2015

ANNUAL REPORT
THE GOLDMAN SACHS GROUP, INC.
The Goldman Sachs Business Principles

Our clients interests We make an unusual effort to We constantly strive to anticipate

always come first. identify and recruit the very best the rapidly changing needs of our
Our experience shows that if we person for every job. clients and to develop new services
serve our clients well, our own Although our activities are measured in to meet those needs.
success will follow. billions of dollars, we select our people We know that the world of finance will
one by one. In a service business, not stand still and that complacency
Our assets are our people,
we know that without the best people, can lead to extinction.
capital and reputation.
we cannot be the best firm.
If any of these is ever diminished, the We regularly receive confidential
last is the most difficult to restore. We We offer our people the opportunity information as part of our normal
are dedicated to complying fully with to move ahead more rapidly than is client relationships.
the letter and spirit of the laws, rules possible at most other places. To breach a confidence or to use
and ethical principles that govern us. Advancement depends on merit and confidential information improperly or
Our continued success depends upon we have yet to find the limits to the carelessly would be unthinkable.
unswerving adherence to this standard. responsibility our best people are able
Our business is highly competitive,
to assume. For us to be successful,
Our goal is to provide superior and we aggressively seek to expand
our men and women must reflect the
returns to our shareholders. our client relationships.
diversity of the communities and cultures
Profitability is critical to achieving However, we must always be fair
in which we operate. That means
superior returns, building our capital, competitors and must never denigrate
we must attract, retain and motivate
and attracting and keeping our best other firms.
people from many backgrounds and
people. Significant employee stock
perspectives. Being diverse is Integrity and honesty are
ownership aligns the interests of our
not optional; it is what we must be. at the heart of our business.
employees and our shareholders.
We expect our people to maintain high
We stress teamwork
We take great pride in the ethical standards in everything they do,
in everything we do.
professional quality of our work. both in their work for the firm and in
While individual creativity is always
We have an uncompromising their personal lives.
encouraged, we have found that team
determination to achieve excellence
effort often produces the best results.
in everything we undertake. Though
We have no room for those who put their
we may be involved in a wide variety
personal interests ahead of the interests
and heavy volume of activity, we
of the firm and its clients.
would, if it came to a choice, rather
be best than biggest. The dedication of our people to
the firm and the intense effort
We stress creativity and
they give their jobs are greater
imagination in everything we do.
than one finds in most other
While recognizing that the old way may
organizations.
still be the best way, we constantly
We think that this is an important
strive to find a better solution to a
part of our success.
clients problems. We pride ourselves
on having pioneered many of the We consider our size an asset
practices and techniques that have that we try hard to preserve.
become standard in the industry. 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.
 Fellow Shareholders:

A s many of you know first hand, 2015 was a tale of two

halves: the first half of the year featured a strong operating
environment, but headwinds emerged, particularly during the
second half, and these headwinds persisted into early 2016.
The first two quarters of 2015 were marked by heightened demand from our
corporate clients for strategic advice and financings, strong client activity across
our Equities franchise and growing demand from our Investment Management
clients for our products and services. These factors culminated in record first-half
results in Investment Banking and Investment Management, as well as the best
first-half performance for Equities in six years.
As the year progressed, increasing concerns about China, under which we will pay a $2.39 billion civil monetary
the first rate hike from the U.S. Federal Reserve in nearly penalty, make $875 million in cash payments and provide
a decade, slowing global growth and falling commodity $1.80 billion in consumer relief.
prices especially in oil began to emerge. We faced
Despite these factors, our strong and diversified client
these headwinds, and lower client activity across many
franchise allowed us to produce relatively stable net
of our businesses suggested that our clients and peers
revenues in 2015. The firm generated net revenues of
also faced their share of challenges.
$33.82 billion, marking our fourth consecutive year of
In addition to the impact of the operating environment, roughly $34 billion in net revenues. Net earnings were
our 2015 financial performance was negatively affected $6.08 billion and diluted earnings per common share
by the resolution of our most significant outstanding legal were $12.14. Return on average common shareholders
exposure relating to our securitization, underwriting and equity (ROE) was 7.4 percent for 2015, which would
sale of residential mortgage-backed securities (RMBS) have been 3.8 percentage points higher excluding the
from 2005 to 2007. In January 2016, we announced an provisions we recorded during the year related to the
agreement in principle with the RMBS Working Group,* RMBS Working Group settlement.

* On January 14, 2016, the firm announced an agreement in principle, subject to the negotiation of definitive documentation, to resolve the ongoing investigation of the Residential Mortgage-Backed
Securities Working Group of the U.S. Financial Fraud Enforcement Task Force (RMBS Working Group). The agreement in principle will resolve actual and potential civil claims by the U.S. Department of
Justice, the New York and Illinois Attorneys General, the National Credit Union Administration (as conservator for several failed credit unions) and the Federal Home Loan Banks of Chicago and Seattle,
relating to the firms securitization, underwriting and sale of residential mortgage-backed securities from 2005 to 2007. For additional information, see the firms Form 8-K filed with the U.S. Securities
and Exchange Commission on January 14, 2016.

Goldman Sachs 2015 Annual Report 1

Letter to Shareholders

Lloyd C. Blankfein
Chairman and
Chief Executive Officer
(right)

Gary D. Cohn
President and
Chief Operating Officer
(left)

In this years letter to our shareholders, we cover a long term, our focus continues to be on managing to
wide array of topics, including an overview of our both the structural and cyclical forces we see at play,
financial profile, a review of our strong and diverse while remaining flexible enough to capture future
client franchise, as well as our thoughts on the forward growth opportunities.
outlook, particularly how we are thinking about
Our efforts in this regard have yielded solid results. Over
navigating these uncertain times.
the past four years, we have diversified our franchise
while holding net revenues steady. We have increased our
Financial Profile capital and liquidity, decreased our risk, and have stayed
As we manage our financial profile, our strategy is focused on efficiently and prudently managing our
predicated on carefully delineating between structural resources all while helping our clients to execute their
and cyclical factors affecting our businesses. Accordingly, long-term goals and strategic objectives. Over the same
in 2015, we continued to adjust our franchise to address four-year period, we returned approximately $25 billion
structural changes in the regulatory environment, and in capital to our shareholders, increased dividends per
we will continue to do so as needed. From a cyclical common share by 44 percent and reduced our basic
perspective, it certainly feels like the cycle has been share count by 14 percent.
prolonged, particularly as interest rates in many parts In response to structural changes resulting from new
of the world remain at or even below zero, and regulations, since the end of 2007, we have reduced
growth and deflation concerns, among other worries, our balance sheet by approximately one-quarter, while
have persisted. nearly doubling common shareholders equity cutting
It is important to remember that cycles do turn, even if gross leverage by more than 60 percent and tripling
the timing of such inflections may be difficult to predict. our liquidity position to almost $200 billion. These
As we look to deliver value to our shareholders over the measures have strengthened our long-term financial
safety and soundness.

2 Goldman Sachs 2015 Annual Report

Also as a result of structural changes, we have embraced while ensuring we meet the needs of our clients. Whether
opportunities to sell businesses and investments that were we are adjusting to structural or cyclical dynamics, we
not core to our client franchise and were no longer the will carefully balance our expense management efforts
best use of shareholder capital relative to the returns. against our ability to capture future market share and
The loss in net revenues due to these sales has been offset growth opportunities.
by growth in our Investment Banking and Investment
Management businesses. Last year, these two businesses Investment Banking
accounted for 39 percent of our net revenues, compared
Our leading Investment Banking franchise allowed us to
to only 30 percent in 2012. Investment Banking was
capture significant market share in 2015. The business
approximately one-half the size of Fixed Income,
achieved its second-highest net revenues in 2015, driven
Currency and Commodities Client Execution (FICC) four
by a strong environment for mergers and acquisitions
years ago; today, our business mix is more balanced.
(M&A). Industry-wide volumes for announced M&A
This does not mean we are moving away from FICC. transactions increased by more than 45 percent in 2015,
Rather, we remain committed to meeting the needs of while the firms volumes increased by approximately
our clients, while managing to structural and cyclical 80 percent. We ended the year ranked first in global
headwinds. For example, we have reduced risk-weighted announced and completed M&A, with completed
assets within FICC significantly over the past four years, M&A volumes that were more than $350 billion higher
largely in response to structural changes resulting from than our next-closest competitor a record gap since
new regulations. the firm went public.
On the cost side, we have continued to find ways to By most measures, 2015 was a robust year for
improve our operating efficiency. Headcount across M&A. However, volumes as a percentage of market
the firm is up 11 percent over the last four years, largely capitalization are still below prior-cycle peak levels.
to meet regulatory compliance needs. However, through We see this as a sign that there is still some room to run
a combination of shifting to a greater percentage of for M&A activity, particularly when equity markets
junior employees and relocating some of our footprint show signs of sustained stabilization. We also see
to lower-cost locations, we have managed our consolidation opportunities in sectors such as industrials,
expenses well. energy, mining, food, media and telecommunications.
More specifically, we have increased the number of While total underwriting revenues declined in 2015,
analysts, associates and vice presidents at the firm by we performed relatively well in the context of softer
17 percent since the beginning of 2012, while our partner equity and debt markets in the second half of the year.
and managing director populations have decreased by We finished 2015 ranked first in global equity and
two percent. Approximately 25 percent of our total staff equity-related and common stock offerings. Similar to
is now in lower-cost locations such as Salt Lake City, the dynamics we see in the M&A market, we believe
Dallas, Irving, Warsaw, Singapore and Bengaluru. As there may be pent-up demand among our corporate
a result, while total staff levels are up over the four-year clients to tap into public equity markets when conditions
period, overall compensation and benefits expenses improve, particularly given that private financing
have declined by approximately $270 million. conditions have generally tightened. A decline in debt
Looking ahead, we will continue to pursue ways to be underwriting net revenues in 2015 was largely due to
more cost effective by assessing our expense structure a drop in leveraged finance activity.

Goldman Sachs 2015 Annual Report 3

Letter to Shareholders

Institutional Client Services Investing & Lending

In the wake of balance sheet restructurings in the Our Investing & Lending business enhances and expands
U.S. and elsewhere, we remain one of the few financial our client relationships. It creates synergies for our
institutions with leading global franchises in both FICC broader client franchise because it enables us to extend
and Equities. We view this as critical to the long-term credit or to invest alongside our clients. From a broader
success of our Institutional Client Services business. perspective, by participating in Investing & Lending in
We expect our ability to offer our clients a broad suite a disciplined manner, we engage in the capital allocation
of services to be a key competitive advantage in the process, which allows corporates and individuals to put
years ahead. capital to work to generate broader economic growth.

Over the course of 2015, within FICC, lower levels Over the past several years, the composition of Investing
of client activity in credit and mortgage products were & Lending has changed significantly. Since the beginning
partly offset by stronger client activity and a more of 2012, we have seen lending increase threefold,
favorable backdrop for macro products, particularly primarily to private wealth management and corporate
in interest rates and currencies. clients. Our corporate loan portfolio is well diversified,
with no one sector representing more than one-quarter
Equities benefitted from a better market environment,
of the portfolio. Our private equity portfolio similarly
posting solid results for the year. Clients continued to
reflects the diversity of our global client franchise,
place significant value on the integration of our various
comprising more than 800 different investments globally
services across Equities electronic, cash, derivatives
across a broad spectrum of industries. In some cases, we
and prime brokerage as well as our global footprint,
invest in private companies alongside our clients. In other
all of which was reflected in our performance in
cases, we invest in public equity or in real estate, or we
these areas.
deploy capital to seed new funds.
Moving forward, addressing structural changes in our
While the nature of our investing may change over time
Institutional Client Services businesses, such as risk-
due to regulatory changes, and net revenues can fluctuate
based capital rules, will remain a central focus for our
from quarter to quarter based on price movements, we
management team. At the same time, we will look for
evaluate the performance of our Investing & Lending
ways to advance our franchise in the evolving landscape.
portfolio over many years. On that basis, these activities
Competitor retrenchments in the wake of structural
have been strong contributors to returns over the last
developments should provide an opportunity for us to
four years.
capture market share over the longer term.

As it pertains to cyclical trends in Institutional Client

Investment Management
Services, we continue to carefully scale our business
relative to the environment, but have also chosen to Our Investment Management business is one of only
remain targeted in our efforts. Our business is highly a few such franchises globally that can meet the needs
correlated to economic growth, and when a better of a broad spectrum of clients across many products and
opportunity set eventually presents itself and it regions. We serve investors of all types, including retirees
will our strong, deep and broad client franchise in need of mutual funds, entrepreneurs who have sold
should position us well to respond. their companies and pension fund managers who need
help with asset allocation. With this in mind, we built

4 Goldman Sachs 2015 Annual Report

our business to be global, broad and deep, and to focus to evaluate targeted strategic acquisition opportunities
on delivering consistent returns over time. We believe as they arise.
that our emphasis on providing the best possible advice,
products and services will help us outperform the Impact Investing
industry over time.
Our firm is committed to fostering meaningful change
Executing on this strategy, we have experienced in the global economy, and in the communities in which
significant growth in our business over the past several we live and work, both through our core businesses, and
years. We ended 2015 with a record $1.25 trillion in by engaging in other activities that leverage our expertise
assets under supervision, up from $895 billion at the to promote economic progress. This means, among other
start of 2012. This growth has been the direct result things, helping new enterprises succeed and grow by
of robust net inflows, driven in part from market share investing in entrepreneurs, and helping to finance
gains, as clients place increasing value on asset managers different types of projects across the globe, such as those
like us that offer a broad array of products and services. that can improve living standards within traditionally
In 2015, our $53 billion in organic, long-term net inflows underserved communities. It also means being mindful
outperformed our largest active management peers. of the environments importance, not only to society as
In some areas of asset management, we are still small a whole, but also to economic growth, and driving that
relative to the market leader. As we look ahead, this core belief through our work with our clients and within
means we see opportunity to grow substantially both the management of our own operations.
by continuing to gain market share in our incumbent
businesses and by expanding into new ones.
Urban Investment Group
Our growth in assets under supervision has also come We have a long history of innovative impact investing
from new products and several strategic acquisitions. through our Urban Investment Group (UIG). Since
We have launched a handful of new products that 2001, UIG has committed more than $4.9billion to
have added more than $50 billion to our assets under underserved U.S. communities, facilitating the creation
supervision over the past four years. Our Active Beta, and preservation of over 20,000 housing units the
Unconstrained Fixed Income and Income Oriented majority of which are affordable for low- to middle-
Strategies funds, for example, offer our clients compelling income families as well as more than 1.9million
new opportunities. square feet of community space and over 6million
square feet of commercial, retail and industrial facilities.
Whats more, eight acquisitions since the beginning
We work with local stakeholders from the nonprofit,
of 2012 have driven more than $70 billion in inflows.
for-profit and public sectors, focusing on community
These acquisitions have added important new capabilities,
and economic development. We have also been a pioneer
filled gaps in our asset management offering and added
in the creation of social impact bonds, which are
scale to our current business. For example, in 2015,
financial instruments that leverage private investments
we acquired Imprint Capital Advisors, a dedicated
to support high-impact social programs. In fact, we
environmental, social and governance investment
were involved in four of the eight social impact bond
advisor, strengthening our ability to help our clients
financings that have been launched in the U.S.
address these considerations in their portfolios.
Looking to build upon these efforts, we will continue

Goldman Sachs 2015 Annual Report 5

Letter to Shareholders

Environmental Impact 2015, President Obama announced a $100 million

We were among the first global financial institutions commitment by the Overseas Private Investment
to acknowledge the scale and urgency of the challenges Corporation, demonstrating how the facility is catalyzing
posed by climate change when we established our new investments from both the public and private sectors
Environmental Policy Framework in 2005. A decade in women-owned enterprises globally.
later, we have continued to build on our commitment
to environmental stewardship, making it a part of our 10,000 Small Businesses
core mission to deploy financial solutions and drive Designed to help small businesses grow and create jobs
market opportunities that help to address climate change. by providing entrepreneurs with a practical business
Specifically, to facilitate the transition to a low-carbon education and access to capital, 10,000 Small Businesses
economy, last year we updated our Environmental Policy has served more than 6,000 small business owners at
Framework to include an increased target of $150 billion 30 sites across the U.S. and the U.K. This includes our
in clean energy financings and investments by 2025, up commitment of more than $180 million to 28 capital
from an earlier target of $40 billion. Finally, we continue partners that have lent over $120 million to date,
to be mindful of our own operational impact on the resulting in more than 750 loans to small businesses.
environment, pledging to be carbon neutral from The program has maintained a 99 percent graduation
2015 onwards and to target 100 percent renewable rate, with more than 75 percent of surveyed participants
power to meet our global electricity needs by 2020. increasing their revenues, and nearly 60 percent
generating new jobs within 18 months of graduation.
10,000 Women
Since its launch, this initiative has provided more Focus on Technology
than 10,000 women from across 56 countries
Technology underpins everything we do. In fact,
including Afghanistan, Egypt, Rwanda, Brazil, India
approximately one quarter of our total staff works in
and China with business and management education,
technology, which demonstrates just how critical it has
mentoring and networking, and access to capital. After
become to our strategy in several ways.
completing the program, nearly 70 percent of surveyed
graduates have increased their revenue, 60 percent have First and foremost, technology enhances the overall
added new jobs and most have doubled the size of their experience and quality of service we are able to
workforces. Whats also encouraging is the multiplier provide to our clients. It allows us to execute transactions
effect: 90 percent of our graduates have paid it more quickly and seamlessly, to provide better market
forward by mentoring and teaching business skills analytics, data and other information, and to
to other women in their communities. communicate faster and more efficiently.

In 2014, The Goldman Sachs Foundation and Second, technology helps us to operate more efficiently
International Finance Corporation, a member of the as a firm. For example, relying more on open source and
World Bank Group, launched the first-ever global finance cloud strategies has helped us reduce vendor expenses
facility dedicated exclusively to women-owned small- for our workplace application infrastructure products
and medium-sized enterprises. To date, the facility has and market data sources.
made more than $400 million in commitments to banks Third, technology helps us meet new regulatory
in 14 countries, enabling women from Kenya to China requirements, such as Dodd-Frank implementation and
to Laos to access capital and grow their businesses. In Basel III provisions. We have hired more technology

6 Goldman Sachs 2015 Annual Report

staff to build and adapt software and to automate such client service, teamwork and excellence sets us
processes, which would have otherwise been highly apart in this regard, and we find that people come
manual and substantially more time intensive. Once to Goldman Sachs because the nature of our work is
we have fully embedded technology solutions for our fundamentally consequential to the world around them.
regulatory needs, we should be able to reduce or redirect By helping to allocate capital, manage risk and provide
resources to support other areas of our firm. products, services and advice to a broad array of clients,
Goldman Sachs plays a vital role in the economy
Finally, the technology we create or develop inside of
across industries and regions, something that is
Goldman Sachs can be a stand-alone product. We have
inherently appealing to people who want to affect
a successful track record in this regard, with Tradeweb,
positive outcomes.
DirectEdge and Markit as examples of platforms we
developed or participated in creating, and then monetized. With this in mind, we are proud that we were once
Today, new platforms such as Symphony and Marquee again recognized as an employer of choice across
are helping our clients communicate, manage risk and a wide variety of metrics on Fortune magazines
better analyze their investments. Symphony is an 100 Best Companies to Work For and Most
independent company built around core technology Admired Companies. We were also pleased to again
developed and contributed by Goldman Sachs. For be named as one of Working Mother magazines
Marquee, we built a common application development 100 Best Companies and Best Companies for
platform, allowing our businesses to create sophisticated Multicultural Women.
tools that deliver cutting-edge capabilities to our
Attracting and retaining the highest-caliber talent also
institutional investing clients.
means that we must invest in our people early on in
their careers the best of whom will become the next
Our People generation of leadership at the firm. Building off the
In a rapidly evolving and highly competitive industry learnings of our biennial People Survey, last year we
like ours, technology is clearly a critical differentiator. unveiled a set of new initiatives designed to support
Yet the quality of our talent remains a vital competitive junior employees, giving them more flexibility and
advantage for us if not the vital competitive advantage greater exposure to our client franchise. In 2015, we
we maintain. also selected our newest class of managing directors.
In addition to hailing from more than 40 countries,
Ours is a business of relationships. This is the case
40 percent of the class of 2015 started at the firm as
not only in our work with clients, but also here within
analysts, a testament to our emphasis on talent
the firm. To that end, Goldman Sachs goes to great
development and retention for the long haul.
lengths to employ the best people with a wide range
of experience and backgrounds. In 2015, we extended
offers to 4 percent of applicants for open positions, Looking Ahead
and more than 80 percent of those offered roles chose As we look ahead, the question that is top of mind not
to join the firm. only to our clients, but also to Goldman Sachs, is: how
do we think about navigating these uncertain times?
As we compete for talent not only with other financial
firms, but also across other industries, particularly in Since the second half of 2015, concerns about global
technology, we strive to remain a place where top talent economic growth, investor sentiment, and regulatory
aspires to work. We believe our time-tested culture of and monetary policy in tandem with other

Goldman Sachs 2015 Annual Report 7

Letter to Shareholders

macroeconomic and geopolitical dynamics have see room for continued fiscal policy expansion in
made for pervasive uncertainty. Slowing growth in China, some economies, and options for monetary policy if
a presidential election in the U.S., a referendum in the meaningful growth proves elusive.
U.K. about its future in the European Union, volatility
We cant forecast every outcome, and we expect the
in the markets and regions consumed by conflict, to name
near-term environment to prove challenging. This is
a few, are examples of issues that are naturally generating
why we focus on issues such as tight cost controls, and
unease. Other fundamental questions being raised
consistently assess our own strategic areas of focus.
from whether technology is permanently displacing jobs
Yet we find ourselves generally optimistic about the
to whether monetary policy has reached its limits in
longer term. By staying true to our strategic focus, while
affecting economic outcomes have gone from esoteric
adapting quickly to structural and cyclical factors, and
to mainstream.
maintaining our focus on meeting the needs of new and
At Goldman Sachs, we grapple with these questions day existing clients, we strive to continue to deliver on our
in and day out. As managers of risk, we do our best to long history of providing our shareholders with best-
understand them, and to prepare our clients and our in-class returns.
firm for even low-probability but highly consequential
scenarios. This is why we worry about deflationary
pressures, or liquidity problems in financial markets as
a result of new regulations, or how China will manage
its transition from an infrastructure-driven to a
consumer-driven economy. Its why we keep a close eye Lloyd C. Blankfein
on emerging markets, particularly those that lack Chairman and Chief Executive Officer
diversification and are heavily exposed to commodity
exports, where a prolonged supply overhang could
negatively affect prices for some time to come.

When our clients confront these or other challenges,

we use our institutional resources to help them navigate Gary D. Cohn
the choppy waters, and we regularly consider how these President and Chief Operating Officer
scenarios and other tail-risk events could directly affect
our firm.

While we must consistently try to see around corners

to anticipate problems, we also see plenty of reasons
for optimism. We see the U.S. nearing full employment,
signs of modest inflation and some stabilization in equity
and commodity markets. We dont see how a world
of zero or negative interest rates could possibly be the
new normal. Moreover, we view Chinas slower rate
of economic growth as still substantial, particularly given
that it is now the worlds second-largest economy. We

8 Goldman Sachs 2015 Annual Report

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

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

For the fiscal year ended December 31, 2015 Commission File Number: 001-14965

The Goldman Sachs Group, Inc.

(Exact name of registrant as specified in its charter)
Delaware 13-4019460
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

200 West Street 10282

New York, N.Y. (Zip Code)
(Address of principal executive offices)
(212) 902-1000
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common stock, par value $.01 per share New York Stock Exchange
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate
Non-Cumulative Preferred Stock, Series A New York Stock Exchange
Depositary Shares, Each Representing 1/1,000th Interest in a Share of 6.20%
Non-Cumulative Preferred Stock, Series B New York Stock Exchange
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate
Non-Cumulative Preferred Stock, Series C New York Stock Exchange
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate
Non-Cumulative Preferred Stock, Series D New York Stock Exchange
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate
Non-Cumulative Preferred Stock, Series I New York Stock Exchange
Depositary Shares, Each Representing 1/1,000th Interest in a Share of 5.50%
Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series J New York Stock Exchange
Depositary Shares, Each Representing 1/1,000th Interest in a Share of 6.375%
Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K New York Stock Exchange
See Exhibit 99.2 for debt and trust securities registered under Section 12(b) of the Act
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 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 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.
Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Annual
Report on Form 10-K or any amendment to the Annual Report on Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of June 30, 2015, the aggregate market value of the common stock of the registrant held by non-affiliates of the registrant was
approximately $88.6 billion.
As of February 5, 2016, there were 422,349,543 shares of the registrants common stock outstanding.
Documents incorporated by reference: Portions of The Goldman Sachs Group, Inc.s Proxy Statement for its 2016 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 , IN C .
A N N U A L RE 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 EN D E D D E C E M B E R 3 1 , 2 0 1 5

INDEX
Form 10-K Item Number Page No.
PART I 1
Item 1 Business 1
Introduction 1
Our Business Segments and Segment Operating Results 1
Investment Banking 2
Institutional Client Services 3
Investing & Lending 5
Investment Management 5
Business Continuity and Information Security 6
Employees 6
Competition 6
Regulation 8
Available Information 23
Cautionary Statement Pursuant to the U.S. Private Securities Litigation Reform Act of 1995 24
Item 1A Risk Factors 25
Item 1B Unresolved Staff Comments 44
Item 2 Properties 44
Item 3 Legal Proceedings 44
Item 4 Mine Safety Disclosures 44
Executive Officers of The Goldman Sachs Group, Inc. 45
PART II 46
Item 5 Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities 46
Item 6 Selected Financial Data 46
Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations 47
Item 7A Quantitative and Qualitative Disclosures About Market Risk 112
Item 8 Financial Statements and Supplementary Data 113
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 215
Item 9A Controls and Procedures 215
Item 9B Other Information 215
PART III 215
Item 10 Directors, Executive Officers and Corporate Governance 215
Item 11 Executive Compensation 215
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters 216
Item 13 Certain Relationships and Related Transactions, and Director Independence 216
Item 14 Principal Accounting Fees and Services 216
PART IV 217
Item 15 Exhibits, Financial Statement Schedules 217
SIGNATURES II-1
T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

PART I
Item 1. Business
Introduction As of December 2015, we had offices in over 30 countries
and 48% of our total staff was based outside the Americas.
Goldman Sachs is a leading global investment banking,
Our clients are located worldwide, and we are an active
securities and investment management firm that provides a
participant in financial markets around the world. In 2015,
wide range of financial services to a substantial and
we generated 44% of our net revenues outside the
diversified client base that includes corporations, financial
Americas. For more information about our geographic
institutions, governments and individuals.
results, see Note 25 to the consolidated financial statements
When we use the terms Goldman Sachs, the firm, in Part II, Item 8 of the 2015 Form 10-K.
we, us and our, we mean The Goldman Sachs
Group, Inc. (Group Inc. or parent company), a Delaware
corporation, and its consolidated subsidiaries. Our Business Segments and Segment
References to the 2015 Form 10-K are to our Annual Operating Results
Report on Form 10-K for the year ended We report our activities in four business segments:
December 31, 2015. All references to 2015, 2014 and 2013 Investment Banking, Institutional Client Services,
refer to our years ended, or the dates, as the context Investing & Lending and Investment Management. The
requires, December 31, 2015, December 31, 2014 and chart below presents our four business segments.
December 31, 2013, respectively.
Group Inc. is a bank holding company and a financial Firmwide
holding company regulated by the Board of Governors of
the Federal Reserve System (Federal Reserve Board). Our
U.S. depository institution subsidiary, Goldman Sachs Bank Investment Banking
Institutional Client
Services
Investing & Lending
Investment
Management
USA (GS Bank USA), is a New York State-chartered bank.
Fixed Income, Currency
Financial Management and
and Commodities Equity Securities
Advisory Client Execution Other Fees

Debt Securities
Underwriting Equities Incentive Fees
and Loans

Equity Equities Client Transaction

Underwriting Execution Revenues

Debt Commissions
Underwriting and Fees

Securities
Services

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The table below presents our segment operating results. Financial Advisory. Financial Advisory includes strategic
advisory assignments with respect to mergers and
Year Ended December 1 % of 2015 acquisitions, divestitures, corporate defense activities,
Net restructurings, spin-offs and risk management. In
$ in millions 2015 2014 2013 Revenues
particular, we help clients execute large, complex
Investment Banking
Net revenues $ 7,027 $ 6,464 $ 6,004 21% transactions for which we provide multiple services,
Operating expenses 3,713 3,688 3,479 including cross-border structuring expertise. Financial
Pre-tax earnings $ 3,314 $ 2,776 $ 2,525 Advisory also includes revenues from derivative
transactions directly related to these client advisory
Institutional Client Services
Net revenues $15,151 $15,197 $15,721 45% assignments.
Operating expenses 2 13,938 10,880 11,792 We also assist our clients in managing their asset and
Pre-tax earnings $ 1,213 $ 4,317 $ 3,929
liability exposures and their capital.
Investing & Lending
Net revenues $ 5,436 $ 6,825 $ 7,018 16%
Underwriting. The other core activity of Investment
Operating expenses 2,402 2,819 2,686 Banking is helping companies raise capital to fund their
Pre-tax earnings $ 3,034 $ 4,006 $ 4,332 businesses. As a financial intermediary, our job is to match
the capital of our investing clients who aim to grow the
Investment Management
savings of millions of people with the needs of our public
Net revenues $ 6,206 $ 6,042 $ 5,463 18%
Operating expenses 4,841 4,647 4,357
and private sector clients who need financing to generate
Pre-tax earnings $ 1,365 $ 1,395 $ 1,106 growth, create jobs and deliver products and services. Our
underwriting activities include public offerings and private
Total net revenues $33,820 $34,528 $34,206 placements, including local and cross-border transactions
Total operating expenses 3 25,042 22,171 22,469
and acquisition financing, of a wide range of securities and
Total pre-tax earnings $ 8,778 $12,357 $11,737
other financial instruments. Underwriting also includes
1. Financial information concerning our business segments for 2015, 2014 and revenues from derivative transactions entered into with
2013 is included in Managements Discussion and Analysis of Financial public and private sector clients in connection with our
Condition and Results of Operations and the Financial Statements and
Supplementary Data, which are in Part II, Items 7 and 8, respectively, of the
underwriting activities.
2015 Form 10-K. See Note 25 to the consolidated financial statements in
Part II, Item 8 of the 2015 Form 10-K for a summary of our total net Equity Underwriting. We underwrite common and
revenues, pre-tax earnings and net earnings by geographic region. preferred stock and convertible and exchangeable
2. Includes provisions of $3.37 billion recorded during 2015 for the agreement securities. We regularly receive mandates for large, complex
in principle with the Residential Mortgage-Backed Securities Working Group transactions and have held a leading position in worldwide
of the U.S. Financial Fraud Enforcement Task Force (RMBS Working Group).
See Note 27 to the consolidated financial statements in Part II, Item 8 of the public common stock offerings and worldwide initial public
2015 Form 10-K for further information about this agreement in principle. offerings for many years.
3. Includes charitable contributions that have not been allocated to our
segments of $148 million for 2015, $137 million for 2014 and $155 million for
Debt Underwriting. We underwrite and originate various
2013. types of debt instruments, including investment-grade and
high-yield debt, bank loans and bridge loans, including in
Investment Banking
connection with acquisition financing, and emerging- and
Investment Banking serves public and private sector clients
growth-market debt, which may be issued by, among
around the world. We provide financial advisory services
others, corporate, sovereign, municipal and agency issuers.
and help companies raise capital to strengthen and grow
In addition, we underwrite and originate structured
their businesses. We seek to develop and maintain long-
securities, which include mortgage-related securities and
term relationships with a diverse global group of
other asset-backed securities.
institutional clients, including governments, states and
municipalities. Our goal is to deliver to our institutional
clients the entire resources of the firm in a seamless fashion,
with investment banking serving as the main initial point of
contact with Goldman Sachs.

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Institutional Client Services

Institutional Client Services serves our clients who come to Institutional Client Services generates revenues in four
the firm to buy and sell financial products, raise funding ways:
and manage risk. We do this by acting as a market maker
In large, highly liquid markets (such as markets for U.S.
and offering market expertise on a global basis.
Treasury bills, large capitalization S&P 500 stocks or
Institutional Client Services makes markets and facilitates
certain mortgage pass-through securities), we execute a
client transactions in fixed income, equity, currency and
high volume of transactions for our clients;
commodity products. In addition, we make markets in and
clear client transactions on major stock, options and futures In less liquid markets (such as mid-cap corporate bonds,
exchanges worldwide. Market makers provide liquidity growth market currencies or certain non-agency
and play a critical role in price discovery, which contributes mortgage-backed securities), we execute transactions for
to the overall efficiency of the capital markets. Our our clients for spreads and fees that are generally
willingness to make markets, commit capital and take risk somewhat larger than those charged in more liquid
in a broad range of products is crucial to our client markets;
relationships.
We also structure and execute transactions involving
Our clients are primarily institutions that are professional customized or tailor-made products that address our
market participants, including investment entities whose clients risk exposures, investment objectives or other
ultimate customers include individual investors investing complex needs (such as a jet fuel hedge for an airline); and
for their retirement, buying insurance or putting aside
We provide financing to our clients for their securities
surplus cash in a deposit account.
trading activities, as well as securities lending and other
Through our global sales force, we maintain relationships prime brokerage services.
with our clients, receiving orders and distributing
Institutional Client Services activities are organized by asset
investment research, trading ideas, market information and
class and include both cash and derivative
analysis. As a market maker, we provide prices to clients
instruments. Cash refers to trading the underlying
globally across thousands of products in all major asset
instrument (such as a stock, bond or barrel of oil).
classes and markets. At times we take the other side of
Derivative refers to instruments that derive their value
transactions ourselves if a buyer or seller is not readily
from underlying asset prices, indices, reference rates and
available and at other times we connect our clients to other
other inputs, or a combination of these factors (such as an
parties who want to transact. Much of this connectivity
option, which is the right or obligation to buy or sell a
between the firm and its clients is maintained on technology
certain bond or stock index on a specified date in the future
platforms and operates globally wherever and whenever
at a certain price, or an interest rate swap, which is the
markets are open for trading.
agreement to convert a fixed rate of interest into a floating
Institutional Client Services and our other businesses are rate or vice versa).
supported by our Global Investment Research division,
which, as of December 2015, provided fundamental
research on more than 3,400 companies worldwide and
more than 40 national economies, as well as on industries,
currencies and commodities.

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Fixed Income, Currency and Commodities Client Commissions and Fees. We generate commissions and
Execution. Includes interest rate products, credit products, fees from executing and clearing institutional client
mortgages, currencies and commodities. transactions on major stock, options and futures exchanges
worldwide, as well as OTC transactions. We provide our
Interest Rate Products. Government bonds, money
clients with access to a broad spectrum of equity execution
market instruments, treasury bills, repurchase agreements
services, including electronic low-touch access and more
and other highly liquid securities and instruments, as well
complex high-touch execution through both traditional
as interest rate swaps, options and other derivatives.
and electronic platforms.
Credit Products. Investment-grade corporate securities,
Securities Services. Includes financing, securities lending
high-yield securities, credit derivatives, bank and bridge
and other prime brokerage services.
loans, municipal securities, emerging market and
distressed debt, and trade claims. Financing Services. We provide financing to our clients
for their securities trading activities through margin loans
Mortgages. Commercial mortgage-related securities,
that are collateralized by securities, cash or other
loans and derivatives, residential mortgage-related
acceptable collateral. We earn a spread equal to the
securities, loans and derivatives (including U.S.
difference between the amount we pay for funds and the
government agency-issued collateralized mortgage
amount we receive from our client.
obligations, other prime, subprime and Alt-A securities
and loans), and other asset-backed securities, loans and Securities Lending Services. We provide services that
derivatives. principally involve borrowing and lending securities to
cover institutional clients short sales and borrowing
Currencies. Most currencies, including growth-market
securities to cover our short sales and otherwise to make
currencies.
deliveries into the market. In addition, we are an active
Commodities. Crude oil and petroleum products, participant in broker-to-broker securities lending and
natural gas, base, precious and other metals, electricity, third-party agency lending activities.
coal, agricultural and other commodity products.
Other Prime Brokerage Services. We earn fees by
Equities. Includes equities client execution, commissions providing clearing, settlement and custody services
and fees, and securities services. globally. In addition, we provide our hedge fund and
other clients with a technology platform and reporting
Equities Client Execution. We make markets in equity
which enables them to monitor their security portfolios
securities and equity-related products, including convertible
and manage risk exposures.
securities, options, futures and over-the-counter (OTC)
derivative instruments, on a global basis. As a principal, we
facilitate client transactions by providing liquidity to our
clients with large blocks of stocks or derivatives, requiring
the commitment of our capital.
We also structure and make markets in derivatives on
indices, industry groups, financial measures 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 exchange-traded funds,
futures and options on major exchanges worldwide.

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Investing & Lending We also provide customized investment advisory solutions

Our investing and lending activities, which are typically designed to address our clients investment needs. These
longer-term, include the firms investing and relationship solutions begin with identifying clients objectives and
lending activities across various asset classes, primarily debt continue through portfolio construction, ongoing asset
securities and loans, public and private equity securities, allocation and risk management and investment realization.
and real estate. These activities include investing directly in We draw from a variety of third-party managers as well as
publicly and privately traded securities and in loans, and our proprietary offerings to implement solutions for clients.
also through certain investment funds and separate
We supplement our investment advisory solutions for high-
accounts that we manage and through funds managed by
net-worth clients with wealth advisory services that include
external parties. We also provide financing to our clients.
income and liability management, trust and estate planning,
Equity Securities. We make corporate, real estate and philanthropic giving and tax planning. We also use the
infrastructure equity-related investments. firms global securities and derivatives market-making
capabilities to address clients specific investment needs.
Debt Securities and Loans. We make corporate, real
estate, infrastructure and other debt investments. In Management and Other Fees. The majority of revenues
addition, we provide credit to corporate clients through in management and other fees is comprised of asset-based
loan facilities and to individuals primarily through secured fees on client assets. The fees that we charge vary by asset
loans. class and are affected by investment performance as well as
asset inflows and redemptions. Other fees we receive
Investment Management
include financial counseling fees generated through our
Investment Management provides investment and wealth
wealth advisory services and fees related to the
advisory services to help clients preserve and grow their
administration of real estate assets.
financial assets. Our clients include institutions and high-
net-worth individuals, as well as retail investors who Assets under supervision include assets under management
primarily access our products through a network of third- and other client assets. Assets under management include
party distributors around the world. client assets where we earn a fee for managing assets on a
discretionary basis. This includes net assets in our mutual
We manage client assets across a broad range of asset
funds, hedge funds, credit funds and private equity funds
classes and investment strategies, including equity, fixed
(including real estate funds), and separately managed
income and alternative investments. Alternative
accounts for institutional and individual investors. Other
investments primarily include hedge funds, credit funds,
client assets include client assets invested with third-party
private equity, real estate, currencies, commodities, and
managers, bank deposits and advisory relationships where
asset allocation strategies. Our investment offerings include
we earn a fee for advisory and other services, but do not
those managed on a fiduciary basis by our portfolio
have investment discretion. Assets under supervision do not
managers as well as strategies managed by third-party
include the self-directed brokerage assets of our clients.
managers. We offer our investments in a variety of
Long-term assets under supervision represent assets under
structures, including separately managed accounts, mutual
supervision excluding liquidity products. Liquidity
funds, private partnerships, and other commingled vehicles.
products represent money market and bank deposit assets.

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Incentive Fees. In certain circumstances, we are also Employees

entitled to receive incentive fees based on a percentage of a
Management believes that a major strength and principal
funds or a separately managed accounts return, or when
reason for the success of Goldman Sachs is the quality and
the return exceeds a specified benchmark or other
dedication of our people and the shared sense of being part
performance targets. Such fees include overrides, which
of a team. We strive to maintain a work environment that
consist of the increased share of the income and gains
fosters professionalism, excellence, diversity, cooperation
derived primarily from our private equity funds when the
among our employees worldwide and high standards of
return on a funds investments over the life of the fund
business ethics.
exceeds certain threshold returns. Incentive fees are
recognized only when all material contingencies are Instilling the Goldman Sachs culture in all employees is a
resolved. continuous process, in which training plays an important
part. All employees are offered the opportunity to
Transaction Revenues. We receive commissions and net
participate in education and periodic seminars that we
spreads for facilitating transactional activity in high-net-
sponsor at various locations throughout the world. Another
worth client accounts. In addition, we earn net interest
important part of instilling the Goldman Sachs culture is
income primarily associated with client deposits and
our employee review process. Employees are reviewed by
margin lending activity undertaken by such clients.
supervisors, co-workers and employees they supervise in a
360-degree review process that is integral to our team
approach, and includes an evaluation of an employees
Business Continuity and Information performance with respect to risk management, compliance
Security and diversity. As of December 2015, we had 36,800 total
Business continuity and information security, including staff.
cyber security, are high priorities for Goldman Sachs. Their
importance has been highlighted by numerous highly
publicized cyber attacks against financial institutions and Competition
large consumer-based companies in recent years that
The financial services industry and all of our
resulted in the unauthorized disclosure of personal
businesses are intensely competitive, and we expect them
information of clients and customers and the theft and
to remain so. Our competitors are other entities that
destruction of corporate information, as well as extreme
provide investment banking, securities and investment
weather events, such as Hurricane Sandy.
management services, as well as those entities that make
Our Business Continuity Program has been developed to investments in securities, commodities, derivatives, real
provide reasonable assurance of business continuity in the estate, loans and other financial assets. These entities
event of disruptions at the firms critical facilities and to include brokers and dealers, investment banking firms,
comply with regulatory requirements, including those of commercial banks, insurance companies, investment
FINRA. Because we are a bank holding company, our advisers, mutual funds, hedge funds, private equity funds
Business Continuity Program is also subject to review by and merchant banks. We compete with some entities
the Federal Reserve Board. The key elements of the globally and with others on a regional, product or niche
program are crisis planning and management, people basis. Our competition is based on a number of factors,
recovery, business recovery, systems and data recovery, and including transaction execution, products and services,
process improvement. In the area of information security, innovation, reputation and price.
we have developed and implemented a framework of
principles, policies and technology to protect the
information provided to us by our clients and that of the
firm from cyber attacks and other misappropriation,
corruption or loss. Safeguards are applied to maintain the
confidentiality, integrity and availability of information.

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There has been substantial consolidation and convergence The provisions of the U.S. Dodd-Frank Wall Street Reform
among companies in the financial services industry. and Consumer Protection Act (Dodd-Frank Act), the
Moreover, we have faced, and expect to continue to face, requirements promulgated by the Basel Committee on
pressure to retain market share by committing capital to Banking Supervision (Basel Committee) and other financial
businesses or transactions on terms that offer returns that regulation could affect our competitive position to the
may not be commensurate with their risks. In particular, extent that limitations on activities, increased fees and
corporate clients seek such commitments (such as compliance costs or other regulatory requirements do not
agreements to participate in their loan facilities) from apply, or do not apply equally, to all of our competitors or
financial services firms in connection with investment are not implemented uniformly across different
banking and other assignments. jurisdictions. For example, the provisions of the Dodd-
Frank Act that prohibit proprietary trading and restrict
Consolidation and convergence have significantly increased
investments in certain hedge and private equity funds
the capital base and geographic reach of some of our
differentiate between U.S.-based and non-U.S.-based
competitors, and have also hastened the globalization of the
banking organizations and give non-U.S.-based banking
securities and other financial services markets. As a result,
organizations greater flexibility to trade outside of the
we have had to commit capital to support our international
United States and to form and invest in funds outside the
operations and to execute large global transactions. To take
United States. Likewise, the obligations with respect to
advantage of some of our most significant opportunities,
derivative transactions under Title VII of the Dodd-Frank
we will have to compete successfully with financial
Act depend, in part, on the location of the counterparties to
institutions that are larger and have more capital and that
the transaction. The impact of the Dodd-Frank Act and
may have a stronger local presence and longer operating
other regulatory developments on our competitive position
history outside the United States. We also compete with
will depend to a large extent on the manner in which the
smaller institutions that offer more targeted services, such
required rulemaking and regulatory guidance evolve, the
as independent advisory firms. Some clients may perceive
extent of international convergence, and the development
these firms to be less susceptible to potential conflicts of
of market practice and structures under the new regulatory
interest than we are, and, as described below, our ability to
regimes as described further under Regulation below.
effectively compete with them could be affected by
regulations and limitations on activities that apply to us but We also face intense competition in attracting and retaining
may not apply to them. qualified employees. Our ability to continue to compete
effectively will depend upon our ability to attract new
A number of our businesses are subject to intense price
employees, retain and motivate our existing employees and
competition. Efforts by our competitors to gain market
to continue to compensate employees competitively amid
share have resulted in pricing pressure in our investment
intense public and regulatory scrutiny on the compensation
banking and client execution businesses and could result in
practices of large financial institutions. Our pay practices
pricing pressure in other of our businesses. For example, the
and those of certain of our competitors are subject to
increasing volume of trades executed electronically,
review by, and the standards of, the Federal Reserve Board
through the internet and through alternative trading
and other regulators inside and outside the United States,
systems, has increased the pressure on trading commissions,
including the Prudential Regulation Authority (PRA) and
in that commissions for electronic trading are generally
the Financial Conduct Authority (FCA) in the United
lower than for non-electronic trading. It appears that this
Kingdom. We also compete for employees with institutions
trend toward low-commission trading will continue. In
whose pay practices are not subject to regulatory oversight.
addition, we believe that we will continue to experience
See Regulation Compensation Practices below and
competitive pressures in these and other areas in the future
Risk Factors Our businesses may be adversely affected
as some of our competitors seek to obtain market share by
if we are unable to hire and retain qualified employees in
further reducing prices, and as we enter into or expand our
Part I, Item 1A of the 2015 Form 10-K for more
presence in markets that may rely more heavily on
information about the regulation of our compensation
electronic trading and execution, such as consumer-
practices.
oriented deposit-taking activities.

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Regulation
As a participant in the financial services industry, we are Various of our subsidiaries are regulated by the banking
subject to extensive regulation worldwide. Our businesses and securities regulatory authorities of the countries in
have been subject to increasing regulation and supervision which they operate.
in the United States and other countries, and we expect this
Our principal U.S. bank subsidiary, GS Bank USA, is
trend to continue in the future.
supervised and regulated by the Federal Reserve Board, the
In particular, the Dodd-Frank Act, and the rules FDIC, the New York State Department of Financial
thereunder, significantly altered the financial regulatory Services and the Consumer Financial Protection Bureau
regime within which we operate. The capital, liquidity and (CFPB). A number of our activities are conducted partially
leverage ratios based on the Basel Committees final capital or entirely through GS Bank USA and its subsidiaries,
framework for strengthening international capital including: origination of bank loans; interest rate, credit,
standards (Basel III), as implemented by the Federal currency and other derivatives; leveraged finance; mortgage
Reserve, the PRA and FCA and other national regulators origination; structured finance; deposit-taking; and agency
have also had a significant impact on our businesses. The lending.
implications of such regulations for our businesses continue
In addition, Group Inc. has two limited purpose trust
to depend to a large extent on their implementation by the
company subsidiaries that are not permitted to accept
relevant regulators globally, as well as the development of
deposits or make loans (other than as incidental to their
market practices and structures under the regime
trust activities) and are not insured by the FDIC. The
established by such regulations. Other reforms have been
Goldman Sachs Trust Company, N.A., a national banking
adopted or are being considered by regulators and policy
association that is limited to fiduciary activities, is regulated
makers worldwide, as described further throughout this
by the Office of the Comptroller of the Currency and is a
section.
member bank of the Federal Reserve System. The Goldman
Banking Supervision and Regulation Sachs Trust Company of Delaware, a Delaware limited
Group Inc. is a bank holding company under the Bank purpose trust company, is regulated by the Office of the
Holding Company Act of 1956 (BHC Act), a financial Delaware State Bank Commissioner.
holding company under amendments to the BHC Act
Goldman Sachs International Bank (GSIB), our regulated
effected by the U.S. Gramm-Leach-Bliley Act of 1999 (GLB
U.K. bank and principal non-U.S. bank subsidiary, is
Act) and is subject to supervision and examination by the
regulated by the PRA and the FCA. GSIB acts as a primary
Federal Reserve Board.
dealer for European government bonds and is involved in
Under the system of functional regulation established market making in European government bonds, lending
under the BHC Act, the Federal Reserve Board serves as the (including securities lending) and deposit-taking activities.
primary regulator of our consolidated organization. The
In November 2014, a new Single Supervisory Mechanism
primary regulators of our U.S. non-bank subsidiaries
became effective, under which the European Central Bank
directly regulate the activities of those subsidiaries, with the
and national supervisors both have certain regulatory
Federal Reserve Board exercising a supervisory role. Such
responsibilities for banks in participating EU member
functionally regulated U.S. non-bank subsidiaries include
states. While the U.K. does not participate in this new
broker-dealers registered with the SEC, such as our
mechanism, it gives new powers to the European Central
principal U.S. broker-dealer, Goldman, Sachs & Co.
Bank to take regulatory action with regard to the firms
(GS&Co.), entities registered with or regulated by the U.S.
banks in Germany and France.
Commodity Futures Trading Commission (CFTC) with
respect to futures-related and swaps-related activities and
investment advisers registered with the SEC with respect to
their investment advisory activities.

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Capital, Leverage and Liquidity Requirements. We are The Revised Capital Framework also provides a counter-
subject to consolidated regulatory capital and leverage cyclical capital buffer of up to 2.5% (and also consisting
requirements set forth by the Federal Reserve Board, and entirely of CET1), to be imposed in the event that national
GS Bank USA is subject to capital and leverage supervisors deem it necessary in order to counteract
requirements that are calculated in substantially the same excessive credit growth. The Federal Reserve Board has
manner as those applicable to Group Inc., also set forth by proposed, but not yet finalized, its policy for setting the
the Federal Reserve Board. counter-cyclical capital buffer, and several other national
supervisors have started to implement this counter-cyclical
Under the Federal Reserve Boards capital adequacy
buffer. The buffer applicable to us could change in the
requirements, Group Inc. must meet specific regulatory
future and, as a result, the minimum ratios we are subject to
capital requirements that involve quantitative measures of
could increase.
assets, liabilities and certain off-balance-sheet items. The
sufficiency of our capital levels is also subject to qualitative GS Bank USA computes its capital ratios in accordance
judgments by regulators. We are also subject to liquidity with the Revised Capital Framework as an Advanced
requirements established by the U.S. federal bank approach banking organization.
regulatory agencies.
The Basel Committee has published final guidelines for
Capital Ratios. We are subject to the Federal Reserve calculating incremental capital requirements for domestic
Boards revised risk-based capital and leverage ratio systemically important banking institutions (D-SIBs). These
regulations, inclusive of certain transitional provisions guidelines are complementary to the framework outlined
(Revised Capital Framework). These regulations are largely above for G-SIBs, but are more principles-based in order to
based on Basel III, and also implement certain provisions of provide an appropriate degree of national discretion. The
the Dodd-Frank Act. Under the Revised Capital impact of these guidelines on the regulatory capital
Framework, we are an Advanced approach banking requirements of GS Bank USA and other subsidiaries will
organization. The Revised Capital Framework provides for depend on how they are implemented by the banking and
capital buffers (including surcharges) that phase in over non-banking regulators in the United States and other
time, including a capital conservation buffer, and a global jurisdictions.
systemically important bank (G-SIB) surcharge described
In January 2016, the Basel Committee finalized a revised
below, as well as a counter-cyclical capital buffer.
framework for calculating minimum capital requirements
In July 2015, the Federal Reserve Board approved final for market risk, which is expected to increase market risk
rules establishing a capital surcharge for U.S. G-SIBs. For capital requirements for most banking organizations. The
these institutions, the final rules implement the framework revised framework, among other things: modifies the
developed by the Basel Committee for assessing the global boundary between the trading book and banking book;
systemic importance of banking institutions and replaces value at risk (VaR) and stressed VaR
determining the range of additional Common Equity Tier 1 measurements in the internal models approach with an
(CET1) that should be maintained by those deemed to be expected shortfall measure that is intended to reflect tail
G-SIBs. and liquidity risks not captured by VaR; revises the model
review and approval process; limits the capital-reducing
The Federal Reserve Boards framework results in
effects of hedging and portfolio diversification in the
surcharges initially ranging from 1% to 4.5%. The final
internal models approach; provides that securitization
rules treat the Basel Committees methodology as a floor
exposures will be measured using only the Standardized
(Method One) and introduce an alternative calculation to
approach; and makes significant revisions to the
determine the applicable surcharge (Method Two), which
methodology for capital requirements under the
includes a significantly higher surcharge for systemic risk
Standardized approach. The effective date for first
and, as part of the calculation of the applicable surcharge,
reporting under the revised framework is
replaces the Basel Committees indicator for substitutability
December 31, 2019. The U.S. federal bank regulatory
with a new indicator based on a U.S. G-SIBs use of short-
agencies have not yet proposed regulations implementing
term wholesale funding. Under the Federal Reserve Boards
the revised requirements for U.S. banking organizations.
final rules, G-SIBs are required to meet the capital
surcharges on a phased-in basis beginning in 2016 through
January 1, 2019.

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The Basel Committee has issued a series of updates which Liquidity Ratios. The Basel Committees international
propose other changes to capital regulations. In particular, framework for liquidity risk measurement, standards and
it has finalized a revised standard approach for calculating monitoring requires banking organizations to measure their
RWAs for counterparty credit risk on derivatives exposures liquidity against two specific liquidity tests.
(Standardized Approach for measuring Counterparty
The liquidity coverage ratio (LCR) is designed to ensure
Credit Risk exposures, known as SA-CCR). In addition,
that the entity maintains an adequate level of
it has published guidelines for measuring and controlling
unencumbered high-quality liquid assets based on expected
large exposures (Supervisory Framework for measuring
net cash outflows under an acute short-term liquidity stress
and controlling Large Exposures), and issued an updated
scenario. The U.S. federal bank regulatory agencies rules
framework for regulatory capital treatment of banking
implementing the LCR for Advanced approach banking
book securitizations.
organizations are generally consistent with the Basel
The Basel Committee has also issued consultation papers Committees framework, but include accelerated
on, among other matters, a Review of Interest Rate Risk in transitional provisions and more stringent requirements
the Banking Book, a Review of the Credit Valuation related to both the range of assets that qualify as high-
Adjustment Risk Framework, revisions to the Basel quality liquid assets and cash outflow assumptions for
Standardized approach for credit risk and operational risk certain types of funding and other liquidity risks.
capital, and the design of a capital floor framework based
Under the accelerated transition timeline, the LCR became
on the revised Standardized approach.
effective in the United States on January 1, 2015, with a
See Managements Discussion and Analysis of Financial phase-in period whereby firms, including Group Inc. and
Condition and Results of Operations Equity Capital GS Bank USA, must have an 80% and 90% minimum ratio
Management and Regulatory Capital in Part II, Item 7 of in 2015 and 2016, respectively, and a 100% minimum ratio
the 2015 Form 10-K and Note 20 to the consolidated commencing in 2017. In November 2015, the Federal
financial statements in Part II, Item 8 of the 2015 Reserve Board proposed a rule that would require bank
Form 10-K for information about CET1, CET1 ratio, Tier 1 holding companies to disclose their LCR on a quarterly
capital, Tier 1 capital ratio, Total capital, Total capital basis beginning in the quarter ended September 2016.
ratio, risk-weighted assets (RWAs), and for information These requirements include LCR averages over the prior
about minimum required ratios, as well as applicable quarter, detailed information on certain components of the
capital buffers and surcharges. LCR calculation and projected net cash outflows. See
Managements Discussion and Analysis of Financial
Leverage Ratios. Under the Revised Capital Framework,
Condition and Results of Operations Risk
we and GS Bank USA are subject to Tier 1 leverage
Management Liquidity Risk Management in Part II,
requirements established by the Federal Reserve Board. The
Item 7 of the 2015 Form 10-K for information about the
Revised Capital Framework also introduced a
LCR.
supplementary leverage ratio for Advanced approach
banking organizations effective January 1, 2018. The LCR rule issued by the U.K. regulatory authorities
became effective in the United Kingdom on
See Managements Discussion and Analysis of Financial
October 1, 2015, with a phase-in period whereby certain
Condition and Results of Operations Equity Capital
financial institutions, including Goldman Sachs
Management and Regulatory Capital in Part II, Item 7 of
International (GSI), our regulated U.K. broker-dealer
the 2015 Form 10-K and Note 20 to the consolidated
subsidiary, must have an 80% minimum ratio initially,
financial statements in Part II, Item 8 of the 2015
increasing to 90% on January 1, 2017 and 100% on
Form 10-K for information about our Tier 1 leverage ratio
January 1, 2018.
and supplementary leverage ratio.
The net stable funding ratio (NSFR) is designed to promote
more medium- and long-term stable funding of the assets
and off-balance-sheet activities of banking organizations
over a one-year time horizon. Under the Basel Committee
framework, the NSFR will be effective on January 1, 2018.
The U.S. federal bank regulatory agencies and the U.K.
regulatory authorities have not yet proposed rules
implementing the NSFR for U.S. banks and bank holding
companies, and U.K. financial institutions, respectively.

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Since January 1, 2015, the enhanced prudential standards Dividends and Stock Repurchases. Federal and state
implemented by the Federal Reserve Board under the Dodd- laws impose limitations on the payment of dividends by our
Frank Act have required bank holding companies with U.S. depository institution subsidiaries to Group Inc. In
$50 billion or more in total consolidated assets to comply general, the amount of dividends that may be paid by GS
with enhanced liquidity and overall risk management Bank USA or our national bank trust company subsidiary is
standards, including a buffer of highly liquid assets based limited to the lesser of the amounts calculated under a
on projected funding needs for 30 days, and increased recent earnings test and an undivided profits test.
involvement by boards of directors in liquidity and overall Under the recent earnings test, a dividend may not be paid if
risk management. Although the liquidity buffer under these the total of all dividends declared by the entity in any
rules has some similarities to the LCR (and is described by calendar year is in excess of the current years net income
the agencies as complementary to the LCR), it is a separate combined with the retained net income of the two
requirement that is in addition to the LCR. See preceding years, unless the entity obtains prior regulatory
Managements Discussion and Analysis of Financial approval. Under the undivided profits test, a dividend may
Condition and Results of Operations Risk not be paid in excess of the entitys undivided profits
Management Overview and Structure of Risk (generally, accumulated net profits that have not been paid
Management and Liquidity Risk Management in out as dividends or transferred to surplus).
Part II, Item 7 of the 2015 Form 10-K for information
The banking regulators have authority to prohibit or limit
about our risk management practices and liquidity.
the payment of dividends if, in the banking regulators
Stress Tests. Bank holding companies with total opinion, payment of a dividend would constitute an unsafe
consolidated assets of $50 billion or more are subject to or unsound practice in light of the financial condition of the
Dodd-Frank Act supervisory stress tests conducted by the banking organization. The BHC Act prohibits the Federal
Federal Reserve Board and semi-annual company-run stress Reserve Board from requiring a payment by a holding
tests. The stress test rules require increased involvement by company subsidiary to a depository institution if the
boards of directors in stress testing and public disclosure of functional regulator of that subsidiary objects to such
the results of both the Federal Reserve Boards annual stress payment. In such a case, the Federal Reserve Board could
tests and a bank holding companys annual supervisory instead require the divestiture of the depository institution
stress tests, and semi-annual internal stress tests. and impose operating restrictions pending the divestiture.
We publish summaries of our annual and mid-cycle stress Dividend payments by Group Inc. to its shareholders and
tests results on our web site as described under Available stock repurchases by Group Inc. are subject to the oversight
Information below. Our annual Dodd-Frank Act stress of the Federal Reserve Board. The dividend and share
test submission is incorporated into the annual capital plans repurchase policies of large bank holding companies, such
that we are required to submit to the Federal Reserve Board as Group Inc., are reviewed by the Federal Reserve Board
as part of the Comprehensive Capital Analysis and Review through the CCAR process, based on capital plans and
(CCAR). The purpose of CCAR is to ensure that large bank stress tests submitted by the bank holding company, and
holding companies have robust, forward-looking capital are assessed against, among other things, the bank holding
planning processes that account for each institutions companys ability to meet and exceed minimum regulatory
unique risks and that permit continued operations during capital ratios under stressed scenarios, its expected sources
times of economic and financial stress. As part of CCAR, and uses of capital over the planning horizon under baseline
the Federal Reserve Board evaluates an institutions plan to and stressed scenarios, and any potential impact of changes
make capital distributions, such as repurchasing or to its business plan and activities on its capital adequacy
redeeming stock or increasing dividend payments, across a and liquidity.
range of macroeconomic and firm-specific assumptions.
The Federal Reserve Boards capital planning rule includes
Similar to Group Inc., GS Bank USA is required to conduct a limitation on capital distributions to the extent that actual
stress tests on an annual basis, to submit the results to the capital issuances are less than the amount indicated in the
Federal Reserve Board, and to make a summary of those capital plan submission.
results public. The rules require that the board of directors
of GS Bank USA, among other things, consider the results
of the stress tests in the normal course of the banks
business including, but not limited to, its capital planning,
assessment of capital adequacy and risk management
practices.

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Source of Strength. The Dodd-Frank Act requires bank Total Loss-Absorbing Capacity. In October 2015, the
holding companies to act as a source of strength to their Federal Reserve Board issued a proposed rule that would
bank subsidiaries and to commit capital and financial establish loss-absorbency and related requirements for U.S.
resources to support those subsidiaries. This support may G-SIBs. The proposed rule would address U.S.
be required by the Federal Reserve Board at times when we implementation of the Financial Stability Boards total loss-
might otherwise determine not to provide it. Capital loans absorbing capacity (TLAC) principles and term sheet
by a bank holding company to a subsidiary bank are described below. The proposed rule would require U.S.
subordinate in right of payment to deposits and to certain G-SIBs, such as Group Inc., to maintain minimum external
other indebtedness of the subsidiary bank. In addition, if a TLAC, consisting of Tier 1 capital and eligible senior and
bank holding company commits to a federal bank regulator subordinated long-term debt (i.e., debt that is unsecured,
that it will maintain the capital of its bank subsidiary, has a maturity greater than one year from issuance and
whether in response to the Federal Reserve Boards satisfies certain additional criteria), equal to the greater of
invoking its source-of-strength authority or in response to (i) 16% of risk-weighted assets (RWAs) and (ii) 9.5% of
other regulatory measures, that commitment will be total leverage exposure (the denominator of the
assumed by the bankruptcy trustee for the holding supplementary leverage ratio) commencing
company and the bank will be entitled to priority payment January 1, 2019. The RWA component would increase to
in respect of that commitment, ahead of other creditors of 18% of RWAs on January 1, 2022. The proposed rule
the bank holding company. would also require a buffer of CET1 in an amount equal to
the sum of (i) the capital conservation buffer (2.5% of
Transactions between Affiliates. Transactions between
RWAs), (ii) the G-SIB surcharge calculated in accordance
GS Bank USA or its subsidiaries, on the one hand, and
with the Method One calculation and (iii) any applicable
Group Inc. or its other subsidiaries and affiliates, on the
counter-cyclical capital buffer.
other hand, are regulated by the Federal Reserve Board.
These regulations generally limit the types and amounts of In addition, beginning in 2019, U.S. G-SIBs would also be
transactions (including credit extensions from GS Bank required to maintain minimum eligible long-term debt
USA or its subsidiaries to Group Inc. or its other equal to the greater of (i) 6% plus the G-SIB surcharge of
subsidiaries and affiliates) that may take place and RWAs and (ii) 4.5% of total leverage exposure. The
generally require those transactions to be on market terms proposed rule would disqualify from eligible long-term
or better to GS Bank USA or its subsidiaries. These debt, among other instruments, debt securities that permit
regulations generally do not apply to transactions between acceleration for reasons other than insolvency or payment
GS Bank USA and its subsidiaries. The Dodd-Frank Act default, as well as structured notes and debt securities not
expanded the coverage and scope of these regulations, governed by U.S. law. The senior long-term debt of U.S.
including by applying them to the credit exposure arising G-SIBs, including Group Inc., typically permits acceleration
under derivative transactions, repurchase and reverse for reasons other than insolvency or payment default, and
repurchase agreements, and securities borrowing and therefore would not qualify as eligible long-term debt under
lending transactions. the proposed rule.

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The proposed rule would also prohibit Group Inc., as a U.S. The proposed MREL is the sum of a loss absorption
G-SIB, from (i) guaranteeing liabilities of subsidiaries that amount and a recapitalization amount. The loss absorption
are subject to early termination provisions if the parent amount is based on a firms minimum going-concern
company of a U.S. G-SIB enters into an insolvency or capital requirement, which currently consists of Pillar 1 (the
receivership proceeding, (ii) incurring liabilities guaranteed minimum capital requirement under the fourth EU Capital
by subsidiaries, (iii) issuing short-term debt, or (iv) entering Requirements Directive and EU Capital Requirements
into derivatives and certain other financial contracts with Regulation, collectively known as CRD IV), plus Pillar 2A
external counterparties. Additionally, the proposed rule (an additional amount to cover risks not adequately
would cap, at 5% of the value of the U.S. G-SIBs eligible captured in Pillar 1). The recapitalization amount is based
TLAC, the amount of a U.S. G-SIBs unsecured non- on a firms recapitalization needs post-resolution and any
contingent third-party liabilities that are not eligible long- additional requirements to be determined by the Bank of
term debt that could rank equally with or junior to eligible England as necessary to maintain market confidence.
long-term debt. Finally, the proposed rule would require
Resolution and Recovery. Each bank holding company
U.S. G-SIBs and other large banking entities to deduct from
with over $50 billion in assets and each designated
their own Tier 2 capital certain holdings in unsecured debt
systemically important financial institution is required by
of other U.S. G-SIBs, as well as holdings of their own
the Federal Reserve Board and the FDIC to provide an
unsecured debt securities. The Federal Reserve Board has
annual plan for its rapid and orderly resolution in the event
also indicated that it is considering imposing subsidiary
of material financial distress or failure (resolution plan).
TLAC requirements on material operating subsidiaries of
Our resolution plan must, among other things, demonstrate
U.S. G-SIBs.
that GS Bank USA is adequately protected from risks
In November 2015, the Financial Stability Board issued a arising from our other entities. The regulators joint rule
set of final principles and a final term sheet on a new sets specific standards for the resolution plans, including
minimum standard for TLAC of G-SIBs. The Financial requiring a detailed resolution strategy and analyses of the
Stability Boards final standard also requires certain companys material entities, organizational structure,
material subsidiaries of a G-SIB organized outside of the interconnections and interdependencies, and management
G-SIBs home country, such as GSI, to maintain amounts of information systems, among other elements. If the
TLAC to facilitate the transfer of losses from operating regulators jointly determine that an institution has failed to
subsidiaries to the parent company. cure identified shortcomings in its resolution plan and that
its resolution plan, after any permitted resubmission, is not
Also, in November 2015, the Basel Committee issued a
credible, the regulators may jointly impose more stringent
proposal to implement internationally the capital
capital, leverage or liquidity requirements or restrictions on
deductions for G-SIBs holdings of the TLAC of other
growth, activities or operations or may jointly order the
G-SIBs and their own, which will inform how the
institutions to divest assets or operations in order to
deductions are implemented by other national regulators.
facilitate orderly resolution in the event of failure.
In December 2015, the Bank of England published a
We are also required by the Federal Reserve Board to
consultation paper on its approach for setting a minimum
submit, on an annual basis, a global recovery plan that
requirement for own funds and eligible liabilities (MREL)
outlines the steps that management could take to reduce
under which certain U.K. financial institutions, including
risk, maintain sufficient liquidity, and conserve capital in
GSI, would need to maintain equity and liabilities sufficient
times of prolonged stress.
to credibly bear losses in resolution. MREL is generally
consistent with the Financial Stability Boards TLAC The FDIC has issued a rule requiring each insured
standard. depository institution with $50 billion or more in assets,
such as GS Bank USA, to provide a resolution plan. Similar
to our resolution plan for Group Inc., our resolution plan
for GS Bank USA must, among other things, demonstrate
that it is adequately protected from risks arising from our
other entities.

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The EU Bank Recovery and Resolution Directive (the In addition, under federal law, the claims of holders of
BRRD) required EU member states to grant, by domestic deposit liabilities and certain claims for
January 1, 2016, bail-in powers to EU resolution administrative expenses against an insured depository
authorities to recapitalize a failing entity by writing down institution would be afforded a priority over other general
its unsecured debt or converting its unsecured debt into unsecured claims, including deposits at non-U.S. branches
equity. Financial institutions in the EU (including GSI) must and claims of debt holders of the institution, in the
provide that new contracts entered into after liquidation or other resolution of such an institution by
January 1, 2016 enable such actions and also amend pre- any receiver. As a result, whether or not the FDIC ever
existing contracts governed by non-EU law to enable such sought to repudiate any debt obligations of GS Bank USA,
actions, when the financial institutions could incur the debt holders (other than depositors) would be treated
liabilities under such pre-existing contracts after differently from, and could receive, if anything,
January 1, 2016. substantially less than, the depositors of GS Bank USA.
Separately, under the BRRD, financial contracts not The Dodd-Frank Act created a new resolution regime
governed by EU law are required to be amended so that the (known as orderly liquidation authority) for bank
resolution authorities can impose a temporary stay of holding companies and their affiliates that are systemically
termination in resolution. These requirements must be important and certain non-bank financial companies.
implemented over 2016 and 2017, with the timing Under the orderly liquidation authority, the FDIC may be
depending on the category of the counterparty of the appointed as receiver for the systemically important
financial institution. The BRRD also subjects investment institution and its failed non-bank subsidiaries if, upon the
firms to MREL so that they can be resolved without causing recommendation of applicable regulators, the Secretary of
financial instability and without recourse to public funds in the Treasury determines, among other things, that the
the event of a failure. In July 2015, the European Banking institution is in default or in danger of default, that the
Authority published final draft Regulatory Technical institutions failure would have serious adverse effects on
Standards on MREL, which specify the common criteria the U.S. financial system and that resolution under the
under the BRRD. The Bank of Englands proposal on orderly liquidation authority would avoid or mitigate those
MREL is described above under Total Loss-Absorbing effects.
Capacity.
If the FDIC is appointed as receiver under the orderly
Insolvency of an Insured Depository Institution or a liquidation authority, then the powers of the receiver, and
Bank Holding Company. Under the Federal Deposit the rights and obligations of creditors and other parties
Insurance Act of 1950, if the FDIC is appointed as who have dealt with the institution, would be determined
conservator or receiver for an insured depository institution under the orderly liquidation authority, and not under the
such as GS Bank USA, upon its insolvency or in certain bankruptcy or insolvency law that would otherwise apply.
other events, the FDIC has broad powers, including the The powers of the receiver under the orderly liquidation
power: authority were generally based on the powers of the FDIC
as receiver for depository institutions under the Federal
To transfer any of the depository institutions assets and
Deposit Insurance Act. Substantial differences in the rights
liabilities to a new obligor, including a newly formed
of creditors exist between the orderly liquidation authority
bridge bank, without the approval of the depository
and the U.S. Bankruptcy Code, including the right of the
institutions creditors;
FDIC under the orderly liquidation authority to disregard
To enforce the depository institutions contracts pursuant the strict priority of creditor claims in some circumstances,
to their terms without regard to any provisions triggered the use of an administrative claims procedure to determine
by the appointment of the FDIC in that capacity; or creditors claims (as opposed to the judicial procedure
utilized in bankruptcy proceedings), and the right of the
To repudiate or disaffirm any contract or lease to which
FDIC to transfer claims to a bridge entity. In addition,
the depository institution is a party, the performance of
the orderly liquidation authority limits the ability of
which is determined by the FDIC to be burdensome and
creditors to enforce certain contractual cross-defaults
the disaffirmance or repudiation of which is determined
against affiliates of the institution in receivership.
by the FDIC to promote the orderly administration of the
depository institution.

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The orderly liquidation authority provisions of the Dodd- In October 2015, the FDIC issued a proposed rule that
Frank Act became effective upon enactment. The FDIC has would increase the reserve ratio for the Deposit Insurance
completed several rulemakings and taken other actions Fund to 1.35% of total insured deposits. The proposed rule
under the orderly liquidation authority, including the would impose a surcharge on the assessments of larger
issuance of a notice describing some elements of its single depository institutions, beginning the quarter after the
point of entry or SPOE strategy pursuant to the orderly reserve ratio first reaches or exceeds 1.15% and continuing
liquidation authority provisions of the Dodd-Frank Act. through the earlier of the quarter that the reserve ratio first
Under this strategy, the FDIC would, among other things, reaches or exceeds 1.35% and December 31, 2018. Under
resolve a failed financial holding company by transferring the proposed rule, if the reserve ratio does not reach 1.35%
its assets to a bridge holding company. by December 31, 2018, the FDIC would impose a shortfall
assessment on larger depository institutions, including GS
In November 2015, we, along with a number of other
Bank USA.
major global banking organizations, adhered to an updated
version of the International Swaps and Derivatives Prompt Corrective Action. The U.S. Federal Deposit
Association Resolution Stay Protocol (the ISDA Protocol) Insurance Corporation Improvement Act of 1991
that was developed in coordination with the Financial (FDICIA), among other things, requires the federal bank
Stability Board. The ISDA Protocol imposes a stay on regulatory agencies to take prompt corrective action in
certain cross-default and early termination rights within respect of depository institutions that do not meet specified
standard ISDA derivatives contracts and securities capital requirements. FDICIA establishes five capital
financing transactions between adhering parties in the event categories for FDIC-insured banks: well-capitalized,
that one of them is subject to resolution in its home adequately capitalized, undercapitalized, significantly
jurisdiction, including a resolution under the orderly undercapitalized and critically undercapitalized.
liquidation authority in the United States. The initial
An institution may be downgraded to, or deemed to be in, a
version, which addressed ISDA derivatives contracts, took
capital category that is lower than is indicated by its capital
effect in January 2015, and the updated version, which was
ratios if it is determined to be in an unsafe or unsound
revised to also cover securities financing transactions, took
condition or if it receives an unsatisfactory examination
effect in January 2016. The ISDA Protocol is expected to be
rating with respect to certain matters. FDICIA imposes
adopted more broadly in the future, following the adoption
progressively more restrictive constraints on operations,
of regulations by banking regulators, and expanded to
management and capital distributions, as the capital
include instances where a U.S. financial holding company
category of an institution declines. Failure to meet the
becomes subject to proceedings under the U.S. bankruptcy
capital requirements could also require a depository
code.
institution to raise capital. Ultimately, critically
FDIC Insurance. GS Bank USA accepts deposits, and those undercapitalized institutions are subject to the appointment
deposits have the benefit of FDIC insurance up to the of a receiver or conservator, as described under Resolution
applicable limits. The FDICs Deposit Insurance Fund is and Recovery, and Insolvency Insolvency of an Insured
funded by assessments on insured depository institutions, Depository Institution or a Bank Holding Company
such as GS Bank USA. The amounts of these assessments above.
for larger depository institutions (generally those that have
The prompt corrective action regulations apply only to
$10 billion in assets or more), such as GS Bank USA, are
depository institutions and not to bank holding companies
currently based on the average total consolidated assets less
such as Group Inc. However, the Federal Reserve Board is
the average tangible equity of the insured depository
authorized to take appropriate action at the holding
institution during the assessment period, the supervisory
company level, based upon the undercapitalized status of
ratings of the insured depository institution and specified
the holding companys depository institution subsidiaries.
forward-looking financial measures used to calculate the
In certain instances relating to an undercapitalized
assessment rate. The assessment rate is subject to
depository institution subsidiary, the bank holding
adjustment by the FDIC.
company would be required to guarantee the performance
of the undercapitalized subsidiarys capital restoration plan
and might be liable for civil money damages for failure to
fulfill its commitments on that guarantee. Furthermore, in
the event of the bankruptcy of the holding company, the
guarantee would take priority over the holding companys
general unsecured creditors, as described under Source of
Strength above.

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Activities. The Dodd-Frank Act and the BHC Act Other Restrictions. Financial holding companies generally
generally restrict bank holding companies from engaging in can engage in a broader range of financial and related
business activities other than the business of banking and activities than are otherwise permissible for bank holding
certain closely related activities. companies as long as they continue to meet the eligibility
requirements for financial holding companies. The broader
Volcker Rule. The provisions of the Dodd-Frank Act
range of permissible activities for financial holding
referred to as the Volcker Rule became effective in
companies includes underwriting, dealing and making
July 2015. The Volcker Rule prohibits proprietary
markets in securities and making investments in non-
trading, but permits activities such as underwriting,
financial companies. In addition, financial holding
market making and risk-mitigation hedging, requires an
companies are permitted under the GLB Act to engage in
extensive compliance program and includes additional
certain commodities activities in the United States that may
reporting and record keeping requirements. The reporting
otherwise be impermissible for bank holding companies, so
requirements include calculating daily quantitative metrics
long as the assets held pursuant to these activities do not
on covered trading activities (as defined in the rule) and
equal 5% or more of their consolidated assets.
providing these metrics to regulators on a monthly basis.
The Federal Reserve Board, however, has the authority to
In addition, the Volcker Rule limits the sponsorship of, and
limit a financial holding companys ability to conduct
investment in, covered funds (as defined in the rule) by
activities that would otherwise be permissible, and will
banking entities, including Group Inc. and its subsidiaries.
likely do so if the financial holding company does not
It also limits certain types of transactions between us and
satisfactorily meet certain requirements of the Federal
our sponsored funds, similar to the limitations on
Reserve Board. For example, if a financial holding company
transactions between depository institutions and their
or any of its U.S. depository institution subsidiaries ceases
affiliates. Covered funds include our private equity funds,
to maintain its status as well-capitalized or well-managed,
certain of our credit and real estate funds, our hedge funds
the Federal Reserve Board may impose corrective capital
and certain other investment structures. The limitation on
and/or managerial requirements, as well as additional
investments in covered funds requires us to reduce our
limitations or conditions. If the deficiencies persist, the
investment in each such fund to 3% or less of the funds net
financial holding company may be required to divest its
asset value, and to reduce our aggregate investment in all
U.S. depository institution subsidiaries or to cease engaging
such funds to 3% or less of our Tier 1 capital.
in activities other than the business of banking and certain
In December 2014, the Federal Reserve Board extended the closely related activities.
conformance period through July 2016 for investments in,
In addition, we are required to obtain prior Federal Reserve
and relationships with, covered funds that were in place
Board approval before engaging in certain banking and
prior to December 31, 2013, and indicated that it intends to
other financial activities both within and outside the United
further extend the conformance period through July 2017.
States.
See Managements Discussion and Analysis of Financial
Single-counterparty credit limits and early remediation
Condition and Results of Operations Regulatory
requirements have been proposed but are still under
Developments Volcker Rule in Part II, Item 7 of the
consideration by the Federal Reserve Board. The proposed
2015 Form 10-K for information about our investments in
single-counterparty credit limits impose more stringent
covered funds.
requirements for credit exposure among major financial
institutions, which (together with other provisions
incorporated into the Basel III capital rules) may affect our
ability to transact or hedge with other financial institutions.
The proposed early remediation rules are modeled on the
prompt corrective action regime, described under U.S.
Deposit Insurance and Prompt Corrective Action, but are
designed to require action to begin in earlier stages of a
companys financial distress, based on a range of triggers,
including capital and leverage, stress test results, liquidity
and risk management.

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If any insured depository institution subsidiary of a In Europe, we provide broker-dealer services that are
financial holding company fails to maintain at least a subject to oversight by national regulators as well as EU
satisfactory rating under the Community Reinvestment regulators. These services are regulated in accordance with
Act, the financial holding company would be subject to national laws, many of which implement EU directives, and
similar restrictions on activities. increasingly by directly applicable EU regulations. These
national and EU laws require, among other things,
In addition, New York State banking law imposes lending
compliance with certain capital adequacy standards,
limits (which take into account credit exposure from
customer protection requirements and market conduct and
derivative transactions) and other requirements that could
trade reporting rules.
impact the manner and scope of GS Bank USAs activities.
We provide broker-dealer services in and from the United
During the past several years, the U.S. federal bank
Kingdom under the regulation of the PRA and the FCA.
regulatory agencies have raised concerns over origination
GSI, our regulated U.K. broker-dealer subsidiary, is subject
and other practices in leveraged lending markets. The
to capital requirements imposed by the PRA. GSI also has
agencies have issued guidance that focuses on transaction
its own capital planning and stress testing process, which
structures and risk management frameworks and outlines
incorporates internally designed stress tests and those
high-level principles for safe-and-sound leveraged lending,
required under the PRAs Internal Capital Adequacy
including underwriting standards, valuation and stress
Assessment Process. See Managements Discussion and
testing.
Analysis of Financial Condition and Results of
Broker-Dealer and Securities Regulation Operations Equity Capital Management and Regulatory
Our broker-dealer subsidiaries are subject to regulations Capital Subsidiary Capital Requirements in Part II,
that cover all aspects of the securities business, including Item 7 of the 2015 Form 10-K for information about GSIs
sales methods, trade practices, use and safekeeping of capital ratios.
clients funds and securities, capital structure,
Goldman Sachs Japan Co., Ltd. (GSJCL), our regulated
recordkeeping, the financing of clients purchases, and the
Japanese broker-dealer, is subject to capital requirements
conduct of directors, officers and employees. In the United
imposed by Japans Financial Services Agency. GSJCL is
States, the SEC is the federal agency responsible for the
also regulated by the Tokyo Stock Exchange, the Osaka
administration of the federal securities laws. GS&Co. is
Exchange, the Tokyo Financial Exchange, the Japan
registered as a broker-dealer, a municipal advisor and an
Securities Dealers Association, the Tokyo Commodity
investment adviser with the SEC and as a broker-dealer in
Exchange, Securities and Exchange Surveillance
all 50 states and the District of Columbia. Self-regulatory
Commission, Bank of Japan, the Ministry of Finance and
organizations, such as FINRA and the NYSE, adopt rules
the Ministry of Economy, Trade and Industry, among
that apply to, and examine, broker-dealers such as GS&Co.
others.
In addition, state securities and other regulators also have
Also, the Securities and Futures Commission in Hong
regulatory or oversight authority over GS&Co. Similarly,
Kong, the Monetary Authority of Singapore, the China
our businesses are also subject to regulation by various non-
Securities Regulatory Commission, the Korean Financial
U.S. governmental and regulatory bodies and self-
Supervisory Service, the Reserve Bank of India, the
regulatory authorities in virtually all countries where we
Securities and Exchange Board of India, the Australian
have offices, as described further below, as well as under
Securities and Investments Commission and the Australian
Other Regulation. GSEC is a registered U.S. broker-
Securities Exchange, among others, regulate various of our
dealer and is regulated by the SEC, the NYSE and FINRA.
subsidiaries and also have capital standards and other
For a description of net capital requirements applicable to
requirements comparable to the rules of the SEC. Various
GS&Co. and GSEC, see Note 20 to the consolidated
of our other subsidiaries are regulated by the banking and
financial statements in Part II, Item 8 of the 2015
regulatory authorities in jurisdictions in which we operate,
Form 10-K.
including, among others, Brazil and Dubai.
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.

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The Dodd-Frank Act will result in additional regulation by Swaps, Derivatives and Commodities Regulation
the SEC, the CFTC and other regulators of our broker- The commodity futures, commodity options and swaps
dealer and regulated subsidiaries in a number of respects. industry in the United States is subject to regulation under
The legislation calls for the imposition of expanded the U.S. Commodity Exchange Act. The CFTC is the
standards of care by market participants in dealing with federal agency charged with the administration of the CEA.
clients and customers, including by providing the SEC with In addition, the SEC is the federal agency charged with the
authority to adopt rules establishing fiduciary duties for regulation of security-based swaps. Several of our
broker-dealers and directing the SEC to examine and subsidiaries, including GS&Co. and GSEC, are registered
improve sales practices and disclosure by broker-dealers with the CFTC and act as futures commission merchants,
and investment advisers. In addition, the U.S. Department commodity pool operators, commodity trading advisors or
of Labor has issued proposed rules defining the (as described below) swap dealers, and are subject to CFTC
circumstances in which a person would be treated as a regulations. The rules and regulations of various self-
fiduciary under the Employee Retirement Income Security regulatory organizations, such as the Chicago Board of
Act of 1974 by reason of providing investment advice to Trade and the Chicago Mercantile Exchange, other futures
retirement plans and individual retirement accounts, as well exchanges and the National Futures Association, also
as proposed exemptions. govern the commodity futures, commodity options and
swaps activities of these entities. In addition, Goldman
Our broker-dealer and other subsidiaries are also subject to
Sachs Financial Markets, L.P. is registered with the SEC as
rules adopted by federal agencies pursuant to the Dodd-
an OTC derivatives dealer and conducts certain OTC
Frank Act that require any person who organizes or
derivatives activities.
initiates an asset-backed security transaction to retain a
portion (generally, at least five percent) of any credit risk The Dodd-Frank Act provides for significantly increased
that the person conveys to a third party. Securitizations regulation of, and restrictions on, derivative markets and
would also be affected by rules proposed by the SEC to transactions. In particular, the Dodd-Frank Act imposes the
implement the Dodd-Frank Acts prohibition against following requirements relating to swaps and security-
securitization participants engaging in any transaction that based swaps:
would involve or result in any material conflict of interest
Real-time public and regulatory reporting of trade
with an investor in a securitization transaction. The
information for swaps and security-based swaps and
proposed rules would exempt bona fide market-making
large trader reporting for swaps;
activities and risk-mitigating hedging activities in
connection with securitization activities from the general Registration of swap dealers and major swap participants
prohibition. with the CFTC and of security-based swap dealers and
major security-based swap participants with the SEC;
The SEC, FINRA and regulators in various non-U.S.
jurisdictions have imposed both conduct-based and Position limits, aggregated generally across commonly
disclosure-based requirements with respect to research controlled accounts and commonly controlled affiliates,
reports and research analysts and may impose additional that cap exposure to derivatives on certain physical
regulations. commodities;
Mandated clearing through central counterparties and
execution through regulated exchanges or electronic
facilities for certain swaps and security-based swaps;
New business conduct standards and other requirements
for swap dealers, major swap participants, security-based
swap dealers and major security-based swap participants,
covering their relationships with counterparties, internal
oversight and compliance structures, conflict of interest
rules, internal information barriers, general and trade-
specific record-keeping and risk management;

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Margin requirements for trades that are not cleared The CFTC has not yet finalized its capital regulations for
through a central counterparty; and swap dealers. However, many of the requirements,
including registration of swap dealers, mandatory clearing
Entity-level capital requirements for swap dealers, major
and execution of certain swaps, business conduct standards
swap participants, security-based swap dealers, and
and real-time public trade reporting, have taken effect
major security-based swap participants.
already under CFTC rules, and the SEC and the CFTC have
The terms swaps and security-based swaps are finalized the definitions of a number of key terms. Finally,
generally defined broadly for purposes of these the CFTC has begun to decide which swaps must be cleared
requirements, and can include a wide variety of derivative through central counterparties and executed on swap
instruments in addition to those conventionally called execution facilities or exchanges. In particular, certain
swaps. The definition includes certain forward contracts, interest rate swaps and credit default swaps are now subject
options, certain loan participations and guarantees of to these clearing and trade-execution requirements. The
swaps, subject to certain exceptions, and relates to a wide CFTC is expected to continue to make such determinations
variety of underlying assets or obligations, including during 2016.
currencies, commodities, interest or other monetary rates,
The SEC has adopted rules relating to trade reporting and
yields, indices, securities, credit events, loans and other
real-time reporting requirements for security-based swap
financial obligations.
dealers and major security-based swap participants. The
The CFTC is responsible for issuing rules relating to swaps, SEC has also adopted final rules relating to the registration
swap dealers and major swap participants, and the SEC is of security-based swap dealers, but such registration is not
responsible for issuing rules relating to security-based currently required. The SEC has proposed, but not yet
swaps, security-based swap dealers and major security- finalized, rules to impose margin, capital, segregation and
based swap participants. The U.S. federal bank regulatory business conduct requirements for security-based swap
agencies (acting jointly) adopted final rules in dealers and major security-based swap participants. The
October 2015 and the CFTC adopted final margin rules for SEC has also proposed rules that would govern the design
uncleared swaps in December 2015 that will phase in of new trading venues for security-based swaps and
variation margin requirements from September 1, 2016 establish the process for determining which products must
through March 1, 2017 and initial margin requirements be traded on these venues.
from September 1, 2016 through September 1, 2020,
We have registered certain subsidiaries as swap dealers
depending on the level of swaps and foreign exchange
under the CFTC rules, including GS&Co., GS Bank USA,
forward transaction activity of the swap dealer and the
GSI and J. Aron & Company. We also expect to register
relevant counterparty. The final rules of the U.S. federal
certain subsidiaries as security-based swap dealers. We
bank regulatory agencies would generally apply to inter-
expect that these subsidiaries, and our businesses more
affiliate transactions, with limited relief available from the
broadly, will continue to be subject to significant and
initial margin requirements for affiliates that have
developing regulation and regulatory oversight in
registered with the CFTC as swap dealers. Under the CFTC
connection with swap-related activities.
final rules, inter-affiliate transactions would be exempt
from initial margin requirements with certain exceptions, Similar regulations have been proposed or adopted in
but variation margin requirements would still apply. We jurisdictions outside the United States, including the
expect the SEC to adopt margin regulations as well in 2016. adoption of standardized execution and clearing, margining
and reporting requirements for OTC derivatives. For
instance, the EU has established regulatory requirements
for OTC derivatives activities under the European Market
Infrastructure Regulation, including requirements relating
to portfolio reconciliation and reporting, which have
already taken effect, as well as requirements relating to
clearing and margining for uncleared derivatives, which are
currently expected to be finalized during 2016.

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The CFTC and SEC have issued guidance and rules relating In addition, as a result of our power-related and
to swap activities. The CFTC has provided guidance and commodities activities, we are subject to energy,
timing on the cross-border regulation of swaps and environmental and other governmental laws and
announced that it had reached an understanding with the regulations, as described under Risk Factors Our
European Commission regarding the cross-border commodities activities, particularly our physical
regulation of derivatives and the common goals underlying commodities activities, subject us to extensive regulation
their respective regulations. The CFTC also approved and involve certain potential risks, including
certain comparability determinations that would permit environmental, reputational and other risks that may
substituted compliance with non-U.S. regulatory regimes expose us to significant liabilities and costs in Part I,
for certain swap regulations related to certain business Item 1A of the 2015 Form 10-K.
conduct requirements, including chief compliance officer
Investment Management Regulation
duties, conflict of interest rules, monitoring of position
Our investment management business is subject to
limits, record-keeping and risk management. The SEC
significant regulation in numerous jurisdictions around the
issued rules and guidance on cross-border security-based
world relating to, among other things, the safeguarding of
swap activities and the CFTC issued proposed rules that
client assets, offerings of funds, marketing activities,
would determine the circumstances under which registered
transactions among affiliates and our management of client
swap dealers would be subject to the CFTCs rules
funds.
regarding margin in connection with uncleared swaps in
cross-border transactions. In particular, under the Certain of our subsidiaries are registered with, and subject
proposal, certain non-U.S. swap dealers would generally be to oversight by, the SEC as investment advisers. The SEC
required to comply with the CFTCs rules but, with respect recently adopted amendments to the rules that govern SEC-
to the requirement to post margin, these non-U.S. swap registered money market mutual funds. The new rules
dealers would be permitted to comply with comparable require institutional prime money market funds to value
margin requirements in a foreign jurisdiction, subject to the their portfolio securities using market-based factors and to
CFTCs approval of the particular jurisdiction. Substituted sell and redeem their shares based on a floating net asset
compliance would also be available with respect to the value. In addition, the rules allow, in certain circumstances,
collection of margin in certain circumstances. The CFTCs for the board of directors of money market mutual funds to
rules will only be applicable to those swap dealers that are impose liquidity fees and redemption gates and also require
not subject to the margin requirements of a prudential additional disclosure, reporting and stress testing. Certain
regulator. reporting requirements became effective during 2015, and
the firms money market mutual funds will be required to
The application of new derivatives rules across different
comply with the amendments relating to floating net asset
national and regulatory jurisdictions has not yet been fully
value, fees and redemption gates and stress testing in 2016.
established and specific determinations of the extent to
which regulators in each of the relevant jurisdictions will In September 2015, the SEC also proposed rules that would
defer to regulations in other jurisdictions have not yet been require registered funds to adopt and implement liquidity
completed. The full impact of the various U.S. and non-U.S. risk management programs, including establishing a
regulatory developments in this area will not be known minimum percentage of net assets that could be invested
with certainty until all the rules are finalized and only in assets offering three-day liquidity and classifying
implemented and market practices and structures develop and reviewing the liquidity of fund portfolio assets; permit
under the final rules. funds to employ swing pricing, under which the net asset
value of a funds shares may be adjusted in order to pass the
J. Aron & Company is authorized by the U.S. Federal
cost of trading in such shares to purchasing or redeeming
Energy Regulatory Commission (FERC) to sell wholesale
shareholders; and require related disclosures.
physical power at market-based rates. As a FERC-
authorized power marketer, J. Aron & Company 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.

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In December 2015, the SEC also proposed a new rule The U.S. federal bank regulatory agencies have provided
regulating the use of derivatives by registered funds. Under guidance designed to ensure that incentive compensation
the proposed rule, a registered fund would be required to, arrangements at banking organizations take into account
among other things, comply with one of two alternative risk and are consistent with safe and sound practices. The
portfolio limitations designed to impose a limit on the total guidance sets forth the following three key principles with
amount of leverage the fund can obtain through derivatives respect to incentive compensation arrangements: (i) the
transactions; maintain a minimum amount of qualifying arrangements should provide employees with incentives
coverage assets (generally limited to cash and cash that appropriately balance risk and financial results in a
equivalents) to support payment obligations for each manner that does not encourage employees to expose their
derivative transaction; establish a derivatives risk organizations to imprudent risk; (ii) the arrangements
management program if derivative use meets specified should be compatible with effective controls and risk
thresholds; and comply with new recordkeeping, disclosure management; and (iii) the arrangements should be
and reporting requirements related to its use of derivatives. supported by strong corporate governance. The guidance
provides that supervisory findings with respect to incentive
Certain of our European subsidiaries are subject to the
compensation will be incorporated, as appropriate, into the
Alternative Investment Fund Managers Directive and
organizations supervisory ratings, which can affect its
related regulations, which govern the approval,
ability to make acquisitions or perform other actions. The
organizational, marketing and reporting requirements of
guidance also provides that enforcement actions may be
EU-based alternative investment managers and the ability
taken against a banking organization if its incentive
of alternative investment fund managers located outside the
compensation arrangements or related risk management,
EU to access the EU market.
control or governance processes pose a risk to the
The European Commission has published a proposal organizations safety and soundness.
relating to money market funds, including provisions
The Financial Stability Board has released standards for
prescribing minimum levels of daily and weekly liquidity,
implementing certain compensation principles for banks
clear labeling of money market funds, a 3% capital buffer
and other financial companies designed to encourage sound
for constant net asset value funds and internal credit risk
compensation practices. These standards are to be
assessments.
implemented by local regulators. In the EU, CRD IV
Compensation Practices includes compensation provisions designed to implement
Our compensation practices are subject to oversight by the the Financial Stability Boards compensation standards.
Federal Reserve Board and, with respect to some of our These rules have been implemented by EU member states
subsidiaries and employees, by other financial regulatory and, among other things, limit the ratio of variable to fixed
bodies worldwide. The scope and content of compensation compensation of certain employees, including those
regulation in the financial industry are continuing to identified as having a material impact on the risk profile of
develop, and we expect that these regulations and resulting EU-regulated entities, including GSI.
market practices will evolve over a number of years.
The EU 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 described above and the
Dodd-Frank Act provision described below.

