PILLAR 3 DISCLOSURES The Goldman Sachs Group, Inc - For the period ended March 31, 2019

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The Goldman Sachs Group, Inc.

 PILLAR 3
 DISCLOSURES
For the period ended March 31, 2019
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

TABLE OF CONTENTS
                                                                                                             Page No.
 Index of Tables                                                                                                     1
 Introduction                                                                                                        2
 Regulatory Capital                                                                                                  5
 Capital Structure                                                                                                   6
 Risk-Weighted Assets                                                                                                8
 Credit Risk                                                                                                         8
 Equity Exposures in the Banking Book                                                                               15
 Securitizations in the Banking Book                                                                                18
 Market Risk                                                                                                        22
 Operational Risk                                                                                                   28
 Model Risk Management                                                                                              30
 Interest Rate Sensitivity                                                                                          31
 Cautionary Note on Forward-Looking Statements                                                                      32
 Glossary of Risk Terms                                                                                             33
 Index of References                                                                                                36

INDEX OF TABLES
                                                                                                           Page No.
 Table 1       Regulatory Risk-Based Capital and Leverage Ratios                                                          5
 Table 2       Risk-Based Capital and Leverage Requirements                                                               6
 Table 3       Capital Structure                                                                                          6
 Table 4       Risk-Weighted Assets by Exposure Category                                                                  8
 Table 5       Credit Risk Wholesale Exposures by PD Band                                                                11
 Table 6       Credit Risk Retail Exposures by PD Band                                                                   12
 Table 7       Equity Exposures in the Banking Book                                                                      17
 Table 8       Securitization Exposures and Related RWAs by Exposure Type                                                21
 Table 9       Securitization Exposures and Related RWAs by Regulatory Capital Approach                                  21
 Table 10      Securitization Activity - Banking Book                                                                    22
 Table 11      Regulatory VaR                                                                                            24
 Table 12      Stressed VaR                                                                                              24
 Table 13      Incremental Risk                                                                                          24
 Table 14      Comprehensive Risk                                                                                        25
 Table 15      Daily Regulatory VaR                                                                                      26
 Table 16      Specific Risk                                                                                             26
 Table 17      Trading Book Securitization Exposures                                                                     27

                                                                                          March 2019 | Pillar 3 Disclosures   1
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

Introduction

Overview                                                          The Capital Framework, as described below, requires
The Goldman Sachs Group, Inc. (Group Inc. or parent               disclosures based on the third pillar of Basel III (Pillar 3).
company), a Delaware corporation, together with its               The purpose of Pillar 3 disclosures is to provide
consolidated subsidiaries (collectively, the firm), is a          information on banking institutions’ risk management
leading global investment banking, securities and                 practices and regulatory capital ratios. This document is
investment management firm that provides a wide range of          designed to satisfy these requirements and should be read in
financial services to a substantial and diversified client base   conjunction with our most recent Quarterly Report on Form
that includes corporations, financial institutions,               10-Q and our most recent Annual Report on Form 10-K, as
governments and individuals. When we use the terms “the           well as our most recent FFIEC 101 Report, “Regulatory
firm,” “we,” “us” and “our,” we mean Group Inc. and its           Capital Reporting for Institutions Subject to the Advanced
consolidated subsidiaries.                                        Capital Adequacy Framework.” References to our
                                                                  “Quarterly Report on Form 10-Q” are to our Quarterly
The Board of Governors of the Federal Reserve System              Report on Form 10-Q for the quarterly period ended March
(FRB) is the primary regulator of Group Inc., a bank              31, 2019 and references to our “2018 Form 10-K” are to
holding company (BHC) under the Bank Holding Company              our Annual Report on Form 10-K for the year ended
Act of 1956 and a financial holding company under                 December 31, 2018. All references to March 2019 and
amendments to this Act. As a BHC, we are subject to               December 2018 refer to the periods ended, or the dates, as
consolidated regulatory capital requirements which are            the context requires, March 31, 2019 and December 31,
calculated in accordance with the regulations of the FRB          2018, respectively. References to our FFIEC 101 Report
(Capital Framework).                                              refer to our report filed for the period ended March 31,
                                                                  2019, available on the National Information Center’s
The capital requirements are expressed as risk-based capital      website located at www.ffiec.gov.
and leverage ratios that compare measures of regulatory
capital to risk-weighted assets (RWAs), average assets and        Capital Framework
off-balance-sheet exposures. Failure to comply with these         The regulations under the Capital Framework are largely
capital requirements could result in restrictions being           based on the Basel Committee on Banking Supervision’s
imposed by our regulators and could limit our ability to          (Basel Committee) capital framework for strengthening
distribute capital, including share repurchases and dividend      international capital standards (Basel III) and also
payments, and to make certain discretionary compensation          implement certain provisions of the Dodd-Frank Wall
payments. Our capital levels are also subject to qualitative      Street Reform and Consumer Protection Act (Dodd-Frank
judgments by the regulators about components of capital,          Act). Under the Capital Framework, we are an “Advanced
risk weightings and other factors.                                approach” banking organization and have been designated
                                                                  as a global systemically important bank (G-SIB).

                                                                  The capital requirements calculated in accordance with the
                                                                  Capital Framework include the minimum risk-based capital
                                                                  and leverage ratios. In addition, the risk-based capital
                                                                  requirements include the capital conservation buffer,
                                                                  countercyclical capital buffer and the G-SIB surcharge, all
                                                                  of which must consist entirely of capital that qualifies as
                                                                  Common Equity Tier 1 (CET1) capital.

