020 activity related to stock
settled RSUs.

Restricted Stock
Units Outstanding

Weighted Average
Grant-Date Fair Value of
Restricted Stock
Units Outstanding

Future
Service
Required

Beginning balance 4,513,476
3,527,884
Granted
(412,352)
Forfeited
Delivered
–
(3,637,660)
Vested
3,991,348
Ending balance

No Future
Service
Required

14,698,855
5,395,829
(217,114)
(8,292,011)
3,637,660
15,223,219

Future
Service
Required

$196.69
$218.17
$208.89
$
–
$204.57
$207.23

No Future
Service
Required

$191.25
$221.94
$198.33
$194.55
$204.57
$203.41

In the table above:
‰ The weighted average grant-date fair value of RSUs
granted was $220.45 during 2020, $177.42 during 2019
and $218.06 during 2018. The fair value of the RSUs
granted included a liquidity discount of 10.1% during
2020, 10.5% during 2019 and 11.9% during 2018, to
reflect post-vesting and delivery transfer restrictions,
generally of up to 4 years.

‰ The aggregate fair value of awards that vested was
$2.01 billion during 2020, $2.00 billion during 2019 and
$1.79 billion during 2018.

‰ The ending balance included restricted stock subject to
future service requirements of 72,369 shares as of
December 2020 and 23,068 shares as of December 2019.

‰ The

ending

balance

included RSUs

to
performance conditions and future service requirements
of 210,692 RSUs as of December 2020 and 224,898
RSUs as of December 2019, and represents the maximum
amount of such RSUs that may be earned as of
December 2020 and December 2019.

subject

‰ The ending balance also included RSUs subject

to
performance conditions but not subject to future service
requirements of 489,602 RSUs as of December 2020 and
268,433 RSUs as of December 2019, and the maximum
amount of such RSUs that may be earned was 734,403
RSUs as of December 2020 and 402,650 RSUs as of
December 2019.

In relation to 2020 year-end, during the first quarter of
2021, the firm granted to its employees 9.0 million RSUs, of
which 3.0 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 2026. These
grants are not included in the table above.

As of December 2020, there was $408 million of total
unrecognized compensation cost related to non-vested
share-based compensation arrangements. This cost
is
expected to be recognized over a weighted average period
of 1.69 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
stock option agreement and the SIP in effect at the time of
grant.

There were no options outstanding
as of both
December 2020 and December 2019. During 2020 and
2019, no options were exercised. The total intrinsic value of
options exercised was $288 million during 2018.

The table below presents the share-based compensation and
the related excess tax benefit.

$ in millions

Year Ended December

2020

2019

2018

$1,985
Share-based compensation
Excess net tax benefit for options exercised
–
$
Excess net tax benefit for share-based awards $ 120

$2,120
–
$
63
$

$1,850
$
64
$ 269

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 2020 Form 10-K 211

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

2020

2019

2018

Year Ended December

$ in millions

Revenues
Dividends from subsidiaries and other affiliates:
$

Bank
Nonbank

Other revenues
Total non-interest revenues
Interest income
Interest expense
Net interest loss
Total net revenues

40
11,860
774
12,674
4,020
5,861
(1,841)
10,833

63
4,199
335
4,597
7,575
8,545
(970)
3,627

102
16,368
(1,376)
15,094
6,617
8,114
(1,497)
13,597

Operating expenses
Compensation and benefits
Other expenses
Total operating expenses
Pre-tax earnings
Benefit for taxes
Undistributed earnings/(loss) of subsidiaries

and other affiliates

Net earnings
Preferred stock dividends
Net earnings applicable to common

367
3,339
3,706
7,127
(696)

1,636
9,459
544

331
1,365
1,696
1,931
(538)

5,997
8,466
569

299
1,192
1,491
12,106
(1,173)

(2,820)
10,459
599

shareholders

$ 8,915

$7,897

$ 9,860

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 $38 million for 2020, $60 million for 2019 and
$76 million for 2018.

‰ Dividends from nonbank subsidiaries and other affiliates
included cash dividends of $11.32 billion for 2020,
$4.18 billion for 2019 and $10.78 billion for 2018.

‰ Other

revenues

included $2.62 billion for 2020,

$1.29 billion for 2019 and $(1.69) billion for 2018.

‰ Interest

income

included $3.68 billion for 2020,

$7.26 billion for 2019 and $6.33 billion for 2018.