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The Dodd-Frank Act requires the U.S. financial regulators, Other Regulation
including the Federal Reserve Board, to establish joint The U.S. and non-U.S. government agencies, regulatory
regulations or guidelines prohibiting incentive-based bodies and self-regulatory organizations, as well as state
payment arrangements at specified regulated entities having securities commissions and other state regulators in the
at least $1 billion in total assets (which would include United States, are empowered to conduct administrative
Group Inc. and some of its depository institution, broker- proceedings that can result in censure, fine, the issuance of
dealer and investment adviser subsidiaries) that encourage cease-and-desist orders, or the suspension or expulsion of a
inappropriate risks by providing an executive officer, regulated entity or its directors, officers or employees. In
employee, director or principal shareholder with excessive addition, a number of our other activities require us to
compensation, fees, or benefits or that could lead to obtain licenses, adhere to applicable regulations and be
material financial loss to the entity. In addition, these subject to the oversight of various regulators in the
regulators must establish regulations or guidelines requiring jurisdictions in which we conduct these activities.
enhanced disclosure to regulators of incentive-based
The EU finalized the Markets in Financial Instruments
compensation arrangements. The initial version of these
Regulation and a revision of the Markets in Financial
regulations was proposed by the U.S. financial regulators in
Instruments Directive (collectively, MiFID II). These
early 2011 but the regulations have not yet been finalized.
include new extensive market structure reforms, such as the
The proposed regulations incorporate the three key
establishment of new trading venue categories for the
principles from the regulatory guidance described above. If
purposes of discharging the obligation to trade OTC
the regulations are adopted in the form proposed, they may
derivatives on a trading platform, enhanced pre- and post-
restrict our flexibility with respect to the manner in which
trade transparency covering a wider range of financial
we structure compensation.
instruments and a reform of the equities markets.
Anti-Money Laundering and Anti-Bribery Rules and Commodities trading firms will be required to calculate
Regulations their positions and adhere to specific limits. Other reforms
The U.S. Bank Secrecy Act (BSA), as amended by the USA introduce enhanced transaction reporting, the publication
PATRIOT Act of 2001 (PATRIOT Act), contains anti- of best execution data by investment firms and trading
money laundering and financial transparency laws and venues, investor protection-related and organizational
mandated the implementation of various regulations requirements. Other requirements may affect the way
applicable to all financial institutions, including standards investment managers can pay for the receipt of investment
for verifying client identification at account opening, and research. On February 10, 2016, the European Commission
obligations to monitor client transactions and report proposed delaying the effectiveness of MiFID II until
suspicious activities. Through these and other provisions, January 2018.
the BSA and the PATRIOT Act seek to promote the
The EU and national financial legislators and regulators
identification of parties that may be involved in terrorism,
have proposed or adopted numerous further market
money laundering or other suspicious activities. Anti-
reforms that may impact our businesses, including
money laundering laws outside the United States contain
heightened corporate governance standards for financial
some similar provisions.
institutions and rules on indices that are used as
In addition, we are subject to laws and regulations benchmarks for financial instruments or funds. In addition,
worldwide, including the U.S. Foreign Corrupt Practices the European Commission, the European Securities Market
Act and the U.K. Bribery Act, relating to corrupt and illegal Authority and the European Banking Authority have
payments to, and hiring practices with regard to, announced or are formulating regulatory standards and
government officials and others. The obligation of financial other measures which will impact our European operations.
institutions, including Goldman Sachs, to identify their Certain of our subsidiaries are also regulated by the
clients, to monitor for and report suspicious transactions, European securities, derivatives and commodities
to monitor direct and indirect payments to government exchanges of which they are members.
officials, to respond to requests for 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.

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The European Commission has published a proposal for a Also posted on our web site, and available in print upon
common system of financial transactions tax which would request of any shareholder to our Investor Relations
be implemented in certain EU member states willing to Department, are our certificate of incorporation and by-
engage in enhanced cooperation in this area. The proposed laws, charters for our Audit Committee, Risk Committee,
financial transactions tax is broad in scope and would Compensation Committee, Corporate Governance and
apply to transactions in a wide variety of financial Nominating Committee, and Public Responsibilities
instruments and derivatives. The European Commission Committee, our Policy Regarding Director Independence
has also published a draft proposal for structural reform of Determinations, our Policy on Reporting of Concerns
EU banks, which would prohibit certain banks from Regarding Accounting and Other Matters, our Corporate
proprietary trading and would require separating certain Governance Guidelines and our Code of Business Conduct
trading activities from deposit-taking entities. and Ethics governing our directors, officers and employees.
Within the time period required by the SEC, we will post on
As described above, many of our subsidiaries are subject to
our web site any amendment to the Code of Business
regulatory capital requirements in jurisdictions throughout
Conduct and Ethics and any waiver applicable to any
the world. Subsidiaries not subject to separate regulation
executive officer, director or senior financial officer.
may hold capital to satisfy local tax guidelines, rating
agency requirements or internal policies, including policies In addition, our web site includes information concerning:
concerning the minimum amount of capital a subsidiary
Purchases and sales of our equity securities by our
should hold based upon its underlying risk.
executive officers and directors;
Certain of our businesses are subject to laws and
Disclosure relating to certain non-GAAP financial
regulations enacted by U.S. federal and state governments,
measures (as defined in the SECs Regulation G) that we
the EU or other jurisdictions and/or enacted by various
may make public orally, telephonically, by webcast, by
regulatory organizations or exchanges relating to the
broadcast or by similar means from time to time;
privacy of the information of clients, employees or others,
including the GLB Act, the EU Data Protection Directive, Dodd-Frank Act stress test results; and
the Japanese Personal Information Protection Act, the
The firms risk management practices and regulatory
Hong Kong Personal Data (Privacy) Ordinance, the
capital ratios, as required under the disclosure-related
Australian Privacy Act and the Brazilian Bank Secrecy Law.
provisions of the Revised Capital Framework, which are
based on the third pillar of Basel III.

Available Information Our Investor Relations Department can be contacted at

The Goldman Sachs Group, Inc., 200 West Street,
Our internet address is www.gs.com and the investor 29th Floor, New York, New York 10282, Attn:
relations section of our web site is located at Investor Relations, telephone: 212-902-0300, e-mail:
www.gs.com/shareholders. We make available free of [email protected].
charge through the investor relations section of our web
site, annual reports on Form 10-K, quarterly reports on From time to time, we use our website, our Twitter account
Form 10-Q and current reports on Form 8-K and (twitter.com/GoldmanSachs) and other social media
amendments to those reports filed or furnished pursuant to channels as additional means of disclosing public
Section 13(a) or 15(d) of the U.S. Securities Exchange Act of information to investors, the media and others interested in
1934 (Exchange Act), as well as proxy statements, as soon Goldman Sachs. It is possible that certain information we
as reasonably practicable after we electronically file such post on our website and on social media could be deemed to
material with, or furnish it to, the SEC. be material information, and we encourage investors, the
media and others interested in Goldman Sachs to review the
business and financial information we post on our website
and on the social media channels identified above. The
information on our website and the firms social media
channels is not incorporated by reference into the 2015
Form 10-K.

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Cautionary Statement Pursuant to the U.S.

Private Securities Litigation Reform Act of
1995
We have included or incorporated by reference in the 2015 Statements about our investment banking transaction
Form 10-K, and from time to time our management may backlog are subject to the risk that the terms of these
make, statements that may constitute forward-looking transactions may be modified or that they may not be
statements within the meaning of the safe harbor provisions completed at all; therefore, the net revenues, if any, that we
of the U.S. Private Securities Litigation Reform Act of 1995. actually earn from these transactions may differ, possibly
Forward-looking statements are not historical facts, but materially, from those currently expected. Important
instead represent only our beliefs regarding future events, factors that could result in a modification of the terms of a
many of which, by their nature, are inherently uncertain and transaction or a transaction not being completed include, in
outside our control. These statements include statements the case of underwriting transactions, a decline or
other than historical information or statements of current continued weakness in general economic conditions,
condition and may relate to our future plans and objectives outbreak of hostilities, volatility in the securities markets
and results, among other things, and may also include generally or an adverse development with respect to the
statements about the effect of changes to the capital, issuer of the securities and, in the case of financial advisory
leverage, liquidity, long-term debt and total loss-absorbing transactions, a decline in the securities markets, an inability
capacity rules applicable to banks and bank holding to obtain adequate financing, an adverse development with
companies, the impact of the Dodd-Frank Act on our respect to a party to the transaction or a failure to obtain a
businesses and operations, and various legal proceedings or required regulatory approval. For information about other
mortgage-related contingencies as set forth in Notes 27 and important factors that could adversely affect our
18, respectively, to the consolidated financial statements in investment banking transactions, see Risk Factors in
Part II, Item 8 of the 2015 Form 10-K, as well as statements Part I, Item 1A of the 2015 Form 10-K.
about the results of our Dodd-Frank Act and firm stress tests,
We have provided in this filing information regarding the
statements about the objectives and effectiveness of our
firms capital ratios, including the CET1 ratios under the
business continuity plan, information security program, risk
Advanced and Standardized approaches on a fully phased-
management and liquidity policies, statements about trends
in basis, as well as the LCR and the supplementary leverage
in or growth opportunities for our businesses, statements
ratios for the firm and GS Bank USA. The statements with
about our future status, activities or reporting under U.S. or
respect to these ratios are forward-looking statements,
non-U.S. banking and financial regulation, and statements
based on our current interpretation, expectations and
about our investment banking transaction backlog. By
understandings of the relevant regulatory rules and
identifying these statements for you in this manner, we are
guidance, and reflect significant assumptions concerning
alerting you to the possibility that our actual results and
the treatment of various assets and liabilities and the
financial condition may differ, possibly materially, from the
manner in which the ratios are calculated. As a result, the
anticipated results and financial condition indicated in these
methods used to calculate these ratios may differ, possibly
forward-looking statements. Important factors that could
materially, from those used in calculating the firms capital,
cause our actual results and financial condition to differ from
liquidity and leverage ratios for any future disclosures. The
those indicated in the forward-looking statements include,
ultimate methods of calculating the ratios will depend on,
among others, those described below and under Risk
among other things, implementation guidance or further
Factors in Part I, Item 1A of the 2015 Form 10-K.
rulemaking from the U.S. federal bank regulatory agencies
Statements about the agreement in principle to resolve the and the development of market practices and standards.
RMBS Working Group investigation and its impact on the
firms results of operations, financial condition and cash
flows are based on the firms current expectations regarding
the ultimate terms of the definitive settlement
documentation. The agreement in principle is subject to the
negotiation of definitive documentation, and there can be no
assurance that the firm, the U.S. Department of Justice and
the other applicable governmental authorities will agree on
the definitive documentation. Accordingly, the effects of the
definitive settlement, as well as the firms ability to negotiate
definitive documentation for the settlement, may change
materially from what is currently expected.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

Item 1A. Risk Factors

We face a variety of risks that are substantial and inherent In 2008 and through early 2009, the financial services
in our businesses, including market, liquidity, credit, industry and the securities markets generally were
operational, legal, regulatory and reputational risks. The materially and adversely affected by significant declines in
following are some of the more important factors that the values of nearly all asset classes and by a serious lack of
could affect our businesses. liquidity. Since 2011, concerns about European sovereign
debt risk and its impact on the European banking system,
Our businesses have been and may continue to be
and about changes in interest rates and other market
adversely affected by conditions in the global
conditions or actual changes in interest rates and other
financial markets and economic conditions generally.
market conditions, including market conditions in China,
Our businesses, by their nature, do not produce predictable have resulted, at times, in significant volatility while
earnings, and all of our businesses are materially affected by negatively impacting the levels of client activity.
conditions in the global financial markets and economic
General uncertainty about economic, political and market
conditions generally, both directly and through their impact
activities, and the scope, timing and final implementation of
on client activity levels. These conditions can change
regulatory reform, as well as weak consumer, investor and
suddenly and negatively.
CEO confidence resulting in large part from such
Our financial performance is highly dependent on the uncertainty, continues to negatively impact client activity,
environment in which our businesses operate. A favorable which adversely affects many of our businesses. Periods of
business environment is generally characterized by, among low volatility and periods of high volatility combined with
other factors, high global gross domestic product growth, a lack of liquidity, have at times had an unfavorable impact
regulatory and market conditions which result in on our market-making businesses.
transparent, liquid and efficient capital markets, low
Our revenues and profitability and those of our competitors
inflation, high business and investor confidence, stable
have been and will continue to be impacted by requirements
geopolitical conditions, clear regulations and strong
relating to capital, additional loss-absorbing capacity,
business earnings. Unfavorable or uncertain economic and
leverage, minimum liquidity and long-term funding levels,
market conditions can be caused by: concerns about
requirements related to resolution and recovery planning,
sovereign defaults; uncertainty in U.S. federal fiscal or
derivatives clearing and margin rules and levels of
monetary policy, the U.S. federal debt ceiling and the
regulatory oversight, as well as limitations on whether and
continued funding of the U.S. government; the extent of
how certain business activities may be carried out by
and uncertainty about the timing and nature of regulatory
financial institutions. Although interest rates are at or near
reforms; declines in economic growth, business activity or
historically low levels, financial institution returns have
investor or business confidence; limitations on the
also been negatively impacted by increased funding costs
availability or increases in the cost of credit and capital;
due in part to the withdrawal of perceived government
illiquid markets; increases in inflation, interest rates,
support of such institutions in the event of future financial
exchange rate or basic commodity price volatility or default
crises. In addition, liquidity in the financial markets has also
rates; outbreaks of hostilities or other geopolitical
been negatively impacted as market participants and
instability; corporate, political or other scandals that reduce
market practices and structures adjust to new regulations.
investor confidence in capital markets; extreme weather
events or other natural disasters or pandemics; or a The degree to which these and other changes resulting from
combination of these or other factors. the financial crisis will have a long-term impact on the
profitability of financial institutions will depend on the final
interpretation and implementation of new regulations, the
manner in which markets, market participants and
financial institutions adapt to the new landscape, and the
prevailing economic and financial market conditions.
However, there is a significant risk that such changes will,
at least in the near term, continue to negatively impact the
absolute level of revenues, profitability and return on equity
at our firm and at other financial institutions.

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Our businesses and those of our clients are subject to These developments could impact our profitability in the
extensive and pervasive regulation around the world. affected jurisdictions, or even make it uneconomic for us to
continue to conduct all or certain of our businesses in such
As a participant in the financial services industry and a
jurisdictions, or could cause us to incur significant costs
systemically important financial institution, we are subject
associated with changing our business practices,
to extensive regulation in jurisdictions around the world.
restructuring our businesses, moving all or certain of our
We face the risk of significant intervention by regulatory
businesses and our employees to other locations or
and taxing authorities in all jurisdictions in which we
complying with applicable capital requirements, including
conduct our businesses. In many cases, our activities may be
liquidating assets or raising capital in a manner that
subject to overlapping and divergent regulation in different
adversely increases our funding costs or otherwise adversely
jurisdictions. Among other things, as a result of regulators
affects our shareholders and creditors.
or private parties challenging our compliance with existing
laws and regulations, we could be fined, prohibited from U.S. and non-U.S. regulatory developments, in particular
engaging in some of our business activities, subject to the Dodd-Frank Act and Basel III, have significantly altered
limitations or conditions on our business activities or the regulatory framework within which we operate and
subjected to new or substantially higher taxes or other may adversely affect our competitive position and
governmental charges in connection with the conduct of profitability.
our businesses or with respect to our employees. Such
Among the aspects of the Dodd-Frank Act that have
limitations or conditions may negatively impact our
affected or may in the future affect our businesses are:
profitability.
increased capital, liquidity and reporting requirements;
Separate and apart from the impact on the scope and limitations on activities in which we may engage; increased
profitability of our business activities, day-to-day regulation of and restrictions on OTC derivatives markets
compliance with existing laws and regulations, in particular and transactions; limitations on incentive compensation;
those laws and regulations adopted since 2008, has limitations on affiliate transactions; requirements to
involved and will continue to involve significant amounts of reorganize or limit activities in connection with recovery
time, including that of our senior leaders and that of an and resolution planning; increased deposit insurance
increasing number of dedicated compliance and other assessments; and increased standards of care for broker-
reporting and operational personnel, all of which may dealers and investment advisers in dealing with clients. The
negatively impact our profitability. implementation of higher capital requirements, the liquidity
coverage ratio, the net stable funding ratio, requirements
If there are new laws or regulations or changes in the
relating to long-term debt and total loss-absorbing capacity
enforcement of existing laws or regulations applicable to
and the prohibition on proprietary trading and the
our businesses or those of our clients, including capital,
sponsorship of, or investment in, covered funds by the
liquidity, leverage, long-term debt, total loss-absorbing
Volcker Rule may adversely affect our profitability and
capacity and margin requirements, restrictions on leveraged
competitive position, particularly if these requirements do
lending or other business practices, reporting requirements,
not apply, or do not apply equally, to our competitors or
requirements relating to recovery and resolution planning,
are not implemented uniformly across jurisdictions.
tax burdens and compensation restrictions, that are
imposed on a limited subset of financial institutions (either As described under Business Regulation Capital and
based on size, activities, geography or other criteria), Liquidity Requirements Payment of Dividends and Stock
compliance with these new laws or regulations, or changes Repurchases in Part I, Item 1 of the 2015 Form 10-K,
in the enforcement of existing laws or regulations, could Group Inc.s proposed capital actions and capital plan are
adversely affect our ability to compete effectively with other reviewed by the Federal Reserve Board as part of the CCAR
institutions that are not affected in the same way. In process. If the Federal Reserve Board objects to our
addition, regulation imposed on financial institutions or proposed capital actions in our capital plan, Group Inc.
market participants generally, such as taxes on financial could be prohibited from taking some or all of the proposed
transactions, could adversely impact levels of market capital actions, including increasing or paying dividends on
activity more broadly, and thus impact our businesses. common or preferred stock or repurchasing common stock
or other capital securities. Our inability to carry out our
proposed capital actions could, among other things,
prevent us from returning capital to our shareholders and
impact our return on equity.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

We are also subject to laws and regulations relating to the Our businesses have been and may be adversely
privacy of the information of clients, employees or others, affected by declining asset values. This is particularly
and any failure to comply with these regulations could true for those businesses in which we have net long
expose us to liability and/or reputational damage. In positions, receive fees based on the value of assets
addition, our businesses are increasingly subject to laws and managed, or receive or post collateral.
regulations relating to surveillance, encryption and data on-
Many of our businesses have net long positions in debt
shoring in the jurisdictions in which we operate.
securities, loans, derivatives, mortgages, equities (including
Compliance with these laws and regulations may require us
private equity and real estate) and most other asset classes.
to change our policies, procedures and technology for
These include positions we take when we act as a principal
information security, which could, among other things,
to facilitate our clients activities, including our exchange-
make us more vulnerable to cyber attacks and
based market-making activities, or commit large amounts
misappropriation, corruption or loss of information or
of capital to maintain positions in interest rate and credit
technology.
products, as well as through our currencies, commodities,
Increasingly, regulators and courts have sought to hold equities and mortgage-related activities. Because
financial institutions liable for the misconduct of their substantially all of these investing, lending and market-
clients where such regulators and courts have determined making positions are marked-to-market on a daily basis,
that the financial institution should have detected that the declines in asset values directly and immediately impact our
client was engaged in wrongdoing, even though the earnings, unless we have effectively hedged our
financial institution had no direct knowledge of the exposures to such declines.
activities engaged in by its client. Regulators and courts
In certain circumstances (particularly in the case of credit
have also increasingly found liability as a control person
products, including leveraged loans, and private equities or
for activities of entities in which financial institutions or
other securities that are not freely tradable or lack
funds controlled by financial institutions have an
established and liquid trading markets), it may not be
investment, but which they do not actively manage. In
possible or economic to hedge such exposures and to the
addition, regulators and courts continue to seek to establish
extent that we do so the hedge may be ineffective or may
fiduciary obligations to counterparties to which no such
greatly reduce our ability to profit from increases in the
duty had been assumed to exist. To the extent that such
values of the assets. Sudden declines and significant
efforts are successful, the cost of, and liabilities associated
volatility in the prices of assets may substantially curtail or
with, engaging in brokerage, clearing, market-making,
eliminate the trading markets for certain assets, which may
prime brokerage, investing and other similar activities
make it difficult to sell, hedge or value such assets. The
could increase significantly. To the extent that we have
inability to sell or effectively hedge assets reduces our ability
fiduciary obligations in connection with acting as a
to limit losses in such positions and the difficulty in valuing
financial adviser, investment adviser or in other roles for
assets may negatively affect our capital, liquidity or leverage
individual, institutional, sovereign or investment fund
ratios, increase our funding costs and generally require us to
clients, any breach, or even an alleged breach, of such
maintain additional capital.
obligations could have materially negative legal, regulatory
and reputational consequences. In our exchange-based market-making activities, we are
obligated by stock exchange rules to maintain an orderly
For information about the extensive regulation to which
market, including by purchasing securities in a declining
our businesses are subject, see Business Regulation in
market. In markets where asset values are declining and in
Part I, Item 1 of the 2015 Form 10-K.
volatile markets, this results in losses and an increased need
for liquidity.

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We receive asset-based management fees based on the value Our clients engaging in mergers and acquisitions often rely
of our clients portfolios or investment in funds managed by on access to the secured and unsecured credit markets to
us and, in some cases, we also receive incentive fees based finance their transactions. A lack of available credit or an
on increases in the value of such investments. Declines in increased cost of credit can adversely affect the size, volume
asset values reduce the value of our clients portfolios or and timing of our clients merger and acquisition
fund assets, which in turn reduce the fees we earn for transactions particularly large transactions and
managing such assets. adversely affect our financial advisory and underwriting
businesses.
We post collateral to support our obligations and receive
collateral to support the obligations of our clients and Our credit businesses have been and may in the future be
counterparties in connection with our client execution negatively affected by a lack of liquidity in credit markets. A
businesses. When the value of the assets posted as collateral lack of liquidity reduces price transparency, increases price
or the credit ratings of the party posting collateral decline, volatility and decreases transaction volumes and size, all of
the party posting the collateral may need to provide which can increase transaction risk or decrease the
additional collateral or, if possible, reduce its trading profitability of such businesses.
position. A classic example of such a situation is a margin
To the extent that the final rules related to TLAC require us
call in connection with a brokerage account. Therefore,
to issue material amounts of additional qualified loss-
declines in the value of asset classes used as collateral mean
absorbing debt or to refinance material amounts of our
that either the cost of funding positions is increased or the
existing debt, such requirements, at least in the near term,
size of positions is decreased. If we are the party providing
could increase our borrowing costs, perhaps materially, and
collateral, this can increase our costs and reduce our
negatively impact the debt capital markets. See Business
profitability and if we are the party receiving collateral, this
Regulation Banking Supervision and Regulation
can also reduce our profitability by reducing the level of
Total Loss-Absorbing Capacity in Part I, Item 1 of the
business done with our clients and counterparties. In
2015 Form 10-K for more information about the Federal
addition, volatile or less liquid markets increase the
Reserve Boards proposed rules on loss-absorbency
difficulty of valuing assets which can lead to costly and
requirements.
time-consuming disputes over asset values and the level of
required collateral, as well as increased credit risk to the Our market-making activities have been and may be
recipient of the collateral due to delays in receiving affected by changes in the levels of market volatility.
adequate collateral.
Certain of our market-making activities depend on market
Our businesses have been and may be adversely volatility to provide trading and arbitrage opportunities to
affected by disruptions in the credit markets, our clients, and decreases in volatility may reduce these
including reduced access to credit and higher costs of opportunities and adversely affect the results of these
obtaining credit. activities. On the other hand, increased volatility, while it
can increase trading volumes and spreads, also increases
Widening credit spreads, as well as significant declines in
risk as measured by Value-at-Risk (VaR) and may expose
the availability of credit, have in the past adversely affected
us to increased risks in connection with our market-making
our ability to borrow on a secured and unsecured basis and
activities or cause us to reduce our market-making
may do so in the future. We fund ourselves on an unsecured
positions in order to avoid increasing our VaR. Limiting the
basis by issuing long-term debt, by accepting deposits at our
size of our market-making positions can adversely affect
bank subsidiaries, by issuing hybrid financial instruments,
our profitability. In periods when volatility is increasing,
or by obtaining bank loans or lines of credit. We seek to
but asset values are declining significantly, it may not be
finance many of our assets on a secured basis. Any
possible to sell assets at all or it may only be possible to do
disruptions in the credit markets may make it harder and
so at steep discounts. In such circumstances we may be
more expensive to obtain funding for our businesses. If our
forced to either take on additional risk or to realize losses in
available funding is limited or we are forced to fund our
order to decrease our VaR. In addition, increases in
operations at a higher cost, these conditions may require us
volatility increase the level of our RWAs, which increases
to curtail our business activities and increase our cost of
our capital requirements.
funding, both of which could reduce our profitability,
particularly in our businesses that involve investing, lending
and market making.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

Our investment banking, client execution and We may incur losses as a result of ineffective risk
investment management businesses have been management processes and strategies.
adversely affected and may in the future be adversely
We seek to monitor and control our risk exposure through
affected by market uncertainty or lack of confidence
a risk and control framework encompassing a variety of
among investors and CEOs due to general declines in
separate but complementary financial, credit, operational,
economic activity and other unfavorable economic,
compliance and legal reporting systems, internal controls,
geopolitical or market conditions.
management review processes and other mechanisms. Our
Our investment banking business has been and may risk management process seeks to balance our ability to
continue to be adversely affected by market conditions. profit from market-making, investing or lending positions
Poor economic conditions and other adverse geopolitical with our exposure to potential losses. While we employ a
conditions can adversely affect and have in the past broad and diversified set of risk monitoring and risk
adversely affected investor and CEO confidence, resulting mitigation techniques, those techniques and the judgments
in significant industry-wide declines in the size and number that accompany their application cannot anticipate every
of underwritings and of financial advisory transactions, economic and financial outcome or the specifics and timing
which could have an adverse effect on our revenues and our of such outcomes. Thus, we may, in the course of our
profit margins. In particular, because a significant portion activities, incur losses. Market conditions in recent years
of our investment banking revenues is derived from our have involved unprecedented dislocations and highlight the
participation in large transactions, a decline in the number limitations inherent in using historical data to manage risk.
of large transactions would adversely affect our investment
The models that we use to assess and control our risk
banking business.
exposures reflect assumptions about the degrees of
In certain circumstances, market uncertainty or general correlation or lack thereof among prices of various asset
declines in market or economic activity may affect our classes or other market indicators. In times of market stress
client execution businesses by decreasing levels of overall or other unforeseen circumstances, such as occurred during
activity or by decreasing volatility, but at other times 2008 and early 2009, and to some extent since 2011,
market uncertainty and even declining economic activity previously uncorrelated indicators may become correlated,
may result in higher trading volumes or higher spreads or or conversely previously correlated indicators may move in
both. different directions. These types of market movements have
at times limited the effectiveness of our hedging strategies
Market uncertainty, volatility and adverse economic
and have caused us to incur significant losses, and they may
conditions, as well as declines in asset values, may cause our
do so in the future. These changes in correlation can be
clients to transfer their assets out of our funds or other
exacerbated where other market participants are using risk
products or their brokerage accounts and result in reduced
or trading models with assumptions or algorithms that are
net revenues, principally in our investment management
similar to ours. In these and other cases, it may be difficult
business. To the extent that clients do not withdraw their
to reduce our risk positions due to the activity of other
funds, they may invest them in products that generate less
market participants or widespread market dislocations,
fee income.
including circumstances where asset values are declining
Our investment management business may be significantly or no market exists for certain assets.
affected by the poor investment performance of our
investment products.
Poor investment returns in our investment management
business, due to either general market conditions or
underperformance (relative to our competitors or to
benchmarks) by funds or accounts that we manage or
investment products that we design or sell, affects our
ability to retain existing assets and to attract new clients or
additional assets from existing clients. This could affect the
management and incentive fees that we earn on assets under
supervision or the commissions and net spreads that we
earn for selling other investment products, such as
structured notes or derivatives.

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To the extent that we have positions through our market- We employ structured products to benefit our clients and
making or origination activities or we make investments hedge our own risks. The financial instruments that we
directly through our investing activities, including private hold and the contracts to which we are a party are often
equity, that do not have an established liquid trading complex, and these complex structured products often do
market or are otherwise subject to restrictions on sale or not have readily available markets to access in times of
hedging, we may not be able to reduce our positions and liquidity stress. Our investing and lending activities may
therefore reduce our risk associated with such positions. In lead to situations where the holdings from these activities
addition, to the extent permitted by applicable law and represent a significant portion of specific markets, which
regulation, we invest our own capital in private equity, could restrict liquidity for our positions.
credit, real estate and hedge funds that we manage and
Further, our ability to sell assets may be impaired if other
limitations on our ability to withdraw some or all of our
market participants are seeking to sell similar assets at the
investments in these funds, whether for legal, reputational
same time, as is likely to occur in a liquidity or other market
or other reasons, may make it more difficult for us to
crisis or in response to changes to rules or regulations. In
control the risk exposures relating to these investments. See
addition, financial institutions with which we interact may
Managements Discussion and Analysis of Financial
exercise set-off rights or the right to require additional
Condition and Results of Operations Regulatory
collateral, including in difficult market conditions, which
Developments Volcker Rule in Part II, Item 7 of the
could further impair our access to liquidity.
2015 Form 10-K for information about our plans to reduce
our interests in covered funds in order to comply with the Our credit ratings are important to our liquidity. A
Volcker Rule. reduction in our credit ratings could adversely affect our
liquidity and competitive position, increase our borrowing
Prudent risk management, as well as regulatory restrictions,
costs, limit our access to the capital markets or trigger our
may cause us to limit our exposure to counterparties,
obligations under certain provisions in some of our trading
geographic areas or markets, which may limit our business
and collateralized financing contracts. Under these
opportunities and increase the cost of our funding or
provisions, counterparties could be permitted to terminate
hedging activities.
contracts with us or require us to post additional collateral.
For further information about our risk management Termination of our trading and collateralized financing
policies and procedures, see Managements Discussion contracts could cause us to sustain losses and impair our
and Analysis of Financial Condition and Results of liquidity by requiring us to find other sources of financing
Operations Risk Management in Part II, Item 7 of the or to make significant cash payments or securities
2015 Form 10-K. movements. As of December 2015, in the event of a one-
notch and two-notch downgrade of our credit ratings our
Our liquidity, profitability and businesses may be
counterparties could have called for additional collateral or
adversely affected by an inability to access the debt
termination payments related to our net derivative
capital markets or to sell assets or by a reduction in
liabilities under bilateral agreements in an aggregate
our credit ratings or by an increase in our credit
amount of $1.06 billion and $2.69 billion, respectively.
spreads.
A downgrade by any one rating agency, depending on the
Liquidity is essential to our businesses. Our liquidity may agencys relative ratings of the firm at the time of the
be impaired by an inability to access secured and/or downgrade, may have an impact which is comparable to
unsecured debt markets, an inability to access funds from the impact of a downgrade by all rating agencies. For
our subsidiaries or otherwise allocate liquidity optimally further information about our credit ratings, see
across our firm, an inability to sell assets or redeem our Managements Discussion and Analysis of Financial
investments, or unforeseen outflows of cash or collateral. Condition and Results of Operations Risk
This situation may arise due to circumstances that we may Management Liquidity Risk Management Credit
be unable to control, such as a general market disruption or Ratings in Part II, Item 7 of the 2015 Form 10-K.
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.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

Our cost of obtaining long-term unsecured funding is A failure to appropriately identify and address
directly related to our credit spreads (the amount in excess potential conflicts of interest could adversely affect
of the interest rate of U.S. Treasury securities (or other our businesses.
benchmark securities) of the same maturity that we need to
Due to the broad scope of our businesses and our client
pay to our debt investors). Increases in our credit spreads
base, we regularly address potential conflicts of interest,
can significantly increase our cost of this funding. Changes
including situations where our services to a particular client
in credit spreads are continuous, market-driven, and subject
or our own investments or other interests conflict, or are
at times to unpredictable and highly volatile movements.
perceived to conflict, with the interests of another client, as
Our credit spreads are also influenced by market
well as situations where one or more of our businesses have
perceptions of our creditworthiness. In addition, our credit
access to material non-public information that may not be
spreads may be influenced by movements in the costs to
shared with other businesses within the firm and situations
purchasers of credit default swaps referenced to our long-
where we may be a creditor of an entity with which we also
term debt. The market for credit default swaps has proven
have an advisory or other relationship.
to be extremely volatile and at times has lacked a high
degree of transparency or liquidity. In addition, our status as a bank holding company subjects
us to heightened regulation and increased regulatory
Regulatory changes relating to liquidity may also negatively
scrutiny by the Federal Reserve Board with respect to
impact our results of operations and competitive position.
transactions between GS Bank USA and entities that are or
Recently, numerous regulations have been adopted or
could be viewed as affiliates of ours and, under the Volcker
proposed, and additional regulations are under
Rule, transactions between Goldman Sachs and certain
consideration, to introduce more stringent liquidity
covered funds.
requirements for large financial institutions. These
regulations and others being considered address, among We have extensive procedures and controls that are
other matters, liquidity stress testing, minimum liquidity designed to identify and address conflicts of interest,
requirements, wholesale funding, limitations on the including those designed to prevent the improper sharing of
issuance of short-term debt and structured notes and information among our businesses. However,
prohibitions on parent guarantees that are subject to cross- appropriately identifying and dealing with conflicts of
defaults. These may overlap with, and be impacted by, interest is complex and difficult, and our reputation, which
other regulatory changes, including new guidance on the is one of our most important assets, could be damaged and
treatment of brokered deposits and the capital, leverage and the willingness of clients to enter into transactions with us
resolution and recovery frameworks applicable to large may be affected if we fail, or appear to fail, to identify,
financial institutions, as well as proposals relating to disclose and deal appropriately with conflicts of interest. In
minimum long-term debt requirements and TLAC, addition, potential or perceived conflicts could give rise to
including limitations on the terms of eligible debt securities litigation or regulatory enforcement actions.
qualifying as TLAC or as eligible long-term debt limiting
A failure in our operational systems or infrastructure,
events of default, excluding structured notes and
or those of third parties, as well as human error, could
restrictions on non-U.S. governing law. Given the overlap
impair our liquidity, disrupt our businesses, result in
and complex interactions among these new and prospective
the disclosure of confidential information, damage
regulations, they may have unintended cumulative effects,
our reputation and cause losses.
and their full impact will remain uncertain until
implementation of post-financial crisis regulatory reform is Our businesses are highly dependent on our ability to
complete. process and monitor, on a daily basis, a 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.

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Many rules and regulations worldwide govern our Notwithstanding the proliferation of technology and
obligations to report transactions to regulators, exchanges technology-based risk and control systems, our businesses
and investors. Compliance with these legal and reporting ultimately rely on human beings as our greatest resource,
requirements can be challenging, and the firm and other and, from time-to-time, they make mistakes that are not
financial institutions have been subject to regulatory fines always caught immediately by our technological processes
and penalties for failing to report timely, accurate and or by our other procedures which are intended to prevent
complete information. As reporting requirements expand, and detect such errors. These can include calculation errors,
compliance with these rules and regulations has become mistakes in addressing emails, errors in software
more challenging. development or implementation, or simple errors in
judgment. We strive to eliminate such human errors
As our client base, and our geographical reach expands,
through training, supervision, technology and by redundant
and the volume, speed, frequency and complexity of
processes and controls. Human errors, even if promptly
transactions, especially electronic transactions (as well as
discovered and remediated, can result in material losses and
the requirements to report such transactions on a real-time
liabilities for the firm.
basis to clients, regulators and exchanges) increases,
developing and maintaining our operational systems and In addition, we face the risk of operational failure,
infrastructure becomes more challenging, and the risk of termination or capacity constraints of any of the clearing
systems or human error in connection with such agents, exchanges, clearing houses or other financial
transactions increases, as well as the potential consequences intermediaries we use to facilitate our securities and
of such errors due to the speed and volume of transactions derivatives transactions, and as our interconnectivity with
involved and the potential difficulty associated with our clients grows, we increasingly face the risk of
discovering such errors quickly enough to limit the resulting operational failure with respect to our clients systems.
consequences.
In recent years, there has been significant consolidation
Our financial, accounting, data processing or other among clearing agents, exchanges and clearing houses and
operational systems and facilities may fail to operate an increasing number of derivative transactions are now or
properly or become disabled as a result of events that are in the near future will be cleared on exchanges, which has
wholly or partially beyond our control, such as a spike in increased our exposure to operational failure, termination
transaction volume, adversely affecting our ability to or capacity constraints of the particular financial
process these transactions or provide these services. We intermediaries that we use and could affect our ability to
must continuously update these systems to support our find adequate and cost-effective alternatives in the event of
operations and growth and to respond to changes in any such failure, termination or constraint. Industry
regulations and markets, and invest heavily in systemic consolidation, whether among market participants or
controls and training to ensure that such transactions do financial intermediaries, increases the risk of operational
not violate applicable rules and regulations or, due to errors failure as disparate complex systems need to be integrated,
in processing such transactions, adversely affect markets, often on an accelerated basis.
our clients and counterparties or the firm.
Furthermore, the interconnectivity of multiple financial
Systems enhancements and updates, as well as the requisite institutions with central agents, exchanges and clearing
training, including in connection with the integration of houses, and the increased centrality of these entities,
new businesses, entail significant costs and create risks increases the risk that an operational failure at one
associated with implementing new systems and integrating institution or entity may cause an industry-wide
them with existing ones. operational failure that could materially impact our ability
to conduct business. Any such failure, termination or
constraint could adversely affect our ability to effect
transactions, service our clients, manage our exposure to
risk or expand our businesses or result in financial loss or
liability to our clients, impairment of our liquidity,
disruption of our businesses, regulatory intervention or
reputational damage.

32 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

Despite the resiliency plans and facilities we have in place, A failure to protect our computer systems, networks
our ability to conduct business may be adversely impacted and information, and our clients information, against
by a disruption in the infrastructure that supports our cyber attacks and similar threats could impair our
businesses and the communities in which we are located. ability to conduct our businesses, result in the
This may include a disruption involving electrical, satellite, disclosure, theft or destruction of confidential
undersea cable or other communications, internet, information, damage our reputation and cause losses.
transportation or other services facilities used by us or third
Our operations rely on the secure processing, storage and
parties with which we conduct business, including cloud
transmission of confidential and other information in our
service providers. These disruptions may occur as a result of
computer systems and networks. There have been several
events that affect only our buildings or systems or those of
highly publicized cases involving financial services and
such third parties, or as a result of events with a broader
consumer-based companies reporting the unauthorized
impact globally, regionally or in the cities where those
disclosure of client or customer information in recent years,
buildings or systems are located, including, but not limited
as well as cyber attacks involving the dissemination, theft
to, natural disasters, war, civil unrest, terrorism, economic
and destruction of corporate information or other assets, as
or political developments, pandemics and weather events.
a result of failure to follow procedures by employees or
Nearly all of our employees in our primary locations, contractors or as a result of actions by third parties,
including the New York metropolitan area, London, including actions by foreign governments.
Bengaluru, Hong Kong, Tokyo and Salt Lake City, work in
We are regularly the target of attempted cyber attacks,
close proximity to one another, in one or more buildings.
including denial-of-service attacks, and must continuously
Notwithstanding our efforts to maintain business
monitor and develop our systems to protect our technology
continuity, given that our headquarters and the largest
infrastructure and data from misappropriation or
concentration of our employees are in the New York
corruption. In addition, due to our interconnectivity with
metropolitan area, and our two principal office buildings in
third-party vendors, central agents, exchanges, clearing
the New York area both are located on the waterfront of
houses and other financial institutions, we could be
the Hudson River, depending on the intensity and longevity
adversely impacted if any of them is subject to a successful
of the event, a catastrophic event impacting our New York
cyber attack or other information security event.
metropolitan area offices, including a terrorist attack,
extreme weather event or other hostile or catastrophic Despite our efforts to ensure the integrity of our systems
event, could negatively affect our business. If a disruption and information, we may not be able to anticipate, detect or
occurs in one location and our employees in that location implement effective preventive measures against all cyber
are unable to occupy our offices or communicate with or threats, especially because the techniques used are
travel to other locations, our ability to service and interact increasingly sophisticated, change frequently and are often
with our clients may suffer, and we may not be able to not recognized until launched. Cyber attacks can originate
successfully implement contingency plans that depend on from a variety of sources, including third parties who are
communication or travel. affiliated with foreign governments or are involved with
organized crime or terrorist organizations. Third parties
may also attempt to place individuals within the firm 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.

Goldman Sachs 2015 Form 10-K 33

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

Although we take protective measures and endeavor to Group Inc. is a holding company and is dependent for
modify them as circumstances warrant, our computer liquidity on payments from its subsidiaries, many of
systems, software and networks may be vulnerable to which are subject to restrictions.
unauthorized access, misuse, computer viruses or other
Group Inc. is a holding company and, therefore, depends
malicious code and other events that could have a security
on dividends, distributions and other payments from its
impact. If one or more of such events occur, this potentially
subsidiaries to fund dividend payments and to fund all
could jeopardize our or our clients or counterparties
payments on its obligations, including debt obligations.
confidential and other information processed and stored in,
Many of our subsidiaries, including our broker-dealer and
and transmitted through, our computer systems and
bank subsidiaries, are subject to laws that restrict dividend
networks, or otherwise cause interruptions or malfunctions
payments or authorize regulatory bodies to block or reduce
in our, our clients, our counterparties or third parties
the flow of funds from those subsidiaries to Group Inc.
operations, which could impact their ability to transact
with us or otherwise result in significant losses or In addition, our broker-dealer and bank subsidiaries are
reputational damage. subject to restrictions on their ability to lend or transact
with affiliates and to minimum regulatory capital and other
The increased use of mobile and cloud technologies can
requirements, as well as restrictions on their ability to use
heighten these and other operational risks. We expect to
funds deposited with them in brokerage or bank accounts
expend significant additional resources on an ongoing basis
to fund their businesses. Additional restrictions on related-
to modify our protective measures and to investigate and
party transactions, increased capital and liquidity
remediate vulnerabilities or other exposures, but these
requirements and additional limitations on the use of funds
measures may be ineffective and we may be subject to
on deposit in bank or brokerage accounts, as well as lower
litigation and financial losses that are either not insured
earnings, can reduce the amount of funds available to meet
against or not fully covered through any insurance
the obligations of Group Inc., including under the Federal
maintained by us. Certain aspects of the security of such
Reserve Boards source of strength policy, and even require
technologies are unpredictable or beyond our control, and
Group Inc. to provide additional funding to such
the failure by mobile technology and cloud service
subsidiaries. Restrictions or regulatory action of that kind
providers to adequately safeguard their systems and prevent
could impede access to funds that Group Inc. needs to make
cyber attacks could disrupt our operations and result in
payments on its obligations, including debt obligations, or
misappropriation, corruption or loss of confidential and
dividend payments. In addition, Group Inc.s right to
other information. In addition, there is a risk that
participate in a distribution of assets upon a subsidiarys
encryption and other protective measures, despite their
liquidation or reorganization is subject to the prior claims
sophistication, may be defeated, particularly to the extent
of the subsidiarys creditors.
that new computing technologies vastly increase the speed
and computing power available.
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.

34 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

There has been a trend towards increased regulation and The requirements for Group Inc. and GS Bank USA to
supervision of our subsidiaries by the governments and develop and submit recovery and resolution plans to
regulators in the countries in which those subsidiaries are regulators, and the incorporation of feedback received from
located or do business. Concerns about protecting clients regulators, may require us to increase capital or liquidity
and creditors of financial institutions that are controlled by levels or issue additional long-term debt at Group Inc. or
persons or entities located outside of the country in which particular subsidiaries or otherwise incur additional or
such entities are located or do business have caused or may duplicative operational or other costs at multiple entities,
cause a number of governments and regulators to take and may reduce our ability to provide Group Inc.
additional steps to ring fence or maintain internal total guarantees of the obligations of our subsidiaries or raise
loss-absorbing capacity at such entities in order to protect debt at Group Inc. Resolution planning may also impair
clients and creditors of such entities in the event of financial our ability to structure our intercompany and external
difficulties involving such entities. The result has been and activities in a manner that we may otherwise deem most
may continue to be additional limitations on our ability to operationally efficient. Furthermore, we may incur
efficiently move capital and liquidity among our affiliated additional taxes. Any such limitations or requirements
entities, thereby increasing the overall level of capital and would be in addition to the legal and regulatory restrictions
liquidity required by the firm on a consolidated basis. described above on our ability to engage in capital actions
or make intercompany dividends or payments.
Furthermore, Group Inc. has guaranteed the payment
obligations of certain of its subsidiaries, including GS&Co., See Business Regulation in Part I, Item 1 of the 2015
GS Bank USA and GSEC subject to certain exceptions. In Form 10-K for further information about regulatory
addition, Group Inc. guarantees many of the obligations of restrictions.
its other consolidated subsidiaries on a transaction-by-
The application of regulatory strategies and
transaction basis, as negotiated with counterparties. These
requirements in the United States and non-U.S.
guarantees may require Group Inc. to provide substantial
jurisdictions to facilitate the orderly resolution of
funds or assets to its subsidiaries or their creditors or
large financial institutions could create greater risk of
counterparties at a time when Group Inc. is in need of
loss for Group Inc.s security holders.
liquidity to fund its own obligations.
As described under Business Regulation Insolvency
of an Insured Depository Institution or a Bank Holding
Company, if the FDIC is appointed as receiver under the
orderly liquidation authority, the rights of Group Inc.s
creditors would be determined under the orderly
liquidation authority, and substantial differences exist in
the rights of creditors between the orderly liquidation
authority and the U.S. Bankruptcy Code, including the right
of the FDIC under the orderly liquidation authority to
disregard the strict priority of creditor claims in some
circumstances, which could have a material adverse effect
on debt holders.

Goldman Sachs 2015 Form 10-K 35

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

The FDIC has announced that a single point of entry The ultimate impact of the recently proposed rules
strategy may be a desirable strategy under the orderly requiring U.S. G-SIBs to maintain minimum amounts
liquidation authority to resolve a large financial institution of long-term debt meeting specified eligibility
such as Group Inc. in a manner that would, among other requirements is uncertain.
things, impose losses on shareholders, debt holders
On October 30, 2015, the Federal Reserve Board released
(including, in our case, holders of our debt securities) and
for comment proposed rules (the TLAC Rules) that would
other creditors of the top-tier holding company (in our case,
require the eight U.S. G-SIBs, including Group Inc., among
Group Inc.), while the holding companys subsidiaries may
other things, to maintain minimum amounts of long-term
continue to operate. It is possible that the application of the
debt (i.e., debt having a maturity greater than one year from
single point of entry strategy, in which Group Inc. would be
issuance (LTD)) satisfying certain eligibility criteria
the only legal entity to enter resolution proceedings, could
commencing January 1, 2019. As proposed, the TLAC
result in greater losses to Group Inc.s security holders
Rules would disqualify from eligible LTD, among other
(including holders of our fixed rate, floating rate and
instruments, senior debt securities that permit acceleration
indexed debt securities), than the losses that could result
for reasons other than insolvency or payment default, as
from the application of a bankruptcy proceeding or a
well as debt securities defined as structured notes in the
different resolution strategy for Group Inc. Assuming
TLAC Rules (e.g., many of our indexed debt securities) and
Group Inc. entered resolution proceedings and that support
debt securities not governed by U.S. law. The currently
from Group Inc. to its subsidiaries was sufficient to enable
outstanding senior LTD of U.S. G-SIBs, including Group
the subsidiaries to remain solvent, losses at the subsidiary
Inc., typically permits acceleration for reasons other than
level would be transferred to Group Inc. and ultimately
insolvency or payment default and, as a result, neither such
borne by Group Inc.s security holders, third-party
outstanding senior LTD nor any subsequently issued senior
creditors of Group Inc.s subsidiaries would receive full
LTD with similar terms, would qualify as eligible LTD
recoveries on their claims, and Group Inc.s security holders
under the proposed rules. The Federal Reserve Board has
(including our shareholders, holders of our debt securities
requested comment on whether currently outstanding
and other unsecured creditors) could face significant losses.
instruments should be allowed to count as eligible LTD
The orderly liquidation authority also provides the FDIC despite containing features that would be prohibited
with authority to cause creditors and shareholders of the under the proposal. The U.S. G-SIBs, including Group
financial company such as Group Inc. in receivership to Inc., may need to take steps to come into compliance with
bear losses before taxpayers are exposed to such losses, and the final TLAC Rules depending in substantial part on the
amounts owed to the U.S. government would generally ultimate eligibility requirements for senior LTD and any
receive a statutory payment priority over the claims of grandfathering provisions. Non-U.S. regulators are
private creditors, including senior creditors. In addition, considering similar requirements. See Business
under the orderly liquidation authority, claims of creditors Regulation Banking Supervision and Regulation
(including holders of our debt securities) could be satisfied Total Loss-Absorbing Capacity in Part I, Item 1 of the
through the issuance of equity or other securities in a bridge 2015 Form 10-K for more information about the Federal
entity to which Group Inc.s assets are transferred. If such a Reserve Boards proposed rules on loss-absorbency
securities-for-claims exchange were implemented, there can requirements.
be no assurance that the value of the securities of the bridge
In addition, certain jurisdictions, including the United
entity would be sufficient to repay or satisfy all or any part
Kingdom and the EU, have implemented, or are
of the creditor claims for which the securities were
considering, changes to resolution regimes to provide
exchanged. While the FDIC has issued regulations to
resolution authorities with the ability to recapitalize a
implement the orderly liquidation authority, not all aspects
failing entity by writing down its unsecured debt or
of how the FDIC might exercise this authority are known
converting its unsecured debt into equity. Such bail-in
and additional rulemaking is likely.
powers are intended to enable the recapitalization of a
failing institution by allocating losses to its shareholders
and unsecured debt holders. U.S. and non-U.S. regulators
are also considering 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 holding company and,
ultimately, to security holders of the top-tier holding
company in the event of failure.

36 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

The application of Group Inc.s proposed resolution Our businesses, profitability and liquidity may be
strategy could result in greater losses for Group Inc.s adversely affected by deterioration in the credit
security holders, and failure to address shortcomings quality of, or defaults by, third parties who owe us
in our resolution plan could subject us to increased money, securities or other assets or whose securities
regulatory requirements. or obligations we hold.
In our resolution plan, Group Inc. would be resolved under We are exposed to the risk that third parties that owe us
the U.S. Bankruptcy Code. The strategy described in our money, securities or other assets will not perform their
resolution plan is a variant of the single point of entry obligations. These parties may default on their obligations
strategy: Group Inc. would recapitalize and provide to us due to bankruptcy, lack of liquidity, operational
liquidity to certain major subsidiaries, including through failure or other reasons. A failure of a significant market
the forgiveness of intercompany indebtedness, the participant, or even concerns about a default by such an
extension of the maturities of intercompany indebtedness institution, could lead to significant liquidity problems,
and the extension of additional intercompany loans. If this losses or defaults by other institutions, which in turn could
strategy were successful, creditors of some or all of Group adversely affect us.
Inc.s major subsidiaries would receive full recoveries on
We are also subject to the risk that our rights against third
their claims, while Group Inc.s security holders could face
parties may not be enforceable in all circumstances. In
significant losses. If this strategy were not successful, Group
addition, deterioration in the credit quality of third parties
Inc.s financial condition would be adversely impacted and
whose securities or obligations we hold, including a
Group Inc.s security holders, including debt holders, may
deterioration in the value of collateral posted by third
as a consequence be in a worse position than if the strategy
parties to secure their obligations to us under derivatives
had not been implemented. In all cases, any payments to
contracts and loan agreements, could result in losses and/or
debt holders are dependent on our ability to make such
adversely affect our ability to rehypothecate or otherwise
payments and are therefore subject to our credit risk.
use those securities or obligations for liquidity purposes.
In August 2014, the Federal Reserve Board and the FDIC
A significant downgrade in the credit ratings of our
indicated that Group Inc., along with other large industry
counterparties could also have a negative impact on our
participants, had certain shortcomings in the 2013
results. While in many cases we are permitted to require
resolution plans that were required to have been addressed
additional collateral from counterparties that experience
in the 2015 resolution plans. If it is determined that Group
financial difficulty, disputes may arise as to the amount of
Inc. did not effectively address these shortcomings, the
collateral we are entitled to receive and the value of pledged
Federal Reserve Board and the FDIC could, after any
assets. The termination of contracts and the foreclosure on
permitted resubmission, find our resolution plan not
collateral may subject us to claims for the improper exercise
credible and require us to hold more capital, change our
of our rights. Default rates, downgrades and disputes with
business structure or dispose of businesses, which could
counterparties as to the valuation of collateral increase
have a negative impact on our ability to return capital to
significantly in times of market stress and illiquidity.
shareholders, financial condition, results of operations or
competitive position. As part of our clearing and prime brokerage activities, we
finance our clients positions, and we could be held
responsible for the defaults or misconduct of our clients.
Although we regularly review credit exposures to specific
clients and counterparties and to specific industries,
countries and regions that we believe may present credit
concerns, default risk may arise from events or
circumstances that are difficult to detect or foresee.

Goldman Sachs 2015 Form 10-K 37

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

Concentration of risk increases the potential for The financial services industry is both highly
significant losses in our market-making, competitive and interrelated.
underwriting, investing and lending activities.
The financial services industry and all of our businesses are
Concentration of risk increases the potential for significant intensely competitive, and we expect them to remain so. We
losses in our market-making, underwriting, investing and compete on the basis of a number of factors, including
lending activities. The number and size of such transactions transaction execution, our products and services,
may affect our results of operations in a given period. innovation, reputation, creditworthiness and price. There
Moreover, because of concentration of risk, we may suffer has been substantial consolidation and convergence among
losses even when economic and market conditions are companies in the financial services industry. This
generally favorable for our competitors. Disruptions in the consolidation and convergence has hastened the
credit markets can make it difficult to hedge these credit globalization of the securities and other financial services
exposures effectively or economically. In addition, we markets.
extend large commitments as part of our credit origination
As a result, we have had to commit capital to support our
activities.
international operations and to execute large global
Rules adopted under the Dodd-Frank Act require issuers of transactions. To the extent we expand into new business
asset-backed securities and any person who organizes and areas and new geographic regions, we will face competitors
initiates an asset-backed securities transaction to retain with more experience and more established relationships
economic exposure to the asset, which is likely to with clients, regulators and industry participants in the
significantly increase the cost to us of engaging in relevant market, which could adversely affect our ability to
securitization activities. Our inability to reduce our credit expand. Governments and regulators have recently adopted
risk by selling, syndicating or securitizing these positions, regulations, imposed taxes, adopted compensation
including during periods of market stress, could negatively restrictions or otherwise put forward various proposals that
affect our results of operations due to a decrease in the fair have or may impact our ability to conduct certain of our
value of the positions, including due to the insolvency or businesses in a cost-effective manner or at all in certain or
bankruptcy of the borrower, as well as the loss of revenues all jurisdictions, including proposals relating to restrictions
associated with selling such securities or loans. on the type of activities in which financial institutions are
permitted to engage. These or other similar rules, many of
In the ordinary course of business, we may be subject to a
which do not apply to all our U.S. or non-U.S. competitors,
concentration of credit risk to a particular counterparty,
could impact our ability to compete effectively.
borrower, issuer, including sovereign issuers, or geographic
area or group of related countries, such as the EU, and a Pricing and other competitive pressures in our businesses
failure or downgrade of, or default by, such entity could have continued to increase, particularly in situations where
negatively impact our businesses, perhaps materially, and some of our competitors may seek to increase market share
the systems by which we set limits and monitor the level of by reducing prices. For example, in connection with
our credit exposure to individual entities, industries and investment banking and other assignments, we have
countries may not function as we have anticipated. While experienced pressure to extend and price credit at levels that
our activities expose us to many different industries, may not always fully compensate us for the risks we take.
counterparties and countries, we routinely execute a high
volume of transactions with counterparties engaged in
financial services activities, including brokers and dealers,
commercial banks, clearing houses, exchanges and
investment funds. This has resulted in significant credit
concentration with respect to these counterparties.
Provisions of the Dodd-Frank Act have led to increased
centralization of trading activity through particular clearing
houses, central agents or exchanges, which has significantly
increased our concentration of risk with respect to these
entities.

38 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

The financial services industry is highly interrelated in that New business initiatives expose us to new and enhanced
a significant volume of transactions occur among a limited risks, including risks associated with dealing with
number of members of that industry. Many transactions are governmental entities, reputational concerns arising from
syndicated to other financial institutions and financial dealing with less sophisticated counterparties and investors,
institutions are often counterparties in transactions. This greater regulatory scrutiny of these activities, increased
has led to claims by other market participants and credit-related, market, sovereign and operational risks,
regulators that such institutions have colluded in order to risks arising from accidents or acts of terrorism, and
manipulate markets or market prices, including allegations reputational concerns with the manner in which these assets
that antitrust laws have been violated. While we have are being operated or held or in which we interact with
extensive procedures and controls that are designed to these counterparties.
identify and prevent such activities, allegations of such
Derivative transactions and delayed settlements may
activities, particularly by regulators, can have a negative
expose us to unexpected risk and potential losses.
reputational impact and can subject us to large fines and
settlements, and potentially significant penalties, including We are party to a large number of derivative transactions,
treble damages. including credit derivatives. Many of these derivative
instruments are individually negotiated and non-
We face enhanced risks as new business initiatives
standardized, which can make exiting, transferring or
lead us to transact with a broader array of clients and
settling positions difficult. Many credit derivatives require
counterparties and expose us to new asset classes
that we deliver to the counterparty the underlying security,
and new markets.
loan or other obligation in order to receive payment. In a
A number of our recent and planned business initiatives and number of cases, we do not hold the underlying security,
expansions of existing businesses may bring us into contact, loan or other obligation and may not be able to obtain the
directly or indirectly, with individuals and entities that are underlying security, loan or other obligation. This could
not within our traditional client and counterparty base and cause us to forfeit the payments due to us under these
expose us to new asset classes and new markets. For contracts or result in settlement delays with the attendant
example, we continue to transact business and invest in new credit and operational risk as well as increased costs to the
regions, including a wide range of emerging and growth firm.
markets. Furthermore, in a number of our businesses,
Derivative transactions may also involve the risk that
including where we make markets, invest and lend, we
documentation has not been properly executed, that
directly or indirectly own interests in, or otherwise become
executed agreements may not be enforceable against the
affiliated with the ownership and operation of public
counterparty, or that obligations under such agreements
services, such as airports, toll roads and shipping ports, as
may not be able to be netted against other obligations
well as physical commodities and commodities
with such counterparty. In addition, counterparties may
infrastructure components, both within and outside the
claim that such transactions were not appropriate or
United States.
authorized.
We have announced our intention to increase our
As a signatory to the ISDA Protocol, we may not be able to
consumer-oriented deposit-taking activities. To the extent
exercise remedies against counterparties and, as this new
we engage in such activities or similar consumer-oriented
regime has not yet been tested, we may suffer risks or losses
activities, we could face additional compliance, legal and
that we would not have expected to suffer if we could
regulatory risk, increased reputational risk and increased
immediately close out transactions upon a termination
operational risk due to, among other things, higher
event. The ISDA Protocol contemplates adoption of
transaction volumes and significantly increased retention
implementing regulations by various U.S. and non-U.S.
and transmission of customer and client information.
regulators, and the ISDA Protocols impact will depend on,
among other things, how it is implemented.

Goldman Sachs 2015 Form 10-K 39

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

Derivative contracts and other transactions, including Competition from within the financial services industry and
secondary bank loan purchases and sales, entered into with from businesses outside the financial services industry for
third parties are not always confirmed by the counterparties qualified employees has often been intense. Recently, we
or settled on a timely basis. While the transaction remains have experienced increased competition in hiring and
unconfirmed or during any delay in settlement, we are retaining employees to address the demands of new
subject to heightened credit and operational risk and in the regulatory requirements. This is also the case in emerging
event of a default may find it more difficult to enforce our and growth markets, where we are often competing for
rights. In addition, as new complex derivative products are qualified employees with entities that have a significantly
created, covering a wider array of underlying credit and greater presence or more extensive experience in the region.
other instruments, disputes about the terms of the
Changes in law or regulation in jurisdictions in which our
underlying contracts could arise, which could impair our
operations are located that affect taxes on our employees
ability to effectively manage our risk exposures from these
income, or the amount or composition of compensation,
products and subject us to increased costs. The provisions
may also adversely affect our ability to hire and retain
of the Dodd-Frank Act requiring central clearing of credit
qualified employees in those jurisdictions.
derivatives and other OTC derivatives, or a market shift
toward standardized derivatives, could reduce the risk As described further in Business Regulation
associated with such transactions, but under certain Compensation Practices in Part I, Item 1 of the 2015
circumstances could also limit our ability to develop Form 10-K, our compensation practices are subject to
derivatives that best suit the needs of our clients and to review by, and the standards of, the Federal Reserve Board.
hedge our own risks, and could adversely affect our As a large global financial and banking institution, we are
profitability and increase our credit exposure to such subject to limitations on compensation practices (which
platform. may or may not affect our competitors) by the Federal
Reserve Board, the PRA, the FCA, the FDIC and other
Our businesses may be adversely affected if we are
regulators worldwide. These limitations, including any
unable to hire and retain qualified employees.
imposed by or as a result of future legislation or regulation,
Our performance is largely dependent on the talents and may require us to alter our compensation practices in ways
efforts of highly skilled individuals; therefore, our that could adversely affect our ability to attract and retain
continued ability to compete effectively in our businesses, talented employees.
to manage our businesses effectively and to expand into
We may be adversely affected by increased
new businesses and geographic areas depends on our ability
governmental and regulatory scrutiny or negative
to attract new talented and diverse employees and to retain
publicity.
and motivate our existing employees. Factors that affect
our ability to attract and retain such employees include our Governmental scrutiny from regulators, legislative bodies
compensation and benefits, and our reputation as a and law enforcement agencies with respect to matters
successful business with a culture of fairly hiring, training relating to compensation, our business practices, our past
and promoting qualified employees. As a significant actions and other matters has increased dramatically in the
portion of the compensation that we pay to our employees past several years. The financial crisis and the current
is paid in the form of year-end discretionary compensation, political and public sentiment regarding financial
a significant portion of which is in the form of deferred institutions has resulted in a significant amount of adverse
equity-related awards, declines in our profitability, or in the press coverage, as well as adverse statements or charges by
outlook for our future profitability, as well as regulatory regulators or other government officials. Press coverage and
limitations on compensation levels and terms, can other public statements that assert some form of
negatively impact our ability to hire and retain highly wrongdoing often result in some type of investigation by
qualified employees. regulators, legislators and law enforcement officials or in
lawsuits.

40 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

Responding to these investigations and lawsuits, regardless Recently, significant settlements by several large financial
of the ultimate outcome of the proceeding, is time- institutions with governmental entities have been publicly
consuming and expensive and can divert the time and effort announced. The trend of large settlements with
of our senior management from our business. Penalties and governmental entities may adversely affect the outcomes for
fines sought by regulatory authorities have increased other financial institutions in similar actions, especially
substantially over the last several years, and certain where governmental officials have announced that the large
regulators have been more likely in recent years to settlements will be used as the basis or a template for other
commence enforcement actions or to advance or support settlements. The uncertain regulatory enforcement
legislation targeted at the financial services industry. environment makes it difficult to estimate probable losses,
Adverse publicity, governmental scrutiny and legal and which can lead to substantial disparities between legal
enforcement proceedings can also have a negative impact reserves and subsequent actual settlements or penalties.
on our reputation and on the morale and performance of
Certain regulators, including the SEC, have announced
our employees, which could adversely affect our businesses
policies that make it more likely that they will seek an
and results of operations.
admission of wrongdoing as part of any settlement of a
Substantial legal liability or significant regulatory matter brought by them against a regulated entity or
action against us could have material adverse individual, which could lead to increased exposure to civil
financial effects or cause us significant reputational litigation, could adversely affect our reputation, could
harm, which in turn could seriously harm our result in penalties or limitations on our ability to do
business prospects. business in certain jurisdictions with so-called bad actor
laws and could have other negative effects.
We face significant legal risks in our businesses, and the
volume of claims and amount of damages and penalties In addition, the U.S. Department of Justice has announced a
claimed in litigation and regulatory proceedings against policy of requiring companies to provide investigators with
financial institutions remain high. See Note 27 to the all relevant facts relating to the individuals responsible for
consolidated financial statements in Part II, Item 8 of the the alleged misconduct in order to qualify for any
2015 Form 10-K for information about certain legal cooperation credit in civil and criminal investigations of
proceedings in which we are involved and Note 18 to the corporate wrongdoing, which may result in our incurring
consolidated financial statements in Part II, Item 8 of the increased fines and penalties if the Department of Justice
2015 Form 10-K for information regarding certain determines that we have not provided sufficient
mortgage-related contingencies. Our experience has been information about applicable individuals in connection
that legal claims by customers and clients increase in a with an investigation, as well as increased costs in
market downturn and that employment-related claims responding to Department of Justice investigations. It is
increase following periods in which we have reduced our possible that other governmental authorities will adopt
staff. Additionally, governmental entities are plaintiffs in similar policies.
certain of the legal proceedings in which we are involved,
and we may face future actions or claims by the same or
other governmental entities, as well as follow-on civil
litigation that is often commenced after regulatory
settlements.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

The growth of electronic trading and the introduction These activities subject us and/or the entities in which we
of new trading technology may adversely affect our invest to extensive and evolving federal, state and local
business and may increase competition. energy, environmental, antitrust and other governmental
laws and regulations worldwide, including environmental
Technology is fundamental to our business and our
laws and regulations relating to, among others, air quality,
industry. The growth of electronic trading and the
water quality, waste management, transportation of
introduction of new technologies is changing our businesses
hazardous substances, natural resources, site remediation
and presenting us with new challenges. Securities, futures
and health and safety. Additionally, rising climate change
and options transactions are increasingly occurring
concerns may lead to additional regulation that could
electronically, both on our own systems and through other
increase the operating costs and profitability of our
alternative trading systems, and it appears that the trend
investments.
toward alternative trading systems will continue. Some of
these alternative trading systems compete with us, There may be substantial costs in complying with current or
particularly our exchange-based market-making activities, future laws and regulations relating to our commodities-
and we may experience continued competitive pressures in related activities and investments. Compliance with these
these and other areas. In addition, the increased use by our laws and regulations could require significant commitments
clients of low-cost electronic trading systems and direct of capital toward environmental monitoring, renovation of
electronic access to trading markets could cause a reduction storage facilities or transport vessels, payment of emission
in commissions and spreads. As our clients increasingly use fees and carbon or other taxes, and application for, and
our systems to trade directly in the markets, we may incur holding of, permits and licenses.
liabilities as a result of their use of our order routing and
Commodities involved in our intermediation activities and
execution infrastructure. We have invested significant
investments are also subject to the risk of unforeseen or
resources into the development of electronic trading
catastrophic events, which are likely to be outside of our
systems and expect to continue to do so, but there is no
control, including those arising from the breakdown or
assurance that the revenues generated by these systems will
failure of transport vessels, storage facilities or other
yield an adequate return on our investment, particularly
equipment or processes or other mechanical malfunctions,
given the generally lower commissions arising from
fires, leaks, spills or release of hazardous substances,
electronic trades.
performance below expected levels of output or efficiency,
Our commodities activities, particularly our physical terrorist attacks, extreme weather events or other natural
commodities activities, subject us to extensive disasters or other hostile or catastrophic events. In addition,
regulation and involve certain potential risks, we rely on third-party suppliers or service providers to
including environmental, reputational and other risks perform their contractual obligations and any failure on
that may expose us to significant liabilities and costs. their part, including the failure to obtain raw materials at
reasonable prices or to safely transport or store
As part of our commodities business, we purchase and sell
commodities, could expose us to costs or losses. Also, while
certain physical commodities, arrange for their storage and
we seek to insure against potential risks, we may not be able
transport, and engage in market making of commodities.
to obtain insurance to cover some of these risks and the
The commodities involved in these activities may include
insurance that we have may be inadequate to cover our
crude oil, oil refined products, natural gas, liquefied natural
losses.
gas, electric power, agricultural products, metals (base and
precious), minerals (including unenriched uranium), The occurrence of any of such events may prevent us from
emission credits, coal, freight and related products and performing under our agreements with clients, may impair
indices. our operations or financial results and may result in
litigation, regulatory action, negative publicity or other
In our investing and lending businesses, we make
reputational harm.
investments in and finance entities that engage in the
production, storage and transportation of numerous We may also be required to divest or discontinue certain of
commodities, including many of the commodities these activities for regulatory or legal reasons. If that
referenced above. occurs, the firm may receive a value that is less than the then
carrying value, as the firm may be unable to exit these
activities in an orderly transaction.

42 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

In conducting our businesses around the world, we While business and other practices throughout the world
are subject to political, economic, legal, operational differ, our principal legal entities are subject in their
and other risks that are inherent in operating in many operations worldwide to rules and regulations relating to
countries. corrupt and illegal payments, hiring practices and money
laundering, as well as laws relating to doing business with
In conducting our businesses and maintaining and
certain individuals, groups and countries, such as the U.S.
supporting our global operations, we are subject to risks of
Foreign Corrupt Practices Act, the USA PATRIOT Act and
possible nationalization, expropriation, price controls,
U.K. Bribery Act. While we have invested and continue to
capital controls, exchange controls and other restrictive
invest significant resources in training and in compliance
governmental actions, as well as the outbreak of hostilities
monitoring, the geographical diversity of our operations,
or acts of terrorism. For example, there has been significant
employees, clients and customers, as well as the vendors
conflict between Russia and Ukraine in recent years, and
and other third parties that we deal with, greatly increases
sanctions have been imposed by the U.S. and EU on certain
the risk that we may be found in violation of such rules or
individuals and companies in Russia. In many countries, the
regulations and any such violation could subject us to
laws and regulations applicable to the securities and
significant penalties or adversely affect our reputation.
financial services industries and many of the transactions in
which we are involved are uncertain and evolving, and it In addition, there have been a number of highly publicized
may be difficult for us to determine the exact requirements cases around the world, involving actual or alleged fraud or
of local laws in every market. Any determination by local other misconduct by employees in the financial services
regulators that we have not acted in compliance with the industry in recent years, and we run the risk that employee
application of local laws in a particular market or our misconduct could occur. This misconduct has included and
failure to develop effective working relationships with local may include in the future the theft of proprietary
regulators could have a significant and negative effect not information, including proprietary software. It is not
only on our businesses in that market but also on our always possible to deter or prevent employee misconduct
reputation generally. We are also subject to the enhanced and the precautions we take to prevent and detect this
risk that transactions we structure might not be legally activity have not been and may not be effective in all cases.
enforceable in all cases.
We may incur losses as a result of unforeseen or
A determination by the United Kingdom to exit or catastrophic events, including the emergence of a
otherwise significantly change its relationship with the pandemic, terrorist attacks, extreme weather events
European Union could affect the manner in which we or other natural disasters.
conduct our businesses.
The occurrence of unforeseen or catastrophic events,
Our businesses and operations are increasingly expanding including the emergence of a pandemic, such as the Ebola
throughout the world, including in emerging and growth or Zika viruses, or other widespread health emergency (or
markets, and we expect this trend to continue. Various concerns over the possibility of such an emergency),
emerging and growth market countries have experienced terrorist attacks, extreme terrestrial or solar weather events
severe economic and financial disruptions, including or other natural disasters, could create economic and
significant devaluations of their currencies, defaults or financial disruptions, and could lead to operational
threatened defaults on sovereign debt, capital and currency difficulties (including travel limitations) that could impair
exchange controls, and low or negative growth rates in our ability to manage our businesses.
their economies, as well as military activity, civil unrest or
acts of terrorism. The possible effects of any of these
conditions include an adverse impact on our businesses and
increased volatility in financial markets generally.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

Item 1B. Unresolved Staff Comments In the preceding paragraphs, square footage figures are
provided only for properties that are used in the operation
There are no material unresolved written comments that
of our businesses.
were received from the SEC staff 180 days or more before
the end of our fiscal year relating to our periodic or current See Managements Discussion and Analysis of Financial
reports under the Exchange Act. Condition and Results of Operations Off-Balance-Sheet
Arrangements and Contractual Obligations Contractual
Obligations in Part II, Item 7 of the 2015 Form 10-K for
Item 2. Properties information about exit costs we may incur in the future to
the extent we reduce our space capacity or commit to, or
Our principal executive offices are located at 200 West occupy, new properties in the locations in which we operate
Street, New York, New York and comprise approximately and, consequently, dispose of existing space that had been
2.1 million gross square feet. The building is located on a held for potential growth.
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 Goldman Sachs right of exclusive
Item 3. Legal Proceedings
possession and use until June 2069, the expiration date of We are involved in a number of judicial, regulatory and
the lease. Under the terms of the ground lease, we made a arbitration proceedings concerning matters arising in
lump sum ground rent payment in June 2007 of connection with the conduct of our businesses. Many of
$161 million for rent through the term of the lease. these proceedings are in early stages, and many of these
cases seek an indeterminate amount of damages. However,
We have offices at 30 Hudson Street in Jersey City, New
we believe, based on currently available information, that
Jersey, which we own and which include approximately
the results of such proceedings, in the aggregate, will not
1.6 million gross square feet of office space.
have a material adverse effect on our financial condition,
We have additional offices and commercial space in the but may be material to our operating results for any
United States and elsewhere in the Americas, which particular period, depending, in part, upon the operating
together comprise approximately 2.5 million square feet of results for such period. Given the range of litigation and
leased and owned space. investigations presently under way, our litigation expenses
can be expected to remain high. See Managements
In Europe, the Middle East and Africa, we have offices that
Discussion and Analysis of Financial Condition and Results
total approximately 1.5 million square feet of leased and
of Operations Use of Estimates in Part II, Item 7 of the
owned space. Our European headquarters is located in
2015 Form 10-K. See Note 27 to the consolidated financial
London at Peterborough Court, pursuant to a lease
statements in Part II, Item 8 of the 2015 Form 10-K for
expiring in 2026. In total, we have offices with
information about certain judicial, regulatory and legal
approximately 1.2 million square feet in London, relating
proceedings.
to various properties.
In Asia (including India), Australia and New Zealand, we
have offices with approximately 1.9 million square feet. Item 4. Mine Safety Disclosures
Our headquarters in this region are in Tokyo, at the
Roppongi Hills Mori Tower, and in Hong Kong, at the Not applicable.
Cheung Kong Center. In Japan, we currently have offices
with approximately 219,000 square feet, the majority of
which have leases that will expire in 2018. In Hong Kong,
we currently have offices with approximately 315,000
square feet, the majority of which have leases that will
expire in 2017.

44 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

Executive Officers of The Goldman Sachs

Group, Inc.
Set forth below are the name, age, present title, principal John F.W. Rogers, 59
occupation and certain biographical information for our Mr. Rogers has been an Executive Vice President of
executive officers. All of our executive officers have been Goldman Sachs since April 2011 and Chief of Staff and
appointed by and serve at the pleasure of our board of Secretary to the Board of Directors of Goldman Sachs since
directors. December 2001.
Lloyd C. Blankfein, 61 Harvey M. Schwartz, 51
Mr. Blankfein has been our Chairman and Chief Executive Mr. Schwartz has been an Executive Vice President of
Officer since June 2006, and a director since April 2003. Goldman Sachs and our Chief Financial Officer since
January 2013. From February 2008 to January 2013,
Alan M. Cohen, 65
Mr. Schwartz was global co-head of the Securities Division.
Mr. Cohen has been an Executive Vice President of
Goldman Sachs and our Global Head of Compliance since Mark Schwartz, 61
February 2004. Mr. Schwartz has been a Vice Chairman of Goldman Sachs
and Chairman of Goldman Sachs Asia Pacific since
Gary D. Cohn, 55
rejoining the firm in June 2012. From 2006 to June 2012,
Mr. Cohn has been our President and Chief Operating
he was Chairman of MissionPoint Capital Partners, an
Officer (or Co-Chief Operating Officer) and a director since
investment firm he co-founded.
June 2006.
Michael S. Sherwood, 50
Edith W. Cooper, 54
Mr. Sherwood has been a Vice Chairman of Goldman
Ms. Cooper has been an Executive Vice President of
Sachs since February 2008 and co-chief executive officer of
Goldman Sachs since April 2011 and our Global Head of
Goldman Sachs International since 2005. He assumed
Human Capital Management since March 2008. From
responsibility for coordinating the firms business and
2002 to 2008, she served in various positions at the firm,
activities around Growth Markets in November 2013.
including sales management within the Securities Division.
Gregory K. Palm, 67
Mr. Palm has been an Executive Vice President of Goldman
Sachs since May 1999, and our General Counsel and head
or co-head of the Legal Department since May 1992.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

PART II
Item 5. Market for Registrants Common The table below presents purchases made by or on behalf of
Equity, Related Stockholder Matters and Group Inc. or any affiliated purchaser (as defined in
Issuer Purchases of Equity Securities Rule 10b-18(a)(3) under the Exchange Act), of our
common stock during the fourth quarter of 2015.
The principal market on which our common stock is traded
Information relating to compensation plans under which
is the NYSE. Information relating to the high and low sales
our equity securities are authorized for issuance is presented
prices per share of our common stock, as reported by the
in Part III, Item 12 of the 2015 Form 10-K.
Consolidated Tape Association, for each full quarterly
period during 2013, 2014 and 2015 is set forth under the
Total Maximum
heading Supplemental Financial Information Common Number Number
Stock Price Range in Part II, Item 8 of the 2015 of Shares of Shares
Purchased That May
Form 10-K. As of February 5, 2016, there were as Part of Yet Be
9,307 holders of record of our common stock. Total Average Publicly Purchased
Number Price Announced Under the
of Shares Paid Per Plans or Plans or
The table below presents dividends declared by Group Inc. Purchased Share Programs Programs
during 2014 and 2015. Month #1
(October 1, 2015 to
October 31, 2015) 2,901,624 $183.27 2,901,624 69,164,345
Dividend Declared Month #2
Date of Declaration Per Common Share (November 1, 2015 to
2014 November 30, 2015) 2,915,027 192.22 2,915,027 66,249,318
First Quarter January 15, 2014 $0.55 Month #3
(December 1, 2015 to
Second Quarter April 16, 2014 0.55 December 31, 2015) 3,047,435 183.07 3,047,435 63,201,883
Third Quarter July 14, 2014 0.55 Total 8,864,086 8,864,086
Fourth Quarter October 15, 2014 0.60
2015 On March 21, 2000, we announced that our Board had
First Quarter January 15, 2015 0.60 approved a repurchase program authorizing repurchases of
Second Quarter April 15, 2015 0.65
up to 15 million shares of our common stock, which was
Third Quarter July 15, 2015 0.65
Fourth Quarter October 14, 2015 0.65
increased by an aggregate of 490 million shares by
resolutions of our Board adopted from June 2001 through
The declaration of dividends by Group Inc. is subject to the October 2015. The repurchase program is effected
discretion of our Board. Our Board will take into account primarily through regular open-market purchases (which
such matters as general business conditions, our financial may include repurchase plans designed to comply with
results, capital requirements, contractual, legal and Rule 10b5-1), the amounts and timing of which are
regulatory restrictions on the payment of dividends by us to determined primarily by the firms current and projected
our shareholders or by our subsidiaries to us, the effect on capital position, but which may also be influenced by
our debt ratings and such other factors as our Board may general market conditions and the prevailing price and
deem relevant. The holders of our common stock share trading volumes of our common stock. The repurchase
proportionately on a per share basis in all dividends and program has no set expiration or termination date. Prior to
other distributions on common stock declared by the Board repurchasing common stock, we must receive confirmation
of Directors of Group Inc. (Board). See Business that the Board of Governors of the Federal Reserve System
Regulation in Part I, Item 1 of the 2015 Form 10-K for does not object to such capital actions.
information about potential regulatory limitations on our
receipt of funds from our regulated subsidiaries and our
payment of dividends to shareholders of Group Inc. Item 6. Selected Financial Data
The Selected Financial Data table is set forth under Part II,
Item 8 of the 2015 Form 10-K.

46 Goldman Sachs 2015 Form 10-K

Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
INDEX
Page No.
Introduction 48
Executive Overview 49
Business Environment 50
Critical Accounting Policies 51
Recent Accounting Developments 54
Use of Estimates 54
Results of Operations 55
Balance Sheet and Funding Sources 67
Equity Capital Management and Regulatory Capital 73
Regulatory Developments 79
Off-Balance-Sheet Arrangements and Contractual Obligations 81
Risk Management 83
Overview and Structure of Risk Management 84
Liquidity Risk Management 90
Market Risk Management 98
Credit Risk Management 104
Operational Risk Management 110
Model Risk Management 112

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Introduction
The Goldman Sachs Group, Inc. (Group Inc. or parent In this discussion and analysis of our financial condition
company), a Delaware corporation, together with its and results of operations, we have included information
consolidated subsidiaries (collectively, the firm), is a leading that may constitute forward-looking statements within
global investment banking, securities and investment the meaning of the safe harbor provisions of the U.S. Private
management firm that provides a wide range of financial Securities Litigation Reform Act of 1995. Forward-looking
services to a substantial and diversified client base that statements are not historical facts, but instead represent
includes corporations, financial institutions, governments only our beliefs regarding future events, many of which, by
and individuals. Founded in 1869, the firm is their nature, are inherently uncertain and outside our
headquartered in New York and maintains offices in all control. This information includes statements other than
major financial centers around the world. historical information or statements of current condition
and may relate to our future plans and objectives and
We report our activities in four business segments:
results, among other things, and may also include
Investment Banking, Institutional Client Services,
statements about the effect of changes to the capital,
Investing & Lending and Investment Management. See
leverage, liquidity, long-term debt and total loss-absorbing
Results of Operations below for further information
capacity rules applicable to banks and bank holding
about our business segments.
companies, the impact of the U.S. Dodd-Frank Wall Street
When we use the terms Goldman Sachs, the firm, Reform and Consumer Protection Act (Dodd-Frank Act) on
we, us and our, we mean Group Inc. and its our businesses and operations, and various legal
consolidated subsidiaries. proceedings or mortgage-related contingencies as set forth
under Legal Proceedings and Certain Mortgage-Related
References to the 2015 Form 10-K are to our Annual
Contingencies in Notes 27 and 18, respectively, to the
Report on Form 10-K for the year ended
consolidated financial statements, as well as statements
December 31, 2015. All references to the consolidated
about the results of our Dodd-Frank Act and firm stress
financial statements or Supplemental Financial
tests, statements about the objectives and effectiveness of
Information are to Part II, Item 8 of the 2015 Form 10-K.
our business continuity plan, information security program,
All references to 2015, 2014 and 2013 refer to our years
risk management and liquidity policies, statements about
ended, or the dates, as the context requires,
trends in or growth opportunities for our businesses,
December 31, 2015, December 31, 2014 and
statements about our future status, activities or reporting
December 31, 2013, respectively. Any reference to a future
under U.S. or non-U.S. banking and financial regulation,
year refers to a year ending on December 31 of that year.
and statements about our investment banking transaction
Certain reclassifications have been made to previously
backlog.
reported amounts to conform to the current presentation.
By identifying these statements for you in this manner, we
are alerting you to the possibility that our actual results and
financial condition may differ, possibly materially, from the
anticipated results and financial condition indicated in
these forward-looking statements. Important factors that
could cause our actual results and financial condition to
differ from those indicated in these forward-looking
statements include, among others, those described in Risk
Factors in Part I, Item 1A of the 2015 Form 10-K and
Cautionary Statement Pursuant to the U.S. Private
Securities Litigation Reform Act of 1995 in Part I, Item 1
of the 2015 Form 10-K.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Executive Overview
2015 versus 2014. The firm generated net earnings of 2014 versus 2013. The firm generated net earnings of
$6.08 billion and diluted earnings per common share of $8.48 billion and diluted earnings per common share of
$12.14 for 2015, a decrease of 28% and 29%, respectively, $17.07 for 2014, an increase of 5% and 10%, respectively,
compared with $8.48 billion and $17.07 per share for compared with $8.04 billion and $15.46 per share for
2014. Return on average common shareholders equity 2013. ROE was 11.2% for 2014, compared with 11.0%
(ROE) was 7.4% for 2015, compared with 11.2% for for 2013. Book value per common share was $163.01 as of
2014. During 2015, the firm recorded provisions for the December 2014, 7% higher compared with the end of
agreement in principle with the RMBS Working Group 1 of 2013.
$3.37 billion ($2.99 billion after-tax), which reduced
Net revenues were $34.53 billion for 2014, essentially
diluted earnings per common share by $6.53 and ROE by
unchanged compared with 2013, as higher net revenues in
3.8 percentage points.
both Investment Management and Investment Banking,
Book value per common share was $171.03 as of reflecting strong performances in these businesses, were
December 2015, 5% higher compared with the end of largely offset by slightly lower net revenues in both
2014. During the year, the firm repurchased 22.1 million Institutional Client Services and Investing & Lending.
shares of its common stock for a total cost of $4.20 billion.
Operating expenses were $22.17 billion for 2014,
Net revenues were $33.82 billion for 2015, 2% lower than essentially unchanged compared with 2013. Non-
2014, as significantly lower net revenues in Investing & compensation expenses were slightly lower compared with
Lending were largely offset by higher net revenues in the prior year, primarily reflecting lower net provisions for
Investment Banking and slightly higher net revenues in litigation and regulatory proceedings, while compensation
Investment Management. Net revenues in Institutional and benefits expenses were essentially unchanged.
Client Services were essentially unchanged compared with
During 2014, as part of a firmwide initiative to reduce
2014.
activities with lower returns, total assets were reduced by
Operating expenses were $25.04 billion for 2015, 13% $55 billion to $856 billion as of December 2014, while pre-
higher than 2014, due to significantly higher non- tax margin improved approximately 150 basis points to
compensation expenses, primarily reflecting significantly 35.8%.
higher net provisions for mortgage-related litigation and
We also maintained strong capital ratios and liquidity,
regulatory matters. Compensation and benefits expenses
while returning $6.52 billion of capital to shareholders
were essentially unchanged compared with the prior year.
during 2014. During 2014, the firm repurchased
We continued to maintain strong capital ratios and 31.8 million shares of its common stock for a total cost of
liquidity. As of December 2015, our Common Equity Tier 1 $5.47 billion and paid common dividends of $1.05 billion.
ratio 2 as computed in accordance with the Standardized Our Common Equity Tier 1 ratio 2 was 12.2% as of
approach and the Basel III Advanced approach, in each case December 2014, under the Basel III Advanced approach
reflecting the applicable transitional provisions, was 13.6% reflecting the applicable transitional provisions. In
and 12.4%, respectively. In addition, our global core liquid addition, our global core liquid assets 3 were $183 billion as
assets 3 were $199 billion as of December 2015. of December 2014.
See Results of Operations Segment Operating Results
below for information about net revenues and pre-tax
earnings for each of our business segments.

1. On January 14, 2016, the firm announced an agreement in principle, subject to the negotiation of definitive documentation, to resolve the ongoing investigation of
the Residential Mortgage-Backed Securities Working Group of the U.S. Financial Fraud Enforcement Task Force (RMBS Working Group). See Note 27 to the
consolidated financial statements for further information about this agreement in principle.
2. See Note 20 to the consolidated financial statements for further information about our capital ratios.
3. See Risk Management Liquidity Risk Management below for further information about our global core liquid assets.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Our businesses, by their nature, do not produce predictable Europe

earnings. Our results in any given period can be materially In the Euro area, real GDP increased by 1.5% in 2015,
affected by conditions in global financial markets, compared to an increase of 0.9% in 2014, as fixed
economic conditions generally and other factors. For investment, consumer spending and government
further information about the factors that may affect our consumption all grew. Measures of inflation remained
future operating results, see Risk Factors in Part I, subdued, prompting the European Central Bank (ECB) to
Item 1A of the 2015 Form 10-K. announce quantitative easing in the form of an expanded
asset purchase program in January 2015. The central bank
continued its asset purchase program through the second
Business Environment and third quarters and announced further easing measures
in the fourth quarter, cutting the deposit rate by 10 basis
Global points to (0.30)% and extending purchases to March 2017.
During 2015, real gross domestic product (GDP) growth The ECB maintained its main refinancing operations rate at
appeared stable but subdued in most advanced economies 0.05% during 2015. The Euro depreciated by 10% against
and weaker in emerging market economies compared with the U.S. dollar. In the United Kingdom, real GDP increased
2014. In developed markets, growth was higher in the Euro by 2.2% in 2015, compared with an increase of 2.9% in
area and Japan, while growth in the United Kingdom was 2014. The Bank of England maintained its official bank
lower and growth in the United States remained stable. In rate at 0.50% and the British pound depreciated by 5%
emerging markets, many economies suffered from lower against the U.S. dollar. Yields on 10-year government
commodity prices, and Latin America was particularly bonds in the region generally increased slightly during the
weak with negative aggregate growth in 2015. Monetary year. In equity markets, the DAX Index, CAC 40 Index and
policy diverged in 2015, as the U.S. Federal Reserve the Euro Stoxx 50 Index increased by 10%, 9%, and 4%,
increased its target interest rate, while policy remained respectively, while the FTSE 100 Index decreased by 5%
accommodative in the Euro area and Japan. In addition, oil during 2015.
prices declined by 30%, and there were concerns about the
debt situation in Greece earlier in the year and Chinas Asia
growth outlook later in the year. In investment banking, In Japan, real GDP increased by 0.4% in 2015, compared
industry-wide mergers and acquisitions activity remained with no growth in 2014. Measures of inflation were lower
strong, while industry-wide activity in both debt and equity compared with 2014 and remained well below the Bank of
underwriting declined compared with 2014. Japans (BOJ) 2% inflation target. In 2015, the BOJ
extended the timing to achieve 2% inflation, continued its
United States program of monetary easing and introduced measures to
In the United States, real GDP increased by 2.4% in both supplement and facilitate the quantitative and qualitative
2015 and 2014. Residential fixed investment growth and easing program. During the year, the yield on 10-year
consumer expenditures growth both improved, while Japanese government bonds declined, the U.S. dollar was
business fixed investment growth declined. Measures of essentially unchanged against the Japanese yen and, in
consumer confidence improved on average compared with equity markets, the Nikkei 225 Index increased by 9%. In
the prior year, while the unemployment rate declined. China, real GDP increased by 6.9% in 2015 compared with
Housing starts and house sales increased in 2015, but house 7.3% in 2014. During 2015, the Peoples Bank of China
prices declined compared with the end of 2014. Measures announced multiple cuts in the reserve requirement ratio
of inflation were mixed, with headline measures lower and took policy actions that led to a depreciation of the
alongside declining commodity prices, and core inflation Chinese yuan. Measures of inflation were slightly lower and
metrics stable during 2015. The U.S. Federal Reserve raised the U.S. dollar appreciated by 5% against the Chinese yuan.
its target rate for the federal funds rate at the In equity markets, the Shanghai Composite Index increased
December meeting to a range of 0.25% to 0.50%, ending a by 9% after large mid-year swings, while the Hang Seng
seven-year period at a range of zero to 0.25%. The yield on Index decreased by 7%. In India, real GDP increased by
the 10-year U.S. Treasury note increased by 10 basis points 7.5% in 2015 compared with 7.3% in 2014, and the rate of
during 2015 to 2.27%. In equity markets, the NASDAQ inflation declined compared with 2014. The U.S. dollar
Composite Index increased by 6%, while the Dow Jones appreciated by 5% against the Indian rupee and, in equity
Industrial Average and the S&P 500 Index declined by 2% markets, the BSE Sensex Index declined by 5% during
and 1%, respectively, during 2015. 2015.

50 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Other Markets The fair values for substantially all of our financial assets
In Brazil, real GDP appeared to contract by 3.8% in 2015 and financial liabilities are based on observable prices and
compared with an increase of 0.1% in 2014, reflecting inputs and are classified in levels 1 and 2 of the fair value
sharp contractions in fixed investment and private hierarchy. Certain level 2 and level 3 financial assets and
consumption. The U.S. dollar appreciated by 49% against financial liabilities may require appropriate valuation
the Brazilian real and, in equity markets, the Bovespa Index adjustments that a market participant would require to
decreased by 13%. In Russia, real GDP contracted by 3.7% arrive at fair value for factors such as counterparty and the
in 2015 compared with an increase of 0.6% in 2014, firms credit quality, funding risk, transfer restrictions,
reflecting contractions in private consumption and liquidity and bid/offer spreads.
investment. The U.S. dollar appreciated by 26% against the
Instruments categorized within level 3 of the fair value
Russian ruble and, in equity markets, the MICEX Index
hierarchy are those which require one or more significant
increased by 26% during 2015.
inputs that are not observable. As of December 2015 and
December 2014, level 3 financial assets represented 2.8%
and 4.2%, respectively, of our total assets. See Notes 5
Critical Accounting Policies through 8 to the consolidated financial statements for
Fair Value further information about level 3 financial assets, including
Fair Value Hierarchy. Financial instruments owned, at fair changes in level 3 financial assets and related fair value
value and Financial instruments sold, but not yet measurements. Absent evidence to the contrary,
purchased, at fair value (i.e., inventory), as well as certain instruments classified within level 3 of the fair value
other financial assets and financial liabilities, are reflected hierarchy are initially valued at transaction price, which is
in our consolidated statements of financial condition at fair considered to be the best initial estimate of fair value.
value (i.e., marked-to-market), with related gains or losses Subsequent to the transaction date, we use other
generally recognized in our consolidated statements of methodologies to determine fair value, which vary based on
earnings. The use of fair value to measure financial the type of instrument. Estimating the fair value of level 3
instruments is fundamental to our risk management financial instruments requires judgments to be made. These
practices and is our most critical accounting policy. judgments include:

The fair value of a financial instrument is the amount that Determining the appropriate valuation methodology and/
would be received to sell an asset or paid to transfer a or model for each type of level 3 financial instrument;
liability in an orderly transaction between market Determining model inputs based on an evaluation of all
participants at the measurement date. We measure certain relevant empirical market data, including prices
financial assets and financial liabilities as a portfolio (i.e., evidenced by market transactions, interest rates, credit
based on its net exposure to market and/or credit risks). In spreads, volatilities and correlations; and
determining fair value, the hierarchy under U.S. generally
accepted accounting principles (U.S. GAAP) gives (i) the Determining appropriate valuation adjustments,
highest priority to unadjusted quoted prices in active including those related to illiquidity or counterparty
markets for identical, unrestricted assets or liabilities credit quality.
(level 1 inputs), (ii) the next priority to inputs other than Regardless of the methodology, valuation inputs and
level 1 inputs that are observable, either directly or assumptions are only changed when corroborated by
indirectly (level 2 inputs), and (iii) the lowest priority to substantive evidence.
inputs that cannot be observed in market activity (level 3
inputs). Assets and liabilities are classified in their entirety
based on the lowest level of input that is significant to their
fair value measurement.