                                                                                                    March 2019 | Pillar 3 Disclosures   2
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

We calculate our CET1 capital, Tier 1 capital and Total          Definition of Risk-Weighted Assets. As of March
capital ratios in accordance with (i) the Standardized           2019, RWAs were calculated in accordance with both the
approach and market risk rules set out in the Capital            Basel III Advanced Rules and the Standardized Capital
Framework (together, the Standardized Capital Rules) and         Rules.
(ii) the Advanced approach and market risk rules set out in
the Capital Framework (together, the Basel III Advanced          For additional information about the Capital Framework
Rules). The lower of each risk-based capital ratio calculated    and the requirement to calculate RWAs in accordance with
in (i) and (ii) is the ratio against which our compliance with   both the Basel III Advanced Rules and the Standardized
risk-based capital requirements is assessed. Each of the         Capital Rules, see “Note 20. Regulation and Capital
risk-based capital ratios calculated in accordance with the      Adequacy” in Part I, Item 1 “Financial Statements” in our
Basel III Advanced Rules was lower than that calculated in       Quarterly Report on Form 10-Q. Also see “Regulation” in
accordance with the Standardized Capital Rules and               Part I, Item 1 “Business” in our 2018 Form 10-K for
therefore the Basel III Advanced ratios were the ratios that     additional information about our regulatory capital
applied to us as of both March 2019 and December 2018.           requirements.
Under the Capital Framework, the firm is also subject to
leverage requirements which consist of a minimum Tier 1          Fair Value
leverage ratio and a minimum supplementary leverage ratio        The inventory included in our consolidated statements of
(SLR), as well as the SLR buffer.                                financial condition as “Financial instruments owned” and
                                                                 “Financial instruments sold, but not yet purchased,” as well
The Standardized CET1 capital, Tier 1 capital and Total          as certain other financial assets and financial liabilities, are
capital ratios were 13.7%, 15.7% and 18.4% as of March           accounted for at fair value (i.e., marked-to-market), with
2019. For additional information about our Standardized          related gains or losses generally recognized in our
capital ratios, see “Note 20. Regulation and Capital             consolidated statements of earnings and, therefore, in
Adequacy” in Part I, Item 1 “Financial Statements” in our        capital. The fair value of a financial instrument is the
Quarterly Report on Form 10-Q.                                   amount that would be received to sell an asset or paid to
                                                                 transfer a liability in an orderly transaction between market
The Basel III Advanced Rules require an Advanced                 participants at the measurement date. The use of fair value
approach BHC to meet a series of qualification                   to measure financial instruments is fundamental to our risk
requirements on an ongoing basis. They also require              management practices and is our most critical accounting
notification to supervisors of any change to a model that        policy. The daily discipline of marking substantially all of
results in a material change in its RWAs, or of any              our inventory to current market levels is an effective tool
significant change to its modeling assumptions. These            for assessing and managing risk and provides transparent
qualification requirements address the following areas: the      and realistic insight into our financial exposures. The use of
bank’s governance processes and systems for maintaining          fair value is an important aspect to consider when
adequate capital commensurate with its risk profile; its         evaluating our capital base and our capital ratios as changes
internal systems for segmenting exposures and applying           in the fair value of our positions are reflected in the current
risk weights; its quantification of risk parameters used         period’s shareholders’ equity, and accordingly, regulatory
including its model-based estimates of exposures; its            capital; it is also a factor used to determine the
operational risk management processes, data management           classification of positions into the banking book and trading
and quantification systems; the data management systems          book, as discussed further below.
that are designed to support the timely and accurate
reporting of risk-based capital requirements; and the            For additional information regarding the determination of
control, oversight and validation mechanisms exercised by        fair value under accounting principles generally accepted in
senior management and by the Board of Directors of Group         the United States (U.S. GAAP) and controls over valuation
Inc. (Board).                                                    of inventory, see “Note 3. Significant Accounting Policies”
                                                                 in Part I, Item 1 “Financial Statements” and “Critical
The information presented in this document is calculated in      Accounting Policies – Fair Value” in Part I, Item 2
accordance with the Capital Framework with RWAs                  “Management’s Discussion and Analysis of Financial
calculated in accordance with the Basel III Advanced             Condition and Results of Operations” in our Quarterly
Rules, unless otherwise specified.                               Report on Form 10-Q.

                                                                                                    March 2019 | Pillar 3 Disclosures   3
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

Banking Book/Trading Book Classification                           For further information about the basis of presentation of
In order to determine the appropriate regulatory capital           our financial statements and accounting consolidation
treatment for our exposures, positions must be first               policies, see “Note 2. Basis of Presentation” and “Note 3.
classified into either “banking book” or “trading book.”           Significant Accounting Policies” in Part I, Item 1
Positions are classified as banking book unless they qualify       “Financial Statements” in our Quarterly Report on Form
to be classified as trading book.                                  10-Q.

Banking book positions are not generally held “for the             Restrictions on the Transfer of Funds or
purpose of short-term resale or with the intent of benefiting      Regulatory Capital within the Firm
from actual or expected short-term price movements or to           Group Inc. is a holding company and, therefore, utilizes
lock in arbitrage profits1.” They may be accounted for at          dividends, distributions and other payments from its
amortized cost, fair value or in accordance with the equity        subsidiaries to fund dividend payments and other payments
method. Banking book positions are subject to credit risk          on its obligations, including debt obligations. Regulatory
regulatory capital requirements. Credit risk represents the        capital requirements, as well as other provisions of
potential for loss due to the default or deterioration in credit   applicable law and regulations restrict Group Inc.’s ability
quality of a counterparty (e.g., an OTC derivatives                to withdraw capital from its regulated subsidiaries.
counterparty or a borrower) or an issuer of securities or
other instruments we hold. See “Credit Risk” for additional        For information about restrictions on the transfer of funds
details.                                                           within Group Inc. and its subsidiaries, see “Note 20.
                                                                   Regulation and Capital Adequacy” in Part I, Item 1
Trading book positions generally meet the following                “Financial Statements” and “Risk Management – Liquidity
criteria: they are assets or liabilities that are accounted for    Risk Management” and “Equity Capital Management and
at fair value; they are risk managed using a Value-at-Risk         Regulatory Capital” in Part I, Item 2 “Management’s
(VaR) internal model; and they are positions that we hold,         Discussion and Analysis of Financial Condition and Results
generally as part of our market-making and underwriting            of Operations” in our Quarterly Report on Form 10-Q.
businesses, “for the purpose of short-term resale or with the
intent of benefiting from actual or expected short-term price      Compliance with Capital Requirements
movements or to lock in arbitrage profits1.” In accordance         As of March 2019, none of Group Inc.’s consolidated
with the Capital Framework, trading book positions are             subsidiaries that are subject to minimum regulatory capital
generally considered covered positions. Foreign exchange           requirements in a local jurisdiction had capital levels less
and commodity positions are typically considered covered           than such requirements.
positions, whether or not they meet the other criteria for
classification as trading book positions. Covered positions        GS Bank USA, a Federal Deposit Insurance Corporation
are subject to market risk regulatory capital requirements         (FDIC)-insured, New York State-chartered bank and a
which are designed to cover the risk of loss in value of           member of the Federal Reserve System, is supervised and
these positions due to changes in market conditions. See           regulated by the FRB, the FDIC, the New York State
“Market Risk” for further details. Some trading book               Department of Financial Services and the Bureau of
positions, such as derivatives, are also subject to                Consumer Financial Protection. GS Bank USA is an
counterparty credit risk regulatory capital requirements.          Advanced approach banking organization under the Capital
                                                                   Framework.
Basis of Consolidation
The Pillar 3 disclosures and the firm’s regulatory capital
ratio calculations are prepared at the consolidated Group
Inc. level. Our consolidated financial statements are
prepared in accordance with U.S. GAAP and include the
accounts of Group Inc. and all other entities in which we
have a controlling financial interest. Intercompany
transactions and balances have been eliminated. The scope
of consolidation for regulatory capital purposes is
substantially consistent with the U.S. GAAP consolidation.