‰ Interest expense included $1.73 billion for 2020,

$3.15 billion for 2019 and $2.39 billion for 2018.

‰ Other

expenses

included $100 million for 2020,

$138 million for 2019 and $159 million for 2018.

Group Inc.’s other comprehensive income/(loss) was
$50 million for 2020, $(2.18) billion for 2019 and
$2.57 billion for 2018.

212 Goldman Sachs 2020 Form 10-K

As of December

2020

2019

26 $
–

33
7

Assets
Cash and cash equivalents:
With third-party banks
With subsidiary bank

Loans to and receivables from subsidiaries:

Bank
Nonbank (includes $7,242 and $6,460 at fair value)

357
239,483

2,398
239,241

Investments in subsidiaries and other affiliates:

Bank
Nonbank

Trading assets (at fair value)
Investments (includes $16,642 and $16,930 at fair value)
Other assets
Total assets

Liabilities and shareholders’ equity
Secured borrowings with subsidiaries
Payables to subsidiaries
Trading liabilities (at fair value)
Unsecured short-term borrowings:

With third parties (includes $1,723 and $4,751

at fair value)
With subsidiaries

Unsecured long-term borrowings:

With third parties (includes $11,145 and $15,611

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 loss
Stock held in treasury, at cost
Total shareholders’ equity
Total liabilities and shareholders’ equity

31,116
72,689
951
20,204
4,811

30,376
65,301
691
20,499
4,262
$369,637 $362,808

$ 35,228 $ 42,083
640
417

503
320

20,563
7,385

25,635
917

171,934
32,419
5,353
273,705

168,602
28,576
5,673
272,543

11,203
9
3,468
55,679
112,947
(1,434)
(85,940)
95,932

11,203
9
3,195
54,883
106,465
(1,484)
(84,006)
90,265
$369,637 $362,808

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 $843 million as of December 2020 and
$584 million as of December 2019.

derivative

included

Trading liabilities
included derivative contracts with
subsidiaries of $320 million as of December 2020 and
$365 million as of December 2019.

As of December 2020, unsecured long-term borrowings
with subsidiaries by maturity date are $30.97 billion in
2022, $241 million in 2023, $193 million in 2024,
$308 million in 2025 and $704 million in 2026-thereafter.

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:
Collateralized transactions (excluding

secured borrowings, net)

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)

Year Ended December

2020

2019

2018

$ 9,459 $ 8,466 $ 10,459

(1,636)
6
(160)
127

(5,997)
26
(210)
118

2,820
51
(2,817)
105

(1)

(20)

(160)

332
3,484
(97)
(1,492)
10,022

147
77
(1,431)
5,145
27
136
(1,208)
1,492
6,533 10,693

(26)

(34)

(63)

7,021
(32,472)
29,568
(3,767) (16,776)

2,079 10,829
(7,374) (30,336)
1,894 25,956
(3,141)

4,135

9,768

–

subsidiaries, net

(5,617)

(415)

1,807

Net cash provided by/(used for) investing

activities

(1,158) (10,858)

5,052

Cash flows from financing activities
Secured borrowings with subsidiary

(short-term), net

Unsecured short-term borrowings, net:

With third parties
With subsidiaries

(6,360) 26,398 (12,853)

(1,372)
12,603

(22)

(1,541)
4,649 11,855

Proceeds from issuance of unsecured long-term

borrowings

24,789

8,804 26,157

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

(33,432) (27,172) (32,429)
(35)
(650)
(3,294)

(11)
(350)
(1,928)

(206)
(1,100)
(5,335)

satisfaction of withholding tax requirements

(830)

(745)

(1,118)

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

Other financing, net
Net cash provided by/(used for) financing

(2,336)

(2,104)

(1,810)

349

1,098

–
–

–
(3)

–

38
–

activities

(8,878)

4,262 (15,680)

Net increase/(decrease) in cash and cash

equivalents

Cash and cash equivalents, beginning balance
Cash and cash equivalents, ending balance $

(14)
40
26 $

(63)
103

40 $

65
38
103

Supplemental Disclosures:
Cash payments for interest, net of capitalized interest, were
$5.92 billion for 2020, $9.53 billion for 2019 and
$9.83 billion for 2018, and included $1.90 billion for 2020,
$3.01 billion for 2019 and $3.05 billion for 2018 of
payments to subsidiaries.