Goldman Sachs 2015 Form 10-K 51

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Controls Over Valuation of Financial Instruments. Relative Value Analyses. Market-based transactions
Market makers and investment professionals in our are analyzed to determine the similarity, measured in
revenue-producing units are responsible for pricing our terms of risk, liquidity and return, of one instrument
financial instruments. Our control infrastructure is relative to another or, for a given instrument, of one
independent of the revenue-producing units and is maturity relative to another.
fundamental to ensuring that all of our financial
Collateral Analyses. Margin calls on derivatives are
instruments are appropriately valued at market-clearing
analyzed to determine implied values which are used to
levels. In the event that there is a difference of opinion in
corroborate our valuations.
situations where estimating the fair value of financial
instruments requires judgment (e.g., calibration to market Execution of Trades. Where appropriate, trading desks
comparables or trade comparison, as described below), the are instructed to execute trades in order to provide
final valuation decision is made by senior managers in evidence of market-clearing levels.
control and support functions. This independent price
Backtesting. Valuations are corroborated by
verification is critical to ensuring that our financial
comparison to values realized upon sales.
instruments are properly valued.
See Notes 5 through 8 to the consolidated financial
Price Verification. All financial instruments at fair value in
statements for further information about fair value
levels 1, 2 and 3 of the fair value hierarchy are subject to
measurements.
our independent price verification process. The objective of
price verification is to have an informed and independent Review of Net Revenues. Independent control and
opinion with regard to the valuation of financial support functions ensure adherence to our pricing policy
instruments under review. Instruments that have one or through a combination of daily procedures, including the
more significant inputs which cannot be corroborated by explanation and attribution of net revenues based on the
external market data are classified within level 3 of the fair underlying factors. Through this process we independently
value hierarchy. Price verification strategies utilized by our validate net revenues, identify and resolve potential fair
independent control and support functions include: value or trade booking issues on a timely basis and seek to
ensure that risks are being properly categorized and
Trade Comparison. Analysis of trade data (both internal
quantified.
and external where available) is used to determine the
most relevant pricing inputs and valuations. Review of Valuation Models. Our independent model
risk management group (Model Risk Management),
External Price Comparison. Valuations and prices are
consisting of quantitative professionals who are separate
compared to pricing data obtained from third parties
from model developers, performs an independent model
(e.g., brokers or dealers, MarkIt, Bloomberg, IDC,
review and validation process of our valuation models.
TRACE). Data obtained from various sources is
New or changed models are reviewed and approved prior
compared to ensure consistency and validity. When
to being put into use. Models are evaluated and re-
broker or dealer quotations or third-party pricing
approved annually to assess the impact of any changes in
vendors are used for valuation or price verification,
the product or market and any market developments in
greater priority is generally given to executable
pricing theories. See Risk Management Model Risk
quotations.
Management for further information about the review
Calibration to Market Comparables. Market-based and validation of our valuation models.
transactions are used to corroborate the valuation of
positions with similar characteristics, risks and
components.

52 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Goodwill and Identifiable Intangible Assets

Goodwill. Goodwill is the cost of acquired companies in We last performed a quantitative goodwill test in 2012 and,
excess of the fair value of net assets, including identifiable as we believe it is appropriate to periodically update it, we
intangible assets, at the acquisition date. Goodwill is performed another quantitative goodwill test during the
assessed for impairment annually in the fourth quarter or fourth quarter of 2015. We determined that goodwill was
more frequently if events occur or circumstances change not impaired. The estimated fair value of our reporting
that indicate an impairment may exist, by first assessing units in which we hold substantially all of our goodwill
qualitative factors to determine whether it is more likely significantly exceeded their estimated carrying values.
than not that the fair value of a reporting unit is less than its However, the estimated fair value of the Fixed Income,
carrying amount. If the results of the qualitative assessment Currency and Commodities Client Execution reporting
are not conclusive, a quantitative goodwill test is performed unit, which represents approximately 7% of our goodwill,
by comparing the estimated fair value of each reporting unit was not substantially in excess of its carrying value. This
with its estimated net book value. reporting unit and the industry more broadly have been
adversely impacted by the currently challenging operating
Estimating the fair value of our reporting units requires
environment and increased capital requirements. We will
management to make judgments. Critical inputs to the fair
continue to closely monitor it to determine whether an
value estimates include projected earnings and attributed
impairment is required in the future. As of December 2015,
equity. There is inherent uncertainty in the projected
the goodwill related to the Fixed Income, Currency and
earnings. The net book value of each reporting unit reflects
Commodities Client Execution reporting unit was
an allocation of total shareholders equity and represents
$269 million, substantially all of which originated from the
the estimated amount of total shareholders equity required
acquisition of Goldman Sachs Australia Pty Ltd in 2011.
to support the activities of the reporting unit under
currently applicable regulatory capital requirements. See If we experience a prolonged or severe period of weakness
Equity Capital Management and Regulatory Capital for in the business environment or financial markets, or
further information about our capital requirements. additional increases in capital requirements, our goodwill
could be impaired in the future. In addition, significant
changes to other inputs of the quantitative goodwill test
could cause the estimated fair value of our reporting units
to decline, which could result in an impairment of goodwill
in the future.
See Note 13 to the consolidated financial statements for
further information about our goodwill and our
quantitative goodwill test.

Goldman Sachs 2015 Form 10-K 53

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Identifiable Intangible Assets. We amortize our Use of Estimates

identifiable intangible assets over their estimated useful
The use of generally accepted accounting principles requires
lives using the straight-line method or based on economic
management to make certain estimates and assumptions. In
usage for certain commodities-related intangibles.
addition to the estimates we make in connection with fair
Identifiable intangible assets are tested for impairment
value measurements and the accounting for goodwill and
whenever events or changes in circumstances suggest that
identifiable intangible assets, the use of estimates and
an assets or asset groups carrying value may not be fully
assumptions is also important in determining provisions for
recoverable. See Note 13 to the consolidated financial
losses that may arise from litigation, regulatory proceedings
statements for the carrying value and estimated remaining
and tax audits, and the allowance for losses on loans and
useful lives of our identifiable intangible assets by major
lending commitments held for investment.
asset class.
We estimate and provide for potential losses that may arise
A prolonged or severe period of market weakness, or
out of litigation and regulatory proceedings to the extent
significant changes in regulation could adversely impact our
that such losses are probable and can be reasonably
businesses and impair the value of our identifiable
estimated. In addition, we estimate the upper end of the
intangible assets. In addition, certain events could indicate a
range of reasonably possible aggregate loss in excess of the
potential impairment of our identifiable intangible assets,
related reserves for litigation proceedings where the firm
including weaker business performance resulting in a
believes the risk of loss is more than slight. See Notes 18
decrease in our customer base and decreases in revenues
and 27 to the consolidated financial statements for
from commodities-related transportation rights, customer
information about certain judicial, regulatory and legal
contracts and relationships. Management judgment is
proceedings.
required to evaluate whether indications of potential
impairment have occurred, and to test intangible assets for Significant judgment is required in making these estimates
impairment if required. and our final liabilities may ultimately be materially
different. Our total estimated liability in respect of litigation
An impairment, generally calculated as the difference
and regulatory proceedings is determined on a case-by-case
between the estimated fair value and the carrying value of
basis and represents an estimate of probable losses after
an asset or asset group, is recognized if the total of the
considering, among other factors, the progress of each case
estimated undiscounted cash flows relating to the asset or
or proceeding, our experience and the experience of others
asset group is less than the corresponding carrying value.
in similar cases or proceedings, and the opinions and views
See Note 13 to the consolidated financial statements for of legal counsel.
further information about our identifiable intangible assets.
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
Recent Accounting Developments the relevant taxing authority based on the technical merits
See Note 3 to the consolidated financial statements for of the position. See Note 24 to the consolidated financial
information about Recent Accounting Developments. statements for further information about accounting for
income taxes.
We also estimate and record an allowance for credit losses
related to our loans receivable and lending commitments
held for investment. Managements estimate of loan losses
entails judgment about loan collectability at the reporting
dates, and there are uncertainties inherent in those
judgments. See Note 9 to the consolidated financial
statements for further information about the allowance for
losses on loans and lending commitments held for
investment.

54 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Results of Operations
The composition of our net revenues has varied over time as Net Revenues
financial markets and the scope of our operations have The table below presents our net revenues by line item on
changed. The composition of net revenues can also vary the consolidated statements of earnings.
over the shorter term due to fluctuations in U.S. and global Year Ended December
economic and market conditions. See Risk Factors in $ in millions 2015 2014 2013
Part I, Item 1A of the 2015 Form 10-K for further Investment banking $ 7,027 $ 6,464 $ 6,004
information about the impact of economic and market Investment management 5,868 5,748 5,194
conditions on our results of operations. Commissions and fees 3,320 3,316 3,255
Market making 9,523 8,365 9,368
Financial Overview Other principal transactions 5,018 6,588 6,993
The table below presents an overview of our financial Total non-interest revenues 30,756 30,481 30,814
results. Interest income 8,452 9,604 10,060
Interest expense 5,388 5,557 6,668
Year Ended December Net interest income 3,064 4,047 3,392
$ in millions, except
per share amounts 2015 2014 2013 Total net revenues $33,820 $34,528 $34,206

Net revenues $ 33,820 $34,528 $34,206

Pre-tax earnings 8,778 12,357 11,737
In the table above:
Net earnings 6,083 8,477 8,040 Investment banking is comprised of revenues
Net earnings applicable to common (excluding net interest) from financial advisory and
shareholders 5,568 8,077 7,726
underwriting assignments, as well as derivative
Diluted earnings per common share 12.14 17.07 15.46
Return on average common transactions directly related to these assignments. These
shareholders equity 1 7.4% 11.2% 11.0% activities are included in our Investment Banking
segment.
1. ROE is computed by dividing net earnings applicable to common
shareholders by average monthly common shareholders equity. The table Investment management is comprised of revenues
below presents our average common shareholders equity.
(excluding net interest) from providing investment
Average for the
Year Ended December management services to a diverse set of clients, as well as
$ in millions 2015 2014 2013 wealth advisory services and certain transaction services
Total shareholders equity $ 86,314 $80,839 $77,353 to high-net-worth individuals and families. These
Preferred stock (10,585) (8,585) (6,892) activities are included in our Investment Management
Common shareholders equity $ 75,729 $72,254 $70,461
segment.
The table below presents selected financial ratios. Commissions and fees is comprised of revenues from
executing and clearing client transactions on major stock,
Year Ended December options and futures exchanges worldwide, as well as
2015 2014 2013 over-the-counter (OTC) transactions. These activities are
Net earnings to average assets 0.7% 0.9% 0.9% included in our Institutional Client Services and
Return on average total shareholders Investment Management segments.
equity 1 7.0% 10.5% 10.4%
Total average equity to average assets 9.9% 9.0% 8.2% Market making is comprised of revenues (excluding
Dividend payout ratio 2 21.0% 13.2% 13.3% net interest) from client execution activities related to
making markets in interest rate products, credit products,
1. Return on average total shareholders equity is computed by dividing net
earnings by average monthly total shareholders equity.
mortgages, currencies, commodities and equity products.
2. Dividend payout ratio is computed by dividing dividends declared per
These activities are included in our Institutional Client
common share by diluted earnings per common share. Services segment.
Other principal transactions is comprised of revenues
(excluding net interest) from our investing activities and
the origination of loans to provide financing to clients. In
addition, Other principal transactions includes
revenues related to our consolidated investments. These
activities are included in our Investing & Lending
segment.

Goldman Sachs 2015 Form 10-K 55

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

2015 versus 2014

Net revenues on the consolidated statements of earnings Investment management revenues on the consolidated
were $33.82 billion for 2015, 2% lower than 2014, statements of earnings were $5.87 billion for 2015, 2%
reflecting significantly lower other principal transactions higher than 2014, due to slightly higher management and
revenues and net interest income, largely offset by higher other fees, primarily reflecting higher average assets under
market-making revenues and investment banking revenues, supervision, and higher transaction revenues.
as well as slightly higher investment management revenues.
Commissions and fees on the consolidated statements of
Commissions and fees were essentially unchanged
earnings were $3.32 billion for 2015, essentially unchanged
compared with 2014.
compared with 2014.
During 2015, the operating environment for market-
Market-making revenues on the consolidated statements of
making activities was positively impacted by diverging
earnings were $9.52 billion for 2015, 14% higher than
central bank monetary policies in the United States and the
2014. Excluding a gain of $289 million in 2014 related to
Euro area in the first quarter, as increased volatility levels
the extinguishment of certain of our junior subordinated
contributed to strong client activity levels in currencies,
debt, market-making revenues were 18% higher than 2014,
interest rate products and equity products. However,
reflecting significantly higher revenues in interest rate
during the remainder of the year, concerns about global
products, currencies, equity cash products and equity
growth and uncertainty about the U.S. Federal Reserves
derivatives. These increases were partially offset by
interest rate policy, along with lower global equity prices,
significantly lower revenues in mortgages, commodities and
widening high-yield credit spreads and declining
credit products.
commodity prices, contributed to lower levels of client
activity, particularly in mortgages and credit, and more Other principal transactions revenues on the consolidated
difficult market-making conditions. The operating statements of earnings were $5.02 billion for 2015, 24%
environment for investment banking activities for 2015 lower than 2014. This decrease was primarily due to lower
reflected strong industry-wide mergers and acquisitions revenues from investments in equities, principally reflecting
activity. In addition, investment management reflected an the sale of Metro International Trade Services (Metro) in
environment generally characterized by strong client net the fourth quarter of 2014 and lower net gains from
inflows, which more than offset the declines in equity and investments in private equities, driven by corporate
fixed income asset prices. Although other principal performance. In addition, revenues in debt securities and
transactions for 2015 benefited from favorable company- loans were significantly lower, reflecting lower net gains
specific events, including sales, initial public offerings and from investments.
financings, a decline in global equity prices and widening Net Interest Income. Net interest income on the
high-yield credit spreads during the second half of the year consolidated statements of earnings was $3.06 billion for
impacted results. If macroeconomic concerns continue over 2015, 24% lower than 2014. The decrease compared with
the long term, and market-making activity levels, 2014 was due to lower interest income resulting from a
investment banking activity levels or assets under reduction in interest income related to financial instruments
supervision decline, or if asset prices continue to decline, net owned, at fair value, partially offset by the impact of an
revenues would likely be negatively impacted. See Segment increase in total average loans receivable. The decrease in
Operating Results below for further information about interest income was partially offset by a decrease in interest
material trends and uncertainties that may impact our expense, which primarily reflected lower interest expense
results of operations. related to financial instruments sold, but not yet purchased,
Non-Interest Revenues. Investment banking revenues on at fair value and other interest-bearing liabilities, partially
the consolidated statements of earnings were $7.03 billion offset by higher interest expense related to long-term
for 2015, 9% higher than 2014, due to significantly higher borrowings. See Supplemental Financial Information
revenues in financial advisory, reflecting strong client Statistical Disclosures Distribution of Assets, Liabilities
activity, particularly in the United States. Industry-wide and Shareholders Equity for further information about
completed mergers and acquisitions increased significantly our sources of net interest income.
compared with the prior year. Revenues in underwriting
were lower compared with a strong 2014. Revenues in debt
underwriting were lower compared with 2014, reflecting
significantly lower leveraged finance activity. Revenues in
equity underwriting were also lower, reflecting significantly
lower revenues from initial public offerings and convertible
offerings, partially offset by significantly higher revenues
from secondary offerings.
56 Goldman Sachs 2015 Form 10-K
T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

2014 versus 2013

Net revenues on the consolidated statements of earnings Market-making revenues on the consolidated statements of
were $34.53 billion for 2014, essentially unchanged earnings were $8.37 billion for 2014, 11% lower than
compared with 2013, reflecting higher net interest income, 2013. Results for 2014 included a gain of $289 million
investment management revenues and investment banking ($270 million of which was recorded at extinguishment in
revenues, as well as slightly higher commissions and fees, the third quarter) related to the extinguishment of certain of
largely offset by lower market-making revenues and other our junior subordinated debt. Excluding this gain and a
principal transactions revenues. gain of $211 million on the sale of a majority stake in our
European insurance business in 2013, the decrease in
During 2014, the operating environment was favorable for
market-making revenues compared with 2013 reflected
investment banking activities, as industry-wide
significantly lower revenues in both credit products and
underwriting activity was strong and industry-wide mergers
equity derivatives, lower revenues in mortgages and the sale
and acquisitions activity increased. Improved asset prices
of our Americas reinsurance business in 2013. These
resulted in appreciation in the value of client assets in
decreases were partially offset by significantly higher
investment management. In addition, other principal
revenues in commodities, as well as higher revenues in
transactions were impacted by favorable company-specific
equity cash products, currencies and interest rate products.
events and strong corporate performance. However, the
operating environment remained challenging for market- Other principal transactions revenues on the consolidated
making activities as economic uncertainty and low statements of earnings were $6.59 billion for 2014, 6%
volatility levels contributed to generally low levels of lower than 2013. Revenues from investments in equity
activity, particularly in fixed income products. See securities were lower due to a significant decrease in net
Segment Operating Results below for further gains from investments in public equities, as movements in
information about material trends and uncertainties that global equity prices during 2014 were less favorable
may impact our results of operations. compared with 2013, as well as significantly lower revenues
related to our consolidated investments, reflecting a
Non-Interest Revenues. Investment banking revenues on
decrease in operating revenues from commodities-related
the consolidated statements of earnings were $6.46 billion
consolidated investments. These decreases were partially
for 2014, 8% higher than 2013, due to significantly higher
offset by an increase in net gains from investments in
revenues in financial advisory, reflecting an increase in
private equities, primarily driven by company-specific
industry-wide completed mergers and acquisitions,
events. Revenues from debt securities and loans were
primarily in the United States. Revenues in underwriting
slightly higher than 2013, primarily due to sales of certain
were essentially unchanged compared with a strong 2013,
investments during 2014.
as industry-wide activity levels remained high. Revenues in
debt underwriting were slightly lower compared with 2013, Net Interest Income. Net interest income on the
reflecting lower revenues from commercial mortgage- consolidated statements of earnings was $4.05 billion for
related activity, while revenues in equity underwriting were 2014, 19% higher than 2013. The increase compared with
slightly higher, principally from initial public offerings. 2013 was primarily due to lower interest expense resulting
from a reduction in our total liabilities, lower costs of long-
Investment management revenues on the consolidated
term funding due to a decline in interest rates and the
statements of earnings were $5.75 billion for 2014, 11%
impact of rebates in the securities services business, partially
higher than 2013, reflecting higher management and other
offset by lower interest income due to a reduction in our
fees, primarily due to higher average assets under
total assets. See Supplemental Financial Information
supervision, as well as higher incentive fees and transaction
Statistical Disclosures Distribution of Assets, Liabilities
revenues.
and Shareholders Equity for further information about
Commissions and fees on the consolidated statements of our sources of net interest income.
earnings were $3.32 billion for 2014, 2% higher than 2013,
due to higher commissions and fees in both Europe and the
United States, reflecting generally higher client activity,
consistent with increases in listed cash equity market
volumes in these regions.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Operating Expenses
Our operating expenses are primarily influenced by Non-compensation expenses on the consolidated
compensation, headcount and levels of business activity. statements of earnings were $12.36 billion for 2015, 30%
Compensation and benefits includes salaries, discretionary higher than 2014, due to significantly higher net provisions
compensation, amortization of equity awards and other for mortgage-related litigation and regulatory matters,
items such as benefits. Discretionary compensation is which are included in other expenses. This increase was
significantly impacted by, among other factors, the level of partially offset by lower depreciation and amortization
net revenues, overall financial performance, prevailing expenses, primarily reflecting lower impairment charges
labor markets, business mix, the structure of our share- related to consolidated investments, and a reduction in
based compensation programs and the external expenses related to the sale of Metro in the fourth quarter
environment. In addition, see Use of Estimates for of 2014. Net provisions for litigation and regulatory
additional information about expenses that may arise from proceedings for 2015 were $4.01 billion compared with
litigation and regulatory proceedings. $754 million for 2014 (both primarily comprised of net
provisions for mortgage-related matters). 2015 included a
The table below presents our operating expenses and total
$148 million charitable contribution to Goldman Sachs
staff (which includes employees, consultants and temporary
Gives, our donor-advised fund. Compensation was reduced
staff).
to fund this charitable contribution to Goldman Sachs
Gives. The firm asks its participating managing directors to
Year Ended December
make recommendations regarding potential charitable
$ in millions 2015 2014 2013
recipients for this contribution.
Compensation and benefits $12,678 $12,691 $12,613
2014 versus 2013. Operating expenses on the consolidated
Brokerage, clearing, exchange and
distribution fees 2,576 2,501 2,341
statements of earnings were $22.17 billion for 2014,
Market development 557 549 541 essentially unchanged compared with 2013. Compensation
Communications and technology 806 779 776 and benefits expenses on the consolidated statements of
Depreciation and amortization 991 1,337 1,322 earnings were $12.69 billion for 2014, essentially
Occupancy 772 827 839 unchanged compared with 2013. The ratio of
Professional fees 963 902 930 compensation and benefits to net revenues for 2014 was
Insurance reserves 1 176 36.8% compared with 36.9% for 2013. Total staff
Other expenses 2 5,699 2,585 2,931
increased 3% during 2014.
Total non-compensation expenses 12,364 9,480 9,856
Total operating expenses $25,042 $22,171 $22,469 Non-compensation expenses on the consolidated
Total staff at period-end 36,800 34,000 32,900 statements of earnings were $9.48 billion for 2014, 4%
1. Consists of changes in reserves related to our Americas reinsurance
lower than 2013. The decrease compared with 2013
business, including interest credited to policyholder account balances, and included a decrease in other expenses, due to lower net
expenses related to property catastrophe reinsurance claims. In April 2013, provisions for litigation and regulatory proceedings and
we completed the sale of a majority stake in our Americas reinsurance
business and no longer consolidate this business.
lower operating expenses related to consolidated
2. Includes provisions of $3.37 billion recorded during 2015 for the agreement
investments, as well as a decline in insurance reserves,
in principle with the RMBS Working Group. See Note 27 to the consolidated reflecting the sale of our Americas reinsurance business in
financial statements for further information about this agreement in principle. 2013. These decreases were partially offset by an increase in
2015 versus 2014. Operating expenses on the consolidated brokerage, clearing, exchange and distribution fees. Net
statements of earnings were $25.04 billion for 2015, 13% provisions for litigation and regulatory proceedings for
higher than 2014. Compensation and benefits expenses on 2014 were $754 million compared with $962 million for
the consolidated statements of earnings were $12.68 billion 2013 (both primarily comprised of net provisions for
for 2015, essentially unchanged compared with 2014. The mortgage-related matters). 2014 included a charitable
ratio of compensation and benefits to net revenues for 2015 contribution of $137 million to Goldman Sachs Gives, our
was 37.5% compared with 36.8% for 2014. Total staff donor-advised fund. Compensation was reduced to fund
increased 8% during 2015, primarily due to activity levels this charitable contribution to Goldman Sachs Gives. The
in certain businesses and continued investment in firm asks its participating managing directors to make
regulatory compliance. recommendations regarding potential charitable recipients
for this contribution.

58 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Provision for Taxes Segment Operating Results

The effective income tax rate for 2015 was 30.7%, down The table below presents the net revenues, operating
from 31.4% for 2014. The decline compared with 2014 expenses and pre-tax earnings of our segments.
reflected reductions related to a change in the mix of
earnings, the impact of changes in tax law on deferred tax Year Ended December
assets, settlements of tax audits and the determination that $ in millions 2015 2014 2013
certain non-U.S. earnings would be permanently reinvested Investment Banking
abroad, and an increase related to the impact of non- Net revenues $ 7,027 $ 6,464 $ 6,004
deductible provisions for mortgage-related litigation and Operating expenses 3,713 3,688 3,479
regulatory matters. Pre-tax earnings $ 3,314 $ 2,776 $ 2,525

The effective income tax rate for 2014 was 31.4%, Institutional Client Services
Net revenues $15,151 $15,197 $15,721
essentially unchanged compared with 31.5% for 2013.
Operating expenses 1 13,938 10,880 11,792
On December 18, 2015, U.S. federal legislation was enacted Pre-tax earnings $ 1,213 $ 4,317 $ 3,929
to permanently defer U.S. tax on certain non-repatriated Investing & Lending
active financing income. This legislation did not have a Net revenues $ 5,436 $ 6,825 $ 7,018
material impact on our effective tax rate for the year ended Operating expenses 2,402 2,819 2,686
December 2015, and we do not expect it will have a Pre-tax earnings $ 3,034 $ 4,006 $ 4,332
material impact on our effective tax rate for 2016.
Investment Management
New York State enacted executive budget legislation for the Net revenues $ 6,206 $ 6,042 $ 5,463
Operating expenses 4,841 4,647 4,357
2015-2016 fiscal year which makes changes to the income
Pre-tax earnings $ 1,365 $ 1,395 $ 1,106
taxation of corporations doing business in New York City.
This change did not have a material impact on our effective Total net revenues $33,820 $34,528 $34,206
tax rate for 2015, and we do not expect this legislation will Total operating expenses 2 25,042 22,171 22,469
have a material impact on our effective tax rate for 2016. Total pre-tax earnings $ 8,778 $12,357 $11,737

In November 2015, the United Kingdom government 1. Includes provisions of $3.37 billion recorded during 2015 for the agreement
in principle with the RMBS Working Group. See Note 27 to the consolidated
enacted a budget which contained several changes that financial statements for further information about this agreement in principle.
impact our subsidiaries operating in the U.K., including: 2. Includes charitable contributions that have not been allocated to our
(i) an 8 percentage point surcharge on banking profits segments of $148 million for 2015, $137 million for 2014 and $155 million for
effective in 2016, (ii) a 1 percentage point reduction in 2013.
corporate income tax rates effective in 2017, (iii) a further 1 Net revenues in our segments include allocations of interest
percentage point reduction in corporate tax rates effective income and interest expense to specific securities,
in 2020, and (iv) a phased-in reduction from 2016 through commodities and other positions in relation to the cash
2021 in the U.K. Bank Levy rate (for which the related generated by, or funding requirements of, such underlying
expense is included in our non-compensation expenses). positions. See Note 25 to the consolidated financial
During the fourth quarter of 2015, we recognized a benefit statements for further information about our business
related to the revaluation of deferred income tax assets. segments.
Beginning in 2016, the new legislation will increase our
effective income tax rate and the impact will depend on the The cost drivers of Goldman Sachs taken as a whole
level and mix of our earnings. compensation, headcount and levels of business activity
are broadly similar in each of our business segments.
Compensation and benefits expenses within our segments
reflect, among other factors, the overall performance of
Goldman Sachs as well as the performance of 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 2015 Form 10-K 59

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Investment Banking
Our Investment Banking segment is comprised of: 2015 versus 2014. Net revenues in Investment Banking
were $7.03 billion for 2015, 9% higher than 2014.
Financial Advisory. Includes strategic advisory
assignments with respect to mergers and acquisitions, Net revenues in Financial Advisory were $3.47 billion,
divestitures, corporate defense activities, restructurings, 40% higher than 2014, reflecting strong client activity,
spin-offs, risk management and derivative transactions particularly in the United States. Industry-wide completed
directly related to these client advisory assignments. mergers and acquisitions increased significantly compared
with the prior year. Net revenues in Underwriting were
Underwriting. Includes public offerings and private
$3.56 billion, 11% lower compared with a strong 2014.
placements, including local and cross-border transactions
Net revenues in debt underwriting were lower compared
and acquisition financing, of a wide range of securities,
with 2014, reflecting significantly lower leveraged finance
loans and other financial instruments, and derivative
activity. Net revenues in equity underwriting were also
transactions directly related to these client underwriting
lower, reflecting significantly lower net revenues from
activities.
initial public offerings and convertible offerings, partially
The table below presents the operating results of our offset by significantly higher net revenues from secondary
Investment Banking segment. offerings.
During 2015, Investment Banking operated in an
Year Ended December
environment characterized by strong industry-wide mergers
$ in millions 2015 2014 2013
and acquisitions activity. Industry-wide activity in both
Financial Advisory $3,470 $2,474 $1,978
debt and equity underwriting declined compared with
Equity underwriting 1,546 1,750 1,659 2014. In the future, if client activity levels in mergers and
Debt underwriting 2,011 2,240 2,367 acquisitions decline, or client activity levels in underwriting
Total Underwriting 3,557 3,990 4,026 continue to decline, net revenues in Investment Banking
Total net revenues 7,027 6,464 6,004 would likely be negatively impacted.
Operating expenses 3,713 3,688 3,479
Pre-tax earnings $3,314 $2,776 $2,525 Operating expenses were $3.71 billion for 2015, essentially
unchanged compared with 2014. Pre-tax earnings were
The table below presents our financial advisory and $3.31 billion in 2015, 19% higher than 2014.
underwriting transaction volumes. 1
As of December 2015, our investment banking transaction
backlog was higher compared with the end of 2014,
Year Ended December
primarily due to significantly higher estimated net revenues
$ in billions 2015 2014 2013
from potential debt underwriting transactions, principally
Announced mergers and acquisitions $1,774 $ 973 $ 602
related to leveraged finance transactions, and higher
Completed mergers and acquisitions 1,090 661 634
Equity and equity-related offerings 2 72 78 90 estimated net revenues from potential advisory
Debt offerings 3 251 270 281 transactions, reflecting the continued high level of mergers
and acquisitions activity. Estimated net revenues from
1. Source: Thomson Reuters. Announced and completed mergers and
potential equity underwriting transactions were slightly
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 higher compared with the end of 2014.
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.
2. Includes Rule 144A and public common stock offerings, convertible offerings
and rights offerings.
3. Includes non-convertible preferred stock, mortgage-backed securities, asset-
backed securities and taxable municipal debt. Includes publicly registered
and Rule 144A issues. Excludes leveraged loans.

60 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Our investment banking transaction backlog represents an As of December 2014, our investment banking transaction
estimate of our future net revenues from investment backlog was significantly higher compared with the end of
banking transactions where we believe that future revenue 2013, due to a significant increase in estimated net revenues
realization is more likely than not. We believe changes in from potential advisory transactions. Estimated net
our investment banking transaction backlog may be a revenues from potential underwriting transactions were
useful indicator of client activity levels which, over the long lower compared with the end of 2013, as a significant
term, impact our net revenues. However, the time frame for decrease in estimated net revenues from potential equity
completion and corresponding revenue recognition of underwriting transactions, particularly in initial public
transactions in our backlog varies based on the nature of offerings, was partially offset by an increase in estimated
the assignment, as certain transactions may remain in our net revenues from potential debt underwriting transactions,
backlog for longer periods of time and others may enter and reflecting increases across most products.
leave within the same reporting period. In addition, our
Institutional Client Services
transaction backlog is subject to certain limitations, such as
Our Institutional Client Services segment is comprised of:
assumptions about the likelihood that individual client
transactions will occur in the future. Transactions may be Fixed Income, Currency and Commodities Client
cancelled or modified, and transactions not included in the Execution. Includes client execution activities related to
estimate may also occur. making markets in interest rate products, credit products,
mortgages, currencies and commodities.
2014 versus 2013. Net revenues in Investment Banking
were $6.46 billion for 2014, 8% higher than 2013. Interest Rate Products. Government bonds, money
market instruments, treasury bills, repurchase agreements
Net revenues in Financial Advisory were $2.47 billion,
and other highly liquid securities and instruments, as well
25% higher than 2013, reflecting an increase in industry-
as interest rate swaps, options and other derivatives.
wide completed mergers and acquisitions, primarily in the
United States. Net revenues in Underwriting were Credit Products. Investment-grade corporate securities,
$3.99 billion, essentially unchanged compared with a high-yield securities, credit derivatives, bank and bridge
strong 2013, as industry-wide activity levels remained high. loans, municipal securities, emerging market and
Net revenues in debt underwriting were slightly lower distressed debt, and trade claims.
compared with 2013, reflecting lower net revenues from
Mortgages. Commercial mortgage-related securities,
commercial mortgage-related activity, while net revenues in
loans and derivatives, residential mortgage-related
equity underwriting were slightly higher, principally from
securities, loans and derivatives (including U.S.
initial public offerings.
government agency-issued collateralized mortgage
During 2014, Investment Banking operated in an obligations, other prime, subprime and Alt-A securities
environment generally characterized by strong industry- and loans), and other asset-backed securities, loans and
wide underwriting activity in both equity and debt, and an derivatives.
increase in industry-wide completed mergers and
Currencies. Most currencies, including growth-market
acquisitions activity compared with 2013. Industry-wide
currencies.
announced mergers and acquisitions activity significantly
increased compared with 2013. Commodities. Crude oil and petroleum products,
natural gas, base, precious and other metals, electricity,
Operating expenses were $3.69 billion for 2014, 6% higher
coal, agricultural and other commodity products.
than 2013, primarily due to increased compensation and
benefits expenses, reflecting higher net revenues. Pre-tax
earnings were $2.78 billion in 2014, 10% higher than
2013.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Equities. Includes client execution activities related to Net revenues in Equities were $7.83 billion for 2015, 16%
making markets in equity products and commissions and higher than 2014. Excluding a gain of $121 million
fees from executing and clearing institutional client ($30 million and $91 million included in equities client
transactions on major stock, options and futures exchanges execution and securities services, respectively) in 2014
worldwide, as well as OTC transactions. Equities also related to the extinguishment of certain of our junior
includes our securities services business, which provides subordinated debt, net revenues in Equities were 18%
financing, securities lending and other prime brokerage higher than 2014, primarily due to significantly higher net
services to institutional clients, including hedge funds, revenues in equities client execution across the major
mutual funds, pension funds and foundations, and regions, reflecting significantly higher results in both
generates revenues primarily in the form of interest rate derivatives and cash products, and higher net revenues in
spreads or fees. securities services, reflecting the impact of higher average
customer balances and improved securities lending spreads.
The table below presents the operating results of our
Commissions and fees were essentially unchanged
Institutional Client Services segment.
compared with 2014.
Year Ended December The firm elects the fair value option for certain unsecured
$ in millions 2015 2014 2013 borrowings. The fair value net gain attributable to the
Fixed Income, Currency and impact of changes in our credit spreads on these borrowings
Commodities Client Execution $ 7,322 $ 8,461 $ 8,651 was $255 million ($214 million and $41 million related to
Equities client execution 1 3,028 2,079 2,594
Fixed Income, Currency and Commodities Client
Commissions and fees 3,156 3,153 3,103 Execution and equities client execution, respectively) for
Securities services 1,645 1,504 1,373 2015, compared with a net gain of $144 million
Total Equities 7,829 6,736 7,070 ($108 million and $36 million related to Fixed Income,
Total net revenues 15,151 15,197 15,721 Currency and Commodities Client Execution and equities
Operating expenses 13,938 10,880 11,792 client execution, respectively) for 2014.
Pre-tax earnings $ 1,213 $ 4,317 $ 3,929
During 2015, the operating environment for Institutional
1. Net revenues related to the Americas reinsurance business were Client Services was positively impacted by diverging central
$317 million for 2013. In April 2013, we completed the sale of a majority
stake in our Americas reinsurance business and no longer consolidate this bank monetary policies in the United States and the Euro
business. area in the first quarter, as increased volatility levels
contributed to strong client activity levels in currencies,
2015 versus 2014. Net revenues in Institutional Client
interest rate products and equity products, and market-
Services were $15.15 billion for 2015, essentially
making conditions improved. However, during the
unchanged compared with 2014.
remainder of the year, concerns about global growth and
Net revenues in Fixed Income, Currency and Commodities uncertainty about the U.S. Federal Reserves interest rate
Client Execution were $7.32 billion for 2015, 13% lower policy, along with lower global equity prices, widening
than 2014. Excluding a gain of $168 million in 2014 high-yield credit spreads and declining commodity prices,
related to the extinguishment of certain of our junior contributed to lower levels of client activity, particularly in
subordinated debt, net revenues in Fixed Income, Currency mortgages and credit, and more difficult market-making
and Commodities Client Execution were 12% lower than conditions. If macroeconomic concerns continue over the
2014, reflecting significantly lower net revenues in long term and activity levels decline, net revenues in
mortgages, credit products and commodities. The decreases Institutional Client Services would likely be negatively
in mortgages and credit products reflected challenging impacted.
market-making conditions and generally low levels of
Operating expenses were $13.94 billion for 2015, 28%
activity during 2015. The decline in commodities primarily
higher than 2014, due to significantly higher net provisions
reflected less favorable market-making conditions
for mortgage-related litigation and regulatory matters,
compared with 2014, which included a strong first quarter
partially offset by decreased compensation and benefits
of 2014. These decreases were partially offset by
expenses. Pre-tax earnings were $1.21 billion in 2015, 72%
significantly higher net revenues in interest rate products
lower than 2014.
and currencies, reflecting higher volatility levels which
contributed to higher client activity levels, particularly
during the first quarter of 2015.

62 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

2014 versus 2013. Net revenues in Institutional Client The firm elects the fair value option for certain unsecured
Services were $15.20 billion for 2014, 3% lower than borrowings. The fair value net gain attributable to the
2013. Results for 2014 included a gain of $289 million impact of changes in our credit spreads on these borrowings
($270 million of which was recorded at extinguishment in was $144 million ($108 million and $36 million related to
the third quarter) related to the extinguishment of certain of Fixed Income, Currency and Commodities Client
our junior subordinated debt, of which $168 million was Execution and equities client execution, respectively) for
included in Fixed Income, Currency and Commodities 2014, compared with a net loss of $296 million
Client Execution and $121 million in Equities ($30 million ($220 million and $76 million related to Fixed Income,
and $91 million included in equities client execution and Currency and Commodities Client Execution and equities
securities services, respectively). client execution, respectively) for 2013.
Net revenues in Fixed Income, Currency and Commodities During 2014, Institutional Client Services continued to
Client Execution were $8.46 billion for 2014, 2% lower operate in a challenging environment, as economic
than 2013. Excluding the gain related to the uncertainty contributed to subdued risk appetite for our
extinguishment of debt in 2014 and a gain of $211 million clients and generally low levels of activity, particularly in
on the sale of a majority stake in our European insurance credit products, interest rate products and mortgages. In
business in 2013, net revenues in Fixed Income, Currency addition, volatility levels remained low, although volatility
and Commodities Client Execution were slightly lower increased in certain businesses towards the end of the year.
compared with 2013. This decline reflected significantly Debt markets were also impacted by the widening of high-
lower net revenues in credit products and slightly lower net yield credit spreads and the decline in oil prices during the
revenues in both interest rate products and mortgages. The second half of the year, which contributed to low liquidity,
decrease in credit products primarily reflected difficult particularly in credit. Equity markets, however, generally
market-making conditions, particularly during the second increased during the year.
half of 2014, and generally low levels of activity. These
Operating expenses were $10.88 billion for 2014, 8%
results were largely offset by significantly higher net
lower than 2013, due to decreased compensation and
revenues in commodities and higher net revenues in
benefits expenses, reflecting lower net revenues, lower net
currencies. The increase in commodities reflected more
provisions for litigation and regulatory proceedings, and
favorable market-making conditions in certain energy
lower expenses as a result of the sale of a majority stake in
products, primarily during the first quarter of 2014. The
our Americas reinsurance business. Pre-tax earnings were
increase in currencies reflected a stronger performance
$4.32 billion in 2014, 10% higher than 2013.
towards the end of 2014, as activity levels improved and
volatility was higher.
Net revenues in Equities were $6.74 billion for 2014, 5%
lower than 2013. Excluding the gain related to the
extinguishment of debt in 2014 and net revenues of
$317 million related to the sale of a majority stake in our
Americas reinsurance business in 2013, net revenues in
Equities were slightly lower compared with 2013. This
decline reflected lower net revenues in derivatives, partially
offset by slightly higher commissions and fees and slightly
higher net revenues in securities services. The increase in
securities services net revenues reflected the impact of
higher average customer balances. The increase in
commissions and fees was due to higher commissions and
fees in both Europe and the United States, reflecting
generally higher client activity, consistent with increases in
listed cash equity market volumes in these regions.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Investing & Lending

Investing & Lending includes our investing activities and Operating expenses were $2.40 billion for 2015, 15%
the origination of loans to provide financing to clients. lower than 2014, due to lower depreciation and
These investments and loans are typically longer-term in amortization expenses, primarily reflecting lower
nature. We make investments, some of which are impairment charges related to consolidated investments,
consolidated, directly and indirectly through funds and and a reduction in expenses related to the sale of Metro in
separate accounts that we manage, in debt securities and the fourth quarter of 2014. Pre-tax earnings were
loans, public and private equity securities, and real estate $3.03 billion in 2015, 24% lower than 2014.
entities.
2014 versus 2013. Net revenues in Investing & Lending
The table below presents the operating results of our were $6.83 billion for 2014, 3% lower than 2013. Net
Investing & Lending segment. revenues from investments in equity securities were lower
Year Ended December due to a significant decrease in net gains from investments
$ in millions 2015 2014 2013 in public equities, as movements in global equity prices
Equity securities $3,781 $4,579 $4,974 during 2014 were less favorable compared with 2013, as
Debt securities and loans 1,655 2,246 2,044 well as significantly lower net revenues related to our
Total net revenues 1 5,436 6,825 7,018 consolidated investments, reflecting a decrease in operating
Operating expenses 2,402 2,819 2,686 revenues from commodities-related consolidated
Pre-tax earnings $3,034 $4,006 $4,332 investments. These decreases were partially offset by an
1. Net revenues related to our consolidated investments, previously reported in
increase in net gains from investments in private equities,
other net revenues within Investing & Lending, are now reported in equity primarily driven by company-specific events. Net revenues
securities and debt securities and loans, as results from these activities from debt securities and loans were higher than 2013,
($391 million for 2015) are no longer significant principally due to the sale of
Metro in the fourth quarter of 2014. Reclassifications have been made to
reflecting a significant increase in net interest income,
previously reported amounts to conform to the current presentation. primarily driven by increased lending, and a slight increase
in net gains, primarily due to sales of certain investments
2015 versus 2014. Net revenues in Investing & Lending
during 2014.
were $5.44 billion for 2015, 20% lower than 2014. This
decrease was primarily due to lower net revenues from During 2014, net revenues in Investing & Lending generally
investments in equities, principally reflecting the sale of reflected favorable company-specific events, including
Metro in the fourth quarter of 2014 and lower net gains initial public offerings and financings, and strong corporate
from investments in private equities, driven by corporate performance, as well as net gains from sales of certain
performance. In addition, net revenues in debt securities investments.
and loans were significantly lower, reflecting lower net
Operating expenses were $2.82 billion for 2014, 5% higher
gains from investments.
than 2013, reflecting higher compensation and benefits
Although net revenues in Investing & Lending for 2015 expenses, partially offset by lower expenses related to
benefited from favorable company-specific events, consolidated investments. Pre-tax earnings were
including sales, initial public offerings and financings, a $4.01 billion in 2014, 8% lower than 2013.
decline in global equity prices and widening high-yield
credit spreads during the second half of the year impacted
results. Concern about the outlook for the global economy
continues to be a meaningful consideration for the global
marketplace. If equity markets continue to decline or credit
spreads widen further, net revenues in Investing & Lending
would likely continue to be negatively impacted.

64 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Investment Management
Investment Management provides investment management The table below presents the operating results of our
services and offers investment products (primarily through Investment Management segment.
separately managed accounts and commingled vehicles,
such as mutual funds and private investment funds) across Year Ended December
all major asset classes to a diverse set of institutional and $ in millions 2015 2014 2013
individual clients. Investment Management also offers Management and other fees $4,887 $4,800 $4,386
wealth advisory services, including portfolio management Incentive fees 780 776 662
and financial counseling, and brokerage and other Transaction revenues 539 466 415
transaction services to high-net-worth individuals and Total net revenues 6,206 6,042 5,463
families. Operating expenses 4,841 4,647 4,357
Pre-tax earnings $1,365 $1,395 $1,106
Assets under supervision include assets under management
and other client assets. Assets under management include The tables below present our period-end assets under
client assets where we earn a fee for managing assets on a supervision (AUS) by asset class and by distribution
discretionary basis. This includes net assets in our mutual channel.
funds, hedge funds, credit funds and private equity funds
(including real estate funds), and separately managed As of December
accounts for institutional and individual investors. Other $ in billions 2015 2014 2013
client assets include client assets invested with third-party Assets under management $1,078 $1,027 $ 919
managers, bank deposits and advisory relationships where Other client assets 174 151 123
we earn a fee for advisory and other services, but do not Total AUS $1,252 $1,178 $1,042
have investment discretion. Assets under supervision do not Asset Class
include the self-directed brokerage assets of our clients. Alternative investments 1 $ 148 $ 143 $ 142
Long-term assets under supervision represent assets under Equity 252 236 208
supervision excluding liquidity products. Liquidity Fixed income 546 516 446
products represent money market and bank deposit assets. Long-term AUS 946 895 796
Liquidity products 306 283 246
Assets under supervision typically generate fees as a Total AUS $1,252 $1,178 $1,042
percentage of net asset value, which vary by asset class and
are affected by investment performance as well as asset Distribution Channel
Institutional $ 471 $ 412 $ 363
inflows and redemptions. Asset classes such as alternative High-net-worth individuals 369 363 330
investment and equity assets typically generate higher fees Third-party distributed 412 403 349
relative to fixed income and liquidity product assets. The Total AUS $1,252 $1,178 $1,042
average effective management fee (which excludes non-
asset-based fees) we earned on our assets under supervision 1. Primarily includes hedge funds, credit funds, private equity, real estate,
currencies, commodities and asset allocation strategies.
was 39 basis points for 2015 and 40 basis points for both
2014 and 2013. The table below presents our average monthly assets under
supervision by asset class.
In certain circumstances, we are also entitled to receive
incentive fees based on a percentage of a funds or a
Average for the
separately managed accounts return, or when the return Year Ended December
exceeds a specified benchmark or other performance target. $ in billions 2015 2014 2013
Incentive fees are recognized only when all material Alternative investments $ 145 $ 145 $ 145
contingencies are resolved. Equity 247 225 180
Fixed income 530 499 425
Long-term AUS 922 869 750
Liquidity products 272 248 235
Total AUS $1,194 $1,117 $ 985

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

The table below presents a summary of the changes in our Operating expenses were $4.84 billion for 2015, 4% higher
assets under supervision. than 2014, due to increased compensation and benefits
expenses, reflecting higher net revenues. Pre-tax earnings
Year Ended December were $1.37 billion in 2015, 2% lower than 2014.
$ in billions 2015 2014 2013
2014 versus 2013. Net revenues in Investment
Balance, beginning of year $1,178 $1,042 $ 965
Management were $6.04 billion for 2014, 11% higher than
Net inflows/(outflows)
Alternative investments 7 1 (13)
2013, reflecting higher management and other fees,
Equity 23 15 13 primarily due to higher average assets under supervision, as
Fixed income 41 58 41 3 well as higher incentive fees and transaction revenues.
Long-term AUS net inflows/(outflows) 71 1 74 41 During 2014, total assets under supervision increased
Liquidity products 23 37 (4) $136 billion to $1.18 trillion. Long-term assets under
Total AUS net inflows/(outflows) 94 111 2 37 supervision increased $99 billion, including net inflows of
Net market appreciation/(depreciation) (20) 25 40 $74 billion (including $19 billion of fixed income asset
Balance, end of year $1,252 $1,178 $1,042
inflows in connection with our acquisition of Deutsche
1. Includes $18 billion of fixed income, equity and alternative investments asset Asset & Wealth Managements stable value business) and
inflows in connection with our acquisition of Pacific Global Advisors net market appreciation of $25 billion, both primarily in
solutions business.
fixed income and equity assets. In addition, liquidity
2. Includes $19 billion of fixed income asset inflows in connection with our products increased $37 billion (including $6 billion of
acquisition of Deutsche Asset & Wealth Managements stable value
business and $6 billion of liquidity products inflows in connection with our inflows in connection with our acquisition of RBS Asset
acquisition of RBS Asset Managements money market funds. Managements money market funds).
3. Includes $10 billion in assets managed by the firm related to our Americas
reinsurance business, in which a majority stake was sold in April 2013, that During 2014, Investment Management operated in an
were previously excluded from assets under supervision as they were assets environment generally characterized by improved asset
of a consolidated subsidiary. prices, primarily in equity and fixed income assets, resulting
2015 versus 2014. Net revenues in Investment in appreciation in the value of client assets. In addition, the
Management were $6.21 billion for 2015, 3% higher than mix of average assets under supervision shifted slightly
2014, due to slightly higher management and other fees, from liquidity products to long-term assets under
primarily reflecting higher average assets under supervision, supervision, due to growth in fixed income and equity
and higher transaction revenues. During 2015, total assets assets, compared with 2013.
under supervision increased $74 billion to $1.25 trillion. Operating expenses were $4.65 billion for 2014, 7% higher
Long-term assets under supervision increased $51 billion, than 2013, primarily due to increased compensation and
including net inflows of $71 billion (which includes benefits expenses, reflecting higher net revenues, and higher
$18 billion of asset inflows in connection with our fund distribution fees. Pre-tax earnings were $1.40 billion
acquisition of Pacific Global Advisors solutions business), in 2014, 26% higher than 2013.
and net market depreciation of $20 billion, both primarily
in fixed income and equity assets. In addition, liquidity Geographic Data
products increased $23 billion. See Note 25 to the consolidated financial statements for a
summary of our total net revenues, pre-tax earnings and net
During 2015, Investment Management operated in an earnings by geographic region.
environment generally characterized by strong client net
inflows, which more than offset the declines in equity and
fixed income asset prices, which resulted in depreciation in
the value of client assets, particularly in the third quarter of
2015. The mix of average assets under supervision shifted
slightly from long-term assets under supervision to liquidity
products compared with 2014. In the future, if asset prices
continue to decline, or investors continue to favor asset
classes that typically generate lower fees or investors
withdraw their assets, net revenues in Investment
Management would likely be negatively impacted.

66 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Balance Sheet and Funding Sources

Balance Sheet Management
One of our most important risk management disciplines is To prepare our quarterly balance sheet plan, business risk
our ability to manage the size and composition of our managers and managers from our independent control and
balance sheet. While our asset base changes due to client support functions meet with business managers to review
activity, market fluctuations and business opportunities, current and prior period information and discuss
the size and composition of our balance sheet reflect (i) our expectations for the upcoming quarter. The specific
overall risk tolerance, (ii) our ability to access stable information reviewed includes asset and liability size and
funding sources and (iii) the amount of equity capital we composition, aged inventory, limit utilization, risk and
hold. See Equity Capital Management and Regulatory performance measures, and capital usage.
Capital Equity Capital Management for information
Our consolidated quarterly plan, including our balance
about our equity capital management process.
sheet plans by business, funding projections, and projected
Although our balance sheet fluctuates on a day-to-day key metrics, is reviewed and approved by the Firmwide
basis, our total assets at quarter-end and year-end dates are Finance Committee. See Overview and Structure of Risk
generally not materially different from those occurring Management for an overview of our risk management
within our reporting periods. structure.
In order to ensure appropriate risk management, we seek to Business-Specific Limits. The Firmwide Finance
maintain a liquid balance sheet and have processes in place Committee sets asset and liability limits for each business
to dynamically manage our assets and liabilities which and aged inventory limits for certain financial instruments
include (i) quarterly planning, (ii) business-specific limits, as a disincentive to hold inventory over longer periods of
(iii) monitoring of key metrics and (iv) scenario analyses. time. These limits are set at levels which are close to actual
operating levels in order to ensure prompt escalation and
Quarterly Planning. We prepare a quarterly balance sheet
discussion among business managers and managers in our
plan that combines our projected total assets and
independent control and support functions on a routine
composition of assets with our expected funding sources for
basis. The Firmwide Finance Committee reviews and
the upcoming quarter. The objectives of this quarterly
approves balance sheet limits on a quarterly basis and may
planning process are:
also approve changes in limits on an ad hoc basis in
To develop our near-term balance sheet projections, response to changing business needs or market conditions.
taking into account the general state of the financial Requests for changes in limits are evaluated after giving
markets and expected business activity levels, as well as consideration to their impact on key firm metrics.
current regulatory requirements; Compliance with limits is monitored on a daily basis by
business risk managers, as well as managers in our
To determine the target amount, tenor and type of
independent control and support functions.
funding to raise, based on our projected assets and
forecasted maturities; and Monitoring of Key Metrics. We monitor key balance
sheet metrics daily both by business and on a consolidated
To allow business risk managers and managers from our
basis, including asset and liability size and composition,
independent control and support functions to objectively
aged inventory, limit utilization and risk measures. We
evaluate balance sheet limit requests from business
allocate assets to businesses and review and analyze
managers in the context of the firms overall balance sheet
movements resulting from new business activity as well as
constraints, including the firms liability profile and
market fluctuations.
equity capital levels, and key metrics. Limits are typically
set at levels that will be periodically exceeded, rather than
at levels which reflect our maximum risk appetite.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Scenario Analyses. We conduct various scenario analyses The following is a description of the captions in the table
including as part of the Comprehensive Capital Analysis above:
and Review (CCAR) and Dodd-Frank Act Stress Tests
Global Core Liquid Assets and Cash. We maintain
(DFAST), as well as our resolution and recovery planning.
liquidity to meet a broad range of potential cash outflows
See Equity Capital Management and Regulatory
and collateral needs in a stressed environment. See
Capital Equity Capital Management below for further
Liquidity Risk Management below for details on the
information. These scenarios cover short-term and long-
composition and sizing of our Global Core Liquid
term time horizons using various macroeconomic and firm-
Assets (GCLA). In addition to our GCLA, we maintain
specific assumptions, based on a range of economic
other operating cash balances, primarily for use in specific
scenarios. We use these analyses to assist us in developing
currencies, entities, or jurisdictions where we do not have
our longer-term balance sheet management strategy,
immediate access to parent company liquidity.
including the level and composition of assets, funding and
equity capital. Additionally, these analyses help us develop Secured Client Financing. We provide collateralized
approaches for maintaining appropriate funding, liquidity financing for client positions, including margin loans
and capital across a variety of situations, including a secured by client collateral, securities borrowed, and
severely stressed environment. resale agreements primarily collateralized by government
obligations. As a result of client activities, we are required
Balance Sheet Allocation
to segregate cash and securities to satisfy regulatory
In addition to preparing our consolidated statements of
requirements. Our secured client financing arrangements,
financial condition in accordance with U.S. GAAP, we
which are generally short-term, are accounted for at fair
prepare a balance sheet that generally allocates assets to our
value or at amounts that approximate fair value, and
businesses, which is a non-GAAP presentation and may not
include daily margin requirements to mitigate
be comparable to similar non-GAAP presentations used by
counterparty credit risk.
other companies. We believe that presenting our assets on
this basis is meaningful because it is consistent with the way Institutional Client Services. In Institutional Client
management views and manages risks associated with the Services, we maintain inventory positions to facilitate
firms assets and better enables investors to assess the market making in fixed income, equity, currency and
liquidity of the firms assets. commodity products. Additionally, as part of market-
making activities, we enter into resale or securities
The table below presents our balance sheet allocation.
borrowing arrangements to obtain securities which we
can use to cover transactions in which we or our clients
As of December
have sold securities that have not yet been purchased. The
$ in millions 2015 2014
receivables in Institutional Client Services primarily relate
Global Core Liquid Assets (GCLA) $199,120 $182,947
to securities transactions.
Other cash 9,180 7,805
GCLA and cash 208,300 190,752 Investing & Lending. In Investing & Lending, we make
Secured client financing 221,325 210,641
investments and originate loans to provide financing to
clients. These investments and loans are typically longer-
Inventory 208,836 230,667 term in nature. We make investments, directly and
Secured financing agreements 63,495 74,767
indirectly through funds and separate accounts that we
Receivables 39,976 47,317
manage, in debt securities, loans, public and private
Institutional Client Services 312,307 352,751
equity securities, real estate entities and other
Public equity 3,991 4,041 investments.
Private equity 16,985 17,979
Debt 1 23,216 24,768 Other Assets. Other assets are generally less liquid, non-
Loans receivable 2 45,407 28,938 financial assets, including property, leasehold
Other 4,646 3,771 improvements and equipment, goodwill and identifiable
Investing & Lending 94,245 79,497 intangible assets, income tax-related receivables, equity-
Total inventory and related assets 406,552 432,248 method investments, assets classified as held for sale and
Other assets 25,218 22,201
miscellaneous receivables.
Total assets $861,395 $855,842

1. Includes $17.29 billion and $18.24 billion as of December 2015 and

December 2014, respectively, of direct loans primarily extended to corporate
and private wealth management clients that are accounted for at fair value.
2. See Note 9 to the consolidated financial statements for further information
about loans receivable.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

The tables below present the reconciliation of this balance See Balance Sheet Analysis and Metrics for
sheet allocation to our U.S. GAAP balance sheet. In the explanations on the changes in our balance sheet from
tables below: December 2014 to December 2015.
Total assets for Institutional Client Services and
Investing & Lending represent inventory and related
assets. These amounts differ from total assets by business
segment disclosed in Note 25 to the consolidated
financial statements because total assets disclosed in
Note 25 include allocations of our GCLA and cash,
secured client financing and other assets.

As of December 2015
Secured Institutional
GCLA Client Client Investing & Other Total
$ in millions and Cash Financing Services Lending Assets Assets
Cash and cash equivalents $ 75,105 $ $ $ $ $ 75,105
Cash and securities segregated for regulatory and other purposes 56,838 56,838
Securities purchased under agreements to resell and federal funds
sold 60,092 42,786 16,368 1,659 120,905
Securities borrowed 33,260 91,712 47,127 172,099
Receivables from brokers, dealers and clearing organizations 5,912 19,541 25,453
Receivables from customers and counterparties 24,077 20,435 1,918 46,430
Loans receivable 45,407 45,407
Financial instruments owned, at fair value 39,843 208,836 45,261 293,940
Other assets 25,218 25,218
Total assets $208,300 $221,325 $ 312,307 $94,245 $25,218 $861,395

As of December 2014
Secured Institutional
GCLA Client Client Investing & Other Total
$ in millions and Cash Financing Services Lending Assets Assets
Cash and cash equivalents $ 57,600 $ $ $ $ $ 57,600
Cash and securities segregated for regulatory and other purposes 51,716 51,716
Securities purchased under agreements to resell and federal funds
sold 66,928 34,506 24,940 1,564 127,938
Securities borrowed 32,311 78,584 49,827 160,722
Receivables from brokers, dealers and clearing organizations 8,908 21,656 107 30,671
Receivables from customers and counterparties 36,927 25,661 1,220 63,808
Loans receivable 28,938 28,938
Financial instruments owned, at fair value 33,913 230,667 47,668 312,248
Other assets 22,201 22,201
Total assets $190,752 $210,641 $ 352,751 $79,497 $22,201 $855,842

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Balance Sheet Analysis and Metrics

As of December 2015, total assets on our consolidated As of December 2014, our total securities sold under
statements of financial condition were $861.40 billion, an agreements to repurchase, accounted for as collateralized
increase of $5.55 billion from December 2014, reflecting financings, were $88.22 billion, which was 3% lower and
increases in cash and cash equivalents of $17.51 billion, 26% lower than the daily average amount of repurchase
loans receivable of $16.47 billion and securities borrowed agreements during the quarter ended and year ended
of $11.38 billion, partially offset by decreases in financial December 2014, respectively. The decrease in our
instruments owned, at fair value of $18.31 billion, and repurchase agreements relative to the daily average during
receivables from customers and counterparties of 2014 resulted from a decrease in client and firm financing
$17.38 billion. During 2015, cash and cash equivalents activity during the second half of the year, including a
increased primarily due to an increase in GCLA, loans reduction in our matched book, primarily resulting from a
receivable increased, reflecting lending activity, and firmwide initiative to reduce activities with lower returns.
securities borrowed increased due to firm-related activity.
The level of our repurchase agreements fluctuates between
Financial instruments owned, at fair value decreased
and within periods, primarily due to providing clients with
primarily reflecting the impact of movements in interest
access to highly liquid collateral, such as U.S. government
rate and currency markets on derivative valuations and the
and federal agency, and investment-grade sovereign
impact of lower market-making activity related to non-U.S.
obligations through collateralized financing activities.
government and agency obligations and corporate debt
securities, partially offset by the impact of higher market- The table below presents information about our assets,
making activity related to equities and convertible unsecured long-term borrowings, shareholders equity and
debentures. Receivables from customers and counterparties leverage ratios.
decreased primarily due to lower client activity.
As of December
As of December 2015, total liabilities on our consolidated
$ in millions 2015 2014
statements of financial condition were $774.67 billion, an
Total assets $861,395 $855,842
increase of $1.62 billion from December 2014, reflecting
Unsecured long-term borrowings $175,422 $167,302
increases in deposits of $14.64 billion and unsecured long-
Total shareholders equity $ 86,728 $ 82,797
term borrowings of $8.12 billion, partially offset by a Leverage ratio 9.9x 10.3x
decrease in financial instruments sold, but not yet Debt to equity ratio 2.0x 2.0x
purchased, at fair value of $16.84 billion. During 2015,
deposits increased primarily in Goldman Sachs Bank USA In the table above:
(GS Bank USA) and unsecured long-term borrowings
The leverage ratio equals total assets divided by total
increased due to net new issuances. Financial instruments
shareholders equity and measures the proportion of
sold, but not yet purchased, at fair value decreased
equity and debt the firm is using to finance assets. This
primarily reflecting the impact of movements in interest
ratio is different from the Tier 1 leverage ratio included in
rate and currency markets on derivative valuations.
Note 20 to the consolidated financial statements.
As of December 2015, our total securities sold under
The debt to equity ratio equals unsecured long-term
agreements to repurchase, accounted for as collateralized
borrowings divided by total shareholders equity.
financings, were $86.07 billion, which was 3% higher than
the daily average amount of repurchase agreements during The table below presents information about our
both the quarter ended and year ended December 2015. shareholders equity and book value per common share,
The increase in our repurchase agreements relative to the including the reconciliation of total shareholders equity to
daily average during 2015 resulted from an increase in firm tangible common shareholders equity.
financing and client activity at the end of the year. As of December
$ in millions, except per share amounts 2015 2014
Total shareholders equity $ 86,728 $ 82,797
Less: Preferred stock (11,200) (9,200)
Common shareholders equity 75,528 73,597
Less: Goodwill and identifiable intangible assets (4,148) (4,160)
Tangible common shareholders equity $ 71,380 $ 69,437
Book value per common share $ 171.03 $ 163.01
Tangible book value per common share 161.64 153.79

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

In the table above: Our funding is primarily raised in U.S. dollar, Euro, British
pound and Japanese yen. We generally distribute our
Tangible common shareholders equity equals total
funding products through our own sales force and third-
shareholders equity less preferred stock, goodwill and
party distributors to a large, diverse creditor base in a
identifiable intangible assets. We believe that tangible
variety of markets in the Americas, Europe and Asia. We
common shareholders equity is meaningful because it is a
believe that our relationships with our creditors are critical
measure that we and investors use to assess capital
to our liquidity. Our creditors include banks, governments,
adequacy. Tangible common shareholders equity is a
securities lenders, pension funds, insurance companies,
non-GAAP measure and may not be comparable to
mutual funds and individuals. We have imposed various
similar non-GAAP measures used by other companies.
internal guidelines to monitor creditor concentration across
Book value per common share and tangible book value our funding programs.
per common share are based on common shares
Secured Funding. We fund a significant amount of
outstanding, including restricted stock units (RSUs)
inventory on a secured basis. Secured funding is less
granted to employees with no future service requirements,
sensitive to changes in our credit quality than unsecured
of 441.6 million and 451.5 million as of December 2015
funding, due to our posting of collateral to our lenders.
and December 2014, respectively. We believe that
Nonetheless, we continually analyze the refinancing risk of
tangible book value per common share (tangible common
our secured funding activities, taking into account trade
shareholders equity divided by common shares
tenors, maturity profiles, counterparty concentrations,
outstanding, including RSUs granted to employees with
collateral eligibility and counterparty rollover probabilities.
no future service requirements) is meaningful because it is
We seek to mitigate our refinancing risk by executing term
a measure that we and investors use to assess capital
trades with staggered maturities, diversifying
adequacy. Tangible book value per common share is a
counterparties, raising excess secured funding, and pre-
non-GAAP measure and may not be comparable to
funding residual risk through our GCLA.
similar non-GAAP measures used by other companies.
We seek to raise secured funding with a term appropriate
Funding Sources
for the liquidity of the assets that are being financed, and we
Our primary sources of funding are secured financings,
seek longer maturities for secured funding collateralized by
unsecured long-term and short-term borrowings, and
asset classes that may be harder to fund on a secured basis
deposits. We seek to maintain broad and diversified
especially during times of market stress. Substantially all of
funding sources globally across products, programs,
our secured funding, excluding funding collateralized by
markets, currencies and creditors to avoid funding
liquid government obligations, is executed for tenors of one
concentrations.
month or greater. Assets that may be harder to fund on a
We raise funding through a number of different products, secured basis during times of market stress include certain
including: financial instruments in the following categories: mortgage
and other asset-backed loans and securities, non-
Collateralized financings, such as repurchase agreements,
investment-grade corporate debt securities, equities and
securities loaned and other secured financings;
convertible debentures and emerging market securities.
Long-term unsecured debt (including structured notes) Assets that are classified as level 3 in the fair value hierarchy
through syndicated U.S. registered offerings, U.S. are generally funded on an unsecured basis. See Notes 5 and
registered and Rule 144A medium-term note programs, 6 to the consolidated financial statements for further
offshore medium-term note offerings and other debt information about the classification of financial
offerings; instruments in the fair value hierarchy and Unsecured
Long-Term Borrowings below for further information
Savings and demand deposits through deposit sweep
about the use of unsecured long-term borrowings as a
programs and time deposits through internal and third-
source of funding.
party broker-dealers; and
The weighted average maturity of our secured funding,
Short-term unsecured debt at the subsidiary level through
excluding funding collateralized by highly liquid securities
U.S. and non-U.S. hybrid financial instruments,
eligible for inclusion in our GCLA, exceeded 120 days as of
commercial paper and promissory note issuances and
December 2015.
other methods.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

A majority of our secured funding for securities not eligible Deposits. We raise deposits mainly through GS Bank USA
for inclusion in the GCLA is executed through term and Goldman Sachs International Bank (GSIB). The tables
repurchase agreements and securities loaned contracts. We below present the types and sources of our deposits.
also raise financing through other types of collateralized
financings, such as secured loans and notes. GS Bank USA As of December 2015
has access to funding from the Federal Home Loan Bank Savings and
(FHLB). As of December 2015, our outstanding $ in millions Demand 1 Time 2 Total

borrowings against the FHLB were $2.92 billion. Private bank deposits 3 $38,715 $ 2,354 $41,069
Certificates of deposit 34,375 34,375
GS Bank USA also has access to funding through the Deposit sweep programs 4 15,791 15,791
Federal Reserve Bank discount window. While we do not Institutional 1 6,283 6,284
rely on this funding in our liquidity planning and stress Total 5 $54,507 $43,012 $97,519
testing, we maintain policies and procedures necessary to
access this funding and test discount window borrowing As of December 2014
procedures. Savings and
$ in millions Demand 1 Time 2 Total
Unsecured Long-Term Borrowings. We issue unsecured
Private bank deposits 3 $33,590 $ 1,609 $35,199
long-term borrowings as a source of funding for inventory
Certificates of deposit 25,780 25,780
and other assets and to finance a portion of our GCLA. We Deposit sweep programs 4 15,691 15,691
issue in different tenors, currencies and products to Institutional 12 6,198 6,210
maximize the diversification of our investor base. Total 5 $49,293 $33,587 $82,880

The table below presents our quarterly unsecured long-term 1. Represents deposits with no stated maturity.
borrowings maturity profile as of December 2015. 2. Weighted average maturity of approximately three years as of both
December 2015 and December 2014.
Unsecured Long-Term Borrowings Maturity Profile 3. Substantially all were from overnight deposit sweep programs related to
private wealth management clients.
First Second Third Fourth
$ in millions Quarter Quarter Quarter Quarter Total 4. Represents long-term contractual agreements with several U.S. broker-
2017 $12,618 $3,403 $7,305 $2,036 $ 25,362 dealers who sweep client cash to FDIC-insured deposits.

2018 8,114 8,258 5,243 3,516 25,131 5. Deposits insured by the FDIC as of December 2015 and December 2014
2019 6,318 663 2,243 6,811 16,035 were approximately $55.48 billion and $45.72 billion, respectively.

2020 4,290 7,368 5,455 842 17,955

In August 2015, GS Bank USA entered into an agreement,
2021 - thereafter 90,939
subject to regulatory approval, to acquire GE Capital
Total $175,422
Banks online deposit platform and to assume
The weighted average maturity of our unsecured long-term approximately $16 billion of deposits, consisting of
borrowings as of December 2015 was approximately nine approximately $8 billion in online deposit accounts and
years. To mitigate refinancing risk, we seek to limit the approximately $8 billion in brokered certificates of deposit.
principal amount of debt maturing on any one day or Unsecured Short-Term Borrowings. A significant
during any week or year. We enter into interest rate swaps portion of our unsecured short-term borrowings was
to convert a majority of the amount of our unsecured long- originally long-term debt that is scheduled to mature within
term borrowings into floating-rate obligations in order to one year of the reporting date. We use unsecured short-term
manage our exposure to interest rates. See Note 16 to the borrowings to finance liquid assets and for other cash
consolidated financial statements for further information management purposes. We issue hybrid financial
about our unsecured long-term borrowings. instruments, commercial paper and promissory notes. In
light of regulatory developments, since the third quarter of
2015, Group Inc. has not issued debt with an original
maturity of less than one year and currently does not expect
to issue short-term debt in the future.
As of December 2015 and December 2014, our unsecured
short-term borrowings, including the current portion of
unsecured long-term borrowings, were $42.79 billion and
$44.54 billion, respectively. See Note 15 to the
consolidated financial statements for further information
about our unsecured short-term borrowings.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Equity Capital Management and Regulatory

Capital
Capital adequacy is of critical importance to us. We have in The following is a description of our capital planning and
place a comprehensive capital management policy that stress testing process:
provides a framework, defines objectives and establishes
Capital Planning. Our capital planning process
guidelines to assist us in maintaining the appropriate level
incorporates an internal capital adequacy assessment
and composition of capital in both business-as-usual and
with the objective of ensuring that we are appropriately
stressed conditions.
capitalized relative to the risks in our business. We
Equity Capital Management incorporate stress scenarios into our capital planning
We determine the appropriate level and composition of our process with a goal of holding sufficient capital to ensure
equity capital by considering multiple factors including our we remain adequately capitalized after experiencing a
current and future consolidated regulatory capital severe stress event. Our assessment of capital adequacy is
requirements, the results of our capital planning and stress viewed in tandem with our assessment of liquidity
testing process and other factors such as rating agency adequacy and is integrated into our overall risk
guidelines, subsidiary capital requirements, the business management structure, governance and policy
environment and conditions in the financial markets. We framework.
manage our capital requirements and the levels of our
Our capital planning process also includes an internal
capital usage principally by setting limits on balance sheet
risk-based capital assessment. This assessment
assets and/or limits on risk, in each case at both the
incorporates market risk, credit risk and operational risk.
consolidated and business levels.
Market risk is calculated by using Value-at-Risk (VaR)
We principally manage the level and composition of our calculations supplemented by risk-based add-ons which
equity capital through issuances and repurchases of our include risks related to rare events (tail risks). Credit risk
common stock. We may also, from time to time, issue or utilizes assumptions about our counterparties
repurchase our preferred stock, junior subordinated debt probability of default and the size of our losses in the
issued to trusts, and other subordinated debt or other forms event of a default. Operational risk is calculated based on
of capital as business conditions warrant. Prior to any scenarios incorporating multiple types of operational
repurchases, we must receive confirmation that the Board failures as well as incorporating internal and external
of Governors of the Federal Reserve System (Federal actual loss experience. Backtesting is used to gauge the
Reserve Board) does not object to such capital actions. See effectiveness of models at capturing and measuring
Notes 16 and 19 to the consolidated financial statements relevant risks.
for further information about our preferred stock, junior
Stress Testing. Our stress tests incorporate our
subordinated debt issued to trusts and other subordinated
internally designed stress scenarios, including our
debt.
internally developed severely adverse scenario, and those
Capital Planning and Stress Testing Process. As part of required under CCAR and DFAST, and are designed to
capital planning, we project sources and uses of capital capture our specific vulnerabilities and risks. We provide
given a range of business environments, including stressed additional information about our stress test processes and
conditions. Our stress testing process is designed to identify a summary of the results on our web site as described
and measure material risks associated with our business under Business Available Information in Part I,
activities including market risk, credit risk and operational Item 1 of the 2015 Form 10-K.
risk, as well as our ability to generate revenues.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

As required by the Federal Reserve Boards annual CCAR In addition, the rules adopted by the Federal Reserve Board
rules, we submit a capital plan for review by the Federal under the Dodd-Frank Act require GS Bank USA to
Reserve Board. The purpose of the Federal Reserve Boards conduct stress tests on an annual basis and publish a
review is to ensure that we have a robust, forward-looking summary of certain results. GS Bank USA submitted its
capital planning process that accounts for our unique risks 2015 annual DFAST stress results to the Federal Reserve
and that permits continued operation during times of Board in January 2015 and published a summary of its
economic and financial stress. results in March 2015. See Business Available
Information in Part I, Item 1 of the 2015 Form 10-K.
The Federal Reserve Board evaluates us based, in part, on
whether we have the capital necessary to continue Goldman Sachs International (GSI) also has its own capital
operating under the baseline and stress scenarios provided planning and stress testing process, which incorporates
by the Federal Reserve Board and those developed internally designed stress tests and those required under the
internally. This evaluation also takes into account our Prudential Regulation Authoritys (PRA) Internal Capital
process for identifying risk, our controls and governance Adequacy Assessment Process.
for capital planning, and our guidelines for making capital
Contingency Capital Plan. As part of our comprehensive
planning decisions. In addition, the Federal Reserve Board
capital management policy, we maintain a contingency
evaluates our plan to make capital distributions (i.e.,
capital plan. Our contingency capital plan provides a
dividend payments and repurchases or redemptions of
framework for analyzing and responding to a perceived or
stock, subordinated debt or other capital securities) and
actual capital deficiency, including, but not limited to,
issue capital, across a range of macroeconomic scenarios
identification of drivers of a capital deficiency, as well as
and firm-specific assumptions.
mitigants and potential actions. It outlines the appropriate
In addition, the DFAST rules require us to conduct stress communication procedures to follow during a crisis period,
tests on a semi-annual basis and publish a summary of including internal dissemination of information as well as
certain results. The Federal Reserve Board also conducts its timely communication with external stakeholders.
own annual stress tests and publishes a summary of certain
Capital Attribution. We assess each of our businesses
results.
capital usage based upon our internal assessment of risks,
We submitted our initial 2015 CCAR to the Federal which incorporates an attribution of all of our relevant
Reserve Board in January 2015 and, based on the Federal regulatory capital requirements. These regulatory capital
Reserve Board feedback, we submitted revised capital requirements are allocated using our attributed equity
actions in March 2015. The Federal Reserve Board framework, which takes into consideration our binding
informed us that it did not object to our revised capital capital constraints. We also attribute risk-weighted assets
actions, including the repurchase of outstanding common (RWAs) to our business segments. As of December 2015,
stock, an increase in our quarterly common stock dividend approximately two-thirds of RWAs calculated in
and the possible issuance, redemption and modification of accordance with the Standardized Capital Rules and the
other capital securities from the second quarter of 2015 Basel III Advanced Rules, subject to transitional provisions,
through the second quarter of 2016. We published a were attributed to our Institutional Client Services segment
summary of our annual DFAST results in March 2015. See and substantially all of the remaining RWAs were
Business Available Information in Part I, Item 1 of the attributed to our Investing & Lending segment. We manage
2015 Form 10-K. the levels of our capital usage based upon balance sheet and
risk limits, as well as capital return analyses of our
In July 2015, we submitted the results of our semi-annual
businesses based on our capital attribution.
DFAST to the Federal Reserve Board and published a
summary of our internally developed severely adverse
scenario results. See Business Available Information in
Part I, Item 1 of the 2015 Form 10-K.
In accordance with the Federal Reserve Board
requirements, we plan to submit our 2016 CCAR in
April 2016.

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Managements Discussion and Analysis

Share Repurchase Program. We use our share Rating Agency Guidelines

repurchase program to help maintain the appropriate level The credit rating agencies assign credit ratings to the
of common equity. The repurchase program is effected obligations of Group Inc., which directly issues or
primarily through regular open-market purchases (which guarantees substantially all of the firms senior unsecured
may include repurchase plans designed to comply with obligations. Goldman, Sachs & Co. (GS&Co.) and GSI
Rule 10b5-1), the amounts and timing of which are have been assigned long- and short-term issuer ratings by
determined primarily by our current and projected capital certain credit rating agencies. GS Bank USA and GSIB have
position and our capital plan submitted to the Federal also been assigned long- and short-term issuer ratings, as
Reserve Board as part of CCAR. The amounts and timing well as ratings on their long-term and short-term bank
of the repurchases may also be influenced by general deposits. In addition, credit rating agencies have assigned
market conditions and the prevailing price and trading ratings to debt obligations of certain other subsidiaries of
volumes of our common stock. Group Inc.
On October 14, 2015, the Board of Directors of Group Inc. The level and composition of our equity capital are among
(Board) authorized the repurchase of an additional the many factors considered in determining our credit
60.0 million shares of common stock pursuant to our ratings. Each agency has its own definition of eligible
existing share repurchase program. As of December 2015, capital and methodology for evaluating capital adequacy,
the remaining share authorization under our existing and assessments are generally based on a combination of
repurchase program was 63.2 million shares; however, we factors rather than a single calculation. See Liquidity Risk
are only permitted to make repurchases to the extent that Management Credit Ratings for further information
such repurchases have not been objected to by the Federal about credit ratings of Group Inc., GS Bank USA, GSIB,
Reserve Board. See Market for Registrants Common GS&Co. and GSI.
Equity, Related Stockholder Matters and Issuer Purchases
Consolidated Regulatory Capital
of Equity Securities in Part II, Item 5 of the 2015
We are subject to the Federal Reserve Boards revised risk-
Form 10-K and Note 19 to the consolidated financial
based capital and leverage regulations, subject to certain
statements for additional information about our share
transitional provisions (Revised Capital Framework). These
repurchase program and see above for information about
regulations are largely based on the Basel Committee on
our capital planning and stress testing process.
Banking Supervisions (Basel Committee) final capital
Resolution and Recovery Plans framework for strengthening international capital
We are required by the Federal Reserve Board and the FDIC standards (Basel III) and also implement certain provisions
to submit an annual plan that describes our strategy for a of the Dodd-Frank Act. Under the Revised Capital
rapid and orderly resolution in the event of material Framework, we are an Advanced approach banking
financial distress or failure (resolution plan). We are also organization.
required by the Federal Reserve Board to submit and have
As of December 2015, we calculated our Common Equity
submitted, on an annual basis, a global recovery plan that
Tier 1 (CET1), Tier 1 capital and Total capital ratios in
outlines the steps that management could take to reduce
accordance with (i) the Standardized approach and market
risk, maintain sufficient liquidity, and conserve capital in
risk rules set out in the Revised Capital Framework
times of prolonged stress. In August 2014, the Federal
(together, the Standardized Capital Rules) and (ii) the
Reserve Board and the FDIC indicated that we and other
Advanced approach and market risk rules set out in the
large industry participants had certain shortcomings in the
Revised Capital Framework (together, the Basel III
2013 resolution plans that must be addressed in the 2015
Advanced Rules) as described in Note 20 to the
resolution plans. We submitted our 2015 resolution plan on
consolidated financial statements. The lower of each ratio
June 30, 2015. See Risk Factors in Part 1, Item 1A of the
calculated in (i) and (ii) is the ratio against which our
2015 Form 10-K for information about the potential
compliance with minimum ratio requirements is assessed.
consequences to us if we failed to address the identified
Each of the ratios calculated in accordance with the Basel III
shortcomings in our 2015 resolution plan.
Advanced Rules was lower than that calculated in
In addition, GS Bank USA is required by the FDIC to accordance with the Standardized Capital Rules and
submit a resolution plan. As required, GS Bank USAs 2015 therefore the Basel III Advanced ratios were the ratios that
resolution plan was submitted on September 1, 2015. applied to us as of December 2015.

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Managements Discussion and Analysis

As of December 2014, we calculated our CET1, Tier 1 In July 2015, the Federal Reserve Board approved a final
capital and Total capital ratios using the Revised Capital rule establishing a capital surcharge for U.S. G-SIBs
Framework for regulatory capital, but RWAs were (generally higher than that required by the Basel
calculated in accordance with (i) the Basel I Capital Accord Committee) to be implemented as an extension of the U.S.
of the Basel Committee, incorporating the market risk capital conservation buffer. This surcharge will be phased-
requirements set out in the Revised Capital Framework, in ratably, beginning in 2016, becoming fully effective on
and adjusted for certain items related to capital deductions January 1, 2019, and must consist entirely of capital that
and for the phase-in of capital deductions (Hybrid Capital qualifies as CET1. The surcharge must be calculated using
Rules), and (ii) the Basel III Advanced Rules. The lower of two methodologies, the higher of which will be reflected in
each ratio calculated in (i) and (ii) was the ratio against our minimum risk-based capital ratios. The first calculation
which our compliance with minimum ratio requirements is based upon the Basel Committees methodology which,
was assessed. Each of the ratios calculated in accordance among other factors, relies upon measures of the size,
with the Basel III Advanced Rules was lower than that activity and complexity of each G-SIB (Method One). The
calculated in accordance with the Hybrid Capital Rules and second calculation uses similar inputs, but it includes a
therefore the Basel III Advanced ratios were the ratios that measure of each firms reliance on short-term wholesale
applied to us as of December 2014. funding (Method Two). The Federal Reserve Board has
indicated that its preliminary estimate of our G-SIB
See Note 20 to the consolidated financial statements for
surcharge is 3.0%, based on the Method Two calculation
further information about our capital ratios as of
using financial data as of December 2014. The surcharge
December 2015 and December 2014, and for additional
becomes applicable to us beginning in 2016 on a phased-in
information about the Revised Capital Framework.
basis, and will be updated annually based on financial data
Minimum Capital Ratios and Capital Buffers as of the end of the prior year. We currently estimate that,
The table below presents our minimum required ratios as of based on information as of December 2015, we are at or
December 2015, as well as the minimum ratios that we near the threshold for a lower G-SIB surcharge. However,
expect will apply at the end of the transitional provisions the surcharge in the future may differ from the estimate
beginning January 2019. above due to additional guidance from our regulators and/
or positional changes.
December 2015 January 2019
Minimum Ratio 1 Minimum Ratio The Revised Capital Framework also provides a counter-
CET1 ratio 4.5% 10.0% 4 cyclical capital buffer of up to 2.5% (and also consisting
Tier 1 capital ratio 6.0% 11.5% 4 entirely of CET1) in order to counteract excessive credit
Total capital ratio 8.0% 3 13.5% 4 growth. The Federal Reserve Board has not finalized all of
Tier 1 leverage ratio 2 4.0% 4.0% the regulations with respect to this buffer and the table
1. Does not reflect the capital conservation buffer or Global Systemically
above does not reflect this buffer.
Important Banks (G-SIBs) surcharge described below.
Our regulators could change these buffers in the future. As
2. Tier 1 leverage ratio is defined as Tier 1 capital divided by quarterly average
a result, the minimum ratios we are subject to as of
adjusted total assets (which includes adjustments for goodwill and
identifiable intangible assets, and certain investments in nonconsolidated January 1, 2019 could be higher than the amounts
financial institutions). presented in the table above.
3. In order to meet the quantitative requirements for being well-capitalized
under the Federal Reserve Boards regulations, we must meet a higher Our minimum required supplementary leverage ratio will
required minimum Total capital ratio of 10.0%. be 5.0% on January 1, 2018. See Supplementary Leverage
4. Includes the capital conservation buffer of 2.5% and a preliminary G-SIB Ratio below for further information.
surcharge of 3.0% estimated by the Federal Reserve Board under the
methodology described below.

Under the Revised Capital Framework, the minimum

CET1, Tier 1 capital, and Total capital ratios will be
supplemented by a capital conservation buffer, consisting
entirely of capital that qualifies as CET1, that phases in
beginning on January 1, 2016, in increments of 0.625% per
year until it reaches 2.5% of RWAs on January 1, 2019.

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Managements Discussion and Analysis

Fully Phased-in Capital Ratios

The table below presents our capital ratios calculated in In the table above:
accordance with the Standardized Capital Rules and the
The deductions for goodwill and identifiable intangible
Basel III Advanced Rules on a fully phased-in basis.
assets, net of deferred tax liabilities, include goodwill of
$3.66 billion and $3.65 billion as of December 2015 and
As of December
December 2014, respectively, and identifiable intangible
$ in millions 2015 2014
assets of $491 million and $515 million as of
Common shareholders equity $ 75,528 $ 73,597
Deductions for goodwill and identifiable
December 2015 and December 2014, respectively, net of
intangible assets, net of deferred tax liabilities (3,044) (3,196) associated deferred tax liabilities of $1.10 billion and
Deductions for investments in nonconsolidated $964 million as of December 2015 and December 2014,
financial institutions (2,274) (4,928) respectively.
Other adjustments (1,409) (1,213)
Total Common Equity Tier 1 68,801 64,260 The deductions for investments in nonconsolidated
Perpetual non-cumulative preferred stock 11,200 9,200 financial institutions represent the amount by which our
Deduction for investments in covered funds (413) investments in the capital of nonconsolidated financial
Other adjustments (128) (286) institutions exceed certain prescribed thresholds. The
Tier 1 capital $ 79,460 $ 73,174
decrease from December 2014 to December 2015
Standardized Tier 2 and total capital primarily reflects reductions in our fund investments.
Tier 1 capital $ 79,460 $ 73,174
Qualifying subordinated debt 15,132 11,894 The deduction for investments in covered funds
Allowance for losses on loans and lending represents our aggregate investments in applicable
commitments 602 316 covered funds, as permitted by the Volcker Rule, that
Other adjustments (19) (9)
were purchased after December 2013. Substantially all of
Standardized Tier 2 capital 15,715 12,201
Standardized total capital $ 95,175 $ 85,375
these investments in covered funds were purchased in
connection with our market-making activities. This
Basel III Advanced Tier 2 and total capital
deduction became effective in July 2015 and is not subject
Tier 1 capital $ 79,460 $ 73,174
Standardized Tier 2 capital 15,715 12,201
to a transition period. See Regulatory Developments
Allowance for losses on loans and lending below for further information about the Volcker Rule.
commitments (602) (316)
Other adjustments within CET1 and Tier 1 capital
Basel III Advanced Tier 2 capital 15,113 11,885
Basel III Advanced total capital $ 94,573 $ 85,059 primarily include the overfunded portion of our defined
benefit pension plan obligation net of associated deferred
RWAs
Standardized $534,135 $627,444
tax liabilities, disallowed deferred tax assets, credit
Basel III Advanced 587,319 577,869 valuation adjustments on derivative liabilities, debt
CET1 ratio valuation adjustments and other required credit risk-
Standardized 12.9% 10.2% based deductions.
Basel III Advanced 11.7% 11.1%
Qualifying subordinated debt represents subordinated
Tier 1 capital ratio
Standardized 14.9% 11.7% debt issued by Group Inc. with an original term to
Basel III Advanced 13.5% 12.7% maturity of five years or greater. The outstanding amount
Total capital ratio of subordinated debt qualifying for Tier 2 capital is
Standardized 17.8% 13.6% reduced upon reaching a remaining maturity of five years.
Basel III Advanced 16.1% 14.7% See Note 16 to the consolidated financial statements for
additional information about our subordinated debt.
Although the fully phased-in capital ratios are not
applicable until 2019, we believe that the ratios in the table See Note 20 to the consolidated financial statements for
above are meaningful because they are measures that we, information about our transitional capital ratios, which
our regulators and investors use to assess our ability to meet represent the ratios that are applicable to us as of
future regulatory capital requirements. The fully phased-in December 2015 and December 2014.
Basel III Advanced and Standardized capital ratios are non-
GAAP measures as of both December 2015 and
December 2014 and may not be comparable to similar non-
GAAP measures used by other companies as of those dates.
These ratios are based on our current interpretation,
expectations and understanding of the Revised Capital
Framework and may evolve as we discuss its interpretation
and application with our regulators.
Goldman Sachs 2015 Form 10-K 77
T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Supplementary Leverage Ratio GS Bank USA. GS Bank USA is subject to regulatory

The Revised Capital Framework includes a supplementary capital requirements that are calculated in substantially the
leverage ratio requirement for Advanced approach banking same manner as those applicable to bank holding
organizations. Under amendments to the Revised Capital companies and calculates its capital ratios in accordance
Framework, the U.S. federal bank regulatory agencies with the risk-based capital and leverage requirements
approved a final rule that implements the supplementary applicable to state member banks, which are based on the
leverage ratio aligned with the definition of leverage Revised Capital Framework. See Note 20 to the
established by the Basel Committee. The supplementary consolidated financial statements for further information
leverage ratio compares Tier 1 capital to a measure of about the Revised Capital Framework as it relates to GS
leverage exposure, defined as total daily average assets for Bank USA, including GS Bank USAs capital ratios and
the quarter less certain deductions plus certain off-balance- required minimum ratios.
sheet exposures, including a measure of derivatives
In addition, under Federal Reserve Board rules,
exposures and commitments. The Revised Capital
commencing on January 1, 2018, in order to be considered
Framework requires a minimum supplementary leverage
a well-capitalized depository institution, GS Bank USA
ratio of 5.0% (comprised of the minimum requirement of
must have a supplementary leverage ratio of 6.0% or
3.0% and a 2.0% buffer) for U.S. bank holding companies
greater. The supplementary leverage ratio compares Tier 1
deemed to be G-SIBs, effective on January 1, 2018.
capital to a measure of leverage exposure, defined as total
As of December 2015 and December 2014, our daily average assets for the quarter less certain deductions
supplementary leverage ratio was 5.9% and 5.0%, plus certain off-balance-sheet exposures, including a
respectively, based on Tier 1 capital on a fully phased-in measure of derivatives exposures and commitments. As of
basis of $79.46 billion and $73.17 billion, respectively, December 2015, GS Bank USAs supplementary leverage
divided by total leverage exposure of $1.34 trillion (total ratio was 7.1%, based on Tier 1 capital on a fully phased-in
daily average assets for the quarter of $878 billion plus basis of $23.02 billion, divided by total leverage exposure
adjustments of $465 billion) and $1.45 trillion (total daily of $324 billion (total daily average assets for the quarter of
average assets for the quarter of $873 billion plus $134 billion plus adjustments of $190 billion). As of
adjustments of $579 billion), respectively. Within total December 2014, GS Bank USA would also have met the
leverage exposure, the adjustments to quarterly average well-capitalized minimum. This supplementary leverage
assets in both periods were primarily comprised of off- ratio is based on our current interpretation and
balance-sheet exposures related to derivatives, secured understanding of this rule and may evolve as we discuss
financing transactions, commitments and guarantees. their interpretation and application with our regulators.
The supplementary leverage ratio was not a required GSI. Our regulated U.K. broker-dealer, GSI, is one of our
regulatory disclosure as of December 2014. Therefore, it principal non-U.S. regulated subsidiaries and is regulated
was a non-GAAP measure as of December 2014 and may by the PRA and the Financial Conduct Authority. GSI is
not be comparable to similar non-GAAP measures used by subject to the revised capital framework for European
other companies as of that date. Union (EU)-regulated financial institutions (the fourth EU
Capital Requirements Directive and EU Capital
This supplementary leverage ratio is based on our current
Requirements Regulation, collectively known as CRD
interpretation and understanding of the U.S. federal bank
IV). These capital regulations are largely based on
regulatory agencies final rule and may evolve as we discuss
Basel III.
its interpretation and application with our regulators.
Subsidiary Capital Requirements
Many of our subsidiaries, including GS Bank USA and our
broker-dealer subsidiaries, are subject to separate
regulation and capital requirements of the jurisdictions in
which they operate.

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Managements Discussion and Analysis

The table below presents GSIs minimum required ratios as Subsidiaries not subject to separate regulatory capital
of December 2015, as well as the minimum required ratios requirements may hold capital to satisfy local tax and legal
that became effective in January 2016. guidelines, rating agency requirements (for entities with
assigned credit ratings) or internal policies, including
December 2015 January 2016 policies concerning the minimum amount of capital a
Minimum Ratio Minimum Ratio subsidiary should hold based on its underlying level of risk.
CET1 ratio 6.1% 6.6% In certain instances, Group Inc. may be limited in its ability
Tier 1 capital ratio 8.2% 8.5%
to access capital held at certain subsidiaries as a result of
Total capital ratio 10.9% 11.2%
regulatory, tax or other constraints. As of December 2015
The minimum ratios in the table above incorporate capital and December 2014, Group Inc.s equity investment in
guidance received from the PRA and could change in the subsidiaries was $85.52 billion and $79.70 billion,
future. GSIs future capital requirements may also be respectively, compared with its total shareholders equity of
impacted by developments such as the introduction of $86.73 billion and $82.80 billion, respectively.
capital buffers as described above in Minimum Capital Our capital invested in non-U.S. subsidiaries is generally
Ratios and Capital Buffers. exposed to foreign exchange risk, substantially all of which
As of December 2015, GSI had a CET1 ratio of 12.9%, a is managed through a combination of derivatives and non-
Tier 1 capital ratio of 12.9% and a Total capital ratio of U.S. denominated debt. See Note 7 to the consolidated
17.6%. Each of these ratios includes approximately 70 bps financial statements for information about our net
attributable to unaudited results for the year ended investment hedges, which are used to hedge this risk.
December 2015. These ratios will be finalized upon the Guarantees of Subsidiaries. Group Inc. has guaranteed
completion of the 2015 GSI audit. As of December 2014, the payment obligations of GS&Co., GS Bank USA, and
GSI had a CET1 ratio of 9.7%, a Tier 1 capital ratio of Goldman Sachs Execution & Clearing, L.P. (GSEC), in
9.7% and a Total capital ratio of 12.7%. The ratios for each case subject to certain exceptions. In November 2008,
both December 2015 and December 2014 reflect the Group Inc. contributed subsidiaries into GS Bank USA, and
applicable transitional provisions. Group Inc. agreed to guarantee certain losses, including
CRD IV, as amended by the European Commission credit-related losses, relating to assets held by the
Delegated Act (the Delegated Act), introduced a new contributed entities.
leverage ratio, which compares CRD IVs definition of
Tier 1 capital to a measure of leverage exposure, defined as
the sum of assets less Tier 1 capital deductions plus certain Regulatory Developments
off-balance-sheet exposures, including a measure of
Our businesses are subject to significant and evolving
derivatives exposures, securities financing transactions and
regulation. The Dodd-Frank Act, enacted in July 2010,
commitments. The Delegated Act does not currently
significantly altered the financial regulatory regime within
include a minimum leverage ratio requirement; however,
which we operate. In addition, other reforms have been
the Basel Committee has proposed a minimum requirement
adopted or are being considered by regulators and policy
of 3%. Any required minimum ratio is expected to become
makers worldwide. We expect that the principal areas of
effective for GSI on January 1, 2018. As of December 2015,
impact from regulatory reform for us will be increased
GSI had a leverage ratio of 3.6%. This leverage ratio is
regulatory capital requirements and increased regulation
based on our current interpretation and understanding of
and restriction on certain activities. However, given that
this rule and may evolve as we discuss its interpretation and
many of the new and proposed rules are highly complex,
application with GSIs regulators.
the full impact of regulatory reform will not be known until
Other Subsidiaries. We expect that the capital the rules are implemented and market practices develop
requirements of several of our subsidiaries are likely to under the final regulations.
increase in the future due to the various developments
arising from the Basel Committee, the Dodd-Frank Act, and
other governmental entities and regulators. See Note 20 to
the consolidated financial statements for information about
the capital requirements of our other regulated subsidiaries.