1
    See definition of “Trading position” in 12 CFR 217.202.

                                                                                                    March 2019 | Pillar 3 Disclosures   4
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

For information about GS Bank USA’s regulatory capital        Regulatory Capital
ratios and for further information about other regulated
subsidiaries, see “Note 20. Regulation and Capital            The table below presents information about the regulatory
Adequacy” in Part I, Item 1 “Financial Statements” and        risk-based capital and leverage ratios, calculated in
“Equity Capital Management and Regulatory Capital –           accordance with the Basel III Advanced Rules.
Subsidiary Capital Requirements” in Part I, Item 2
“Management’s Discussion and Analysis of Financial            Table 1: Regulatory Risk-Based Capital and
Condition and Results of Operations” in our Quarterly         Leverage Ratios
Report on Form 10-Q. See “Note 20. Regulation and                                                           As of
Capital Adequacy” in Part I, Item 1 “Financial Statements”    $ in millions                          March 2019      December 2018
in our Quarterly Report on Form 10-Q for information          CET1 capital                       $       74,650        $       73,116
about GS Bank USA’s SLR.                                      Tier 1 capital                             85,289                83,702
                                                              Tier 2 capital                             13,713                13,743
Other Items                                                   Total capital                      $       99,002        $       97,445
For a detailed description of our equity capital and
                                                              RWAs                               $      556,609        $     558,111
additional information regarding our capital planning and
                                                              CET1 capital ratio                         13.4%                 13.1%
stress testing process, including the Comprehensive Capital
Analysis and Review, the Dodd-Frank Act Stress Tests, our     Tier 1 capital ratio                       15.3%                 15.0%

internally designed stress tests, our internal risk-based     Total capital ratio                        17.8%                 17.5%

capital assessment, our attribution of capital and
contingency capital plan, see “Equity Capital Management      Average adjusted total assets      $      949,738        $     941,207

and Regulatory Capital” in Part I, Item 2 “Management’s       Tier 1 leverage ratio                       9.0%                      8.9%
Discussion and Analysis of Financial Condition and Results    Total leverage exposure            $    1,338,115        $   1,342,906
of Operations” in our Quarterly Report on Form 10-Q.          SLR                                         6.4%                      6.2%

For an overview of our risk management framework,             In the table above:
including Board governance, processes and committee
structure, see “Risk Management – Overview and Structure      • CET1 capital ratio is calculated as CET1 capital divided
of Risk Management” in Part I, Item 2 “Management’s             by RWAs, the Tier 1 capital ratio is defined as Tier 1
Discussion and Analysis of Financial Condition and Results      capital divided by RWAs, and the Total capital ratio is
of Operations” in our Quarterly Report on Form 10-Q.            defined as Total capital divided by RWAs.
                                                              • Tier 1 leverage ratio is calculated as Tier 1 capital divided
Measures of exposures and other metrics disclosed in this       by quarterly average adjusted total assets (which includes
report and the FFIEC 101 Report may not be based on U.S.        adjustments for goodwill and identifiable intangible
GAAP, may not be directly comparable to measures                assets, and certain investments in nonconsolidated
reported in our Quarterly Report on Form 10-Q or 2018           financial institutions).
Form 10-K and may not all be comparable to similar
measures used by other companies. These disclosures are       • SLR is calculated as Tier 1 capital divided by total
not required to be, and have not been, audited by our           leverage exposure (which includes daily average total
independent auditors. Our historical filings with the SEC       assets for the quarter and certain off-balance-sheet
and previous Pillar 3 and Regulatory Capital Disclosure         exposures, less certain balance sheet deductions). For
documents             are            located           at:      additional information on our SLR, see our FFIEC 101
www.goldmansachs.com/investor-relations.                        Report, “Regulatory Capital Reporting for Institutions
                                                                Subject to the Advanced Capital Adequacy Framework.”

                                                                                                March 2019 | Pillar 3 Disclosures     5
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

The table below presents the risk-based capital and leverage          • The Tier 1 leverage ratio requirement is a minimum of
requirements.                                                           4%. The SLR requirement of 5% as of both March 2019
                                                                        and December 2018 includes a minimum of 3% and a 2%
Table 2: Risk-Based               Capital     and       Leverage        buffer applicable to G-SIBs.
Requirements
                                              As of
                                                                      For a detailed description of regulatory capital reforms that
                                     March 2019       December 2018   impact us, see “Regulation” in Part I, Item 1 “Business” in
Risk-based capital requirements
                                                                      our 2018 Form 10-K and “Regulatory Matters and Other
                                                                      Developments” in Part I, Item 2 “Management’s Discussion
CET1 capital ratio                          9.5%              8.3%
                                                                      and Analysis of Financial Condition and Results of
Tier 1 capital ratio                        11.0%             9.8%
                                                                      Operations” in our Quarterly Report on Form 10-Q.
Total capital ratio                         13.0%            11.8%
Leverage requirements
                                                                      Capital Structure
Tier 1 leverage ratio                       4.0%              4.0%
SLR                                         5.0%              5.0%
                                                                      The table below presents information about risk-based
                                                                      capital in accordance with the Basel III Advanced Rules.
In the table above:
• As of March 2019, the CET1 capital ratio requirement                Table 3: Capital Structure
                                                                                                                            As of
  included a minimum of 4.5%, the Tier 1 capital ratio
                                                                      $ in millions                              March 2019       December 2018
  requirement included a minimum of 6.0%, and the Total
                                                                      Common stock                               $           9       $              9
  capital ratio requirement included a minimum of 8.0%.
  The requirements also included the capital conservation             Share-based awards                                 2,739               2,845