Cash payments/(refunds)
for income taxes, net, were
$1.37 billion for 2020, $272 million for 2019 and
$(98) million for 2018.

Non-cash activities during the year ended December 2020:
‰ Group Inc. exchanged $11.2 million of Trust Preferred
for
securities
$12.5 million of certain of the Group Inc.’s junior
subordinated debt.

beneficial

common

interests

and

Non-cash activities during the year ended December 2019:
‰ Group Inc. acquired $8.50 billion of deposits with GS
for

Bank USA from Funding IHC in exchange
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 GSG UK and GSI,
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.

Goldman Sachs 2020 Form 10-K 213

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

Common Stock Performance

Statistical Disclosures

the

firm’s

The graph and table below compare the performance of an
investment
from
December 31, 2015 (the last trading day before the firm’s
2016 fiscal year) through December 31, 2020, 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-15

Dec-16

Dec-17

Dec-18

Dec-19

Dec-20

The Goldman Sachs Group, Inc.

S&P 500 Index

S&P 500 Financials Index

As of December

2015

2016

2017

2018

2019

2020

Group Inc.
$100.00 $134.91 $145.35 $ 96.63 $135.73 $159.45
$100.00 $111.95 $136.38 $130.39 $171.44 $202.96
S&P 500
S&P 500 Financials $100.00 $122.75 $149.93 $130.38 $172.21 $169.18

The graph and table above assume $100 was invested on
December 31, 2015 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

Distribution of Assets, Liabilities and Shareholders’
Equity
The tables below present
balances, interest and average interest rates.

information about average

$ in millions

Average Balance for the
Year Ended December

2020

2019

2018

55,662 $ 41,250 $ 65,888
49,161
71,312
52,773
126,974
90,411 118,661
138,447 156,769 161,783
114,974 123,069 140,411
253,421 279,838 302,194
204,118 157,266 127,771
118,642 118,086 105,105
322,760 275,352 232,876
32,619
38,419
56,167
12,729
15,100
17,156
45,348
53,519
73,323
77,884
84,416
94,115
9,246
13,839
18,867
87,130
98,255
112,982
41,854
39,961
57,149
42,292
36,768
45,672
102,821
84,146
76,729
992,281 874,104 870,355
11,380
10,998
85,846
86,137
$1,119,334 $971,239 $967,581

10,303
116,750

51,997

77,727
35,284
113,011
42,213
55,119
97,332
34,449
22,113
56,562

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
11,253
Preferred stock
73,985
Common stock
85,238
Total shareholders’ equity
Total liabilities and shareholders’ equity $1,119,334 $971,239 $967,581

$ 188,767 $131,937 $117,121
30,071
34,993
240,764 166,930 147,192
59,129
65,170
31,875
45,747
97,045 104,876
33,193
29,333
49,295
45,816
82,488
75,149
40,360
34,284
16,909
17,323
57,269
51,607
199,196 205,324 212,200
24,173
28,079
230,137 233,403 236,373
127,489 128,846 124,657
63,428
55,101
193,892 183,947 188,085
931,698 808,081 816,283
4,273
61,787
1,027,555 880,942 882,343

11,203
80,576
91,779

11,203
79,094
90,297

6,672
89,185

5,503
67,358

66,403

30,941

Percentage attributable to non-U.S. operations
Interest-earnings assets
Interest-bearing liabilities

38.96% 40.73% 41.67%
28.11% 26.38% 28.13%

214 Goldman Sachs 2020 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 millions

2020

2019

2018

Interest for the
Year Ended December

Average Rate for the
Year Ended December

2020

2019

2018

219
26
245
371
(89)
282
3,649
1,561
5,210
1,081
546
1,627
4,061
822
4,883
1,099
343
1,442
$13,689

$ 1,967
419
2,386
554
45
599
477
761
1,238
492
50
542
4,034
119
4,153
(148)
168
20
$ 8,938

$ 3,104
1,647
$ 4,751

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

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
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
Interest rate spread
U.S.
Non-U.S.
Net yield on interest-earning assets

0.39%
0.04%
0.19%
0.27%
(0.08)%
0.11%
1.79%
1.32%
1.61%
1.92%
3.18%
2.22%
4.31%
4.36%
4.32%
1.92%
0.75%
1.40%
1.38%

1.04%
0.81%
0.99%
0.71%
0.13%
0.53%
1.13%
1.38%
1.27%
1.43%
0.23%
0.96%
2.03%
0.38%
1.80%
(0.12)%
0.25%
0.01%
0.96%
0.42%
0.51%
0.43%
0.48%