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Managements Discussion and Analysis

There has been increased regulation of, and limitations on, We continue to manage our existing interests in such funds,
our activities, including the Dodd-Frank Act prohibition on taking into account the conformance period under the
proprietary trading and the limitation on the sponsorship Volcker Rule. We plan to continue to conduct our investing
of, and investment in, covered funds (as defined in the and lending activities in ways that are permissible under the
Volcker Rule). In addition, there is increased regulation of, Volcker Rule.
and restrictions on, OTC derivatives markets and
Our current investment in funds that are measured at NAV
transactions, particularly related to swaps and security-
is $7.76 billion. In order to be compliant with the Volcker
based swaps.
Rule, we will be required to reduce most of our interests in
See Business Regulation in Part I, Item 1 of the 2015 these funds by the end of the conformance period. See
Form 10-K for more information about the laws, rules and Note 6 to the consolidated financial statements for further
regulations and proposed laws, rules and regulations that information about our investment in funds measured at
apply to us and our operations. In addition, see Note 20 to NAV and the conformance period for covered funds.
the consolidated financial statements for information about
Although our net revenues from our interests in private
regulatory developments as they relate to our regulatory
equity, credit, real estate and hedge funds may vary from
capital and leverage ratios.
period to period, our aggregate net revenues from these
Volcker Rule investments were approximately 3% and 5% of our
The provisions of the Dodd-Frank Act referred to as the aggregate total net revenues over the last 10 years and
Volcker Rule, became effective in July 2015 (subject to a 5 years, respectively.
conformance period, as applicable). The Volcker Rule
Total Loss-Absorbing Capacity
prohibits proprietary trading, but permits activities such
In October 2015, the Federal Reserve Board issued a
as underwriting, market making and risk-mitigation
proposed rule which would establish a new total loss-
hedging, requires an extensive compliance program and
absorbing capacity (TLAC) requirement for U.S. bank
includes additional reporting and record keeping
holding companies designated as G-SIBs. The TLAC
requirements. The initial implementation of these rules did
proposal has been designed so that, in the event of a G-SIBs
not have a material impact on our financial condition,
failure, there will be sufficient external loss-absorbing
results of operations or cash flows. However, the rule is
capacity available in order for authorities to implement an
highly complex, and its impact may change as market
orderly resolution of the G-SIB. The proposal would
practices further develop.
require G-SIBs to maintain an amount of regulatory capital
In addition to the prohibition on proprietary trading, the and eligible long-term debt (i.e., debt that is unsecured, has
Volcker Rule limits the sponsorship of, and investment in, a maturity greater than one year from issuance and satisfies
covered funds by banking entities, including Group Inc. and certain additional criteria) to cover a percentage of RWAs
its subsidiaries. It also limits certain types of transactions and/or leverage exposure (the denominator in the
between us and our sponsored funds, similar to the supplementary leverage ratio).
limitations on transactions between depository institutions
Under the proposed rule, eligible long-term debt would
and their affiliates as described in Business Regulation
exclude, among other instruments, debt securities that
in Part I, Item 1 of the 2015 Form 10-K. Covered funds
permit acceleration for reasons other than insolvency or
include our private equity funds, certain of our credit and
payment default, as well as structured notes, as defined in
real estate funds, our hedge funds and certain other
the TLAC proposal, and debt securities not governed by
investment structures. The limitation on investments in
U.S. law. The senior long-term debt of U.S. G-SIBs,
covered funds requires us to reduce our investment in each
including Group Inc., typically permits acceleration for
such fund to 3% or less of the funds net asset value, and to
reasons other than insolvency or payment default, and
reduce our aggregate investment in all such funds to 3% or
therefore would not qualify as eligible long-term debt under
less of our Tier 1 capital.
the proposed rule.
Beginning in July 2015, our investments in applicable
covered funds purchased after December 2013 are required
to be deducted from Tier 1 capital. See Fully Phased-in
Capital Ratios above for further information about our
Tier 1 capital and the deduction for investments in covered
funds.

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The proposed rule would prohibit Group Inc., as a U.S. Off-Balance-Sheet Arrangements
G-SIB, from (i) guaranteeing liabilities of subsidiaries that and Contractual Obligations
are subject to early termination provisions under certain
Off-Balance-Sheet Arrangements
conditions, (ii) incurring liabilities guaranteed by
We have various types of off-balance-sheet arrangements
subsidiaries, (iii) issuing short-term debt, or (iv) entering
that we enter into in the ordinary course of business. Our
into derivatives and certain other financial contracts with
involvement in these arrangements can take many different
external counterparties. Additionally, the proposed rule
forms, including:
would cap the amount of certain liabilities of a U.S. G-SIB
that are not eligible long-term debt. Finally, the proposed Purchasing or retaining residual and other interests in
rule would require U.S. G-SIBs and other large banking special purpose entities such as mortgage-backed and
entities to deduct from their own Tier 2 capital certain other asset-backed securitization vehicles;
holdings in unsecured debt of other U.S. G-SIBs, as well as
Holding senior and subordinated debt, interests in limited
holdings of their own unsecured debt securities.
and general partnerships, and preferred and common
Under the proposal, the TLAC requirements would phase stock in other nonconsolidated vehicles;
in between 2019 and 2022. We are currently evaluating the
Entering into interest rate, foreign currency, equity,
impact of the proposed TLAC requirements. See
commodity and credit derivatives, including total return
Business Regulation in Part I, Item 1 of the 2015
swaps;
Form 10-K for further information on the Federal Reserve
Boards proposed TLAC rule. Entering into operating leases; and
Other Developments Providing guarantees, indemnifications, loan
In January 2016, the Basel Committee finalized a revised commitments, letters of credit and representations and
framework for calculating minimum capital requirements warranties.
for market risk. The revisions constitute a fundamental
We enter into these arrangements for a variety of business
change to the calculation of both model-based and non-
purposes, including securitizations. The securitization
model-based components of market risk capital. The Basel
vehicles that purchase mortgages, corporate bonds, and
Committee has set an effective date for first reporting under
other types of financial assets are critical to the functioning
the revised framework of December 31, 2019. The U.S.
of several significant investor markets, including the
federal bank regulatory agencies have not yet proposed
mortgage-backed and other asset-backed securities
rules implementing these revisions for U.S. banking
markets, since they offer investors access to specific cash
organizations. We are currently evaluating the potential
flows and risks created through the securitization process.
impact of the Basel Committees revised framework.
We also enter into these arrangements to underwrite client
See Business Regulation in Part I, Item 1 of the 2015
securitization transactions; provide secondary market
Form 10-K for further information on regulations that may
liquidity; make investments in performing and
impact us in the future.
nonperforming debt, equity, 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.
Our financial interests in, and derivative transactions with,
such nonconsolidated entities are generally accounted for at
fair value, in the same manner as our other financial
instruments, except in cases where we apply the equity
method of accounting.

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The table below presents where information about our The table below presents our contractual obligations,
various off-balance-sheet arrangements may be found in the commitments and guarantees by type.
2015 Form 10-K. In addition, see Note 3 to the As of December
consolidated financial statements for information about $ in millions 2015 2014
our consolidation policies. Amounts related to on-balance-sheet obligations
Time deposits $ 25,748 $ 18,719
Secured long-term financings 10,520 7,249
Type of Off-Balance-Sheet
Arrangement Disclosure in Form 10-K Unsecured long-term borrowings 175,422 167,302
Contractual interest payments 59,327 61,416
Variable interests and other See Note 12 to the consolidated
obligations, including contingent financial statements. Subordinated liabilities issued by consolidated
obligations, arising from variable VIEs 501 843
interests in nonconsolidated VIEs Amounts related to off-balance-sheet arrangements
Leases, letters of credit, and See Contractual Obligations Commitments to extend credit 117,158 95,949
lending and other commitments below and Note 18 to the Contingent and forward starting resale and
consolidated financial statements. securities borrowing agreements 28,874 35,225
Guarantees See Contractual Obligations Forward starting repurchase and secured
below and Note 18 to the lending agreements 5,878 8,180
consolidated financial statements. Letters of credit 249 308
Derivatives See Credit Risk Management Investment commitments 6,054 5,164
Credit Exposures OTC Other commitments 6,944 6,321
Derivatives below and Notes 4, Minimum rental payments 2,575 2,173
5, 7 and 18 to the consolidated Derivative guarantees 926,443 612,735
financial statements. Securities lending indemnifications 31,902 27,567
Other financial guarantees 4,461 4,486
Contractual Obligations
We have certain contractual obligations which require us to The table below presents our contractual obligations,
make future cash payments. These contractual obligations commitments and guarantees by period of expiration.
include our unsecured long-term borrowings, secured long- Contractual Obligations, Commitments and
term financings, time deposits and contractual interest Guarantees Amount by Period
of Expiration as of December 2015
payments, all of which are included in our consolidated
2017 - 2019 - 2021 -
statements of financial condition. $ in millions 2016 2018 2020 Thereafter
Amounts related to on-balance-sheet obligations
Our obligations to make future cash payments also include
Time deposits $ $ 10,314 $ 7,122 $ 8,312
certain off-balance-sheet contractual obligations such as Secured long-term financings 8,465 1,435 620
purchase obligations, minimum rental payments under Unsecured long-term
noncancelable leases and commitments and guarantees. borrowings 50,493 33,990 90,939
Contractual interest
payments 6,613 11,742 8,381 32,591
Subordinated liabilities issued
by consolidated VIEs 501
Amounts related to off-balance-sheet arrangements
Commitments to extend
credit 28,404 24,956 53,822 9,976
Contingent and forward
starting resale and securities
borrowing agreements 28,839 35
Forward starting repurchase
and secured lending
agreements 5,878
Letters of credit 217 25 3 4
Investment commitments 4,600 336 24 1,094
Other commitments 6,484 339 70 51
Minimum rental payments 317 614 484 1,160
Derivative guarantees 640,288 168,784 67,643 49,728
Securities lending
indemnifications 31,902
Other financial guarantees 611 1,402 1,772 676

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In the table above: As of December 2015, our unsecured long-term borrowings

were $175.42 billion, with maturities extending to 2061,
The 2016 column includes $2.53 billion of investment
and consisted principally of senior borrowings. See Note 16
commitments to covered funds (as defined by the Volcker
to the consolidated financial statements for further
Rule). We expect that substantially all of these
information about our unsecured long-term borrowings.
commitments will not be called.
As of December 2015, our future minimum rental
Obligations maturing within one year of our financial
payments, net of minimum sublease rentals under
statement date or redeemable within one year of our
noncancelable leases, were $2.58 billion. These lease
financial statement date at the option of the holders are
commitments for office space expire on various dates
excluded as they are treated as short-term obligations.
through 2069. Certain agreements are subject to periodic
Obligations that are repayable prior to maturity at our escalation provisions for increases in real estate taxes and
option are reflected at their contractual maturity dates other charges. See Note 18 to the consolidated financial
and obligations that are redeemable prior to maturity at statements for further information about our leases.
the option of the holders are reflected at the earliest dates
Our occupancy expenses include costs associated with
such options become exercisable.
office space held in excess of our current requirements. This
Amounts included in the table do not necessarily reflect excess space, the cost of which is charged to earnings as
the actual future cash flow requirements for these incurred, is being held for potential growth or to replace
arrangements because commitments and guarantees currently occupied space that we may exit in the future. We
represent notional amounts and may expire unused or be regularly evaluate our current and future space capacity in
reduced or cancelled at the counterpartys request. relation to current and projected staffing levels. For 2015,
total occupancy expenses for space held in excess of our
Due to the uncertainty of the timing and amounts that
current requirements and exit costs related to our office
will ultimately be paid, our liability for unrecognized tax
space were not material. We may incur exit costs in the
benefits has been excluded. See Note 24 to the
future to the extent we (i) reduce our space capacity or
consolidated financial statements for further information
(ii) commit to, or occupy, new properties in the locations in
about our unrecognized tax benefits.
which we operate and, consequently, dispose of existing
Unsecured long-term borrowings includes $8.34 billion space that had been held for potential growth. These exit
of adjustments to the carrying value of certain unsecured costs may be material to our results of operations in a given
long-term borrowings resulting from the application of period.
hedge accounting.
The aggregate contractual principal amount of secured
long-term financings and unsecured long-term Risk Management
borrowings for which the fair value option was elected Risks are inherent in our business and include liquidity,
exceeded the related fair value by $362 million and market, credit, operational, legal, regulatory and
$1.12 billion, respectively. reputational risks. For further information about our risk
Contractual interest payments represents estimated future management processes, see Overview and Structure of
interest payments related to unsecured long-term Risk Management below. Our risks include the risks
borrowings, secured long-term financings and time across our risk categories, regions or global businesses, as
deposits based on applicable interest rates as of well as those which have uncertain outcomes and have the
December 2015, and includes stated coupons, if any, on potential to materially impact our financial results, our
structured notes. liquidity and our reputation. For further information about
our areas of risk, see Liquidity Risk Management,
See Notes 15 and 18 to the consolidated financial Market Risk Management, Credit Risk
statements for further information about our short-term Management, Operational Risk Management,
borrowings and commitments and guarantees, respectively. Model Risk Management and Risk Factors in
Part I, Item 1A of the 2015 Form 10-K.

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Overview and Structure of Risk

Management
Overview
We believe that effective risk management is of primary We maintain strong communication about risk and we have
importance to the success of the firm. Accordingly, we have a culture of collaboration in decision-making among the
comprehensive risk management processes through which revenue-producing units, independent control and support
we monitor, evaluate and manage the risks we assume in functions, committees and senior management. While we
conducting our activities. These include market, credit, believe that the first line of defense in managing risk rests
liquidity, operational, model, legal, regulatory and with the managers in our revenue-producing units, we
reputational risk exposures. Our risk management dedicate extensive resources to independent control and
framework is built around three core components: support functions in order to ensure a strong oversight
governance, processes and people. structure and an appropriate segregation of duties. We
regularly reinforce our strong culture of escalation and
Governance. Risk management governance starts with
accountability across all divisions and functions.
our Board, which plays an important role in reviewing and
approving risk management policies and practices, both Processes. We maintain various processes and procedures
directly and through its committees, including its Risk that are critical components of our risk management. First
Committee. The Board also receives regular briefings on and foremost is our daily discipline of marking
firmwide risks, including market risk, liquidity risk, credit substantially all of our inventory to current market levels.
risk, operational risk and model risk from our independent Goldman Sachs carries its inventory at fair value, with
control and support functions, including the chief risk changes in valuation reflected immediately in our risk
officer, and on matters impacting our reputation from the management systems and in net revenues. We do so because
chair of our Firmwide Client and Business Standards we believe this discipline is one of the most effective tools
Committee. The chief risk officer, as part of the review of for assessing and managing risk and that it provides
the firmwide risk portfolio, regularly advises the Risk transparent and realistic insight into our financial
Committee of the Board of relevant risk metrics and exposures.
material exposures. Next, at the most senior levels of the
We also apply a rigorous framework of limits to control
firm, our leaders are experienced risk managers, with a
risk across multiple transactions, products, businesses and
sophisticated and detailed understanding of the risks we
markets. This includes approval of limits at both firmwide
take. Our senior management, and senior managers in our
and business levels by the Risk Committee of the Board. In
revenue-producing units and independent control and
addition, the Firmwide Risk Committee is responsible for
support functions, lead and participate in risk-oriented
approving limits, subject to the overall limits approved by
committees. Independent control and support functions
the Risk Committee of the Board, at a variety of levels and
include Business Selection and Conflicts Resolution
monitoring these limits on a daily basis. Divisional risk
(Conflicts), Compliance, Controllers, Credit Risk
committees are responsible for setting sub-limits below the
Management and Advisory (Credit Risk Management),
overall business-level limits approved by the Firmwide Risk
Human Capital Management, Legal, Liquidity Risk
Committee. Limits are typically set at levels that will be
Management and Analysis (Liquidity Risk Management),
periodically exceeded, rather than at levels which reflect
Market Risk Management and Analysis (Market Risk
our maximum risk appetite. This fosters an ongoing
Management), Model Risk Management, Operations,
dialogue on risk among revenue-producing units,
Operational Risk Management and Analysis (Operational
independent control and support functions, committees and
Risk Management), Tax, Technology and Treasury.
senior management, as well as rapid escalation of risk-
Our governance structure provides the protocol and related matters. See Liquidity Risk Management,
responsibility for decision-making on risk management Market Risk Management and Credit Risk
issues and ensures implementation of those decisions. We Management for further information about our risk
make extensive use of risk-related committees that meet limits.
regularly and serve as an important means to facilitate and
foster ongoing discussions to identify, manage and mitigate
risks.

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Active management of our positions is another important Structure

process. Proactive mitigation of our market and credit Ultimate oversight of risk is the responsibility of our Board.
exposures minimizes the risk that we will be required to The Board oversees risk both directly and through its
take outsized actions during periods of stress. committees, including its Risk Committee. Within the firm,
a series of committees with specific risk management
We also focus on the rigor and effectiveness of our risk
mandates have oversight or decision-making
systems. The goal of our risk management technology is to
responsibilities for risk management activities. Committee
get the right information to the right people at the right
membership generally consists of senior managers from
time, which requires systems that are comprehensive,
both our revenue-producing units and our independent
reliable and timely. We devote significant time and
control and support functions. We have established
resources to our risk management technology to ensure that
procedures for these committees to ensure that appropriate
it consistently provides us with complete, accurate and
information barriers are in place. Our primary risk
timely information.
committees, most of which also have additional sub-
People. Even the best technology serves only as a tool for committees or working groups, are described below. In
helping to make informed decisions in real time about the addition to these committees, we have other risk-oriented
risks we are taking. Ultimately, effective risk management committees which provide oversight for different
requires our people to interpret our risk data on an ongoing businesses, activities, products, regions and legal entities.
and timely basis and adjust risk positions accordingly. In All of our firmwide, regional and divisional committees
both our revenue-producing units and our independent have responsibility for considering the impact of
control and support functions, the experience of our transactions and activities which they oversee on our
professionals, and their understanding of the nuances and reputation.
limitations of each risk measure, guide us in assessing
Membership of our risk committees is reviewed regularly
exposures and maintaining them within prudent levels.
and updated to reflect changes in the responsibilities of the
We reinforce a culture of effective risk management in our committee members. Accordingly, the length of time that
training and development programs as well as the way we members serve on the respective committees varies as
evaluate performance, and recognize and reward our determined by the committee chairs and based on the
people. Our training and development programs, including responsibilities of the members within the firm.
certain sessions led by our most senior leaders, are focused
In addition, independent control and support functions,
on the importance of risk management, client relationships
which report to the chief executive officer, the president
and reputational excellence. As part of our annual
and chief operating officer, the chief financial officer, the
performance review process, we assess reputational
chief risk officer and the chief administrative officer, are
excellence including how an employee exercises good risk
responsible for day-to-day oversight or monitoring of risk,
management and reputational judgment, and adheres to
as illustrated in the chart below and as described in greater
our code of conduct and compliance policies. Our review
detail in the following sections. Internal Audit, which
and reward processes are designed to communicate and
reports to the Audit Committee of the Board and includes
reinforce to our professionals the link between behavior
professionals with a broad range of audit and industry
and how people are recognized, the need to focus on our
experience, including risk management expertise, is
clients and our reputation, and the need to always act in
responsible for independently assessing and validating key
accordance with the highest standards of the firm.
controls within the risk management framework.

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The chart below presents an overview of our risk oversight of our Board, our key risk-related committees and
management governance structure, highlighting the the independence of our key control and support functions.

Corporate Oversight
Board of Directors
Board Committees

Senior Management Oversight

Chief Executive Officer

President/Chief Operating Officer

Chief Financial Officer

Committee Oversight
Management Committee Chief Administrative Officer
Chief Risk Officer

Firmwide Client and Business Firmwide Risk Committee

Standards Committee
Credit Policy Committee
Firmwide New Activity Committee Firmwide Operational Risk Committee
Firmwide Suitability Committee Firmwide Finance Committee
Firmwide Technology Risk Committee Investment
Firmwide Reputational Risk Management
Committee Firmwide Investment Policy Committee
Division Risk
Firmwide Model Risk Control Committee Committee
Global Business Resilience Committee
Firmwide Volcker Oversight Committee
Securities Division Risk Committee
Investment Banking Division Risk Committee
Merchant Banking Division Risk Committee

Firmwide Commitments Committee

Firmwide Capital Committee

Revenue-Producing Units Independent Control and Support Functions

Operations Technology
Business Managers
Controllers Tax Treasury
Business Risk Managers
Internal Audit Human Capital Management Conflicts
Compliance Legal

Credit Risk Management Operational Risk Management

Market Risk Management Model Risk Management
Liquidity Risk Management

Management Committee. The Management Committee Firmwide Client and Business Standards Committee.
oversees our global activities, including all of our The Firmwide Client and Business Standards Committee
independent control and support functions. It provides this assesses and makes determinations regarding business
oversight directly and through authority delegated to standards and practices, reputational risk management,
committees it has established. This committee is comprised client relationships and client service, is chaired by our
of our most senior leaders, and is chaired by our chief president and chief operating officer, and reports to the
executive officer. The Management Committee has Management Committee. This committee also has
established various committees with delegated authority responsibility for overseeing recommendations of the
and the chair of the Management Committee appoints the Business Standards Committee. This committee
chairs of these committees. Most members of the periodically updates and receives guidance from the Public
Management Committee are also members of other Responsibilities Committee of the Board. This committee
firmwide, divisional and regional committees. The has also established certain committees that report to it,
following are the committees that are principally involved including divisional Client and Business Standards
in firmwide risk management. Committees and risk-related committees. The following are
the risk-related committees that report to the Firmwide
Client and Business Standards Committee:

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Firmwide New Activity Committee. The Firmwide Firmwide Risk Committee. The Firmwide Risk
New Activity Committee is responsible for reviewing new Committee is globally responsible for the ongoing
activities and for establishing a process to identify and monitoring and management of our financial risks.
review previously approved activities that are significant Through both direct and delegated authority, the Firmwide
and that have changed in complexity and/or structure or Risk Committee approves firmwide and business-level
present different reputational and suitability concerns limits for both market and credit risks, approves sovereign
over time to consider whether these activities remain credit risk limits, reviews results of stress tests and scenario
appropriate. This committee is co-chaired by our global analyses, and provides oversight over model risk. This
treasurer and the chief administrative officer of our committee is co-chaired by our chief financial officer and
Investment Management Division, who are appointed as our chief risk officer, and reports to the Management
co-chairs by the chair of the Firmwide Client and Business Committee. The following are the primary committees that
Standards Committee. report to the Firmwide Risk Committee:
Firmwide Suitability Committee. The Firmwide Credit Policy Committee. The Credit Policy Committee
Suitability Committee is responsible for setting standards establishes and reviews broad firmwide credit policies
and policies for product, transaction and client suitability and parameters that are implemented by Credit Risk
and providing a forum for consistency across divisions, Management. This committee is co-chaired by a deputy
regions and products on suitability assessments. This chief risk officer and the head of Credit Risk
committee also reviews suitability matters escalated from Management for our Securities Division, who are
other committees. This committee is co-chaired by the appointed as co-chairs by our chief risk officer.
deputy head of Compliance and the co-head of Fixed
Firmwide Operational Risk Committee. The
Income, Currency and Commodities Sales, who are
Firmwide Operational Risk Committee provides
appointed as co-chairs by the chair of the Firmwide Client
oversight of the ongoing development and
and Business Standards Committee.
implementation of our operational risk policies,
Firmwide Reputational Risk Committee. The framework and methodologies, and monitors the
Firmwide Reputational Risk Committee is responsible for effectiveness of operational risk management. This
assessing reputational risks arising from transactions that committee is co-chaired by a managing director in Credit
have been identified as presenting heightened Risk Management and the head of Operational Risk
reputational risk, and other situations where the facts and Management, who are appointed as co-chairs by our
circumstances warrant escalation. This committee is co- chief risk officer.
chaired by the head of Compliance and the head of
Firmwide Finance Committee. The Firmwide Finance
Conflicts, who are appointed as co-chairs by the
Committee has oversight responsibility for liquidity risk,
Firmwide Client and Business Standards Committee.
the size and composition of our balance sheet and capital
base, and credit ratings. This committee regularly reviews
our liquidity, balance sheet, funding position and
capitalization, approves related policies, and makes
recommendations as to any adjustments to be made in
light of current events, risks, exposures and regulatory
requirements. As a part of such oversight, among other
things, this committee reviews and approves balance
sheet limits and the size of our GCLA. This committee is
co-chaired by our chief financial officer and our global
treasurer, who are appointed as co-chairs by the
Firmwide Risk Committee.

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Firmwide Technology Risk Committee. The Firmwide Firmwide Volcker Oversight Committee. The
Technology Risk Committee reviews matters related to Firmwide Volcker Oversight Committee is responsible for
the design, development, deployment and use of the oversight and periodic review of the implementation
technology. This committee oversees cyber security of our Volcker Rule compliance program, as approved by
matters, as well as technology risk management the Board, and other Volcker Rule-related matters. This
frameworks and methodologies, and monitors their committee is co-chaired by our chief risk officer and a
effectiveness. This committee is co-chaired by our chief deputy general counsel, who are appointed as co-chairs
information officer and the head of Global Investment by the Firmwide Risk Committee.
Research, who are appointed as co-chairs by the
Securities Division Risk Committee. The Securities
Firmwide Risk Committee.
Division Risk Committee sets market risk limits, subject
Firmwide Investment Policy Committee. The to business-level risk limits approved by the Firmwide
Firmwide Investment Policy Committee reviews, Risk Committee, for the Securities Division based on a
approves, sets policies, and provides oversight for certain number of risk measures, including but not limited to
illiquid principal investments, including review of risk VaR, stress tests and scenario analyses. This committee is
management and controls for these types of investments. chaired by the Securities Divisions chief risk officer, who
This committee is co-chaired by the head of our Merchant is appointed as chair by the co-chairs of the Firmwide
Banking Division and a co-head of our Securities Risk Committee.
Division, who are appointed as co-chairs by our president
Investment Banking Division Risk Committee. The
and chief operating officer and our chief financial officer.
Investment Banking Division Risk Committee is
Firmwide Model Risk Control Committee. The responsible for the ongoing monitoring and control of
Firmwide Model Risk Control Committee is responsible financial risks for the Investment Banking Division,
for oversight of the development and implementation of including setting risk limits, subject to business-level risk
model risk controls, which includes governance, policies limits approved by the Firmwide Risk Committee,
and procedures related to our reliance on financial reviewing established risk limits and monitoring risk
models. This committee is chaired by a deputy chief risk exposures. This committee is co-chaired by the co-head of
officer, who is appointed as chair by the Firmwide Risk the Global Financing Group in our Investment Banking
Committee. Division and the head of Credit Risk Management for our
Investment Banking Division and our Merchant Banking
Global Business Resilience Committee. The Global
Division. The co-chairs of the Investment Banking
Business Resilience Committee is responsible for
Division Risk Committee are appointed by the co-chairs
oversight of business resilience initiatives, promoting
of the Firmwide Risk Committee.
increased levels of security and resilience, and reviewing
certain operating risks related to business resilience. This Merchant Banking Division Risk Committee. The
committee is chaired by our chief administrative officer, Merchant Banking Division Risk Committee is
who is appointed as chair by the Firmwide Risk responsible for the ongoing monitoring and control of
Committee. financial risks for the Merchant Banking Division. This
committee is chaired by a managing director in the
Merchant Banking Division, who is appointed as chair by
the co-chairs of the Firmwide Risk Committee.

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The following committees report jointly to the Firmwide Conflicts Management

Risk Committee and the Firmwide Client and Business Conflicts of interest and our approach to dealing with them
Standards Committee: are fundamental to our client relationships, our reputation
and our long-term success. The term conflict of interest
Firmwide Commitments Committee. The Firmwide
does not have a universally accepted meaning, and conflicts
Commitments Committee reviews our underwriting and
can arise in many forms within a business or between
distribution activities with respect to equity and equity-
businesses. The responsibility for identifying potential
related product offerings, and sets and maintains policies
conflicts, as well as complying with our policies and
and procedures designed to ensure that legal,
procedures, is shared by the entire firm.
reputational, regulatory and business standards are
maintained on a global basis. In addition to reviewing We have a multilayered approach to resolving conflicts and
specific transactions, this committee periodically addressing reputational risk. Our senior management
conducts general strategic reviews of sectors and products oversees policies related to conflicts resolution, and, in
and establishes policies in connection with transaction conjunction with Conflicts, Legal and Compliance, the
practices. This committee is co-chaired by the co-head of Firmwide Client and Business Standards Committee, and
the Financial Institutions Group in our Investment other internal committees, formulates policies, standards
Banking Division and an advisory director to the firm, and principles, and assists in making judgments regarding
who are appointed as co-chairs by the chair of the the appropriate resolution of particular conflicts. Resolving
Firmwide Client and Business Standards Committee. potential conflicts necessarily depends on the facts and
circumstances of a particular situation and the application
Firmwide Capital Committee. The Firmwide Capital
of experienced and informed judgment.
Committee provides approval and oversight of debt-
related transactions, including principal commitments of As a general matter, Conflicts reviews all financing and
our capital. This committee aims to ensure that business advisory assignments in Investment Banking and certain
and reputational standards for underwritings and capital investing, lending and other activities of the firm. In
commitments are maintained on a global basis. This addition, we have various transaction oversight
committee is co-chaired by the head of Credit Risk committees, such as the Firmwide Capital, Commitments
Management for our Investment Banking Division and and Suitability Committees and other committees across
our Merchant Banking Division and the head of credit the firm that also review new underwritings, loans,
finance for Europe, Middle East and Africa (EMEA). The investments and structured products. These groups and
co-chairs of the Firmwide Capital Committee are committees work with internal and external counsel and
appointed by the co-chairs of the Firmwide Risk Compliance to evaluate and address any actual or potential
Committee. conflicts.
Investment Management Division Risk Committee. We regularly assess our policies and procedures that
The Investment Management Division Risk Committee is address conflicts of interest in an effort to conduct our
responsible for the ongoing monitoring and control of business in accordance with the highest ethical standards
global market, counterparty credit and liquidity risks and in compliance with all applicable laws, rules, and
associated with the activities of our investment regulations.
management businesses and reports to our chief risk officer.
This committee is chaired by the Investment Management
Divisions chief risk officer, who is appointed as chair by
our chief risk officer.

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Managements Discussion and Analysis

Liquidity Risk Management

Overview Our GCLA reflects the following principles:
Liquidity risk is the risk that we will be unable to fund the
The first days or weeks of a liquidity crisis are the most
firm or meet our liquidity needs in the event of firm-specific,
critical to a companys survival;
broader industry, or market liquidity stress events.
Liquidity is of critical importance to us, as most of the Focus must be maintained on all potential cash and
failures of financial institutions have occurred in large part collateral outflows, not just disruptions to financing
due to insufficient liquidity. Accordingly, we have in place a flows. Our businesses are diverse, and our liquidity needs
comprehensive and conservative set of liquidity and are determined by many factors, including market
funding policies. Our principal objective is to be able to movements, collateral requirements and client
fund the firm and to enable our core businesses to continue commitments, all of which can change dramatically in a
to serve clients and generate revenues, even under adverse difficult funding environment;
circumstances.
During a liquidity crisis, credit-sensitive funding,
Treasury has the primary responsibility for assessing, including unsecured debt and some types of secured
monitoring and managing our liquidity and funding financing agreements, may be unavailable, and the terms
strategy. Treasury is independent of the revenue-producing (e.g., interest rates, collateral provisions and tenor) or
units and reports to our chief financial officer. availability of other types of secured financing may
change; and
Liquidity Risk Management is an independent risk
management function responsible for control and oversight As a result of our policy to pre-fund liquidity that we
of the firms liquidity risk management framework, estimate may be needed in a crisis, we hold more
including stress testing and limit governance. Liquidity Risk unencumbered securities and have larger debt balances
Management is independent of the revenue-producing units than our businesses would otherwise require. We believe
and Treasury, and reports to our chief risk officer. that our liquidity is stronger with greater balances of
highly liquid unencumbered securities, even though it
Liquidity Risk Management Principles
increases our total assets and our funding costs.
We manage liquidity risk according to three principles
(i) hold sufficient excess liquidity in the form of Global We maintain our GCLA across major broker-dealer and
Core Liquid Assets (GCLA) to cover outflows during a bank subsidiaries, asset types, and clearing agents to
stressed period, (ii) maintain appropriate Asset-Liability provide us with sufficient operating liquidity to ensure
Management and (iii) maintain a viable Contingency timely settlement in all major markets, even in a difficult
Funding Plan. funding environment. In addition to the GCLA, we
maintain cash balances in several of our other entities,
Global Core Liquid Assets. GCLA is liquidity that we
primarily for use in specific currencies, entities, or
maintain to meet a broad range of potential cash outflows
jurisdictions where we do not have immediate access to
and collateral needs in a stressed environment. Our most
parent company liquidity.
important liquidity policy is to pre-fund our estimated
potential cash and collateral needs during a liquidity crisis We believe that our GCLA provides us with a resilient
and hold this liquidity in the form of unencumbered, highly source of funds that would be available in advance of
liquid securities and cash. We believe that the securities held potential cash and collateral outflows and gives us
in our GCLA would be readily convertible to cash in a significant flexibility in managing through a difficult
matter of days, through liquidation, by entering into funding environment.
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.

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Managements Discussion and Analysis

Asset-Liability Management. Our liquidity risk Our goal is to ensure that we maintain sufficient liquidity to
management policies are designed to ensure we have a fund our assets and meet our contractual and contingent
sufficient amount of financing, even when funding markets obligations in normal times as well as during periods of
experience persistent stress. We manage the maturities and market stress. Through our dynamic balance sheet
diversity of our funding across markets, products and management process, we use actual and projected asset
counterparties, and seek to maintain a long-dated and balances to determine secured and unsecured funding
diversified funding profile, taking into consideration the requirements. Funding plans are reviewed and approved by
characteristics and liquidity profile of our assets. the Firmwide Finance Committee on a quarterly basis. In
addition, senior managers in our independent control and
Our approach to asset-liability management includes:
support functions regularly analyze, and the Firmwide
Conservatively managing the overall characteristics of Finance Committee reviews, our consolidated total capital
our funding book, with a focus on maintaining long-term, position (unsecured long-term borrowings plus total
diversified sources of funding in excess of our current shareholders equity) so that we maintain a level of long-
requirements. See Balance Sheet and Funding Sources term funding that is sufficient to meet our long-term
Funding Sources for additional details; financing requirements. In a liquidity crisis, we would first
use our GCLA in order to avoid reliance on asset sales
Actively managing and monitoring our asset base, with
(other than our GCLA). However, we recognize that
particular focus on the liquidity, holding period and our
orderly asset sales may be prudent or necessary in a severe
ability to fund assets on a secured basis. We assess our
or persistent liquidity crisis.
funding requirements and our ability to liquidate assets in
a stressed environment while appropriately managing Subsidiary Funding Policies
risk. This enables us to determine the most appropriate The majority of our unsecured funding is raised by Group
funding products and tenors. See Balance Sheet and Inc. which lends the necessary funds to its subsidiaries,
Funding Sources Balance Sheet Management for some of which are regulated, to meet their asset financing,
more detail on our balance sheet management process liquidity and capital requirements. In addition, Group Inc.
and Funding Sources Secured Funding for more provides its regulated subsidiaries with the necessary capital
detail on asset classes that may be harder to fund on a to meet their regulatory requirements. The benefits of this
secured basis; and approach to subsidiary funding are enhanced control and
greater flexibility to meet the funding requirements of our
Raising secured and unsecured financing that has a long
subsidiaries. Funding is also raised at the subsidiary level
tenor relative to the liquidity profile of our assets. This
through a variety of products, including secured funding,
reduces the risk that our liabilities will come due in
unsecured borrowings and deposits.
advance of our ability to generate liquidity from the sale
of our assets. Because we maintain a highly liquid balance Our intercompany funding policies assume that, unless
sheet, the holding period of certain of our assets may be legally provided for, a subsidiarys funds or securities are
materially shorter than their contractual maturity dates. not freely available to its parent or other subsidiaries. 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. 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 until the maturity of
such financing.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Group Inc. has provided substantial amounts of equity and Liquidity Stress Tests
subordinated indebtedness, directly or indirectly, to its In order to determine the appropriate size of our GCLA, we
regulated subsidiaries. For example, as of December 2015, use an internal liquidity model, referred to as the Modeled
Group Inc. had $28.39 billion of equity and subordinated Liquidity Outflow, which captures and quantifies our
indebtedness invested in GS&Co., its principal U.S. liquidity risks. We also consider other factors including, but
registered broker-dealer; $32.88 billion invested in GSI, a not limited to, an assessment of our potential intraday
regulated U.K. broker-dealer; $2.30 billion invested in liquidity needs through an additional internal liquidity
GSEC, a U.S. registered broker-dealer; $2.58 billion model, referred to as the Intraday Liquidity Model, the
invested in Goldman Sachs Japan Co., Ltd. (GSJCL), a results of our long-term stress testing models, applicable
regulated Japanese broker-dealer; $25.20 billion invested in regulatory requirements and a qualitative assessment of the
GS Bank USA, a regulated New York State-chartered bank; condition of the financial markets and the firm. The results
and $3.64 billion invested in GSIB, a regulated U.K. bank. of the Modeled Liquidity Outflow, the Intraday Liquidity
Group Inc. also provided, directly or indirectly, Model and the long-term stress testing models are reported
$91.97 billion of unsubordinated loans and $8.81 billion of to senior management on a regular basis.
collateral to these entities, substantially all of which was to
Modeled Liquidity Outflow. Our Modeled Liquidity
GS&Co., GSI, GSJCL and GS Bank USA, as of
Outflow is based on conducting multiple scenarios that
December 2015. In addition, as of December 2015, Group
include combinations of market-wide and firm-specific
Inc. had significant amounts of capital invested in and loans
stress. These scenarios are characterized by the following
to its other regulated subsidiaries.
qualitative elements:
Contingency Funding Plan. We maintain a contingency
Severely challenged market environments, including low
funding plan to provide a framework for analyzing and
consumer and corporate confidence, financial and
responding to a liquidity crisis situation or periods of
political instability, adverse changes in market values,
market stress. Our contingency funding plan outlines a list
including potential declines in equity markets and
of potential risk factors, key reports and metrics that are
widening of credit spreads; and
reviewed on an ongoing basis to assist in assessing the
severity of, and managing through, a liquidity crisis and/or A firm-specific crisis potentially triggered by material
market dislocation. The contingency funding plan also losses, reputational damage, litigation, executive
describes in detail our potential responses if our departure, and/or a ratings downgrade.
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.
The contingency funding plan identifies key groups of
individuals to foster effective coordination, control and
distribution of information, all of which are critical in the
management of a crisis or period of market stress. The
contingency funding plan also details the responsibilities of
these groups and individuals, which include making and
disseminating key decisions, coordinating all contingency
activities throughout the duration of the crisis or period of
market stress, implementing liquidity maintenance
activities and managing internal and external
communication.

92 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

The following are the critical modeling parameters of the Secured Funding
Modeled Liquidity Outflow: Contractual: A portion of upcoming contractual
maturities of secured funding due to either the inability to
Liquidity needs over a 30-day scenario;
refinance or the ability to refinance only at wider haircuts
A two-notch downgrade of our long-term senior (i.e., on terms which require us to post additional
unsecured credit ratings; collateral). Our assumptions reflect, among other factors,
the quality of the underlying collateral, counterparty roll
A combination of contractual outflows, such as
probabilities (our assessment of the counterpartys
upcoming maturities of unsecured debt, and contingent
likelihood of continuing to provide funding on a secured
outflows (e.g., actions though not contractually required,
basis at the maturity of the trade) and counterparty
we may deem necessary in a crisis). We assume that most
concentration.
contingent outflows will occur within the initial days and
weeks of a crisis; Contingent: Adverse changes in value of financial assets
pledged as collateral for financing transactions, which
No issuance of equity or unsecured debt;
would necessitate additional collateral postings under
No support from additional government funding those transactions.
facilities. Although we have access to various central bank
OTC Derivatives
funding programs, we do not assume reliance on
Contingent: Collateral postings to counterparties due to
additional sources of funding in a liquidity crisis; and
adverse changes in the value of our OTC derivatives,
No asset liquidation, other than the GCLA. excluding those that are cleared and settled through
central counterparties (OTC-cleared).
The potential contractual and contingent cash and
collateral outflows covered in our Modeled Liquidity Contingent: Other outflows of cash or collateral related
Outflow include: to OTC derivatives, excluding OTC-cleared, including
the impact of trade terminations, collateral substitutions,
Unsecured Funding
collateral disputes, loss of rehypothecation rights,
Contractual: All upcoming maturities of unsecured long-
collateral calls or termination payments required by a
term debt, commercial paper, promissory notes and other
two-notch downgrade in our credit ratings, and collateral
unsecured funding products. We assume that we will be
that has not been called by counterparties, but is available
unable to issue new unsecured debt or rollover any
to them.
maturing debt.
Exchange-Traded and OTC-cleared Derivatives
Contingent: Repurchases of our outstanding long-term
Contingent: Variation margin postings required due to
debt, commercial paper and hybrid financial instruments
adverse changes in the value of our outstanding
in the ordinary course of business as a market maker.
exchange-traded and OTC-cleared derivatives.
Deposits
Contingent: An increase in initial margin and guaranty
Contractual: All upcoming maturities of term deposits.
fund requirements by derivative clearing houses.
We assume that we will be unable to raise new term
deposits or rollover any maturing term deposits. Customer Cash and Securities
Contingent: Liquidity outflows associated with our prime
Contingent: Withdrawals of bank deposits that have no
brokerage business, including withdrawals of customer
contractual maturity. The withdrawal assumptions
credit balances, and a reduction in customer short
reflect, among other factors, the type of deposit, whether
positions, which may serve as a funding source for long
the deposit is insured or uninsured, and our relationship
positions.
with the depositor.
Firm Securities
Contingent: Liquidity outflows associated with a
reduction or composition change in firm short positions,
which may serve as a funding source for long positions.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Unfunded Commitments Model Review and Validation

Contingent: Draws on our unfunded commitments. Draw Treasury regularly refines our Modeled Liquidity Outflow,
assumptions reflect, among other things, the type of Intraday Liquidity Model and our stress testing models to
commitment and counterparty. reflect changes in market or economic conditions and our
business mix. Any changes, including model assumptions,
Other
are assessed and approved by Liquidity Risk Management.
Other upcoming large cash outflows, such as tax
payments. Model Risk Management is responsible for the independent
review and validation of our liquidity models. See Model
Intraday Liquidity Model. Our Intraday Liquidity Model
Risk Management for further information about the
measures our intraday liquidity needs using a scenario
review and validation of these models.
analysis characterized by the same qualitative elements as
our Modeled Liquidity Outflow. The model assesses the Limits
risk of increased intraday liquidity requirements during a We use liquidity limits at various levels and across liquidity
scenario where access to sources of intraday liquidity may risk types to control the size of our liquidity exposures.
become constrained. Limits are measured relative to acceptable levels of risk
given the liquidity risk tolerance of the firm. The purpose of
The following are key modeling elements of the Intraday
the firmwide limits is to assist senior management in
Liquidity Model:
monitoring and controlling our overall liquidity profile.
Liquidity needs over a one-day settlement period;
The Risk Committee of the Board and the Firmwide
Delays in receipt of counterparty cash payments; Finance Committee approve liquidity risk limits at the
firmwide level. Limits are reviewed frequently and
A reduction in the availability of intraday credit lines at
amended, with required approvals, on a permanent and
our third-party clearing agents; and
temporary basis, as appropriate, to reflect changing market
Higher settlement volumes due to an increase in activity. or business conditions.
Long-Term Stress Testing. We utilize a longer-term Our liquidity risk limits are monitored by Treasury and
stress test to take a forward view on our liquidity position Liquidity Risk Management. Treasury is responsible for
through a prolonged stress period in which the firm identifying and escalating, on a timely basis, instances
experiences a severe liquidity stress and recovers in an where limits have been exceeded.
environment that continues to be challenging. We are
GCLA and Unencumbered Metrics
focused on ensuring conservative asset-liability
GCLA. Based on the results of our internal liquidity risk
management to prepare for a prolonged period of potential
models, described above, as well as our consideration of
stress, seeking to maintain a long-dated and diversified
other factors including, but not limited to, an assessment of
funding profile, taking into consideration the
our potential intraday liquidity needs and a qualitative
characteristics and liquidity profile of our assets.
assessment of the condition of the financial markets and the
We also run stress tests on a regular basis as part of our firm, we believe our liquidity position as of both
routine risk management processes and conduct tailored December 2015 and December 2014 was appropriate. As
stress tests on an ad hoc or product-specific basis in of December 2015 and December 2014, the fair value of the
response to market developments. securities and certain overnight cash deposits included in
our GCLA totaled $199.12 billion and $182.95 billion,
respectively, and the fair value of these assets averaged
$187.75 billion for 2015 and $179.63 billion for 2014.

94 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

The table below presents the fair value of the securities and We maintain our GCLA to enable us to meet current and
certain overnight cash deposits that are included in our potential liquidity requirements of our parent company,
GCLA. Group Inc., and its subsidiaries. Our Modeled Liquidity
Outflow and Intraday Liquidity Model incorporate a
Average for the consolidated requirement for Group Inc. as well as a
Year Ended December standalone requirement for each of our major broker-dealer
$ in millions 2015 2014 and bank subsidiaries. Liquidity held directly in each of
U.S. dollar-denominated $132,415 $134,223 these major subsidiaries is intended for use only by that
Non-U.S. dollar-denominated 55,333 45,410 subsidiary to meet its liquidity requirements and is assumed
Total $187,748 $179,633
not to be available to Group Inc. unless (i) legally provided
for and (ii) there are no additional regulatory, tax or other
The U.S. dollar-denominated GCLA is composed of
restrictions. In addition, the Modeled Liquidity Outflow
(i) unencumbered U.S. government and federal agency
and Intraday Liquidity Model also incorporate a broader
obligations (including highly liquid U.S. federal agency
assessment of standalone liquidity requirements for other
mortgage-backed obligations), all of which are eligible as
subsidiaries and we hold a portion of our GCLA directly at
collateral in Federal Reserve open market operations and
Group Inc. to support such requirements.
(ii) certain overnight U.S. dollar cash deposits. The non-
U.S. dollar-denominated GCLA is composed of only The table below presents the GCLA of Group Inc. and our
unencumbered German, French, Japanese and United major broker-dealer and bank subsidiaries.
Kingdom government obligations and certain overnight
cash deposits in highly liquid currencies. We strictly limit Average for the
our GCLA to this narrowly defined list of securities and Year Ended December

cash because they are highly liquid, even in a difficult $ in millions 2015 2014

funding environment. We do not include other potential Group Inc. $ 41,284 $ 37,699
sources of excess liquidity in our GCLA, such as less liquid Major broker-dealer subsidiaries 89,510 89,549
Major bank subsidiaries 56,954 52,385
unencumbered securities or committed credit facilities.
Total $187,748 $179,633
The table below presents the fair value of our GCLA by
asset class. Other Unencumbered Assets. In addition to our GCLA,
we have a significant amount of other unencumbered cash
Average for the and Financial instruments owned, at fair value, including
Year Ended December other government obligations, high-grade money market
$ in millions 2015 2014 securities, corporate obligations, marginable equities, loans
Overnight cash deposits $ 61,407 $ 57,177 and cash deposits not included in our GCLA. The fair value
U.S. government obligations 69,562 62,838 of these assets averaged $90.36 billion for 2015 and
U.S. federal agency obligations, including $94.52 billion for 2014. We do not consider these assets
highly liquid U.S. federal agency
mortgage-backed obligations 11,413 16,722
liquid enough to be eligible for our GCLA.
German, French, Japanese and United
Kingdom government obligations 45,366 42,896
Total $187,748 $179,633

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Liquidity Regulatory Framework The following is information on our subsidiary liquidity

The Basel Committees international framework for regulatory requirements:
liquidity risk measurement, standards and monitoring calls
GS Bank USA. GS Bank USA is subject to minimum
for a liquidity coverage ratio (LCR) designed to ensure that
liquidity standards under the LCR rule approved by the
banking organizations maintain an adequate level of
U.S. federal bank regulatory agencies that became
unencumbered high-quality liquid assets (HQLA) based on
effective on January 1, 2015, with the same phase-in
expected net cash outflows under an acute short-term
through 2017 described above.
liquidity stress scenario.
GSI. The LCR rule issued by the U.K. regulatory
The final rules on minimum liquidity standards approved
authorities became effective in the United Kingdom on
by the U.S. federal bank regulatory agencies are generally
October 1, 2015, with a phase-in period whereby certain
consistent with the Basel Committees framework as
financial institutions, including GSI, must have an 80%
described above, but include accelerated transition
minimum ratio initially, increasing to 90% on
provisions and more stringent requirements related to both
January 1, 2017 and 100% on January 1, 2018.
the range of assets that qualify as HQLA and cash outflow
assumptions for certain types of funding and other liquidity Other Subsidiaries. We monitor the local regulatory
risks. Our GCLA is substantially the same in composition liquidity requirements of our subsidiaries to ensure
as the assets that qualify as HQLA under these rules. Under compliance. For many of our subsidiaries, these
the accelerated transition timeline, the LCR became requirements either have changed or are likely to change
effective in the United States on January 1, 2015, with a in the future due to the implementation of the Basel
phase-in period whereby firms have an 80% minimum in Committees framework for liquidity risk measurement,
2015, which will increase by 10% per year until 2017. In standards and monitoring, as well as other regulatory
November 2015, the Federal Reserve Board proposed a rule developments.
that would require bank holding companies to disclose
The implementation of these rules, and any amendments
their LCR on a quarterly basis beginning in the quarter
adopted by the applicable regulatory authorities, could
ended September 2016. These requirements include LCR
impact our liquidity and funding requirements and
averages over the prior quarter, detailed information on
practices in the future.
certain components of the LCR calculation and projected
net cash outflows. For the three months ended Credit Ratings
December 2015, our average LCR exceeded the fully We rely on the short-term and long-term debt capital
phased-in minimum requirement, based on our markets to fund a significant portion of our day-to-day
interpretation and understanding of the finalized operations and the cost and availability of debt financing is
framework, which may evolve as we review our influenced by our credit ratings. Credit ratings are also
interpretation and application with our regulators. important when we are competing in certain markets, such
as OTC derivatives, and when we seek to engage in longer-
The Basel Committees international framework for
term transactions. See Risk Factors in Part I, Item 1A of
liquidity risk measurement, standards and monitoring also
the 2015 Form 10-K for information about the risks
calls for a net stable funding ratio (NSFR) designed to
associated with a reduction in our credit ratings.
promote more medium- and long-term stable funding of the
assets and off-balance-sheet activities of banking During the fourth quarter of 2015, Standard & Poors
organizations over a one-year time horizon. The Basel Ratings Services (S&P) downgraded the long-term debt
Committees NSFR framework requires banking ratings of Group Inc. from A- to BBB+ and the
organizations to maintain a stable funding profile in subordinated debt ratings of Group Inc. from BBB+ to
relation to the composition of their assets and off-balance- BBB-, and changed the outlook of Group Inc. from negative
sheet activities and will be effective on January 1, 2018. The to stable and the outlook for GS Bank USA, GSIB, GS&Co.
U.S. federal bank regulatory agencies have not yet proposed and GSI from positive to watch positive. Additionally,
rules implementing the NSFR for U.S. banks and bank Rating and Investment Information, Inc. (R&I)
holding companies. We are currently evaluating the impact downgraded the long-term debt ratings of Group Inc. from
of the Basel Committees NSFR framework. A+ to A and the subordinated debt ratings for Group Inc.
from A to A-, and changed the outlook for Group Inc. from
negative to stable.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

The table below presents the unsecured credit ratings and We believe our credit ratings are primarily based on the
outlook of Group Inc. by DBRS, Inc. (DBRS), Fitch, Inc. credit rating agencies assessment of:
(Fitch), Moodys Investors Service (Moodys), S&P, and
Our liquidity, market, credit and operational risk
R&I.
management practices;
As of December 2015 The level and variability of our earnings;
DBRS Fitch Moodys S&P R&I
Our capital base;
Short-term Debt R-1 (middle) F1 P-2 A-2 a-1
Long-term Debt 1 A (high) A A3 BBB+ A Our franchise, reputation and management;
Subordinated Debt A A- Baa2 BBB- A-
Our corporate governance; and
Trust Preferred 2 A BBB- Baa3 BB N/A
Preferred Stock 3 BBB (high) BB+ Ba1 BB N/A The external operating environment, including, in some
Ratings Outlook Stable Stable Stable Stable Stable cases, the assumed level of government or other systemic
1. Fitch, Moodys and S&P include the senior guaranteed trust securities issued support.
by Murray Street Investment Trust I and Vesey Street Investment Trust I.
Certain of our derivatives have been transacted under
2. Trust preferred securities issued by Goldman Sachs Capital I.
bilateral agreements with counterparties who may require
3. DBRS, Fitch, Moodys and S&P include the APEX issued by Goldman Sachs
Capital II and Goldman Sachs Capital III. us to post collateral or terminate the transactions based on
changes in our credit ratings. We assess the impact of these
The table below presents the unsecured credit ratings and bilateral agreements by determining the collateral or
outlook of GS Bank USA, GSIB, GS&Co. and GSI, by termination payments that would occur assuming a
Fitch, Moodys and S&P. downgrade by all rating agencies. A downgrade by any one
rating agency, depending on the agencys relative ratings of
As of December 2015 us at the time of the downgrade, may have an impact which
Fitch Moodys S&P is comparable to the impact of a downgrade by all rating
GS Bank USA agencies. We allocate a portion of our GCLA to ensure we
Short-term Debt F1 P-1 A-1 would be able to make the additional collateral or
Long-term Debt A+ A1 A
termination payments that may be required in the event of a
Short-term Bank Deposits F1+ P-1 N/A
two-notch reduction in our long-term credit ratings, as well
Long-term Bank Deposits AA- A1 N/A
Ratings Outlook Stable Stable Watch Positive
as collateral that has not been called by counterparties, but
GSIB is available to them. The table below presents the additional
Short-term Debt F1 P-1 A-1 collateral or termination payments related to our net
Long-term Debt A A1 A derivative liabilities under bilateral agreements that could
Short-term Bank Deposits F1 P-1 N/A have been called at the reporting date by counterparties in
Long-term Bank Deposits A A1 N/A the event of a one-notch and two-notch downgrade in our
Ratings Outlook Positive Stable Watch Positive
credit ratings.
GS&Co.
Short-term Debt F1 N/A A-1
Long-term Debt A+ N/A A As of December
Ratings Outlook Stable N/A Watch Positive $ in millions 2015 2014
GSI Additional collateral or termination
Short-term Debt F1 P-1 A-1 payments for a one-notch downgrade $1,061 $1,072
Long-term Debt A A1 A Additional collateral or termination
Ratings Outlook Positive Stable Watch Positive payments for a two-notch downgrade 2,689 2,815

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Cash Flows Market Risk Management

As a global financial institution, our cash flows are complex
Overview
and bear little relation to our net earnings and net assets.
Market risk is the risk of loss in the value of our inventory,
Consequently, we believe that traditional cash flow analysis
as well as certain other financial assets and financial
is less meaningful in evaluating our liquidity position than
liabilities, due to changes in market conditions. We employ
the liquidity and asset-liability management policies
a variety of risk measures, each described in the respective
described above. Cash flow analysis may, however, be
sections below, to monitor market risk. We hold inventory
helpful in highlighting certain macro trends and strategic
primarily for market making for our clients and for our
initiatives in our businesses.
investing and lending activities. Our inventory therefore
Year Ended December 2015. Our cash and cash changes based on client demands and our investment
equivalents increased by $17.51 billion to $75.11 billion at opportunities. Our inventory is accounted for at fair value
the end of 2015. We used $18.57 billion in net cash for and therefore fluctuates on a daily basis, with the related
investing activities, primarily due to funding of loans gains and losses included in Market making and Other
receivable. We generated $36.08 billion in net cash from principal transactions. Categories of market risk include
financing activities and operating activities primarily from the following:
net issuances of long-term borrowings and bank deposits,
Interest rate risk: results from exposures to changes in the
partially offset by repurchases of common stock.
level, slope and curvature of yield curves, the volatilities
Year Ended December 2014. Our cash and cash of interest rates, mortgage prepayment speeds and credit
equivalents decreased by $3.53 billion to $57.60 billion at spreads;
the end of 2014. We used $22.53 billion in net cash for
Equity price risk: results from exposures to changes in
operating and investing activities, which reflects an
prices and volatilities of individual equities, baskets of
initiative to reduce our balance sheet, and the funding of
equities and equity indices;
loans receivable. We generated $19.00 billion in net cash
from financing activities from an increase in bank deposits Currency rate risk: results from exposures to changes in
and net proceeds from issuances of unsecured long-term spot prices, forward prices and volatilities of currency
borrowings, partially offset by repurchases of common rates; and
stock.
Commodity price risk: results from exposures to changes
Year Ended December 2013. Our cash and cash in spot prices, forward prices and volatilities of
equivalents decreased by $11.54 billion to $61.13 billion at commodities, such as crude oil, petroleum products,
the end of 2013. We generated $4.54 billion in net cash natural gas, electricity, and precious and base metals.
from operating activities. We used net cash of
Managers in revenue-producing units are accountable for
$16.08 billion for investing and financing activities,
managing risk within prescribed limits. These managers
primarily to fund loans receivable and repurchases of
have in-depth knowledge of their positions, markets and
common stock.
the instruments available to hedge their exposures.
Market Risk Management, which is independent of the
revenue-producing units and reports to our chief risk
officer, has primary responsibility for assessing, monitoring
and managing market risk at the firm. We monitor and
control risks through strong firmwide oversight and
independent control and support functions across our
global businesses.
Managers in revenue-producing units and Market Risk
Management discuss market information, positions and
estimated risk and loss scenarios on an ongoing basis.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Market Risk Management Process When calculating VaR, we use historical simulations with
We manage our market risk by diversifying exposures, full valuation of approximately 70,000 market factors.
controlling position sizes and establishing economic hedges VaR is calculated at a position level based on
in related securities or derivatives. This process includes: simultaneously shocking the relevant market risk factors
for that position. We sample from five years of historical
Accurate and timely exposure information incorporating
data to generate the scenarios for our VaR calculation. The
multiple risk metrics;
historical data is weighted so that the relative importance of
A dynamic limit setting framework; and the data reduces over time. This gives greater importance to
more recent observations and reflects current asset
Constant communication among revenue-producing
volatilities, which improves the accuracy of our estimates of
units, risk managers and senior management.
potential loss. As a result, even if our positions included in
Risk Measures. Market Risk Management produces risk VaR were unchanged, our VaR would increase with
measures and monitors them against market risk limits set increasing market volatility and vice versa.
by our risk committees. These measures reflect an extensive
Given its reliance on historical data, VaR is most effective in
range of scenarios and the results are aggregated at product,
estimating risk exposures in markets in which there are no
business and firmwide levels.
sudden fundamental changes or shifts in market conditions.
We use a variety of risk measures to estimate the size of
Our VaR measure does not include:
potential losses for both moderate and more extreme
market moves over both short-term and long-term time Positions that are best measured and monitored using
horizons. Our primary risk measures are VaR, which is sensitivity measures; and
used for shorter-term periods, and stress tests. Our risk
The impact of changes in counterparty and our own
reports detail key risks, drivers and changes for each desk
credit spreads on derivatives, as well as changes in our
and business, and are distributed daily to senior
own credit spreads on unsecured borrowings for which
management of both our revenue-producing units and our
the fair value option was elected.
independent control and support functions.
We perform daily backtesting of our VaR model (i.e.,
Value-at-Risk. VaR is the potential loss in value due to
comparing daily trading net revenues to the VaR measure
adverse market movements over a defined time horizon
calculated as of the prior business day) at the firmwide level
with a specified confidence level. For assets and liabilities
and for each of our businesses and major regulated
included in VaR, see Financial Statement Linkages to
subsidiaries.
Market Risk Measures. We typically employ a one-day
time horizon with a 95% confidence level. We use a single Stress Testing. Stress testing is a method of determining
VaR model which captures risks including interest rates, the effect of various hypothetical stress scenarios on the
equity prices, currency rates and commodity prices. As firm. We use stress testing to examine risks of specific
such, VaR facilitates comparison across portfolios of portfolios as well as the potential impact of significant risk
different risk characteristics. VaR also captures the exposures across the firm. We use a variety of stress testing
diversification of aggregated risk at the firmwide level. techniques to calculate the potential loss from a wide range
of market moves on our portfolios, including sensitivity
We are aware of the inherent limitations to VaR and
analysis, scenario analysis and firmwide stress tests. The
therefore use a variety of risk measures in our market risk
results of our various stress tests are analyzed together for
management process. Inherent limitations to VaR include:
risk management purposes.
VaR does not estimate potential losses over longer time
Sensitivity analysis is used to quantify the impact of a
horizons where moves may be extreme;
market move in a single risk factor across all positions (e.g.,
VaR does not take account of the relative liquidity of equity prices or credit spreads) using a variety of defined
different risk positions; and market shocks, ranging from those that could be expected
over a one-day time horizon up to those that could take
Previous moves in market risk factors may not produce
many months to occur. We also use sensitivity analysis to
accurate predictions of all future market moves.
quantify the impact of the default of any single entity,
which captures the risk of large or concentrated exposures.

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Managements Discussion and Analysis

Scenario analysis is used to quantify the impact of a Limits. We use risk limits at various levels in the firm
specified event, including how the event impacts multiple (including firmwide, business and product) to govern risk
risk factors simultaneously. For example, for sovereign appetite by controlling the size of our exposures to market
stress testing we calculate potential direct exposure risk. Limits are set based on VaR and on a range of stress
associated with our sovereign inventory as well as the tests relevant to our exposures. Limits are reviewed
corresponding debt, equity and currency exposures frequently and amended on a permanent or temporary basis
associated with our non-sovereign inventory that may be to reflect changing market conditions, business conditions
impacted by the sovereign distress. When conducting or tolerance for risk.
scenario analysis, we typically consider a number of
The Risk Committee of the Board and the Firmwide Risk
possible outcomes for each scenario, ranging from
Committee approve market risk limits at firmwide and
moderate to severely adverse market impacts. In addition,
business levels and our divisional risk committees set sub-
these stress tests are constructed using both historical events
limits below the approved business-level risk limits. The
and forward-looking hypothetical scenarios.
purpose of the firmwide limits is to assist senior
Firmwide stress testing combines market, credit, management in controlling our overall risk profile. Sub-
operational and liquidity risks into a single combined limits set the desired maximum amount of exposure that
scenario. Firmwide stress tests are primarily used to assess may be managed by any particular business on a day-to-day
capital adequacy as part of our capital planning and stress basis without additional levels of senior management
testing process; however, we also ensure that firmwide approval, effectively leaving day-to-day decisions to
stress testing is integrated into our risk governance individual desk managers and traders. Accordingly, sub-
framework. This includes selecting appropriate scenarios to limits are a management tool designed to ensure
use for our capital planning and stress testing process. See appropriate escalation rather than to establish maximum
Equity Capital Management and Regulatory Capital risk tolerance. Sub-limits also distribute risk among various
Equity Capital Management above for further businesses in a manner that is consistent with their level of
information. activity and client demand, taking into account the relative
performance of each area.
Unlike VaR measures, which have an implied probability
because they are calculated at a specified confidence level, Our market risk limits are monitored daily by Market Risk
there is generally no implied probability that our stress test Management, which is responsible for identifying and
scenarios will occur. Instead, stress tests are used to model escalating, on a timely basis, instances where limits have
both moderate and more extreme moves in underlying been exceeded. The business-level limits that are set by the
market factors. When estimating potential loss, we divisional risk committees are subject to the same scrutiny
generally assume that our positions cannot be reduced or and limit escalation policy as the firmwide limits.
hedged (although experience demonstrates that we are
When a risk limit has been exceeded (e.g., due to changes in
generally able to do so).
market conditions, such as increased volatilities or changes
Stress test scenarios are conducted on a regular basis as part in correlations), it is escalated to the appropriate risk
of our routine risk management process and on an ad hoc committee and remediated by an inventory reduction and/
basis in response to market events or concerns. Stress or a temporary or permanent increase to the risk limit.
testing is an important part of our risk management process
because it allows us to quantify our exposure to tail risks,
highlight potential loss concentrations, undertake risk/
reward analysis, and assess and mitigate our risk positions.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Model Review and Validation The table below presents average daily VaR.
Our VaR and stress testing models are regularly reviewed
by Market Risk Management and enhanced in order to $ in millions Year Ended December
incorporate changes in the composition of positions Risk Categories 2015 2014 2013
included in our market risk measures, as well as variations Interest rates $ 47 $ 51 $ 63
in market conditions. Prior to implementing significant Equity prices 26 26 32
changes to our assumptions and/or models, Model Risk Currency rates 30 19 17
Management performs model validations. Significant Commodity prices 20 21 19
changes to our VaR and stress testing models are reviewed Diversification effect (47) (45) (51)
Total $ 76 $ 72 $ 80
with our chief risk officer and chief financial officer, and
approved by the Firmwide Risk Committee.
Our average daily VaR increased to $76 million in 2015
See Model Risk Management for further information from $72 million in 2014, reflecting an increase in the
about the review and validation of these models. currency rates category due to higher levels of volatility,
partially offset by a decrease in the interest rates category
Systems
due to decreased exposures.
We have made a significant investment in technology to
monitor market risk including: Our average daily VaR decreased to $72 million in 2014
from $80 million in 2013, primarily reflecting a decrease in
An independent calculation of VaR and stress measures;
the interest rates category due to decreased exposures and
Risk measures calculated at individual position levels; lower levels of volatility, and a decrease in the equity prices
category principally due to lower levels of volatility. These
Attribution of risk measures to individual risk factors of
decreases were partially offset by a decrease in the
each position;
diversification benefit across risk categories.
The ability to report many different views of the risk
The table below presents period-end VaR, and high and
measures (e.g., by desk, business, product type or legal
low VaR.
entity); and
The ability to produce ad hoc analyses in a timely Year Ended
manner. $ in millions As of December December 2015
Risk Categories 2015 2014 High Low
Metrics Interest rates $ 43 $ 53 $62 $38
We analyze VaR at the firmwide level and a variety of more Equity prices 24 19 52 18
detailed levels, including by risk category, business, and Currency rates 31 24 47 18
region. The tables below present, by risk category, average Commodity prices 17 23 38 13
daily VaR and period-end VaR, as well as the high and low Diversification effect (48) (42)
VaR for the period. Diversification effect in the tables Total $ 67 $ 77 $94 $57
below represents the difference between total VaR and the
sum of the VaRs for the four risk categories. This effect Our daily VaR decreased to $67 million as of
arises because the four market risk categories are not December 2015 from $77 million as of December 2014,
perfectly correlated. primarily reflecting decreases in the interest rates and
commodity prices categories due to decreased exposures,
and an increase in the diversification benefit across risk
categories. In addition, the currency rates and equity prices
categories increased due to higher levels of volatility.
During 2015, the firmwide VaR risk limit was temporarily
raised on two occasions in order to facilitate client
transactions. Separately, in March 2015, the firmwide VaR
risk limit was reduced, reflecting lower risk utilization over
the last year.
During 2014, the firmwide VaR risk limit was not
exceeded, raised or reduced.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

The chart below reflects our daily VaR over the last four Sensitivity Measures
quarters. Certain portfolios and individual positions are not included
in VaR because VaR is not the most appropriate risk
Daily VaR
$ in millions measure. Other sensitivity measures we use to analyze
120
market risk are described below.
100
10% Sensitivity Measures. The table below presents
80
market risk for inventory positions that are not included in
VaR. The market risk of these positions is determined by
Daily VaR ($)

60 estimating the potential reduction in net revenues of a 10%

decline in the underlying asset value. Equity positions
40
below relate to private and restricted public equity
20 securities, including interests in funds that invest in
corporate equities and real estate and interests in hedge
0
First Quarter Second Quarter Third Quarter Fourth Quarter
funds, which are included in Financial instruments owned,
2015 2015 2015 2015
at fair value. Debt positions include interests in funds that
The chart below presents the frequency distribution of our invest in corporate mezzanine and senior debt instruments,
daily trading net revenues for substantially all positions loans backed by commercial and residential real estate,
included in VaR for 2015. corporate bank loans and other corporate debt, including
acquired portfolios of distressed loans. These debt positions
Daily Trading Net Revenues are included in Financial instruments owned, at fair
$ in millions
100 value. See Note 6 to the consolidated financial statements
for further information about cash instruments. These
80
measures do not reflect diversification benefits across asset
Number of Days

60 54 56
categories or across other market risk measures.
41
40 34
28 27
$ in millions As of December
20
10 Asset Categories 2015 2014
0 0 2
0 Equity $2,157 $2,132
<(100) (100)-(75) (75)-(50) (50)-(25) (25)-0 0-25 25-50 50-75 75-100 >100
Debt 1,479 1,686
Daily Trading Net Revenues ($)
Total $3,636 $3,818
Daily trading net revenues are compared with VaR
calculated as of the end of the prior business day. Trading
losses incurred on a single day did not exceed our 95% one-
day VaR during 2015 (i.e., a VaR exception). Trading
losses incurred on a single day exceeded our 95% one-day
VaR on one occasion during 2014.
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 market-
making revenues 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.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Credit Spread Sensitivity on Derivatives and Financial Statement Linkages to Market Risk
Borrowings. VaR excludes the impact of changes in Measures
counterparty and our own credit spreads on derivatives as We employ a variety of risk measures, each described in the
well as changes in our own credit spreads on unsecured respective sections above, to monitor market risk across the
borrowings for which the fair value option was elected. The consolidated statements of financial condition and
estimated sensitivity to a one basis point increase in credit consolidated statements of earnings. The related gains and
spreads (counterparty and our own) on derivatives was a losses on these positions are included in Market making,
gain of $3 million (including hedges) as of both Other principal transactions, Interest income and
December 2015 and December 2014. In addition, the Interest expense.
estimated sensitivity to a one basis point increase in our
The table below presents certain categories in our
own credit spreads on unsecured borrowings for which the
consolidated statements of financial condition and the
fair value option was elected was a gain of $17 million and
market risk measures used to assess those assets and
$10 million (including hedges) as of December 2015 and
liabilities. Certain categories on the consolidated statements
December 2014, respectively. However, the actual net
of financial condition are incorporated in more than one
impact of a change in our own credit spreads is also affected
risk measure.
by the liquidity, duration and convexity (as the sensitivity is
not linear to changes in yields) of those unsecured
borrowings for which the fair value option was elected, as Categories on the Consolidated
Statements of Financial
well as the relative performance of any hedges undertaken. Condition Included in Market
Risk Measures Market Risk Measures
Interest Rate Sensitivity. Loans receivable as of Securities segregated for VaR
December 2015 and December 2014 were $45.41 billion regulatory and other purposes, at
and $28.94 billion, respectively, substantially all of which fair value
had floating interest rates. As of December 2015 and Collateralized agreements VaR
December 2014, the estimated sensitivity to a 100 basis Securities purchased under
point increase in interest rates on such loans was agreements to resell, at fair
$396 million and $254 million, respectively, of additional value
interest income over a twelve-month period, which does not Securities borrowed, at fair
take into account the potential impact of an increase in value
costs to fund such loans. See Note 9 to the consolidated Receivables
financial statements for further information about loans Certain secured loans, at fair VaR
receivable. value
Loans receivable Interest Rate Sensitivity
Other Market Risk Considerations
Financial instruments owned, at VaR
In addition, as of December 2015 and December 2014, we fair value 10% Sensitivity Measures
had commitments and held loans for which we have
Credit Spread Sensitivity
obtained credit loss protection from Sumitomo Mitsui
Derivatives
Financial Group, Inc. See Note 18 to the consolidated
financial statements for further information about such Collateralized financings VaR
lending commitments. Securities sold under
agreements to repurchase, at
Additionally, we make investments accounted for under the fair value
equity method and we also make direct investments in real Securities loaned, at fair value
estate, both of which are included in Other assets. Direct Other secured financings, at fair
investments in real estate are accounted for at cost less value
accumulated depreciation. See Note 13 to the consolidated Financial instruments sold, but not VaR
financial statements for information about Other assets. yet purchased, at fair value Credit Spread Sensitivity
Derivatives
Unsecured short-term borrowings VaR
and unsecured long-term Credit Spread Sensitivity
borrowings, at fair value Borrowings

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Credit Risk Management

Overview As part of the risk assessment process, Credit Risk
Credit risk represents the potential for loss due to the Management performs credit reviews which include initial
default or deterioration in credit quality of a counterparty and ongoing analyses of our counterparties. For
(e.g., an OTC derivatives counterparty or a borrower) or an substantially all of our credit exposures, the core of our
issuer of securities or other instruments we hold. Our process is an annual counterparty credit review. A credit
exposure to credit risk comes mostly from client review is an independent analysis of the capacity and
transactions in OTC derivatives and loans and lending willingness of a counterparty to meet its financial
commitments. Credit risk also comes from cash placed with obligations, resulting in an internal credit rating. The
banks, securities financing transactions (i.e., resale and determination of internal credit ratings also incorporates
repurchase agreements and securities borrowing and assumptions with respect to the nature of and outlook for
lending activities) and receivables from brokers, dealers, the counterpartys industry, and the economic
clearing organizations, customers and counterparties. environment. Senior personnel within Credit Risk
Management, with expertise in specific industries, inspect
Credit Risk Management, which is independent of the
and approve credit reviews and internal credit ratings.
revenue-producing units and reports to our chief risk
officer, has primary responsibility for assessing, monitoring Our global credit risk management systems capture credit
and managing credit risk at the firm. The Credit Policy exposure to individual counterparties and on an aggregate
Committee and the Firmwide Risk Committee establish and basis to counterparties and their subsidiaries (economic
review credit policies and parameters. In addition, we hold groups). These systems also provide management with
other positions that give rise to credit risk (e.g., bonds held comprehensive information on our aggregate credit risk by
in our inventory and secondary bank loans). These credit product, internal credit rating, industry, country and region.
risks are captured as a component of market risk measures,
Risk Measures and Limits
which are monitored and managed by Market Risk
We measure our credit risk based on the potential loss in the
Management, consistent with other inventory positions.
event of non-payment by a counterparty using current and
We also enter into derivatives to manage market risk
potential exposure. For derivatives and securities financing
exposures. Such derivatives also give rise to credit risk,
transactions, current exposure represents the amount
which is monitored and managed by Credit Risk
presently owed to us after taking into account applicable
Management.
netting and collateral arrangements while potential
Credit Risk Management Process exposure represents our estimate of the future exposure
Effective management of credit risk requires accurate and that could arise over the life of a transaction based on
timely information, a high level of communication and market movements within a specified confidence level.
knowledge of customers, countries, industries and Potential exposure also takes into account netting and
products. Our process for managing credit risk includes: collateral arrangements. For loans and lending
commitments, the primary measure is a function of the
Approving transactions and setting and communicating
notional amount of the position.
credit exposure limits;
We use credit limits at various levels (counterparty,
Monitoring compliance with established credit exposure
economic group, industry, country) to control the size of
limits;
our credit exposures. Limits for counterparties and
Assessing the likelihood that a counterparty will default economic groups are reviewed regularly and revised to
on its payment obligations; reflect changing risk appetites for a given counterparty or
group of counterparties. Limits for industries and countries
Measuring our current and potential credit exposure and
are based on our risk tolerance and are designed to allow
losses resulting from counterparty default;
for regular monitoring, review, escalation and management
Reporting of credit exposures to senior management, the of credit risk concentrations. The Risk Committee of the
Board and regulators; Board and the Firmwide Risk Committee approve credit
risk limits at the firmwide and business levels. Credit Risk
Use of credit risk mitigants, including collateral and
Management sets credit limits for individual counterparties,
hedging; and
economic groups, industries and countries. Policies
Communication and collaboration with other authorized by the Firmwide Risk Committee and the Credit
independent control and support functions such as Policy Committee prescribe the level of formal approval
operations, legal and compliance. required for us to assume credit exposure to a counterparty
across all product areas, taking into account any applicable
netting provisions, collateral or other credit risk mitigants.
104 Goldman Sachs 2015 Form 10-K
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Managements Discussion and Analysis

Stress Tests For loans and lending commitments, depending on the

We use regular stress tests to calculate the credit exposures, credit quality of the borrower and other characteristics of
including potential concentrations that would result from the transaction, we employ a variety of potential risk
applying shocks to counterparty credit ratings or credit risk mitigants. Risk mitigants include: collateral provisions,
factors (e.g., currency rates, interest rates, equity prices). guarantees, covenants, structural seniority of the bank loan
These shocks include a wide range of moderate and more claims and, for certain lending commitments, provisions in
extreme market movements. Some of our stress tests the legal documentation that allow us to adjust loan
include shocks to multiple risk factors, consistent with the amounts, pricing, structure and other terms as market
occurrence of a severe market or economic event. In the conditions change. The type and structure of risk mitigants
case of sovereign default, we estimate the direct impact of employed can significantly influence the degree of credit
the default on our sovereign credit exposures, changes to risk involved in a loan or lending commitment.
our credit exposures arising from potential market moves in
When we do not have sufficient visibility into a
response to the default, and the impact of credit market
counterpartys financial strength or when we believe a
deterioration on corporate borrowers and counterparties
counterparty requires support from its parent, we may
that may result from the sovereign default. Unlike potential
obtain third-party guarantees of the counterpartys
exposure, which is calculated within a specified confidence
obligations. We may also mitigate our credit risk using
level, with a stress test there is generally no assumed
credit derivatives or participation agreements.
probability of these events occurring.
Credit Exposures
We run stress tests on a regular basis as part of our routine
As of December 2015, our credit exposures increased as
risk management processes and conduct tailored stress tests
compared with December 2014, primarily reflecting
on an ad hoc basis in response to market developments.
increases in loans and lending commitments. The
Stress tests are regularly conducted jointly with our market
percentage of our credit exposure arising from non-
and liquidity risk functions.
investment-grade counterparties (based on our internally
Model Review and Validation determined public rating agency equivalents) increased as
Our potential credit exposure and stress testing models, and compared with December 2014, primarily reflecting an
any changes to such models or assumptions, are reviewed increase in loans and lending commitments. During 2015,
by Model Risk Management. See Model Risk the number of counterparty defaults decreased as compared
Management for further information about the review with 2014, and such defaults primarily occurred within
and validation of these models. loans and lending commitments. The total number of
counterparty defaults remained low, representing less than
Risk Mitigants
0.5% of all counterparties. Estimated losses associated with
To reduce our credit exposures on derivatives and securities
counterparty defaults were lower compared with the prior
financing transactions, we may enter into netting
year and were not material to the firm. Our credit
agreements with counterparties that permit us to offset
exposures are described further below.
receivables and payables with such counterparties. We may
also reduce credit risk with counterparties by entering into Cash and Cash Equivalents. Cash and cash equivalents
agreements that enable us to obtain collateral from them on include both interest-bearing and non-interest-bearing
an upfront or contingent basis and/or to terminate deposits. To mitigate the risk of credit loss, we place
transactions if the counterpartys credit rating falls below a substantially all of our deposits with highly-rated banks
specified level. We monitor the fair value of the collateral and central banks.
on a daily basis to ensure that our credit exposures are
OTC Derivatives. Our credit exposure on OTC derivatives
appropriately collateralized. We seek to minimize
arises primarily from our market-making activities. As a
exposures where there is a significant positive correlation
market maker, we enter into derivative transactions to
between the creditworthiness of our counterparties and the
provide liquidity to clients and to facilitate the transfer and
market value of collateral we receive.
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.

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Managements Discussion and Analysis

Derivatives are reported on a net-by-counterparty basis The tables below present the distribution of our exposure to
(i.e., the net payable or receivable for derivative assets and OTC derivatives by tenor and our internally determined
liabilities for a given counterparty) when a legal right of public rating agency equivalents.
setoff exists under an enforceable netting agreement.
Derivatives are accounted for at fair value, net of cash Investment-Grade
collateral received or posted under enforceable credit AAA/ AA/ A/ BBB/
support agreements. We generally enter into OTC $ in millions Aaa Aa2 A2 Baa2 Total

derivatives transactions under bilateral collateral As of December 2015

Less than 1 year $ 411 $ 6,059 $ 10,051 $ 7,429 $ 23,950
arrangements with daily exchange of collateral. As credit 1 - 5 years 1,214 10,374 16,995 6,666 35,249
risk is an essential component of fair value, we include a Greater than 5 years 3,205 40,879 20,507 20,803 85,394
credit valuation adjustment (CVA) in the fair value of Total 4,830 57,312 47,553 34,898 144,593
derivatives to reflect counterparty credit risk, as described Netting (2,202) (40,872) (36,847) (23,166) (103,087)
OTC derivative assets $ 2,628 $ 16,440 $ 10,706 $ 11,732 $ 41,506
in Note 7 to the consolidated financial statements. CVA is a
Net credit exposure $ 2,427 $ 10,269 $ 6,652 $ 7,653 $ 27,001
function of the present value of expected exposure, the
probability of counterparty default and the assumed As of December 2014
recovery upon default. Less than 1 year $ 1,119 $ 8,260 $ 13,719 $ 7,049 $ 30,147
1 - 5 years 898 12,182 18,949 8,758 40,787
The table below presents the distribution of our exposure to Greater than 5 years 3,500 40,443 26,649 26,087 96,679
OTC derivatives by tenor, both before and after the effect Total 5,517 60,885 59,317 41,894 167,613
of collateral and netting agreements. In the table below: Netting (2,163) (42,513) (44,147) (28,321) (117,144)
OTC derivative assets $ 3,354 $ 18,372 $ 15,170 $ 13,573 $ 50,469
Tenor is based on expected duration for mortgage-related
Net credit exposure $ 3,135 $ 12,453 $ 9,493 $ 9,577 $ 34,658
credit derivatives and generally on remaining contractual
maturity for other derivatives.
Non-Investment-Grade / Unrated
Receivable and payable balances for the same counterparty
across tenor categories are netted under enforceable netting BB/Ba2
$ in millions or lower Unrated Total
agreements, and cash collateral received is netted under
As of December 2015
enforceable credit support agreements. Less than 1 year $ 3,657 $ 308 $ 3,965
Receivable and payable balances with the same 1 - 5 years 6,505 244 6,749
counterparty in the same tenor category are netted within Greater than 5 years 4,434 279 4,713
such tenor category. Total 14,596 831 15,427
Netting (6,472) (35) (6,507)
Net credit exposure represents OTC derivative assets, all
OTC derivative assets $ 8,124 $ 796 $ 8,920
of which are included in Financial instruments owned, Net credit exposure $ 6,769 $ 599 $ 7,368
at fair value, less cash collateral and the fair value of
securities collateral, primarily U.S. government and As of December 2014
federal agency obligations and non-U.S. government and Less than 1 year $ 4,959 $ 79 $ 5,038
1 - 5 years 6,226 363 6,589
agency obligations, received under credit support
Greater than 5 years 5,660 160 5,820
agreements, which management considers when Total 16,845 602 17,447
determining credit risk, but such collateral is not eligible Netting (7,062) (117) (7,179)
for netting under U.S. GAAP. OTC derivative assets $ 9,783 $ 485 $10,268
Investment- Non-Investment- Net credit exposure $ 8,506 $ 188 $ 8,694
$ in millions Grade Grade / Unrated Total
As of December 2015
Less than 1 year $ 23,950 $ 3,965 $ 27,915
1 - 5 years 35,249 6,749 41,998
Greater than 5 years 85,394 4,713 90,107
Total 144,593 15,427 160,020
Netting (103,087) (6,507) (109,594)
OTC derivative assets $ 41,506 $ 8,920 $ 50,426
Net credit exposure $ 27,001 $ 7,368 $ 34,369
As of December 2014
Less than 1 year $ 30,147 $ 5,038 $ 35,185
1 - 5 years 40,787 6,589 47,376
Greater than 5 years 96,679 5,820 102,499
Total 167,613 17,447 185,060
Netting (117,144) (7,179) (124,323)
OTC derivative assets $ 50,469 $10,268 $ 60,737
Net credit exposure $ 34,658 $ 8,694 $ 43,352

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Lending and Financing Activities. We manage our Other Credit Exposures. We are exposed to credit risk
lending and financing activities using the credit risk process, from our receivables from brokers, dealers and clearing
measures, limits and risk mitigants described above. Other organizations and customers and counterparties.
lending positions, including secondary trading positions, Receivables from brokers, dealers and clearing
are risk-managed as a component of market risk. organizations are primarily comprised of initial margin
placed with clearing organizations and receivables related
Lending Activities. Our lending activities include
to sales of securities which have traded, but not yet
lending to investment-grade and non-investment-grade
settled. These receivables generally have minimal credit
corporate borrowers. Loans and lending commitments
risk due to the low probability of clearing organization
associated with these activities are principally used for
default and the short-term nature of receivables related to
operating liquidity and general corporate purposes or in
securities settlements. Receivables from customers and
connection with contingent acquisitions. Our lending
counterparties are generally comprised of collateralized
activities also include extending loans to borrowers that
receivables related to customer securities transactions and
are secured by commercial and other real estate. See the
generally have minimal credit risk due to both the value of
tables below for further information about our credit
the collateral received and the short-term nature of these
exposures associated with these lending activities.
receivables. Our net credit exposure related to these
Securities Financing Transactions. We enter into activities was approximately $33 billion and $26 billion
securities financing transactions in order to, among other as of December 2015 and December 2014, respectively,
things, facilitate client activities, invest excess cash, and was primarily comprised of initial margin (both cash
acquire securities to cover short positions and finance and securities) placed with investment-grade clearing
certain firm activities. We bear credit risk related to resale organizations. The regional breakdown of our net credit
agreements and securities borrowed only to the extent exposure related to these activities was approximately
that cash advanced or the value of securities pledged or 44% and 48% in the Americas, approximately 45% and
delivered to the counterparty exceeds the value of the 39% in EMEA, and approximately 11% and 13% in Asia
collateral received. We also have credit exposure on as of December 2015 and December 2014, respectively.
repurchase agreements and securities loaned to the extent
In addition, we extend other loans and lending
that the value of securities pledged or delivered to the
commitments to our private wealth management clients
counterparty for these transactions exceeds the amount of
that are primarily secured by residential real estate,
cash or collateral received. Securities collateral obtained
securities or other assets. We also purchase performing
for securities financing transactions primarily includes
and distressed loans backed by residential real estate and
U.S. government and federal agency obligations and non-
consumer loans. The gross exposure related to such loans
U.S. government and agency obligations. We had
and lending commitments was approximately $28 billion
approximately $27 billion and $36 billion as of
and $17 billion as of December 2015 and
December 2015 and December 2014, respectively, of
December 2014, respectively, and was substantially all
credit exposure related to securities financing transactions
concentrated in the Americas region. The fair value of the
reflecting both netting agreements and collateral that
collateral received against such loans and lending
management considers when determining credit risk. As
commitments generally exceeded the gross exposure as of
of both December 2015 and December 2014,
both December 2015 and December 2014.
substantially all of our credit exposure related to
securities financing transactions was with investment-
grade financial institutions, funds and governments,
primarily located in the Americas and EMEA.

Goldman Sachs 2015 Form 10-K 107

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Credit Exposure by Industry, Region and Credit

Quality
Loans and Lending
The tables below present our credit exposure related to Commitments
cash, OTC derivatives, and loans and lending commitments as of December
(excluding credit exposures described above in Securities $ in millions 2015 2014
Financing Transactions and Other Credit Exposures) Credit Exposure by Industry
broken down by industry, region and credit quality. Funds $ 2,595 $ 1,706
Financial Institutions 14,063 11,316
Consumer, Retail & Healthcare 31,944 30,216
Cash
as of December Sovereign 419 450
$ in millions 2015 2014 Municipalities & Nonprofit 628 541
Natural Resources & Utilities 24,476 24,275
Credit Exposure by Industry
Funds $ 176 $ 96 Real Estate 15,045 12,366
Financial Institutions 12,799 12,469 Technology, Media & Telecommunications 36,444 20,633
Sovereign 62,130 45,029 Diversified Industrials 20,047 16,392
Real Estate 6 Other 13,941 11,998
Total $75,105 $57,600 Total $159,602 $129,893

Credit Exposure by Region Credit Exposure by Region

Americas $54,846 $45,599 Americas $121,271 $ 91,378
EMEA 8,496 1,666 EMEA 33,061 34,397
Asia 11,763 10,335 Asia 5,270 4,118
Total $75,105 $57,600 Total $159,602 $129,893
Credit Exposure by Credit Quality (Credit Rating Equivalent) Credit Exposure by Credit Quality (Credit Rating Equivalent)
AAA/Aaa $55,626 $38,778 AAA/Aaa $ 4,148 $ 3,969
AA/Aa2 4,286 4,598 AA/Aa2 7,716 8,097
A/A2 14,243 13,346 A/A2 27,212 22,623
BBB/Baa2 855 730
BBB/Baa2 43,937 35,706
BB/Ba2 or lower 95 148
BB/Ba2 or lower 76,049 58,670
Total $75,105 $57,600
Unrated 540 828
Total $159,602 $129,893
OTC Derivatives
as of December Selected Exposures
$ in millions 2015 2014 The section below provides information about our credit
Credit Exposure by Industry and market exposure to certain jurisdictions and industries
Funds $10,899 $13,114 that have had heightened focus due to recent events and
Financial Institutions 13,148 15,051
broad market concerns. Credit exposure represents the
Consumer, Retail & Healthcare 1,553 3,325
Sovereign 7,566 10,004 potential for loss due to the default or deterioration in
Municipalities & Nonprofit 3,984 4,303 credit quality of a counterparty or borrower. Market
Natural Resources & Utilities 4,846 5,741 exposure represents the potential for loss in value of our
Real Estate 205 407 long and short inventory due to changes in market prices.
Technology, Media & Telecommunications 1,839 2,995 There is no overlap between the credit and market
Diversified Industrials 5,008 4,321
exposures in the amounts below.
Other 1,378 1,476
Total $50,426 $60,737 Country Exposures. The decline in oil prices continues to
Credit Exposure by Region raise concerns about Venezuela and Nigeria, and their
Americas $17,724 $22,032 sovereign debt. The political situations in Iraq and Russia,
EMEA 27,113 31,295 as well as the decline in oil prices, have led to continued
Asia 5,589 7,410 concerns about their economic and financial stability. In
Total $50,426 $60,737
addition, Argentinas default on its sovereign debt coupled
Credit Exposure by Credit Quality (Credit Rating Equivalent) with its contracting economy has raised concerns about its
AAA/Aaa $ 2,628 $ 3,354 long term financial stability. Separately, signs of slowing
AA/Aa2 16,440 18,372
growth in China and deteriorating macroeconomic
A/A2 10,706 15,170
BBB/Baa2 11,732 13,573
conditions in Brazil have led to heightened focus and broad
BB/Ba2 or lower 8,124 9,783 market concerns relating to these countries.
Unrated 796 485
Total $50,426 $60,737

108 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

As of December 2015, our total credit exposure to Russia We use regular stress tests, described above, to calculate the
was $292 million and primarily related to loans and lending credit exposures, including potential concentrations that
commitments. Such exposure was substantially all with would result from applying shocks to counterparty credit
non-sovereign counterparties or borrowers. In addition, ratings or credit risk factors. To supplement these regular
our total market exposure to Russia as of December 2015 stress tests, we also conduct tailored stress tests on an ad
was $791 million, which was primarily with non-sovereign hoc basis in response to specific market events that we deem
issuers or underliers and was primarily related to equities significant. These stress tests are designed to estimate the
and credit derivatives. direct impact of the event on our credit and market
exposures resulting from shocks to risk factors including,
As of December 2015, our total credit exposure to China
but not limited to, currency rates, interest rates, and equity
was $3.7 billion and primarily related to deposits with
prices. We also utilize these stress tests to estimate the
banks and loans and lending commitments. Such exposure
indirect impact of certain hypothetical events on our
was primarily with non-sovereign counterparties or
country exposures, such as the impact of credit market
borrowers. In addition, our total market exposure to China
deterioration on corporate borrowers and counterparties
as of December 2015 was $2.5 billion and was primarily
along with the shocks to the risk factors described above.
related to equities.
The parameters of these shocks vary based on the scenario
As of December 2015, our total credit exposure to Brazil reflected in each stress test. We review estimated losses
was $3.2 billion and primarily related to secured produced by the stress tests in order to understand their
receivables and initial margin placed with clearing magnitude, highlight potential loss concentrations, and
organizations. Substantially all of such exposure was with assess and mitigate our exposures where necessary.
non-sovereign counterparties or borrowers. In addition,
See Stress Tests above, Liquidity Risk Management
our total market exposure to Brazil as of December 2015
Liquidity Stress Tests and Market Risk Management
was $1.9 billion and was primarily related to sovereign
Stress Testing for further information about stress tests.
debt.
Industry Exposures. Significant declines in the price of oil
Our total credit and market exposure to each of Argentina,
have led to market concerns regarding the creditworthiness
Iraq, Venezuela and Nigeria as of December 2015 was not
of certain companies in the oil and gas industry. As of
material.
December 2015, our credit exposure to oil and gas
We have a comprehensive framework to monitor, measure companies related to loans and lending commitments was
and assess our country exposures and to determine our risk $10.6 billion ($1.8 billion of loans and $8.8 billion of
appetite. We determine the country of risk by the location lending commitments). Such exposure included $4.2 billion
of the counterparty, issuer or underliers assets, where they of exposure to non-investment-grade counterparties
generate revenue, the country in which they are ($1.5 billion related to loans and $2.7 billion related to
headquartered, the jurisdiction where a claim against them lending commitments). In addition, we have exposure to
could be enforced, and/or the government whose policies our clients in the oil and gas industry arising from
affect their ability to repay their obligations. We monitor derivatives. As of December 2015, our credit exposure
our credit exposure to a specific country both at the related to derivatives and receivables with oil and gas
individual counterparty level as well as at the aggregate companies was $1.9 billion, primarily with investment-
country level. grade counterparties. As of December 2015, our market
exposure related to oil and gas companies was
$(677) million, which was primarily to investment-grade
issuers or underliers.