  buffer of 2.5%, the G-SIB surcharge of 2.5% (Method 2)              Additional paid-in capital                       54,862               54,005

  and the countercyclical capital buffer, which the FRB has           Retained earnings                               101,988              100,100
                                                                      Accumulated other comprehensive
  set to zero percent.                                                    income/(loss)                                  (613)                    693

• As of December 2018, the CET1 capital ratio requirement             Stock held in treasury, at cost                 (79,915)            (78,670)

  included a minimum of 4.5%, the Tier 1 capital ratio                Common Shareholders' Equity                $     79,070        $      78,982
  requirement included a minimum of 6.0%, and the Total               Deduction for goodwill                           (3,099)              (3,097)
  capital ratio requirement included a minimum of 8.0%.               Deduction for identifiable intangible
                                                                         assets                                          (310)                (297)
  The requirements also included the 75% phase-in of the
                                                                      Other adjustments                                (1,011)              (2,472)
  capital conservation buffer of 2.5%, the 75% phase-in of
  the G-SIB surcharge of 2.5% (Method 2) and the                      CET1 capital                               $     74,650        $      73,116

  countercyclical capital buffer, which the FRB has set to            Preferred stock                                  11,203               11,203
                                                                      Deduction for investments in covered
  zero percent.                                                           funds                                          (562)                (615)

• The capital conservation buffer, countercyclical capital            Other adjustments                                     (2)                   (2)

  buffer and G-SIB surcharge began to phase in ratably on             Tier 1 capital                             $     85,289        $      83,702
  January 1, 2016, and became fully effective on January 1,           Qualifying subordinated debt                     13,144               13,147
  2019.                                                               Junior subordinated debt                             332                    442
                                                                      Other adjustments                                    237                    154
• The G-SIB surcharge is updated annually based on
  financial data from the prior year and is generally                 Tier 2 capital                                   13,713               13,743

  applicable for the following year. The G-SIB surcharge              Total capital                              $     99,002        $      97,445
  must be calculated using two methodologies, the higher
  of which is reflected in the firm’s risk-based capital
  requirements. The first calculation (Method 1) is based
  upon the Basel Committee’s methodology which, among
  other factors, relies upon measures of the size, activity
  and complexity of each G-SIB. The second calculation
  (Method 2) uses similar inputs but it includes a measure
  of reliance on short-term wholesale funding.

                                                                                                              March 2019 | Pillar 3 Disclosures     6
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

In the table above:                                             For further information on the terms and conditions of our
                                                                common stock, perpetual non-cumulative preferred stock,
• Deduction for goodwill was net of deferred tax liabilities
                                                                junior subordinated debt issued to trusts and qualifying
  of $661 million as of both March 2019 and December
                                                                subordinated debt, see “Note 16. Long-Term Borrowings”
  2018.
                                                                and “Note 19. Shareholders’ Equity” in Part I, Item 1
• Deduction for identifiable intangible assets was net of       “Financial Statements” in our Quarterly Report on Form
  deferred tax liabilities of $22 million as of March 2019      10-Q.
  and $27 million as of December 2018.
                                                                For additional information on the firm’s capital, see
• Deduction for investments in covered funds represents
                                                                “Equity Capital Management and Regulatory Capital” in
  our aggregate investments in applicable covered funds,
                                                                Part I, Item 2 “Management’s Discussion and Analysis of
  excluding investments that are subject to an extended
                                                                Financial Condition and Results of Operations” in our
  conformance period. For additional information about the
                                                                Quarterly Report on Form 10-Q, and the following
  Volcker Rule, see “Note 6. Cash Instruments” in Part I,
                                                                footnotes to the consolidated financial statements in Part I,
  Item 1 “Financial Statements” in our Quarterly Report on
                                                                Item 1 “Financial Statements” in our Quarterly Report on
  Form 10-Q.
                                                                Form 10-Q:
• Other adjustments within CET1 capital and Tier 1 capital
                                                                • “Note 13. Other Assets” for a discussion on our goodwill
  primarily include credit valuation adjustments on
                                                                  and identifiable intangible assets;
  derivative liabilities, pension and postretirement
  liabilities, the overfunded portion of our defined benefit    • “Note 16. Long-Term Borrowings” for a discussion on
  pension plan obligation net of associated deferred tax          our subordinated borrowings and junior subordinated
  liabilities, disallowed deferred tax assets, debt valuation     debt issued to trusts; and
  adjustments and other required credit risk-based
                                                                • “Note 19. Shareholders' Equity” for detail on common
  deductions. Other adjustments within Basel III Advanced
                                                                  equity, preferred equity and accumulated other
  Tier 2 capital include eligible credit reserves.
                                                                  comprehensive income/(loss).
• Qualifying subordinated debt is subordinated debt issued
  by Group Inc. with an original maturity of five years or
  greater. The outstanding amount of subordinated debt
  qualifying for Tier 2 capital is reduced upon reaching a
  remaining maturity of five years. For further information
  about our subordinated debt, see “Note 16. Long-Term
  Borrowings” in Part I, Item 1 “Financial Statements” in
  our Quarterly Report on Form 10-Q.
• Junior subordinated debt represents debt issued to Trust.
  As of March 2019, 30% of this debt was included in Tier
  2 capital and 70% was phased out of regulatory capital.
  As of December 2018, 40% of this debt was included in
  Tier 2 capital and 60% was phased out of regulatory
  capital. Junior subordinated debt is reduced by the amount
  of Trust Preferred Securities we purchase and will be
  fully phased out of Tier 2 capital by 2022 at a rate of 10%
  per year. See “Note 16. Long-Term Borrowings” in Part I,
  Item 1 “Financial Statements” in our Quarterly Report on
  Form 10-Q, for further information about our junior
  subordinated debt and Trust Preferred Securities we
  purchased.