2.23% 1.89%
0.60% 0.32%
1.34% 1.20%
2.50% 2.06%
0.38% 0.36%
1.57% 1.27%
2.30% 2.50%
1.93% 1.86%
2.14% 2.21%
2.53% 2.47%
3.21% 3.21%
2.72% 2.68%
5.51% 5.35%
5.46% 5.66%
5.51% 5.38%
5.79% 5.69%
2.86% 2.28%
4.38% 3.98%
2.49% 2.26%

2.35% 1.98%
1.34% 0.96%
2.14% 1.77%
3.64% 2.98%
0.89% 0.64%
2.74% 1.96%
1.59% 2.42%
1.63% 1.52%
1.61% 1.88%
1.87% 1.67%
0.15% 0.14%
1.29% 1.21%
2.55% 2.58%
0.45% 0.34%
2.30% 2.35%
3.14% 2.60%
(0.25)% 0.32%
2.13% 1.83%
2.15% 1.95%
0.34% 0.31%
0.10% 0.17%
1.07% 0.80%
0.50% 0.43%

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.

Goldman Sachs 2020 Form 10-K 215

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

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 2020
versus December 2019

Increase (decrease)
due to change in:

$ in millions

Volume

Rate

57
8
65
(49)
6
(43)
838
7
845
342
65
407
419
219
638
331
67
398
2,310

592
137
729
90
4
94
146
128
274
2
11
13
(124)
11
(113)
2
29
31
1,028
$1,282

(756)
(275)
(1,031)
(3,505)
(567)
(4,072)
(811)
(723)
(1,534)
(233)
(4)
(237)
(1,013)
(153)
(1,166)
(1,545)
(774)
(2,319)
(10,359)

(1,724)
(187)
(1,911)
(1,910)
(243)
(2,153)
(135)
(114)
(249)
(152)
13
(139)
(1,076)
(17)
(1,093)
(4,198)
277
(3,921)
(9,466)
(893)

Net
Change

$ (699)
(267)
(966)
(3,554)
(561)
(4,115)
27
(716)
(689)
109
61
170
(594)
66
(528)
(1,214)
(707)
(1,921)
(8,049)

(1,132)
(50)
(1,182)
(1,820)
(239)
(2,059)
11
14
25
(150)
24
(126)
(1,200)
(6)
(1,206)
(4,196)
306
(3,890)
(8,438)
389

216 Goldman Sachs 2020 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

Deposits
The table below presents information about
bearing deposits.

interest-

$ in millions

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

Year Ended December

2020

2019

2018

$125,264
63,503
188,767

$ 86,108
45,829
131,937

$ 76,428
40,693
117,121

34,838
17,159
51,997
$240,764

20,733
14,260
34,993
$166,930

9,579
20,492
30,071
$147,192

0.72%
1.68%
1.04%

0.79%
0.84%
0.81%
0.99%

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%

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 2020, deposits in U.S. offices included
$21.72 billion and non-U.S. offices included $12.57 billion
of time deposits that were greater than $100,000.

As of December 2020, deposits in U.S. offices included
$4.53 billion held by non-U.S. depositors.

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 2020

$ 8,093
6,023
5,317
2,282
$21,715

Short-Term and Other Borrowed Funds
The table below presents information about securities loaned
and repurchase agreements, and short-term borrowings.

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.

year-end for

‰ Amounts outstanding

short-term
borrowings included short-term secured financings of
$13.22 billion as of December 2020, $7.32 billion as of
December 2019 and $9.56 billion as of December 2018.
‰ 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

2020

2019

2018

2017

2016

As of December

Corporate
Wealth management
Commercial real estate
Residential real estate
Consumer:

Installment
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

$ 37,322 $ 37,161 $37,518 $32,616 $28,889
24,783 22,649 21,591 19,225
3,604
12,836 11,052
4,305
7,820

29,000
15,374
5,131

8,239
7,299

6,290

4,747
1,858
4,186

1,912
–
5,014

4,536
–
4,461

3,823
4,270
3,443
98,363
11,337
4,023
4,916
619
731
21,626

208
–
3,428
91,861 88,036 76,671 59,659
2,529
1,442
2,805
556
21
7,353
119,989 110,345 98,903 86,240 67,012