Goldman Sachs 2015 Form 10-K 109

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Operational Risk Management

Overview Operational Risk Management Process
Operational risk is the risk of loss resulting from Managing operational risk requires timely and accurate
inadequate or failed internal processes, people and systems information as well as a strong control culture. We seek to
or from external events. Our exposure to operational risk manage our operational risk through:
arises from routine processing errors as well as
Training, supervision and development of our people;
extraordinary incidents, such as major systems failures or
legal and regulatory matters. Potential types of loss events Active participation of senior management in identifying
related to internal and external operational risk include: and mitigating key operational risks across the firm;
Clients, products and business practices; Independent control and support functions that monitor
operational risk on a daily basis, and implementation of
Execution, delivery and process management;
extensive policies and procedures, and controls designed
Business disruption and system failures; to prevent the occurrence of operational risk events;
Employment practices and workplace safety; Proactive communication between our revenue-
producing units and our independent control and support
Damage to physical assets;
functions; and
Internal fraud; and
A network of systems throughout the firm to facilitate the
External fraud. collection of data used to analyze and assess our
operational risk exposure.
We maintain a comprehensive control framework designed
to provide a well-controlled environment to minimize We combine top-down and bottom-up approaches to
operational risks. The Firmwide Operational Risk manage and measure operational risk. From a top-down
Committee provides oversight of the ongoing development perspective, our senior management assesses firmwide and
and implementation of our operational risk policies and business-level operational risk profiles. From a bottom-up
framework. Operational Risk Management is a risk perspective, revenue-producing units and independent
management function independent of our revenue- control and support functions are responsible for risk
producing units, reports to our chief risk officer, and is management on a day-to-day basis, including identifying,
responsible for developing and implementing policies, mitigating, and escalating operational risks to senior
methodologies and a formalized framework for operational management.
risk management with the goal of minimizing our exposure
Our operational risk framework is in part designed to
to operational risk.
comply with the operational risk measurement rules under
the Revised Capital Framework and has evolved based on
the changing needs of our businesses and regulatory
guidance. Our framework comprises the following
practices:
Risk identification and reporting;
Risk measurement; and
Risk monitoring.
Internal Audit performs an independent review of our
operational risk framework, including our key controls,
processes and applications, on an annual basis to assess the
effectiveness of our framework.

110 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Risk Identification and Reporting Risk Measurement

The core of our operational risk management framework is We measure our operational risk exposure over a twelve-
risk identification and reporting. We have a comprehensive month time horizon using both statistical modeling and
data collection process, including firmwide policies and scenario analyses, which involve qualitative assessments of
procedures, for operational risk events. the potential frequency and extent of potential operational
risk losses, for each of our businesses. Operational risk
We have established policies that require managers in our
measurement incorporates qualitative and quantitative
revenue-producing units and our independent control and
assessments of factors including:
support functions to escalate operational risk events. When
operational risk events are identified, our policies require Internal and external operational risk event data;
that the events be documented and analyzed to determine
Assessments of our internal controls;
whether changes are required in our systems and/or
processes to further mitigate the risk of future events. Evaluations of the complexity of our business activities;
We have established thresholds to monitor the impact of an The degree of and potential for automation in our
operational risk event, including single loss events and processes;
cumulative losses over a twelve-month period, as well as
New product information;
escalation protocols. We also provide periodic operational
risk reports, which include incidents that breach escalation The legal and regulatory environment;
thresholds, to senior management, firmwide and divisional
Changes in the markets for our products and services,
risk committees and the Risk Committee of the Board.
including the diversity and sophistication of our
In addition, our firmwide systems capture internal customers and counterparties; and
operational risk event data, key metrics such as transaction
Liquidity of the capital markets and the reliability of the
volumes, and statistical information such as performance
infrastructure that supports the capital markets.
trends. We use an internally-developed operational risk
management application to aggregate and organize this The results from these scenario analyses are used to
information. Managers from both revenue-producing units monitor changes in operational risk and to determine
and independent control and support functions analyze the business lines that may have heightened exposure to
information to evaluate operational risk exposures and operational risk. These analyses ultimately are used in the
identify businesses, activities or products with heightened determination of the appropriate level of operational risk
levels of operational risk. We also provide periodic capital to hold.
operational risk reports to senior management, risk
Risk Monitoring
committees and the Board.
We evaluate changes in the operational risk profile of the
firm and its businesses, including changes in business mix
or jurisdictions in which we operate, by monitoring the
factors noted above at a firmwide level. We have both
detective and preventive internal controls, which are
designed to reduce the frequency and severity of
operational risk losses and the probability of operational
risk events. We monitor the results of assessments and
independent internal audits of these internal controls.
Model Review and Validation
The statistical models utilized by Operational Risk
Management are subject to independent review and
validation by Model Risk Management. See Model Risk
Management for further information about the review
and validation of these models.

Goldman Sachs 2015 Form 10-K 111

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Managements Discussion and Analysis

Model Risk Management

Overview The model validation process incorporates a review of
Model risk is the potential for adverse consequences from models and trade and risk parameters across a broad range
decisions made based on model outputs that may be of scenarios (including extreme conditions) in order to
incorrect or used inappropriately. We rely on quantitative critically evaluate and verify:
models across our business activities primarily to value
The models conceptual soundness, including the
certain financial assets and liabilities, to monitor and
reasonableness of model assumptions, and suitability for
manage our risk, and to measure and monitor our
intended use;
regulatory capital.
The testing strategy utilized by the model developers to
Our model risk management framework is managed
ensure that the models function as intended;
through a governance structure and risk management
controls, which encompass standards designed to ensure we The suitability of the calculation techniques incorporated
maintain a comprehensive model inventory, including risk in the model;
assessment and classification, sound model development
The models accuracy in reflecting the characteristics of
practices, independent review and model-specific usage
the related product and its significant risks;
controls. The Firmwide Risk Committee and the Firmwide
Model Risk Control Committee oversee our model risk The models consistency with models for similar
management framework. Model Risk Management, which products; and
is independent of model developers, model owners and
The models sensitivity to input parameters and
model users, reports to our chief risk officer, is responsible
assumptions.
for identifying and reporting significant risks associated
with models, and provides periodic updates to senior See Critical Accounting Policies Fair Value Review
management, risk committees and the Risk Committee of of Valuation Models, Liquidity Risk Management,
the Board. Market Risk Management, Credit Risk Management
and Operational Risk Management for further
Model Review and Validation
information about our use of models within these areas.
Model Risk Management consists of quantitative
professionals who perform an independent review,
validation and approval of our models. This review
includes an analysis of the model documentation, Item 7A. Quantitative and Qualitative
independent testing, an assessment of the appropriateness Disclosures About Market Risk
of the methodology used, and verification of compliance Quantitative and qualitative disclosures about market risk
with model development and implementation standards. are set forth under Managements Discussion and Analysis
Model Risk Management reviews all existing models on an of Financial Condition and Results of Operations
annual basis, as well as new models or significant changes Overview and Structure of Risk Management in Part II,
to models. Item 7 of the 2015 Form 10-K.

112 Goldman Sachs 2015 Form 10-K

Item 8. Financial Statements and Supplementary Data
INDEX
Page No.
Managements Report on Internal Control over Financial Reporting 114
Report of Independent Registered Public Accounting Firm 115
Consolidated Financial Statements 116
Consolidated Statements of Earnings 116
Consolidated Statements of Comprehensive Income 117
Consolidated Statements of Financial Condition 118
Consolidated Statements of Changes in Shareholders Equity 119
Consolidated Statements of Cash Flows 120
Notes to Consolidated Financial Statements 121
Note 1. Description of Business 121
Note 2. Basis of Presentation 121
Note 3. Significant Accounting Policies 122
Note 4. Financial Instruments Owned, at Fair Value and Financial Instruments Sold, But Not Yet
Purchased, at Fair Value 127
Note 5. Fair Value Measurements 129
Note 6. Cash Instruments 130
Note 7. Derivatives and Hedging Activities 137
Note 8. Fair Value Option 150
Note 9. Loans Receivable 156
Note 10. Collateralized Agreements and Financings 159
Note 11. Securitization Activities 163
Note 12. Variable Interest Entities 165
Note 13. Other Assets 168
Note 14. Deposits 171
Note 15. Short-Term Borrowings 171
Note 16. Long-Term Borrowings 172
Note 17. Other Liabilities and Accrued Expenses 174
Note 18. Commitments, Contingencies and Guarantees 175
Note 19. Shareholders Equity 180
Note 20. Regulation and Capital Adequacy 182
Note 21. Earnings Per Common Share 191
Note 22. Transactions with Affiliated Funds 191
Note 23. Interest Income and Interest Expense 192
Note 24. Income Taxes 192
Note 25. Business Segments 195
Note 26. Credit Concentrations 197
Note 27. Legal Proceedings 198
Note 28. Employee Benefit Plans 206
Note 29. Employee Incentive Plans 206
Note 30. Parent Company 208
Supplemental Financial Information 209
Quarterly Results 209
Common Stock Price Range 209
Common Stock Performance 209
Selected Financial Data 210
Statistical Disclosures 211

Goldman Sachs 2015 Form 10-K 113

Managements Report on Internal Control over Financial Reporting

Management of The Goldman Sachs Group, Inc., together Our internal control over financial reporting includes
with its consolidated subsidiaries (the firm), is responsible policies and procedures that pertain to the maintenance of
for establishing and maintaining adequate internal control records that, in reasonable detail, accurately and fairly
over financial reporting. The firms internal control over reflect transactions and dispositions of assets; provide
financial reporting is a process designed under the reasonable assurance that transactions are recorded as
supervision of the firms principal executive and principal necessary to permit preparation of financial statements in
financial officers to provide reasonable assurance regarding accordance with U.S. generally accepted accounting
the reliability of financial reporting and the preparation of principles, and that receipts and expenditures are being
the firms financial statements for external reporting made only in accordance with authorizations of
purposes in accordance with U.S. generally accepted management and the directors of the firm; and provide
accounting principles. reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
As of December 31, 2015, management conducted an
the firms assets that could have a material effect on our
assessment of the firms internal control over financial
financial statements.
reporting based on the framework established in Internal
Control Integrated Framework (2013) issued by the The firms internal control over financial reporting as of
Committee of Sponsoring Organizations of the Treadway December 31, 2015 has been audited by
Commission (COSO). Based on this assessment, PricewaterhouseCoopers LLP, an independent registered
management has determined that the firms internal control public accounting firm, as stated in their report appearing
over financial reporting as of December 31, 2015 was on page 115, which expresses an unqualified opinion on the
effective. effectiveness of the firms internal control over financial
reporting as of December 31, 2015.

114 Goldman Sachs 2015 Form 10-K

Report of Independent Registered Public Accounting Firm

To the Board of Directors and the Shareholders of

The Goldman Sachs Group, Inc.:
In our opinion, the consolidated financial statements listed A companys internal control over financial reporting is a
in the accompanying index present fairly, in all material process designed to provide reasonable assurance regarding
respects, the financial position of The Goldman Sachs the reliability of financial reporting and the preparation of
Group, Inc. and its subsidiaries (the Company) at financial statements for external purposes in accordance
December 31, 2015 and 2014, and the results of its with generally accepted accounting principles. A companys
operations and its cash flows for each of the three years in internal control over financial reporting includes those
the period ended December 31, 2015, in conformity with policies and procedures that (i) pertain to the maintenance
accounting principles generally accepted in the United of records that, in reasonable detail, accurately and fairly
States of America. Also in our opinion, the Company reflect the transactions and dispositions of the assets of the
maintained, in all material respects, effective internal company; (ii) provide reasonable assurance that
control over financial reporting as of December 31, 2015, transactions are recorded as necessary to permit
based on criteria established in Internal Control preparation of financial statements in accordance with
Integrated Framework (2013) issued by the Committee of generally accepted accounting principles, and that receipts
Sponsoring Organizations of the Treadway Commission and expenditures of the company are being made only in
(COSO). The Companys management is responsible for accordance with authorizations of management and
these financial statements, for maintaining effective internal directors of the company; and (iii) provide reasonable
control over financial reporting and for its assessment of the assurance regarding prevention or timely detection of
effectiveness of internal control over financial reporting, unauthorized acquisition, use, or disposition of the
included in Managements Report on Internal Control over companys assets that could have a material effect on the
Financial Reporting appearing on page 114. Our financial statements.
responsibility is to express opinions on these financial
Because of its inherent limitations, internal control over
statements and on the Companys internal control over
financial reporting may not prevent or detect
financial reporting based on our integrated audits. We
misstatements. Also, projections of any evaluation of
conducted our audits in accordance with the standards of
effectiveness to future periods are subject to the risk that
the Public Company Accounting Oversight Board (United
controls may become inadequate because of changes in
States). Those standards require that we plan and perform
conditions, or that the degree of compliance with the
the audits to obtain reasonable assurance about whether
policies or procedures may deteriorate.
the financial statements are free of material misstatement
and whether effective internal control over financial /s/ PRICEWATERHOUSECOOPERS LLP
reporting was maintained in all material respects. Our
New York, New York
audits of the financial statements included examining, on a
February 19, 2016
test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting
principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. 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 2015 Form 10-K 115

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Consolidated Statements of Earnings

Year Ended December

in millions, except per share amounts 2015 2014 2013
Revenues
Investment banking $ 7,027 $ 6,464 $ 6,004
Investment management 5,868 5,748 5,194
Commissions and fees 3,320 3,316 3,255
Market making 9,523 8,365 9,368
Other principal transactions 5,018 6,588 6,993
Total non-interest revenues 30,756 30,481 30,814

Interest income 8,452 9,604 10,060

Interest expense 5,388 5,557 6,668
Net interest income 3,064 4,047 3,392
Net revenues, including net interest income 33,820 34,528 34,206

Operating expenses
Compensation and benefits 12,678 12,691 12,613

Brokerage, clearing, exchange and distribution fees 2,576 2,501 2,341

Market development 557 549 541
Communications and technology 806 779 776
Depreciation and amortization 991 1,337 1,322
Occupancy 772 827 839
Professional fees 963 902 930
Insurance reserves 176
Other expenses 5,699 2,585 2,931
Total non-compensation expenses 12,364 9,480 9,856
Total operating expenses 25,042 22,171 22,469

Pre-tax earnings 8,778 12,357 11,737

Provision for taxes 2,695 3,880 3,697
Net earnings 6,083 8,477 8,040
Preferred stock dividends 515 400 314
Net earnings applicable to common shareholders $ 5,568 $ 8,077 $ 7,726

Earnings per common share

Basic $ 12.35 $ 17.55 $ 16.34
Diluted 12.14 17.07 15.46

Average common shares outstanding

Basic 448.9 458.9 471.3
Diluted 458.6 473.2 499.6

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

116 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Consolidated Statements of Comprehensive Income

Year Ended December

$ in millions 2015 2014 2013
Net earnings $6,083 $8,477 $8,040
Other comprehensive income/(loss) adjustments, net of tax:
Currency translation (114) (109) (50)
Pension and postretirement liabilities 139 (102) 38
Available-for-sale securities (327)
Cash flow hedges (8) 8
Other comprehensive income/(loss) 25 (219) (331)
Comprehensive income $6,108 $8,258 $7,709

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

Goldman Sachs 2015 Form 10-K 117

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Consolidated Statements of Financial Condition

As of December
$ in millions, except per share amounts 2015 2014
Assets
Cash and cash equivalents $ 75,105 $ 57,600
Cash and securities segregated for regulatory and other purposes (includes $38,504 and $34,291 at fair value as of
December 2015 and December 2014, respectively) 56,838 51,716
Collateralized agreements:
Securities purchased under agreements to resell and federal funds sold (includes $119,450 and $126,036 at fair value as
of December 2015 and December 2014, respectively) 120,905 127,938
Securities borrowed (includes $69,801 and $66,769 at fair value as of December 2015 and December 2014, respectively) 172,099 160,722
Receivables:
Brokers, dealers and clearing organizations 25,453 30,671
Customers and counterparties (includes $4,992 and $6,944 at fair value as of December 2015 and December 2014,
respectively) 46,430 63,808
Loans receivable 45,407 28,938
Financial instruments owned, at fair value (includes $54,426 and $64,473 pledged as collateral as of December 2015 and
December 2014, respectively) 293,940 312,248
Other assets 25,218 22,201
Total assets $861,395 $855,842

Liabilities and shareholders equity

Deposits (includes $14,680 and $13,523 at fair value as of December 2015 and December 2014, respectively) $ 97,519 $ 82,880
Collateralized financings:
Securities sold under agreements to repurchase, at fair value 86,069 88,215
Securities loaned (includes $466 and $765 at fair value as of December 2015 and December 2014, respectively) 3,614 5,570
Other secured financings (includes $23,207 and $21,450 at fair value as of December 2015 and December 2014,
respectively) 24,753 22,809
Payables:
Brokers, dealers and clearing organizations 5,406 6,636
Customers and counterparties 204,956 206,936
Financial instruments sold, but not yet purchased, at fair value 115,248 132,083
Unsecured short-term borrowings, including the current portion of unsecured long-term borrowings (includes $17,743 and
$18,826 at fair value as of December 2015 and December 2014, respectively) 42,787 44,539
Unsecured long-term borrowings (includes $22,273 and $16,005 at fair value as of December 2015 and December 2014,
respectively) 175,422 167,302
Other liabilities and accrued expenses (includes $1,253 and $831 at fair value as of December 2015 and December 2014,
respectively) 18,893 16,075
Total liabilities 774,667 773,045

Commitments, contingencies and guarantees

Shareholders equity
Preferred stock, par value $0.01 per share; aggregate liquidation preference of $11,200 and $9,200 as of December 2015
and December 2014, respectively 11,200 9,200
Common stock, par value $0.01 per share; 4,000,000,000 shares authorized, 863,976,731 and 852,784,764 shares issued
as of December 2015 and December 2014, respectively, and 419,480,736 and 430,259,102 shares outstanding as of
December 2015 and December 2014, respectively 9 9
Share-based awards 4,151 3,766
Nonvoting common stock, par value $0.01 per share; 200,000,000 shares authorized, no shares issued and outstanding
Additional paid-in capital 51,340 50,049
Retained earnings 83,386 78,984
Accumulated other comprehensive loss (718) (743)
Stock held in treasury, at cost, par value $0.01 per share; 444,495,997 and 422,525,664 shares as of December 2015 and
December 2014, respectively (62,640) (58,468)
Total shareholders equity 86,728 82,797
Total liabilities and shareholders equity $861,395 $855,842

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

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Consolidated Statements of Changes in Shareholders Equity

Year Ended December

$ in millions 2015 2014 2013
Preferred stock
Balance, beginning of year $ 9,200 $ 7,200 $ 6,200
Issued 2,000 2,000 1,000
Balance, end of year 11,200 9,200 7,200
Common stock
Balance, beginning of year 9 8 8
Issued 1
Balance, end of year 9 9 8
Share-based awards
Balance, beginning of year 3,766 3,839 3,298
Issuance and amortization of share-based awards 2,308 2,079 2,017
Delivery of common stock underlying share-based awards (1,742) (1,725) (1,378)
Forfeiture of share-based awards (72) (92) (79)
Exercise of share-based awards (109) (335) (19)
Balance, end of year 4,151 3,766 3,839
Additional paid-in capital
Balance, beginning of year 50,049 48,998 48,030
Delivery of common stock underlying share-based awards 2,092 2,206 1,483
Cancellation of share-based awards in satisfaction of withholding tax requirements (1,198) (1,922) (599)
Preferred stock issuance costs (7) (20) (9)
Excess net tax benefit related to share-based awards 406 788 94
Cash settlement of share-based awards (2) (1) (1)
Balance, end of year 51,340 50,049 48,998
Retained earnings
Balance, beginning of year 78,984 71,961 65,223
Net earnings 6,083 8,477 8,040
Dividends and dividend equivalents declared on common stock and share-based awards (1,166) (1,054) (988)
Dividends declared on preferred stock (515) (400) (314)
Balance, end of year 83,386 78,984 71,961
Accumulated other comprehensive loss
Balance, beginning of year (743) (524) (193)
Other comprehensive income/(loss) 25 (219) (331)
Balance, end of year (718) (743) (524)
Stock held in treasury, at cost
Balance, beginning of year (58,468) (53,015) (46,850)
Repurchased (4,195) (5,469) (6,175)
Reissued 32 49 40
Other (9) (33) (30)
Balance, end of year (62,640) (58,468) (53,015)
Total shareholders equity $ 86,728 $ 82,797 $ 78,467

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

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Consolidated Statements of Cash Flows

Year Ended December

$ in millions 2015 2014 2013
Cash flows from operating activities
Net earnings $ 6,083 $ 8,477 $ 8,040
Adjustments to reconcile net earnings to net cash provided by/(used for) operating activities
Depreciation and amortization 991 1,337 1,322
Deferred income taxes 425 495 29
Share-based compensation 2,272 2,085 2,015
Gain on sale of European insurance business (211)
Gain related to extinguishment of junior subordinated debt (34) (289)
Changes in operating assets and liabilities
Cash and securities segregated for regulatory and other purposes (5,123) (2,046) (143)
Receivables and payables (excluding loans receivable), net 19,132 12,328 (3,682)
Collateralized transactions (excluding other secured financings), net (9,005) (52,104) (51,669)
Financial instruments owned, at fair value 14,472 27,547 51,079
Financial instruments sold, but not yet purchased, at fair value (16,835) 4,642 933
Other, net (5,417) (10,095) (3,170)
Net cash provided by/(used for) operating activities 6,961 (7,623) 4,543
Cash flows from investing activities
Purchase of property, leasehold improvements and equipment (1,833) (678) (706)
Proceeds from sales of property, leasehold improvements and equipment 228 30 62
Business acquisitions, net of cash acquired (1,808) (1,732) (2,274)
Proceeds from sales of investments 1,019 1,514 2,503
Purchase of available-for-sale securities (738)
Proceeds from sales of available-for-sale securities 817
Loans receivable, net (16,180) (14,043) (8,392)
Net cash used for investing activities (18,574) (14,909) (8,728)
Cash flows from financing activities
Unsecured short-term borrowings, net (369) 1,659 1,336
Other secured financings (short-term), net (867) (837) (7,272)
Proceeds from issuance of other secured financings (long-term) 10,349 6,900 6,604
Repayment of other secured financings (long-term), including the current portion (6,502) (7,636) (3,630)
Proceeds from issuance of unsecured long-term borrowings 44,595 39,857 30,851
Repayment of unsecured long-term borrowings, including the current portion (29,520) (28,138) (30,473)
Purchase of trust preferred securities (1) (1,611)
Derivative contracts with a financing element, net (47) 643 874
Deposits, net 14,639 12,201 683
Common stock repurchased (4,135) (5,469) (6,175)
Dividends and dividend equivalents paid on common stock, preferred stock and share-based awards (1,681) (1,454) (1,302)
Proceeds from issuance of preferred stock, net of issuance costs 1,993 1,980 991
Proceeds from issuance of common stock, including exercise of share-based awards 259 123 65
Excess tax benefit related to share-based awards 407 782 98
Cash settlement of share-based awards (2) (1) (1)
Net cash provided by/(used for) financing activities 29,118 18,999 (7,351)
Net increase/(decrease) in cash and cash equivalents 17,505 (3,533) (11,536)
Cash and cash equivalents, beginning of year 57,600 61,133 72,669
Cash and cash equivalents, end of year $ 75,105 $ 57,600 $ 61,133
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest, net of capitalized interest, were $4.82 billion, $6.43 billion and $5.69 billion for 2015, 2014 and 2013, respectively.
Cash payments for income taxes, net of refunds, were $2.65 billion, $3.05 billion and $4.07 billion for 2015, 2014 and 2013, respectively.
Non-cash activities:
During 2015, the firm exchanged $262 million of Trust Preferred Securities and common beneficial interests held by the firm for $296 million of the firms junior
subordinated debt held by the issuing trust. Following the exchange, this junior subordinated debt was extinguished.
During 2015, the firm repurchased $60 million of its common stock for which settlement occurred and cash was paid in 2016.
During 2014, the firm exchanged $1.58 billion of Trust Preferred Securities, common beneficial interests and senior guaranteed trust securities held by the firm for
$1.87 billion of the firms junior subordinated debt held by the issuing trusts. Following the exchange, this junior subordinated debt was extinguished.
During 2014, the firm sold certain consolidated investments and provided seller financing, which resulted in a non-cash increase to loans receivable of $115 million.

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

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Notes to Consolidated Financial Statements

Note 1. Investing & Lending

Description of Business The firm invests in and originates loans to provide
financing to clients. These investments and loans are
The Goldman Sachs Group, Inc. (Group Inc. or parent typically longer-term in nature. The firm makes
company), a Delaware corporation, together with its investments, some of which are consolidated, directly and
consolidated subsidiaries (collectively, the firm), is a leading indirectly through funds and separate accounts that the
global investment banking, securities and investment firm manages, in debt securities and loans, public and
management firm that provides a wide range of financial private equity securities, and real estate entities.
services to a substantial and diversified client base that
includes corporations, financial institutions, governments Investment Management
and individuals. Founded in 1869, the firm is The firm provides investment management services and
headquartered in New York and maintains offices in all offers investment products (primarily through separately
major financial centers around the world. managed accounts and commingled vehicles, such as
mutual funds and private investment funds) across all
The firm reports its activities in the following four business major asset classes to a diverse set of institutional and
segments: individual clients. The firm also offers wealth advisory
Investment Banking services, including portfolio management and financial
The firm provides a broad range of investment banking counseling, and brokerage and other transaction services to
services to a diverse group of corporations, financial high-net-worth individuals and families.
institutions, investment funds and governments. Services
include strategic advisory assignments with respect to Note 2.
mergers and acquisitions, divestitures, corporate defense
Basis of Presentation
activities, restructurings, spin-offs and risk management,
and debt and equity underwriting of public offerings and These consolidated financial statements are prepared in
private placements, including local and cross-border accordance with accounting principles generally accepted in
transactions and acquisition financing, as well as derivative the United States (U.S. GAAP) and include the accounts of
transactions directly related to these activities. Group Inc. and all other entities in which the firm has a
controlling financial interest. Intercompany transactions
Institutional Client Services
and balances have been eliminated.
The firm facilitates client transactions and makes markets
in fixed income, equity, currency and commodity products, All references to 2015, 2014 and 2013 refer to the firms
primarily with institutional clients such as corporations, years ended, or the dates, as the context requires,
financial institutions, investment funds and governments. December 31, 2015, December 31, 2014 and
The firm also makes markets in and clears client December 31, 2013, respectively. Any reference to a future
transactions on major stock, options and futures exchanges year refers to a year ending on December 31 of that year.
worldwide and provides financing, securities lending and Certain reclassifications have been made to previously
other prime brokerage services to institutional clients. reported amounts to conform to the current presentation.

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Notes to Consolidated Financial Statements

Note 3.
Significant Accounting Policies
The firms significant accounting policies include when and Consolidation
how to measure the fair value of assets and liabilities, The firm consolidates entities in which the firm has a
accounting for goodwill and identifiable intangible assets, controlling financial interest. The firm determines whether
and when to consolidate an entity. See Notes 5 through 8 it has a controlling financial interest in an entity by first
for policies on fair value measurements, Note 13 for evaluating whether the entity is a voting interest entity or a
policies on goodwill and identifiable intangible assets, and variable interest entity (VIE).
below and Note 12 for policies on consolidation
Voting Interest Entities. Voting interest entities are
accounting. All other significant accounting policies are
entities in which (i) the total equity investment at risk is
either described below or included in the following
sufficient to enable the entity to finance its activities
footnotes:
independently and (ii) the equity holders have the power to
Financial Instruments Owned, at Fair Value and direct the activities of the entity that most significantly
Financial Instruments Sold, But Not Yet Purchased, impact its economic performance, the obligation to absorb
at Fair Value Note 4 the losses of the entity and the right to receive the residual
Fair Value Measurements Note 5 returns of the entity. The usual condition for a controlling
financial interest in a voting interest entity is ownership of a
Cash Instruments Note 6 majority voting interest. If the firm has a majority voting
Derivatives and Hedging Activities Note 7 interest in a voting interest entity, the entity is consolidated.
Fair Value Option Note 8 Variable Interest Entities. A VIE is an entity that lacks
Loans Receivable Note 9
one or more of the characteristics of a voting interest entity.
The firm has a controlling financial interest in a VIE when
Collateralized Agreements and Financings Note 10 the firm has a variable interest or interests that provide it
Securitization Activities Note 11 with (i) the power to direct the activities of the VIE that
most significantly impact the VIEs economic performance
Variable Interest Entities Note 12
and (ii) the obligation to absorb losses of the VIE or the
Other Assets, including Goodwill and right to receive benefits from the VIE that could potentially
Identifiable Intangible Assets Note 13 be significant to the VIE. See Note 12 for further
Deposits Note 14 information about VIEs.
Short-Term Borrowings Note 15 Equity-Method Investments. When the firm does not
have a controlling financial interest in an entity but can
Long-Term Borrowings Note 16
exert significant influence over the entitys operating and
Other Liabilities and Accrued Expenses Note 17 financial policies, the investment is accounted for either
Commitments, Contingencies and Guarantees Note 18 (i) under the equity method of accounting or (ii) at fair value
by electing the fair value option available under U.S. GAAP.
Shareholders Equity Note 19
Significant influence generally exists when the firm owns
Regulation and Capital Adequacy Note 20 20% to 50% of the entitys common stock or in-substance
Earnings Per Common Share Note 21
common stock.

Transactions with Affiliated Funds Note 22 In general, the firm accounts for investments acquired after
the fair value option became available, at fair value. In
Interest Income and Interest Expense Note 23
certain cases, the firm applies the equity method of
Income Taxes Note 24 accounting to new investments that are strategic in nature
or closely related to the firms principal business activities,
Business Segments Note 25
when the firm has a significant degree of involvement in the
Credit Concentrations Note 26 cash flows or operations of the investee or when cost-
Legal Proceedings Note 27 benefit considerations are less significant. See Note 13 for
further information about equity-method investments.
Employee Benefit Plans Note 28

Employee Incentive Plans Note 29

Parent Company Note 30

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Notes to Consolidated Financial Statements

Investment Funds. The firm has formed numerous Investment Banking. Fees from financial advisory
investment funds with third-party investors. These funds assignments and underwriting revenues are recognized in
are typically organized as limited partnerships or limited earnings when the services related to the underlying
liability companies for which the firm acts as general transaction are completed under the terms of the
partner or manager. Generally, the firm does not hold a assignment. Expenses associated with such transactions are
majority of the economic interests in these funds. These deferred until the related revenue is recognized or the
funds are usually voting interest entities and generally are assignment is otherwise concluded. Expenses associated
not consolidated because third-party investors typically with financial advisory assignments are recorded as non-
have rights to terminate the funds or to remove the firm as compensation expenses, net of client reimbursements.
general partner or manager. Investments in these funds are Underwriting revenues are presented net of related
included in Financial instruments owned, at fair value. expenses.
See Notes 6, 18 and 22 for further information about
Investment Management. The firm earns management
investments in funds.
fees and incentive fees for investment management services.
Use of Estimates Management fees for mutual funds are calculated as a
Preparation of these consolidated financial statements percentage of daily net asset value and are received
requires management to make certain estimates and monthly. Management fees for hedge funds and separately
assumptions, the most important of which relate to fair managed accounts are calculated as a percentage of month-
value measurements, accounting for goodwill and end net asset value and are generally received quarterly.
identifiable intangible assets, the provisions for losses that Management fees for private equity funds are calculated as
may arise from litigation, regulatory proceedings and tax a percentage of monthly invested capital or commitments
audits, and the allowance for losses on loans and lending and are received quarterly, semi-annually or annually,
commitments held for investment. These estimates and depending on the fund. All management fees are recognized
assumptions are based on the best available information over the period that the related service is provided.
but actual results could be materially different. Incentive fees are calculated as a percentage of a funds or
separately managed accounts return, or excess return
Revenue Recognition
above a specified benchmark or other performance target.
Financial Assets and Financial Liabilities at Fair Value.
Incentive fees are generally based on investment
Financial instruments owned, at fair value and Financial
performance over a 12-month period or over the life of a
instruments sold, but not yet purchased, at fair value are
fund. Fees that are based on performance over a 12-month
recorded at fair value either under the fair value option or in
period are subject to adjustment prior to the end of the
accordance with other U.S. GAAP. In addition, the firm has
measurement period. For fees that are based on investment
elected to account for certain of its other financial assets
performance over the life of the fund, future investment
and financial liabilities at fair value by electing the fair value
underperformance may require fees previously distributed
option. The fair value of a financial instrument is the
to the firm to be returned to the fund. Incentive fees are
amount that would be received to sell an asset or paid to
recognized only when all material contingencies have been
transfer a liability in an orderly transaction between market
resolved. Management and incentive fee revenues are
participants at the measurement date. Financial assets are
included in Investment management revenues.
marked to bid prices and financial liabilities are marked to
offer prices. Fair value measurements do not include The firm makes payments to brokers and advisors related
transaction costs. Fair value gains or losses are generally to the placement of the firms investment funds. These
included in Market making for positions in Institutional payments are computed based on either a percentage of the
Client Services and Other principal transactions for management fee or the investment funds net asset value.
positions in Investing & Lending. See Notes 5 through 8 for Where the firm is principal to the arrangement, such costs
further information about fair value measurements. are recorded on a gross basis and included in Brokerage,
clearing, exchange and distribution fees, and where the
firm is agent to the arrangement, such costs are recorded on
a net basis in Investment management revenues.

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Notes to Consolidated Financial Statements

Commissions and Fees. The firm earns Commissions Receivables from Customers and Counterparties
and fees from executing and clearing client transactions on Receivables from customers and counterparties generally
stock, options and futures markets, as well as over-the- relate to collateralized transactions. Such receivables are
counter (OTC) transactions. Commissions and fees are primarily comprised of customer margin loans, certain
recognized on the day the trade is executed. transfers of assets accounted for as secured loans rather
than purchases at fair value and collateral posted in
Transfers of Assets
connection with certain derivative transactions.
Transfers of assets are accounted for as sales when the firm
Substantially all of these receivables are accounted for at
has relinquished control over the assets transferred. For
amortized cost net of estimated uncollectible amounts.
transfers of assets accounted for as sales, any gains or losses
Certain of the firms receivables from customers and
are recognized in net revenues. Assets or liabilities that arise
counterparties are accounted for at fair value under the fair
from the firms continuing involvement with transferred
value option, with changes in fair value generally included
assets are recognized at fair value. For transfers of assets
in Market making revenues. See Note 8 for further
that are not accounted for as sales, the assets remain in
information about receivables from customers and
Financial instruments owned, at fair value and the
counterparties accounted for at fair value under the fair
transfer is accounted for as a collateralized financing, with
value option. In addition, as of December 2015 and
the related interest expense recognized over the life of the
December 2014, the firms receivables from customers and
transaction. See Note 10 for further information about
counterparties included $2.35 billion and $400 million,
transfers of assets accounted for as collateralized financings
respectively, of loans held for sale, accounted for at the
and Note 11 for further information about transfers of
lower of cost or fair value. See Note 5 for an overview of the
assets accounted for as sales.
firms fair value measurement policies.
Cash and Cash Equivalents
As of December 2015 and December 2014, the carrying
The firm defines cash equivalents as highly liquid overnight
value of receivables not accounted for at fair value generally
deposits held in the ordinary course of business. As of
approximated fair value. While these items are carried at
December 2015 and December 2014, Cash and cash
amounts that approximate fair value, they are not
equivalents included $6.47 billion and $5.79 billion,
accounted for at fair value under the fair value option or at
respectively, of cash and due from banks, and
fair value in accordance with other U.S. GAAP and
$68.64 billion and $51.81 billion, respectively, of interest-
therefore are not included in the firms fair value hierarchy
bearing deposits with banks.
in Notes 6 through 8. Had these items been included in the
Receivables from and Payables to Brokers, Dealers firms fair value hierarchy, substantially all would have
and Clearing Organizations been classified in level 2 as of December 2015 and
Receivables from and payables to brokers, dealers and December 2014. Interest on receivables from customers and
clearing organizations are accounted for at cost plus counterparties is recognized over the life of the transaction
accrued interest, which generally approximates fair value. and included in Interest income.
While these receivables and payables are carried at amounts
Payables to Customers and Counterparties
that approximate fair value, they are not accounted for at
Payables to customers and counterparties primarily consist
fair value under the fair value option or at fair value in
of customer credit balances related to the firms prime
accordance with other U.S. GAAP and therefore are not
brokerage activities. Payables to customers and
included in the firms fair value hierarchy in Notes 6
counterparties are accounted for at cost plus accrued
through 8. Had these receivables and payables been
interest, which generally approximates fair value. While
included in the firms fair value hierarchy, substantially all
these payables are carried at amounts that approximate fair
would have been classified in level 2 as of December 2015
value, they are not accounted for at fair value under the fair
and December 2014.
value option or at fair value in accordance with other U.S.
GAAP and therefore are not included in the firms fair value
hierarchy in Notes 6 through 8. Had these payables been
included in the firms fair value hierarchy, substantially all
would have been classified in level 2 as of December 2015
and December 2014. Interest on payables to customers and
counterparties is recognized over the life of the transaction
and included in Interest expense.

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Notes to Consolidated Financial Statements

Offsetting Assets and Liabilities Foreign Currency Translation

To reduce credit exposures on derivatives and securities Assets and liabilities denominated in non-U.S. currencies
financing transactions, the firm may enter into master are translated at rates of exchange prevailing on the date of
netting agreements or similar arrangements (collectively, the consolidated statements of financial condition and
netting agreements) with counterparties that permit it to revenues and expenses are translated at average rates of
offset receivables and payables with such counterparties. A exchange for the period. Foreign currency remeasurement
netting agreement is a contract with a counterparty that gains or losses on transactions in nonfunctional currencies
permits net settlement of multiple transactions with that are recognized in earnings. Gains or losses on translation of
counterparty, including upon the exercise of termination the financial statements of a non-U.S. operation, when the
rights by a non-defaulting party. Upon exercise of such functional currency is other than the U.S. dollar, are
termination rights, all transactions governed by the netting included, net of hedges and taxes, in the consolidated
agreement are terminated and a net settlement amount is statements of comprehensive income.
calculated. In addition, the firm receives and posts cash and
Recent Accounting Developments
securities collateral with respect to its derivatives and
Reporting Discontinued Operations and Disclosures
securities financing transactions, subject to the terms of the
of Disposals of Components of an Entity (ASC 205 and
related credit support agreements or similar arrangements
ASC 360). In April 2014, the FASB issued ASU No. 2014-
(collectively, credit support agreements). An enforceable
08, Presentation of Financial Statements (Topic 205) and
credit support agreement grants the non-defaulting party
Property, Plant, and Equipment (Topic 360) Reporting
exercising termination rights the right to liquidate the
Discontinued Operations and Disclosures of Disposals of
collateral and apply the proceeds to any amounts owed. In
Components of an Entity. ASU No. 2014-08 limits
order to assess enforceability of the firms right of setoff
discontinued operations reporting to disposals of
under netting and credit support agreements, the firm
components of an entity that represent strategic shifts that
evaluates various factors including applicable bankruptcy
have (or will have) a major effect on an entitys operations
laws, local statutes and regulatory provisions in the
and financial results. The ASU requires expanded
jurisdiction of the parties to the agreement.
disclosures for discontinued operations and disposals of
Derivatives are reported on a net-by-counterparty basis individually significant components of an entity that do not
(i.e., the net payable or receivable for derivative assets and qualify for discontinued operations reporting. The ASU was
liabilities for a given counterparty) in the consolidated effective for disposals and components classified as held for
statements of financial condition when a legal right of setoff sale that occurred within annual periods beginning on or
exists under an enforceable netting agreement. Resale and after December 15, 2014, and interim periods within those
repurchase agreements and securities borrowed and loaned years. Early adoption was permitted. The firm early
transactions with the same term and currency are presented adopted ASU No. 2014-08 in 2014 and adoption did not
on a net-by-counterparty basis in the consolidated materially affect the firms financial condition, results of
statements of financial condition when such transactions operations, or cash flows.
meet certain settlement criteria and are subject to netting
Revenue from Contracts with Customers (ASC 606).
agreements.
In May 2014, the FASB issued ASU No. 2014-09,
In the consolidated statements of financial condition, Revenue from Contracts with Customers (Topic 606).
derivatives are reported net of cash collateral received and ASU No. 2014-09 provides comprehensive guidance on the
posted under enforceable credit support agreements, when recognition of revenue from customers arising from the
transacted under an enforceable netting agreement. In the transfer of goods and services. The ASU also provides
consolidated statements of financial condition, resale and guidance on accounting for certain contract costs, and
repurchase agreements, and securities borrowed and requires new disclosures. ASU No. 2014-09, as amended in
loaned, are not reported net of the related cash and August 2015 by ASU No. 2015-14, is effective for annual
securities received or posted as collateral. See Note 10 for reporting periods beginning after December 15, 2017,
further information about collateral received and pledged, including interim periods within that reporting period.
including rights to deliver or repledge collateral. See Early adoption is permitted for annual reporting periods
Notes 7 and 10 for further information about offsetting. beginning after December 15, 2016. The firm is still
evaluating the effect of the ASU on its financial condition,
results of operations, and cash flows.

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Notes to Consolidated Financial Statements

Repurchase-to-Maturity Transactions, Repurchase Amendments to the Consolidation Analysis

Financings, and Disclosures (ASC 860). In June 2014, (ASC 810). In February 2015, the FASB issued ASU
the FASB issued ASU No. 2014-11, Transfers and No. 2015-02, Consolidation (Topic 810) Amendments
Servicing (Topic 860) Repurchase-to-Maturity to the Consolidation Analysis. ASU No. 2015-02
Transactions, Repurchase Financings, and Disclosures. eliminates the deferral of the requirements of ASU
ASU No. 2014-11 changes the accounting for repurchase- No. 2009-17, Consolidations (Topic 810)
and resale-to-maturity agreements by requiring that such Improvements to Financial Reporting by Enterprises
agreements be recognized as financing arrangements, and Involved with Variable Interest Entities for certain
requires that a transfer of a financial asset and a repurchase interests in investment funds and provides a scope
agreement entered into contemporaneously be accounted exception from Topic 810 for certain investments in money
for separately. ASU No. 2014-11 also requires additional market funds. The ASU also makes several modifications to
disclosures about certain transferred financial assets the consolidation guidance for VIEs and general partners
accounted for as sales and certain securities financing investments in limited partnerships, as well as
transactions. The accounting changes and additional modifications to the evaluation of whether limited
disclosures about certain transferred financial assets partnerships are VIEs or voting interest entities. ASU
accounted for as sales were effective for the first interim and No. 2015-02 is effective for interim and annual reporting
annual reporting periods beginning after periods beginning after December 15, 2015. ASU
December 15, 2014. The additional disclosures for certain No. 2015-02 is required to be adopted under a modified
securities financing transactions were required for annual retrospective approach or retrospectively to all periods
reporting periods beginning after December 15, 2014 and presented. Early adoption was permitted. The firm adopted
for interim reporting periods beginning after ASU No. 2015-02 effective January 1, 2016, using a
March 15, 2015. Adoption of ASU No. 2014-11 did not modified retrospective approach. The impact of adoption
materially affect the firms financial condition, results of was not material (approximately $200 million on the firms
operations, or cash flows. statement of financial condition).
Measuring the Financial Assets and the Financial Simplifying the Presentation of Debt Issuance Costs
Liabilities of a Consolidated Collateralized Financing (ASC 835). In April 2015, the FASB issued ASU No. 2015-
Entity (ASC 810). In August 2014, the FASB issued ASU 03, Interest Imputation of Interest (Subtopic 835-30)
No. 2014-13, Consolidation (Topic 810) Measuring Simplifying the Presentation of Debt Issuance Costs. ASU
the Financial Assets and the Financial Liabilities of a No. 2015-03 simplifies the presentation of debt issuance
Consolidated Collateralized Financing Entity (CFE). ASU costs by requiring that these costs related to a recognized
No. 2014-13 provides an alternative to reflect changes in debt liability be presented in the statement of financial
the fair value of the financial assets and the financial condition as a direct reduction from the carrying amount of
liabilities of the CFE by measuring either the fair value of that liability. ASU No. 2015-03 is effective for annual
the assets or liabilities, whichever is more observable. ASU reporting periods beginning after December 15, 2015,
No. 2014-13 provides new disclosure requirements for including interim periods within that reporting period. ASU
those electing this approach, and was effective for interim No. 2015-03 is required to be applied retrospectively to all
and annual periods beginning after periods presented beginning in the year of adoption. Early
December 15, 2015. Adoption of ASU No. 2014-13 in the adoption was permitted. The firm early adopted ASU
first quarter of 2016 did not materially affect the firms No. 2015-03 in September 2015 and upon adoption the
financial condition, results of operations, or cash flows. impact was a reduction to both total assets and total
liabilities of $444 million. In accordance with ASU
No. 2015-03, previously reported amounts have been
conformed to the current presentation, as reflected in
Notes 13 through 16. The impact as of December 2014 was
a reduction to both total assets and total liabilities of
$398 million.

126 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Disclosures for Investments in Certain Entities That Recognition and Measurement of Financial Assets and
Calculate Net Asset Value (NAV) per Share (or Its Financial Liabilities (ASC 825). In January 2016, the FASB
Equivalent) (ASC 820). In May 2015, the FASB issued issued ASU No. 2016-01, Financial Instruments
ASU No. 201507, Fair Value Measurement (Topic 825) Recognition and Measurement of Financial
(Topic 820) Disclosures for Investments in Certain Assets and Financial Liabilities. ASU No. 2016-01 amends
Entities That Calculate Net Asset Value per Share (or Its certain aspects of recognition, measurement, presentation and
Equivalent). ASU No. 201507 requires that investments disclosure of financial instruments. This guidance includes a
for which the fair value is measured at NAV using the requirement to present separately in other comprehensive
practical expedient (investments in funds measured at income changes in fair value attributable to a firms own credit
NAV) under Fair Value Measurements and Disclosures spreads (debt valuation adjustments or DVA), net of tax, on
(Topic 820) be excluded from the fair value hierarchy. ASU financial liabilities for which the fair value option was elected.
No. 201507 is effective for annual reporting periods ASU No. 2016-01 is effective for annual reporting periods
beginning after December 15, 2015, including interim beginning after December 15, 2017, including interim periods
periods within that reporting period. ASU No. 201507 is within that reporting period. Early adoption is permitted
required to be applied retrospectively to all periods under a modified retrospective approach for the requirements
presented beginning in the period of adoption. Early related to DVA. The cumulative DVA gain, net of tax, of
adoption was permitted. The firm early adopted ASU approximately $300 million as of December 2015, will be
No. 201507 in June 2015 and adoption did not affect the reclassified from retained earnings to accumulated other
firms financial condition, results of operations, or cash comprehensive loss if ASU No. 2016-01 is early adopted by
flows. In accordance with ASU No. 2015-07, previously the firm in 2016. In addition, any DVA recorded during 2016
reported amounts have been conformed to the current would be classified as other comprehensive income/(loss).
presentation. See Notes 4 through 6 for the disclosures
required by ASU No. 2015-07.
Note 4.
Simplifying the Accounting for Measurement-Period
Financial Instruments Owned, at Fair Value
Adjustments (ASC 805). In September 2015, the FASB
and Financial Instruments Sold, But Not
issued ASU No. 2015-16, Business Combinations
Yet Purchased, at Fair Value
(Topic 805) Simplifying the Accounting for
Measurement-Period Adjustments. ASU No. 2015-16 Financial instruments owned, at fair value and financial
eliminates the requirement for an acquirer in a business instruments sold, but not yet purchased, at fair value are
combination to account for measurement-period accounted for at fair value either under the fair value option
adjustments retrospectively. ASU No. 2015-16 was or in accordance with other U.S. GAAP. See Note 8 for
effective for annual reporting periods beginning after further information about other financial assets and
December 15, 2015, including interim periods within that financial liabilities accounted for at fair value primarily
reporting period. Adoption of ASU No. 2015-16 in the first under the fair value option.
quarter of 2016 did not materially affect the firms financial
condition, results of operations, or cash flows.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

The tables below present the firms financial instruments Gains and Losses from Market Making and Other
owned, at fair value, and financial instruments sold, but not Principal Transactions
yet purchased, at fair value. The table below presents Market making revenues by
major product type, as well as Other principal
As of December 2015
transactions revenues. These gains/(losses) include both
Financial
Instruments realized and unrealized gains and losses, and are primarily
Financial Sold, But related to the firms financial instruments owned, at fair
Instruments Not Yet
$ in millions Owned Purchased value and financial instruments sold, but not yet purchased,
Commercial paper, certificates of deposit, at fair value, including both derivative and non-derivative
time deposits and other money market financial instruments. These gains/(losses) exclude related
instruments $ 2,583 $ interest income and interest expense. See Note 23 for
U.S. government and federal agency further information about interest income and interest
obligations 46,382 15,516
expense.
Non-U.S. government and agency obligations 31,772 14,973
Loans and securities backed by commercial The gains/(losses) in the table below are not representative
real estate 4,975 1 4 of the manner in which the firm manages its business
Loans and securities backed by residential
real estate 13,183 2 2
activities because many of the firms market-making and
Bank loans and bridge loans 12,164 461 client facilitation strategies utilize financial instruments
Corporate debt securities 16,640 6,123 across various product types. Accordingly, gains or losses in
State and municipal obligations 992 2 one product type frequently offset gains or losses in other
Other debt obligations 1,595 3 2 product types. For example, most of the firms longer-term
Equities and convertible debentures 98,072 31,394 derivatives across product types are sensitive to changes in
Commodities 3,935 interest rates and may be economically hedged with interest
Investments in funds measured at NAV 7,757
rate swaps. Similarly, a significant portion of the firms cash
Subtotal 240,050 68,477
instruments and derivatives across product types has
Derivatives 53,890 46,771
Total $293,940 $115,248
exposure to foreign currencies and may be economically
hedged with foreign currency contracts.
As of December 2014
Financial $ in millions Year Ended December
Instruments Product Type 2015 2014 2013
Financial Sold, But
Instruments Not Yet Interest rates $ (1,360) $ (5,316) $ 930
$ in millions Owned Purchased Credit 920 2,982 1,845
Commercial paper, certificates of deposit, Currencies 3,345 6,566 2,446
time deposits and other money market Equities 5,515 2,683 2,655
instruments $ 3,654 $ Commodities 1,103 1,450 902
U.S. government and federal agency Other 590 2
obligations 48,002 12,762 Market making 9,523 8,365 9,368
Non-U.S. government and agency obligations 37,059 20,500 Other principal transactions 1 5,018 6,588 6,993
Loans and securities backed by commercial Total $14,541 $14,953 $16,361
real estate 7,140 1 1
Loans and securities backed by residential 1. Other principal transactions are included in the firms Investing & Lending
real estate 11,717 2 segment. See Note 25 for net revenues, including net interest income, by
Bank loans and bridge loans 14,171 464 product type for Investing & Lending, as well as the amount of net interest
Corporate debt securities 21,419 5,800 income included in Investing & Lending.

State and municipal obligations 1,203 2. Includes a gain of $211 million on the sale of a majority stake in the firms
Other debt obligations 3,257 3 2 European insurance business.

Equities and convertible debentures 87,900 28,314

Commodities 3,846 1,224
Investments in funds measured at NAV 9,610
Subtotal 248,978 69,067
Derivatives 63,270 63,016
Total $312,248 $132,083

1. Includes $3.11 billion and $4.97 billion of loans backed by commercial real
estate as of December 2015 and December 2014, respectively.
2. Includes $10.22 billion and $6.43 billion of loans backed by residential real
estate as of December 2015 and December 2014, respectively.
3. Includes $272 million and $618 million of loans backed by consumer loans
and other assets as of December 2015 and December 2014, respectively.

128 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Note 5.

Fair Value Measurements

The fair value of a financial instrument is the amount that See Notes 6 through 8 for further information about fair
would be received to sell an asset or paid to transfer a value measurements of cash instruments, derivatives and
liability in an orderly transaction between market other financial assets and financial liabilities accounted for at
participants at the measurement date. Financial assets are fair value primarily under the fair value option (including
marked to bid prices and financial liabilities are marked to information about unrealized gains and losses related to
offer prices. Fair value measurements do not include level 3 financial assets and financial liabilities, and transfers
transaction costs. The firm measures certain financial assets in and out of level 3), respectively.
and financial liabilities as a portfolio (i.e., based on its net
The table below presents financial assets and financial
exposure to market and/or credit risks).
liabilities accounted for at fair value under the fair value
The best evidence of fair value is a quoted price in an active option or in accordance with other U.S. GAAP.
market. If quoted prices in active markets are not available, Counterparty and cash collateral netting represents the
fair value is determined by reference to prices for similar impact on derivatives of netting across levels of the fair value
instruments, quoted prices or recent transactions in less hierarchy. Netting among positions classified in the same
active markets, or internally developed models that level is included in that level.
primarily use market-based or independently sourced
As of December
parameters as inputs including, but not limited to, interest
rates, volatilities, equity or debt prices, foreign exchange $ in millions 2015 2014

rates, commodity prices, credit spreads and funding spreads Total level 1 financial assets $153,051 $139,484
Total level 2 financial assets 432,445 466,030
(i.e., the spread, or difference, between the interest rate at
Total level 3 financial assets 24,046 35,780
which a borrower could finance a given financial
Investments in funds measured at NAV 7,757 9,610
instrument relative to a benchmark interest rate). Counterparty and cash collateral netting (90,612) (104,616)
U.S. GAAP has a three-level fair value hierarchy for Total financial assets at fair value $526,687 $546,288
disclosure of fair value measurements. The fair value Total assets 1 $861,395 $855,842
Total level 3 financial assets as a percentage
hierarchy prioritizes inputs to the valuation techniques used
of total assets 2.8% 4.2%
to measure fair value, giving the highest priority to level 1 Total level 3 financial assets as a percentage
inputs and the lowest priority to level 3 inputs. A financial of total financial assets at fair value 4.6% 6.5%
instruments level in the fair value hierarchy is based on the Total level 1 financial liabilities $ 59,798 $ 59,697
lowest level of input that is significant to its fair value Total level 2 financial liabilities 245,759 253,364
measurement. The fair value hierarchy is as follows: Total level 3 financial liabilities 16,812 15,904
Counterparty and cash collateral netting (41,430) (37,267)
Level 1. Inputs are unadjusted quoted prices in active Total financial liabilities at fair value $280,939 $291,698
markets to which the firm had access at the measurement Total level 3 financial liabilities as a percentage
date for identical, unrestricted assets or liabilities. of total financial liabilities at fair value 6.0% 5.5%

Level 2. Inputs to valuation techniques are observable, 1. Includes $836 billion and $834 billion as of December 2015 and
December 2014, respectively, that is carried at fair value or at amounts that
either directly or indirectly. generally approximate fair value.

Level 3. One or more inputs to valuation techniques are The table below presents a summary of level 3 financial
significant and unobservable. assets. See Notes 6 through 8 for further information about
The fair values for substantially all of the firms financial level 3 financial assets.
assets and financial liabilities are based on observable prices
Level 3 Financial Assets
and inputs and are classified in levels 1 and 2 of the fair as of December
value hierarchy. Certain level 2 and level 3 financial assets $ in millions 2015 2014
and financial liabilities may require appropriate valuation Cash instruments $ 18,131 $ 28,650
adjustments that a market participant would require to Derivatives 5,870 7,074
arrive at fair value for factors such as counterparty and the Other financial assets 45 56
firms credit quality, funding risk, transfer restrictions, Total $ 24,046 $ 35,780
liquidity and bid/offer spreads. Valuation adjustments are
generally based on market evidence. Level 3 financial assets as of December 2015 decreased
compared with December 2014, primarily reflecting a
decrease in level 3 cash instruments. See Note 6 for further
information about changes in level 3 cash instruments.

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Notes to Consolidated Financial Statements

Note 6.

Cash Instruments
Cash instruments include U.S. government and federal Level 2 Cash Instruments
agency obligations, non-U.S. government and agency Level 2 cash instruments include commercial paper,
obligations, mortgage-backed loans and securities, bank certificates of deposit, time deposits, most government
loans and bridge loans, corporate debt securities, equities agency obligations, certain non-U.S. government
and convertible debentures, investments in funds measured obligations, most corporate debt securities, commodities,
at NAV, and other non-derivative financial instruments certain mortgage-backed loans and securities, certain bank
owned and financial instruments sold, but not yet loans and bridge loans, restricted or less liquid listed
purchased. See below for the types of cash instruments equities, most state and municipal obligations and certain
included in each level of the fair value hierarchy and the lending commitments.
valuation techniques and significant inputs used to
Valuations of level 2 cash instruments can be verified to
determine their fair values. See Note 5 for an overview of
quoted prices, recent trading activity for identical or similar
the firms fair value measurement policies.
instruments, broker or dealer quotations or alternative
Level 1 Cash Instruments pricing sources with reasonable levels of price transparency.
Level 1 cash instruments include U.S. government Consideration is given to the nature of the quotations (e.g.,
obligations and most non-U.S. government obligations, indicative or firm) and the relationship of recent market
actively traded listed equities, certain government agency activity to the prices provided from alternative pricing
obligations and money market instruments. These sources.
instruments are valued using quoted prices for identical
Valuation adjustments are typically made to level 2 cash
unrestricted instruments in active markets.
instruments (i) if the cash instrument is subject to transfer
The firm defines active markets for equity instruments restrictions and/or (ii) for other premiums and liquidity
based on the average daily trading volume both in absolute discounts that a market participant would require to arrive
terms and relative to the market capitalization for the at fair value. Valuation adjustments are generally based on
instrument. The firm defines active markets for debt market evidence.
instruments based on both the average daily trading volume
Level 3 Cash Instruments
and the number of days with trading activity.
Level 3 cash instruments have one or more significant
valuation inputs that are not observable. Absent evidence to
the contrary, level 3 cash 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 of financial
assets.

130 Goldman Sachs 2015 Form 10-K

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Notes to Consolidated Financial Statements

Valuation Techniques and Significant Inputs

The table below presents the valuation techniques and the significant inputs are generally used to determine the fair
nature of significant inputs. These valuation techniques and values of each type of level 3 cash instrument.

Level 3 Cash Instruments Valuation Techniques and Significant Inputs

Loans and securities backed by commercial Valuation techniques vary by instrument, but are generally based on discounted cash flow techniques.
real estate Significant inputs are generally determined based on relative value analyses and include:
Directly or indirectly collateralized by a Transaction prices in both the underlying collateral and instruments with the same or similar underlying collateral and
single commercial real estate property or the basis, or price difference, to such prices
a portfolio of properties Market yields implied by transactions of similar or related assets and/or current levels and changes in market indices
May include tranches of varying levels of such as the CMBX (an index that tracks the performance of commercial mortgage bonds)
subordination A measure of expected future cash flows in a default scenario (recovery rates) implied by the value of the underlying
collateral, which is mainly driven by current performance of the underlying collateral, capitalization rates and
multiples. 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
Timing of expected future cash flows (duration) which, in certain cases, may incorporate the impact of other
unobservable inputs (e.g., prepayment speeds)

Loans and securities backed by residential Valuation techniques vary by instrument, but are generally based on discounted cash flow techniques.
real estate Significant inputs are generally determined based on relative value analyses, which incorporate comparisons to
Directly or indirectly collateralized by instruments with similar collateral and risk profiles. Significant inputs include:
portfolios of residential real estate Transaction prices in both the underlying collateral and instruments with the same or similar underlying collateral
May include tranches of varying levels of Market yields implied by transactions of similar or related assets
subordination Cumulative loss expectations, driven by default rates, home price projections, residential property liquidation
timelines, related costs and subsequent recoveries
Duration, driven by underlying loan prepayment speeds and residential property liquidation timelines

Bank loans and bridge loans Valuation techniques vary by instrument, but are generally based on discounted cash flow techniques.
Significant inputs are generally determined based on relative value analyses, which incorporate comparisons both to
prices of credit default swaps that reference the same or similar underlying instrument or entity and to other debt
instruments for the same issuer for which observable prices or broker quotations are available. Significant inputs
include:
Market yields implied by transactions of similar or related assets and/or current levels and trends of market indices
such as CDX and LCDX (indices that track the performance of corporate credit and loans, respectively)
Current performance and recovery assumptions and, where the firm uses credit default swaps to value the related
cash instrument, the cost of borrowing the underlying reference obligation
Duration

Commercial paper, certificates of deposit, Valuation techniques vary by instrument, but are generally based on discounted cash flow techniques.
time deposits and other money market Significant inputs are generally determined based on relative value analyses, which incorporate comparisons both to
instruments prices of credit default swaps that reference the same or similar underlying instrument or entity and to other debt
Non-U.S. government and instruments for the same issuer for which observable prices or broker quotations are available. Significant inputs
agency obligations include:
Corporate debt securities Market yields implied by transactions of similar or related assets and/or current levels and trends of market indices
such as CDX and LCDX
State and municipal obligations
Current performance and recovery assumptions and, where the firm uses credit default swaps to value the related
Other debt obligations cash instrument, the cost of borrowing the underlying reference obligation
Duration

Equities and convertible debentures Recent third-party completed or pending transactions (e.g., merger proposals, tender offers, debt restructurings) are
(including private equity investments and considered to be the best evidence for any change in fair value. When these are not available, the following valuation
investments in real estate entities) methodologies are used, as appropriate:
Industry multiples (primarily EBITDA multiples) and public comparables
Transactions in similar instruments
Discounted cash flow techniques
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, long-term growth rates, earnings compound annual growth rates and capitalization rates
For equity instruments with debt-like features: market yields implied by transactions of similar or related assets,
current performance and recovery assumptions, and duration

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Notes to Consolidated Financial Statements

Significant Unobservable Inputs

The table below presents the ranges and weighted averages Increases in yield, discount rate, capitalization rate,
of significant unobservable inputs used to value the firms duration or cumulative loss rate used in the valuation of
level 3 cash instruments. In the table below: the firms level 3 cash instruments would result in a lower
fair value measurement, while increases in recovery rate,
Ranges represent the significant unobservable inputs that
basis, multiples, long-term growth rate or compound
were used in the valuation of each type of cash
annual growth rate would result in a higher fair value
instrument.
measurement. Due to the distinctive nature of each of the
Weighted averages are calculated by weighting each input firms level 3 cash instruments, the interrelationship of
by the relative fair value of the financial instruments. inputs is not necessarily uniform within each product
type.
The ranges and weighted averages of these inputs are not
representative of the appropriate inputs to use when The fair value of any one instrument may be determined
calculating the fair value of any one cash instrument. For using multiple valuation techniques. For example, market
example, the highest multiple presented in the tables comparables and discounted cash flows may be used
below for private equity investments is appropriate for together to determine fair value. Therefore, the level 3
valuing a specific private equity investment but may not balance encompasses both of these techniques.
be appropriate for valuing any other private equity
investment. Accordingly, the ranges of inputs presented
below do not represent uncertainty in, or possible ranges
of, fair value measurements of the firms level 3 cash
instruments.
Range of Significant Unobservable Inputs (Weighted Average)
Valuation Techniques and
Level 3 Cash Instruments Significant Unobservable Inputs As of December 2015 As of December 2014
Loans and securities backed by commercial real Discounted cash flows:
estate
Directly or indirectly collateralized by a single Yield 3.5% to 22.0% (11.8%) 3.2% to 20.0% (10.5%)
commercial real estate property or a portfolio of
properties Recovery rate 19.6% to 96.5% (59.4%) 24.9% to 100.0% (68.3%)
May include tranches of varying levels of Duration (years) 0.3 to 5.3 (2.3) 0.3 to 4.7 (2.0)
subordination Basis (11) points to 4 points ((2) points) (8) points to 13 points (2 points)
($1.92 billion and $3.28 billion of level 3 assets as
of December 2015 and December 2014,
respectively)

Loans and securities backed by residential real Discounted cash flows:

estate
Directly or indirectly collateralized by portfolios of Yield 3.2% to 17.0% (7.9%) 1.9% to 17.5% (7.6%)
residential real estate Cumulative loss rate 4.6% to 44.2% (27.3%) 0.0% to 95.1% (24.4%)
May include tranches of varying levels of Duration (years) 1.5 to 13.8 (7.0) 0.5 to 13.0 (4.3)
subordination
($1.77 billion and $2.55 billion of level 3 assets as
of December 2015 and December 2014,
respectively)

Bank loans and bridge loans Discounted cash flows:

($3.15 billion and $6.97 billion of level 3 assets as Yield 1.9% to 36.6% (10.2%) 1.4% to 29.5% (8.7%)
of December 2015 and December 2014,
Recovery rate 14.5% to 85.6% (51.2%) 26.6% to 92.5% (60.6%)
respectively)
Duration (years) 0.7 to 6.1 (2.2) 0.3 to 7.8 (2.5)

Non-U.S. government and agency obligations Discounted cash flows:

Corporate debt securities Yield 0.9% to 25.6% (10.9%) 0.9% to 24.4% (9.2%)
State and municipal obligations Recovery rate 0.0% to 70.0% (59.7%) 0.0% to 71.9% (59.2%)
Other debt obligations Duration (years) 1.1 to 11.4 (4.5) 0.5 to 19.6 (3.7)
($2.74 billion and $4.75 billion of level 3 assets as
of December 2015 and December 2014,
respectively)

Equities and convertible debentures (including Market comparables and

private equity investments and investments in real discounted cash flows:
estate entities)
Multiples 0.7x to 21.4x (6.4x) 0.8x to 16.6x (6.5x)
($8.55 billion and $11.11 billion of level 3 assets as
of December 2015 and December 2014, Discount rate/yield 7.1% to 20.0% (14.8%) 3.7% to 30.0% (14.4%)
respectively) Long-term growth rate/ 3.0% to 5.2% (4.5%) 1.0% to 10.0% (6.0%)
compound annual growth rate
Capitalization rate 5.5% to 12.5% (7.6%) 3.8% to 13.0% (7.6%)

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Notes to Consolidated Financial Statements

Fair Value of Cash Instruments by Level

Cash Instruments at Fair Value
The tables below present cash instrument assets and as of December 2014
liabilities at fair value by level within the fair value $ in millions Level 1 Level 2 Level 3 Total
hierarchy. In the tables below:
Assets
Cash instrument assets and liabilities are included in Commercial paper,
certificates of deposit, time
Financial instruments owned, at fair value and
deposits and other money
Financial instruments sold, but not yet purchased, at fair market instruments $ $ 3,654 $ $ 3,654
value, respectively. U.S. government and
federal agency obligations 18,540 29,462 48,002
Cash instrument assets are shown as positive amounts
Non-U.S. government and
and cash instrument liabilities are shown as negative agency obligations 30,255 6,668 136 37,059
amounts. Loans and securities backed
by commercial real estate 3,865 3,275 7,140
Cash Instruments at Fair Value Loans and securities backed
as of December 2015 by residential real estate 9,172 2,545 11,717
$ in millions Level 1 Level 2 Level 3 Total Bank loans and bridge loans 7,198 6,973 14,171
Assets Corporate debt securities 249 17,537 3,633 21,419
Commercial paper, State and municipal
certificates of deposit, time obligations 1,093 110 1,203
deposits and other money Other debt obligations 2,387 870 3,257
market instruments $ 625 $ 1,958 $ $ 2,583 Equities and convertible
U.S. government and debentures 68,974 7,818 11,108 87,900
federal agency obligations 24,844 21,538 46,382 Commodities 3,846 3,846
Non-U.S. government and Subtotal $118,018 $92,700 $28,650 $239,368
agency obligations 26,500 5,260 12 31,772 Investments in funds
Loans and securities backed measured at NAV 9,610
by commercial real estate 3,051 1,924 4,975 Total cash instrument
Loans and securities backed assets $248,978
by residential real estate 11,418 1,765 13,183
Liabilities
Bank loans and bridge loans 9,014 3,150 12,164
U.S. government and
Corporate debt securities 218 14,330 2,092 16,640 federal agency obligations $ (12,746) $ (16) $ $ (12,762)
State and municipal Non-U.S. government and
obligations 891 101 992 agency obligations (19,256) (1,244) (20,500)
Other debt obligations 1,057 538 1,595 Loans and securities backed
Equities and convertible by commercial real estate (1) (1)
debentures 81,252 8,271 8,549 98,072 Bank loans and bridge loans (286) (178) (464)
Commodities 3,935 3,935 Corporate debt securities (5,741) (59) (5,800)
Subtotal $133,439 $80,723 $18,131 $232,293 Other debt obligations (2) (2)
Investments in funds Equities and convertible
measured at NAV 7,757 debentures (27,587) (722) (5) (28,314)
Total cash instrument Commodities (1,224) (1,224)
assets $240,050
Total cash instrument
Liabilities liabilities $ (59,589) $ (9,234) $ (244) $ (69,067)
U.S. government and
federal agency obligations $ (15,455) $ (61) $ $ (15,516) In the tables above:
Non-U.S. government and
agency obligations (13,522) (1,451) (14,973) Total cash instrument assets includes collateralized debt
Loans and securities backed obligations (CDOs) and collateralized loan obligations
by commercial real estate (4) (4) (CLOs) backed by real estate and corporate obligations of
Loans and securities backed $405 million in level 2 and $774 million in level 3 as of
by residential real estate (2) (2) December 2015, and $234 million in level 2 and
Bank loans and bridge loans (337) (124) (461)
$1.34 billion in level 3 as of December 2014, respectively.
Corporate debt securities (2) (6,119) (2) (6,123)
State and municipal Level 3 equities and convertible debentures includes
obligations (2) (2) $7.69 billion of private equity investments, $308 million
Other debt obligations (1) (1) (2) of investments in real estate entities and $552 million of
Equities and convertible
convertible debentures as of December 2015, and
debentures (30,790) (538) (66) (31,394)
Total cash instrument
$10.25 billion of private equity investments, $294 million
liabilities $ (59,769) $ (8,515) $ (193) $ (68,477) of investments in real estate entities and $562 million of
convertible debentures as of December 2014.
Goldman Sachs 2015 Form 10-K 133
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Notes to Consolidated Financial Statements

Transfers Between Levels of the Fair Value Hierarchy Level 3 Rollforward

Transfers between levels of the fair value hierarchy are The table below presents changes in fair value for all cash
reported at the beginning of the reporting period in which instrument assets and liabilities categorized as level 3 as of
they occur. the end of the year. In the table below:
During 2015: If a cash instrument asset or liability was transferred to
level 3 during a reporting period, its entire gain or loss for
Transfers into level 2 from level 1 of cash instruments
the period is included in level 3. For level 3 cash
were $260 million, reflecting transfers of public equity
instrument assets, increases are shown as positive
securities primarily due to decreased market activity in
amounts, while decreases are shown as negative amounts.
these instruments.
For level 3 cash instrument liabilities, increases are shown
Transfers into level 1 from level 2 of cash instruments as negative amounts, while decreases are shown as
were $283 million, reflecting transfers of public equity positive amounts.
securities due to increased market activity in these
Level 3 cash instruments are frequently economically
instruments.
hedged with level 1 and level 2 cash instruments and/or
During 2014: level 1, level 2 or level 3 derivatives. Accordingly, gains or
losses that are reported in level 3 can be partially offset by
Transfers into level 2 from level 1 of cash instruments
gains or losses attributable to level 1 or level 2 cash
were $60 million, including $47 million of public equity
instruments and/or level 1, level 2 or level 3 derivatives.
securities and $13 million of U.S. government and federal
As a result, gains or losses included in the level 3
agency obligations due to decreased market activity in
rollforward below do not necessarily represent the overall
these instruments.
impact on the firms results of operations, liquidity or
Transfers into level 1 from level 2 of cash instruments capital resources.
were $92 million, reflecting transfers of public equity
Purchases include both originations and secondary
securities due to increased market activity in these
market purchases.
instruments.
Net unrealized gains/(losses) relate to instruments that
See level 3 rollforward below for information about
were still held at year-end.
transfers between level 2 and level 3.
For the year ended December 2015, the net realized and
unrealized gains on level 3 cash instrument assets of
$1.66 billion (reflecting $957 million of realized gains
and $701 million of unrealized gains) include gains/
(losses) of approximately $(142) million, $1.08 billion
and $718 million reported in Market making, Other
principal transactions and Interest income,
respectively.
For the year ended December 2014, the net realized and
unrealized gains on level 3 cash instrument assets of
$3.20 billion (reflecting $1.33 billion of realized gains
and $1.87 billion of unrealized gains) include gains of
approximately $247 million, $1.95 billion and
$1.00 billion reported in Market making, Other
principal transactions and Interest income,
respectively.
See Level 3 Rollforward Commentary below for an
explanation of the net unrealized gains/(losses) on level 3
cash instruments and the activity related to transfers into
and out of level 3.

134 Goldman Sachs 2015 Form 10-K

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Notes to Consolidated Financial Statements

Level 3 Cash Instrument Assets and Liabilities at Fair Value

Net Net
Balance, realized unrealized Transfers Transfers Balance,
beginning gains/ gains/ into out of end of
$ in millions of year (losses) (losses) Purchases Sales Settlements level 3 level 3 year

Year Ended December 2015

Non-U.S. government and agency obligations $ 136 $ 7 $ $ 11 $ (35) $ (23) $ $ (84) $ 12
Loans and securities backed by commercial
real estate 3,275 120 44 566 (598) (1,569) 351 (265) 1,924
Loans and securities backed by residential real estate 2,545 150 34 564 (609) (327) 188 (780) 1,765
Bank loans and bridge loans 6,973 198 (156) 663 (1,027) (2,170) 516 (1,847) 3,150
Corporate debt securities 3,633 208 (78) 616 (641) (982) 236 (900) 2,092
State and municipal obligations 110 3 3 9 (24) (2) 24 (22) 101
Other debt obligations 870 20 10 116 (164) (206) 17 (125) 538
Equities and convertible debentures 11,108 251 844 1,295 (744) (1,193) 466 (3,478) 8,549
Total cash instrument assets $28,650 $ 957 $ 701 $ 3,840 $(3,842) $(6,472) $1,798 $(7,501) $18,131
Total cash instrument liabilities $ (244) $ (28) $ (21) $ 205 $ (38) $ (14) $ (116) $ 63 $ (193)

Year Ended December 2014

Non-U.S. government and agency obligations $ 40 $ 7 $ 3 $ 103 $ (20) $ (5) $ 8 $ $ 136
Loans and securities backed by commercial
real estate 2,515 173 49 1,877 (436) (890) 176 (189) 3,275
Loans and securities backed by residential real estate 1,961 123 224 1,008 (363) (497) 235 (146) 2,545
Bank loans and bridge loans 6,071 611 (222) 4,512 (709) (3,166) 294 (418) 6,973
Corporate debt securities 2,744 254 (16) 2,635 (1,023) (929) 384 (416) 3,633
State and municipal obligations 257 4 3 12 (112) (2) 25 (77) 110
Other debt obligations 807 24 41 448 (212) (164) 21 (95) 870
Equities and convertible debentures 8,671 132 1,788 2,670 (1,128) (1,016) 1,250 (1,259) 11,108
Total cash instrument assets $23,066 $1,328 $1,870 $13,265 $(4,003) $(6,669) $2,393 $(2,600) $28,650
Total cash instrument liabilities $ (297) $ 12 $ (1) $ 223 $ (121) $ (23) $ (49) $ 12 $ (244)

Level 3 Rollforward Commentary

Year Ended December 2015. The net unrealized gain on Year Ended December 2014. The net unrealized gain on
level 3 cash instruments of $680 million (reflecting a level 3 cash instruments of $1.87 billion (reflecting a
$701 million gain on cash instrument assets and a $1.87 billion gain on cash instrument assets and a
$21 million loss on cash instrument liabilities) for 2015 $1 million loss on cash instrument liabilities) for 2014
primarily reflected gains on private equity investments, primarily reflected gains on private equity investments
principally driven by company-specific events and strong principally driven by company-specific events and strong
corporate performance. corporate performance.
Transfers into level 3 during 2015 primarily reflected transfers Transfers into level 3 during 2014 primarily reflected
of certain bank loans and bridge loans, private equity transfers of certain private equity investments and
investments and loans and securities backed by commercial corporate debt securities from level 2 principally due to
real estate from level 2, principally due to reduced price reduced price transparency as a result of a lack of market
transparency as a result of a lack of market evidence, including evidence, including fewer market transactions in these
fewer market transactions in these instruments. instruments.
Transfers out of level 3 during 2015 primarily reflected Transfers out of level 3 during 2014 primarily reflected
transfers of certain private equity investments, corporate transfers of certain private equity investments, bank loan
debt securities and loans and securities backed by and bridge loans and corporate debt securities to level 2
residential real estate to level 2, principally due to increased principally due to increased price transparency as a result of
price transparency as a result of market evidence, including market evidence, including market transactions in these
market transactions in these instruments, and transfers of instruments.
certain bank loans and bridge loans to level 2 principally
due to certain unobservable yield and duration inputs not
being significant to the valuation of these instruments.

Goldman Sachs 2015 Form 10-K 135

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Notes to Consolidated Financial Statements

Investments in Funds That Are Measured at Net

Asset Value Per Share
Cash instruments at fair value include investments in funds Many of the funds described above are covered funds as
that are measured at NAV of the investment fund. The firm defined by the Volcker Rule of the U.S. Dodd-Frank Wall
uses NAV to measure the fair value of its fund investments Street Reform and Consumer Protection Act (Dodd-Frank
when (i) the fund investment does not have a readily Act). The Board of Governors of the Federal Reserve
determinable fair value and (ii) the NAV of the investment System (Federal Reserve Board) extended the conformance
fund is calculated in a manner consistent with the period through July 2016 for investments in, and
measurement principles of investment company relationships with, covered funds that were in place prior to
accounting, including measurement of the underlying December 2013, and indicated that it intends to further
investments at fair value. The firm early adopted ASU extend the conformance period through July 2017. The
No. 2015-07 in June 2015 and, as required, disclosures in firm currently expects to be able to exit the majority of such
the paragraphs and tables below are limited to only those interests in these funds in orderly transactions prior to
investments in funds that are measured at NAV. In July 2017, subject to market conditions. However, to the
accordance with ASU No. 2015-07, previously reported extent that the underlying investments of particular funds
amounts have been conformed to the current presentation. are not sold, the firm may be required to sell its interests in
such funds. If that occurs, the firm may receive a value for
The firms investments in funds measured at NAV primarily
its interests that is less than the then carrying value as there
consist of investments in firm-sponsored private equity,
could be a limited secondary market for these investments
credit, real estate and hedge funds where the firm co-invests
and the firm may be unable to sell them in orderly
with third-party investors.
transactions. The firm continues to manage its existing
Private equity funds primarily invest in a broad range of interests in such funds, taking into account the
industries worldwide in a variety of situations, including conformance period outlined above. In order to be
leveraged buyouts, recapitalizations, growth investments compliant with the Volcker Rule, the firm will be required
and distressed investments. Credit funds generally invest in to reduce most of its interests in the funds in the table below
loans and other fixed income instruments and are focused by the end of the conformance period.
on providing private high-yield capital for mid- to large-
The tables below present the fair value of the firms
sized leveraged and management buyout transactions,
investments in, and unfunded commitments to, funds that
recapitalizations, financings, refinancings, acquisitions and
are measured at NAV.
restructurings for private equity firms, private family
companies and corporate issuers. Real estate funds invest
As of December 2015
globally, primarily in real estate companies, loan portfolios,
Fair Value of Unfunded
debt recapitalizations and property. The private equity, $ in millions Investments Commitments
credit and real estate funds are primarily closed-end funds Private equity funds $5,414 $2,057
in which the firms investments are generally not eligible for Credit funds 611 344
redemption. Distributions will be received from these funds Hedge funds 560
as the underlying assets are liquidated or distributed. Real estate funds 1,172 296
Total $7,757 $2,697
The firm also invests in hedge funds, primarily multi-
disciplinary hedge funds that employ a fundamental
bottom-up investment approach across various asset classes As of December 2014

and strategies including long/short equity, credit, Fair Value of Unfunded

$ in millions Investments Commitments
convertibles, risk arbitrage, special situations and capital
Private equity funds $6,307 $2,175
structure arbitrage. The firms investments in hedge funds
Credit funds 1,008 383
primarily include interests where the underlying assets are Hedge funds 863
illiquid in nature, and proceeds from redemptions will not Real estate funds 1,432 310
be received until the underlying assets are liquidated or Total $9,610 $2,868
distributed.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Note 7.
Derivatives and Hedging Activities
Derivative Activities
Derivatives are instruments that derive their value from The firm enters into various types of derivatives, including:
underlying asset prices, indices, reference rates and other
Futures and Forwards. Contracts that commit
inputs, or a combination of these factors. Derivatives may
counterparties to purchase or sell financial instruments,
be traded on an exchange (exchange-traded) or they may be
commodities or currencies in the future.
privately negotiated contracts, which are usually referred to
as OTC derivatives. Certain of the firms OTC derivatives Swaps. Contracts that require counterparties to
are cleared and settled through central clearing exchange cash flows such as currency or interest payment
counterparties (OTC-cleared), while others are bilateral streams. The amounts exchanged are based on the
contracts between two counterparties (bilateral OTC). specific terms of the contract with reference to specified
rates, financial instruments, commodities, currencies or
Market-Making. As a market maker, the firm enters into
indices.
derivative transactions to provide liquidity to clients and to
facilitate the transfer and hedging of their risks. In this Options. Contracts in which the option purchaser has
capacity, the firm typically acts as principal and is the right, but not the obligation, to purchase from or sell
consequently required to commit capital to provide to the option writer financial instruments, commodities
execution. As a market maker, it is essential to maintain an or currencies within a defined time period for a specified
inventory of financial instruments sufficient to meet price.
expected client and market demands.
Derivatives are reported on a net-by-counterparty basis
Risk Management. The firm also enters into derivatives to (i.e., the net payable or receivable for derivative assets and
actively manage risk exposures that arise from its market- liabilities for a given counterparty) when a legal right of
making and investing and lending activities in derivative setoff exists under an enforceable netting agreement
and cash instruments. The firms holdings and exposures (counterparty netting). Derivatives are accounted for at fair
are hedged, in many cases, on either a portfolio or risk- value, net of cash collateral received or posted under
specific basis, as opposed to an instrument-by-instrument enforceable credit support agreements (cash collateral
basis. The offsetting impact of this economic hedging is netting). Derivative assets and liabilities are included in
reflected in the same business segment as the related Financial instruments owned, at fair value and
revenues. In addition, the firm may enter into derivatives Financial instruments sold, but not yet purchased, at fair
designated as hedges under U.S. GAAP. These derivatives value, respectively. Realized and unrealized gains and
are used to manage interest rate exposure in certain fixed- losses on derivatives not designated as hedges under
rate unsecured long-term and short-term borrowings, and ASC 815 are included in Market making and Other
deposits, and to manage foreign currency exposure on the principal transactions in Note 4.
net investment in certain non-U.S. operations.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

The table below presents the gross fair value and the In the table below:
notional amount of derivative contracts by major product Gross fair values exclude the effects of both counterparty
type, the amounts of counterparty and cash collateral netting and collateral, and therefore are not
netting in the consolidated statements of financial representative of the firms exposure.
condition, as well as cash and securities collateral posted
Where the firm has received or posted collateral under
and received under enforceable credit support agreements
credit support agreements, but has not yet determined
that do not meet the criteria for netting under U.S. GAAP.
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 firms derivative activity and do not
represent anticipated losses.
As of December 2015 As of December 2014
Derivative Derivative Notional Derivative Derivative Notional
$ in millions Assets Liabilities Amount Assets Liabilities Amount
Derivatives not accounted for as hedges
Exchange-traded $ 310 $ 280 $ 4,402,843 $ 228 $ 238 $ 3,151,865
OTC-cleared 211,272 192,401 20,738,687 351,801 330,298 30,408,636
Bilateral OTC 345,516 321,458 12,953,830 434,333 409,071 13,552,017
Total interest rates 557,098 514,139 38,095,360 786,362 739,607 47,112,518
OTC-cleared 5,203 5,596 339,244 5,812 5,663 378,099
Bilateral OTC 35,679 31,179 1,552,806 49,036 44,491 2,122,859
Total credit 40,882 36,775 1,892,050 54,848 50,154 2,500,958
Exchange-traded 183 204 13,073 69 69 17,214
OTC-cleared 165 128 14,617 100 96 13,304
Bilateral OTC 96,660 99,235 5,461,940 109,747 108,442 5,535,685
Total currencies 97,008 99,567 5,489,630 109,916 108,607 5,566,203
Exchange-traded 2,997 3,623 203,465 7,683 7,166 321,378
OTC-cleared 232 233 2,839 313 315 3,036
Bilateral OTC 17,445 17,215 230,750 20,994 21,065 345,065
Total commodities 20,674 21,071 437,054 28,990 28,546 669,479
Exchange-traded 9,372 7,908 528,419 9,592 9,636 541,711
Bilateral OTC 37,788 38,290 927,078 49,339 49,013 983,784
Total equities 47,160 46,198 1,455,497 58,931 58,649 1,525,495
Subtotal 762,822 717,750 47,369,591 1,039,047 985,563 57,374,653
Derivatives accounted for as hedges
OTC-cleared 4,567 85 51,446 2,713 228 31,109
Bilateral OTC 6,660 20 62,022 11,559 34 95,389
Total interest rates 11,227 105 113,468 14,272 262 126,498
OTC-cleared 24 6 1,333 12 3 1,205
Bilateral OTC 116 27 8,615 113 13 8,431
Total currencies 140 33 9,948 125 16 9,636
Subtotal 11,367 138 123,416 14,397 278 136,134
Total gross fair value/notional amount of derivatives $ 774,189 1 $ 717,888 1 $47,493,007 $1,053,444 1 $ 985,841 1 $57,510,787
Amounts that have been offset in the consolidated
statements of financial condition
Exchange-traded $ (9,398) $ (9,398) $ (15,039) $ (15,039)
OTC-cleared (194,928) (194,928) (335,792) (335,792)
Bilateral OTC (426,841) (426,841) (535,839) (535,839)
Total counterparty netting (631,167) (631,167) (886,670) (886,670)
OTC-cleared (26,151) (3,305) (24,801) (738)
Bilateral OTC (62,981) (36,645) (78,703) (35,417)
Total cash collateral netting (89,132) (39,950) (103,504) (36,155)
Total counterparty and cash collateral netting $(720,299) $(671,117) $ (990,174) $(922,825)
Amounts included in financial instruments owned/financial
instruments sold, but not yet purchased
Exchange-traded $ 3,464 $ 2,617 $ 2,533 $ 2,070
OTC-cleared 384 216 158 73
Bilateral OTC 50,042 43,938 60,579 60,873
Total amounts included in the consolidated statements
of financial condition $ 53,890 $ 46,771 $ 63,270 $ 63,016
Amounts that have not been offset in the consolidated
statements of financial condition
Cash collateral received/posted $ (498) $ (1,935) $ (980) $ (2,940)
Securities collateral received/posted (14,008) (10,044) (14,742) (18,159)
Total $ 39,384 $ 34,792 $ 47,548 $ 41,917

1. Includes derivative assets and derivative liabilities of $17.09 billion and $18.16 billion, respectively, as of December 2015, and derivative assets and derivative
liabilities of $25.93 billion and $26.19 billion, respectively, as of December 2014, which are not subject to an enforceable netting agreement or are subject to a
netting agreement that the firm has not yet determined to be enforceable.

138 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Valuation Techniques for Derivatives Commodity. Commodity derivatives include

The firms level 2 and level 3 derivatives are valued using transactions referenced to energy (e.g., oil and natural
derivative pricing models (e.g., discounted cash flow gas), metals (e.g., precious and base) and soft
models, correlation models, and models that incorporate commodities (e.g., agricultural). Price transparency varies
option pricing methodologies, such as Monte Carlo based on the underlying commodity, delivery location,
simulations). Price transparency of derivatives can generally tenor and product quality (e.g., diesel fuel compared to
be characterized by product type, as described below. unleaded gasoline). In general, price transparency for
commodity derivatives is greater for contracts with
Interest Rate. In general, the key inputs used to value
shorter tenors and contracts that are more closely aligned
interest rate derivatives are transparent, even for most
with major and/or benchmark commodity indices.
long-dated contracts. Interest rate swaps and options
denominated in the currencies of leading industrialized Equity. Price transparency for equity derivatives varies by
nations are characterized by high trading volumes and market and underlier. Options on indices and the
tight bid/offer spreads. Interest rate derivatives that common stock of corporates included in major equity
reference indices, such as an inflation index, or the shape indices exhibit the most price transparency. Equity
of the yield curve (e.g., 10-year swap rate vs. 2-year swap derivatives generally have observable market prices,
rate) are more complex, but the key inputs are generally except for contracts with long tenors or reference prices
observable. that differ significantly from current market prices. More
complex equity derivatives, such as those sensitive to the
Credit. Price transparency for credit default swaps,
correlation between two or more individual stocks,
including both single names and baskets of credits, varies
generally have less price transparency.
by market and underlying reference entity or obligation.
Credit default swaps that reference indices, large Liquidity is essential to observability of all product types. If
corporates and major sovereigns generally exhibit the transaction volumes decline, previously transparent prices
most price transparency. For credit default swaps with and other inputs may become unobservable. Conversely,
other underliers, price transparency varies based on credit even highly structured products may at times have trading
rating, the cost of borrowing the underlying reference volumes large enough to provide observability of prices and
obligations, and the availability of the underlying other inputs. See Note 5 for an overview of the firms fair
reference obligations for delivery upon the default of the value measurement policies.
issuer. Credit default swaps that reference loans, asset-
Level 1 Derivatives
backed securities and emerging market debt instruments
Level 1 derivatives include short-term contracts for future
tend to have less price transparency than those that
delivery of securities when the underlying security is a
reference corporate bonds. In addition, more complex
level 1 instrument, and exchange-traded derivatives if they
credit derivatives, such as those sensitive to the
are actively traded and are valued at their quoted market
correlation between two or more underlying reference
price.
obligations, generally have less price transparency.
Level 2 Derivatives
Currency. Prices for currency derivatives based on the
Level 2 derivatives include OTC derivatives for which all
exchange rates of leading industrialized nations,
significant valuation inputs are corroborated by market
including those with longer tenors, are generally
evidence and exchange-traded derivatives that are not
transparent. The primary difference between the price
actively traded and/or that are valued using models that
transparency of developed and emerging market currency
calibrate to market-clearing levels of OTC derivatives. In
derivatives is that emerging markets tend to be observable
evaluating the significance of a valuation input, the firm
for contracts with shorter tenors.
considers, among other factors, a portfolios net risk
exposure to that input.

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Notes to Consolidated Financial Statements

The selection of a particular model to value a derivative For level 3 commodity derivatives, significant
depends on the contractual terms of and specific risks unobservable inputs include volatilities for options
inherent in the instrument, as well as the availability of with strike prices that differ significantly from current
pricing information in the market. For derivatives that market prices and prices or spreads for certain
trade in liquid markets, model selection does not involve products for which the product quality or physical
significant management judgment because outputs of location of the commodity is not aligned with
models can be calibrated to market-clearing levels. benchmark indices.
Valuation models require a variety of inputs, such as For level 3 equity derivatives, significant unobservable
contractual terms, market prices, yield curves, discount inputs generally include equity volatility inputs for
rates (including those derived from interest rates on options that are long-dated and/or have strike prices
collateral received and posted as specified in credit support that differ significantly from current market prices. In
agreements for collateralized derivatives), credit curves, addition, the valuation of certain structured trades
measures of volatility, prepayment rates, loss severity rates requires the use of level 3 correlation inputs, such as
and correlations of such inputs. Significant inputs to the the correlation of the price performance of two or
valuations of level 2 derivatives can be verified to market more individual stocks or the correlation of the price
transactions, broker or dealer quotations or other performance for a basket of stocks to another asset
alternative pricing sources with reasonable levels of price class such as commodities.
transparency. Consideration is given to the nature of the Subsequent to the initial valuation of a level 3 derivative,
quotations (e.g., indicative or firm) and the relationship of the firm updates the level 1 and level 2 inputs to reflect
recent market activity to the prices provided from observable market changes and any resulting gains and
alternative pricing sources. losses are recorded in level 3. Level 3 inputs are changed
Level 3 Derivatives when corroborated by evidence such as similar market
Level 3 derivatives are valued using models which utilize transactions, third-party pricing services and/or broker or
observable level 1 and/or level 2 inputs, as well as dealer quotations or other empirical market data. In
unobservable level 3 inputs. The significant unobservable circumstances where the firm cannot verify the model value
inputs used to value the firms level 3 derivatives are by reference to market transactions, it is possible that a
described below. different valuation model could produce a materially
different estimate of fair value. See below for further
For the majority of the firms interest rate and currency information about significant unobservable inputs used in
derivatives classified within level 3, significant the valuation of level 3 derivatives.
unobservable inputs include correlations of certain
currencies and interest rates (e.g., the correlation between Valuation Adjustments
Euro inflation and Euro interest rates) and specific Valuation adjustments are integral to determining the fair
interest rate volatilities. value of derivative portfolios and are used to adjust the
mid-market valuations produced by derivative pricing
For level 3 credit derivatives, significant unobservable models to the appropriate exit price valuation. These
inputs include illiquid credit spreads and upfront credit adjustments incorporate bid/offer spreads, the cost of
points, which are unique to specific reference obligations liquidity, credit valuation adjustments and funding
and reference entities, recovery rates and certain valuation adjustments, which account for the credit and
correlations required to value credit and mortgage funding risk inherent in the uncollateralized portion of
derivatives (e.g., the likelihood of default of the derivative portfolios. The firm also makes funding
underlying reference obligation relative to one another). 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.
In addition, for derivatives that include significant
unobservable inputs, the firm makes model or exit price
adjustments to account for the valuation uncertainty
present in the transaction.

140 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Significant Unobservable Inputs

The table below presents the ranges, averages and medians The ranges, averages and medians of these inputs are not
of significant unobservable inputs used to value the firms representative of the appropriate inputs to use when
level 3 derivatives. In the table below: calculating the fair value of any one derivative. For
example, the highest correlation presented in the tables
Ranges represent the significant unobservable inputs that
below for interest rate derivatives is appropriate for
were used in the valuation of each type of derivative.
valuing a specific interest rate derivative but may not be
Averages represent the arithmetic average of the inputs appropriate for valuing any other interest rate derivative.
and are not weighted by the relative fair value or notional Accordingly, the ranges of inputs presented below do not
of the respective financial instruments. An average greater represent uncertainty in, or possible ranges of, fair value
than the median indicates that the majority of inputs are measurements of the firms level 3 derivatives.
below the average.
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.