                                                                                                 March 2019 | Pillar 3 Disclosures   7
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

Risk-Weighted Assets

The table below presents information about RWAs                             Basel III Advanced Credit RWAs as of March 2019
calculated in accordance with the Basel III Advanced                        increased by $3.23 billion compared with December 2018,
Rules. More details on each of the material components,                     primarily reflecting increases in commitments, guarantees
including a description of the methodologies used, can be                   and loans, principally due to an increase in lending activity,
found in the remainder of this document, under the section                  equity investments, principally due to increased exposures,
headings indicated below.                                                   and an increase in other Credit RWAs, principally due to
                                                                            the recognition of operating lease right-of-use assets upon
Table 4: Risk-Weighted Assets by Exposure                                   adoption of ASU No. 2016-02. These increases were
Category                                                                    partially offset by decreases in derivatives and securities
                                    As of                                   financing transactions, principally due to reduced
                                March     December             Section
$ in millions                    2019         2018           Reference
                                                                            exposures. Basel III Advanced Market RWAs as of March
                                                                            2019 decreased by $6.59 billion compared with December
Credit RWAs
                                                                            2018, primarily reflecting decreases in specific risk, as a
Wholesale Exposures        $   212,047   $   213,215         Credit Risk
                                                                            result of reduced exposures, and stressed VaR, as a result of
Retail Exposures                18,622        18,509         Credit Risk
                                                                            changes in risk exposure.
Cleared Exposures                3,296         3,556         Credit Risk
Other Assets                    30,634        29,490        Credit Risk
                                                                   Equity   Credit Risk
                                                       Exposures in the
Equity Exposures                55,041        52,032     Banking Book
                                                       Securitizations in   Overview
Securitization                                             the Banking      Credit risk represents the potential for loss due to the
Exposures                        8,943         8,011                Book
Subtotal: Credit RWAs
                                                                            default or deterioration in credit quality of a counterparty
subject to the 6% add-on       328,583       324,813                        (e.g., an OTC derivatives counterparty or a borrower) or an
6% add-on
           1
                                19,715        19,489                        issuer of securities or other instruments we hold. Our
Credit Valuation                                                            exposure to credit risk comes mostly from client
Adjustment                      23,682        24,449         Credit Risk
                                                                            transactions in OTC derivatives and loans and lending
Total Credit RWAs              371,980       368,751
                                                                            commitments. Credit risk also comes from cash placed with
Market RWAs                                                                 banks, securities financing transactions (i.e., resale and
Regulatory VaR                   8,104         7,782        Market Risk     repurchase agreements and securities borrowing and
Stressed VaR                    25,295        27,952        Market Risk     lending activities) and customer and other receivables.
Incremental Risk                10,236        10,469        Market Risk
Comprehensive Risk               2,354         2,770        Market Risk     Credit Risk, which is independent of our revenue-producing
Specific Risk                   21,990        25,599        Market Risk     units and reports to our chief risk officer, has primary
Total Market RWAs               67,979        74,572
                                                                            responsibility for assessing, monitoring and managing our
Total Operational                                                           credit risk through firmwide oversight across our global
RWAs                           116,650       114,788   Operational Risk     businesses. The Risk Governance Committee reviews and
Total RWAs                 $   556,609   $   558,111                        approves credit policies and parameters. In addition, we
1. The FRB’s regulations require that a 6% add-on be applied to all         hold other positions that give rise to credit risk (e.g., bonds
   components of our Credit RWAs other than the Credit Valuation            held in our inventory and secondary bank loans). These
   Adjustment (CVA) component.
                                                                            credit risks are captured as a component of market risk
                                                                            measures, which are monitored and managed by Market
                                                                            Risk, consistent with other inventory positions. We also
                                                                            enter into derivatives to manage market risk exposures.
                                                                            Such derivatives also give rise to credit risk, which is
                                                                            monitored and managed by Credit Risk.

                                                                                                              March 2019 | Pillar 3 Disclosures   8
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

Credit Risk Management Process                                   Risk Measures and Limits
Our process for managing credit risk includes:                   We measure our credit risk based on the potential loss in the
                                                                 event of non-payment by a counterparty using current and
• Collecting complete, accurate and timely information;
                                                                 potential exposure. For derivatives and securities financing
• Approving transactions and setting and communicating           transactions, current exposure represents the amount
  credit exposure limits;                                        presently owed to us after taking into account applicable
                                                                 netting and collateral arrangements, while potential
• Monitoring compliance with established credit risk limits
                                                                 exposure represents our estimate of the future exposure that
  and reporting our exposure;
                                                                 could arise over the life of a transaction based on market
• Establishing or approving underwriting standards;              movements within a specified confidence level. Potential
                                                                 exposure also takes into account netting and collateral
• Assessing the likelihood that a counterparty will default      arrangements. For loans and lending commitments, the
  on its payment obligations;                                    primary measure is a function of the notional amount of the
• Measuring our current and potential credit exposure and        position.
  losses resulting from a counterparty default;
                                                                 We use credit risk limits at various levels as well as
• Using credit risk mitigants, including collateral and          underwriting standards, to manage the size and nature of our
  hedging;                                                       credit exposures. The Risk Committee of the Board and the
• Maximizing recovery through active workout and                 Risk Governance Committee approve limits at firmwide,
  restructuring of claims; and                                   business and product levels, consistent with our risk appetite
                                                                 statement. Credit Risk (through delegated authority from the
• Ensuring proactive communication between our revenue-          Risk Governance Committee) sets limits for individual
  producing units and our independent risk oversight and         counterparties, economic groups, industries, and countries.
  control functions.                                             Limits for counterparties and economic groups are reviewed
As part of the risk assessment process, we perform credit        regularly and revised to reflect changing risk appetites for a
reviews, which include initial and ongoing analyses of our       given counterparty or group of counterparties. Limits for
counterparties. For substantially all of our credit exposures,   industries and countries are based on our risk appetite and
the core of our process is an annual counterparty credit         are designed to allow for regular monitoring, review,
review. A credit review is an independent analysis of the        escalation and management of credit risk concentrations.
capacity and willingness of a counterparty to meet its
financial obligations, resulting in an internal credit rating.   Policies authorized by the Firmwide Enterprise Risk
The determination of internal credit ratings also incorporates   Committee and the Risk Governance Committee prescribe
assumptions with respect to the nature of and outlook for the    the level of formal approval required for us to assume credit
counterparty’s industry, and the economic environment.           exposure to a counterparty across all product areas, taking
Senior personnel, with expertise in specific industries,         into account any applicable netting provisions, collateral or
inspect and approve credit reviews and internal credit           other credit risk mitigants.
ratings.
                                                                 Credit Risk is responsible for monitoring these limits, and
Our risk assessment process may also include, where              identifying and escalating to senior management and/or the
applicable, reviewing certain key metrics, including, but not    appropriate risk committee, on a timely basis, instances
limited to, delinquency status, collateral values, Fair Isaac    where limits have been exceeded.
Corporation credit scores and other risk factors.