4,857
2,119
3,126
481
284
18,484 10,867

3,686
2,102
3,149
600
32
9,569

9,146
3,157
4,907
668
606

3,038
836
3,874

476
33
509
$116,115 $108,904 $97,837 $85,437 $66,503

1,146
295
1,441

848
218
1,066

604
199
803

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

2020

2019

2018

$ in millions

2020

2019

2018

2017

2016

As of December

Securities loaned and securities sold under agreements to repurchase
$148,192 $132,741 $ 90,531
Amounts outstanding at year-end
$113,011 $ 97,045 $104,876
Average outstanding during the year
Maximum month-end outstanding
$148,192 $132,741 $123,805
Weighted average interest rate
During the year
At year-end
Short-term borrowings
Amounts outstanding at year-end
Average outstanding during the year
Maximum month-end outstanding
Weighted average interest rate
During the year
At year-end

$ 66,088 $ 55,611 $ 50,057
$ 56,562 $ 51,607 $ 57,269
$ 66,088 $ 57,209 $ 63,743

0.53%
(0.14)%

1.29%
1.24%

1.21%
1.30%

2.74%
1.61%

1.96%
3.31%

0.96%
0.83%

Allowance for loan losses
Beginning balance
Impact of CECL adoption
Net charge-offs
Provision for loan losses
Other
Ending balance

727
(907)
2,853
(240)

$1,441 $1,066 $ 803 $509 $414
–
(8)
138
(35)
$3,874 $1,441 $1,066 $803 $509

–
(203)
574
(77)

–
(337)
654
(54)

–
(490)
990
(125)

Goldman Sachs 2020 Form 10-K 217

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 2020, 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 2020 were primarily related to corporate
loans 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:

Installment
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 2020

Less
than
1 year

1 - 5
years

Greater
than 5
years

Total

$ 4,058 $29,591 $ 3,673 $ 37,322
29,000
15,374
5,131

3,775
12,443
3,453

17,374
2,146
865

7,851
785
813

3,613
–
2,258
55,133
6,832
65
2,329
448
692
10,366

208
4,270
354
29,275
868
3,958
1,606
80
39
6,551

2
–
831
13,955
3,637
–
981
91
–
4,709

3,823
4,270
3,443
98,363
11,337
4,023
4,916
619
731
21,626
$35,826 $65,499 $18,664 $119,989
4,973
$
115,016
$35,826 $65,499 $18,664 $119,989

722 $ 3,987 $

18,400

61,512

35,104

264 $

events,

to country-specific

Cross-border Outstandings
Cross-border outstandings are based on the Federal Financial
Institutions Examination Council’s (FFIEC) guidelines for
reporting cross-border information and represent the amounts
that the firm may not be able to obtain from a foreign country
due
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.

218 Goldman Sachs 2020 Form 10-K

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 2020

Cayman Islands $
Japan
Canada
France
China
Ireland
U.K.
South Korea
Taiwan
Germany

7
$7,106
$4,380
$1,197
$2,608
$ 416
$2,511
$ 478
$ 532
$1,525

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
$

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

$
1 $62,427 $62,435
$21,795 $ 5,962 $34,863
$
158 $14,440 $18,978
$ 1,787 $15,219 $18,203
153 $14,730 $17,491
$
15 $12,831 $13,262
$
$
6 $ 8,173 $10,690
$ 1,549 $ 8,273 $10,300
$ 1,981 $ 7,510 $10,023
$ 1,128 $ 6,338 $ 8,991

$
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
$

$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

$ 7,001
$16,384
$ 1,992
$18,618
374
$
$ 1,501
$13,026
–
$
$
–
$ 7,476

$ 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
$

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

extend

credit

and

to
commitments.

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, 2020
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

to shares of

On February 16, 2021, Group Inc. filed a Certificate of
Elimination with the Secretary of State of the State of
Delaware which, upon filing, had the effect of eliminating
from its Restated Certificate of Incorporation all matters set
forth therein with respect
its 5.375%
Fixed-To-Floating Rate Non-Cumulative Preferred Stock,
Series M, which had previously been redeemed in full. A
copy of
the Certificate of Elimination is attached as
Exhibit 3.3 to this Form 10-K and incorporated by
reference herein. A Restated Certificate of Incorporation
reflecting these changes was filed with the Secretary of State
of the State of Delaware on February 16, 2021, and a copy
is included as Exhibit 3.1 to this Form 10-K.