Range of Significant Unobservable Inputs (Average / Median)

Level 3 Derivative Valuation Techniques and
Product Type Significant Unobservable Inputs As of December 2015 As of December 2014
Interest rates Option pricing models:
($398 million and $40 million of net
level 3 liabilities as of Correlation (25)% to 92% (53% / 55%) (16)% to 84% (37% / 40%)
December 2015 and
December 2014, respectively) Volatility 31 basis points per annum (bpa) to 152 bpa 36 basis points per annum (bpa)
(84 bpa / 57 bpa) to 156 bpa (100 bpa / 115 bpa)

Credit Option pricing models, correlation

($2.79 billion and $3.53 billion of models and discounted cash flows
net level 3 assets as of models:
December 2015 and
December 2014, respectively) Correlation 46% to 99% (68% / 66%) 5% to 99% (71% / 72%)

Credit spreads 1 basis points (bps) to 1,019 bps 1 basis points (bps) to 700 bps
(129 bps / 86 bps) 1 (116 bps / 79 bps) 1

Upfront credit points 0 points to 100 points (41 points / 40 points) 0 points to 99 points (40 points / 30 points)

Recovery rates 2% to 97% (58% / 70%) 14% to 87% (44% / 40%)

Currencies Option pricing models:

($34 million and $267 million of net
level 3 liabilities as of Correlation (including 25% to 70% (50% / 51%) 22% to 80% (47% / 50%)
December 2015 and cross-product correlation)
December 2014, respectively)

Commodities Option pricing models and

($262 million and $1.14 billion of discounted cash flows models:
net level 3 liabilities as of
December 2015 and Volatility 11% to 77% (35% / 34%) 16% to 68% (33% / 32%)
December 2014, respectively)
Spread per million British Thermal $(1.32) to $4.15 ($(0.05) / $(0.01)) $(1.66) to $4.45 ($(0.13) / $(0.03))
units (MMBTU) of natural gas

Spread per Metric Tonne (MT) of N/A $(10.50) to $3.00 ($(4.04) / $(6.74))
coal

Spread per barrel of oil and refined $(10.64) to $65.29 ($3.34 / $(3.31)) 1 $(15.35) to $80.55 ($22.32 / $13.50) 1
products

Equities Option pricing models:

($1.60 billion and $1.38 billion of
net level 3 liabilities as of Correlation (including (65)% to 94% (42% / 48%) (34)% to 99% (47% / 49%)
December 2015 and cross-product correlation)
December 2014, respectively) 5% to 76% (24% / 23%) 5% to 90% (23% / 21%)
Volatility

1. The difference between the average and the median for these spread inputs indicates that the majority of the inputs fall in the lower end of the range.

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Notes to Consolidated Financial Statements

Range of Significant Unobservable Inputs Sensitivity of Fair Value Measurement to Changes

The following is information about the ranges of significant in Significant Unobservable Inputs
unobservable inputs used to value the firms level 3 The following is a description of the directional sensitivity
derivative instruments: of the firms level 3 fair value measurements to changes in
significant unobservable inputs, in isolation:
Correlation. Ranges for correlation cover a variety of
underliers both within one market (e.g., equity index and Correlation. In general, for contracts where the holder
equity single stock names) and across markets (e.g., benefits from the convergence of the underlying asset or
correlation of an interest rate and a foreign exchange index prices (e.g., interest rates, credit spreads, foreign
rate), as well as across regions. Generally, cross-product exchange rates, inflation rates and equity prices), an
correlation inputs are used to value more complex increase in correlation results in a higher fair value
instruments and are lower than correlation inputs on measurement.
assets within the same derivative product type.
Volatility. In general, for purchased options, an increase
Volatility. Ranges for volatility cover numerous in volatility results in a higher fair value measurement.
underliers across a variety of markets, maturities and
Credit spreads, upfront credit points and recovery
strike prices. For example, volatility of equity indices is
rates. In general, the fair value of purchased credit
generally lower than volatility of single stocks.
protection increases as credit spreads or upfront credit
Credit spreads, upfront credit points and recovery points increase or recovery rates decrease. Credit spreads,
rates. The ranges for credit spreads, upfront credit points upfront credit points and recovery rates are strongly
and recovery rates cover a variety of underliers (index and related to distinctive risk factors of the underlying
single names), regions, sectors, maturities and credit reference obligations, which include reference entity-
qualities (high-yield and investment-grade). The broad specific factors such as leverage, volatility and industry,
range of this population gives rise to the width of the market-based risk factors, such as borrowing costs or
ranges of significant unobservable inputs. liquidity of the underlying reference obligation, and
macroeconomic conditions.
Commodity prices and spreads. The ranges for
commodity prices and spreads cover variability in Commodity prices and spreads. In general, for
products, maturities and locations. 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.
Due to the distinctive nature of each of the firms level 3
derivatives, the interrelationship of inputs is not necessarily
uniform within each product type.

142 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Fair Value of Derivatives by Level

Derivatives at Fair Value as of December 2014
The tables below present the fair value of derivatives on a
gross basis by level and major product type as well as the $ in millions Level 1 Level 2 Level 3 Total

impact of netting. In the tables below: Assets

Interest rates $ 123 $ 800,028 $ 483 $ 800,634
The gross fair values exclude the effects of both Credit 47,190 7,658 54,848
counterparty netting and collateral netting, and therefore Currencies 109,891 150 110,041
are not representative of the firms exposure. Commodities 28,124 866 28,990
Equities 175 58,122 634 58,931
Counterparty netting is reflected in each level to the Gross fair value of
extent that receivable and payable balances are netted derivative assets 298 1,043,355 9,791 1,053,444
within the same level and is included in Counterparty Counterparty netting within
levels (882,841) (2,717) (885,558)
netting within levels. Where the counterparty netting is
Subtotal $ 298 $ 160,514 $ 7,074 $ 167,886
across levels, the netting is reflected in Cross-level Cross-level counterparty
counterparty netting. netting (1,112)
Cash collateral netting (103,504)
Derivative assets are shown as positive amounts and
Fair value included in
derivative liabilities are shown as negative amounts. financial instruments
owned $ 63,270
Derivatives at Fair Value as of December 2015
Liabilities
$ in millions Level 1 Level 2 Level 3 Total Interest rates $ (14) $ (739,332) $ (523) $ (739,869)
Assets Credit (46,026) (4,128) (50,154)
Interest rates $ 4 $ 567,761 $ 560 $ 568,325 Currencies (108,206) (417) (108,623)
Credit 34,832 6,050 40,882 Commodities (26,538) (2,008) (28,546)
Currencies 96,959 189 97,148 Equities (94) (56,546) (2,009) (58,649)
Commodities 20,087 587 20,674 Gross fair value of
Equities 46 46,491 623 47,160 derivative liabilities (108) (976,648) (9,085) (985,841)
Gross fair value of Counterparty netting
derivative assets 50 766,130 8,009 774,189 within levels 882,841 2,717 885,558
Counterparty netting Subtotal $(108) $ (93,807) $(6,368) $ (100,283)
within levels (627,548) (2,139) (629,687) Cross-level counterparty
Subtotal $ 50 $ 138,582 $ 5,870 $ 144,502 netting 1,112
Cross-level counterparty Cash collateral netting 36,155
netting (1,480) Fair value included in
Cash collateral netting (89,132) financial instruments sold,
Fair value included in but not yet purchased $ (63,016)
financial instruments
owned $ 53,890

Liabilities
Interest rates $(11) $(513,275) $ (958) $(514,244)
Credit (33,518) (3,257) (36,775)
Currencies (99,377) (223) (99,600)
Commodities (20,222) (849) (21,071)
Equities (18) (43,953) (2,227) (46,198)
Gross fair value of
derivative liabilities (29) (710,345) (7,514) (717,888)
Counterparty netting
within levels 627,548 2,139 629,687
Subtotal $(29) $ (82,797) $(5,375) $ (88,201)
Cross-level counterparty
netting 1,480
Cash collateral netting 39,950
Fair value included in
financial instruments sold,
but not yet purchased $ (46,771)

Goldman Sachs 2015 Form 10-K 143

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Level 3 Rollforward
The table below presents changes in fair value for all Net unrealized gains/(losses) relate to instruments that
derivatives categorized as level 3 as of the end of the year. In were still held at year-end.
the table below:
For the year ended December 2015, the net realized and
If a derivative was transferred to level 3 during a unrealized gains on level 3 derivative assets and liabilities
reporting period, its entire gain or loss for the period is of $746 million (reflecting $67 million of realized gains
included in level 3. Transfers between levels are reported and $679 million of unrealized gains) include gains of
at the beginning of the reporting period in which they approximately $518 million and $228 million reported in
occur. Market making and Other principal transactions
respectively.
Positive amounts for transfers into level 3 and negative
amounts for transfers out of level 3 represent net transfers For the year ended December 2014, the net realized and
of derivative assets. Negative amounts for transfers into unrealized losses on level 3 derivative assets and liabilities
level 3 and positive amounts for transfers out of level 3 of $306 million (reflecting $123 million of realized losses
represent net transfers of derivative liabilities. and $183 million of unrealized losses) include losses of
approximately $276 million and $30 million reported in
A derivative with level 1 and/or level 2 inputs is classified
Market making and Other principal transactions
in level 3 in its entirety if it has at least one significant
respectively.
level 3 input.
See Level 3 Rollforward Commentary below for an
If there is one significant level 3 input, the entire gain or
explanation of the net unrealized gains/(losses) on level 3
loss from adjusting only observable inputs (i.e., level 1
derivative assets and liabilities and the activity related to
and level 2 inputs) is classified as level 3.
transfers into and out of level 3.
Gains or losses that have been reported 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 cash
instruments. As a result, gains/(losses) included in the
level 3 rollforward below do not necessarily represent the
overall impact on the firms results of operations,
liquidity or capital resources.

Level 3 Derivative Assets and Liabilities at Fair Value

Asset/ Asset/
(liability) Net Net (liability)
balance, realized unrealized Transfers Transfers balance,
beginning gains/ gains/ into out of end of
$ in millions of year (losses) (losses) Purchases Sales Settlements level 3 level 3 year

Year Ended December 2015

Interest rates net $ (40) $ (53) $ 66 $ 3 $ (31) $ (144) $(149) $ (50) $ (398)
Credit net 3,530 92 804 80 (237) (640) 206 (1,042) 2,793
Currencies net (267) (49) 40 32 (10) 162 (1) 59 (34)
Commodities net (1,142) 34 (52) (234) 1,034 (35) 133 (262)
Equities net (1,375) 43 (179) 125 (1,352) 1,086 (25) 73 (1,604)
Total derivatives net $ 706 $ 67 $ 679 $240 $(1,864) $ 1,498 $ (4) $ (827) $ 495

Year Ended December 2014

Interest rates net $ (86) $ (50) $ (101) $ 97 $ (2) $ 92 $ 14 $ (4) $ (40)
Credit net 4,176 64 1,625 151 (138) (1,693) (194) (461) 3,530
Currencies net (200) (70) (175) 19 172 (9) (4) (267)
Commodities net 60 (19) (1,096) 38 (272) 95 84 (32) (1,142)
Equities net (959) (48) (436) 344 (979) 270 (115) 548 (1,375)
Total derivatives net $ 2,991 $(123) $ (183) $649 $(1,391) $(1,064) $(220) $ 47 $ 706

144 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Level 3 Rollforward Commentary OTC Derivatives

Year Ended December 2015. The net unrealized gain on The tables below present the fair values of OTC derivative
level 3 derivatives of $679 million for 2015 was primarily assets and liabilities by tenor and major product type.
attributable to gains on certain credit derivatives, reflecting
OTC Derivatives as of December 2015
the impact of wider credit spreads, and changes in foreign
exchange and interest rates. Less than 1-5 Greater than
$ in millions 1 Year Years 5 Years Total
Transfers into level 3 derivatives during 2015 primarily Assets
Interest rates $ 4,231 $23,278 $ 81,401 $ 108,910
reflected transfers of certain credit derivative assets from
Credit 1,664 4,547 5,842 12,053
level 2, primarily due to unobservable credit spread inputs Currencies 14,646 8,936 6,353 29,935
becoming significant to the valuations of these derivatives, Commodities 6,228 3,897 231 10,356
and transfers of certain interest rate derivative liabilities Equities 4,806 7,091 1,550 13,447
from level 2, primarily due to certain unobservable inputs Counterparty netting
becoming significant to the valuations of these derivatives. within tenors (3,660) (5,751) (5,270) (14,681)
Subtotal $27,915 $41,998 $ 90,107 $ 160,020
Transfers out of level 3 derivatives during 2015 primarily Cross-tenor counterparty
reflected transfers of certain credit derivative assets to netting (20,462)
Cash collateral netting (89,132)
level 2, principally due to increased transparency and
Total $ 50,426
reduced significance of certain unobservable credit spread
inputs used to value these derivatives. Liabilities
Interest rates $ 5,323 $13,945 $ 35,592 $ 54,860
Year Ended December 2014. The net unrealized loss on Credit 1,804 4,704 1,437 7,945
level 3 derivatives of $183 million for 2014 was primarily Currencies 12,378 9,940 10,048 32,366
Commodities 4,464 3,136 2,526 10,126
attributable to the impact of a decrease in commodity prices
Equities 5,154 5,802 2,994 13,950
on certain commodity derivatives, a decrease in equity Counterparty netting
prices on certain equity derivatives, and the impact of within tenors (3,660) (5,751) (5,270) (14,681)
changes in foreign exchange rates on certain currency Subtotal $25,463 $31,776 $ 47,327 $ 104,566
derivatives, largely offset by the impact of tighter credit Cross-tenor counterparty
netting (20,462)
spreads and a decrease in interest rates on certain credit Cash collateral netting (39,950)
derivatives. Total $ 44,154

Transfers into level 3 derivatives during 2014 primarily

OTC Derivatives as of December 2014
reflected transfers of certain credit derivative liabilities from
Less than 1-5 Greater than
level 2, principally due to unobservable credit spread inputs $ in millions 1 Year Years 5 Years Total
becoming significant to the valuation of these derivatives Assets
and transfers of certain equity derivative liabilities from Interest rates $ 7,064 $25,049 $ 90,553 $ 122,666
level 2, primarily due to reduced transparency of volatility Credit 1,696 6,093 5,707 13,496
inputs used to value these derivatives. Currencies 17,835 9,897 6,386 34,118
Commodities 8,298 4,068 161 12,527
Transfers out of level 3 derivatives during 2014 primarily Equities 4,771 9,285 3,750 17,806
reflected transfers of certain equity derivative liabilities to Counterparty netting
within tenors (4,479) (7,016) (4,058) (15,553)
level 2, principally due to unobservable correlation inputs
Subtotal $35,185 $47,376 $102,499 $ 185,060
no longer being significant to the valuation of these Cross-tenor counterparty
derivatives, and transfers of certain credit derivative assets netting (20,819)
to level 2, principally due to unobservable credit spread Cash collateral netting (103,504)
inputs no longer being significant to the net risk of certain Total $ 60,737
portfolios. Liabilities
Interest rates $ 7,001 $17,649 $ 37,242 $ 61,892
Credit 2,154 4,942 1,706 8,802
Currencies 18,549 7,667 6,482 32,698
Commodities 5,686 4,105 2,810 12,601
Equities 7,064 6,845 3,571 17,480
Counterparty netting
within tenors (4,479) (7,016) (4,058) (15,553)
Subtotal $35,975 $34,192 $ 47,753 $ 117,920
Cross-tenor counterparty
netting (20,819)
Cash collateral netting (36,155)
Total $ 60,946

Goldman Sachs 2015 Form 10-K 145

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

In the tables above: Credit Indices, Baskets and Tranches. Credit

derivatives may reference a basket of single-name credit
Tenor is based on expected duration for mortgage-related
default swaps or a broad-based index. If a credit event
credit derivatives and generally on remaining contractual
occurs in one of the underlying reference obligations, the
maturity for other derivatives.
protection seller pays the protection buyer. The payment
Counterparty netting within the same product type and is typically a pro-rata portion of the transactions total
tenor category is included within such product type and notional amount based on the underlying defaulted
tenor category. reference obligation. In certain transactions, the credit
risk of a basket or index is separated into various portions
Counterparty netting across product types within the
(tranches), each having different levels of subordination.
same tenor category is included in Counterparty netting
The most junior tranches cover initial defaults and once
within tenors. Where the counterparty netting is across
losses exceed the notional amount of these junior
tenor categories, the netting is reflected in Cross-tenor
tranches, any excess loss is covered by the next most
counterparty netting.
senior tranche in the capital structure.
Credit Derivatives
Total Return Swaps. A total return swap transfers the
The firm enters into a broad array of credit derivatives in
risks relating to economic performance of a reference
locations around the world to facilitate client transactions
obligation from the protection buyer to the protection
and to manage the credit risk associated with market-
seller. Typically, the protection buyer receives from the
making and investing and lending activities. Credit
protection seller a floating rate of interest and protection
derivatives are actively managed based on the firms net risk
against any reduction in fair value of the reference
position.
obligation, and in return the protection seller receives the
Credit derivatives are individually negotiated contracts and cash flows associated with the reference obligation, plus
can have various settlement and payment conventions. any increase in the fair value of the reference obligation.
Credit events include failure to pay, bankruptcy,
Credit Options. In a credit option, the option writer
acceleration of indebtedness, restructuring, repudiation and
assumes the obligation to purchase or sell a reference
dissolution of the reference entity.
obligation at a specified price or credit spread. The option
The firm enters into the following types of credit purchaser buys the right, but does not assume the
derivatives: obligation, to sell the reference obligation to, or purchase
it from, the option writer. The payments on credit options
Credit Default Swaps. Single-name credit default swaps
depend either on a particular credit spread or the price of
protect the buyer against the loss of principal on one or
the reference obligation.
more bonds, loans or mortgages (reference obligations) in
the event the issuer (reference entity) of the reference The firm economically hedges its exposure to written credit
obligations suffers a credit event. The buyer of protection derivatives primarily by entering into offsetting purchased
pays an initial or periodic premium to the seller and credit derivatives with identical underliers. Substantially all
receives protection for the period of the contract. If there of the firms purchased credit derivative transactions are
is no credit event, as defined in the contract, the seller of with financial institutions and are subject to stringent
protection makes no payments to the buyer of protection. collateral thresholds. In addition, upon the occurrence of a
However, if a credit event occurs, the seller of protection specified trigger event, the firm may take possession of the
is required to make a payment to the buyer of protection, reference obligations underlying a particular written credit
which is calculated in accordance with the terms of the derivative, and consequently may, upon liquidation of the
contract. reference obligations, recover amounts on the underlying
reference obligations in the event of default.
As of December 2015, written and purchased credit
derivatives had total gross notional amounts of
$923.48 billion and $968.68 billion, respectively, for total
net notional purchased protection of $45.20 billion. As of
December 2014, written and purchased credit derivatives
had total gross notional amounts of $1.22 trillion and
$1.28 trillion, respectively, for total net notional purchased
protection of $59.35 billion. Substantially all of the firms
written and purchased credit derivatives are credit default
swaps.

146 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

The tables below present certain information about credit Impact of Credit Spreads on Derivatives
derivatives. In the tables below: On an ongoing basis, the firm realizes gains or losses
Fair values exclude the effects of both netting of relating to changes in credit risk through the unwind of
receivable balances with payable balances under derivative contracts and changes in credit mitigants.
enforceable netting agreements, and netting of cash The net gain/(loss), including hedges, attributable to the
received or posted under enforceable credit support impact of changes in credit exposure and credit spreads
agreements, and therefore are not representative of the (counterparty and the firms) on derivatives was $9 million
firms credit exposure. for 2015, $135 million for 2014 and $(66) million for
Tenor is based on expected duration for mortgage-related 2013.
credit derivatives and on remaining contractual maturity Bifurcated Embedded Derivatives
for other credit derivatives. The table below presents the fair value and the notional
The credit spread on the underlier, together with the tenor amount of derivatives that have been bifurcated from their
of the contract, are indicators of payment/performance related borrowings. These derivatives, which are recorded
risk. The firm is less likely to pay or otherwise be required at fair value, primarily consist of interest rate, equity and
to perform where the credit spread and the tenor are lower. commodity products and are included in Unsecured short-
term borrowings and Unsecured long-term borrowings
Offsetting purchased credit derivatives represent the with the related borrowings. See Note 8 for further
notional amount of purchased credit derivatives that information.
economically hedge written credit derivatives with
identical underliers and are included in Offsetting. As of December
Other purchased credit derivatives represent the notional $ in millions 2015 2014
amount of all other purchased credit derivatives not Fair value of assets $ 466 $ 390
included in Offsetting. Fair value of liabilities 794 690
Net liability $ 328 $ 300
As of December 2015
Notional amount $7,869 $7,735
Credit Spread on Underlier (basis points)
Greater
251 - 501 - than
$ in millions 0 - 250 500 1,000 1,000 Total
Maximum Payout/Notional Amount of Written Credit Derivatives by Tenor
Less than 1 year $ 240,468 $ 2,859 $ 2,881 $ 10,533 $ 256,741
1 5 years 514,986 42,399 16,327 26,271 599,983
Greater than 5 years 57,054 6,481 1,567 1,651 66,753
Total $ 812,508 $51,739 $20,775 $ 38,455 $ 923,477
Maximum Payout/Notional Amount of Purchased Credit Derivatives
Offsetting $ 722,436 $46,313 $19,556 $ 33,266 $ 821,571
Other 132,757 6,383 3,372 4,598 147,110
Fair Value of Written Credit Derivatives
Asset $ 17,110 $ 924 $108 $190 $ 18,332
Liability 2,756 2,596 1,942 12,485 19,779
Net asset/(liability) $ 14,354 $ (1,672) $ (1,834) $(12,295) $ (1,447)

As of December 2014
Credit Spread on Underlier (basis points)
Greater
251 - 501 - than
$ in millions 0 - 250 500 1,000 1,000 Total
Maximum Payout/Notional Amount of Written Credit Derivatives by Tenor
Less than 1 year $ 261,591 $ 7,726 $ 8,449 $ 8,728 $ 286,494
1 5 years 775,784 37,255 18,046 26,834 857,919
Greater than 5 years 68,830 5,042 1,309 1,279 76,460
Total $1,106,205 $50,023 $27,804 $ 36,841 $1,220,873
Maximum Payout/Notional Amount of Purchased Credit Derivatives
Offsetting $1,012,874 $41,657 $26,240 $ 33,112 $1,113,883
Other 152,465 8,426 1,949 3,499 166,339
Fair Value of Written Credit Derivatives
Asset $ 28,004 $ 1,542 $ 112 $ 82 $ 29,740
Liability 3,629 2,266 1,909 13,943 21,747
Net asset/(liability) $ 24,375 $ (724) $ (1,797) $(13,861) $ 7,993

Goldman Sachs 2015 Form 10-K 147

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Derivatives with Credit-Related Contingent Features Fair Value Hedges

Certain of the firms derivatives have been transacted under The firm designates certain interest rate swaps as fair value
bilateral agreements with counterparties who may require hedges. These interest rate swaps hedge changes in fair
the firm to post collateral or terminate the transactions value attributable to the designated benchmark interest rate
based on changes in the firms credit ratings. The firm (e.g., London Interbank Offered Rate (LIBOR) or
assesses the impact of these bilateral agreements by Overnight Index Swap Rate (OIS)), effectively converting a
determining the collateral or termination payments that substantial portion of fixed-rate obligations into floating-
would occur assuming a downgrade by all rating agencies. rate obligations.
A downgrade by any one rating agency, depending on the
The firm applies a statistical method that utilizes regression
agencys relative ratings of the firm at the time of the
analysis when assessing the effectiveness of its fair value
downgrade, may have an impact which is comparable to
hedging relationships in achieving offsetting changes in the
the impact of a downgrade by all rating agencies.
fair values of the hedging instrument and the risk being
The table below presents the aggregate fair value of net hedged (i.e., interest rate risk). An interest rate swap is
derivative liabilities under such agreements (excluding considered highly effective in offsetting changes in fair value
application of collateral posted to reduce these liabilities), attributable to changes in the hedged risk when the
the related aggregate fair value of the assets posted as regression analysis results in a coefficient of determination
collateral and the additional collateral or termination of 80% or greater and a slope between 80% and 125%.
payments that could have been called at the reporting date
For qualifying fair value hedges, gains or losses on
by counterparties in the event of a one-notch and two-notch
derivatives are included in Interest expense. The change
downgrade in the firms credit ratings.
in fair value of the hedged item attributable to the risk being
hedged is reported as an adjustment to its carrying value
As of December
and is subsequently amortized into interest expense over its
$ in millions 2015 2014
remaining life. Gains or losses resulting from hedge
Net derivative liabilities under bilateral
ineffectiveness are included in Interest expense. When a
agreements $29,836 $35,764
Collateral posted 26,075 30,824
derivative is no longer designated as a hedge, any remaining
Additional collateral or termination payments for difference between the carrying value and par value of the
a one-notch downgrade 1,061 1,072 hedged item is amortized to interest expense over the
Additional collateral or termination payments for remaining life of the hedged item using the effective interest
a two-notch downgrade 2,689 2,815 method. See Note 23 for further information about interest
income and interest expense.
Hedge Accounting
The firm applies hedge accounting for (i) certain interest The table below presents the gains/(losses) from interest
rate swaps used to manage the interest rate exposure of rate derivatives accounted for as hedges, the related hedged
certain fixed-rate unsecured long-term and short-term borrowings and bank deposits, and the hedge
borrowings and certain fixed-rate certificates of deposit and ineffectiveness on these derivatives, which primarily
(ii) certain foreign currency forward contracts and foreign consists of amortization of prepaid credit spreads resulting
currency-denominated debt used to manage foreign from the passage of time.
currency exposures on the firms net investment in certain
non-U.S. operations. Year Ended December
$ in millions 2015 2014 2013
To qualify for hedge accounting, the hedging instrument
Interest rate hedges $(1,613) $ 1,936 $(8,683)
must be highly effective at reducing the risk from the
Hedged borrowings and bank deposits 898 (2,451) 6,999
exposure being hedged. Additionally, the firm must Hedge ineffectiveness $ (715) $ (515) $(1,684)
formally document the hedging relationship at inception
and test 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.

148 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Net Investment Hedges Cash Flow Hedges

The firm seeks to reduce the impact of fluctuations in During 2013, the firm designated certain commodities-
foreign exchange rates on its net investments in certain non- related swap and forward contracts as cash flow hedges.
U.S. operations through the use of foreign currency forward These swap and forward contracts hedged the firms
contracts and foreign currency-denominated debt. For exposure to the variability in cash flows associated with the
foreign currency forward contracts designated as hedges, forecasted sales of certain energy commodities by one of the
the effectiveness of the hedge is assessed based on the firms consolidated investments. During the fourth quarter
overall changes in the fair value of the forward contracts of 2014, the firm de-designated these swaps and forward
(i.e., based on changes in forward rates). For foreign contracts as cash flow hedges as it became probable that the
currency-denominated debt designated as a hedge, the hedged forecasted sales would not occur.
effectiveness of the hedge is assessed based on changes in
Prior to de-designation, the firm applied a statistical
spot rates.
method that utilized regression analysis of changes in
For qualifying net investment hedges, the gains or losses on forecasted cash flows when assessing hedge effectiveness,
the hedging instruments, to the extent effective, are subject to the same quantitative criteria as the firms fair
included in Currency translation within the consolidated value hedging relationships described above.
statements of comprehensive income.
The effective portion of the gains/(losses) recognized on
The table below presents the gains/(losses) from net these cash flow hedges were included in Cash flow
investment hedging. hedges within the consolidated statements of
comprehensive income, and gains/(losses) reclassified to
Year Ended December earnings from accumulated other comprehensive income
$ in millions 2015 2014 2013 and gains/(losses) related to hedge ineffectiveness were
Foreign currency forward contract hedges $695 $576 $150 included in Other principal transactions within the
Foreign currency-denominated debt hedges (9) 202 470 consolidated statements of earnings. Such gains/(losses)
were not material for 2014 and 2013. There were no gains/
The gain/(loss) related to ineffectiveness and the gain/(loss) (losses) excluded from the assessment of hedge effectiveness
reclassified to earnings from accumulated other for 2014 and 2013.
comprehensive income/(loss) were not material for
2015, 2014 or 2013.
As of December 2015 and December 2014, the firm had
designated $2.20 billion and $1.36 billion, respectively, of
foreign currency-denominated debt, included in
Unsecured long-term borrowings and Unsecured short-
term borrowings, as hedges of net investments in non-U.S.
subsidiaries.

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Notes to Consolidated Financial Statements

Note 8.
Fair Value Option
Other Financial Assets and Financial Liabilities at
Fair Value
In addition to all cash and derivative instruments included Certain unsecured long-term borrowings, including
in Financial instruments owned, at fair value and certain prepaid commodity transactions and certain
Financial instruments sold, but not yet purchased, at fair hybrid financial instruments;
value, the firm accounts for certain of its other financial
Certain receivables from customers and counterparties,
assets and financial liabilities at fair value primarily under
including transfers of assets accounted for as secured
the fair value option. The primary reasons for electing the
loans rather than purchases and certain margin loans;
fair value option are to:
Certain time deposits issued by the firms bank
Reflect economic events in earnings on a timely basis;
subsidiaries (deposits with no stated maturity are not
Mitigate volatility in earnings from using different eligible for a fair value option election), including
measurement attributes (e.g., transfers of financial structured certificates of deposit, which are hybrid
instruments owned accounted for as financings are financial instruments; and
recorded at fair value whereas the related secured
Certain subordinated liabilities issued by consolidated
financing would be recorded on an accrual basis absent
VIEs.
electing the fair value option); and
These financial assets and financial liabilities at fair value
Address simplification and cost-benefit considerations
are generally valued based on discounted cash flow
(e.g., accounting for hybrid financial instruments at fair
techniques, which incorporate inputs with reasonable levels
value in their entirety versus bifurcation of embedded
of price transparency, and are generally classified as level 2
derivatives and hedge accounting for debt hosts).
because the inputs are observable. Valuation adjustments
Hybrid financial instruments are instruments that contain may be made for liquidity and for counterparty and the
bifurcatable embedded derivatives and do not require firms credit quality.
settlement by physical delivery of non-financial assets (e.g.,
See below for information about the significant inputs used
physical commodities). If the firm elects to bifurcate the
to value other financial assets and financial liabilities at fair
embedded derivative from the associated debt, the
value, including the ranges of significant unobservable
derivative is accounted for at fair value and the host
inputs used to value the level 3 instruments within these
contract is accounted for at amortized cost, adjusted for the
categories. These ranges represent the significant
effective portion of any fair value hedges. If the firm does
unobservable inputs that were used in the valuation of each
not elect to bifurcate, the entire hybrid financial instrument
type of other financial assets and financial liabilities at fair
is accounted for at fair value under the fair value option.
value. The ranges and weighted averages of these inputs are
Other financial assets and financial liabilities accounted for not representative of the appropriate inputs to use when
at fair value under the fair value option include: calculating the fair value of any one instrument. For
example, the highest yield presented below for other
Repurchase agreements and substantially all resale
secured financings is appropriate for valuing a specific
agreements;
agreement in that category but may not be appropriate for
Securities borrowed and loaned within Fixed Income, valuing any other agreements in that category. Accordingly,
Currency and Commodities Client Execution; the ranges of inputs presented below do not represent
uncertainty in, or possible ranges of, fair value
Substantially all other secured financings, including
measurements of the firms level 3 other financial assets and
transfers of assets accounted for as financings rather than
financial liabilities.
sales;
Certain unsecured short-term borrowings, consisting of
all promissory notes and commercial paper, and certain
hybrid financial instruments;

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Notes to Consolidated Financial Statements

Resale and Repurchase Agreements and Securities Unsecured Short-term and Long-term Borrowings.
Borrowed and Loaned. The significant inputs to the The significant inputs to the valuation of unsecured short-
valuation of resale and repurchase agreements and term and long-term borrowings at fair value are the amount
securities borrowed and loaned are funding spreads, the and timing of expected future cash flows, interest rates, the
amount and timing of expected future cash flows and credit spreads of the firm, as well as commodity prices in
interest rates. As of both December 2015 and the case of prepaid commodity transactions. The inputs
December 2014, the firm had no level 3 resale agreements, used to value the embedded derivative component of hybrid
securities borrowed or securities loaned. As of both financial instruments are consistent with the inputs used to
December 2015 and December 2014, the firms level 3 value the firms other derivative instruments. See Note 7 for
repurchase agreements were not material. See Note 10 for further information about derivatives. See Notes 15 and 16
further information about collateralized agreements and for further information about unsecured short-term and
financings. long-term borrowings, respectively.
Other Secured Financings. The significant inputs to the Certain of the firms unsecured short-term and long-term
valuation of other secured financings at fair value are the instruments are included in level 3, substantially all of
amount and timing of expected future cash flows, interest which are hybrid financial instruments. As the significant
rates, funding spreads, the fair value of the collateral unobservable inputs used to value hybrid financial
delivered by the firm (which is determined using the instruments primarily relate to the embedded derivative
amount and timing of expected future cash flows, market component of these borrowings, these inputs are
prices, market yields and recovery assumptions) and the incorporated in the firms derivative disclosures related to
frequency of additional collateral calls. The ranges of unobservable inputs in Note 7.
significant unobservable inputs used to value level 3 other
Receivables from Customers and Counterparties.
secured financings are as follows:
Receivables from customers and counterparties at fair value
As of December 2015: are primarily comprised of transfers of assets accounted for
as secured loans rather than purchases. The significant
Yield: 0.6% to 10.0% (weighted average: 2.7%)
inputs to the valuation of such receivables are commodity
Duration: 1.6 to 8.8 years (weighted average: 2.8 years) prices, interest rates, the amount and timing of expected
future cash flows and funding spreads. As of both
As of December 2014:
December 2015 and December 2014, the firms level 3
Funding spreads: 210 bps to 325 bps (weighted average: receivables from customers and counterparties were not
278 bps) material.
Yield: 1.1% to 10.0% (weighted average: 3.1%) Deposits. The significant inputs to the valuation of time
deposits are interest rates and the amount and timing of
Duration: 0.7 to 3.8 years (weighted average: 2.6 years)
future cash flows. The inputs used to value the embedded
Generally, increases in funding spreads, yield or duration, derivative component of hybrid financial instruments are
in isolation, would result in a lower fair value consistent with the inputs used to value the firms other
measurement. Due to the distinctive nature of each of the derivative instruments. See Note 7 for further information
firms level 3 other secured financings, the interrelationship about derivatives. See Note 14 for further information
of inputs is not necessarily uniform across such financings. about deposits.
See Note 10 for further information about collateralized
The firms deposits that are included in level 3 are hybrid
agreements and financings.
financial instruments. As the significant unobservable
inputs used to value hybrid financial instruments primarily
relate to the embedded derivative component of these
deposits, these inputs are incorporated in the firms
derivative disclosures related to unobservable inputs in
Note 7.

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Notes to Consolidated Financial Statements

Fair Value of Other Financial Assets and Financial

Liabilities by Level
The tables below present, by level within the fair value Other Financial Assets and Liabilities
hierarchy, other financial assets and financial liabilities at Fair Value as of December 2014

accounted for at fair value primarily under the fair value $ in millions Level 1 Level 2 Level 3 Total

option. In the tables below: Assets

Securities segregated for
Securities segregated for regulatory and other purposes regulatory and other
include segregated securities accounted for at fair value purposes $21,168 $ 13,123 $ $ 34,291
Securities purchased
under the fair value option and consists of securities
under agreements to
borrowed and resale agreements. resell 126,036 126,036
Level 1 other financial assets at fair value include U.S. Securities borrowed 66,769 66,769
Receivables from
Treasury securities segregated for regulatory and other customers and
purposes accounted for at fair value under other U.S. counterparties 6,888 56 6,944
GAAP. Total $21,168 $ 212,816 $ 56 $ 234,040

Other financial assets are shown as positive amounts and Liabilities

other financial liabilities are shown as negative amounts. Deposits $ $ (12,458) $(1,065) $ (13,523)
Securities sold under
agreements to
Other Financial Assets and Liabilities
at Fair Value as of December 2015
repurchase (88,091) (124) (88,215)
Securities loaned (765) (765)
$ in millions Level 1 Level 2 Level 3 Total
Other secured financings (20,359) (1,091) (21,450)
Assets Unsecured short-term
Securities segregated borrowings (15,114) (3,712) (18,826)
for regulatory and
Unsecured long-term
other purposes $19,562 $ 18,942 $ $ 38,504
borrowings (13,420) (2,585) (16,005)
Securities purchased
Other liabilities and
under agreements to
accrued expenses (116) (715) (831)
resell 119,450 119,450
Total $ $(150,323) $(9,292) $(159,615)
Securities borrowed 69,801 69,801
Receivables from
customers and Transfers Between Levels of the Fair Value Hierarchy
counterparties 4,947 45 4,992 Transfers between levels of the fair value hierarchy are
Total $19,562 $ 213,140 $ 45 $ 232,747 reported at the beginning of the reporting period in which
they occur. There were no transfers of other financial assets
Liabilities
Deposits $ $ (12,465) $ (2,215) $ (14,680) and financial liabilities between level 1 and level 2 during
Securities sold under 2015 or 2014. The table below presents information about
agreements to transfers between level 2 and level 3.
repurchase (85,998) (71) (86,069)
Securities loaned (466) (466)
Other secured
financings (22,658) (549) (23,207)
Unsecured short-term
borrowings (13,610) (4,133) (17,743)
Unsecured long-term
borrowings (18,049) (4,224) (22,273)
Other liabilities and
accrued expenses (1,201) (52) (1,253)
Total $ $(154,447) $(11,244) $(165,691)

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Notes to Consolidated Financial Statements

Level 3 Rollforward
The table below presents changes in fair value for other Net unrealized gains/(losses) relate to instruments that
financial assets and financial liabilities accounted for at fair were still held at year-end.
value categorized as level 3 as of the end of the year. In the
For the year ended December 2015, the net realized and
table below:
unrealized gains on level 3 other financial liabilities of
If a financial asset or financial liability was transferred to $858 million (reflecting $75 million of realized gains and
level 3 during a reporting period, its entire gain or loss for $783 million of unrealized gains) include gains/(losses) of
the period is included in level 3. For level 3 other financial approximately $841 million, $28 million and
assets, increases are shown as positive amounts, while $(11) million reported in Market making, Other
decreases are shown as negative amounts. For level 3 principal transactions and Interest expense,
other financial liabilities, increases are shown as negative respectively.
amounts, while decreases are shown as positive amounts.
For the year ended December 2014, the net realized and
Level 3 other financial assets and liabilities are frequently unrealized losses on level 3 other financial liabilities of
economically hedged with cash instruments and $716 million (reflecting $93 million of realized losses and
derivatives. Accordingly, gains or losses that are reported $623 million of unrealized losses) include gains/(losses) of
in level 3 can be partially offset by gains or losses approximately $150 million, $(833) million and
attributable to level 1, 2 or 3 cash instruments or $(33) million reported in Market making, Other
derivatives. As a result, gains or losses included in the principal transactions and Interest expense,
level 3 rollforward below do not necessarily represent the respectively.
overall impact on the firms results of operations,
See Level 3 Rollforward Commentary below for an
liquidity or capital resources.
explanation of the net unrealized gains/(losses) on level 3
other financial assets and liabilities and the activity
related to transfers into and out of level 3.

Level 3 Other Financial Assets and Liabilities at Fair Value

Net Net
Balance, realized unrealized Transfers Transfers Balance,
beginning gains/ gains/ into out of end of
$ in millions of year (losses) (losses) Purchases Sales Issuances Settlements level 3 level 3 year
Year Ended December 2015
Receivables from customers
and counterparties $ 56 $ 2 $ 2 $ 8 $ $ $ (22) $ $ (1) $ 45
Total other financial assets $ 56 $ 2 $ 2 $ 8 $ $ $ (22) $ $ (1) $ 45

Deposits $(1,065) $ (9) $ 56 $ $ $(1,252) $ 55 $ $ $ (2,215)

Securities sold under agreements to
repurchase (124) (2) 55 (71)
Other secured financings (1,091) (10) 34 (1) (504) 363 (85) 745 (549)
Unsecured short-term borrowings (3,712) 96 355 (3,377) 2,275 (641) 871 (4,133)
Unsecured long-term borrowings (2,585) (7) 352 (2,888) 846 (464) 522 (4,224)
Other liabilities and accrued expenses (715) 5 (12) (3) 10 (23) 686 (52)
Total other financial liabilities $(9,292) $ 75 $ 783 $ (1) $ $(8,024) $3,604 $(1,213) $2,824 $(11,244)

Year Ended December 2014

Securities purchased under
agreements to resell $ 63 $ $ $ $ $ $ (63) $ $ $
Receivables from customers
and counterparties 235 3 2 29 (33) (180) 56
Total other financial assets $ 298 $ 3 $ 2 $ 29 $ $ $ (96) $ $ (180) $ 56

Deposits $ (385) $ $ (21) $ 5 $ $ (442) $ 6 $ (280) $ 52 $ (1,065)

Securities sold under agreements to
repurchase (1,010) 886 (124)
Other secured financings (1,019) (31) 27 (20) (402) 521 (364) 197 (1,091)
Unsecured short-term borrowings (3,387) (11) (251) (5) (2,246) 1,828 (981) 1,341 (3,712)
Unsecured long-term borrowings (1,837) (46) 56 3 (1,221) 446 (1,344) 1,358 (2,585)
Other liabilities and accrued expenses (26) (5) (434) (19) 20 (301) 50 (715)
Total other financial liabilities $(7,664) $ (93) $(623) $(17) $(19) $(4,311) $3,707 $(3,270) $2,998 $ (9,292)

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Notes to Consolidated Financial Statements

Level 3 Rollforward Commentary

Year Ended December 2015. The net unrealized gain on Year Ended December 2014. The net unrealized loss on
level 3 other financial assets and liabilities of $785 million level 3 other financial assets and liabilities of $621 million
(reflecting $2 million of gains on other financial assets and (reflecting $2 million of gains on other financial assets and
$783 million of gains on other financial liabilities) for 2015 $623 million of losses on other financial liabilities) for 2014
primarily reflected gains on certain hybrid financial primarily reflected losses on certain subordinated liabilities
instruments included in unsecured short-term and long- included in other liabilities and accrued expenses,
term borrowings, principally due to a decrease in global principally due to changes in the market value of the related
equity prices, the impact of wider credit spreads, and underlying investments, and certain hybrid financial
changes in interest and foreign exchange rates. instruments included in unsecured short-term borrowings,
principally due to an increase in global equity prices.
Transfers into level 3 of other financial liabilities during
2015 primarily reflected transfers of certain hybrid Transfers out of level 3 of other financial assets during 2014
financial instruments included in unsecured short-term and primarily reflected transfers of certain secured loans
long-term borrowings from level 2, principally due to included in receivables from customers and counterparties
reduced transparency of certain correlation and volatility to level 2, principally due to unobservable inputs not being
inputs used to value these instruments, and transfers from significant to the net risk of the portfolio.
level 3 unsecured long-term borrowings to level 3
Transfers into level 3 of other financial liabilities during
unsecured short-term borrowings, as these borrowings
2014 primarily reflected transfers of certain hybrid
neared maturity.
financial instruments included in unsecured long-term and
Transfers out of level 3 of other financial liabilities during short-term borrowings from level 2, principally due to
2015 primarily reflected transfers of certain hybrid unobservable inputs being significant to the valuation of
financial instruments included in unsecured short-term and these instruments, and transfers from level 3 unsecured
long-term borrowings and certain other secured financings long-term borrowings to level 3 unsecured short-term
to level 2, principally due to increased transparency of borrowings, as these borrowings neared maturity.
certain correlation, volatility and funding spread inputs
Transfers out of level 3 of other financial liabilities during
used to value these instruments, transfers to level 3
2014 primarily reflected transfers of certain hybrid
unsecured short-term borrowings from level 3 unsecured
financial instruments included in unsecured long-term and
long-term borrowings, as these borrowings neared
short-term borrowings to level 2, principally due to
maturity, and transfers of certain subordinated liabilities
increased transparency of certain correlation and volatility
included in other liabilities and accrued expenses to level 2,
inputs used to value these instruments, transfers of certain
principally due to increased price transparency as a result of
other hybrid financial instruments included in unsecured
market transactions in the related underlying investments.
short-term borrowings to level 2, principally due to certain
unobservable inputs not being significant to the valuation
of these hybrid financial instruments, and transfers to
level 3 unsecured short-term borrowings from level 3
unsecured long-term borrowings, as these borrowings
neared maturity.

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Notes to Consolidated Financial Statements

Gains and Losses on Financial Assets and Financial Loans and Lending Commitments
Liabilities Accounted for at Fair Value Under the The table below presents the difference between the
Fair Value Option aggregate fair value and the aggregate contractual principal
The table below presents the gains and losses recognized as amount for loans and long-term receivables for which the
a result of the firm electing to apply the fair value option to fair value option was elected.
certain financial assets and financial liabilities. These gains
and losses are included in Market making and Other As of December
principal transactions. The table below also includes gains $ in millions 2015 2014
and losses on the embedded derivative component of hybrid Performing loans and long-term receivables
financial instruments included in unsecured short-term Aggregate contractual principal in excess of the
borrowings, unsecured long-term borrowings and deposits. related fair value $1,330 $1,699
Loans on nonaccrual status and/or more than
These gains and losses would have been recognized under
90 days past due 1
other U.S. GAAP even if the firm had not elected to account Aggregate contractual principal in excess of the
for the entire hybrid financial instrument at fair value. related fair value (excluding loans carried at zero
fair value and considered uncollectible) 9,600 13,106
The amounts in the table exclude contractual interest, Aggregate fair value of loans on nonaccrual status
which is included in Interest income and Interest and/or more than 90 days past due 2,391 3,333
expense, for all instruments other than hybrid financial
1. The aggregate contractual principal amount of these loans exceeds the
instruments. See Note 23 for further information about related fair value primarily because the firm regularly purchases loans, such
interest income and interest expense. as distressed loans, at values significantly below contractual principal
amounts.

Gains/(Losses) on Financial Assets As of December 2015 and December 2014, the fair value of
and Financial Liabilities at
Fair Value Under the Fair Value Option unfunded lending commitments for which the fair value
Year Ended December option was elected was a liability of $211 million and
$ in millions 2015 2014 2013
$402 million, respectively, and the related total contractual
Unsecured short-term borrowings 1 $ 346 $(1,180) $(1,145)
amount of these lending commitments was $14.01 billion
Unsecured long-term borrowings 2 771 (592) 683 and $26.19 billion, respectively. See Note 18 for further
Other liabilities and accrued information about lending commitments.
expenses 3 (684) (441) (167)
Other 4 (217) (366) (443)
Long-Term Debt Instruments
Total $ 216 $(2,579) $(1,072) The aggregate contractual principal amount of long-term
other secured financings for which the fair value option was
1. Includes gains/(losses) on the embedded derivative component of hybrid elected exceeded the related fair value by $362 million and
financial instruments of $339 million for 2015, $(1.22) billion for 2014 and
$(1.04) billion for 2013, respectively. $203 million as of December 2015 and December 2014,
2. Includes gains/(losses) on the embedded derivative component of hybrid
respectively. The aggregate contractual principal amount of
financial instruments of $653 million for 2015, $(697) million for 2014 and unsecured long-term borrowings for which the fair value
$902 million for 2013, respectively. option was elected exceeded the related fair value by
3. Includes gains/(losses) on certain subordinated liabilities issued by $1.12 billion and $163 million as of December 2015 and
consolidated VIEs. Gains/(losses) for 2013 also includes gains on certain
insurance contracts.
December 2014, respectively. The amounts above include
4. Primarily consists of gains/(losses) on resale and repurchase agreements,
both principal and non-principal-protected long-term
securities borrowed, receivables from customers and counterparties, borrowings.
deposits and other secured financings.
Impact of Credit Spreads on Loans and Lending
Excluding the gains and losses on the instruments Commitments
accounted for under the fair value option described above, The estimated net gain attributable to changes in
Market making and Other principal transactions instrument-specific credit spreads on loans and lending
primarily represent gains and losses on Financial commitments for which the fair value option was elected
instruments owned, at fair value and Financial was $751 million for 2015, $1.83 billion for 2014 and
instruments sold, but not yet purchased, at fair value. $2.69 billion for 2013, respectively. Changes in the fair
value of loans and lending commitments are primarily
attributable to changes in instrument-specific credit
spreads. Substantially all of the firms performing loans and
lending commitments are floating-rate.

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Notes to Consolidated Financial Statements

Impact of Credit Spreads on Borrowings The firm also extends lending commitments that are held
The table below presents the net gains/(losses) attributable for investment and accounted for on an accrual basis. As of
to the impact of changes in the firms own credit spreads on December 2015 and December 2014, such lending
borrowings for which the fair value option was elected. The commitments were $93.92 billion and $66.22 billion,
firm calculates the fair value of borrowings by discounting respectively, substantially all of which were extended to
future cash flows at a rate which incorporates the firms corporate borrowers. The carrying value and the estimated
credit spreads. fair value of such lending commitments were liabilities of
$291 million and $3.32 billion, respectively, as of
Year Ended December December 2015, and $199 million and $1.86 billion,
$ in millions 2015 2014 2013 respectively, as of December 2014. Had these commitments
Net gains/(losses) including hedges $255 $144 $(296) been included in the firms fair value hierarchy, they would
Net gains/(losses) excluding hedges 255 142 (317) have primarily been classified in level 3 as of both
December 2015 and December 2014.

Note 9. The following is a description of the captions in the table

above:
Loans Receivable
Corporate Loans. Corporate loans include term loans,
Loans receivable is comprised of loans held for investment
revolving lines of credit, letter of credit facilities and
that are accounted for at amortized cost net of allowance
bridge loans, and are principally used for operating
for loan losses. Interest on loans receivable is recognized
liquidity and general corporate purposes, or in
over the life of the loan and is recorded on an accrual basis.
connection with acquisitions. Corporate loans may be
The table below presents details about loans receivable. secured or unsecured, depending on the loan purpose, the
As of December risk profile of the borrower and other factors.
$ in millions 2015 2014 Loans to Private Wealth Management Clients. Loans
Corporate loans $20,740 $14,310 to the firms private wealth management clients include
Loans to private wealth management clients 13,961 11,289 loans used by clients to finance private asset purchases,
Loans backed by commercial real estate 5,271 2,425
employ leverage for strategic investments in real or
Loans backed by residential real estate 2,316 321
financial assets, bridge cash flow timing gaps or provide
Other loans 3,533 821
Total loans receivable, gross 45,821 29,166
liquidity for other needs. Such loans are primarily secured
Allowance for loan losses (414) (228) by securities or other assets.
Total loans receivable $45,407 $28,938
Loans Backed by Commercial Real Estate. Loans
backed by commercial real estate include loans extended
As of December 2015 and December 2014, the fair value of
by the firm that are directly or indirectly secured by
loans receivable was $45.19 billion and $28.90 billion,
hotels, retail stores, multifamily housing complexes and
respectively. As of December 2015, had these loans been
commercial and industrial properties. Loans backed by
carried at fair value and included in the fair value hierarchy,
commercial real estate also include loans purchased by
$23.91 billion and $21.28 billion would have been
the firm.
classified in level 2 and level 3, respectively. As of
December 2014, had these loans been carried at fair value Loans Backed by Residential Real Estate. Loans
and included in the fair value hierarchy, $13.75 billion and backed by residential real estate include loans extended
$15.15 billion would have been classified in level 2 and by the firm to clients who warehouse assets that are
level 3, respectively. directly or indirectly secured by residential real estate.
Loans backed by residential real estate also include loans
purchased by the firm.
Other Loans. Other loans primarily include loans
extended to clients who warehouse assets that are directly
or indirectly secured by consumer loans, including auto
loans, and private student loans and other assets.

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Notes to Consolidated Financial Statements

Loans receivable includes Purchased Credit Impaired (PCI) For PCI loans, the firms risk assessment process includes
loans. PCI loans represent acquired loans or pools of loans reviewing certain key metrics, such as delinquency status,
with evidence of credit deterioration subsequent to their collateral values, credit scores and other risk factors. When
origination and where it is probable, at acquisition, that the it is determined that the firm cannot reasonably estimate
firm will not be able to collect all contractually required expected cash flows on the PCI loans or pools of loans, such
payments. Loans acquired within the same reporting loans are placed on non-accrual status.
period, which have at least two common risk
The table below presents gross loans receivable (excluding
characteristics, one of which relates to their credit risk, are
PCI loans of $2.12 billion, which are not assigned a credit
eligible to be pooled together and considered a single unit of
rating equivalent) and related lending commitments by the
account. PCI loans are initially recorded at acquisition price
firms internally determined public rating agency equivalent
and the difference between the acquisition price and the
and by regulatory risk rating. Non-criticized/pass loans and
expected cash flows (accretable yield) is recognized over the
lending commitments represent loans and lending
life of such loans or pools of loans on an effective yield
commitments that are performing and/or do not
method. Expected cash flows on PCI loans are determined
demonstrate adverse characteristics that are likely to result
using various inputs and assumptions, including default
in a credit loss.
rates, loss severities, recoveries, amount and timing of
prepayments and other macroeconomic indicators. As of
Lending
December 2015, the carrying value of such loans was $ in millions Loans Commitments Total
$2.12 billion (including $1.16 billion, $941 million and Credit Rating Equivalent
$23 million related to loans backed by commercial real As of December 2015
estate, residential real estate and other consumer loans, Investment-grade $19,459 $64,898 $ 84,357
respectively). The outstanding principal balance and Non-investment-grade 24,241 29,021 53,262
Total $43,700 $93,919 $137,619
accretable yield related to such loans was $5.54 billion and
$234 million, respectively, as of December 2015. The fair As of December 2014
value, related expected cash flows, and the contractually Investment-grade $ 8,090 $48,112 $ 56,202
required cash flows of PCI loans at the time of acquisition Non-investment-grade 21,076 18,106 39,182
was $2.27 billion, $2.50 billion and $6.47 billion, Total $29,166 $66,218 $ 95,384
respectively. The firm did not have any PCI loans as of Regulatory Risk Rating
December 2014. As of December 2015
Non-criticized/pass $40,967 $92,021 $132,988
Credit Quality Criticized 2,733 1,898 4,631
The firms risk assessment process includes evaluating the Total $43,700 $93,919 $137,619
credit quality of its loans receivable. For loans receivable
As of December 2014
(excluding PCI loans), the firm performs credit reviews
Non-criticized/pass $27,538 $65,141 $ 92,679
which include initial and ongoing analyses of its borrowers. Criticized 1,628 1,077 2,705
A credit review is an independent analysis of the capacity and Total $29,166 $66,218 $ 95,384
willingness of a borrower 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 borrowers
industry, and the economic environment. The firm also
assigns a regulatory risk rating to such loans based on the
definitions provided by the U.S. federal bank regulatory
agencies. Such loans are determined to be impaired when it is
probable that the firm will not be able to collect all principal
and interest due under the contractual terms of the loan. At
that time, loans are placed on non-accrual status and all
accrued but uncollected interest is reversed against interest
income, and interest subsequently collected is recognized on
a cash basis to the extent the loan balance is deemed
collectible. Otherwise, all cash received is used to reduce the
outstanding loan balance. As of December 2015 and
December 2014, impaired loans receivable (excluding PCI
loans) in non-accrual status were $223 million and
$59 million, respectively.

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Notes to Consolidated Financial Statements

Allowance for Losses on Loans and Lending

Commitments
The firms allowance for loan losses is comprised of The firm also records an allowance for losses on lending
portfolio level reserves, specific loan level reserves, and commitments that are held for investment and accounted
reserves on PCI loans as described below: for on an accrual basis. Such allowance is determined using
the same methodology as the allowance for loan losses,
Portfolio level reserves are determined on loans
while also taking into consideration the probability of
(excluding PCI loans) not deemed impaired by
drawdowns or funding, and is included in Other liabilities
aggregating groups of loans with similar risk
and accrued expenses in the consolidated statements of
characteristics and estimating the probable loss inherent
financial condition. As of December 2015 and
in the portfolio.
December 2014, substantially all of such lending
Specific loan level reserves are determined on loans commitments were evaluated for impairment at the
(excluding PCI loans) that exhibit credit quality weakness portfolio level.
and are therefore individually evaluated for impairment.
The table below presents changes in the allowance for loan
Reserves on PCI loans are recorded when it is determined losses and the allowance for losses on lending
that the expected cash flows, which are reassessed on a commitments.
quarterly basis, will be lower than those used to establish
the current effective yield for such loans or pools of loans. Year Ended December
If the expected cash flows are determined to be $ in millions 2015 2014
significantly higher than those used to establish the Allowance for loan losses
current effective yield, such increases are initially Balance, beginning of period $228 $139
recognized as a reduction to any previously recorded Charge-offs (1) (3)
allowances for loan losses and any remaining increases Provision for loan losses 187 92
Balance, end of period $414 $228
are recognized as interest income prospectively over the
life of the loan or pools of loans as an increase to the Allowance for losses on lending commitments
effective yield. Balance, beginning of period $ 86 $ 57
Provision for losses on lending commitments 102 29
The allowance for loan losses is determined using various Balance, end of period $188 $ 86
inputs, including industry default and loss data, current
macroeconomic indicators, borrowers capacity to meet its The provision for losses on loans and lending commitments
financial obligations, borrowers country of risk, loan is included in Other principal transactions in the
seniority and collateral type. Managements estimate of consolidated statements of earnings. As of December 2015
loan losses entails judgment about loan collectability at the and December 2014, substantially all of the allowance for
reporting dates, and there are uncertainties inherent in loan losses and allowance for losses on lending
those judgments. While management uses the best commitments were related to corporate loans and
information available to determine this estimate, future corporate lending commitments and were primarily
adjustments to the allowance may be necessary based on, determined at the portfolio level. The firm did not have any
among other things, changes in the economic environment allowance for losses on PCI loans as of December 2015 and
or variances between actual results and the original did not have any PCI loans as of December 2014.
assumptions used. Loans are charged off against the
allowance for loan losses when deemed to be uncollectible.
As of December 2015 and December 2014, substantially all
of the firms loans receivable were evaluated for
impairment at the portfolio level.

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Notes to Consolidated Financial Statements

Note 10.
Collateralized Agreements and Financings
Collateralized agreements are securities purchased under Resale and Repurchase Agreements
agreements to resell (resale agreements) and securities A resale agreement is a transaction in which the firm
borrowed. Collateralized financings are securities sold purchases financial instruments from a seller, typically in
under agreements to repurchase (repurchase agreements), exchange for cash, and simultaneously enters into an
securities loaned and other secured financings. The firm agreement to resell the same or substantially the same
enters into these transactions in order to, among other financial instruments to the seller at a stated price plus
things, facilitate client activities, invest excess cash, acquire accrued interest at a future date.
securities to cover short positions and finance certain firm
A repurchase agreement is a transaction in which the firm
activities.
sells financial instruments to a buyer, typically in exchange
Collateralized agreements and financings are presented on a for cash, and simultaneously enters into an agreement to
net-by-counterparty basis when a legal right of setoff exists. repurchase the same or substantially the same financial
Interest on collateralized agreements and collateralized instruments from the buyer at a stated price plus accrued
financings is recognized over the life of the transaction and interest at a future date.
included in Interest income and Interest expense,
The financial instruments purchased or sold in resale and
respectively. See Note 23 for further information about
repurchase agreements typically include U.S. government
interest income and interest expense.
and federal agency, and investment-grade sovereign
The table below presents the carrying value of resale and obligations.
repurchase agreements and securities borrowed and loaned
The firm receives financial instruments purchased under
transactions.
resale agreements and makes delivery of financial
instruments sold under repurchase agreements. To mitigate
As of December
credit exposure, the firm monitors the market value of these
$ in millions 2015 2014
financial instruments on a daily basis, and delivers or
Securities purchased under agreements to
obtains additional collateral due to changes in the market
resell 1 $120,905 $127,938
Securities borrowed 2 172,099 160,722
value of the financial instruments, as appropriate. For
Securities sold under agreements to resale agreements, the firm typically requires collateral with
repurchase 1 86,069 88,215 a fair value approximately equal to the carrying value of the
Securities loaned 2 3,614 5,570 relevant assets in the consolidated statements of financial
condition.
1. Substantially all resale agreements and all repurchase agreements are carried
at fair value under the fair value option. See Note 8 for further information
Even though repurchase and resale agreements (including
about the valuation techniques and significant inputs used to determine fair
value. repos- and reverses-to-maturity) involve the legal
2. As of December 2015 and December 2014, $69.80 billion and $66.77 billion transfer of ownership of financial instruments, they are
of securities borrowed, and $466 million and $765 million of securities loaned accounted for as financing arrangements because they
were at fair value, respectively.
require the financial instruments to be repurchased or
resold at the maturity of the agreement. A repo-to-maturity
is a transaction in which the firm transfers a security under
an agreement to repurchase the security where the maturity
date of the repurchase agreement matches the maturity date
of the underlying security. Prior to January 2015, repos-to-
maturity were accounted for as sales. The firm had no
repos-to-maturity as of December 2015 and
December 2014. See Note 3 for information about changes
to the accounting for repos-to-maturity which became
effective in January 2015.

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Notes to Consolidated Financial Statements

Securities Borrowed and Loaned Transactions Offsetting Arrangements

In a securities borrowed transaction, the firm borrows The tables below present the gross and net resale and
securities from a counterparty in exchange for cash or repurchase agreements and securities borrowed and loaned
securities. When the firm returns the securities, the transactions, and the related amount of counterparty
counterparty returns the cash or securities. Interest is netting included in the consolidated statements of financial
generally paid periodically over the life of the transaction. condition. The tables below also present the amounts not
offset in the consolidated statements of financial condition,
In a securities loaned transaction, the firm lends securities
including counterparty netting that does not meet the
to a counterparty in exchange for cash or securities. When
criteria for netting under U.S. GAAP and the fair value of
the counterparty returns the securities, the firm returns the
cash or securities collateral received or posted subject to
cash or securities posted as collateral. Interest is generally
enforceable credit support agreements.
paid periodically over the life of the transaction.
The firm receives securities borrowed and makes delivery of As of December 2015
securities loaned. To mitigate credit exposure, the firm Assets Liabilities
monitors the market value of these securities on a daily Resale Securities Repurchase Securities
basis, and delivers or obtains additional collateral due to $ in millions agreements borrowed agreements loaned
changes in the market value of the securities, as Amounts included in
the consolidated
appropriate. For securities borrowed transactions, the firm
statements of
typically requires collateral with a fair value approximately financial condition
equal to the carrying value of the securities borrowed Gross carrying value $ 163,199 $ 180,203 $114,960 $ 6,179
transaction. Counterparty netting (28,891) (2,565) (28,891) (2,565)
Total 134,308 1 177,638 1 86,069 3,614
Securities borrowed and loaned within Fixed Income, Amounts not offset in
Currency and Commodities Client Execution are recorded the consolidated
statements of
at fair value under the fair value option. See Note 8 for financial condition
further information about securities borrowed and loaned Counterparty netting (4,979) (1,732) (4,979) (1,732)
accounted for at fair value. Collateral (125,561) (167,061) (78,958) (1,721)
Total $ 3,768 $ 8,845 $ 2,132 $ 161
Securities borrowed and loaned within Securities Services
are recorded based on the amount of cash collateral
As of December 2014
advanced or received plus accrued interest. As these
Assets Liabilities
arrangements generally can be terminated on demand, they
exhibit little, if any, sensitivity to changes in interest rates. Resale Securities Repurchase Securities
$ in millions agreements borrowed agreements loaned
Therefore, the carrying value of such arrangements Amounts included in
approximates fair value. While these arrangements are the consolidated
carried at amounts that approximate fair value, they are not statements of
accounted for at fair value under the fair value option or at financial condition
Gross carrying value $ 160,644 $ 171,384 $114,879 $ 9,150
fair value in accordance with other U.S. GAAP and Counterparty netting (26,664) (3,580) (26,664) (3,580)
therefore are not included in the firms fair value hierarchy Total 133,980 1 167,804 1 88,215 5,570
in Notes 6 through 8. Had these arrangements been Amounts not offset in
included in the firms fair value hierarchy, they would have the consolidated
statements of
been classified in level 2 as of December 2015 and financial condition
December 2014. Counterparty netting (3,834) (641) (3,834) (641)
Collateral (124,528) (154,058) (78,457) (4,882)
Total $ 5,618 $ 13,105 $ 5,924 $ 47

1. As of December 2015 and December 2014, the firm had $13.40 billion and
$6.04 billion, respectively, of securities received under resale agreements,
and $5.54 billion and $7.08 billion, respectively, of securities borrowed
transactions that were segregated to satisfy certain regulatory requirements.
These securities are included in Cash and securities segregated for
regulatory and other purposes.

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Notes to Consolidated Financial Statements

In the tables above: The table below presents the gross carrying value of
repurchase agreements and securities loaned by maturity
Substantially all of the gross carrying values of these
date.
arrangements are subject to enforceable netting
agreements.
As of December 2015
Where the firm has received or posted collateral under Repurchase Securities
credit support agreements, but has not yet determined $ in millions agreements loaned

such agreements are enforceable, the related collateral has No stated maturity and overnight $ 30,901 $4,275
not been netted. 2 - 30 days 35,686 1,437
31 - 90 days 16,035
Gross Carrying Value of Repurchase Agreements and 91 days - 1 year 25,691 467
Securities Loaned Greater than 1 year 6,647
The tables below present the gross carrying value of Total $114,960 $6,179
repurchase agreements and securities loaned by class of
collateral pledged. In the table above:
Repurchase agreements and securities loaned that are
As of December 2015 repayable prior to maturity at the option of the firm are
Repurchase Securities reflected at their contractual maturity dates.
$ in millions agreements loaned
Commercial paper, certificates of deposit, time Repurchase agreements and securities loaned that are
deposits and other money market instruments $ 806 $ redeemable prior to maturity at the option of the holders
U.S. government and federal agency obligations 54,856 101 are reflected at the earliest dates such options become
Non-U.S. government and agency obligations 31,547 2,465 exercisable.
Securities backed by commercial real estate 269
Securities backed by residential real estate 2,059 Other Secured Financings
Corporate debt securities 6,877 30 In addition to repurchase agreements and securities loaned
State and municipal obligations 609 transactions, the firm funds certain assets through the use of
Other debt obligations 101 other secured financings and pledges financial instruments
Equities and convertible debentures 17,836 3,583 and other assets as collateral in these transactions. These
Total $114,960 $6,179
other secured financings consist of:
Liabilities of consolidated VIEs;
As of December 2014
Repurchase Securities Transfers of assets accounted for as financings rather than
$ in millions agreements loaned sales (primarily collateralized central bank financings,
Commercial paper, certificates of deposit, time pledged commodities, bank loans and mortgage whole
deposits and other money market instruments $ 900 $
loans); and
U.S. government and federal agency obligations 56,788 123
Non-U.S. government and agency obligations 27,169 3,463 Other structured financing arrangements.
Securities backed by commercial real estate 419
Securities backed by residential real estate 1,574 Other secured financings include arrangements that are
Corporate debt securities 8,028 26 nonrecourse. As of December 2015 and December 2014,
State and municipal obligations 984 nonrecourse other secured financings were $2.20 billion
Other debt obligations 562 and $1.94 billion, respectively.
Equities and convertible debentures 18,455 5,538
Total $114,879 $9,150 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 8 for further information about other
secured financings that are accounted for at fair value.

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Notes to Consolidated Financial Statements

Other secured financings that are not recorded at fair value In the tables above:
are recorded based on the amount of cash received plus
Short-term secured financings include financings
accrued interest, which generally approximates fair value.
maturing within one year of the financial statement date
While these financings are carried at amounts that
and financings that are redeemable within one year of the
approximate fair value, they are not accounted for at fair
financial statement date at the option of the holder.
value under the fair value option or at fair value in
accordance with other U.S. GAAP and therefore are not Weighted average interest rates exclude secured
included in the firms fair value hierarchy in Notes 6 financings at fair value and include the effect of hedging
through 8. Had these financings been included in the firms activities. See Note 7 for further information about
fair value hierarchy, they would have been primarily hedging activities.
classified in level 2 as of December 2015 and
The table below presents other secured financings by
December 2014.
maturity date.
The tables below present information about other secured
financings. As of
$ in millions December 2015
Other secured financings (short-term) $14,233
As of December 2015
Other secured financings (long-term):
U.S. Non-U.S.
2017 5,651
$ in millions Dollar Dollar Total
2018 2,814
Other secured financings (short-term):
2019 482
At fair value $ 7,952 $ 5,448 $13,400
2020 953
At amortized cost 514 319 833
2021 - thereafter 620
Weighted average interest rates 2.93% 3.83%
Total other secured financings (long-term) 10,520
Other secured financings (long-term):
At fair value 6,702 3,105 9,807 Total other secured financings $24,753
At amortized cost 370 343 713
Weighted average interest rates 2.87% 1.54% In the table above:
Total 1 $15,538 $ 9,215 $24,753 Long-term secured financings that are repayable prior to
Amount of other secured financings maturity at the option of the firm are reflected at their
collateralized by:
Financial instruments 2 $14,862 $ 8,872 $23,734 contractual maturity dates.
Other assets 676 343 1,019 Long-term secured financings that are redeemable prior
to maturity at the option of the holders are reflected at the
As of December 2014 earliest dates such options become exercisable.
U.S. Non-U.S.
$ in millions Dollar Dollar Total Collateral Received and Pledged
Other secured financings (short-term): The firm receives cash and securities (e.g., U.S. government
At fair value $ 7,887 $ 7,668 $15,555 and federal agency, other sovereign and corporate
At amortized cost 5 5 obligations, as well as equities and convertible debentures)
Weighted average interest rates 4.33% %
as collateral, primarily in connection with resale
Other secured financings (long-term):
At fair value 3,290 2,605 5,895
agreements, securities borrowed, derivative transactions
At amortized cost 580 774 1,354 and customer margin loans. The firm obtains cash and
Weighted average interest rates 2.69% 2.31% securities as collateral on an upfront or contingent basis for
Total 1 $11,762 $11,047 $22,809 derivative instruments and collateralized agreements to
Amount of other secured financings reduce its credit exposure to individual counterparties.
collateralized by:
Financial instruments 2 $11,460 $10,483 $21,943 In many cases, the firm is permitted to deliver or repledge
Other assets 302 564 866 financial instruments received as collateral when entering
into repurchase agreements and securities loaned
1. Includes $334 million and $974 million related to transfers of financial assets
accounted for as financings rather than sales as of December 2015 and transactions, primarily in connection with secured client
December 2014, respectively. Such financings were collateralized by financial financing activities. The firm is also permitted to deliver or
assets included in Financial instruments owned, at fair value of $336 million repledge these financial instruments in connection with
and $995 million as of December 2015 and December 2014, respectively.
other secured financings, collateralized derivative
2. Includes $14.98 billion and $10.24 billion of other secured financings
collateralized by financial instruments owned, at fair value as of transactions and firm or customer settlement requirements.
December 2015 and December 2014, respectively, and includes $8.76 billion
and $11.70 billion of other secured financings collateralized by financial
instruments received as collateral and repledged as of December 2015 and
December 2014, respectively.

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Notes to Consolidated Financial Statements

The firm also pledges certain financial instruments owned, Beneficial interests issued by securitization entities are debt
at fair value in connection with repurchase agreements, or equity securities that give the investors rights to receive
securities loaned transactions and other secured financings, all or portions of specified cash inflows to a securitization
and other assets (primarily real estate and cash) in vehicle and include senior and subordinated interests in
connection with other secured financings to counterparties principal, interest and/or other cash inflows. The proceeds
who may or may not have the right to deliver or repledge from the sale of beneficial interests are used to pay the
them. transferor for the financial assets sold to the securitization
vehicle or to purchase securities which serve as collateral.
The table below presents financial instruments at fair value
received as collateral that were available to be delivered or The firm accounts for a securitization as a sale when it has
repledged and were delivered or repledged by the firm. relinquished control over the transferred assets. Prior to
securitization, the firm accounts for assets pending transfer
As of December at fair value and therefore does not typically recognize
$ in millions 2015 2014 significant gains or losses upon the transfer of assets. Net
Collateral available to be delivered revenues from underwriting activities are recognized in
or repledged 1 $636,684 $630,046 connection with the sales of the underlying beneficial
Collateral that was delivered or repledged 496,240 474,057 interests to investors.
1. As of December 2015 and December 2014, amounts exclude $13.40 billion For transfers of assets that are not accounted for as sales,
and $6.04 billion, respectively, of securities received under resale
agreements, and $5.54 billion and $7.08 billion, respectively, of securities
the assets remain in Financial instruments owned, at fair
borrowed transactions that contractually had the right to be delivered or value and the transfer is accounted for as a collateralized
repledged, but were segregated to satisfy certain regulatory requirements. financing, with the related interest expense recognized over
The table below presents information about assets pledged. the life of the transaction. See Notes 10 and 23 for further
information about collateralized financings and interest
As of December
expense, respectively.
$ in millions 2015 2014 The firm generally receives cash in exchange for the
Financial instruments owned, at fair value transferred assets but may also have continuing
pledged to counterparties that: involvement with transferred assets, including ownership of
Had the right to deliver or repledge $ 54,426 $ 64,473
beneficial interests in securitized financial assets, primarily
Did not have the right to deliver or repledge 63,880 68,027
Other assets pledged to counterparties that:
in the form of senior or subordinated securities. The firm
Did not have the right to deliver or repledge 1,841 1,304 may also purchase senior or subordinated securities issued
by securitization vehicles (which are typically VIEs) in
connection with secondary market-making activities.
Note 11.
The primary risks included in beneficial interests and other
Securitization Activities interests from the firms continuing involvement with
The firm securitizes residential and commercial mortgages, securitization vehicles are the performance of the
corporate bonds, loans and other types of financial assets underlying collateral, the position of the firms investment
by selling these assets to securitization vehicles (e.g., trusts, in the capital structure of the securitization vehicle and the
corporate entities and limited liability companies) or market yield for the security. Substantially all of these
through a resecuritization. The firm acts as underwriter of interests are accounted for at fair value, are included in
the beneficial interests that are sold to investors. The firms Financial instruments owned, at fair value and are
residential mortgage securitizations are primarily in classified in level 2 of the fair value hierarchy. See Notes 5
connection with government agency securitizations. through 8 for further information about fair value
measurements.

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Notes to Consolidated Financial Statements

The table below presents the amount of financial assets In the tables above:
securitized and the cash flows received on retained interests
The outstanding principal amount is presented for the
in securitization entities in which the firm had continuing
purpose of providing information about the size of the
involvement.
securitization entities in which the firm has continuing
involvement and is not representative of the firms risk of
Year Ended December
loss.
$ in millions 2015 2014 2013
Residential mortgages $10,479 $19,099 $29,772 For retained or purchased interests, the firms risk of loss
Commercial mortgages 6,043 2,810 6,086 is limited to the fair value of these interests.
Other financial assets 1,009
Total $16,522 $22,918 $35,858
Purchased interests represent senior and subordinated
Cash flows on retained
interests, purchased in connection with secondary
interests $ 174 $ 215 $ 249 market-making activities, in securitization entities in
which the firm also holds retained interests.
The tables below present the firms continuing involvement
Substantially all of the total outstanding principal amount
in nonconsolidated securitization entities to which the firm
and total fair value of retained interests as of
sold assets, as well as the total outstanding principal
December 2015 relate to securitizations during 2012 and
amount of transferred assets in which the firm has
thereafter, and substantially all of the total outstanding
continuing involvement.
principal amount and total fair value of retained interests
as of December 2014 relate to securitizations during 2011
As of December 2015
and thereafter.
Outstanding Fair Value of Fair Value of
Principal Retained Purchased In addition to the interests in the tables above, the firm had
$ in millions Amount Interests Interests
U.S. government
other continuing involvement in the form of derivative
agency-issued transactions and commitments with certain
collateralized mortgage nonconsolidated VIEs. The carrying value of these
obligations $39,088 $ 846 $ 20 derivatives and commitments was a net asset of $92 million
Other residential and $115 million as of December 2015 and
mortgage-backed 2,195 154 17
December 2014, respectively. The notional amounts of
Other commercial
mortgage-backed 6,842 115 28 these derivatives and commitments are included in
CDOs, CLOs and other 2,732 44 7 maximum exposure to loss in the nonconsolidated VIE
Total $50,857 $1,159 $ 72 table in Note 12.

As of December 2014
Outstanding Fair Value of Fair Value of
Principal Retained Purchased
$ in millions Amount Interests Interests
U.S. government
agency-issued
collateralized mortgage
obligations $56,792 $2,140 $
Other residential
mortgage-backed 2,273 144 5
Other commercial
mortgage-backed 3,313 86 45
CDOs, CLOs and other 4,299 59 17
Total $66,677 $2,429 $ 67

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Notes to Consolidated Financial Statements

The table below presents the weighted average key Note 12.
economic assumptions used in measuring the fair value of Variable Interest Entities
mortgage-backed retained interests and the sensitivity of
this fair value to immediate adverse changes of 10% and VIEs generally finance the purchase of assets by issuing debt
20% in those assumptions. and equity securities that are either collateralized by or
indexed to the assets held by the VIE. The debt and equity
As of December securities issued by a VIE may include tranches of varying
$ in millions 2015 2014
levels of subordination. The firms involvement with VIEs
Fair value of retained interests $ 1,115 $ 2,370
includes securitization of financial assets, as described in
Weighted average life (years) 7.5 7.6 Note 11, and investments in and loans to other types of
Constant prepayment rate 10.4% 13.2% VIEs, as described below. See Note 11 for additional
Impact of 10% adverse change $ (22) $ (33) information about securitization activities, including the
Impact of 20% adverse change (43) (66) definition of beneficial interests. See Note 3 for the firms
Discount rate 5.5% 4.1% consolidation policies, including the definition of a VIE.
Impact of 10% adverse change $ (28) $ (50)
Impact of 20% adverse change (55) (97) The firm is principally involved with VIEs through the
following business activities:
In the table above:
Mortgage-Backed VIEs and Corporate CDO and CLO
Amounts do not reflect the benefit of other financial VIEs. The firm sells residential and commercial mortgage
instruments that are held to mitigate risks inherent in loans and securities to mortgage-backed VIEs and
these retained interests. corporate bonds and loans to corporate CDO and CLO
Changes in fair value based on an adverse variation in VIEs and may retain beneficial interests in the assets sold to
assumptions generally cannot be extrapolated because the these VIEs. The firm purchases and sells beneficial interests
relationship of the change in assumptions to the change in issued by mortgage-backed and corporate CDO and CLO
fair value is not usually linear. VIEs in connection with market-making activities. In
addition, the firm may enter into derivatives with certain of
The impact of a change in a particular assumption is these VIEs, primarily interest rate swaps, which are
calculated independently of changes in any other typically not variable interests. The firm generally enters
assumption. In practice, simultaneous changes in into derivatives with other counterparties to mitigate its
assumptions might magnify or counteract the sensitivities risk from derivatives with these VIEs.
disclosed above.
Certain mortgage-backed and corporate CDO and CLO
The constant prepayment rate is included only for VIEs, usually referred to as synthetic CDOs or credit-linked
positions for which it is a key assumption in the note VIEs, synthetically create the exposure for the
determination of fair value. beneficial interests they issue by entering into credit
The discount rate for retained interests that relate to U.S. derivatives, rather than purchasing the underlying assets.
government agency-issued collateralized mortgage These credit derivatives may reference a single asset, an
obligations does not include any credit loss. index, or a portfolio/basket of assets or indices. See Note 7
for further information about credit derivatives. These VIEs
Expected credit loss assumptions are reflected in the use the funds from the sale of beneficial interests and the
discount rate for the remainder of retained interests. premiums received from credit derivative counterparties to
The firm has other retained interests not reflected in the purchase securities which serve to collateralize the
table above with a fair value of $44 million and a weighted beneficial interest holders and/or the credit derivative
average life of 3.5 years as of December 2015, and a fair counterparty. These VIEs may enter into other derivatives,
value of $59 million and a weighted average life of 3.6 years primarily interest rate swaps, which are typically not
as of December 2014. Due to the nature and current fair variable interests. The firm may be a counterparty to
value of certain of these retained interests, the weighted derivatives with these VIEs and generally enters into
average assumptions for constant prepayment and discount derivatives with other counterparties to mitigate its risk.
rates and the related sensitivity to adverse changes are not
meaningful as of December 2015 and December 2014. The
firms maximum exposure to adverse changes in the value
of these interests is the carrying value of $44 million and
$59 million as of December 2015 and December 2014,
respectively.

Goldman Sachs 2015 Form 10-K 165

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Real Estate, Credit-Related and Other Investing VIEs. VIE Consolidation Analysis
The firm purchases equity and debt securities issued by and A variable interest in a VIE is an investment (e.g., debt or
makes loans to VIEs that hold real estate, performing and equity securities) or other interest (e.g., derivatives or loans
nonperforming debt, distressed loans and equity securities. and lending commitments) in a VIE that will absorb
The firm typically does not sell assets to, or enter into portions of the VIEs expected losses and/or receive
derivatives with, these VIEs. portions of the VIEs expected residual returns.
Other Asset-Backed VIEs. The firm structures VIEs that The firms variable interests in VIEs include senior and
issue notes to clients, and purchases and sells beneficial subordinated debt in residential and commercial mortgage-
interests issued by other asset-backed VIEs in connection backed and other asset-backed securitization entities,
with market-making activities. In addition, the firm may CDOs and CLOs; loans and lending commitments; limited
enter into derivatives with certain other asset-backed VIEs, and general partnership interests; preferred and common
primarily total return swaps on the collateral assets held by equity; derivatives that may include foreign currency,
these VIEs under which the firm pays the VIE the return due equity and/or credit risk; guarantees; and certain of the fees
to the note holders and receives the return on the collateral the firm receives from investment funds. Certain interest
assets owned by the VIE. The firm generally can be rate, foreign currency and credit derivatives the firm enters
removed as the total return swap counterparty. The firm into with VIEs are not variable interests because they create
generally enters into derivatives with other counterparties rather than absorb risk.
to mitigate its risk from derivatives with these VIEs. The
The enterprise with a controlling financial interest in a VIE
firm typically does not sell assets to the other asset-backed
is known as the primary beneficiary and consolidates the
VIEs it structures.
VIE. The firm determines whether it is the primary
Principal-Protected Note VIEs. The firm structures VIEs beneficiary of a VIE by performing an analysis that
that issue principal-protected notes to clients. These VIEs principally considers:
own portfolios of assets, principally with exposure to hedge
Which variable interest holder has the power to direct the
funds. Substantially all of the principal protection on the
activities of the VIE that most significantly impact the
notes issued by these VIEs is provided by the asset portfolio
VIEs economic performance;
rebalancing that is required under the terms of the notes.
The firm enters into total return swaps with these VIEs Which variable interest holder has the obligation to
under which the firm pays the VIE the return due to the absorb losses or the right to receive benefits from the VIE
principal-protected note holders and receives the return on that could potentially be significant to the VIE;
the assets owned by the VIE. The firm may enter into
The VIEs purpose and design, including the risks the VIE
derivatives with other counterparties to mitigate the risk it
was designed to create and pass through to its variable
has from the derivatives it enters into with these VIEs. The
interest holders;
firm also obtains funding through these VIEs.
The VIEs capital structure;
Other VIEs. Other primarily includes nonconsolidated
power-related and investment fund VIEs. The firm The terms between the VIE and its variable interest
purchases debt and equity securities issued by VIEs that holders and other parties involved with the VIE; and
hold power-related assets, and may provide commitments
Related-party relationships.
to these VIEs. The firm also makes equity investments in
certain of the investment fund VIEs it manages, and is The firm reassesses its initial evaluation of whether an
entitled to receive fees from these VIEs. The firm typically entity is a VIE when certain reconsideration events occur.
does not sell assets to, or enter into derivatives with, these The firm reassesses its determination of whether it is the
VIEs. primary beneficiary of a VIE on an ongoing basis based on
current facts and circumstances.

166 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Nonconsolidated VIEs
The table below presents information about nonconsolidated The firms exposure to the obligations of VIEs is generally
VIEs in which the firm holds variable interests. limited to its interests in these entities. In certain instances,
the firm provides guarantees, including derivative
Nonconsolidated VIEs
as of December
guarantees, to VIEs or holders of variable interests in VIEs.
$ in millions 2015 2014 In the table above, nonconsolidated VIEs are aggregated
Mortgage-backed 1 based on principal business activity. The nature of the
Assets in VIEs $62,672 $ 78,107
Carrying value of variable interests - assets 2,439 4,348 firms variable interests can take different forms, as
Maximum Exposure to Loss described in the rows under maximum exposure to loss. In
Retained interests 1,115 2,370
Purchased interests 1,324 1,978 the table above:
Commitments and guarantees 40
Derivatives 222 392 The maximum exposure to loss excludes the benefit of
Total maximum exposure to loss 2,701 4,740 offsetting financial instruments that are held to mitigate
Corporate CDOs and CLOs the risks associated with these variable interests.
Assets in VIEs 6,493 8,317
Carrying value of variable interests - assets 624 463 For retained and purchased interests, and loans and
Carrying value of variable interests - liabilities 29 3
Maximum Exposure to Loss
investments, the maximum exposure to loss is the
Retained interests 3 4 carrying value of these interests.
Purchased interests 106 184
Commitments and guarantees 647 For commitments and guarantees, and derivatives, the
Derivatives 2,633 2,053 maximum exposure to loss is the notional amount, which
Loans and investments 265
Total maximum exposure to loss 3,654 2,241 does not represent anticipated losses and also has not
Real estate, credit-related and other investing
been reduced by unrealized losses already recorded. As a
Assets in VIEs 9,793 8,720 result, the maximum exposure to loss exceeds liabilities
Carrying value of variable interests - assets 3,557 3,051
recorded for commitments and guarantees, and
Carrying value of variable interests - liabilities 3 3
Maximum Exposure to Loss derivatives provided to VIEs.
Commitments and guarantees 570 604
Loans and investments 3,557 3,051 The carrying values of the firms variable interests in
Total maximum exposure to loss 4,127 3,655 nonconsolidated VIEs are included in the consolidated
Other asset-backed statement of financial condition as follows:
Assets in VIEs 7,026 8,253
Carrying value of variable interests - assets 265 509 Substantially all assets held by the firm related to
Carrying value of variable interests - liabilities 145 16
Maximum Exposure to Loss mortgage-backed and corporate CDO and CLO VIEs are
Retained interests 41 55 included in Financial instruments owned, at fair value.
Purchased interests 98 322
Commitments and guarantees 500 213
Substantially all liabilities held by the firm related to
Derivatives 4,075 3,221 corporate CDO and CLO VIEs are included in Financial
Total maximum exposure to loss 4,714 3,811 instruments sold, but not yet purchased, at fair value;
Other
Assets in VIEs 4,161 5,677 Substantially all assets held by the firm related to other
Carrying value of variable interests - assets 286 290 asset-backed VIEs are included in Financial instruments
Maximum Exposure to Loss
Commitments and guarantees 263 307 owned, at fair value and Loans Receivable.
Derivatives 6 88 Substantially all liabilities held by the firm related to other
Loans and investments 286 290
Total maximum exposure to loss 555 685
asset-backed VIEs are included in Financial instruments
sold, but not yet purchased, at fair value;
Total nonconsolidated VIEs
Assets in VIEs 90,145 109,074
Carrying value of variable interests - assets 7,171 8,661
Substantially all assets held by the firm related to real
Carrying value of variable interests - liabilities 177 22 estate, credit-related and other investing VIEs are
Maximum Exposure to Loss included in Financial instruments owned, at fair value,
Retained interests 1,159 2,429
Purchased interests 1,528 2,484 Loans receivable, and Other assets. Substantially all
Commitments and guarantees 2 2,020 1,124 liabilities held by the firm related to real estate, credit-
Derivatives 2 6,936 5,754
Loans and investments 4,108 3,341
related and other investing VIEs are included in Other
Total maximum exposure to loss $15,751 $ 15,132 liabilities and accrued expenses and Financial
Instruments sold, but not yet purchased, at fair value;
1. Assets in VIEs and maximum exposure to loss include $4.08 billion and
$502 million, respectively, as of December 2015, and $3.57 billion and and
$662 million, respectively, as of December 2014, related to CDOs backed by
mortgage obligations. Substantially all assets held by the firm related to other
2. Includes $1.52 billion and $1.64 billion as of December 2015 and VIEs are included in Financial instruments owned, at
December 2014, respectively, related to commitments and derivative
transactions with VIEs to which the firm transferred assets. fair value.

Goldman Sachs 2015 Form 10-K 167

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Consolidated VIEs In the table above:

The table below presents the carrying amount and
Consolidated VIEs are aggregated based on principal
classification of assets and liabilities in consolidated VIEs,
business activity and their assets and liabilities are
excluding the benefit of offsetting financial instruments that
presented net of intercompany eliminations. The majority
are held to mitigate the risks associated with the firms
of the assets in principal-protected notes VIEs are
variable interests.
intercompany and are eliminated in consolidation.
Consolidated VIEs VIEs in which the firm holds a majority voting interest are
as of December excluded if (i) the VIE meets the definition of a business
$ in millions 2015 2014 and (ii) the VIEs assets can be used for purposes other
Real estate, credit-related and other investing
Assets
than the settlement of its obligations.
Cash and cash equivalents $ 374 $ 218
Cash and securities segregated for regulatory and other Substantially all the assets can only be used to settle
purposes 49 19 obligations of the VIE. The liabilities of real estate, credit-
Receivables from brokers, dealers and clearing organizations 1
Loans receivable 1,534 589 related and other investing VIEs, and CDOs, mortgage-
Financial instruments owned, at fair value 1,585 2,608 backed and other asset-backed VIEs do not have recourse
Other assets 456 349 to the general credit of the firm.
Total 3,999 3,783
Liabilities
Other secured financings 332 419
Payables to customers and counterparties 2 Note 13.
Financial instruments sold, but not yet purchased, at fair
value 16 10 Other Assets
Unsecured long-term borrowings 12
Other liabilities and accrued expenses 556 906 Other assets are generally less liquid, non-financial assets.
Total 906 1,347 The table below presents other assets by type.
CDOs, mortgage-backed and other asset-backed
Assets
Financial instruments owned, at fair value 572 121 As of December
Other assets 15
$ in millions 2015 2014
Total 587 121
Liabilities Property, leasehold improvements and
Other secured financings 113 99 equipment $ 9,956 $ 9,344
Payables to customers and counterparties 432 Goodwill and identifiable intangible assets 4,148 4,160
Financial instruments sold, but not yet purchased, at fair
value 8 Income tax-related assets 5,548 5,181
Total 545 107 Equity-method investments 1 258 360
Principal-protected notes Miscellaneous receivables and other 2 5,308 3 3,156
Assets Total $25,218 $22,201
Cash and securities segregated for regulatory and other
purposes 31
1. Excludes investments accounted for at fair value under the fair value option
Financial instruments owned, at fair value 126 276
where the firm would otherwise apply the equity method of accounting of
Total 126 307
$6.59 billion and $6.62 billion as of December 2015 and December 2014,
Liabilities
Other secured financings 413 439 respectively, all of which are included in Financial instruments owned, at fair
Unsecured short-term borrowings, including the current value. The firm has generally elected the fair value option for such
portion of unsecured long-term borrowings 416 1,090 investments acquired after the fair value option became available.
Unsecured long-term borrowings 312 103 2. Includes $581 million and $461 million of investments in qualified affordable
Total 1,141 1,632 housing projects as of December 2015 and December 2014, respectively.
Total consolidated VIEs 3. Includes $1.96 billion of assets classified as held for sale related to certain of
Assets the firms consolidated investments in Europe.
Cash and cash equivalents 374 218
Cash and securities segregated for regulatory and other
purposes 49 50
Receivables from brokers, dealers and clearing organizations 1
Loans receivable 1,534 589
Financial instruments owned, at fair value 2,283 3,005
Other assets 471 349
Total 4,712 4,211
Liabilities
Other secured financings 858 957
Payables to customers and counterparties 434
Financial instruments sold, but not yet purchased, at fair
value 16 18
Unsecured short-term borrowings, including the current
portion of unsecured long-term borrowings 416 1,090
Unsecured long-term borrowings 312 115
Other liabilities and accrued expenses 556 906
Total $2,592 $3,086

168 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Identifiable Intangible Assets

Assets Held for Sale as of December
In the fourth quarter of 2015, the firm classified certain $ in millions 2015 2014
consolidated investments in Europe within its Investing &
Institutional Client Services:
Lending segment as held for sale. As of December 2015, Fixed Income, Currency and
assets and liabilities related to these investments were Commodities Client Execution $ 92 $138
included in Other assets and Other liabilities and Equities Client Execution 193 246
accrued expenses, respectively. Assets related to these Investing & Lending 75 18
Investment Management 131 113
investments were $1.96 billion as of December 2015 and
Total $491 $515
substantially all consisted of Property, leasehold
improvements and equipment. Liabilities related to these Goodwill. Goodwill is the cost of acquired companies in
investments were $783 million as of December 2015 and excess of the fair value of net assets, including identifiable
substantially all consisted of Other secured financings intangible assets, at the acquisition date.
carried at fair value under the fair value option.
Goodwill is assessed for impairment annually in the fourth
Property, Leasehold Improvements and Equipment quarter or more frequently if events occur or circumstances
Property, leasehold improvements and equipment in the change that indicate an impairment may exist. When
table above is net of accumulated depreciation and assessing goodwill for impairment, first, qualitative factors
amortization of $7.77 billion and $8.98 billion as of are assessed to determine whether it is more likely than not
December 2015 and December 2014, respectively. that the fair value of a reporting unit is less than its carrying
Property, leasehold improvements and equipment included amount. If the results of the qualitative assessment are not
$5.93 billion and $5.81 billion as of December 2015 and conclusive, a quantitative goodwill test is performed. The
December 2014, respectively, related to property, leasehold quantitative goodwill test consists of two steps:
improvements and equipment that the firm uses in
connection with its operations. The remainder is held by The first step compares the estimated fair value of each
investment entities, including VIEs, consolidated by the reporting unit with its estimated net book value
firm. Substantially all property and equipment is (including goodwill and identifiable intangible assets). If
depreciated on a straight-line basis over the useful life of the the reporting units estimated fair value exceeds its
asset. Leasehold improvements are amortized on a straight- estimated net book value, goodwill is not impaired.
line basis over the useful life of the improvement or the term If the estimated fair value of a reporting unit is less than
of the lease, whichever is shorter. Certain costs of software its estimated net book value, the second step of the
developed or obtained for internal use are capitalized and goodwill test is performed to measure the amount of
amortized on a straight-line basis over the useful life of the impairment, if any. An impairment is equal to the excess
software. of the carrying amount of goodwill over its fair value.
Goodwill and Identifiable Intangible Assets Goodwill was tested for impairment, using a quantitative
The tables below present the carrying values of goodwill test, during the fourth quarter of 2015. The estimated fair
and identifiable intangible assets. value of each of the reporting units exceeded its respective
net book value. Accordingly, goodwill was not impaired
Goodwill as of December and step two of the quantitative goodwill test was not
$ in millions 2015 2014 performed.
Investment Banking:
Financial Advisory $ 98 $ 98 To estimate the fair value of each reporting unit, a relative
Underwriting 183 183 value technique was used because the firm believes market
Institutional Client Services: participants would use this technique to value the firms
Fixed Income, Currency and
Commodities Client Execution 269 269
reporting units. The relative value technique applies
Equities Client Execution 2,402 2,403 observable price-to-earnings multiples or price-to-book
Securities Services 105 105 multiples and projected return on equity of comparable
Investing & Lending 2 competitors to reporting units net earnings or net book
Investment Management 598 587 value. The net book value of each reporting unit reflects an
Total $3,657 $3,645 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.