Our global credit risk management systems capture credit
exposure to individual counterparties and on an aggregate
basis to counterparties and their subsidiaries (economic
groups). These systems also provide management with
comprehensive information about our aggregate credit risk
by product, internal credit rating, industry, country and
region.

                                                                                                  March 2019 | Pillar 3 Disclosures   9
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

Credit Exposures                                                 Exposure at Default (EAD). For on-balance-sheet
For information on our credit exposures, including the gross     Wholesale exposures, such as receivables and cash, the
fair value, netting benefits and current exposure of our         EAD is generally based on the carrying value. For the
derivative exposures and our securities financing                calculation of EAD for off-balance-sheet exposures,
transactions, see “Note 7. Derivatives and Hedging               including commitments and guarantees, a credit equivalent
Activities” and “Note 10. Collateralized Agreements and          exposure amount is calculated based on the notional amount
Financings” in Part I, Item 1 “Financial Statements” and         of each transaction multiplied by a credit conversion factor
“Credit Risk Management” in Part I, Item 2 “Management’s         designed to estimate the net additions to funded exposures
Discussion and Analysis of Financial Condition and Results       that would be likely to occur over a one-year horizon,
of Operations” in our Quarterly Report on Form 10-Q.             assuming the obligor were to default. Historical studies and
                                                                 empirical data are generally used to estimate the credit
Allowance for Losses on Loans and Lending                        conversion factor.
Commitments
For information on our impaired loans, past due loans, loans     For on-balance-sheet Retail exposures, the EAD is generally
on non-accrual status, and allowance for losses on loans and     based on the carrying value. For off-balance-sheet Retail
lending commitments, see “Note 9. Loans Receivable” in           exposures, EAD is our best estimate of net additions to
Part I, Item 1 "Financial Statements” in our Quarterly           funded exposures that would be likely to occur over a one-
Report on Form 10-Q.                                             year horizon assuming the Retail exposures in the segment
                                                                 were to default.
Credit Risk: Risk-Weighted Assets
Credit RWAs are calculated based upon measures of credit         For substantially all of the counterparty credit risk arising
exposure, which are then risk weighted. Below is a               from OTC derivatives, exchange-traded derivatives and
description of the methodology used to calculate RWAs for        securities financing transactions, we use internal models to
Wholesale and Retail exposures. Wholesale exposures              calculate the distribution of exposure upon which the EAD
generally include credit exposures to corporates, sovereigns     calculation is based, in accordance with the IMM. The
or government entities (other than Securitization, Retail or     models estimate Expected Exposures (EE) at various points
Equity exposures). Retail exposures are composed of              in the future using risk factor simulations. The model
residential mortgage exposures, qualifying revolving             parameters are derived from historical and implied market
exposures, or other retail exposures, that are managed as        data using the most recent three-year period as well as a
part of a segment with homogeneous risk characteristics, not     stressed three-year period. The models also estimate the
on an individual exposure basis. Certain loans to                Effective Expected Positive Exposure (EEPE) over the first
individuals, including some loans backed by residential real     year of the portfolio, which is the time-weighted average of
estate, are categorized as Wholesale, rather than Retail,        non-declining positive credit exposure over the EE
exposures under the Capital Framework as the associated          simulation. In accordance with the Basel III Advanced
credit risk is assessed on an individual basis and not as part   Rules, we calculate two EEPEs: one based on stressed
of a portfolio of exposures. We compute risk weights for         conditions and one based on unstressed conditions. For the
certain exposures in accordance with the Advanced Internal       stressed EEPE calculation, the model is re-calibrated using
Ratings-Based (AIRB) approach, which utilizes internal           historical market parameters from a period of stress as
assessments of each counterparty’s creditworthiness.             identified by elevated credit spreads for our counterparties.
                                                                 Both stressed and unstressed EAD are calculated by
We utilize internal models to measure exposure for certain       multiplying the EEPE by a standard regulatory factor of 1.4.
products using the Internal Models Methodology (IMM).            Our RWAs calculated in accordance with the IMM are the
                                                                 greater of the RWAs based on the stressed or unstressed
                                                                 EEPE.

                                                                 Our implementation of the IMM incorporates the impact of
                                                                 netting and collateral into calculations of exposure. The
                                                                 EAD detailed in Table 5 below represents the exposures
                                                                 used in computing capital requirements and is not directly
                                                                 comparable to amounts presented in our consolidated
                                                                 statements of financial condition in our Quarterly Report on
                                                                 Form 10-Q, due to differences in measurement
                                                                 methodology, counterparty netting and collateral offsets
                                                                 used.
                                                                                                  March 2019 | Pillar 3 Disclosures   10
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