PART III
Item 10. Directors, Executive Officers
and Corporate Governance

this Form 10-K.

Information about our executive officers is included on
page 23 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 2021 Annual Meeting of Shareholders, which will
be filed within 120 days of the end of 2020 (2021 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 2021 Proxy Statement and is
incorporated in this Form 10-K by reference.

Goldman Sachs 2020 Form 10-K 219

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 2021 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 2021
Proxy Statement and is incorporated in this Form 10-K by
reference.

table

below presents

The
of
December 31, 2020 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 2020.

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)

19,386,999
–
19,386,999

N/A
–

55,515,851
–
55,515,851

Plan Category

Equity compensation plans:
Approved by security holders
Not approved by security holders

Total

In the table above:
‰ Securities to be Issued Upon Exercise of Outstanding
Options and Rights includes 19,386,999 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, 2020, 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.

220 Goldman Sachs 2020 Form 10-K

Item 14. Principal Accountant Fees
and Services

Information regarding principal accountant
fees and
services will be in the 2021 Proxy Statement and is
incorporated in this Form 10-K by reference.

PART IV
Item 15.
Statement Schedules

Exhibit

and

Financial

(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
February 16, 2021 (incorporated by reference
to Exhibit 4.2 to the Registrant’s Post-Effective
Amendment No. 1 to Form S-3,
filed on
February 18, 2021).

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).

5.375%
Elimination
Certificate
Fixed-To-Floating
Non-Cumulative
Rate
Preferred Stock, Series M, of The Goldman
Sachs Group, Inc.

4.1 Description of The Goldman Sachs Group,
Inc.’s
to
Section 12 of the Securities Exchange Act of
1934.

registered

Securities

pursuant

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

Senior Debt Indenture, dated as of 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).

Indenture, dated as of
Fourth Supplemental
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
issuer, The Goldman Sachs Group,
Inc., as
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).

4.9

Indenture, dated as of
First Supplemental
February 20, 2015, among GS Finance Corp.,
as issuer, The Goldman Sachs Group, Inc., as
guarantor, and The Bank of New York Mellon,
to the Senior Debt
as trustee, with respect
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).

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).

4.13 Eighth Supplemental

Indenture, dated as of
October 14, 2020, 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 Current Report on Form 8-K, filed on
October 14, 2020).

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

Goldman Sachs 2020 Form 10-K 221

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 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

10.12 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

10.13 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). †

10.14 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

10.15 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

10.16 Ground Lease, dated August 23, 2005, between
Battery Park City Authority d/b/a/ Hugh L.
as
Carey Battery
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,

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

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

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
Restricted
Plan
(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)). †

and

Restated

Amended
Shareholders’
Agreement, effective as of December 31, 2019,
among The Goldman Sachs Group, Inc. and
various parties (incorporated by reference to
Exhibit 10.6 to the Registrant’s Annual Report
on Form 10-K for
the fiscal year ended
December 31, 2019).

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).

222 Goldman Sachs 2020 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

10.17 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).

10.18 Goldman Sachs & Co. LLC Executive Life
Certificate with
and
Policy
Insurance
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). †

10.19 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

10.20 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,

10.21 Description of PMD Retiree Medical Program. †

10.22 Letter, dated June 28, 2008,

from The
Goldman Sachs Group, Inc. to Mr. Lakshmi N.
to
Mittal
Exhibit 99.1 to the Registrant’s Current Report
on Form 8-K, filed on June 30, 2008). †

(incorporated

reference

10.23 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).

10.24 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

10.25 Amendments to Certain Non-Employee Director
Equity Award 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). †

vested)

10.26 Form of Year-End RSU Award Agreement (not
(incorporated by
fully
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)

10.27 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). †

10.28 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). †

10.29 Form of Year-End Restricted Stock Award
Agreement (fully vested) (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). †

(Base

10.30 Form of Year-End Restricted Stock Award
Supplemental)
Agreement
(pre-2015)
to
reference
Exhibit 10.41 to the Registrant’s Annual Report
ended
on Form 10-K for
December 31, 2014). †

(incorporated

fiscal year

and/or

the

10.31 Form of Fixed Allowance RSU Award Agreement
to
(incorporated
(pre-2015)
Exhibit 10.43 to the Registrant’s Annual Report
on Form 10-K for
ended
December 31, 2014). †

fiscal year

reference

the

10.32 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). †

Goldman Sachs 2020 Form 10-K 223

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

10.33 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). †

10.34 Form of Performance-Based Restricted Stock
Unit Award Agreement (pre-2015) (incorporated
by reference to Exhibit 10.2 to the Registrant’s
filed on
Current Report on Form 8-K,
December 23, 2010). †