Goldman Sachs 2015 Form 10-K 169

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Identifiable Intangible Assets. The table below presents Impairments

the gross carrying amount, accumulated amortization and The firm tests property, leasehold improvements and
net carrying amount of identifiable intangible assets and equipment, identifiable intangible assets and other assets
their weighted average remaining useful lives. for impairment whenever events or changes in
circumstances suggest that an assets or asset groups
As of December carrying value may not be fully recoverable. To the extent
Weighted Average the carrying value of an asset exceeds the projected
Remaining Useful undiscounted cash flows expected to result from the use
$ in millions 2015 Lives (years) 2014
and eventual disposal of the asset or asset group, the firm
Customer lists
Gross carrying amount $ 1,072 $1,036 determines the asset is impaired and records an impairment
Accumulated amortization (777) (715) equal to the difference between the estimated fair value and
Net carrying amount 295 6 321 the carrying value of the asset or asset group. In addition,
Commodities-related the firm will recognize an impairment prior to the sale of an
Gross carrying amount 185 216 asset if the carrying value of the asset exceeds its estimated
Accumulated amortization (94) (78) fair value.
Net carrying amount 91 1 7 138
Other During 2015, the firm recorded impairments of
Gross carrying amount 264 200 $103 million, substantially all of which were attributable to
Accumulated amortization (159) (144) consolidated investments and included in the firms
Net carrying amount 105 2 6 56 Investing & Lending segment. The impairments generally
Total reflected challenging market conditions for certain
Gross carrying amount 1,521 1,452 companies in the energy industry resulting from continued
Accumulated amortization (1,030) (937)
low energy commodity prices. These impairments consisted
Net carrying amount $ 491 6 $ 515
of $81 million related to property, leasehold improvements
1. Primarily includes commodities-related transportation rights. and equipment, which was included in Depreciation and
2. Primarily includes intangible assets related to acquired leases. amortization, and $22 million related to other assets,
which was included in Other Expenses.
Substantially all of the firms identifiable intangible assets
are considered to have finite useful lives and are amortized During 2014, primarily as a result of deterioration in
over their estimated useful lives using the straight-line market and operating conditions related to certain of the
method or based on economic usage for certain firms consolidated investments and the firms exchange-
commodities-related intangibles. traded fund lead market maker (LMM) rights, the firm
determined that certain assets were impaired and recorded
The tables below present details about amortization of impairments of $360 million, all of which were included in
identifiable intangible assets. Depreciation and amortization. These impairments
consisted of $268 million related to property, leasehold
Year Ended December
improvements and equipment, substantially all of which
$ in millions 2015 2014 2013 was attributable to a consolidated investment in Latin
Amortization $132 $217 $205 America, $70 million related to identifiable intangible
assets, primarily attributable to the firms LMM rights, and
$ in millions As of $22 million related to goodwill as a result of the sale of
Estimated future amortization December 2015 Metro International Trade Services (Metro). The
2016 $130 impairments related to property, leasehold improvements
2017 117 and equipment and goodwill were included within the
2018 100 firms Investing & Lending segment and the impairments
2019 68
related to identifiable intangible assets were principally
2020 21
included within the firms Institutional Client Services
segment.
The impairments represented the excess of the carrying
values of these assets over their estimated fair values,
substantially all of which are calculated using level 3
measurements. These fair values were calculated using a
combination of discounted cash flow analyses and relative
value analyses, including the estimated cash flows expected
to result from the use and eventual disposition of these assets.

170 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Note 14. Note 15.

Deposits Short-Term Borrowings
The table below presents deposits held in U.S. and non-U.S. The table below presents details about the firms short-term
offices, substantially all of which were interest-bearing. borrowings.
Substantially all U.S. deposits were held at Goldman Sachs
Bank USA (GS Bank USA) and substantially all non-U.S. As of December
deposits were held at Goldman Sachs International Bank $ in millions 2015 2014
(GSIB). Other secured financings (short-term) $14,233 $15,560
Unsecured short-term borrowings 42,787 44,539
As of December Total $57,020 $60,099
$ in millions 2015 2014
U.S. offices $81,920 $69,142
See Note 10 for information about other secured
Non-U.S. offices 15,599 13,738 financings.
Total $97,519 $82,880 Unsecured short-term borrowings include the portion of
unsecured long-term borrowings maturing within one year
The table below presents maturities of time deposits held in
of the financial statement date and unsecured long-term
U.S. and non-U.S. offices.
borrowings that are redeemable within one year of the
financial statement date at the option of the holder.
As of December 2015
$ in millions U.S. Non-U.S. Total The firm accounts for promissory notes, commercial paper
2016 $ 8,572 $8,692 $17,264 and certain hybrid financial instruments at fair value under
2017 6,213 119 6,332 the fair value option. See Note 8 for further information
2018 3,975 7 3,982 about unsecured short-term borrowings that are accounted
2019 3,931 3,931 for at fair value. The carrying value of unsecured short-term
2020 3,191 3,191 borrowings that are not recorded at fair value generally
2021 - thereafter 8,196 116 8,312 approximates fair value due to the short-term nature of the
Total $34,078 1 $8,934 2 $43,012 3
obligations. While these unsecured short-term borrowings
1. Includes $1.92 billion greater than $100,000, of which $741 million matures are carried at amounts that approximate fair value, they are
within three months, $730 million matures within three to six months, not accounted for at fair value under the fair value option
$326 million matures within six to twelve months, and $127 million matures
after twelve months.
or at fair value in accordance with other U.S. GAAP and
2. Includes $6.98 billion greater than $100,000.
therefore are not included in the firms fair value hierarchy
in Notes 6 through 8. Had these borrowings been included
3. Includes $14.68 billion of time deposits accounted for at fair value under the
fair value option. See Note 8 for further information about deposits in the firms fair value hierarchy, substantially all would
accounted for at fair value. have been classified in level 2 as of December 2015 and
As of December 2015 and December 2014, deposits include December 2014.
$54.51 billion and $49.29 billion, respectively, of savings The table below presents details about the firms unsecured
and demand deposits, which have no stated maturity, and short-term borrowings.
were recorded based on the amount of cash received plus
accrued interest, which approximates fair value. In As of December
addition, the firm designates certain derivatives as fair value $ in millions 2015 2014
hedges to convert substantially all of its time deposits not Current portion of unsecured long-term
accounted for at fair value from fixed-rate obligations into borrowings 1 $25,373 $25,125
floating-rate obligations. Accordingly, the carrying value of Hybrid financial instruments 12,956 14,083
time deposits approximated fair value as of December 2015 Promissory notes 338
and December 2014. While these savings and demand Commercial paper 208 617
Other short-term borrowings 4,250 4,376
deposits and time deposits are carried at amounts that
Total $42,787 $44,539
approximate fair value, they are not accounted for at fair
value under the fair value option or at fair value in Weighted average interest rate 2 1.52% 1.52%
accordance with other U.S. GAAP and therefore are not
1. Includes $24.11 billion and $23.82 billion as of December 2015 and
included in the firms fair value hierarchy in Notes 6 December 2014, respectively, issued by Group Inc.
through 8. Had these deposits been included in the firms 2. The weighted average interest rates for these borrowings include the effect
fair value hierarchy, they would have been classified in of hedging activities and exclude financial instruments accounted for at fair
level 2 as of December 2015 and December 2014. value under the fair value option. See Note 7 for further information about
hedging activities.

Goldman Sachs 2015 Form 10-K 171

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Note 16.
Long-Term Borrowings
The table below presents details about the firms long-term The table below presents unsecured long-term borrowings
borrowings. by maturity date.

As of December As of December 2015

$ in millions 2015 2014 $ in millions Group Inc. Subsidiaries Total
Other secured financings (long-term) $ 10,520 $ 7,249 2017 $ 22,744 $ 2,618 $ 25,362
Unsecured long-term borrowings 175,422 167,302 2018 23,262 1,869 25,131
Total $185,942 $174,551 2019 15,010 1,025 16,035
2020 17,606 349 17,955
See Note 10 for information about other secured 2021 - thereafter 86,059 4,880 90,939
financings. Total 1 $164,681 $10,741 $175,422

The tables below present unsecured long-term borrowings 1. Includes $8.34 billion of adjustments to the carrying value of certain
unsecured long-term borrowings resulting from the application of hedge
extending through 2061 and consisting principally of senior accounting by year of maturity as follows: $436 million in 2017, $614 million
borrowings. in 2018, $407 million in 2019, $443 million in 2020, and $6.44 billion in 2021
and thereafter.

As of December 2015 In the table above:

U.S. Non-U.S.
$ in millions Dollar Dollar Total Unsecured long-term borrowings maturing within one
Fixed-rate obligations 1 year of the financial statement date and unsecured long-
Group Inc. $ 90,076 $29,808 $119,884 term borrowings that are redeemable within one year of
Subsidiaries 2,114 895 3,009 the financial statement date at the option of the holders
Floating-rate obligations 2
Group Inc. 27,881 16,916 44,797
are excluded from the table as they are included as
Subsidiaries 5,662 2,070 7,732 unsecured short-term borrowings.
Total $125,733 $49,689 $175,422 Unsecured long-term borrowings that are repayable prior
to maturity at the option of the firm are reflected at their
As of December 2014 contractual maturity dates.
U.S. Non-U.S.
$ in millions Dollar Dollar Total
Unsecured long-term borrowings that are redeemable
Fixed-rate obligations 1 prior to maturity at the option of the holders are reflected
Group Inc. $ 86,255 $34,070 $120,325 at the earliest dates such options become exercisable.
Subsidiaries 3,062 710 3,772
The firm designates certain derivatives as fair value hedges to
Floating-rate obligations 2
Group Inc. 23,396 14,590 37,986 convert a majority of the amount of its fixed-rate unsecured
Subsidiaries 4,137 1,082 5,219 long-term borrowings not accounted for at fair value into
Total $116,850 $50,452 $167,302 floating-rate obligations. Accordingly, excluding the
cumulative impact of changes in the firms credit spreads, the
1. Interest rates on U.S. dollar-denominated debt ranged from 1.60% to
10.04% (with a weighted average rate of 4.89%) and 1.55% to 10.04% (with
carrying value of unsecured long-term borrowings
a weighted average rate of 5.08%) as of December 2015 and approximated fair value as of December 2015 and
December 2014, respectively. Interest rates on non-U.S. dollar-denominated December 2014. See Note 7 for further information about
debt ranged from 0.40% to 13.00% (with a weighted average rate of 3.81%)
and 0.02% to 13.00% (with a weighted average rate of 4.06%) as of hedging activities. For unsecured long-term borrowings for
December 2015 and December 2014, respectively. which the firm did not elect the fair value option, the
2. Floating interest rates generally are based on LIBOR or OIS. Equity-linked cumulative impact due to changes in the firms own credit
and indexed instruments are included in floating-rate obligations. spreads would be an increase of less than 1% and an increase
of 2% in the carrying value of such borrowings as of
December 2015 and December 2014, respectively. As these
borrowings are not accounted for at fair value under the fair
value option or at fair value in accordance with other U.S.
GAAP, their fair value is not included in the firms fair value
hierarchy in Notes 6 through 8. Had these borrowings been
included in the firms fair value hierarchy, substantially all
would have been classified in level 2 as of December 2015
and December 2014.

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Notes to Consolidated Financial Statements

The tables below present unsecured long-term borrowings, Junior Subordinated Debt
after giving effect to hedging activities that converted a Junior Subordinated Debt Held by 2012 Trusts. In
majority of the amount of fixed-rate obligations to floating- 2012, the Vesey Street Investment Trust I and the Murray
rate obligations. Street Investment Trust I (together, the 2012 Trusts) issued
an aggregate of $2.25 billion of senior guaranteed trust
As of December 2015
securities to third parties. The proceeds of that offering
$ in millions Group Inc. Subsidiaries Total were used to purchase $1.75 billion of junior subordinated
Fixed-rate obligations debt issued by Group Inc. that pays interest semi-annually
At fair value $ $ 21 $ 21
At amortized cost 1 52,448 2,569 55,017
at a fixed annual rate of 4.647% and matures on
Floating-rate obligations March 9, 2017, and $500 million of junior subordinated
At fair value 16,194 6,058 22,252 debt issued by Group Inc. that pays interest semi-annually
At amortized cost 1 96,039 2,093 98,132 at a fixed annual rate of 4.404% and matures on
Total $164,681 $10,741 $175,422 September 1, 2016. During 2014, the firm exchanged
$175 million of the senior guaranteed trust securities held
As of December 2014 by the firm for $175 million of junior subordinated debt
$ in millions Group Inc. Subsidiaries Total held by the Murray Street Investment Trust I. Following the
Fixed-rate obligations exchange, these senior guaranteed trust securities and
At fair value $ $ 861 $ 861
junior subordinated debt were extinguished.
At amortized cost 1 31,232 2,440 33,672
Floating-rate obligations The 2012 Trusts purchased the junior subordinated debt
At fair value 11,662 3,482 15,144
from Goldman Sachs Capital II and Goldman Sachs Capital
At amortized cost 1 115,417 2,208 117,625
III (APEX Trusts). The APEX Trusts used the proceeds
Total $158,311 $ 8,991 $167,302
from such sales to purchase shares of Group Inc.s
1. The weighted average interest rates on the aggregate amounts were 2.73% Perpetual Non-Cumulative Preferred Stock, Series E
(4.33% related to fixed-rate obligations and 1.84% related to floating-rate
obligations) and 2.68% (5.09% related to fixed-rate obligations and 2.01%
(Series E Preferred Stock) and Perpetual Non-Cumulative
related to floating-rate obligations) as of December 2015 and Preferred Stock, Series F (Series F Preferred Stock). See
December 2014, respectively. These rates exclude financial instruments Note 19 for more information about the Series E and
accounted for at fair value under the fair value option.
Series F Preferred Stock.
Subordinated Borrowings
The 2012 Trusts are required to pay distributions on their
Unsecured long-term borrowings include subordinated debt
senior guaranteed trust securities in the same amounts and
and junior subordinated debt. Junior subordinated debt is
on the same dates that they are scheduled to receive interest
junior in right of payment to other subordinated borrowings,
on the junior subordinated debt they hold, and are required
which are junior to senior borrowings. As of December 2015
to redeem their respective senior guaranteed trust securities
and December 2014, subordinated debt had maturities
upon the maturity or earlier redemption of the junior
ranging from 2017 to 2045, and 2017 to 2038, respectively.
subordinated debt they hold.
The tables below present subordinated borrowings.
The firm has the right to defer payments on the junior
As of December 2015 subordinated debt, subject to limitations. During any such
Par Carrying deferral period, the firm will not be permitted to, among
$ in millions Amount Amount Rate 1 other things, pay dividends on or make certain repurchases
Subordinated debt 2 $18,004 $20,784 3.79% of its common or preferred stock. However, as Group Inc.
Junior subordinated debt 1,359 1,817 5.77% fully and unconditionally guarantees the payment of the
Total subordinated borrowings $19,363 $22,601 3.93%
distribution and redemption amounts when due on a senior
basis on the senior guaranteed trust securities issued by the
As of December 2014
2012 Trusts, if the 2012 Trusts are unable to make
Par Carrying
$ in millions Amount Amount Rate 1
scheduled distributions to the holders of the senior
Subordinated debt 2 $14,254 $17,236 3.77%
guaranteed trust securities, under the guarantee, Group Inc.
Junior subordinated debt 1,582 2,121 6.21% would be obligated to make those payments. As such, the
Total subordinated borrowings $15,836 $19,357 4.02% $1.58 billion and the $500 million of junior subordinated
debt held by the 2012 Trusts for the benefit of investors,
1. Weighted average interest rates after giving effect to fair value hedges used
to convert these fixed-rate obligations into floating-rate obligations. See
included in Unsecured long-term borrowings and
Note 7 for further information about hedging activities. See below for Unsecured short-term borrowings, respectively, in the
information about interest rates on junior subordinated debt. consolidated statements of financial condition, is not
2. Par amount and carrying amount of subordinated debt issued by Group Inc. classified as subordinated borrowings.
were $17.47 billion and $20.25 billion, respectively, as of December 2015,
and $13.68 billion and $16.67 billion, respectively, as of December 2014.

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Notes to Consolidated Financial Statements

The APEX Trusts and the 2012 Trusts are Delaware The firm pays interest semi-annually on the junior
statutory trusts sponsored by the firm and wholly-owned subordinated debt at an annual rate of 6.345% and the
finance subsidiaries of the firm for regulatory and legal debt matures on February 15, 2034. The coupon rate and
purposes but are not consolidated for accounting purposes. the payment dates applicable to the beneficial interests are
the same as the interest rate and payment dates for the
The firm has covenanted in favor of the holders of Group
junior subordinated debt. The firm has the right, from time
Inc.s 6.345% junior subordinated debt due
to time, to defer payment of interest on the junior
February 15, 2034, that, subject to certain exceptions, the
subordinated debt, and therefore cause payment on the
firm will not redeem or purchase the capital securities
Trusts preferred beneficial interests to be deferred, in each
issued by the APEX Trusts or shares of Group Inc.s
case up to ten consecutive semi-annual periods. During any
Series E or Series F Preferred Stock prior to specified dates
such deferral period, the firm will not be permitted to,
in 2022 for a price that exceeds a maximum amount
among other things, pay dividends on or make certain
determined by reference to the net cash proceeds that the
repurchases of its common stock. The Trust is not
firm has received from the sale of qualifying securities.
permitted to pay any distributions on the common
Junior Subordinated Debt Issued in Connection with beneficial interests held by Group Inc. unless all dividends
Trust Preferred Securities. Group Inc. issued payable on the preferred beneficial interests have been paid
$2.84 billion of junior subordinated debt in 2004 to in full.
Goldman Sachs Capital I (Trust), a Delaware statutory
trust. The Trust issued $2.75 billion of guaranteed
Note 17.
preferred beneficial interests (Trust Preferred Securities) to
third parties and $85 million of common beneficial interests Other Liabilities and Accrued Expenses
to Group Inc. and used the proceeds from the issuances to The table below presents other liabilities and accrued
purchase the junior subordinated debt from Group Inc. expenses by type.
During 2014 and the first quarter of 2015, the firm
purchased $1.43 billion (par amount) of Trust Preferred As of December
Securities and delivered these securities, along with
$ in millions 2015 2014
$44.2 million of common beneficial interests, to the Trust
Compensation and benefits $ 8,149 $ 8,368
in exchange for a corresponding par amount of the junior Noncontrolling interests 1 459 404
subordinated debt. Following the exchanges, these Trust Income tax-related liabilities 1,280 1,533
Preferred Securities, common beneficial interests and junior Employee interests in consolidated funds 149 176
subordinated debt were extinguished. Subsequent to these Subordinated liabilities issued by
extinguishments, the outstanding par amount of junior consolidated VIEs 501 843
subordinated debt held by the Trust was $1.36 billion and Accrued expenses and other 2 8,355 3 4,751
Total $18,893 $16,075
the outstanding par amount of Trust Preferred Securities
and common beneficial interests issued by the Trust was 1. Primarily relates to consolidated investment funds.
$1.32 billion and $40.8 million, respectively. The Trust is a 2. Substantially all of the increase from December 2014 to December 2015
wholly-owned finance subsidiary of the firm for regulatory relates to provisions for the agreement in principle with the Residential
and legal purposes but is not consolidated for accounting Mortgage-Backed Securities Working Group of the U.S. Financial Fraud
Enforcement Task Force (RMBS Working Group). See Note 27 for further
purposes. information about this agreement in principle.
3. Includes $783 million of liabilities classified as held for sale related to certain
of the firms consolidated investments in Europe. See Note 13 for further
information.

174 Goldman Sachs 2015 Form 10-K

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Notes to Consolidated Financial Statements

Note 18.
Commitments, Contingencies and
Guarantees
Commitments Commitments to Extend Credit
The table below presents the firms commitments by type. The firms commitments to extend credit are agreements to
lend with fixed termination dates and depend on the
As of December satisfaction of all contractual conditions to borrowing.
$ in millions 2015 2014 These commitments are presented net of amounts
Commitments to extend credit syndicated to third parties. The total commitment amount
Commercial lending: does not necessarily reflect actual future cash flows because
Investment-grade $ 72,428 $ 63,634 the firm may syndicate all or substantial additional portions
Non-investment-grade 41,277 29,605
of these commitments. In addition, commitments can
Warehouse financing 3,453 2,710
expire unused or be reduced or cancelled at the
Total commitments to extend credit 117,158 95,949
Contingent and forward starting resale and counterpartys request.
securities borrowing agreements 28,874 35,225
As of December 2015 and December 2014, $93.92 billion
Forward starting repurchase and secured
lending agreements 5,878 8,180
and $66.22 billion, respectively, of the firms lending
Letters of credit 249 308 commitments were held for investment and were accounted
Investment commitments 6,054 5,164 for on an accrual basis. See Note 9 for further information
Other 6,944 6,321 about such commitments. In addition, as of December 2015
Total commitments $165,157 $151,147 and December 2014, $9.92 billion and $3.12 billion,
respectively, of the firms lending commitments were held
The table below presents the firms commitments by period for sale and were accounted for at the lower of cost or fair
of expiration. value.

Commitment Amount by Period

The firm accounts for the remaining commitments to
of Expiration as of December 2015 extend credit at fair value. Losses, if any, are generally
2017 - 2019 - 2021- recorded, net of any fees in Other principal transactions.
$ in millions 2016 2018 2020 Thereafter
Commitments to extend credit
Commercial lending:
Investment-grade $18,283 $14,530 $36,811 $ 2,804
Non-investment-grade 9,652 8,521 16,932 6,172
Warehouse financing 469 1,905 79 1,000
Total commitments to
extend credit 28,404 24,956 53,822 9,976
Contingent and forward
starting resale and
securities borrowing
agreements 28,839 35
Forward starting
repurchase and secured
lending agreements 5,878
Letters of credit 217 25 3 4
Investment commitments 4,600 336 24 1,094
Other 6,484 339 70 51
Total commitments $74,422 $25,691 $53,919 $11,125

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Notes to Consolidated Financial Statements

Commercial Lending. The firms commercial lending Letters of Credit

commitments are extended to investment-grade and non- The firm has commitments under letters of credit issued by
investment-grade corporate borrowers. Commitments to various banks which the firm provides to counterparties in
investment-grade corporate borrowers are principally used lieu of securities or cash to satisfy various collateral and
for operating liquidity and general corporate purposes. The margin deposit requirements.
firm also extends lending commitments in connection with
Investment Commitments
contingent acquisition financing and other types of
The firms investment commitments of $6.05 billion and
corporate lending as well as commercial real estate
$5.16 billion as of December 2015 and December 2014,
financing. Commitments that are extended for contingent
respectively, include commitments to invest in private
acquisition financing are often intended to be short-term in
equity, real estate and other assets directly and through
nature, as borrowers often seek to replace them with other
funds that the firm raises and manages. Of these amounts,
funding sources.
$2.86 billion and $2.87 billion as of December 2015 and
Sumitomo Mitsui Financial Group, Inc. (SMFG) provides December 2014, respectively, relate to commitments to
the firm with credit loss protection on certain approved invest in funds managed by the firm. If these commitments
loan commitments (primarily investment-grade commercial are called, they would be funded at market value on the
lending commitments). The notional amount of such loan date of investment.
commitments was $27.03 billion and $27.51 billion as of
Leases
December 2015 and December 2014, respectively. The
The firm has contractual obligations under long-term
credit loss protection on loan commitments provided by
noncancelable lease agreements for office space expiring on
SMFG is generally limited to 95% of the first loss the firm
various dates through 2069. Certain agreements are subject
realizes on such commitments, up to a maximum of
to periodic escalation provisions for increases in real estate
approximately $950 million. In addition, subject to the
taxes and other charges.
satisfaction of certain conditions, upon the firms request,
SMFG will provide protection for 70% of additional losses The table below presents future minimum rental payments,
on such commitments, up to a maximum of $1.13 billion, net of minimum sublease rentals.
of which $768 million of protection had been provided as
of both December 2015 and December 2014. The firm also As of
uses other financial instruments to mitigate credit risks $ in millions December 2015

related to certain commitments not covered by SMFG. 2016 $ 317

2017 313
These instruments primarily include credit default swaps
2018 301
that reference the same or similar underlying instrument or
2019 258
entity, or credit default swaps that reference a market 2020 226
index. 2021 - thereafter 1,160
Total $2,575
Warehouse Financing. The firm provides financing to
clients who warehouse financial assets. These arrangements
Rent charged to operating expense was $249 million for
are secured by the warehoused assets, primarily consisting
2015, $309 million for 2014 and $324 million for 2013.
of consumer and corporate loans.
Operating leases include office space held in excess of
Contingent and Forward Starting Resale and
current requirements. Rent expense relating to space held
Securities Borrowing Agreements/Forward Starting
for growth is included in Occupancy. The firm records a
Repurchase and Secured Lending Agreements
liability, based on the fair value of the remaining lease
The firm enters into resale and securities borrowing
rentals reduced by any potential or existing sublease
agreements and repurchase and secured lending agreements
rentals, for leases where the firm has ceased using the space
that settle at a future date, generally within three business
and management has concluded that the firm will not
days. The firm also enters into commitments to provide
derive any future economic benefits. Costs to terminate a
contingent financing to its clients and counterparties
lease before the end of its term are recognized and measured
through resale agreements. The firms funding of these
at fair value on termination.
commitments depends on the satisfaction of all contractual
conditions to the resale agreement and these commitments
can expire unused.

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Notes to Consolidated Financial Statements

Contingencies Guarantees
Legal Proceedings. See Note 27 for information about The tables below present information about certain
legal proceedings, including certain mortgage-related derivatives that meet the definition of a guarantee, securities
matters, and agreements the firm has entered into to toll the lending indemnifications and certain other guarantees.
statute of limitations.
As of December 2015
Certain Mortgage-Related Contingencies. There are
Securities Other
multiple areas of focus by regulators, governmental lending financial
agencies and others within the mortgage market that may $ in millions Derivatives indemnifications guarantees
impact originators, issuers, servicers and investors. There Carrying Value of Net
remains significant uncertainty surrounding the nature and Liability $ 8,351 $ $ 76
extent of any potential exposure for participants in this Maximum Payout/Notional Amount by Period of Expiration
2016 $640,288 $31,902 $ 611
market. 2017 - 2018 168,784 1,402
The firm has not been a significant originator of residential 2019 - 2020 67,643 1,772
mortgage loans. The firm did purchase loans originated by 2021 - thereafter 49,728 676
Total $926,443 $31,902 $4,461
others and generally received loan-level representations.
During the period 2005 through 2008, the firm sold
approximately $10 billion of loans to government- As of December 2014
sponsored enterprises and approximately $11 billion of Securities Other
lending financial
loans to other third parties. In addition, the firm transferred $ in millions Derivatives indemnifications guarantees
$125 billion of loans to trusts and other mortgage Carrying Value of Net
securitization vehicles. In connection with both sales of Liability $ 11,201 $ $ 119
loans and securitizations, the firm provided loan level Maximum Payout/Notional Amount by Period of Expiration
representations and/or assigned the loan level 2015 $351,308 $27,567 $ 471
representations from the party from whom the firm 2016 - 2017 150,989 935
purchased the loans. 2018 - 2019 51,927 1,390
2020 - thereafter 58,511 1,690
The firms exposure to claims for repurchase of residential Total $612,735 $27,567 $4,486
mortgage loans based on alleged breaches of
representations will depend on a number of factors such as In the tables above:
the extent to which these claims are made within the statute The maximum payout is based on the notional amount of
of limitations taking into consideration the agreements to the contract and does not represent anticipated losses.
toll the statute of limitations the firm has entered into with
trustees representing trusts. Based upon the large number of Amounts exclude certain commitments to issue standby
defaults in residential mortgages, including those sold or letters of credit that are included in Commitments to
securitized by the firm, there is a potential for repurchase extend credit. See the tables in Commitments above
claims. However, the firm is not in a position to make a for a summary of the firms commitments.
meaningful estimate of that exposure at this time.
Other Contingencies. In connection with the sale of
Metro, the firm provided customary representations and
warranties, and indemnities for breaches of these
representations and warranties, to the buyer. The firm
further agreed to provide indemnities to the buyer, which
primarily relate to potential liabilities for legal or regulatory
proceedings arising out of the conduct of Metros business
while the firm owned it.

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Notes to Consolidated Financial Statements

Derivative Guarantees. The firm enters into various Other Financial Guarantees. In the ordinary course of
derivatives that meet the definition of a guarantee under business, the firm provides other financial guarantees of the
U.S. GAAP, including written equity and commodity put obligations of third parties (e.g., standby letters of credit
options, written currency contracts and interest rate caps, and other guarantees to enable clients to complete
floors and swaptions. These derivatives are risk managed transactions and fund-related guarantees). These
together with derivatives that do not meet the definition of guarantees represent obligations to make payments to
a guarantee, and therefore the amounts in the tables above beneficiaries if the guaranteed party fails to fulfill its
do not reflect the firms overall risk related to its derivative obligation under a contractual arrangement with that
activities. Disclosures about derivatives are not required if beneficiary.
they may be cash settled and the firm has no basis to
Guarantees of Securities Issued by Trusts. The firm has
conclude it is probable that the counterparties held the
established trusts, including Goldman Sachs Capital I, the
underlying instruments at inception of the contract. The
APEX Trusts, the 2012 Trusts, and other entities for the
firm has concluded that these conditions have been met for
limited purpose of issuing securities to third parties, lending
certain large, internationally active commercial and
the proceeds to the firm and entering into contractual
investment bank counterparties, central clearing
arrangements with the firm and third parties related to this
counterparties and certain other counterparties.
purpose. The firm does not consolidate these entities. See
Accordingly, the firm has not included such contracts in the
Note 16 for further information about the transactions
tables above. In addition, see Note 7 for information about
involving Goldman Sachs Capital I, the APEX Trusts, and
credit derivatives that meet the definition of a guarantee,
the 2012 Trusts.
which are not included in the tables above.
The firm effectively provides for the full and unconditional
Derivatives are accounted for at fair value and therefore the
guarantee of the securities issued by these entities. Timely
carrying value is considered the best indication of payment/
payment by the firm of amounts due to these entities under
performance risk for individual contracts. However, the
the guarantee, borrowing, preferred stock and related
carrying values in the tables above exclude the effect of
contractual arrangements will be sufficient to cover
counterparty and cash collateral netting.
payments due on the securities issued by these entities.
Securities Lending Indemnifications. The firm, in its
Management believes that it is unlikely that any
capacity as an agency lender, indemnifies most of its
circumstances will occur, such as nonperformance on the
securities lending customers against losses incurred in the
part of paying agents or other service providers, that would
event that borrowers do not return securities and the
make it necessary for the firm to make payments related to
collateral held is insufficient to cover the market value of
these entities other than those required under the terms of
the securities borrowed. Collateral held by the lenders in
the guarantee, borrowing, preferred stock and related
connection with securities lending indemnifications was
contractual arrangements and in connection with certain
$32.85 billion and $28.49 billion as of December 2015 and
expenses incurred by these entities.
December 2014, respectively. Because the contractual
nature of these arrangements requires the firm to obtain Indemnities and Guarantees of Service Providers. In
collateral with a market value that exceeds the value of the the ordinary course of business, the firm indemnifies and
securities lent to the borrower, there is minimal guarantees certain service providers, such as clearing and
performance risk associated with these guarantees. 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.

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Notes to Consolidated Financial Statements

The firm may also be liable to some clients or other parties In addition, the firm may provide indemnifications to some
for losses arising from its custodial role or caused by acts or counterparties to protect them in the event additional taxes
omissions of third-party service providers, including sub- are owed or payments are withheld, due either to a change
custodians and third-party brokers. In certain cases, the in or an adverse application of certain non-U.S. tax laws.
firm has the right to seek indemnification from these third-
These indemnifications generally are standard contractual
party service providers for certain relevant losses incurred
terms and are entered into in the ordinary course of
by the firm. In addition, the firm is a member of payment,
business. Generally, there are no stated or notional
clearing and settlement networks as well as securities
amounts included in these indemnifications, and the
exchanges around the world that may require the firm to
contingencies triggering the obligation to indemnify are not
meet the obligations of such networks and exchanges in the
expected to occur. The firm is unable to develop an estimate
event of member defaults and other loss scenarios.
of the maximum payout under these guarantees and
In connection with its prime brokerage and clearing indemnifications. However, management believes that it is
businesses, the firm agrees to clear and settle on behalf of its unlikely the firm will have to make any material payments
clients the transactions entered into by them with other under these arrangements, and no material liabilities related
brokerage firms. The firms obligations in respect of such to these arrangements have been recognized in the
transactions are secured by the assets in the clients account consolidated statements of financial condition as of
as well as any proceeds received from the transactions December 2015 and December 2014.
cleared and settled by the firm on behalf of the client. In
Guarantees of Subsidiaries. Group Inc. fully and
connection with joint venture investments, the firm may
unconditionally guarantees the securities issued by GS
issue loan guarantees under which it may be liable in the
Finance Corp., a wholly-owned finance subsidiary of the
event of fraud, misappropriation, environmental liabilities
firm.
and certain other matters involving the borrower.
Group Inc. has guaranteed the payment obligations of
The firm is unable to develop an estimate of the maximum
Goldman, Sachs & Co. (GS&Co.), GS Bank USA and
payout under these guarantees and indemnifications.
Goldman Sachs Execution & Clearing, L.P. (GSEC),
However, management believes that it is unlikely the firm
subject to certain exceptions.
will have to make any material payments under these
arrangements, and no material liabilities related to these In November 2008, the firm contributed subsidiaries into
guarantees and indemnifications have been recognized in GS Bank USA, and Group Inc. agreed to guarantee the
the consolidated statements of financial condition as of reimbursement of certain losses, including credit-related
December 2015 and December 2014. losses, relating to assets held by the contributed entities.
Other Representations, Warranties and In addition, Group Inc. guarantees many of the obligations
Indemnifications. The firm provides representations and of its other consolidated subsidiaries on a transaction-by-
warranties to counterparties in connection with a variety of transaction basis, as negotiated with counterparties. Group
commercial transactions and occasionally indemnifies them Inc. is unable to develop an estimate of the maximum
against potential losses caused by the breach of those payout under its subsidiary guarantees; however, because
representations and warranties. The firm may also provide these guaranteed obligations are also obligations of
indemnifications protecting against changes in or adverse consolidated subsidiaries, Group Inc.s liabilities as
application of certain U.S. tax laws in connection with guarantor are not separately disclosed.
ordinary-course transactions such as securities issuances,
borrowings or derivatives.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Note 19.
Shareholders Equity
Common Equity Preferred Equity
Dividends declared per common share were $2.55 in 2015, The tables below present details about the perpetual
$2.25 in 2014 and $2.05 in 2013. On January 19, 2016, preferred stock issued and outstanding as of
Group Inc. declared a dividend of $0.65 per common share December 2015.
to be paid on March 30, 2016 to common shareholders of
record on March 2, 2016. Shares Shares Shares Depositary Shares
Series Authorized Issued Outstanding Per Share
The firms share repurchase program is intended to help A 50,000 30,000 29,999 1,000
maintain the appropriate level of common equity. The B 50,000 32,000 32,000 1,000
share repurchase program is effected primarily through C 25,000 8,000 8,000 1,000
regular open-market purchases (which may include D 60,000 54,000 53,999 1,000
repurchase plans designed to comply with Rule 10b5-1), E 17,500 17,500 17,500 N/A
the amounts and timing of which are determined primarily F 5,000 5,000 5,000 N/A
I 34,500 34,000 34,000 1,000
by the firms current and projected capital position, but
J 46,000 40,000 40,000 1,000
which may also be influenced by general market conditions
K 32,200 28,000 28,000 1,000
and the prevailing price and trading volumes of the firms L 52,000 52,000 52,000 25
common stock. Prior to repurchasing common stock, the M1 80,000 80,000 80,000 25
firm must receive confirmation that the Federal Reserve Total 452,200 380,500 380,498
Board does not object to such capital actions.
1. In April 2015, Group Inc. issued 80,000 shares of Series M perpetual 5.375%
The table below presents the amount of common stock Fixed-to-Floating Rate Non-Cumulative Preferred Stock (Series M Preferred
Stock).
repurchased by the firm under the share repurchase
program.
Redemption
Liquidation Redemption Value
Year Ended December Series Preference Price Per Share ($ in millions)
in millions, except per share amounts 2015 2014 2013 $25,000 plus declared and
Common share repurchases 22.1 31.8 39.3 A $ 25,000 unpaid dividends $ 750
Average cost per share $189.41 $171.79 $157.11 $25,000 plus declared and
B 25,000 unpaid dividends 800
Total cost of common share
repurchases $ 4,195 $ 5,469 $ 6,175 $25,000 plus declared and
C 25,000 unpaid dividends 200
Pursuant to the terms of certain share-based compensation $25,000 plus declared and
D 25,000 unpaid dividends 1,350
plans, employees may remit shares to the firm or the firm
$100,000 plus declared and
may cancel restricted stock units (RSUs) or stock options to E 100,000 unpaid dividends 1,750
satisfy minimum statutory employee tax withholding $100,000 plus declared and
requirements and the exercise price of stock options. Under F 100,000 unpaid dividends 500
these plans, during 2015, 2014 and 2013, employees $25,000 plus accrued and
I 25,000 unpaid dividends 850
remitted 35,217 shares, 174,489 shares and 161,211 shares
$25,000 plus accrued and
with a total value of $6 million, $31 million and J 25,000 unpaid dividends 1,000
$25 million, and the firm cancelled 5.7 million, 5.8 million $25,000 plus accrued and
and 4.0 million of RSUs with a total value of $1.03 billion, K 25,000 unpaid dividends 700
$974 million and $599 million. Under these plans, the firm $25,000 plus accrued and
also cancelled 2.0 million and 15.6 million of stock options L 25,000 unpaid dividends 1,300
with a total value of $406 million and $2.65 billion during $25,000 plus accrued and
M 25,000 unpaid dividends 2,000
2015 and 2014, respectively.
Total $11,200

180 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

In the tables above: The table below presents the dividend rates of the firms
perpetual preferred stock as of December 2015.
Each share of non-cumulative Series A, Series B, Series C
and Series D Preferred Stock issued and outstanding is
Series Dividend Rate
redeemable at the firms option.
A 3 month LIBOR + 0.75%, with floor of 3.75% per annum
Each share of non-cumulative Series E and Series F B 6.20% per annum
Preferred Stock issued and outstanding is redeemable at C 3 month LIBOR + 0.75%, with floor of 4.00% per annum
the firms option, subject to certain covenant restrictions D 3 month LIBOR + 0.67%, with floor of 4.00% per annum
governing the firms ability to redeem or purchase the E 3 month LIBOR + 0.77%, with floor of 4.00% per annum
F 3 month LIBOR + 0.77%, with floor of 4.00% per annum
preferred stock without issuing common stock or other
I 5.95% per annum
instruments with equity-like characteristics. See Note 16 5.50% per annum to, but excluding, May 10, 2023;
for information about the replacement capital covenants J 3 month LIBOR + 3.64% per annum thereafter
applicable to the Series E and Series F Preferred Stock. 6.375% per annum to, but excluding, May 10, 2024;
K 3 month LIBOR + 3.55% per annum thereafter
Each share of non-cumulative Series I Preferred Stock 5.70% per annum to, but excluding, May 10, 2019;
issued and outstanding is redeemable at the firms option L 3 month LIBOR + 3.884% per annum thereafter
beginning November 10, 2017. 5.375% per annum to, but excluding, May 10, 2020;
M 3 month LIBOR + 3.922% per annum thereafter
Each share of non-cumulative Series J Preferred Stock
issued and outstanding is redeemable at the firms option The table below presents preferred dividends declared on
beginning May 10, 2023. the firms preferred stock.
Each share of non-cumulative Series K Preferred Stock
Year Ended December
issued and outstanding is redeemable at the firms option
beginning May 10, 2024. 2015 2014 2013
per $ in per $ in per $ in
Each share of non-cumulative Series L Preferred Stock Series share millions share millions share millions
issued and outstanding is redeemable at the firms option A $ 950.52 $ 28 $ 945.32 $ 28 $ 947.92 $ 28
beginning May 10, 2019. B 1,550.00 50 1,550.00 50 1,550.00 50
C 1,013.90 8 1,008.34 8 1,011.11 8
Each share of non-cumulative Series M Preferred Stock D 1,013.90 54 1,008.34 54 1,011.11 54
issued and outstanding is redeemable at the firms option E 4,055.55 71 4,044.44 71 4,044.44 71
beginning May 10, 2020. F 4,055.55 20 4,044.44 20 4,044.44 20
I 1,487.52 51 1,487.52 51 1,553.63 53
All shares of preferred stock have a par value of $0.01 per J 1,375.00 55 1,375.00 55 744.79 30
share and, where applicable, each share of preferred stock K 1,593.76 45 850.00 24
is represented by the specified number of depositary L 1,425.00 74 760.00 39
shares. M 735.33 59
Total $515 $400 $314
Prior to redeeming preferred stock, the firm must receive
confirmation that the Federal Reserve Board does not On January 8, 2016, Group Inc. declared dividends of
object to such capital actions. All series of preferred stock $239.58, $387.50, $255.56, $255.56, $371.88, $343.75
are pari passu and have a preference over the firms and $398.44 per share of Series A Preferred Stock, Series B
common stock on liquidation. Dividends on each series of Preferred Stock, Series C Preferred Stock, Series D Preferred
preferred stock, excluding Series L and Series M Preferred Stock, Series I Preferred Stock, Series J Preferred Stock and
Stock, if declared, are payable quarterly in arrears. Series K Preferred Stock, respectively, to be paid on
Dividends on Series L and Series M Preferred Stock, if February 10, 2016 to preferred shareholders of record on
declared, are payable semi-annually in arrears from the January 26, 2016. In addition, the firm declared dividends
issuance date to, but excluding, May 10, 2019 and of $1,011.11 per each share of Series E Preferred Stock and
May 10, 2020, respectively, and quarterly thereafter. The Series F Preferred Stock, to be paid on March 1, 2016 to
firms ability to declare or pay dividends on, or purchase, preferred shareholders of record on February 15, 2016.
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.

Goldman Sachs 2015 Form 10-K 181

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Accumulated Other Comprehensive Loss Capital Framework

The tables below present accumulated other comprehensive The regulations under the Revised Capital Framework are
loss, net of tax by type. largely based on the Basel Committees final capital
framework for strengthening international capital
December 2015 standards (Basel III) and also implement certain provisions
Other of the Dodd-Frank Act. Under the Revised Capital
comprehensive Framework, the firm is an Advanced approach banking
Balance, income/(loss) Balance,
beginning adjustments, end of organization.
$ in millions of year net of tax year
Currency translation $(473) $(114) $(587) As of December 2015, the firm calculated its Common
Pension and postretirement Equity Tier 1 (CET1), Tier 1 capital and Total capital ratios
liabilities (270) 139 (131) in accordance with (i) the Standardized approach and
Accumulated other market risk rules set out in the Revised Capital Framework
comprehensive income/(loss), (together, the Standardized Capital Rules) and (ii) the
net of tax $(743) $ 25 $(718)
Advanced approach and market risk rules set out in the
Revised Capital Framework (together, the Basel III
Advanced Rules). The lower of each ratio calculated in
December 2014
(i) and (ii) is the ratio against which the firms compliance
Other
comprehensive
with its minimum ratio requirements is assessed. Each of
Balance, income/(loss) Balance, the ratios calculated in accordance with the Basel III
beginning adjustments, end of
$ in millions of year net of tax year
Advanced Rules was lower than that calculated in
Currency translation $(364) $(109) $(473) accordance with the Standardized Capital Rules and
Pension and postretirement therefore the Basel III Advanced ratios were the ratios that
liabilities (168) (102) (270) applied to the firm as of December 2015. The capital ratios
Cash flow hedges 8 (8) that apply to the firm can change in future reporting periods
Accumulated other as a result of these regulatory requirements.
comprehensive loss,
net of tax $(524) $(219) $(743) As of December 2014, the firm calculated its CET1, Tier 1
capital and Total capital ratios using the Revised Capital
Framework for regulatory capital, but RWAs were
Note 20. calculated in accordance with (i) the Basel I Capital Accord
Regulation and Capital Adequacy of the Basel Committee, incorporating the market risk
requirements set out in the Revised Capital Framework,
The Federal Reserve Board is the primary regulator of and adjusted for certain items related to capital deductions
Group Inc., a bank holding company under the Bank and for the phase-in of capital deductions (Hybrid Capital
Holding Company Act of 1956 (BHC Act) and a financial Rules), and (ii) the Basel III Advanced Rules. The lower of
holding company under amendments to the BHC Act. As a each ratio calculated in (i) and (ii) was the ratio against
bank holding company, the firm is subject to consolidated which the firms compliance with its minimum ratio
regulatory capital requirements which are calculated in requirements was assessed. Each of the ratios calculated in
accordance with the revised risk-based capital and leverage accordance with the Basel III Advanced Rules was lower
regulations of the Federal Reserve Board, subject to certain than that calculated in accordance with the Hybrid Capital
transitional provisions (Revised Capital Framework). Rules and therefore the Basel III Advanced ratios were the
The risk-based capital requirements are expressed as capital ratios that applied to the firm as of December 2014.
ratios that compare measures of regulatory capital to risk-
weighted assets (RWAs). Failure to comply with these
requirements could result in restrictions being imposed by
the firms regulators. The firms capital levels are also
subject to qualitative judgments by the regulators about
components of capital, risk weightings and other factors.
Furthermore, certain of the firms subsidiaries are subject to
separate regulations and capital requirements as described
below.

182 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Regulatory Capital and Capital Ratios. The table below As of December 2014, the firm calculated RWAs in
presents the minimum ratios required for the firm as of accordance with both the Basel III Advanced Rules and the
December 2015. Hybrid Capital Rules described below.

Minimum Ratio Credit Risk

CET1 ratio 4.5% Credit RWAs are calculated based upon measures of
Tier 1 capital ratio 6.0% exposure, which are then risk weighted. The following is a
Total capital ratio 1 8.0% description of the calculation of credit RWAs in accordance
Tier 1 leverage ratio 2 4.0% with the Standardized Capital Rules, the Basel III Advanced
1. In order to meet the quantitative requirements for being well-capitalized
Rules and the Hybrid Capital Rules:
under the Federal Reserve Boards regulations, the firm must meet a higher
required minimum Total capital ratio of 10.0%.
For credit RWAs calculated in accordance with the
2. Tier 1 leverage ratio is defined as Tier 1 capital divided by quarterly average
Standardized Capital Rules, the firm utilizes prescribed
adjusted total assets (which includes adjustments for goodwill and risk-weights which depend largely on the type of
identifiable intangible assets, and certain investments in nonconsolidated counterparty (e.g., whether the counterparty is a
financial institutions).
sovereign, bank, broker-dealer or other entity). The
Certain aspects of the Revised Capital Frameworks exposure measure for derivatives is based on a
requirements phase in over time (transitional provisions). combination of positive net current exposure and a
These include the introduction of capital buffers (including percentage of the notional amount of each derivative. The
surcharges) and certain deductions from regulatory capital exposure measure for securities financing transactions is
(such as investments in nonconsolidated financial calculated to reflect adjustments for potential price
institutions). These deductions from regulatory capital are volatility, the size of which depends on factors such as the
required to be phased in ratably per year from 2014 to type and maturity of the security, and whether it is
2018, with residual amounts not deducted during the denominated in the same currency as the other side of the
transitional period subject to risk weighting. In addition, financing transaction. The firm utilizes specific required
junior subordinated debt issued to trusts is being phased formulaic approaches to measure exposure for
out of regulatory capital. The minimum CET1, Tier 1 and securitizations and equities;
Total capital ratios that apply to the firm will increase as
For credit RWAs calculated in accordance with the
the transitional provisions phase in and capital buffers
Basel III Advanced Rules, the firm has been given
(including surcharges) are introduced.
permission by its regulators to compute risk-weights for
Definition of Risk-Weighted Assets. As of wholesale and retail credit exposures in accordance with
December 2015, RWAs were calculated in accordance with the Advanced Internal Ratings-Based approach. This
both the Standardized Capital Rules and the Basel III approach is based on internal assessments of the
Advanced Rules. The following is a comparison of RWA creditworthiness of counterparties, with key inputs being
calculations under these rules: the probability of default, loss given default and the
effective maturity. The firm utilizes internal models to
RWAs for credit risk in accordance with the Standardized
measure exposure for derivatives, securities financing
Capital Rules are calculated in a different manner than
transactions and eligible margin loans. The Revised
the Basel III Advanced Rules. The primary difference is
Capital Framework requires that a bank holding
that the Standardized Capital Rules do not contemplate
company obtain prior written agreement from its
the use of internal models to compute exposure for credit
regulators before using internal models for such purposes.
risk on derivatives and securities financing transactions,
The firm utilizes specific required formulaic approaches
whereas the Basel III Advanced Rules permit the use of
to measure exposure for securitizations and equities; and
such models, subject to supervisory approval. In addition,
credit RWAs calculated in accordance with the For credit RWAs calculated in accordance with the
Standardized Capital Rules utilize prescribed risk-weights Hybrid Capital Rules, the firm utilized prescribed risk-
which depend largely on the type of counterparty, rather weights depending on, among other things, the type of
than on internal assessments of the creditworthiness of counterparty. The exposure measure for derivatives was
such counterparties; based on a combination of positive net current exposure
RWAs for market risk in accordance with the and a percentage of the notional amount of each
Standardized Capital Rules and the Basel III Advanced derivative. The exposure measure for securities financing
Rules are generally consistent; and transactions was based on the carrying value without the
application of potential price volatility adjustments
RWAs for operational risk are not required by the required under the Standardized Capital Rules.
Standardized Capital Rules, whereas the Basel III
Advanced Rules do include such a requirement.

Goldman Sachs 2015 Form 10-K 183

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Market Risk Stressed VaR is the potential loss in value of inventory

Market RWAs are calculated based on measures of positions, as well as certain other financial assets and
exposure which include Value-at-Risk (VaR), stressed VaR, financial liabilities, during a period of significant market
incremental risk and comprehensive risk based on internal stress;
models, and a standardized measurement method for
Incremental risk is the potential loss in value of non-
specific risk. The market risk regulatory capital rules
securitized inventory positions due to the default or credit
require that a bank holding company obtain prior written
migration of issuers of financial instruments over a one-
agreement from its regulators before using any internal
year time horizon;
model to calculate its risk-based capital requirement. The
following is further information regarding the measures of Comprehensive risk is the potential loss in value, due to
exposure for market RWAs calculated in accordance with price risk and defaults, within the firms credit correlation
the Standardized Capital Rules, Basel III Advanced Rules positions; and
and Hybrid Capital Rules:
Specific risk is the risk of loss on a position that could
VaR is the potential loss in value of inventory positions, result from factors other than broad market movements,
as well as certain other financial assets and financial including event risk, default risk and idiosyncratic risk.
liabilities, due to adverse market movements over a The standardized measurement method is used to
defined time horizon with a specified confidence level. For determine specific risk RWAs, by applying supervisory
both risk management purposes and regulatory capital defined risk-weighting factors after applicable netting is
calculations the firm uses a single VaR model which performed.
captures risks including those related to interest rates,
Operational Risk
equity prices, currency rates and commodity prices.
Operational RWAs are only required to be included under
However, VaR used for regulatory capital requirements
the Basel III Advanced Rules. The firm has been given
(regulatory VaR) differs from risk management VaR due
permission by its regulators to calculate operational RWAs
to different time horizons and confidence levels (10-day
in accordance with the Advanced Measurement
and 99% for regulatory VaR vs. one-day and 95% for
Approach, and therefore utilizes an internal risk-based
risk management VaR), as well as differences in the scope
model to quantify operational RWAs.
of positions on which VaR is calculated. In addition, the
daily trading net revenues used to determine risk Consolidated Regulatory Capital Ratios
management VaR exceptions (i.e., comparing the daily Capital Ratios and RWAs. Each of the ratios calculated in
trading net revenues to the VaR measure calculated as of accordance with the Basel III Advanced Rules was lower
the end of the prior business day) include intraday than that calculated in accordance with the Standardized
activity, whereas the Federal Reserve Boards regulatory Rules as of December 2015 and therefore such lower ratios
capital rules require that intraday activity be excluded applied to the firm as of that date. Each of the ratios
from daily trading net revenues when calculating calculated in accordance with the Basel III Advanced Rules
regulatory VaR exceptions. Intraday activity includes bid/ was lower than that calculated in accordance with the
offer net revenues, which are more likely than not to be Hybrid Capital Rules as of December 2014 and therefore
positive by their nature. As a result, there may be such lower ratios applied to the firm as of that date.
differences in the number of VaR exceptions and the
amount of daily trading net revenues calculated for
regulatory VaR compared to the amounts calculated for
risk management VaR. The firms positional losses
observed on a single day did not exceed its 99% one-day
regulatory VaR during 2015, but did exceed its 99% one-
day regulatory VaR on three occasions during 2014.
There was no change in the VaR multiplier used to
calculate Market RWAs;

184 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

The table below presents the ratios calculated in accordance In the table above:
with both the Standardized and Basel III Advanced rules as
The deductions for goodwill and identifiable intangible
of both December 2015 and December 2014. While the
assets, net of deferred tax liabilities, include goodwill of
ratios calculated in accordance with the Standardized
$3.66 billion and $3.65 billion as of December 2015 and
Capital Rules were not applicable until January 2015, the
December 2014, respectively, and identifiable intangible
December 2014 ratios are presented in the table below for
assets of $196 million (40% of $491 million) and
comparative purposes.
$103 million (20% of $515 million) as of December 2015
and December 2014, respectively, net of associated
As of December
deferred tax liabilities of $1.04 billion and $961 million
$ in millions 2015 2014
as of December 2015 and December 2014, respectively.
Common shareholders equity $ 75,528 $ 73,597 Goodwill is fully deducted from CET1, while the
Deductions for goodwill and identifiable
intangible assets, net of deferred tax
deduction for identifiable intangible assets is required to
liabilities (2,814) (2,787) be phased into CET1 ratably over five years from 2014 to
Deductions for investments in 2018. The balance that is not deducted during the
nonconsolidated financial institutions (864) (953) transitional period is risk weighted.
Other adjustments (487) (27)
Common Equity Tier 1 71,363 69,830 The deductions for investments in nonconsolidated
Perpetual non-cumulative preferred stock 11,200 9,200 financial institutions represent the amount by which the
Junior subordinated debt issued to trusts 330 660 firms investments in the capital of nonconsolidated
Deduction for investments in covered funds (413) financial institutions exceed certain prescribed
Other adjustments (969) (1,257) thresholds. The deduction for such investments is
Tier 1 capital $ 81,511 $ 78,433 required to be phased into CET1 ratably over five years
Standardized Tier 2 and total capital from 2014 to 2018. As of December 2015 and
Tier 1 capital $ 81,511 $ 78,433
Qualifying subordinated debt 15,132 11,894 December 2014, CET1 reflects 40% and 20% of the
Junior subordinated debt issued to trusts 990 660 deduction, respectively. The balance that is not deducted
Allowance for losses on loans and lending during the transitional period is risk weighted.
commitments 602 316
Other adjustments (19) (9)
The deduction for investments in covered funds
Standardized Tier 2 capital 16,705 12,861 represents the firms aggregate investments in applicable
Standardized total capital $ 98,216 $ 91,294 covered funds, as permitted by the Volcker Rule, that
Basel III Advanced Tier 2 and total capital were purchased after December 2013. Substantially all of
Tier 1 capital $ 81,511 $ 78,433 these investments in covered funds were purchased in
Standardized Tier 2 capital 16,705 12,861 connection with the firms market-making activities. This
Allowance for losses on loans and lending
deduction became effective in July 2015 and is not subject
commitments (602) (316)
Basel III Advanced Tier 2 capital 16,103 12,545
to a transition period. See Note 6 for further information
Basel III Advanced total capital $ 97,614 $ 90,978 about the Volcker Rule.

RWAs Other adjustments within CET1 and Tier 1 capital

Standardized $524,107 $619,216 primarily include accumulated other comprehensive loss,
Basel III Advanced 577,651 570,313 credit valuation adjustments on derivative liabilities, debt
CET1 ratio valuation adjustments, the overfunded portion of the
Standardized 13.6% 11.3% firms defined benefit pension plan obligation net of
Basel III Advanced 12.4% 12.2%
associated deferred tax liabilities, disallowed deferred tax
Tier 1 capital ratio assets and other required credit risk-based deductions.
Standardized 15.6% 12.7% The deductions for such items are generally required to be
Basel III Advanced 14.1% 13.8%
phased into CET1 ratably over five years from 2014 to
Total capital ratio 2018. As of December 2015 and December 2014, CET1
Standardized 18.7% 14.7% reflects 40% and 20% of such deductions, respectively.
Basel III Advanced 16.9% 16.0%
The balance that is not deducted from CET1 during the
Tier 1 leverage ratio 9.3% 9.0% transitional period is generally deducted from Tier 1
capital within other adjustments.

Goldman Sachs 2015 Form 10-K 185

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Period Ended
Junior subordinated debt issued to trusts is reflected in both $ in millions December 2014
Tier 1 capital (25%) and Tier 2 capital (75%) as of Common Equity Tier 1
December 2015. Such percentages were 50% for both Tier 1 Balance, December 31, 2013 $63,248
and Tier 2 capital as of December 2014. Junior subordinated Change in CET1 related to the transition to the Revised
Capital Framework 1 3,177
debt issued to trusts is reduced by the amount of trust Increase in common shareholders equity 2,330
preferred securities purchased by the firm and will be fully Change in deduction for goodwill and identifiable intangible
phased out of Tier 1 capital into Tier 2 capital by 2016, and assets, net of deferred tax liabilities 144
Change in deduction for investments in nonconsolidated
then out of Tier 2 capital by 2022. See Note 16 for
financial institutions 839
additional information about the firms junior subordinated Change in other adjustments 92
debt issued to trusts and trust preferred securities purchased Balance, December 31, 2014 $69,830
by the firm. Tier 1 capital
Balance, December 31, 2013 $72,471
Qualifying subordinated debt represents subordinated debt Change in CET1 related to the transition to the Revised
issued by Group Inc. with an original term to maturity of Capital Framework 1 3,177
Change in Tier 1 capital related to the transition to the Revised
five years or greater. The outstanding amount of Capital Framework 2 (443)
subordinated debt qualifying for Tier 2 capital is reduced Other net increase in CET1 3,405
upon reaching a remaining maturity of five years. See Increase in perpetual non-cumulative preferred stock 2,000
Note 16 for additional information about the firms Redesignation of junior subordinated debt issued to trusts and
decrease related to trust preferred securities purchased by
subordinated debt. the firm (1,403)
The tables below present changes in CET1, Tier 1 capital and Change in other adjustments (774)
Balance, December 31, 2014 78,433
Tier 2 capital for the period ended December 2015 and the
Tier 2 capital
period from December 31, 2013 to December 31, 2014. Balance, December 31, 2013 13,632
Change in Tier 2 capital related to the transition to the Revised
Period Ended Capital Framework 3 (197)
December 2015
Decrease in qualifying subordinated debt (879)
Basel III Trust preferred securities purchased by the firm, net of
$ in millions Standardized Advanced redesignation of junior subordinated debt issued to trusts (27)
Common Equity Tier 1 Change in other adjustments 16
Beginning balance $69,830 $69,830 Balance, December 31, 2014 12,545
Increased deductions due to transitional Total capital $90,978
provisions 1 (1,368) (1,368)
Increase in common shareholders equity 1,931 1,931 1. Includes $3.66 billion related to the transition to the Revised Capital
Change in deduction for goodwill and identifiable Framework on January 1, 2014 as well as $(479) million related to the firms
intangible assets, net of deferred tax liabilities 75 75 application of the Basel III Advanced Rules on April 1, 2014.
Change in deduction for investments in
2. Includes $(219) million related to the transition to the Revised Capital
nonconsolidated financial institutions 1,059 1,059
Framework on January 1, 2014 as well as $(224) million related to the firms
Change in other adjustments (164) (164)
application of the Basel III Advanced Rules on April 1, 2014.
Ending balance $71,363 $71,363
3. Includes $(2) million related to the transition to the Revised Capital
Tier 1 capital
Beginning balance $78,433 $78,433 Framework on January 1, 2014 as well as $(195) million related to the firms
application of the Basel III Advanced Rules on April 1, 2014.
Increased deductions due to transitional
provisions 1 (1,073) (1,073)
In the table above, Change in CET1 related to the
Other net increase in CET1 2,901 2,901
Redesignation of junior subordinated debt issued transition to the Revised Capital Framework primarily
to trusts (330) (330) reflects the change in the treatment of equity investments in
Increase in perpetual non-cumulative preferred certain nonconsolidated entities. The Revised Capital
stock 2,000 2,000
Deduction for investments in covered funds (413) (413)
Framework requires only a portion of such investments that
Change in other adjustments (7) (7) exceed certain prescribed thresholds to be treated as
Ending balance 81,511 81,511 deductions from CET1 and the remainder are risk-
Tier 2 capital weighted, subject to the applicable transitional provisions.
Beginning balance 12,861 12,545
Increased deductions due to transitional As of December 2013, in accordance with the previous
provisions 1 (53) (53) capital regulations, these equity investments were treated as
Increase in qualifying subordinated debt 3,238 3,238 deductions.
Redesignation of junior subordinated debt issued
to trusts 330 330
Change in the allowance for losses on loans and
lending commitments 286
Change in other adjustments 43 43
Ending balance 16,705 16,103
Total capital $98,216 $97,614
1. Represents the increased phase-in of deductions from 20% to 40%,
effective January 2015.

186 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

The tables below present the components of RWAs The table below presents changes in RWAs calculated in
calculated in accordance with the Standardized and accordance with the Standardized and Basel III Advanced
Basel III Advanced rules as of December 2015 and rules for the period ended December 2015.
December 2014.
Period Ended
December 2015
Standardized Capital Rules
as of December Basel III
$ in millions Standardized Advanced
$ in millions 2015 2014
Risk-Weighted Assets
Credit RWAs
Beginning balance $619,216 $570,313
Derivatives $136,841 $180,771
Credit RWAs
Commitments, guarantees and loans 111,391 89,783
Increased deductions due to transitional
Securities financing transactions 1 71,392 92,116
provisions 1 (1,073) (1,073)
Equity investments 37,687 38,526
Increase/(decrease) in derivatives (43,930) (8,830)
Other 2 62,807 71,499
Increase/(decrease) in commitments,
Total Credit RWAs 420,118 472,695 guarantees and loans 21,608 19,314
Market RWAs Increase/(decrease) in securities financing
Regulatory VaR 12,000 10,238 transactions (20,724) (717)
Stressed VaR 21,738 29,625 Increase/(decrease) in equity investments 131 934
Incremental risk 9,513 16,950 Change in other (8,589) 6,510
Comprehensive risk 5,725 9,855 Change in Credit RWAs (52,577) 16,138
Specific risk 55,013 79,853 Market RWAs
Total Market RWAs 103,989 146,521 Increase/(decrease) in regulatory VaR 1,762 1,762
Total RWAs $524,107 $619,216 Increase/(decrease) in stressed VaR (7,887) (7,887)
Increase/(decrease) in incremental risk (7,437) (7,437)
Increase/(decrease) in comprehensive risk (4,130) (3,433)
Basel III Advanced Rules
as of December Increase/(decrease) in specific risk (24,840) (24,905)
$ in millions 2015 2014 Change in Market RWAs (42,532) (41,900)
Operational RWAs
Credit RWAs
Increase/(decrease) in operational risk 33,100
Derivatives $113,671 $122,501
Change in Operational RWAs 33,100
Commitments, guarantees and loans 114,523 95,209
Ending balance $524,107 $577,651
Securities financing transactions 1 14,901 15,618
Equity investments 40,110 40,146 1. Represents the increased phase-in of deductions from 20% to 40%,
Other 2 60,877 54,470 effective January 2015.
Total Credit RWAs 344,082 327,944
Market RWAs Standardized Credit RWAs as of December 2015 decreased
Regulatory VaR 12,000 10,238 by $52.58 billion compared with December 2014,
Stressed VaR 21,738 29,625 reflecting decreases in derivatives and securities financing
Incremental risk 9,513 16,950 transactions, primarily due to lower exposures. These
Comprehensive risk 4,717 8,150 decreases were partially offset by an increase in lending
Specific risk 55,013 79,918
activity. Standardized Market RWAs as of December 2015
Total Market RWAs 102,981 144,881
decreased by $42.53 billion compared with
Total Operational RWAs 130,588 97,488
Total RWAs $577,651 $570,313 December 2014, primarily due to decreased specific risk, as
a result of reduced risk exposures.
1. Represents resale and repurchase agreements and securities borrowed and
loaned transactions. Basel III Advanced Credit RWAs as of December 2015
2. Includes receivables, other assets, and cash and cash equivalents. increased by $16.14 billion compared with
December 2014, primarily reflecting an increase in lending
activity. This increase was partially offset by a decrease in
RWAs related to derivatives, due to lower counterparty
credit risk. Basel III Advanced Market RWAs as of
December 2015 decreased by $41.90 billion compared with
December 2014, primarily due to decreased specific risk, as
a result of reduced risk exposures. Basel III Advanced
Operational RWAs as of December 2015 increased by
$33.10 billion compared with December 2014,
substantially all of which is associated with mortgage-
related legal matters and regulatory proceedings.

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Notes to Consolidated Financial Statements

See Definition of Risk-Weighted Assets above for a Bank Subsidiaries

description of the calculations of Credit RWAs, Market Regulatory Capital Ratios. GS Bank USA, an FDIC-
RWAs and Operational RWAs, including the differences in insured, New York State-chartered bank and a member of
the calculation of Credit RWAs under each of the the Federal Reserve System, is supervised and regulated by
Standardized Capital Rules and the Basel III Advanced Rules. the Federal Reserve Board, the FDIC, the New York State
Department of Financial Services and the Consumer
The table below presents changes in RWAs from
Financial Protection Bureau, and is subject to regulatory
December 31, 2013 to December 31, 2014. As of
capital requirements that are calculated in substantially the
December 31, 2013, the firm was subject to the capital
same manner as those applicable to bank holding
regulations of the Federal Reserve Board that were based on
companies. For purposes of assessing the adequacy of its
the Basel Committees Basel I Capital Accord, including the
capital, GS Bank USA calculates its capital ratios in
revised market risk capital requirements.
accordance with the risk-based capital and leverage
Period Ended requirements applicable to state member banks. Those
$ in millions December 2014 requirements are based on the Revised Capital Framework
Risk-weighted assets described above. GS Bank USA is an Advanced approach
Balance, December 31, 2013 $433,226
banking organization under the Revised Capital
Credit RWAs
Change related to the transition to the Revised
Framework.
Capital Framework 1 69,101 Under the regulatory framework for prompt corrective
Decrease in derivatives (24,109)
action applicable to GS Bank USA, in order to meet the
Increase in commitments, guarantees and loans 18,208
Decrease in securities financing transactions (2,782)
quantitative requirements for being a well-capitalized
Decrease in equity investments (2,728) depository institution, GS Bank USA must meet higher
Increase in other 2,007 minimum requirements than the minimum ratios in the
Change in Credit RWAs 59,697 table below. The table below presents the minimum ratios
Market RWAs and well-capitalized minimum ratios required for GS
Change related to the transition to the Revised Bank USA as of December 2015.
Capital Framework 1,626
Decrease in regulatory VaR (5,175)
Well-capitalized
Decrease in stressed VaR (11,512) Minimum Ratio Minimum Ratio
Increase in incremental risk 7,487
CET1 ratio 4.5% 6.5%
Decrease in comprehensive risk (6,617)
Tier 1 capital ratio 6.0% 8.0%
Decrease in specific risk (5,907)
Total capital ratio 8.0% 10.0%
Change in Market RWAs (20,098)
Tier 1 leverage ratio 4.0% 5.0%
Operational RWAs
Change related to the transition to the Revised
Capital Framework 88,938
GS Bank USA was in compliance with its minimum capital
Increase in operational risk 8,550 requirements and the well-capitalized minimum ratios as
Change in Operational RWAs 97,488 of December 2015 and December 2014. GS Bank USAs
Ending balance (Basel III Advanced) $570,313 capital levels and prompt corrective action classification are
also subject to qualitative judgments by the regulators
1. Includes $26.67 billion of RWA changes related to the transition to the Revised
Capital Framework on January 1, 2014 and $42.43 billion of changes to the
about components of capital, risk weightings and other
calculation of credit RWAs in accordance with the Basel III Advanced Rules factors. Failure to comply with these capital requirements
related to the firms application of the Basel III Advanced Rules on April 1, 2014. could result in restrictions being imposed by GS Bank
Credit RWAs as of December 2014 increased by USAs regulators.
$59.70 billion compared with December 2013, primarily
due to increased risk weightings related to counterparty
credit risk for derivative exposures and the inclusion of
RWAs for equity investments in certain nonconsolidated
entities, both resulting from the transition to the Revised
Capital Framework. Market RWAs as of December 2014
decreased by $20.10 billion compared with
December 2013, primarily due to a decrease in stressed
VaR, reflecting reduced fixed income and equities
exposures. Operational RWAs as of December 2014
increased by $97.49 billion compared with
December 2013, substantially all of which was due to the
transition to the Revised Capital Framework.
188 Goldman Sachs 2015 Form 10-K
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Notes to Consolidated Financial Statements

As of December 2015, similar to the firm, GS Bank USA is The table below presents the ratios for GS Bank USA
required to calculate each of the CET1, Tier 1 capital and calculated in accordance with both the Standardized and
Total capital ratios in accordance with both the Basel III Advanced rules as of both December 2015 and
Standardized Capital Rules and Basel III Advanced Rules. December 2014, and with the Hybrid Capital Rules as of
The lower of each ratio calculated in accordance with the December 2014. While the ratios calculated in accordance
Standardized Capital Rules and Basel III Advanced Rules is with the Standardized Capital Rules were not applicable
the ratio against which GS Bank USAs compliance with its until January 2015, the December 2014 ratios are presented
minimum ratio requirements is assessed. Each of the ratios in the table below for comparative purposes.
calculated in accordance with the Standardized Capital
Rules was lower than that calculated in accordance with the As of December
Basel III Advanced Rules and therefore the Standardized $ in millions 2015 2014
Capital ratios were the ratios that applied to GS Bank USA Standardized
as of December 2015. The capital ratios that apply to GS Common Equity Tier 1 $ 23,017 $ 21,293
Bank USA can change in future reporting periods as a result Tier 1 capital 23,017 21,293
of these regulatory requirements. Tier 2 capital 2,311 2,182
Total capital $ 25,328 $ 23,475
As of December 2014, GS Bank USA was required to
RWAs $202,197 $200,605
calculate each of the CET1, Tier 1 capital and Total capital
CET1 ratio 11.4% 10.6%
ratios in accordance with both the Basel III Advanced Rules
Tier 1 capital ratio 11.4% 10.6%
and Hybrid Capital Rules. The lower of each ratio Total capital ratio 12.5% 11.7%
calculated in accordance with the Basel III Advanced Rules
and the Hybrid Capital Rules was the ratio against which Basel III Advanced
Common Equity Tier 1 $ 23,017 $ 21,293
GS Bank USAs compliance with its minimum ratio
requirements was assessed. Each of the ratios calculated in Tier 1 capital 23,017 21,293
accordance with the Hybrid Capital Rules was lower than Standardized Tier 2 capital 2,311 2,182
that calculated in accordance with the Basel III Advanced Allowance for losses on loans and
lending commitments (311) (182)
Rules and therefore the Hybrid Capital ratios were the
Tier 2 capital 2,000 2,000
ratios that applied to GS Bank USA as of December 2014. Total capital $ 25,017 $ 23,293
RWAs $131,059 $141,978
CET1 ratio 17.6% 15.0%
Tier 1 capital ratio 17.6% 15.0%
Total capital ratio 19.1% 16.4%

Hybrid
RWAs N/A $149,963
CET1 ratio N/A 14.2%
Tier 1 capital ratio N/A 14.2%
Total capital ratio N/A 15.7%

Tier 1 leverage ratio 16.4% 17.3%

The firms principal non-U.S. bank subsidiary, GSIB, is a

wholly-owned credit institution, regulated by the
Prudential Regulation Authority (PRA) and the Financial
Conduct Authority (FCA) and is subject to minimum
capital requirements. As of December 2015 and
December 2014, GSIB was in compliance with all
regulatory capital requirements.

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Notes to Consolidated Financial Statements

Broker-Dealer Subsidiaries Non-U.S. Regulated Broker-Dealer Subsidiaries. The

U.S. Regulated Broker-Dealer Subsidiaries. The firms firms principal non-U.S. regulated broker-dealer
U.S. regulated broker-dealer subsidiaries include GS&Co. subsidiaries include Goldman Sachs International (GSI) and
and GSEC. GS&Co. and GSEC are registered U.S. broker- Goldman Sachs Japan Co., Ltd. (GSJCL). GSI, the firms
dealers and futures commission merchants, and are subject U.K. broker-dealer, is regulated by the PRA and the FCA.
to regulatory capital requirements, including those imposed GSJCL, the firms Japanese broker-dealer, is regulated by
by the SEC, the U.S. Commodity Futures Trading Japans Financial Services Agency. These and certain other
Commission (CFTC), the Chicago Mercantile Exchange, non-U.S. subsidiaries of the firm are also subject to capital
the Financial Industry Regulatory Authority, Inc. (FINRA) adequacy requirements promulgated by authorities of the
and the National Futures Association. Rule 15c3-1 of the countries in which they operate. As of December 2015 and
SEC and Rule 1.17 of the CFTC specify uniform minimum December 2014, these subsidiaries were in compliance with
net capital requirements, as defined, for their registrants, their local capital adequacy requirements.
and also effectively require that a significant part of the
Restrictions on Payments
registrants assets be kept in relatively liquid form. GS&Co.
Group Inc.s ability to withdraw capital from its regulated
and GSEC have elected to calculate their minimum capital
subsidiaries is limited by minimum equity capital
requirements in accordance with the Alternative Net
requirements applicable to those subsidiaries, provisions of
Capital Requirement as permitted by Rule 15c3-1.
applicable law and regulations and other regulatory
As of December 2015 and December 2014, GS&Co. had restrictions that limit the ability of those subsidiaries to
regulatory net capital, as defined by Rule 15c3-1, of declare and pay dividends without prior regulatory
$14.75 billion and $14.83 billion, respectively, which approval even if the relevant subsidiary would satisfy the
exceeded the amount required by $12.37 billion and equity capital requirements applicable to it after giving
$12.46 billion, respectively. As of December 2015 and effect to the dividend. For example, the Federal Reserve
December 2014, GSEC had regulatory net capital, as Board, the FDIC and the New York State Department of
defined by Rule 15c3-1, of $1.71 billion and $1.67 billion, Financial Services have authority to prohibit or to limit the
respectively, which exceeded the amount required by payment of dividends by the banking organizations they
$1.59 billion and $1.53 billion, respectively. supervise (including GS Bank USA) if, in the relevant
regulators opinion, payment of a dividend would
In addition to its alternative minimum net capital
constitute an unsafe or unsound practice in the light of the
requirements, GS&Co. is also required to hold tentative net
financial condition of the banking organization.
capital in excess of $1 billion and net capital in excess of
$500 million in accordance with the market and credit risk As of December 2015 and December 2014, Group Inc. was
standards of Appendix E of Rule 15c3-1. GS&Co. is also required to maintain $48.09 billion and $33.62 billion,
required to notify the SEC in the event that its tentative net respectively, of minimum equity capital in its regulated
capital is less than $5 billion. As of December 2015 and subsidiaries in order to satisfy the regulatory requirements
December 2014, GS&Co. had tentative net capital and net of such subsidiaries. The increased requirement is primarily
capital in excess of both the minimum and the notification a result of higher regulatory capital requirements in GS
requirements. Bank USA, reflecting the implementation of the
Standardized Capital Rules.
Other
The deposits of GS Bank USA are insured by the FDIC to
the extent provided by law. The Federal Reserve Board
requires that GS Bank USA maintain cash reserves with the
Federal Reserve Bank of New York. The amount deposited
by GS Bank USA held at the Federal Reserve Bank of New
York was $49.36 billion and $38.68 billion as of
December 2015 and December 2014, respectively, which
exceeded required reserve amounts by $49.25 billion and
$38.57 billion as of December 2015 and December 2014,
respectively.

190 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Note 21. Note 22.

Earnings Per Common Share Transactions with Affiliated Funds
Basic earnings per common share (EPS) is calculated by The firm has formed numerous nonconsolidated investment
dividing net earnings applicable to common shareholders funds with third-party investors. As the firm generally acts
by the weighted average number of common shares as the investment manager for these funds, it is entitled to
outstanding. Common shares outstanding includes receive management fees and, in certain cases, advisory fees
common stock and RSUs for which no future service is or incentive fees from these funds. Additionally, the firm
required as a condition to the delivery of the underlying invests alongside the third-party investors in certain funds.
common stock. Diluted EPS includes the determinants of
The tables below present fees earned from affiliated funds,
basic EPS and, in addition, reflects the dilutive effect of the
fees receivable from affiliated funds and the aggregate
common stock deliverable for stock options, warrants and
carrying value of the firms interests in affiliated funds.
for RSUs for which future service is required as a condition
to the delivery of the underlying common stock.
Year Ended December
The table below presents the computations of basic and $ in millions 2015 2014 2013
diluted EPS. Fees earned from funds $3,293 $3,232 $2,897

Year Ended December

As of December
in millions, except per share amounts 2015 2014 2013
$ in millions 2015 2014
Numerator for basic and diluted
Fees receivable from funds $ 599 $ 724
EPS net earnings applicable
Aggregate carrying value of interests in funds 7,768 9,099
to common shareholders $5,568 $8,077 $7,726
Denominator for basic EPS
weighted average number As of December 2015 and December 2014, the firm had
of common shares 448.9 458.9 471.3 outstanding guarantees on behalf of its funds of
Effect of dilutive securities: $300 million and $304 million, respectively. This amount
RSUs 5.3 6.1 7.2 primarily related to a guarantee that the firm has
Stock options and warrants 4.4 8.2 21.1
voluntarily provided in connection with a financing
Dilutive potential common shares 9.7 14.3 28.3
agreement with a third-party lender executed by one of the
Denominator for diluted EPS
weighted average number of firms real estate funds that is not covered by the Volcker
common shares and dilutive Rule. As of December 2015 and December 2014, the firm
potential common shares 458.6 473.2 499.6 had no outstanding loans or commitments to extend credit
Basic EPS $12.35 $17.55 $16.34
to affiliated funds.
Diluted EPS 12.14 17.07 15.46 The Volcker Rule restricts the firm from providing financial
support to covered funds (as defined in the rule) after the
In the table above, unvested share-based awards that have
expiration of any applicable conformance period. As a
non-forfeitable rights to dividends or dividend equivalents
general matter, in the ordinary course of business, the firm
are treated as a separate class of securities in calculating
does not expect to provide additional voluntary financial
EPS. The impact of applying this methodology was a
support to any covered funds but may choose to do so with
reduction in basic EPS of $0.05 for 2015, 2014 and 2013.
respect to funds that are not subject to the Volcker Rule;
The diluted EPS computations in the table above do not however, in the event that such support is provided, the
include antidilutive RSUs and common shares underlying amount is not expected to be material.
antidilutive stock options of 6.0 million for 2015, 2014 and
In addition, in the ordinary course of business, the firm may
2013.
also engage in other activities with its affiliated funds
including, among others, securities lending, trade
execution, market making, custody, and acquisition and
bridge financing. See Note 18 for the firms investment
commitments related to these funds.

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Notes to Consolidated Financial Statements

Note 23. Note 24.

Interest Income and Interest Expense Income Taxes
Interest is recorded over the life of the instrument on an Provision for Income Taxes
accrual basis based on contractual interest rates. The table Income taxes are provided for using the asset and liability
below presents the firms sources of interest income and method under which deferred tax assets and liabilities are
interest expense. recognized for temporary differences between the financial
reporting and tax bases of assets and liabilities. The firm
Year Ended December reports interest expense related to income tax matters in
$ in millions 2015 2014 2013 Provision for taxes and income tax penalties in Other
Interest income expenses.
Deposits with banks $ 161 $ 164 $ 186
Securities borrowed, securities
The tables below present the components of the provision
purchased under agreements to for taxes and a reconciliation of the U.S. federal statutory
resell and federal funds sold 1 10 (81) 43 income tax rate to the firms effective income tax rate.
Financial instruments owned, at fair
value 5,842 7,452 8,159
Year Ended December
Loans receivable 1,191 708 296
$ in millions 2015 2014 2013
Other interest 2 1,248 1,361 1,376
Total interest income 8,452 9,604 10,060 Current taxes
U.S. federal $1,116 $1,908 $2,589
Interest expense
Deposits 408 333 387 State and local (12) 1 576 466
Securities loaned and securities sold Non-U.S. 1,166 901 613
under agreements to repurchase 330 431 576 Total current tax expense 2,270 3,385 3,668
Financial instruments sold, but not Deferred taxes
yet purchased, at fair value 1,319 1,741 2,054 U.S. federal 397 190 (188)
Short-term secured and unsecured State and local 62 38 67
borrowings 429 447 394 Non-U.S. (34) 267 150
Long-term secured and unsecured Total deferred tax expense 425 495 29
borrowings 3,878 3,460 3,752 Provision for taxes $2,695 $3,880 $3,697
Other interest 3 (976) (855) (495)
Total interest expense 5,388 5,557 6,668 1. Includes the impact of a settlement of state and local examinations.

Net interest income $3,064 $4,047 $ 3,392

Year Ended December
1. Includes rebates paid and interest income on securities borrowed.
2015 2014 2013
2. Includes interest income on customer debit balances and other interest-
U.S. federal statutory income tax rate 35.0% 35.0% 35.0%
earning assets.
State and local taxes, net of U.S.
3. Includes rebates received on other interest-bearing liabilities and interest
federal income tax effects 0.3% 2 3.2% 4.1%
expense on customer credit balances.
Tax credits (1.7)% (1.1)% (1.0)%
Non-U.S. operations 1 (12.1)% (5.8)% (5.6)%
Tax-exempt income, including
dividends (0.7)% (0.3)% (0.5)%
Non-deductible legal expenses 10.2% 3
Other (0.3)% 0.4% (0.5)%
Effective income tax rate 30.7% 31.4% 31.5%

1. Includes the impact of permanently reinvested earnings.

2. Includes the impact of a settlement of state and local examinations.
3. Substantially all of the non-deductible legal expenses relate to provisions for
the agreement in principle with the RMBS Working Group. See Note 27 for
further information about this agreement in principle.

192 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of As of December 2015, the U.S. federal and foreign net
temporary differences between the financial reporting and operating loss carryforwards were $106 million and
tax bases of assets and liabilities. These temporary $1.48 billion, respectively. If not utilized, the U.S. federal
differences result in taxable or deductible amounts in future net operating loss carryforward will begin to expire in
years and are measured using the tax rates and laws that 2016. The foreign net operating loss carryforwards can be
will be in effect when such differences are expected to carried forward indefinitely. State and local net operating
reverse. Valuation allowances are established to reduce loss carryforwards of $798 million will begin to expire in
deferred tax assets to the amount that more likely than not 2016. If these carryforwards expire, they will not have a
will be realized and primarily relate to the ability to utilize material impact on the firms results of operations. The firm
losses in various tax jurisdictions. Tax assets and liabilities had no foreign tax credit carryforwards and no related net
are presented as a component of Other assets and Other deferred income tax assets as of December 2015 and
liabilities and accrued expenses, respectively. December 2014.
The table below presents the significant components of The firm had no capital loss carryforwards and no related
deferred tax assets and liabilities, excluding the impact of net deferred income tax assets as of December 2015 and
netting within tax jurisdictions. December 2014.
The valuation allowance increased by $9 million during
As of December
2015 and decreased by $119 million during 2014. The
$ in millions 2015 2014
increase in 2015 was primarily due to an increase in
Deferred tax assets
deferred tax assets from which the firm does not expect to
Compensation and benefits $2,744 $3,032
ASC 740 asset related to unrecognized tax benefits 197 172
realize any benefit. The decrease in 2014 was primarily due
Non-U.S. operations 1,200 1,418 to a decrease in deferred tax assets from which the firm does
Net operating losses 426 336 not expect to realize any benefit.
Occupancy-related 80 78
The firm permanently reinvests eligible earnings of certain
Other comprehensive income-related 521 277
Other, net 836 545
foreign subsidiaries and, accordingly, does not accrue any
Subtotal 6,004 5,858 U.S. income taxes that would arise if such earnings were
Valuation allowance (73) (64) repatriated. As of December 2015 and December 2014, this
Total deferred tax assets $5,931 $5,794 policy resulted in an unrecognized net deferred tax liability
of $5.66 billion and $4.66 billion, respectively, attributable
Depreciation and amortization $1,254 $1,176
to reinvested earnings of $28.55 billion and $24.88 billion,
Unrealized gains 853 406
Total deferred tax liabilities $2,107 $1,582
respectively.

The firm has recorded deferred tax assets of $426 million

and $336 million as of December 2015 and
December 2014, respectively, in connection with U.S.
federal, state and local and foreign net operating loss
carryforwards. The firm also recorded a valuation
allowance of $24 million and $26 million as of
December 2015 and December 2014, respectively, related
to these net operating loss carryforwards.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Unrecognized Tax Benefits Regulatory Tax Examinations

The firm recognizes tax positions in the financial statements The firm is subject to examination by the U.S. Internal
only when it is more likely than not that the position will be Revenue Service (IRS) and other taxing authorities in
sustained on examination by the relevant taxing authority jurisdictions where the firm has significant business
based on the technical merits of the position. A position operations, such as the United Kingdom, Japan, Hong
that meets this standard is measured at the largest amount Kong, Korea and various states, such as New York. The tax
of benefit that will more likely than not be realized on years under examination vary by jurisdiction. The firm does
settlement. A liability is established for differences between not expect completion of these audits to have a material
positions taken in a tax return and amounts recognized in impact on the firms financial condition but it may be
the financial statements. material to operating results for a particular period,
depending, in part, on the operating results for that period.
The accrued liability for interest expense related to income
tax matters and income tax penalties was $101 million as of The table below presents the earliest tax years that remain
both December 2015 and December 2014. The firm subject to examination by major jurisdiction.
recognized interest expense and income tax penalties of
$17 million, $45 million and $53 million for 2015, 2014 As of
and 2013, respectively. It is reasonably possible that Jurisdiction December 2015

unrecognized tax benefits could change significantly during U.S. Federal 2008
New York State and City 2007
the twelve months subsequent to December 2015 due to
United Kingdom 2014
potential audit settlements. However, at this time it is not
Japan 2010
possible to estimate any potential change. Hong Kong 2006
The table below presents the changes in the liability for Korea 2010
unrecognized tax benefits. This liability is included in
The U.S. Federal examinations of fiscal 2008 through
Other liabilities and accrued expenses. See Note 17 for
calendar 2010 have been finalized, but the settlement is
further information.
subject to review by the Joint Committee of Taxation. The
examinations of 2011 and 2012 began in 2013.
As of December
$ in millions 2015 2014 2013 The firm has been accepted into the Compliance Assurance
Balance, beginning of year $ 871 $ 1,765 $2,237 Process program by the IRS for the 2013, 2014, 2015 and
Increases based on tax positions 2016 tax years. This program allows the firm to work with
related to the current year 65 204 144 the IRS to identify and resolve potential U.S. federal tax
Increases based on tax positions issues before the filing of tax returns. The 2013 tax year is
related to prior years 158 263 149
the first year that was examined under the program, and
Decreases based on tax positions
related to prior years (205) (241) (471) 2013 and 2014 remain subject to post-filing review.
Decreases related to settlements (87) (1,112) (299) New York State and City examinations of fiscal 2007
Exchange rate fluctuations 23 (8) 5
through calendar 2010 began in 2013. New York State and
Balance, end of year $ 825 $ 871 $1,765
City examinations of 2011 through 2014 began in 2015.
Related deferred income tax asset 197 172 475
Net unrecognized tax benefit $ 628 $ 699 $1,290 All years including and subsequent to the years in the table
above remain open to examination by the taxing
authorities. The firm believes that the liability for
unrecognized tax benefits it has established is adequate in
relation to the potential for additional assessments.

194 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Note 25.
Business Segments
Year Ended or as of December
The firm reports its activities in the following four business
segments: Investment Banking, Institutional Client Services, $ in millions 2015 2014 2013

Investing & Lending and Investment Management. Investment Banking

Financial Advisory $ 3,470 $ 2,474 $ 1,978
Basis of Presentation Equity underwriting 1,546 1,750 1,659
In reporting segments, certain of the firms business lines Debt underwriting 2,011 2,240 2,367
have been aggregated where they have similar economic Total Underwriting 3,557 3,990 4,026
characteristics and are similar in each of the following Total net revenues 7,027 6,464 6,004
areas: (i) the nature of the services they provide, (ii) their Operating expenses 3,713 3,688 3,479
Pre-tax earnings $ 3,314 $ 2,776 $ 2,525
methods of distribution, (iii) the types of clients they serve
Segment assets $ 2,564 $ 1,844 $ 1,900
and (iv) the regulatory environments in which they operate.
Institutional Client Services
The cost drivers of the firm taken as a whole Fixed Income, Currency and
compensation, headcount and levels of business activity Commodities Client Execution $ 7,322 $ 8,461 $ 8,651
are broadly similar in each of the firms business segments. Equities client execution 3,028 2,079 2,594
Compensation and benefits expenses in the firms segments Commissions and fees 3,156 3,153 3,103
reflect, among other factors, the overall performance of the Securities services 1,645 1,504 1,373
firm as well as the performance of individual businesses. Total Equities 7,829 6,736 7,070
Consequently, pre-tax margins in one segment of the firms Total net revenues 15,151 15,197 15,721 4
business may be significantly affected by the performance Operating expenses 13,938 10,880 11,792
Pre-tax earnings $ 1,213 $ 4,317 $ 3,929
of the firms other business segments.
Segment assets $663,394 $695,674 $787,896
The firm allocates assets (including allocations of global
Investing & Lending
core liquid assets and cash, secured client financing and Equity securities $ 3,781 $ 4,579 $ 4,974
other assets), revenues and expenses among the four Debt securities and loans 1,655 2,246 2,044
business segments. Due to the integrated nature of these Total net revenues 1 5,436 6,825 7,018
segments, estimates and judgments are made in allocating Operating expenses 2,402 2,819 2,686
certain assets, revenues and expenses. The allocation Pre-tax earnings $ 3,034 $ 4,006 $ 4,332
process is based on the manner in which management Segment assets $179,428 $143,790 $109,250
currently views the performance of the segments. Investment Management
Transactions between segments are based on specific Management and other fees $ 4,887 $ 4,800 $ 4,386
criteria or approximate third-party rates. Total operating Incentive fees 780 776 662
expenses include charitable contributions that have not Transaction revenues 539 466 415
been allocated to individual business segments. Total net revenues 6,206 6,042 5,463
Operating expenses 4,841 4,647 4,357
Management believes that the information in the table Pre-tax earnings $ 1,365 $ 1,395 $ 1,106
below provides a reasonable representation of each Segment assets $ 16,009 $ 14,534 $ 12,078
segments contribution to consolidated pre-tax earnings
Total net revenues $ 33,820 $ 34,528 $ 34,206
and total assets. Total operating expenses 2, 3 25,042 22,171 22,469
Total pre-tax earnings $ 8,778 $ 12,357 $ 11,737
Total assets $861,395 $855,842 $911,124

1. Net revenues related to the firms consolidated investments, previously

reported in other net revenues within Investing & Lending, are now reported
in equity securities and debt securities and loans, as results from these
activities ($391 million for 2015) are no longer significant principally due to
the sale of Metro in the fourth quarter of 2014. Reclassifications have been
made to previously reported amounts to conform to the current presentation.
2. Includes net provisions for litigation and regulatory proceedings of
$4.01 billion (of which $3.37 billion was related to the agreement in principle
with the RMBS Working Group) for 2015, $754 million for 2014 and
$962 million for 2013. See Note 27 for further information about this
agreement in principle.
3. Includes charitable contributions that have not been allocated to the firms
segments of $148 million for 2015, $137 million for 2014 and $155 million for
2013.
4. Includes $37 million of realized gains on available-for-sale securities.

Goldman Sachs 2015 Form 10-K 195

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Notes to Consolidated Financial Statements

The segment information presented in the table above is Geographic results are generally allocated as follows:
prepared according to the following methodologies:
Investment Banking: location of the client and investment
Revenues and expenses directly associated with each banking team.
segment are included in determining pre-tax earnings.
Institutional Client Services: Fixed Income, Currency and
Net revenues in the firms segments include allocations of Commodities Client Execution, and Equities (excluding
interest income and interest expense to specific securities, Securities Services): location of the market-making desk;
commodities and other positions in relation to the cash Securities Services: location of the primary market for the
generated by, or funding requirements of, such underlying security.
underlying positions. Net interest is included in segment
Investing & Lending: Investing: location of the
net revenues as it is consistent with the way in which
investment; Lending: location of the client.
management assesses segment performance.
Investment Management: location of the sales team.
Overhead expenses not directly allocable to specific
segments are allocated ratably based on direct segment The table below presents the total net revenues, pre-tax
expenses. earnings and net earnings of the firm by geographic region
allocated based on the methodology referred to above, as
The table below presents the amounts of net interest income
well as the percentage of total net revenues, pre-tax
by segment included in net revenues.
earnings and net earnings (excluding Corporate) for each
geographic region. In the table below, Asia includes
Year Ended December
Australia and New Zealand.
$ in millions 2015 2014 2013
Investment Banking $ $ $
Year Ended December
Institutional Client Services 2,471 3,679 3,250
$ in millions 2015 2014 2013
Investing & Lending 418 237 25
Investment Management 175 131 117 Net revenues
Americas $19,202 56% $20,062 58% $19,858 58%
Total net interest income $3,064 $4,047 $3,392
Europe, Middle East
and Africa 8,981 27% 9,057 26% 8,828 26%
The table below presents the amounts of depreciation and Asia 5,637 17% 5,409 16% 5,520 16%
amortization expense by segment included in pre-tax Total net revenues $33,820 100% $34,528 100% $34,206 100%
earnings. Pre-tax earnings
Americas $ 3,359 2 37% $ 7,144 57% $ 6,794 57%
Europe, Middle East
Year Ended December and Africa 3,364 38% 3,338 27% 3,230 27%
$ in millions 2015 2014 2013 Asia 2,203 25% 2,012 16% 1,868 16%
Subtotal 8,926 100% 12,494 100% 11,892 100%
Investment Banking $ 123 $ 135 $ 144
Corporate 1 (148) (137) (155)
Institutional Client Services 462 525 571 Total pre-tax earnings $ 8,778 $12,357 $11,737
Investing & Lending 253 530 441 Net earnings
Investment Management 153 147 166 Americas $ 1,587 26% $ 4,558 53% $ 4,425 54%
Total depreciation and amortization $ 991 $1,337 $1,322 Europe, Middle East
and Africa 2,914 47% 2,576 30% 2,377 29%
Geographic Information Asia 1,686 27% 1,434 17% 1,345 17%
Subtotal 6,187 100% 8,568 100% 8,147 100%
Due to the highly integrated nature of international
Corporate 1 (104) (91) (107)
financial markets, the firm manages its businesses based on Total net earnings $ 6,083 $ 8,477 $ 8,040
the profitability of the enterprise as a whole. The
methodology for allocating profitability to geographic 1. Includes charitable contributions that have not been allocated to the firms
geographic regions.
regions is dependent on estimates and management
2. Includes provisions of $3.37 billion recorded during 2015 for the agreement
judgment because a significant portion of the firms in principle with the RMBS Working Group. See Note 27 for further
activities require cross-border coordination in order to information about this agreement in principle.
facilitate the needs of the firms clients.