Advanced Internal Ratings-Based Approach. RWAs                                            • LGD is an estimate of the economic loss rate if a default
are calculated by multiplying EAD by the counterparty’s                                     occurs during economic downturn conditions. For
risk weight. In accordance with the AIRB approach, risk                                     Wholesale exposures, the LGD is determined using
weights are a function of the counterparty’s Probability of                                 recognized vendor models, but exposure-specific
Default (PD), Loss Given Default (LGD) and the effective                                    estimates of LGD are employed where the recovery
maturity of the trade or portfolio of trades.                                               prospects of an exposure are more accurately captured by
                                                                                            an analysis incorporating information about the specific
Wholesale Credit Risk Parameters                                                            collateral, structure or counterparty.
Wholesale exposures are internally risk rated and assigned
                                                                                          • The definition of effective maturity depends on the nature
PDs and LGDs.
                                                                                            of the exposure. For OTC derivatives, effective maturity is
• PD is an estimate of the probability that an obligor will                                 an average time measure weighted by credit exposure
  default over a one-year horizon. For the majority of our                                  (based on EE and EEPE). For securities financing
  Wholesale exposure, the PD is assigned using an approach                                  transactions, effective maturity represents the notional
  where quantitative factors are combined with a qualitative                                weighted average number of days to maturity. For other
  assessment to determine internal credit rating grades. For                                products, the effective maturity is based on the contractual
  each internal credit rating grade, over 5 years of historical                             maturity. Effective maturity is floored at one year and
  empirical data is used to calculate a long run average                                    capped at five years except where the Basel III Advanced
  annual PD which is assigned to each counterparty with                                     Rules allow a maturity of less than one year to be used as
  that credit rating grade.                                                                 long as certain criteria are met.
  While the firm’s default experience is incorporated into                                The table below presents a distribution of EAD, Weighted
  the determination of probability of default, our internal                               Average LGD, Weighted Average PD, and Weighted
  credit rating grades each have external public rating                                   Average Risk Weight by PD band for Wholesale exposures
  agency equivalents. The scale that we employ for internal                               (excluding cleared transactions). The table also shows the
  credit ratings corresponds to those used by the major                                   notional amount of undrawn commitments and guarantees
  rating agencies and our internal credit ratings, while                                  that are included in the Total EAD.
  arrived at independently of public ratings, are assigned
  using definitions of each internal credit rating grade that
  are consistent with the definitions used by the major rating
  agencies for their equivalent credit rating grades. As a
  result, we are able to map default data published by the
  major rating agencies for obligors with public ratings to
  our counterparties with equivalent internal credit ratings
  for use in quantification and validation of risk parameters.
Table 5: Credit Risk Wholesale Exposures by PD Band
 $ in millions                                                             As of March 2019
                                                                                                       Exposure
                                                   Exposure            Exposure                        Weighted                  Undrawn               Undrawn
                                                   Weighted            Weighted                     Average Risk            Commitments &        Commitments &
PD Band Range                  Total EAD1, 2    Average LGD          Average PD            RWAs          Weight                Guarantees3       Guarantees EAD

0 to
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

Retail Credit Risk Parameters
For Retail exposures, statistical techniques are used to                                   • Retail LGD is our empirically based best estimate of the
devise risk segmentation that results in homogeneous risk                                    economic loss or long-run default-weighted average
segments that are heterogeneous from each other.                                             economic loss, per dollar of EAD, we would expect to
Segmentation uses borrower-related and exposure-related                                      incur if the exposures in the segment were to default
characteristics that reliably and consistently, over time,                                   within a one-year horizon over a mix of economic
differentiate a segment’s risk from that of other segments.                                  conditions, including economic downturn conditions.
Risk drivers considered for segmentation are generally
                                                                                           The table below presents a distribution of EAD, Weighted
consistent with the predominant risk characteristics used for
                                                                                           Average LGD, Weighted Average PD, and Weighted
internal credit risk measurement and management.
                                                                                           Average Risk Weight by PD band for Retail exposures. The
• Retail PD is our empirically based best estimate of the                                  table also shows the notional amount of undrawn
  long-run average one-year default rate for the exposures in                              commitments that are included in the Total EAD. The Retail
  the segment, capturing the average default experience for                                exposures include purchased performing and distressed
  exposures in the segment over a mix of economic                                          loans backed by residential real estate and consumer loans.
  conditions, including economic downturn conditions.

Table 6: Credit Risk Retail Exposures by PD Band
 $ in millions                                                             As of March 2019
                                                                                                         Exposure
                                                    Exposure           Exposure                          Weighted                                 Undrawn
                                                    Weighted           Weighted                       Average Risk          Undrawn            Commitments
PD Band Range                   Total EAD1       Average LGD         Average PD            RWAs            Weight        Commitments                  EAD

0 to
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

Governance and Validation of Risk Parameters                     Credit Risk Mitigation
Approaches and methodologies for quantifying PD, LGD,            To reduce our credit exposures on derivatives and securities
and EAD are monitored and managed by Credit Risk.                financing transactions, we may enter into master netting
Models used for regulatory capital are independently             agreements or similar arrangements (collectively, netting
reviewed, validated and approved by Model Risk. For              agreements) with counterparties that permit us to offset
further information, see “Model Risk Management.”                receivables and payables with such counterparties. A netting
                                                                 agreement is a contract with a counterparty that permits net
To assess the performance of the PD parameters used, on an       settlement of multiple transactions with that counterparty,
annual basis we perform a benchmarking exercise which            including upon the exercise of termination rights by a non-
includes comparisons of realized annual default rates to the     defaulting party. Upon exercise of such termination rights,
expected annual default rates for each credit rating band and    all transactions governed by the netting agreement are
comparisons of the internal realized long-term average           terminated and a net settlement amount is calculated.
default rates to the empirical long-term average default rates
assigned to each credit rating band. For the year ended          We may also reduce credit risk with counterparties by
December 2018, as well as in previous annual periods, the        entering into agreements that enable us to receive and post
PDs used for regulatory capital calculations were higher         cash and securities collateral with respect to our derivatives
(i.e., more conservative) than our actual internal realized      and securities financing transactions, subject to the terms of
default rate.                                                    the related credit support agreements or similar
                                                                 arrangements (collectively, credit support agreements). An
During the three months ended March 2019, our credit             enforceable credit support agreement grants the non-
exposure to counterparties that defaulted remained low,          defaulting party exercising termination provisions the right
representing less than 0.5% of our total credit exposure, and    to liquidate collateral and apply the proceeds to any amounts
substantially all of such exposure was related to loans and      owed. In order to assess enforceability of our right to setoff
lending commitments. Estimated losses compared with the          under netting and credit support agreements, we evaluate
same prior year period were higher, but were not material.       various factors including applicable bankruptcy laws, local
                                                                 statutes and regulatory provisions in the jurisdiction of the
To assess the performance of LGD parameters used, on an          parties to the agreement. Securities collateral obtained
annual basis we compare recovery rates following                 primarily includes U.S. and non-U.S. government and
counterparty defaults to the recovery rates based on LGD         agency obligations.
parameters assigned to the corresponding exposures prior to
default. While the actual realized recovery on each defaulted    Our collateral is managed by certain functions within the
exposure varies due to transaction and other situation-          firm which review exposure calculations, make margin calls
specific factors, on average, recovery rates remain higher       with relevant counterparties, and ensure subsequent
than those implied by the LGD parameters used in our             settlement of collateral movements. We monitor the fair
regulatory capital calculations.                                 value of the collateral to ensure that our credit exposures are
                                                                 appropriately collateralized.
The performance of each IMM model used to quantify EAD
is assessed quarterly via backtesting procedures, performed      For additional information about our derivatives (including
by comparing the predicted and realized exposure of a set of     collateral and the impact of the amount of collateral we
representative trades and portfolios at certain horizons. Our    would have to provide in the event of a ratings downgrade),
models are monitored and enhanced in response to                 see “Note 7. Derivatives and Hedging Activities” in Part I,
backtesting.                                                     Item 1 “Financial Statements” in our Quarterly Report on
                                                                 Form 10-Q. See “Note 10. Collateralized Agreements and
                                                                 Financings” in Part I, Item 1 “Financial Statements” in our
                                                                 Quarterly Report on Form 10-Q for further information
                                                                 about our collateralized agreements and financings.