10.35 Form of Performance-Based Option Award
to
(incorporated
Agreement
Exhibit 10.3 to the Registrant’s Current Report
on Form 8-K, filed on December 23, 2010). †

reference

10.43 Form of Year-End RSU Award Agreement (fully

vested). †

10.44 Form of Year-End RSU Award Agreement (Base
(not fully vested) and/or Supplemental). †

10.45 Form of Year-End Short-Term RSU Award

Agreement. †

10.46 Form of Year-End Restricted Stock Award

Agreement (not fully vested). †

10.47 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). †

10.36 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). †

10.48 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). †

10.37 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 the
Registrant’s Current Report on Form 8-K, filed
on November 21, 2011).

10.38 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). †

10.39 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

10.40 Form of Non-Employee Director RSU Award

Agreement. †

10.41 Form of One-Time RSU Award Agreement. †

10.42 Form of Year-End RSU Award Agreement (not

fully vested). †

224 Goldman Sachs 2020 Form 10-K

10.49 Form of

Fixed Allowance RSU Award

Agreement. †

10.50 Form of Fixed Allowance Restricted Stock

Award Agreement. †

10.51 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

10.52 Form of Performance-Based Restricted Stock
Unit Award Agreement (fully vested). †

10.53 Form of Performance-Based Restricted Stock

Unit Award Agreement (not fully vested). †

10.54 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

10.55 Form of Signature Card for Equity Awards. †

10.56 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 the
Registrant’s Current Report on Form 8-K, filed
on September 28, 2018).

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

10.57 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).

101

Limited

Partners
(Nominee) Limited,

10.58 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

22.1

23.1

List of significant subsidiaries of The Goldman
Sachs Group, Inc.

Issuers of guaranteed securities (incorporated
by reference to Exhibit 22.1 to the Registrant’s
Post-Effective Amendment No. 1 to Form S-3,
filed on February 18, 2021).

Consent of
Accounting Firm.

Independent Registered Public

31.1

Rule 13a-14(a) Certifications.

32.1

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).

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
2020,
ended December
the
December 31, 2019 and December 31, 2018,
Statements
(ii)
of
Comprehensive Income for
the years ended
December 31, 2020, December 31, 2019 and
December 31, 2018,
the Consolidated
Balance Sheets as of December 31, 2020 and
December 31, 2019,
the Consolidated
Statements of Changes in Shareholders’ Equity for
the
2020,
ended December
December 31, 2019 and December 31, 2018,
(v) the Consolidated Statements of Cash Flows for
2020,
ended December
the
December 31, 2019 and December 31, 2018,
(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 2020 Form 10-K 225

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 19, 2021

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 19, 2021

/s/ M. Michele Burns
M. Michele Burns
Director
February 19, 2021

/s/ Drew G. Faust
Drew G. Faust
Director
February 19, 2021

/s/ Mark A. Flaherty
Mark A. Flaherty
Director
February 19, 2021

/s/ Ellen J. Kullman
Ellen J. Kullman
Director
February 19, 2021

By:
Name:
Capacity:
Date:

By:
Name:
Capacity:

Date:

By:
Name:
Capacity:

Date:

/s/ Lakshmi N. Mittal
Lakshmi N. Mittal
Director
February 19, 2021

/s/ Adebayo O. Ogunlesi
Adebayo O. Ogunlesi
Director
February 19, 2021

/s/ Peter Oppenheimer
Peter Oppenheimer
Director
February 19, 2021

/s/

Jan E. Tighe
Jan E. Tighe
Director
February 19, 2021

/s/ David A. Viniar
David A. Viniar
Director
February 19, 2021

/s/ Mark O. Winkelman
Mark O. Winkelman
Director
February 19, 2021

/s/

Stephen M. Scherr
Stephen M. Scherr
Chief Financial Officer
(Principal Financial Officer)
February 19, 2021

Sheara Fredman
Sheara Fredman
Chief Accounting Officer
(Principal Accounting Officer)
February 19, 2021

226 Goldman Sachs 2020 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.

2020 Annual Report on Form 10-K

Copies of the firm’s 2020 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
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