196 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Note 26.
Credit Concentrations
Credit concentrations may arise from market making, client To reduce credit exposures, the firm may enter into
facilitation, investing, underwriting, lending and agreements with counterparties that permit the firm to
collateralized transactions and may be impacted by changes offset receivables and payables with such counterparties
in economic, industry or political factors. The firm seeks to and/or enable the firm to obtain collateral on an upfront or
mitigate credit risk by actively monitoring exposures and contingent basis. Collateral obtained by the firm related to
obtaining collateral from counterparties as deemed derivative assets is principally cash and is held by the firm
appropriate. or a third-party custodian. Collateral obtained by the firm
related to resale agreements and securities borrowed
While the firms activities expose it to many different
transactions is primarily U.S. government and federal
industries and counterparties, the firm routinely executes a
agency obligations and non-U.S. government and agency
high volume of transactions with asset managers,
obligations. See Note 10 for further information about
investment funds, commercial banks, brokers and dealers,
collateralized agreements and financings.
clearing houses and exchanges, which results in significant
credit concentrations. The table below presents U.S. government and federal
agency obligations, and non-U.S. government and agency
In the ordinary course of business, the firm may also be
obligations, that collateralize resale agreements and
subject to a concentration of credit risk to a particular
securities borrowed transactions (including those in Cash
counterparty, borrower or issuer, including sovereign
and securities segregated for regulatory and other
issuers, or to a particular clearing house or exchange.
purposes). Because the firms primary credit exposure on
The table below presents the credit concentrations in cash such transactions is to the counterparty to the transaction,
instruments held by the firm. the firm would be exposed to the collateral issuer only in
the event of counterparty default.
As of December
$ in millions 2015 2014 As of December
U.S. government and federal $ in millions 2015 2014
agency obligations 1 $63,844 $69,170 U.S. government and federal
% of total assets 7.4% 8.1% agency obligations $107,198 $103,263
Non-U.S. government and Non-U.S. government and
agency obligations 1 $31,772 $37,059 agency obligations 1 74,326 71,302
% of total assets 3.7% 4.3%
1. Principally consists of securities issued by the governments of France, the
1. Included in Financial instruments owned, at fair value and Cash and United Kingdom, Japan and Germany.
securities segregated for regulatory and other purposes.

As of December 2015 and December 2014, the firm did not

have credit exposure to any other counterparty that
exceeded 2% of total assets.

Goldman Sachs 2015 Form 10-K 197

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Note 27.
Legal Proceedings
The firm is involved in a number of judicial, regulatory and Management is generally unable to estimate a range of
arbitration proceedings (including those described below) reasonably possible loss for matters other than those
concerning matters arising in connection with the conduct included in the estimate above, including where (i) actual or
of the firms businesses. Many of these proceedings are in potential plaintiffs have not claimed an amount of money
early stages, and many of these cases seek an indeterminate damages, except in those instances where management can
amount of damages. otherwise determine an appropriate amount, (ii) matters
are in early stages, (iii) matters relate to regulatory
Under ASC 450, an event is reasonably possible if the
investigations or reviews, except in those instances where
chance of the future event or events occurring is more than
management can otherwise determine an appropriate
remote but less than likely and an event is remote if the
amount, (iv) there is uncertainty as to the likelihood of a
chance of the future event or events occurring is slight.
class being certified or the ultimate size of the class, (v) there
Thus, references to the upper end of the range of reasonably
is uncertainty as to the outcome of pending appeals or
possible loss for cases in which the firm is able to estimate a
motions, (vi) there are significant factual issues to be
range of reasonably possible loss mean the upper end of the
resolved, and/or (vii) there are novel legal issues presented.
range of loss for cases for which the firm believes the risk of
For example, the firms potential liabilities with respect to
loss is more than slight.
future mortgage-related put-back claims described below
With respect to matters described below for which may ultimately result in an increase in the firms liabilities,
management has been able to estimate a range of but are not included in managements estimate of
reasonably possible loss where (i) actual or potential reasonably possible loss. As another example, the firms
plaintiffs have claimed an amount of money damages, potential liabilities with respect to the investigations and
(ii) the firm is being, or threatened to be, sued by purchasers reviews described below under Regulatory Investigations
in an underwriting and is not being indemnified by a party and Reviews and Related Litigation also generally are not
that the firm believes will pay any judgment, or (iii) the included in managements estimate of reasonably possible
purchasers are demanding that the firm repurchase loss. However, management does not believe, based on
securities, management has estimated the upper end of the currently available information, that the outcomes of such
range of reasonably possible loss as being equal to (a) in the other matters will have a material adverse effect on the
case of (i), the amount of money damages claimed, (b) in the firms financial condition, though the outcomes could be
case of (ii), the difference between the initial sales price of material to the firms operating results for any particular
the securities that the firm sold in such underwriting and the period, depending, in part, upon the operating results for
estimated lowest subsequent price of such securities and such period. See Note 18 for further information about
(c) in the case of (iii), the price that purchasers paid for the mortgage-related contingencies.
securities less the estimated value, if any, as of
December 2015 of the relevant securities, in each of cases
(i), (ii) and (iii), taking into account any 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
$2.0 billion in excess of the aggregate reserves for such
matters.

198 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Mortgage-Related Matters. Beginning in April 2010, a In addition, the Board has received books and records
number of purported securities law class actions were filed demands from several shareholders for materials relating
in the U.S. District Court for the Southern District of New to, among other subjects, the firms mortgage servicing and
York challenging the adequacy of Group Inc.s public foreclosure activities, participation in federal programs
disclosure of, among other things, the firms activities in the providing assistance to financial institutions and
CDO market, the firms conflict of interest management, homeowners, loan sales to Fannie Mae and Freddie Mac,
and the SEC investigation that led to GS&Co. entering into mortgage-related activities and conflicts management.
a consent agreement with the SEC, settling all claims made
GS&Co., Goldman Sachs Mortgage Company and GS
against GS&Co. by the SEC in connection with the
Mortgage Securities Corp. and three current or former
ABACUS 2007-AC1 CDO offering (ABACUS 2007-AC1
Goldman Sachs employees are defendants in a putative
transaction), pursuant to which GS&Co. paid $550 million
class action commenced on December 11, 2008 in the U.S.
of disgorgement and civil penalties. The consolidated
District Court for the Southern District of New York
amended complaint filed on July 25, 2011, which names as
brought on behalf of purchasers of various mortgage pass-
defendants Group Inc. and certain officers and employees
through certificates and asset-backed certificates issued by
of Group Inc. and its affiliates, generally alleges violations
various securitization trusts established by the firm and
of Sections 10(b) and 20(a) of the Exchange Act and seeks
underwritten by GS&Co. in 2007. On June 3, 2010,
unspecified damages. On June 21, 2012, the district court
another investor filed a separate putative class action
dismissed the claims based on Group Inc.s not disclosing
asserting substantively similar allegations relating to one
that it had received a Wells notice from the staff of the
other offering and thereafter moved to further amend its
SEC related to the ABACUS 2007-AC1 transaction, but
amended complaint to add claims with respect to two
permitted the plaintiffs other claims to proceed. The
additional offerings. On December 30, 2015, the district
district court granted class certification on
court preliminarily approved a settlement covering both
September 24, 2015, but the appellate court granted
actions. The firm has paid the full amount of the proposed
defendants petition for review on January 26, 2016. On
settlement into an escrow account.
February 1, 2016, the district court stayed proceedings in
the district court pending the appellate courts decision. On September 30, 2010, a class action was filed in the U.S.
District Court for the Southern District of New York
In June 2012, the Board received a demand from a
against GS&Co., Group Inc. and two former GS&Co.
shareholder that the Board investigate and take action
employees on behalf of investors in $823 million of notes
relating to the firms mortgage-related activities and to
issued in 2006 and 2007 by two synthetic CDOs (Hudson
stock sales by certain directors and executives of the firm.
Mezzanine 2006-1 and 2006-2). On November 2, 2015,
On February 15, 2013, this shareholder filed a putative
the parties reached a settlement in principle, subject to
shareholder derivative action in New York Supreme Court,
documentation and court approval. The firm has reserved
New York County, against Group Inc. and certain current
the full amount of the proposed settlement.
or former directors and employees, based on these activities
and stock sales. The derivative complaint includes
allegations of breach of fiduciary duty, unjust enrichment,
abuse of control, gross mismanagement and corporate
waste, and seeks, among other things, unspecified monetary
damages, disgorgement of profits and certain corporate
governance and disclosure reforms. On May 28, 2013,
Group Inc. informed the shareholder that the Board
completed its investigation and determined to refuse the
demand. On June 20, 2013, the shareholder made a books
and records demand requesting materials relating to the
Boards determination. The parties have agreed to stay
proceedings in the putative derivative action pending
resolution of the books and records demand.

Goldman Sachs 2015 Form 10-K 199

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Various alleged purchasers of, and counterparties and Group Inc., Litton Loan Servicing LP (Litton), Ocwen
providers of credit enhancement involved in transactions Financial Corporation and Arrow Corporate Member
relating to, mortgage pass-through certificates, CDOs and Holdings LLC (Arrow), a former subsidiary of Group Inc.,
other mortgage-related products (including ACA Financial are defendants in a putative class action pending since
Guaranty Corp., Aozora Bank, Ltd., Basis Yield Alpha January 23, 2013 in the U.S. District Court for the Southern
Fund (Master), the Charles Schwab Corporation, CIFG District of New York generally challenging the
Assurance of North America, Inc., the FDIC (as receiver for procurement manner and scope of force-placed hazard
Guaranty Bank), IKB Deutsche Industriebank AG, insurance arranged by Litton when homeowners failed to
Massachusetts Mutual Life Insurance Company, Texas arrange for insurance as required by their mortgages. The
County & District Retirement System and the Tennessee complaint asserts claims for breach of contract, breach of
Consolidated Retirement System) have filed complaints in fiduciary duty, misappropriation, conversion, unjust
state and federal court against firm affiliates, generally enrichment and violation of Florida unfair practices law,
alleging that the offering documents for the securities that and seeks unspecified compensatory and punitive damages
they purchased contained untrue statements of material fact as well as declaratory and injunctive relief. An amended
and material omissions and generally seeking rescission complaint, filed on November 19, 2013, added an
and/or damages. Certain of these complaints allege fraud additional plaintiff and RICO claims. On
and seek punitive damages. Certain of these complaints also September 29, 2014, the court denied without prejudice and
name other firms as defendants. with leave to renew at a later date Group Inc.s motion to
sever the claims against it and certain other defendants. On
Norges Bank Investment Management and Selective
February 2, 2016, the defendants motion to dismiss the
Insurance Company have threatened to assert claims of
action as preempted by the filed-rate doctrine under a
various types against the firm in connection with the sale of
recent Second Circuit decision was granted with respect to
mortgage-related securities. The firm has entered into
certain of the plaintiffs. On January 15, 2016, Group Inc.
agreements with one of these entities to toll the relevant
and Arrow were added as defendants to a putative class
statute of limitations.
action in the U.S. District Court for the Northern District of
As of the date hereof, the aggregate amount of mortgage- California based on substantially similar allegations,
related securities sold to plaintiffs in active and threatened asserting RICO claims and violations of Californias Unfair
cases described in the preceding two paragraphs where Competition Law, and seeking similar relief. On
those plaintiffs are seeking rescission of such securities was February 10, 2016, Group Inc., Litton and Arrow and the
approximately $3.3 billion (which does not reflect plaintiffs in the action pending in the Southern District of
adjustment for any subsequent paydowns or distributions New York reached a settlement in principle, subject to
or any residual value of such securities, statutory interest or documentation and court approval, which would resolve
any other adjustments that may be claimed). This amount the remaining claims in both actions.
does not include the potential claims by these or other
purchasers in the same or other mortgage-related offerings
that have not been described above, or claims that have
been dismissed.
The firm has entered into agreements with Deutsche Bank
National Trust Company and U.S. Bank National
Association to toll the relevant statute of limitations with
respect to claims for repurchase of residential mortgage
loans based on alleged breaches of representations related
to $11.1 billion original notional face amount of
securitizations issued by trusts for which they act as
trustees.

200 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

On January 14, 2016, the firm announced an agreement in GT Advanced Technologies Securities Litigation.
principle, subject to definitive documentation, to resolve GS&Co. is among the underwriters named as defendants in
the ongoing investigation of the Residential Mortgage- several putative securities class actions filed in
Backed Securities Working Group of the U.S. Financial October 2014 in the U.S. District Court for the District of
Fraud Enforcement Task Force. The agreement in principle New Hampshire. In addition to the underwriters, the
will resolve actual and potential civil claims by the U.S. defendants include certain directors and officers of GT
Department of Justice, the New York and Illinois Attorneys Advanced Technologies Inc. (GT Advanced Technologies).
General, the National Credit Union Administration (as As to the underwriters, the complaints generally allege
conservator for several failed credit unions) and the Federal misstatements and omissions in connection with the
Home Loan Banks of Chicago and Seattle, relating to the December 2013 offerings by GT Advanced Technologies of
firms securitization, underwriting and sale of residential approximately $86 million of common stock and
mortgage-backed securities from 2005 to 2007. Under the $214 million principal amount of convertible senior notes,
terms of the agreement in principle, the firm will pay a assert claims under the federal securities laws, and seek
$2.39 billion civil monetary penalty, make $875 million in compensatory damages in an unspecified amount and
cash payments and provide $1.80 billion in consumer relief. rescission. On July 20, 2015, the plaintiffs filed a
The consumer relief will be in the form of principal consolidated amended complaint. On October 7, 2015, the
forgiveness for underwater homeowners and distressed defendants moved to dismiss. GS&Co. underwrote
borrowers; financing for construction, rehabilitation and 3,479,769 shares of common stock and $75 million
preservation of affordable housing; and support for debt principal amount of notes for an aggregate offering price of
restructuring, foreclosure prevention and housing quality approximately $105 million. On October 6, 2014, GT
improvement programs, as well as land banks. The firm has Advanced Technologies filed for Chapter 11 bankruptcy.
established a reserve for its estimated obligations under the
FireEye Securities Litigation. GS&Co. is among the
agreement in principle. See also Regulatory Investigations
underwriters named as defendants in several putative
and Reviews and Related Litigation below. The firm has
securities class actions, filed beginning in June 2014 in the
also received, and continues to receive, requests for
California Superior Court, County of Santa Clara. In
information and/or subpoenas from, and is engaged in
addition to the underwriters, the defendants include
discussions with, federal, state and local regulators and law
FireEye, Inc. (FireEye) and certain of its directors and
enforcement authorities as part of inquiries or
officers. The complaints generally allege misstatements and
investigations relating to the mortgage-related
omissions in connection with the offering materials for the
securitization process, subprime mortgages, CDOs,
March 2014 offering of approximately $1.15 billion of
synthetic mortgage-related products, sales communications
FireEye common stock, assert claims under the federal
and particular transactions involving these products, and
securities laws, and seek compensatory damages in an
servicing and foreclosure activities, which may subject the
unspecified amount and rescission. On August 11, 2015,
firm to actions, including litigation, penalties and fines.
the court overruled the defendants demurrers, which
The firm may be the subject of additional putative sought to have the consolidated amended complaint
shareholder derivative actions, purported class actions, dismissed. On November 16, 2015, plaintiffs moved for
rescission and put-back claims and other litigation, class certification. On January 6, 2016, FireEye and its
additional investor and shareholder demands, and director and officer defendants filed a motion for judgment
additional regulatory and other investigations and actions on the pleadings for lack of subject matter jurisdiction.
with respect to mortgage-related offerings, loan sales, GS&Co. underwrote 2,100,000 shares for a total offering
CDOs, and servicing and foreclosure activities. See Note 18 price of approximately $172 million.
for information regarding mortgage-related contingencies
not described in this Note 27.

Goldman Sachs 2015 Form 10-K 201

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Cobalt International Energy Securities Litigation. Employment-Related Matters. On September 15, 2010,
Cobalt International Energy, Inc. (Cobalt), certain of its a putative class action was filed in the U.S. District Court
officers and directors (including employees of affiliates of for the Southern District of New York by three female
Group Inc. who served as directors of Cobalt), affiliates of former employees alleging that Group Inc. and GS&Co.
shareholders of Cobalt (including Group Inc.) and have systematically discriminated against female employees
underwriters (including GS&Co.) for certain offerings of in respect of compensation, promotion, assignments,
Cobalts securities are defendants in a putative securities mentoring and performance evaluations. The complaint
class action filed on November 30, 2014 in the U.S. District alleges a class consisting of all female employees employed
Court for the Southern District of Texas. The consolidated at specified levels in specified areas by Group Inc. and
amended complaint, filed on May 1, 2015, asserts claims GS&Co. since July 2002, and asserts claims under federal
under the federal securities laws, seeks compensatory and and New York City discrimination laws. The complaint
rescissory damages in unspecified amounts and alleges seeks class action status, injunctive relief and unspecified
material misstatements and omissions concerning Cobalt in amounts of compensatory, punitive and other damages. On
connection with a $1.67 billion February 2012 offering of July 17, 2012, the district court issued a decision granting in
Cobalt common stock, a $1.38 billion December 2012 part Group Inc.s and GS&Co.s motion to strike certain of
offering of Cobalts convertible notes, a $1.00 billion plaintiffs class allegations on the ground that plaintiffs
January 2013 offering of Cobalts common stock, a lacked standing to pursue certain equitable remedies and
$1.33 billion May 2013 offering of Cobalts common stock, denying Group Inc.s and GS&Co.s motion to strike
and a $1.30 billion May 2014 offering of Cobalts plaintiffs class allegations in their entirety as premature.
convertible notes. The consolidated amended complaint On March 21, 2013, the U.S. Court of Appeals for the
alleges that, among others, Group Inc. and GS&Co. are Second Circuit held that arbitration should be compelled
liable as controlling persons with respect to all five with one of the named plaintiffs, who as a managing
offerings. The consolidated amended complaint also seeks director was a party to an arbitration agreement with the
damages from GS&Co. in connection with its acting as an firm. On March 10, 2015, the magistrate judge to whom
underwriter of 14,430,000 shares of common stock the district judge assigned the remaining plaintiffs
representing an aggregate offering price of approximately May 2014 motion for class certification recommended that
$465 million, $690 million principal amount of convertible the motion be denied in all respects. On August 3, 2015, the
notes, and approximately $508 million principal amount of magistrate judge denied plaintiffs motion for
convertible notes in the February 2012, December 2012 reconsideration of that recommendation and granted the
and May 2014 offerings, respectively, for an aggregate plaintiffs motion to intervene two female individuals, one
offering price of approximately $1.66 billion. On of whom was employed by the firm as of September 2010
January 19, 2016, the court granted, with leave to replead, and the other of whom is a current employee of the firm.
the underwriter defendants motions to dismiss as to claims On August 17, 2015, the defendants appealed the
by plaintiffs who purchased Cobalt securities after magistrate judges decision on intervention. On
April 30, 2013, but denied the motions to dismiss in all September 28, 2015, the defendants moved to dismiss the
other respects. claims of an intervenor who is not a current employee of the
firm for lack of standing.
Solazyme, Inc. Securities Litigation. GS&Co. is among
the underwriters named as defendants in a putative securities Investment Management Services. Group Inc. and
class action filed on June 24, 2015 in the U.S. District Court certain of its affiliates are parties to various civil litigation
for the Northern District of California. In addition to the and arbitration proceedings and other disputes with clients
underwriters, the defendants include Solazyme, Inc. relating to losses allegedly sustained as a result of the firms
(Solazyme) and certain of its directors and officers. As to the investment management services. These claims generally
underwriters, the complaints generally allege misstatements seek, among other things, restitution or other
and omissions in connection with March 2014 offerings by compensatory damages and, in some cases, punitive
Solazyme of approximately $63 million of common stock damages.
and $150 million principal amount of convertible senior
subordinated notes, assert claims under the federal securities
laws, and seek compensatory damages in an unspecified
amount and rescission. Plaintiffs filed an amended complaint
on December 15, 2015, and defendants moved to dismiss on
February 12, 2016. GS&Co. underwrote 3,450,000 shares
of common stock and $150 million principal amount of
notes for an aggregate offering price of approximately
$187 million.

202 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Financial Advisory Services. Group Inc. and certain of its Municipal Securities Matters. GS&Co. (along with, in
affiliates are from time to time parties to various civil some cases, other financial services firms) is named by
litigation and arbitration proceedings and other disputes municipalities, municipal-owned entities, state-owned
with clients and third parties relating to the firms financial agencies or instrumentalities and non-profit entities in a
advisory activities. These claims generally seek, among number of FINRA arbitrations and federal court cases
other things, compensatory damages and, in some cases, based on GS&Co.s role as underwriter of the claimants
punitive damages, and in certain cases allege that the firm issuances of an aggregate of approximately $1.9 billion of
did not appropriately disclose or deal with conflicts of auction rate securities from 2003 through 2007 and as a
interest. broker-dealer with respect to auctions for these securities.
The claimants generally allege that GS&Co. failed to
Credit Derivatives Antitrust Matters. On
disclose that it had a practice of placing cover bids in
December 4, 2015, the European Commission announced
auctions, and/or failed to inform the claimant of the
that it had closed antitrust proceedings against all banks,
deterioration of the auction rate market beginning in the
including Group Inc., involved in the European
fall of 2007, and that, as a result, the claimant was forced to
Commissions investigation, announced in April 2011, of
engage in a series of expensive refinancing and conversion
numerous financial services companies in connection with
transactions after the failure of the auction market in
the supply of data related to credit default swaps and in
February 2008. Certain claimants also allege that GS&Co.
connection with profit sharing and fee arrangements for
advised them to enter into or continue with interest rate
clearing of credit default swaps, including potential anti-
swaps in connection with their auction rate securities
competitive practices.
issuances, causing them to incur additional losses. The
GS&Co. is among the numerous defendants in putative claims include breach of fiduciary duty, fraudulent
antitrust class actions relating to credit derivatives, filed concealment, negligent misrepresentation, breach of
beginning in May 2013 and consolidated in the U.S. contract, violations of the Exchange Act and state securities
District Court for the Southern District of New York. On laws, and breach of duties under the rules of the Municipal
October 29, 2015, the court preliminarily approved the Securities Rulemaking Board and the NASD. Certain of the
settlement among GS&Co. and the plaintiffs. The firm has arbitrations have been enjoined in accordance with the
reserved the full amount of the proposed settlement. exclusive forum selection clauses in the transaction
documents. In addition, GS&Co. has filed motions with the
Libya-Related Litigation. GSI is the defendant in an
FINRA Panels to dismiss the arbitrations, one of which has
action filed on January 21, 2014 with the High Court of
been granted, and has filed motions to dismiss two of the
Justice in London by the Libyan Investment Authority,
proceedings pending in federal court, one of which was
relating to nine derivative transactions between the plaintiff
granted but has been appealed and one of which was
and GSI and seeking, among other things, rescission of the
denied. GS&Co. has also reached settlements or settlements
transactions and unspecified equitable compensation and
in principle in five actions and one action was voluntarily
damages exceeding $1 billion. On December 4, 2014, the
dismissed.
Libyan Investment Authority filed an amended statement of
claim. U.S. Treasury Securities-Related 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. The complaints generally allege that
the defendants violated the federal antitrust laws and the
Commodity Exchange Act in connection with an alleged
conspiracy to manipulate the when-issued market and
auctions for U.S. Treasury securities, as well as related
futures and options, and seek declaratory and injunctive
relief, treble damages in an unspecified amount and
restitution.

Goldman Sachs 2015 Form 10-K 203

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Commodities-Related Litigation. GS&Co., GSI, ISDAFIX-Related Litigation. Group Inc. is among the
J. Aron & Company and Metro, a previously consolidated defendants named in several putative class actions relating
subsidiary of Group Inc. that was sold in the fourth quarter to trading in interest rate derivatives, filed beginning in
of 2014, are among the defendants in a number of putative September 2014 in the U.S. District Court for the Southern
class actions filed beginning on August 1, 2013 and District of New York. The second consolidated amended
consolidated in the U.S. District Court for the Southern complaint, filed on February 12, 2015, asserts claims under
District of New York. The complaints generally allege the federal antitrust laws and state common law in
violations of federal antitrust laws and state laws in connection with an alleged conspiracy to manipulate the
connection with the storage of aluminum and aluminum ISDAFIX benchmark and seeks declaratory and injunctive
trading. The complaints seek declaratory, injunctive and relief as well as treble damages in an unspecified amount.
other equitable relief as well as unspecified monetary Defendants moved to dismiss the second consolidated
damages, including treble damages. On August 29, 2014, amended complaint on April 13, 2015.
the court granted the Goldman Sachs defendants motion to
Currencies-Related Litigation. GS&Co. and Group Inc.
dismiss. Certain plaintiffs appealed on September 24, 2014,
are among the defendants named in several putative
and the remaining plaintiffs sought to amend their
antitrust class actions relating to trading in the foreign
complaints in October 2014. On March 26, 2015, the court
exchange markets, filed beginning in December 2013 in the
granted in part and denied in part plaintiffs motions for
U.S. District Court for the Southern District of New York.
leave to amend their complaints, rejecting their
The complaints generally allege that defendants violated
monopolization claims and most state law claims but
federal antitrust laws in connection with an alleged
permitting their antitrust conspiracy claims and certain
conspiracy to manipulate the foreign currency exchange
parallel state law and unjust enrichment claims to proceed,
markets and seek declaratory and injunctive relief as well as
and the court directed the remaining plaintiffs to file their
treble damages in an unspecified amount. On
amended complaints, which they did on April 9, 2015.
February 13, 2014, the cases were consolidated into one
GS Power, Metro and GSI are among the defendants named action.
in putative class actions, filed beginning on May 23, 2014
Beginning in February 2015, GS&Co. and Group Inc. were
in the U.S. District Court for the Southern District of New
named as defendants in separate putative class actions filed
York, based on similar alleged violations of the federal
in the U.S. District Court for the Southern District of New
antitrust laws in connection with the management of zinc
York, which were consolidated with the antitrust class
storage facilities. On January 7, 2016, the court granted the
actions described above on August 13, 2015. On
defendants motion to dismiss.
December 15, 2015, the court preliminarily approved a
GSI is among the defendants named in putative class settlement among GS&Co., Group Inc. and the plaintiffs in
actions relating to trading in platinum and palladium, filed the consolidated action. The firm has paid the full amount
beginning on November 25, 2014, in the U.S. District of the proposed settlement into an escrow account.
Court for the Southern District of New York. The
On June 3, 2015, GS&Co. and Group Inc. were among the
complaints generally allege that the defendants violated
defendants named in a putative class action filed in the U.S.
federal antitrust laws and the Commodity Exchange Act in
District Court for the Southern District of New York on
connection with an alleged conspiracy to manipulate a
behalf of certain ERISA employee benefit plans. As to the
benchmark for physical platinum and palladium prices and
claims brought against GS&Co. and Group Inc., the
seek declaratory and injunctive relief as well as treble
amended complaint, filed on November 16, 2015, generally
damages in an unspecified amount. On July 27, 2015,
alleges that the defendants violated ERISA in connection
plaintiffs filed a second amended consolidated complaint,
with an alleged conspiracy to manipulate the foreign
and on September 21, 2015, the defendants moved to
currency exchange markets, which caused losses to ERISA
dismiss.
plans for which the defendants provided foreign exchange
services or otherwise authorized the execution of foreign
exchange services. The plaintiffs have moved for leave to
file a second amended complaint containing substantially
the same allegations. Plaintiffs seek declaratory and
injunctive relief as well as restitution and disgorgement in
an unspecified amount.

204 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Group Inc., GS&Co. and Goldman Sachs Canada Inc. are Regulatory Investigations and Reviews and Related
among the defendants named in putative class actions Litigation. Group Inc. and certain of its affiliates are
related to trading in foreign exchange markets, filed subject to a number of other investigations and reviews by,
beginning in September 2015 in the Superior Court of and in some cases have received subpoenas and requests for
Justice in Ontario, Canada and the Superior Court of documents and information from, various governmental
Quebec, Canada, on behalf of direct and indirect and regulatory bodies and self-regulatory organizations and
purchasers of foreign exchange instruments traded in litigation relating to various matters relating to the firms
Canada. The complaints generally allege a conspiracy to businesses and operations, including:
manipulate the foreign currency exchange markets and
The 2008 financial crisis;
assert claims under Canadas Competition Act and
common law. The Ontario and Quebec complaints seek, The public offering process;
among other things, compensatory damages in the amounts
The firms investment management and financial
of 1 billion Canadian dollars and 100 million Canadian
advisory services;
dollars, respectively, as well as restitution and 50 million
Canadian dollars in punitive, exemplary and aggravated Conflicts of interest;
damages.
Research practices, including research independence and
Interest Rate Swap Antitrust Litigation. Group Inc., interactions between research analysts and other firm
GS&Co., GSI, GS Bank USA and Goldman Sachs Financial personnel, including investment banking personnel, as
Markets, L.P. are among the defendants named in a well as third parties;
putative antitrust class action relating to the trading of
Transactions involving municipal securities, including
interest rate swaps, filed on November 25, 2015 in the U.S.
wall-cross procedures and conflict of interest disclosure
District Court for the Southern District of New York. The
with respect to state and municipal clients, the trading
complaint generally alleges a conspiracy among the dealers
and structuring of municipal derivative instruments in
and brokers since at least January 1, 2008 to preclude
connection with municipal offerings, political
exchange trading of interest rate swaps. The complaint
contribution rules, municipal advisory services and the
seeks declaratory and injunctive relief as well as treble
possible impact of credit default swap transactions on
damages in an unspecified amount.
municipal issuers;
Compensation-Related Litigation. On June 9, 2015,
The offering, auction, sales, trading and clearance of
Group Inc. and certain of its current and former directors
corporate and government securities, currencies,
were named as defendants in a purported shareholder
commodities and other financial products and related sales
derivative action in the Court of Chancery of the State of
and other communications and activities, including
Delaware. The derivative complaint alleges that excessive
compliance with the SECs short sale rule, algorithmic,
compensation has been paid to such directors since 2012.
high-frequency and quantitative trading, the firms U.S.
The derivative complaint includes allegations of breach of
alternative trading system (dark pool), futures trading,
fiduciary duty and unjust enrichment and seeks, among
options trading, when-issued trading, transaction
other things, unspecified monetary damages, disgorgement
reporting, technology systems and controls, securities
of director compensation and reform of the firms stock
lending practices, trading and clearance of credit derivative
incentive plan. On September 30, 2015, the defendants
instruments, commodities activities and metals storage,
moved to dismiss.
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 and the ISDAFIX benchmark rates;
Compliance with the U.S. Foreign Corrupt Practices Act;
The firms hiring and compensation practices;
The firms 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
firms insider trading controls and information barriers.
Goldman Sachs is cooperating with all such regulatory
investigations and reviews.
Goldman Sachs 2015 Form 10-K 205
T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Note 28. Note 29.

Employee Benefit Plans Employee Incentive Plans
The firm sponsors various pension plans and certain other The cost of employee services received in exchange for a
postretirement benefit plans, primarily healthcare and life share-based award is generally measured based on the
insurance. The firm also provides certain benefits to former grant-date fair value of the award. Share-based awards that
or inactive employees prior to retirement. do not require future service (i.e., vested awards, including
awards granted to retirement-eligible employees) are
Defined Benefit Pension Plans and Postretirement
expensed immediately. Share-based awards that require
Plans
future service are amortized over the relevant service
Employees of certain non-U.S. subsidiaries participate in
period. Expected forfeitures are included in determining
various defined benefit pension plans. These plans generally
share-based employee compensation expense.
provide benefits based on years of credited service and a
percentage of the employees eligible compensation. The The firm pays cash dividend equivalents on outstanding
firm maintains a defined benefit pension plan for certain RSUs. Dividend equivalents paid on RSUs are generally
U.K. employees. As of April 2008, the U.K. defined benefit charged to retained earnings. Dividend equivalents paid on
plan was closed to new participants, but allows existing RSUs expected to be forfeited are included in compensation
participants to continue to accrue benefits. In 2015, the expense. The firm accounts for the tax benefit related to
firm notified plan participants that the U.K. defined benefit dividend equivalents paid on RSUs as an increase to
plan will no longer accrue future benefit accruals after additional paid-in capital.
March 31, 2016. The non-U.S. plans do not have a material
The firm generally issues new shares of common stock upon
impact on the firms consolidated results of operations.
delivery of share-based awards. In certain cases, primarily
The firm also maintains a defined benefit pension plan for related to conflicted employment (as outlined in the
substantially all U.S. employees hired prior to applicable award agreements), the firm may cash settle
November 1, 2003. As of November 2004, this plan was share-based compensation awards accounted for as equity
closed to new participants and frozen for existing instruments. For these awards, whose terms allow for cash
participants. In addition, the firm maintains unfunded settlement, additional paid-in capital is adjusted to the
postretirement benefit plans that provide medical and life extent of the difference between the value of the award at
insurance for eligible retirees and their dependents covered the time of cash settlement and the grant-date value of the
under these programs. These plans do not have a material award.
impact on the firms consolidated results of operations.
Stock Incentive Plan
The firm recognizes the funded status of its defined benefit The firm sponsors a stock incentive plan, The Goldman
pension and postretirement plans, measured as the Sachs Amended and Restated Stock Incentive Plan
difference between the fair value of the plan assets and the (2015) (2015 SIP), which provides for grants of RSUs,
benefit obligation, in the consolidated statements of restricted stock, dividend equivalent rights, incentive stock
financial condition. As of December 2015, Other assets options, nonqualified stock options, stock appreciation
and Other liabilities and accrued expenses included rights, and other share-based awards, each of which may be
$329 million (related to overfunded pension plans) and subject to performance conditions. On May 21, 2015,
$561 million, respectively, related to these plans. As of shareholders approved the 2015 SIP. The 2015 SIP replaced
December 2014, Other assets and Other liabilities and The Goldman Sachs Amended and Restated Stock Incentive
accrued expenses included $273 million (related to Plan (2013) (2013 SIP) previously in effect, and applies to
overfunded pension plans) and $739 million, respectively, awards granted on or after the date of approval.
related to these plans.
As of December 2015, 83.8 million shares were available
Defined Contribution Plans for grant under the 2015 SIP. If any shares of common
The firm contributes to employer-sponsored U.S. and non- stock underlying awards granted under the 2015 SIP or
U.S. defined contribution plans. The firms contribution to 2013 SIP are not delivered due to forfeiture, termination or
these plans was $231 million for 2015, $223 million for cancellation or are surrendered or withheld, those shares
2014 and $219 million for 2013. will again become available to be delivered under the 2015
SIP. Shares available for grant are also subject to
adjustment for certain changes in corporate structure as
permitted under the 2015 SIP. The 2015 SIP is scheduled to
terminate on the date of the annual meeting of shareholders
that occurs in 2019.

206 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Restricted Stock Units Stock Options

The firm grants RSUs to employees under the 2015 SIP, Stock options generally vest as outlined in the applicable
which are valued based on the closing price of the stock option agreement. In general, options expire on the
underlying shares on the date of grant after taking into tenth anniversary of the grant date, although they may be
account a liquidity discount for any applicable post-vesting subject to earlier termination or cancellation under certain
and delivery transfer restrictions. RSUs generally vest and circumstances in accordance with the terms of the
underlying shares of common stock deliver as outlined in applicable stock option agreement and the SIP in effect at
the applicable award agreements. Employee award the time of grant.
agreements generally provide that vesting is accelerated in
The table below presents the activity related to outstanding
certain circumstances, such as on retirement, death,
stock options, all of which were granted in 2005 through
disability and conflicted employment. Delivery of the
2008.
underlying shares of common stock is conditioned on the
grantees satisfying certain vesting and other requirements Weighted
outlined in the award agreements. Weighted Aggregate Average
Average Intrinsic Remaining
The table below presents the activity related to RSUs. Options Exercise Value Life
Outstanding Price (in millions) (years)
Outstanding,
Weighted Average December 2014 19,955,338 $120.40 $1,516 3.28
Grant-Date Fair Value
Restricted Stock of Restricted Stock Exercised (5,199,063) 96.57
Units Outstanding Units Outstanding Outstanding,
Future No Future Future No Future December 2015 14,756,275 128.79 891 2.38
Service Service Service Service Exercisable,
Required Required Required Required December 2015 14,756,275 128.79 891 2.38
Outstanding,
December 2014 6,656,869 4 21,289,845 $143.07 $129.52 The total intrinsic value of options exercised during
Granted 1, 2 4,193,176 10,450,094 164.23 158.58
2015, 2014 and 2013 was $531 million, $2.03 billion and
Forfeited (726,013) (165,355) 152.06 147.10
$26 million, respectively.
Delivered 3 (13,966,859) 125.29
Vested 2 (4,474,876) 4,474,876 140.29 140.29 The table below presents options outstanding.
Outstanding,
December 2015 5,649,156 4 22,082,601 159.82 148.00 Weighted
Weighted Average
1. The weighted average grant-date fair value of RSUs granted during Average Remaining
2015, 2014 and 2013 was $160.19, $151.40 and $122.59, respectively. The Options Exercise Life
fair value of the RSUs granted during 2015, 2014 and 2013 includes a Exercise Price Outstanding Price (years)
liquidity discount of 9.2%, 13.8% and 13.7%, respectively, to reflect post- $ 75.00 - $ 89.99 8,780,151 $ 78.78 3.00
vesting and delivery transfer restrictions of up to 4 years.
90.00 - 194.99
2. The aggregate fair value of awards that vested during 2015, 2014 and 2013 195.00 - 209.99 5,976,124 202.27 1.48
was $2.40 billion, $2.39 billion and $2.26 billion, respectively.
Outstanding,
3. Includes RSUs that were cash settled. December 2015 14,756,275 128.79 2.38
4. Includes restricted stock subject to future service requirements as of
December 2015 and December 2014 of 6,354 and 20,651 shares, As of December 2015, there was $440 million of total
respectively.
unrecognized compensation cost related to non-vested
In the first quarter of 2016, the firm granted to its share-based compensation arrangements. This cost is
employees 15.0 million year-end RSUs, of which expected to be recognized over a weighted average period
4.0 million RSUs require future service as a condition of of 1.54 years.
delivery for the related shares of common stock. These The table below presents the share-based compensation and
awards are subject to additional conditions as outlined in the related excess tax benefit.
the award agreements. Generally, shares underlying these
awards, net of required withholding tax, deliver over a Year Ended December
three-year period but are subject to post-vesting and $ in millions 2015 2014 2013
delivery transfer restrictions through January 2021. These Share-based compensation $2,304 $2,101 $2,039
grants are not included in the table above. Excess net tax benefit related to
options exercised 134 549 3
Excess net tax benefit related to
share-based awards 1 406 788 94

1. Represents the net tax benefit recognized in additional paid-in capital on

stock options exercised, the delivery of common stock underlying share-
based awards and dividend equivalents paid on RSUs.

Goldman Sachs 2015 Form 10-K 207

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Notes to Consolidated Financial Statements

Note 30.

Parent Company
Group Inc. Condensed Statements of Earnings Group Inc. Condensed Statements of Cash Flows
Year Ended December Year Ended December
$ in millions 2015 2014 2013 $ in millions 2015 2014 2013
Revenues Cash flows from operating activities
Dividends from subsidiaries Net earnings $ 6,083 $ 8,477 $ 8,040
Bank subsidiaries $ 32 $ 16 $2,000 Adjustments to reconcile net earnings to net cash
Nonbank subsidiaries 3,181 2,739 4,176 provided by operating activities
Undistributed earnings of subsidiaries (3,506) (5,330) (1,086)
Undistributed earnings of subsidiaries 3,506 5,330 1,086
Depreciation and amortization 50 42 15
Other revenues (132) 826 2,209
Deferred income taxes 86 (4) 1,398
Total non-interest revenues 6,587 8,911 9,471 Share-based compensation 178 188 194
Interest income 3,519 3,769 4,048 Gain related to extinguishment of junior
Interest expense 4,165 3,802 4,161 subordinated debt (34) (289)
Net interest loss (646) (33) (113) Changes in operating assets and liabilities
Net revenues, including net interest loss 5,941 8,878 9,358 Financial instruments owned, at fair value (620) 6,766 (3,235)
Financial instruments sold, but not yet
Operating expenses purchased, at fair value 274 (252) 183
Compensation and benefits 498 411 403 Other, net (56) (5,793) 586
Other expenses 188 282 424
Net cash provided by operating activities 2,455 3,805 6,095
Total operating expenses 686 693 827
Cash flows from investing activities
Pre-tax earnings 5,255 8,185 8,531
Purchase of property, leasehold improvements
Provision/(benefit) for taxes (828) (292) 491 and equipment (33) (15) (3)
Net earnings 6,083 8,477 8,040 Issuances of short-term loans to subsidiaries, net (24,417) (4,099) (5,153)
Preferred stock dividends 515 400 314 Issuance of term loans to subsidiaries (8,632) (8,803) (2,174)
Net earnings applicable to common shareholders $5,568 $8,077 $7,726 Repayments of term loans by subsidiaries 24,196 3,979 7,063
Capital distributions from/(contributions to)
subsidiaries, net (1,500) 865 655
Group Inc. Condensed Statements of Financial Condition
Net cash provided by/(used for) investing activities (10,386) (8,073) 388
As of December Cash flows from financing activities
$ in millions 2015 2014 Unsecured short-term borrowings, net (2,684) 963 1,296
Assets Proceeds from issuance of long-term borrowings 42,795 37,101 28,458
Cash and cash equivalents Repayment of long-term borrowings, including the
With third-party banks $ 36 $ 42 current portion (27,726) (27,931) (29,910)
With subsidiary bank 1,300 Purchase of trust preferred securities and senior
guaranteed trust securities (1) (1,801)
Loans to and receivables from subsidiaries
Bank subsidiaries 9,494 8,222 Common stock repurchased (4,135) (5,469) (6,175)
Nonbank subsidiaries 1 179,826 171,121 Dividends and dividend equivalents paid on
common stock, preferred stock and share-based
Investments in subsidiaries and other affiliates awards (1,681) (1,454) (1,302)
Bank subsidiaries 23,985 22,393
Proceeds from issuance of preferred stock, net of
Nonbank subsidiaries and other affiliates 61,533 57,311 issuance costs 1,993 1,980 991
Financial instruments owned, at fair value 4,410 11,812 Proceeds from issuance of common stock,
Other assets 7,472 7,374 including exercise of share-based awards 259 123 65
Total assets $288,056 $278,275 Excess tax benefit related to share-based awards 407 782 98
Cash settlement of share-based awards (2) (1) (1)
Liabilities and shareholders equity
Payables to subsidiaries $ 591 $ 129 Net cash provided by/(used for) financing activities 9,225 4,293 (6,480)
Financial instruments sold, but not yet purchased, Net increase in cash and cash equivalents 1,294 25 3
at fair value 443 169 Cash and cash equivalents, beginning of year 42 17 14
Unsecured short-term borrowings Cash and cash equivalents, end of year $ 1,336 $ 42 $ 17
With third parties 2 29,547 31,021
SUPPLEMENTAL DISCLOSURES:
With subsidiaries 628 1,955
Cash payments for third-party interest, net of capitalized interest, were $3.54 billion,
Unsecured long-term borrowings $4.31 billion and $2.78 billion for 2015, 2014 and 2013, respectively.
With third parties 3 164,718 158,359
Cash payments for income taxes, net of refunds, were $1.28 billion, $2.35 billion and
With subsidiaries 4 3,854 1,616 $3.21 billion for 2015, 2014 and 2013, respectively.
Other liabilities and accrued expenses 1,547 2,229 Non-cash activity:
Total liabilities 201,328 195,478 During 2015, Group Inc. exchanged $262 million of Trust Preferred Securities and
common beneficial interests held by Group Inc. for $296 million of Group Inc.s junior
Commitments, contingencies and guarantees subordinated debt held by the issuing trusts. Following the exchange, this junior
Shareholders equity subordinated debt was extinguished.
Preferred stock 11,200 9,200 During 2015, Group Inc. exchanged $6.12 billion in financial instruments owned, at
Common stock 9 9 fair value, held by Group Inc. for $5.20 billion of loans to and $918 million of equity in
Share-based awards 4,151 3,766 certain of its subsidiaries.
Additional paid-in capital 51,340 50,049 During 2015, Group Inc. repurchased $60 million of its common stock for which
settlement occurred and cash was paid in 2016.
Retained earnings 83,386 78,984
During 2014, Group Inc. exchanged $1.58 billion of Trust Preferred Securities,
Accumulated other comprehensive loss (718) (743) common beneficial interests and senior guaranteed trust securities held by Group
Stock held in treasury, at cost (62,640) (58,468) Inc. for $1.87 billion of Group Inc.s junior subordinated debt held by the issuing
Total shareholders equity 86,728 82,797 trusts. Following the exchange, this junior subordinated debt was extinguished.
Total liabilities and shareholders equity $288,056 $278,275 1. Primarily includes overnight loans, the proceeds of which can be used to satisfy the
short-term obligations of Group Inc.
2. Includes $4.92 billion and $5.88 billion at fair value for 2015 and 2014, respectively.
3. Includes $16.19 billion and $11.66 billion at fair value for 2015 and 2014, respectively.
4. Unsecured long-term borrowings with subsidiaries by maturity date are
$2.18 billion in 2017, $254 million in 2018, $108 million in 2019, $217 million in
2020, and $1.09 billion in 2021-thereafter.

208 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Supplemental Financial Information

Quarterly Results (unaudited) Common Stock Price Range

The tables below present the firms unaudited quarterly The table below presents the high and low sales prices per
results for 2015 and 2014. These quarterly results were share of the firms common stock.
prepared in accordance with U.S. GAAP and reflect all
adjustments that are, in the opinion of management, Year Ended December
necessary for a fair statement of the results. These 2015 2014 2013
adjustments are of a normal, recurring nature. The timing High Low High Low High Low
and magnitude of changes in the firms discretionary First quarter $195.73 $172.26 $181.13 $159.77 $159.00 $129.62
compensation accruals (included in operating expenses) can Second quarter 218.77 186.96 171.08 151.65 168.20 137.29
have a significant effect on results in a given quarter. Third quarter 214.61 167.49 188.58 161.53 170.00 149.28
Fourth quarter 199.90 169.87 198.06 171.26 177.44 152.83

Three Months Ended As of February 5, 2016, there were 9,307 holders of record
in millions, except per December September June March of the firms common stock.
share data 2015 2015 2015 2015
Non-interest revenues $6,573 $6,019 $8,406 $ 9,758 On February 5, 2016, the last reported sales price for the
Interest income 2,148 2,119 2,150 2,035 firms common stock on the New York Stock Exchange
Interest expense 1,448 1,277 1,487 1,176 was $156.47 per share.
Net interest income 700 842 663 859
Net revenues, including Common Stock Performance
net interest income 7,273 6,861 9,069 10,617 The following graph and table compare the performance of
Operating expenses 6,201 4,815 7,343 6,683 an investment in the firms common stock from
Pre-tax earnings 1,072 2,046 1,726 3,934 December 31, 2010 (the last trading day before the firms
Provision for taxes 307 620 678 1,090
2011 fiscal year) through December 31, 2015, with the
Net earnings 765 1,426 1,048 2,844
S&P 500 Index and the S&P 500 Financials Index. The
Preferred stock dividends 191 96 132 96
Net earnings applicable to graph and table assume $100 was invested on
common shareholders $ 574 $1,330 $ 916 $ 2,748 December 31, 2010 in each of the firms common stock, the
Earnings per common share S&P 500 Index and the S&P 500 Financials Index, and the
Basic $ 1.28 $ 2.95 $ 2.01 $ 6.05 dividends were reinvested on the date of payment without
Diluted 1.27 2.90 1.98 5.94 payment of any commissions. The performance shown
Dividends declared per represents past performance and should not be considered
common share 0.65 0.65 0.65 0.60
an indication of future performance.

Three Months Ended Common Stock Performance

$300
in millions, except per December September June March
$250
share data 2014 2014 2014 2014
$200
Non-interest revenues $ 6,727 $7,338 $8,125 $ 8,291
Interest income 2,134 2,297 2,579 2,594 $150

Interest expense 1,173 1,248 1,579 1,557 $100

Net interest income 961 1,049 1,000 1,037 $50

Net revenues, including $0

net interest income 7,688 8,387 9,125 9,328 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
The Goldman Sachs Group, Inc. S&P 500 Index S&P 500 Financials Index
Operating expenses 4,478 5,082 6,304 6,307
Pre-tax earnings 3,210 3,305 2,821 3,021
Provision for taxes 1,044 1,064 784 988 As of December
Net earnings 2,166 2,241 2,037 2,033 2010 2011 2012 2013 2014 2015
Preferred stock dividends 134 98 84 84
The Goldman
Net earnings applicable to Sachs Group, Inc. $100.00 $ 54.40 $ 77.99 $109.80 $121.64 $114.59
common shareholders $ 2,032 $2,143 $1,953 $ 1,949 S&P 500 Index 100.00 102.11 118.44 156.78 178.22 180.66
Earnings per common share S&P 500 Financials
Basic $ 4.50 $ 4.69 $ 4.21 $ 4.15 Index 100.00 82.94 106.78 144.78 166.76 164.15
Diluted 4.38 4.57 4.10 4.02
Dividends declared per
common share 0.60 0.55 0.55 0.55

Goldman Sachs 2015 Form 10-K 209

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S
Supplemental Financial Information

Selected Financial Data

Year Ended or as of December

2015 2014 2013 2012 2011
Income statement data ($ in millions)
Non-interest revenues $ 30,756 $ 30,481 $ 30,814 $ 30,283 $ 23,619
Interest income 8,452 9,604 10,060 11,381 13,174
Interest expense 5,388 5,557 6,668 7,501 7,982
Net interest income 3,064 4,047 3,392 3,880 5,192
Net revenues, including net interest income 33,820 34,528 34,206 34,163 28,811
Compensation and benefits 12,678 12,691 12,613 12,944 12,223
Non-compensation expenses 12,364 9,480 9,856 10,012 10,419
Pre-tax earnings $ 8,778 $ 12,357 $ 11,737 $ 11,207 $ 6,169
Balance sheet data ($ in millions)
Total assets 1 $861,395 $855,842 $911,124 $938,205 $923,022
Other secured financings (long-term) 10,520 7,249 7,524 8,965 8,179
Unsecured long-term borrowings 175,422 167,302 160,695 167,084 173,407
Total liabilities 1 774,667 773,045 832,657 862,489 852,643
Total shareholders equity 86,728 82,797 78,467 75,716 70,379
Common share data (in millions, except per share amounts)
Earnings per common share
Basic $ 12.35 $ 17.55 $ 16.34 $ 14.63 $ 4.71
Diluted 12.14 17.07 15.46 14.13 4.51
Dividends declared per common share 2.55 2.25 2.05 1.77 1.40
Book value per common share 171.03 163.01 152.48 144.67 130.31
Common shares outstanding, including RSUs granted to employees with no future
service requirements 441.6 451.5 467.4 480.5 516.3
Average common shares outstanding
Basic 448.9 458.9 471.3 496.2 524.6
Diluted 458.6 473.2 499.6 516.1 556.9
Selected data (unaudited)
Total staff
Americas 19,000 17,400 16,600 16,400 17,200
Non-Americas 17,800 16,600 16,300 16,000 16,100
Total staff 36,800 34,000 32,900 32,400 33,300
Assets under supervision ($ in billions)
Asset class
Alternative investments $ 148 $ 143 $ 142 $ 151 $ 148
Equity 252 236 208 153 147
Fixed income 546 516 446 411 353
Long-term assets under supervision 946 895 796 715 648
Liquidity products 306 283 246 250 247
Total assets under supervision $ 1,252 $ 1,178 $ 1,042 $ 965 $ 895

1. The impact of adopting ASU No. 2015-03 was a reduction to both total assets and total liabilities of $398 million, $383 million, $350 million and $203 million as of
December 2014, December 2013, December 2012 and December 2011, respectively. See Note 3 to the consolidated financial statements for further information
about ASU No. 2015-03.

210 Goldman Sachs 2015 Form 10-K

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Supplemental Financial Information
Statistical Disclosures
Distribution of Assets, Liabilities and Shareholders
Equity
The table below presents a summary of consolidated average classified as U.S. and non-U.S. based on the location of the
balances and interest rates. Assets, liabilities and interest are legal entity in which the assets and liabilities are held.
Year Ended December
2015 2014 2013
Average Average Average Average Average Average
$ in millions balance Interest rate balance Interest rate balance Interest rate
Assets
U.S. $ 57,846 $ 141 0.24% $ 53,606 $ 144 0.27% $ 56,848 $ 167 0.29%
Non-U.S. 5,360 20 0.37% 5,529 20 0.36% 5,073 19 0.37%
Total deposits with banks 63,206 161 0.25% 59,135 164 0.28% 61,921 186 0.30%
U.S. 178,496 (376) (0.21)% 193,555 (514) (0.27)% 198,677 (289) (0.15)%
Non-U.S. 111,168 386 0.35% 108,766 433 0.40% 129,071 332 0.26%
Total securities borrowed, securities purchased under
agreements to resell and federal funds sold 289,664 10 0.00% 302,321 (81) (0.03)% 327,748 43 0.01%
U.S. 150,631 4,063 2.70% 170,647 5,045 2.96% 182,158 5,353 2.94%
Non-U.S. 97,152 1,779 1.83% 101,163 2,407 2.38% 110,807 2,806 2.53%
Total financial instruments owned, at fair value 1 247,783 5,842 2.36% 271,810 7,452 2.74% 292,965 8,159 2.78%
U.S. 34,521 1,101 3.19% 21,459 650 3.03% 9,736 268 2.75%
Non-U.S. 2,440 90 3.69% 966 58 6.00% 560 28 5.00%
Total loans receivable 36,961 1,191 3.22% 22,425 708 3.16% 10,296 296 2.87%
U.S. 75,789 783 1.03% 85,811 813 0.95% 81,759 796 0.97%
Non-U.S. 54,773 465 0.85% 54,922 548 1.00% 57,016 580 1.02%
Total other interest-earning assets 2 130,562 1,248 0.96% 140,733 1,361 0.97% 138,775 1,376 0.99%
Total interest-earning assets 768,176 8,452 1.10% 796,424 9,604 1.21% 831,705 10,060 1.21%
Cash and due from banks 6,352 5,237 6,212
Other non-interest-earning assets 1 99,421 92,600 105,713
Total assets 3 $873,949 $894,261 $943,630
Liabilities
U.S. $ 73,063 $ 354 0.48% $ 62,595 $ 286 0.46% $ 60,699 $ 352 0.58%
Non-U.S. 13,885 54 0.39% 10,569 47 0.44% 8,883 35 0.39%
Total interest-bearing deposits 86,948 408 0.47% 73,164 333 0.46% 69,582 387 0.56%
U.S. 59,885 221 0.37% 79,517 206 0.26% 114,884 242 0.21%
Non-U.S. 29,777 109 0.37% 52,394 225 0.43% 63,802 334 0.52%
Total securities loaned and securities sold under
agreements to repurchase 89,662 330 0.37% 131,911 431 0.33% 178,686 576 0.32%
U.S. 36,609 644 1.76% 39,708 828 2.09% 37,923 671 1.77%
Non-U.S. 36,066 675 1.87% 42,511 913 2.15% 54,990 1,383 2.52%
Total financial instruments sold, but not yet purchased, at
fair value 1 72,675 1,319 1.81% 82,219 1,741 2.12% 92,913 2,054 2.21%
U.S. 42,743 401 0.94% 45,841 413 0.90% 40,511 365 0.90%
Non-U.S. 14,447 28 0.19% 18,751 34 0.18% 20,415 29 0.14%
Total short-term borrowings 4 57,190 429 0.75% 64,592 447 0.69% 60,926 394 0.65%
U.S. 172,160 3,722 2.16% 164,568 3,327 2.02% 167,850 3,635 2.17%
Non-U.S. 8,843 156 1.76% 7,201 133 1.85% 6,088 117 1.92%
Total long-term borrowings 4 181,003 3,878 2.14% 171,769 3,460 2.01% 173,938 3,752 2.16%
U.S. 156,248 (1,378) (0.88)% 153,600 (1,222) (0.80)% 144,888 (904) (0.62)%
Non-U.S. 62,672 402 0.64% 62,311 367 0.59% 58,594 409 0.70%
Total other interest-bearing liabilities 5 218,920 (976) (0.45)% 215,911 (855) (0.40)% 203,482 (495) (0.24)%
Total interest-bearing liabilities 706,398 5,388 0.76% 739,566 5,557 0.75% 779,527 6,668 0.86%
Non-interest-bearing deposits 1,986 799 655
Other non-interest-bearing liabilities 1 79,251 73,057 86,095
Total liabilities 3 787,635 813,422 866,277
Shareholders equity
Preferred stock 10,585 8,585 6,892
Common stock 75,729 72,254 70,461
Total shareholders equity 86,314 80,839 77,353
Total liabilities and shareholders equity $873,949 $894,261 $943,630
Interest rate spread 0.34% 0.46% 0.35%
U.S. $ 1,748 0.35% $ 2,300 0.44% $ 1,934 0.37%
Non-U.S. 1,316 0.49% 1,747 0.64% 1,458 0.48%
Net interest income and net yield on interest-earning assets 3,064 0.40% 4,047 0.51% 3,392 0.41%
Percentage of interest-earning assets and interest-bearing liabilities attributable to non-U.S. operations
Assets 35.26% 34.07% 36.37%
Liabilities 23.46% 26.20% 27.30%

1. Derivative instruments and commodities are included in other non-interest-earning assets and other non-interest-bearing liabilities.
2. Primarily consists of certain receivables from customers and counterparties and cash and securities segregated for regulatory and other purposes.
3. The impact of adopting ASU No. 2015-03 was a reduction to both average total assets and average total liabilities of $402 million and $382 million for the year ended
December 2014 and December 2013, respectively. See Note 3 to the consolidated financial statements for further information about ASU No. 2015-03.
4. Interest rates include the effects of interest rate swaps accounted for as hedges.
5. Substantially all consists of certain payables to customers and counterparties.

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Supplemental Financial Information

Changes in Net Interest Income, Volume and Rate

Analysis
The table below presents an analysis of the effect on net changes due to volume/rate variance have been allocated to
interest income of volume and rate changes. In this analysis, volume.

Year Ended
December 2015 versus December 2014 December 2014 versus December 2013
Increase (decrease) Increase (decrease)
due to change in: due to change in:
Net Net
$ in millions Volume Rate Change Volume Rate Change
Interest-earning assets
U.S. $ 10 $ (13) $ (3) $ (9) $ (14) $ (23)
Non-U.S. (1) 1 2 (1) 1
Total deposits with banks 9 (12) (3) (7) (15) (22)
U.S. 32 106 138 14 (239) (225)
Non-U.S. 8 (55) (47) (81) 182 101
Total securities borrowed, securities purchased under
agreements to resell and federal funds sold 40 51 91 (67) (57) (124)
U.S. (540) (442) (982) (340) 32 (308)
Non-U.S. (73) (555) (628) (229) (170) (399)
Total financial instruments owned, at fair value (613) (997) (1,610) (569) (138) (707)
U.S. 416 35 451 355 27 382
Non-U.S. 54 (22) 32 24 6 30
Total loans receivable 470 13 483 379 33 412
U.S. (103) 73 (30) 38 (21) 17
Non-U.S. (1) (82) (83) (21) (11) (32)
Total other interest-earning assets (104) (9) (113) 17 (32) (15)
Change in interest income (198) (954) (1,152) (247) (209) (456)
Interest-bearing liabilities
U.S. 51 17 68 9 (75) (66)
Non-U.S. 13 (6) 7 7 5 12
Total interest-bearing deposits 64 11 75 16 (70) (54)
U.S. (72) 87 15 (92) 56 (36)
Non-U.S. (83) (33) (116) (49) (60) (109)
Total securities loaned and securities sold under
agreements to repurchase (155) 54 (101) (141) (4) (145)
U.S. (55) (129) (184) 37 120 157
Non-U.S. (121) (117) (238) (268) (202) (470)
Total financial instruments sold, but not yet purchased, at
fair value (176) (246) (422) (231) (82) (313)
U.S. (29) 17 (12) 48 48
Non-U.S. (8) 2 (6) (3) 8 5
Total short-term borrowings (37) 19 (18) 45 8 53
U.S. 164 231 395 (66) (242) (308)
Non-U.S. 29 (6) 23 21 (5) 16
Total long-term borrowings 193 225 418 (45) (247) (292)
U.S. (23) (133) (156) (69) (249) (318)
Non-U.S. 2 33 35 22 (64) (42)
Total other interest-bearing liabilities (21) (100) (121) (47) (313) (360)
Change in interest expense (132) (37) (169) (403) (708) (1,111)
Change in net interest income $ (66) $(917) $ (983) $ 156 $ 499 $ 655

212 Goldman Sachs 2015 Form 10-K

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Supplemental Financial Information

Deposits Loan Portfolio

The table below presents a summary of the firms interest- The table below presents a summary of the firms loans
bearing deposits. receivable. Loans receivable are classified as U.S. and non-
U.S. based on the location of the legal entity in which such
Year Ended December loans are held.
$ in millions 2015 2014 2013
Average balances As of December
U.S. $ in millions 2015 2014 2013 2012 2011
Savings $44,486 $ 41,785 $ 39,411 U.S.
Corporate loans $19,909 $14,020 $ 6,910 $2,187 $ 104
Time 28,577 20,810 21,288
Loans to private wealth
Total U.S. 73,063 62,595 60,699 management clients 12,824 10,989 6,545 4,057 3,040
Non-U.S. Loans backed by commercial
Demand 5,703 4,571 4,613 real estate 3,186 1,876 727 245 198
Time 8,182 5,998 4,270 Loans backed by residential
real estate 2,187 311
Total Non-U.S. 13,885 10,569 8,883 Other loans 3,495 821 400
Total $86,948 $ 73,164 $ 69,582 Total U.S. 41,601 28,017 14,182 6,489 3,742
Non-U.S.
Average interest rates Corporate loans 831 290 131
U.S. Loans to private wealth
Savings 0.27% 0.23% 0.30% management clients 1,137 300 13 14 22
Loans backed by commercial
Time 0.83% 0.91% 1.09% real estate 2,085 549 708
Total U.S. 0.48% 0.46% 0.58% Loans backed by residential
Non-U.S. real estate 129 10
Demand 0.19% 0.18% 0.22% Other loans 38
Total non-U.S. 4,220 1,149 852 14 22
Time 0.53% 0.65% 0.59% Total loans receivable, gross 45,821 29,166 15,034 6,503 3,764
Total Non-U.S. 0.39% 0.44% 0.39% Allowance for loan losses
Total 0.47% 0.46% 0.56% U.S. 381 205 115 24 8
Non-U.S. 33 23 24
Total allowance for loan
Short-Term and Other Borrowed Funds losses 414 228 139 24 8
The table below presents a summary of the firms securities Total loans receivable $45,407 $28,938 $14,895 $6,479 $3,756
loaned and securities sold under agreements to repurchase,
and short-term borrowings. These borrowings generally Allowance for Loan Losses
mature within one year of the financial statement date and The table below presents changes in the allowance for loan
include borrowings that are redeemable at the option of the losses. In the table below, provisions and allowance for
holder within one year of the financial statement date. loan losses primarily relate to corporate loans and loans
extended to private wealth management clients that are
held in legal entities located in the U.S.
As of December
$ in millions 2015 2014 2013
As of December
Securities loaned and securities sold under agreements to
repurchase $ in millions 2015 2014 2013 2012 2011
Amounts outstanding at year-end $89,683 $ 93,785 $183,527 Allowance for loan losses
Average outstanding during the year 89,662 131,911 178,686 Balance, beginning of period $ 228 $ 139 $ 24 $ 8 $ 5
Maximum month-end outstanding 97,466 178,049 196,393 Charge-offs (1) (3)
Weighted average interest rate Provision for loan losses 187 92 115 16 3
Balance, end of period $ 414 $ 228 $ 139 $ 24 $ 8
During the year 0.37% 0.33% 0.32%
At year-end 0.39% 0.31% 0.28%

Short-term borrowings
Amounts outstanding at year-end 1 $57,020 $ 60,099 $ 61,981
Average outstanding during the year 57,190 64,592 60,926
Maximum month-end outstanding 60,522 68,570 66,977
Weighted average interest rate 2
During the year 0.75% 0.69% 0.65%
At year-end 0.80% 0.68% 0.89%

1. Includes short-term secured financings of $14.23 billion, $15.56 billion and

$17.29 billion as of December 2015, December 2014 and December 2013,
respectively.
2. The weighted average interest rates for these borrowings include the effect
of hedging activities.

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Supplemental Financial Information

Maturities and Sensitivity to Changes in Interest The table below presents cross-border outstandings and
Rates commitments for each country in which cross-border
The table below presents the firms gross loans receivable outstandings exceed 0.75% of consolidated assets in
by tenor and a distribution of such loans receivable between accordance with the FFIEC guidelines and include cash,
fixed and floating interest rates. receivables, securities purchased under agreements to resell,
securities borrowed and cash financial instruments, but
Maturities and Sensitivity to Changes in exclude derivative instruments. Securities purchased under
Interest Rates as of December 2015 agreements to resell and securities borrowed are presented
Less Greater gross, without reduction for related securities collateral
than 1-5 than 5
$ in millions 1 year years years Total held. Margin loans (included in receivables) are presented
U.S. based on the amount of collateral advanced by the
Corporate loans $ 1,382 $14,042 $4,485 $19,909
Loans to private wealth management
counterparty. Substantially all commitments in the tables
clients 9,742 3,042 40 12,824 below consist of commitments to extend credit and forward
Loans backed by commercial real estate 284 2,658 244 3,186
Loans backed by residential real estate 440 960 787 2,187
starting resale and securities borrowing agreements.
Other loans 74 2,478 943 3,495
Total U.S. 11,922 23,180 6,499 41,601 $ in millions Banks Governments Other Total Commitments
Non-U.S.
Corporate loans 411 303 117 831 As of December 2015
Loans to private wealth management Cayman Islands $ 1 $ $39,603 $39,604 $ 3,046
clients 1,137 1,137 France 5,596 2,904 23,854 32,354 4,795
Loans backed by commercial real estate 15 1,670 400 2,085 Japan 10,254 297 10,882 21,433 9,684
Loans backed by residential real estate 69 60 129 Germany 4,072 7,652 8,481 20,205 5,008
Other loans 31 7 38 United Kingdom 2,170 42 11,361 13,573 15,075
Total non-U.S. 1,563 2,073 584 4,220 Italy 4,326 3,691 2,647 10,664 2,634
Total loans receivable, gross 13,485 25,253 7,083 45,821 Canada 1,173 253 8,290 9,716 1,404
China 2,189 254 6,069 8,512 111
Loans at fixed interest rates 16 917 1,279 2,212
Loans at variable interest rates 13,469 24,336 5,804 43,609
As of December 2014
Total loans receivable, gross $13,485 $25,253 $7,083 $45,821
Cayman Islands $ 2 $ $35,829 $35,831 $ 2,658
France 4,730 4,932 18,261 27,923 12,214
Cross-border Outstandings Japan 13,862 373 10,763 24,998 11,413

Cross-border outstandings are based on the Federal Germany 5,362 4,479 10,629 20,470 4,631
United Kingdom 1,870 282 8,821 10,973 11,755
Financial Institutions Examination Councils (FFIEC) Italy 3,331 4,173 2,215 9,719 783
guidelines for reporting cross-border information and China 2,474 1,952 4,984 9,410 6

represent the amounts that the firm may not be able to As of December 2013
obtain from a foreign country due to country-specific Cayman Islands $ 12 $ 1 $35,969 $35,982 $ 1,671
events, including unfavorable economic and political Japan 23,026 123 11,981 35,130 5,086
France 12,427 2,871 16,567 31,865 12,060
conditions, economic and social instability, and changes in Germany 5,148 4,336 7,793 17,277 4,716
government policies. Spain 7,002 2,281 2,491 11,774 1,069
United Kingdom 2,688 217 7,321 10,226 19,014
Credit exposure represents the potential for loss due to the Netherlands 1,785 540 5,786 8,111 1,962

default or deterioration in credit quality of a counterparty

or an issuer of securities or other instruments the firm holds
and is measured based on the potential loss in an event of
non-payment by a counterparty. Credit exposure is reduced
through the effect of risk mitigants, such as netting
agreements with counterparties that permit the firm to
offset receivables and payables with such counterparties or
obtaining collateral from counterparties. The table below
does not include all the effects of such risk mitigants and
does not represent the firms credit exposure.

214 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

Item 9. Changes in and Disagreements PART III

with Accountants on Accounting and Item 10. Directors, Executive Officers and
Financial Disclosure Corporate Governance
There were no changes in or disagreements with
Information relating to our executive officers is included on
accountants on accounting and financial disclosure during
page 45 of the 2015 Form 10-K. Information relating to our
the last two years.
directors, including our audit committee and audit
committee financial experts and the procedures by which
shareholders can recommend director nominees, and our
Item 9A. Controls and Procedures executive officers will be in our definitive Proxy Statement
As of the end of the period covered by this report, an for our 2016 Annual Meeting of Shareholders, which will
evaluation was carried out by Goldman Sachs be filed within 120 days of the end of 2015 (2016 Proxy
management, with the participation of our Chief Executive Statement) and is incorporated herein by reference.
Officer and Chief Financial Officer, of the effectiveness of Information relating to our Code of Business Conduct and
our disclosure controls and procedures (as defined in Ethics, which applies to our senior financial officers, is
Rule 13a-15(e) under the Exchange Act). Based upon that included under Available Information in Part I, Item 1 of
evaluation, our Chief Executive Officer and Chief Financial the 2015 Form 10-K.
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 Item 11. Executive Compensation
internal control over financial reporting (as defined in
Information relating to our executive officer and director
Rule 13a-15(f) under the Exchange Act) occurred during
compensation and the compensation committee of the
the fourth quarter of our year ended December 31, 2015
Board will be in the 2016 Proxy Statement and is
that has materially affected, or is reasonably likely to
incorporated herein by reference.
materially affect, our internal control over financial
reporting.
Managements 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 the 2015
Form 10-K.

Item 9B. Other Information

On February 18, 2016, the Board of Directors of The
Goldman Sachs Group, Inc. (Board) approved an
amendment to our Amended and Restated By-Laws solely
to specify that a group of funds that are under common
management and funded primarily by a single employer or
a group of investment companies as defined in the
Investment Company Act of 1940 will be considered one
eligible holder for purposes of the Companys proxy
access bylaw.

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Item 12. Security Ownership of Certain The Number of Securities to be Issued Upon Exercise of
Beneficial Owners and Management and Outstanding Options and Rights includes: (i) 14,756,275
Related Stockholder Matters shares of common stock that may be issued upon exercise
of outstanding options and (ii) 27,816,394 shares that
Information relating to security ownership of certain
may be issued pursuant to outstanding restricted stock
beneficial owners of our common stock and information
units. These awards are subject to vesting and other
relating to the security ownership of our management will
conditions to the extent set forth in the respective award
be in the 2016 Proxy Statement and is incorporated herein
agreements, and the underlying shares will be delivered
by reference.
net of any required tax withholding.
The following table provides information as of
The Weighted Average Exercise Price of Outstanding
December 31, 2015, the last day of 2015, regarding
Options relates only to the options described above.
securities to be issued on exercise of outstanding stock
Shares underlying restricted stock units are deliverable
options or pursuant to outstanding restricted stock units
without the payment of any consideration, and therefore
and securities remaining available for issuance under our
these awards have not been taken into account in
equity compensation plans that were in effect during 2015.
calculating the weighted average exercise price.
Number of The Number of Securities Remaining Available For
Number of Securities Future Issuance Under Equity Compensation Plans
Securities Remaining
to be Issued Weighted Available represents shares remaining to be issued under the 2015
Upon Average For Future
Exercise of Exercise Issuance
SIP, excluding shares reflected in column (a). If any shares
Outstanding Price of Under Equity of common stock underlying awards granted under the
Plan Options and Outstanding Compensation
Category Rights (a) Options (b) Plans (c)
2015 SIP or 2013 SIP are not delivered due to forfeiture,
Equity The Goldman termination or cancellation or are surrendered or
compensation Sachs Amended withheld, those shares will again become available to be
plans and Restated delivered under the 2015 SIP. Shares available for grant
approved by Stock Incentive
security holders Plan (2015) 42,572,669 $128.79 83,805,880 are also subject to adjustment for certain changes in
Equity corporate structure as permitted under the 2015 SIP.
compensation There are no shares remaining to be issued under the
plans not
approved by 1999 SIP, 2003 SIP or 2013 SIP other than those reflected
security holders None in column (a).
Total 42,572,669 83,805,880

In the table above:

Item 13. Certain Relationships and Related
The Goldman Sachs Amended and Restated Stock Transactions, and Director Independence
Incentive Plan (2015) (2015 SIP) was approved by our
shareholders at our 2015 Annual Meeting of Information regarding certain relationships and related
Shareholders. The 2015 SIP replaced The Goldman Sachs transactions and director independence will be in the 2016
Amended and Restated Stock Incentive Plan (2013) (2013 Proxy Statement and is incorporated herein by reference.
SIP) previously in effect, and applies to awards granted on
or after the date of approval. The 2013 SIP was approved
by our shareholders at our 2013 Annual Meeting of Item 14. Principal Accounting Fees and
Shareholders and was a successor plan to The Goldman Services
Sachs Amended and Restated Stock Incentive Plan (2003
SIP). The 2003 SIP was approved by our shareholders at Information regarding principal accounting fees and
our 2003 Annual Meeting of Shareholders and was a services will be in the 2016 Proxy Statement and is
successor plan to The Goldman Sachs 1999 Stock incorporated herein by reference.
Incentive Plan (1999 SIP), which was approved by our
shareholders immediately prior to our initial public
offering in May 1999.

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T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) Documents filed as part of this Report:
1. Consolidated Financial Statements 4.5 Senior Debt Indenture, dated as of July 16, 2008,
between The Goldman Sachs Group, Inc. and The
The consolidated financial statements required to be filed
Bank of New York Mellon, as trustee
in the 2015 Form 10-K are included in Part II, Item 8
(incorporated by reference to Exhibit 4.82 to the
hereof.
Registrants Post-Effective Amendment No. 11 to
2. Exhibits Form S-3 (No. 333-130074), filed on
July 17, 2008).
2.1 Plan of Incorporation (incorporated by reference
to the corresponding exhibit to the Registrants 4.6 Senior Debt Indenture, dated as of
Registration Statement on Form S-1 (No. 333- October 10, 2008, among GS Finance Corp., as
74449)). issuer, The Goldman Sachs Group, Inc., as
guarantor, and The Bank of New York Mellon, as
3.1 Restated Certificate of Incorporation of The trustee (incorporated by reference to Exhibit 4.70
Goldman Sachs Group, Inc., amended as of to the Registrants Registration Statement on
April 28, 2015 (incorporated by reference to Form S-3 (No. 333-154173), filed on
Exhibit 3.1 to the Registrants Quarterly Report October 10, 2008).
on Form 10-Q for the period ended
March 31, 2015). 4.7 First Supplemental Indenture, dated as of
February 20, 2015, among GS Finance Corp., as
3.2 Amended and Restated By-Laws of The Goldman issuer, The Goldman Sachs Group, Inc., as
Sachs Group, Inc., amended as of guarantor, and The Bank of New York Mellon, as
February 18, 2016. trustee, with respect to the Senior Debt Indenture,
4.1 Indenture, dated as of May 19, 1999, between dated as of October 10, 2008 (incorporated by
The Goldman Sachs Group, Inc. and The Bank of reference to Exhibit 4.7 to the Registrants Annual
New York, as trustee (incorporated by reference Report on Form 10-K for the fiscal year ended
to Exhibit 6 to the Registrants Registration December 31, 2014).
Statement on Form 8-A, filed on June 29, 1999). 4.8 Ninth Supplemental Subordinated Debt Indenture,
4.2 Subordinated Debt Indenture, dated as of dated as of May 20, 2015, between The Goldman
February 20, 2004, between The Goldman Sachs Sachs Group, Inc. and The Bank of New York
Group, Inc. and The Bank of New York, as Mellon, as trustee, with respect to the
trustee (incorporated by reference to Exhibit 4.2 Subordinated Debt Indenture, dated as of
to the Registrants Annual Report on Form 10-K February 20, 2004 (incorporated by reference to
for the fiscal year ended November 28, 2003). Exhibit 4.1 to the Registrants Current Report on
4.3 Warrant Indenture, dated as of Form 8-K, filed on May 22, 2015).
February 14, 2006, between The Goldman Sachs Certain instruments defining the rights of holders
Group, Inc. and The Bank of New York, as of long-term debt securities of the Registrant and
trustee (incorporated by reference to Exhibit 4.34 its subsidiaries are omitted pursuant to Item
to the Registrants Post-Effective Amendment 601(b)(4)(iii) of Regulation S-K. The Registrant
No. 3 to Form S-3, filed on March 1, 2006). hereby undertakes to furnish to the SEC, upon
4.4 Senior Debt Indenture, dated as of request, copies of any such instruments.
December 4, 2007, among GS Finance Corp., as 10.1 The Goldman Sachs Amended and Restated Stock
issuer, The Goldman Sachs Group, Inc., as Incentive Plan (2015) (incorporated by reference
guarantor, and The Bank of New York, as trustee to Annex B to the Registrants Definitive Proxy
(incorporated by reference to Exhibit 4.69 to the Statement on Schedule 14A, filed on
Registrants Post-Effective Amendment No. 10 to April 10, 2015).
Form S-3, filed on December 4, 2007). 10.2 The Goldman Sachs Amended and Restated
Restricted Partner Compensation Plan
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for
the period ended February 24, 2006).

Goldman Sachs 2015 Form 10-K 217

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

10.3 Form of Employment Agreement for Participating 10.13 Letter, dated December 18, 2002, from The
Managing Directors (applicable to executive Goldman Sachs Group, Inc. to Mr. William W.
officers) (incorporated by reference to George (incorporated by reference to
Exhibit 10.19 to the Registrants Registration Exhibit 10.39 to the Registrants Annual Report
Statement on Form S-1 (No. 333-75213)). on Form 10-K for the fiscal year ended
10.4 Form of Agreement Relating to Noncompetition November 29, 2002).
and Other Covenants (incorporated by reference 10.14 Form of Amendment, dated November 27, 2004,
to Exhibit 10.20 to the Registrants Registration to Agreement Relating to Noncompetition and
Statement on Form S-1 (No. 333-75213)). Other Covenants, dated May 7, 1999
10.5 Tax Indemnification Agreement, dated as of (incorporated by reference to Exhibit 10.32 to
May 7, 1999, by and among The Goldman Sachs the Registrants Annual Report on Form 10-K for
Group, Inc. and various parties (incorporated by the fiscal year ended November 26, 2004).
reference to Exhibit 10.25 to the Registrants 10.15 The Goldman Sachs Group, Inc. Non-Qualified
Registration Statement on Form S-1 Deferred Compensation Plan for U.S.
(No. 333-75213)). Participating Managing Directors (terminated as
10.6 Amended and Restated Shareholders Agreement, of December 15, 2008) (incorporated by reference
effective as of January 15, 2015, among The to Exhibit 10.36 to the Registrants Annual
Goldman Sachs Group, Inc. and various parties Report on Form 10-K for the fiscal year ended
(incorporated by reference to Exhibit 10.6 to the November 30, 2007).
Registrants Annual Report on Form 10-K for the 10.16 Form of Year-End Option Award Agreement
fiscal year ended December 31, 2014). (incorporated by reference to Exhibit 10.36 to
10.7 Instrument of Indemnification (incorporated by the Registrants Annual Report on Form 10-K for
reference to Exhibit 10.27 to the Registrants the fiscal year ended November 28, 2008).
Registration Statement on Form S-1 10.17 Amendments to 2005 and 2006 Year-End RSU
(No. 333-75213)). and Option Award Agreements (incorporated by
10.8 Form of Indemnification Agreement (incorporated reference to Exhibit 10.44 to the Registrants
by reference to Exhibit 10.28 to the Registrants Annual Report on Form 10-K for the fiscal year
Annual Report on Form 10-K for the fiscal year ended November 30, 2007).
ended November 26, 1999). 10.18 Form of Non-Employee Director Option Award
10.9 Form of Indemnification Agreement (incorporated Agreement (incorporated by reference to
by reference to Exhibit 10.44 to the Registrants Exhibit 10.34 to the Registrants Annual Report
Annual Report on Form 10-K for the fiscal year on Form 10-K for the fiscal year ended
ended November 26, 1999). December 31, 2009).
10.10 Form of Indemnification Agreement, dated as of 10.19 Form of Non-Employee Director RSU Award
July 5, 2000 (incorporated by reference to Agreement (pre-2015) (incorporated by reference
Exhibit 10.1 to the Registrants Quarterly Report to Exhibit 10.21 to the Registrants Annual
on Form 10-Q for the period ended Report on Form 10-K for the fiscal year ended
August 25, 2000). December 31, 2014).

10.11 Amendment No. 1, dated as of 10.20 Ground Lease, dated August 23, 2005, between
September 5, 2000, to the Tax Indemnification Battery Park City Authority d/b/a/ Hugh L. Carey
Agreement, dated as of May 7, 1999 Battery Park City Authority, as Landlord, and
(incorporated by reference to Exhibit 10.3 to the Goldman Sachs Headquarters LLC, as Tenant
Registrants Quarterly Report on Form 10-Q for (incorporated by reference to Exhibit 10.1 to
the period ended August 25, 2000). the Registrants Current Report on Form 8-K,
filed on August 26, 2005).
10.12 Letter, dated February 6, 2001, from The
Goldman Sachs Group, Inc. to Mr. James A. 10.21 General Guarantee Agreement, dated
Johnson (incorporated by reference to January 30, 2006, made by The Goldman Sachs
Exhibit 10.65 to the Registrants Annual Report Group, Inc. relating to certain obligations of
on Form 10-K for the fiscal year ended Goldman, Sachs & Co. (incorporated by reference
November 24, 2000). to Exhibit 10.45 to the Registrants Annual
Report on Form 10-K for the fiscal year ended
November 25, 2005).

218 Goldman Sachs 2015 Form 10-K

T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

10.22 Goldman, Sachs & Co. Executive Life Insurance 10.31 Form of Year-End RSU Award Agreement (not
Policy and Certificate with Metropolitan Life fully vested) (pre-2015) (incorporated by reference
Insurance Company for Participating Managing to Exhibit 10.36 to the Registrants Annual
Directors (incorporated by reference to Report on Form 10-K for the fiscal year ended
Exhibit 10.1 to the Registrants Quarterly Report December 31, 2014).
on Form 10-Q for the period ended 10.32 Form of Year-End RSU Award Agreement (fully
August 25, 2006). vested) (pre-2015) (incorporated by reference to
10.23 Form of Goldman, Sachs & Co. Executive Life Exhibit 10.37 to the Registrants Annual Report
Insurance Policy with Pacific Life & Annuity on Form 10-K for the fiscal year ended
Company for Participating Managing Directors, December 31, 2014).
including policy specifications and form of
10.33 Form of Year-End RSU Award Agreement (Base
restriction on Policy Owners Rights (incorporated
and/or Supplemental) (pre-2015) (incorporated by
by reference to Exhibit 10.2 to the Registrants
reference to Exhibit 10.38 to the Registrants
Quarterly Report on Form 10-Q for the period
Annual Report on Form 10-K for the fiscal year
ended August 25, 2006).
ended December 31, 2014).
10.24 Form of Second Amendment, dated
November 25, 2006, to Agreement Relating to 10.34 Form of Year-End Short-Term RSU Award
Noncompetition and Other Covenants, dated Agreement (pre-2015) (incorporated by reference
May 7, 1999, as amended effective to Exhibit 10.39 to the Registrants Annual
November 27, 2004 (incorporated by reference to Report on Form 10-K for the fiscal year ended
Exhibit 10.51 to the Registrants Annual Report December 31, 2014).
on Form 10-K for the fiscal year ended 10.35 Form of Year-End Restricted Stock Award
November 24, 2006). Agreement (fully vested) (pre-2015) (incorporated
10.25 Description of PMD Retiree Medical Program by reference to Exhibit 10.41 to the Registrants
(incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K for the fiscal year
Registrants Quarterly Report on Form 10-Q for ended December 31, 2013).
the period ended February 29, 2008). 10.36 Form of Year-End Restricted Stock Award
10.26 Letter, dated June 28, 2008, from The Goldman Agreement (Base and/or Supplemental) (pre-2015)
Sachs Group, Inc. to Mr. Lakshmi N. Mittal (incorporated by reference to Exhibit 10.41 to
(incorporated by reference to Exhibit 99.1 to the the Registrants Annual Report on Form 10-K for
Registrants Current Report on Form 8-K, filed on the fiscal year ended December 31, 2014).
June 30, 2008).
10.37 Form of Year-End Short-Term Restricted Stock
10.27 General Guarantee Agreement, dated Award Agreement (pre-2015) (incorporated by
December 1, 2008, made by The Goldman Sachs reference to Exhibit 10.42 to the Registrants
Group, Inc. relating to certain obligations of Annual Report on Form 10-K for the fiscal year
Goldman Sachs Bank USA (incorporated by ended December 31, 2014).
reference to Exhibit 4.80 to the Registrants Post-
Effective Amendment No. 2 to Form S-3, filed on 10.38 Form of Fixed Allowance RSU Award Agreement
March 19, 2009). (pre-2015) (incorporated by reference to
Exhibit 10.43 to the Registrants Annual Report
10.28 Guarantee Agreement, dated November 28, 2008
on Form 10-K for the fiscal year ended
and amended effective as of January 1, 2010,
December 31, 2014).
between The Goldman Sachs Group, Inc. and
Goldman Sachs Bank USA (incorporated by 10.39 General Guarantee Agreement, dated
reference to Exhibit 10.51 to the Registrants March 2, 2010, made by The Goldman Sachs
Annual Report on Form 10-K for the fiscal year Group, Inc. relating to the obligations of
ended December 31, 2009). Goldman Sachs Execution & Clearing, L.P.
10.29 Form of One-Time RSU Award Agreement (pre- (incorporated by reference to Exhibit 10.1 to the
2015) (incorporated by reference to Exhibit 10.32 Registrants Quarterly Report on Form 10-Q for
to the Registrants Annual Report on Form 10-K the period ended March 31, 2010).
for the fiscal year ended December 31, 2014). 10.40 Form of Deed of Gift (incorporated by reference
10.30 Amendments to Certain Non-Employee Director to the Registrants Quarterly Report on
Equity Award Agreements (incorporated by Form 10-Q for the period ended June 30, 2010).
reference to Exhibit 10.69 to the Registrants
Annual Report on Form 10-K for the fiscal year
ended November 28, 2008).
Goldman Sachs 2015 Form 10-K 219
T H E G O L D M A N S A C H S G R O U P , IN C . AN D S U B S I D I A R I E S

10.41 The Goldman Sachs Long-Term Performance 10.56 Form of Year-End Restricted Stock Award
Incentive Plan, dated December 17, 2010 Agreement (fully vested).
(incorporated by reference to the Registrants 10.57 Form of Year-End Short-Term Restricted Stock
Current Report on Form 8-K, filed on Award Agreement.
December 23, 2010).
10.58 Form of Fixed Allowance RSU Award
10.42 Form of Performance-Based Restricted Stock Unit Agreement.
Award Agreement (pre-2015) (incorporated by
reference to the Registrants Current Report on 10.59 Form of Fixed Allowance Deferred Cash Award
Form 8-K, filed on December 23, 2010). Agreement.

10.43 Form of Performance-Based Option Award 10.60 Form of Performance-Based Restricted Stock Unit
Agreement (incorporated by reference to the Award Agreement.
Registrants Current Report on Form 8-K, filed on 10.61 Form of Performance-Based Cash Compensation
December 23, 2010). Award Agreement.
10.44 Form of Performance-Based Cash Compensation 10.62 Form of Signature Card for Equity Awards.
Award Agreement (pre-2015) (incorporated by 12.1 Statement re: Computation of Ratios of Earnings
reference to the Registrants Current Report on to Fixed Charges and Ratios of Earnings to
Form 8-K, filed on December 23, 2010). Combined Fixed Charges and Preferred Stock
10.45 Amended and Restated General Guarantee Dividends.
Agreement, dated November 21, 2011, made by 21.1 List of significant subsidiaries of The Goldman
The Goldman Sachs Group, Inc. relating to Sachs Group, Inc.
certain obligations of Goldman Sachs Bank USA
(incorporated by reference to Exhibit 4.1 to the 23.1 Consent of Independent Registered Public
Registrants Current Report on Form 8-K, filed on Accounting Firm.
November 21, 2011). 31.1 Rule 13a-14(a) Certifications.
10.46 Form of Aircraft Time Sharing Agreement 32.1 Section 1350 Certifications. *
(incorporated by reference to Exhibit 10.61 to the 99.1 Report of Independent Registered Public
Registrants Annual Report on Form 10-K for the Accounting Firm on Selected Financial Data.
fiscal year ended December 31, 2011).
99.2 Debt and trust securities registered under Section
10.47 Description of Compensation Arrangements with 12(b) of the Exchange Act.
Executive Officer (incorporated by reference to
the Registrants Quarterly Report on Form 10-Q 101 Interactive data files pursuant to Rule 405 of
for the period ended June 30, 2012). Regulation S-T: (i) the Consolidated Statements of
Earnings for the years ended December 31, 2015,
10.48 The Goldman Sachs Group, Inc. Clawback Policy, December 31, 2014 and December 31, 2013, (ii)
effective as of January 1, 2015 (incorporated by the Consolidated Statements of Comprehensive
reference to Exhibit 10.53 to the Registrants Income for the years ended December 31, 2015,
Annual Report on Form 10-K for the fiscal year December 31, 2014 and December 31, 2013, (iii)
ended December 31, 2014). the Consolidated Statements of Financial
10.49 Form of Non-Employee Director RSU Award Condition as of December 31, 2015 and
Agreement. December 31, 2014, (iv) the Consolidated
10.50 Form of One-Time RSU Award Agreement. Statements of Changes in Shareholders Equity for
the years ended December 31, 2015,
10.51 Form of Year-End RSU Award Agreement (not December 31, 2014 and December 31, 2013, (v)
fully vested). the Consolidated Statements of Cash Flows for
10.52 Form of Year-End RSU Award Agreement (fully the years ended December 31, 2015,
vested). December 31, 2014 and December 31, 2013, and
10.53 Form of Year-End RSU Award Agreement (Base (vi) the notes to the Consolidated Financial
and/or Supplemental). Statements.
This exhibit is a management contract or a compensatory plan or
10.54 Form of Year-End Short-Term RSU Award arrangement.
Agreement. * This information is furnished and not filed for purposes of
Sections 11 and 12 of the Securities Act of 1933 and Section 18
10.55 Form of Year-End Restricted Stock Award of the Securities Exchange Act of 1934.
Agreement (not fully vested).

220 Goldman Sachs 2015 Form 10-K

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: /s/ Harvey M. Schwartz

Name: Harvey M. Schwartz
Title: Chief Financial Officer
Date: February 19, 2016
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.

Signature Capacity Date

Director, Chairman and Chief Executive February 19, 2016
/s/ Lloyd C. Blankfein Officer (Principal Executive Officer)
Lloyd C. Blankfein

/s/ M. Michele Burns Director February 19, 2016

M. Michele Burns

/s/ Gary D. Cohn Director February 19, 2016

Gary D. Cohn

/s/ Mark A. Flaherty Director February 19, 2016

Mark A. Flaherty

/s/ William W. George Director February 19, 2016

William W. George

/s/ James A. Johnson Director February 19, 2016

James A. Johnson

/s/ Lakshmi N. Mittal Director February 19, 2016

Lakshmi N. Mittal

/s/ Adebayo O. Ogunlesi Director February 19, 2016

Adebayo O. Ogunlesi

Goldman Sachs 2015 Form 10-K II-1

 /s/ Peter Oppenheimer Director February 19, 2016
Peter Oppenheimer

/s/ Debora L. Spar Director February 19, 2016

Debora L. Spar

/s/ Mark E. Tucker Director February 19, 2016

Mark E. Tucker

/s/ David A. Viniar Director February 19, 2016

David A. Viniar

/s/ Mark O. Winkelman Director February 19, 2016

Mark O. Winkelman
Chief Financial Officer February 19, 2016
/s/ Harvey M. Schwartz (Principal Financial Officer)
Harvey M. Schwartz

/s/ Sarah E. Smith Principal Accounting Officer February 19, 2016

Sarah E. Smith

II-2 Goldman Sachs 2015 Form 10-K

Shareholder Information

Executive Offices 2015 Annual Report on Form 10-K

The Goldman Sachs Group, Inc. Copies of the firms 2015 Annual Report on
200 West Street Form 10-K as filed with the U.S. Securities and Exchange
New York, New York 10282 Commission can be accessed via our Web site at
1-212-902-1000 www.goldmansachs.com/investor-relations.
www.goldmansachs.com
Copies can also be obtained by
Common Stock contacting Investor Relations via email at
[email protected]
The common stock of The Goldman Sachs Group, Inc. is
or by calling 1-212-902-0300.
listed on the New York Stock Exchange and trades under
the ticker symbol GS.
Transfer Agent and Registrar for Common Stock
Shareholder Inquiries Questions from registered shareholders of The Goldman
Sachs Group, Inc. regarding lost or stolen stock certificates,
Information about the firm, including all quarterly earnings
dividends, changes of address and other issues related to
releases and financial filings with the U.S. Securities and
registered share ownership should be addressed to:
Exchange Commission, can be accessed via our Web site
at www.goldmansachs.com.
Computershare
P.O. Box 30170
Shareholder inquiries can also be directed to Investor Relations
College Station, TX 77842-3170
via email at [email protected]
U.S. and Canada: 1-800-419-2595
or by calling 1-212-902-0300.
International: 1-201-680-6541
www.computershare.com

Independent Registered Public Accounting Firm

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300 Madison Avenue
New York, New York 10017

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