                                                                                                   March 2019 | Pillar 3 Disclosures   13
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

For loans and lending commitments, depending on the               Wrong-Way Risk
credit quality of the borrower and other characteristics of the   We seek to minimize risk where there is a significant
transaction, we employ a variety of potential risk mitigants.     positive correlation between the probability of default of a
Risk mitigants include collateral provisions, guarantees,         counterparty and our exposure to that counterparty (net of
covenants, structural seniority of the bank loan claims and,      the market value of any collateral we receive), which is
for certain lending commitments, provisions in the legal          known as “wrong-way risk.” Wrong-way risk is commonly
documentation that allow us to adjust loan amounts, pricing,      categorized into two types: specific wrong-way risk and
structure and other terms as market conditions change. The        general wrong-way risk. We categorize exposure as specific
type and structure of risk mitigants employed can                 wrong-way risk when our counterparty and the issuer of the
significantly influence the degree of credit risk involved in a   reference asset of the transaction are the same entity or are
loan or lending commitment.                                       affiliates, or if the collateral supporting a transaction is
                                                                  issued by the counterparty or its affiliates. General wrong-
When we do not have sufficient visibility into a                  way risk arises when there is a significant positive
counterparty’s financial strength or when we believe a            correlation between the probability of default of a
counterparty requires support from its parent, we may obtain      counterparty and general market risk factors affecting the
third-party guarantees of the counterparty’s obligations. We      exposure to that counterparty. We have procedures in place
may also mitigate our credit risk using credit derivatives or     to actively identify, monitor and control specific and general
participation agreements.                                         wrong-way risk, beginning at the inception of a transaction
                                                                  and continuing through its life, including assessing the level
Credit Derivatives                                                of risk through stress tests. We ensure that material wrong-
We enter into credit derivative transactions primarily to         way risk is mitigated using collateral agreements or
facilitate client activity and to manage the credit risk          increases to initial margin, where appropriate.
associated with market-making, including to hedge
counterparty exposures arising from OTC derivatives               Credit Valuation Adjustment Risk-Weighted Assets
(intermediation activities).                                      RWAs for CVA address the risk of losses related to changes
                                                                  in counterparty credit risk arising from OTC derivatives. We
We also use credit derivatives to hedge counterparty              calculate RWAs for CVA primarily using the Advanced
exposure associated with investing and lending activities.        CVA approach set out in the Capital Framework, which
Some of these hedges qualify as credit risk mitigants for         permits the use of regulator approved VaR models.
regulatory capital purposes. For these transactions, the          Consistent with our Regulatory VaR calculation (see
substitution approach is applied, where the PD and/or LGD         “Market Risk” for further details), the CVA RWAs are
associated with the credit derivative counterparty replaces       calculated at a 99% confidence level over a 10-day time
the PD and/or LGD of the loan obligors for capital                horizon. The CVA RWAs also include a stressed CVA
calculations. Where the aggregate notional of credit              component, which is also calculated at a 99% confidence
derivatives hedging exposure to a loan obligor is less than       level over a 10-day horizon using both a stressed VaR
the notional loan exposure, the substitution approach is only     period and stressed EEs. The CVA VaR model estimates the
employed for the percentage of loan exposure covered by           impact on our credit valuation adjustments of changes to our
eligible credit derivatives. As of March 2019, our purchased      counterparties’ credit spreads. It reflects eligible CVA
credit default swaps that were used to hedge counterparty         hedges (as defined in the Capital Framework), but it
exposure associated with investing and lending activities         excludes those hedges that, although used for risk-
had a notional amount of $7.50 billion, of which $4.25            management purposes, are ineligible for inclusion in the
billion were deemed to be eligible hedges for regulatory          regulatory CVA VaR model. Examples of such hedges are
capital purposes.                                                 interest rate hedges, or those that do not reference the
                                                                  specific exposures they are intended to mitigate, but are
For further information regarding our credit derivative           nevertheless highly correlated to the underlying credit risk.
transactions, see “Note 7. Derivatives and Hedging
Activities” in Part I, Item 1 “Financial Statements” in our
Quarterly Report on Form 10-Q

For information regarding credit risk concentrations, see
“Note 26. Credit Concentrations” in Part I, Item 1
“Financial Statements” in our Quarterly Report on Form 10-
Q.

                                                                                                   March 2019 | Pillar 3 Disclosures   14
THE GOLDMAN SACHS GROUP, INC.
Pillar 3 Disclosures

Other Credit Risk-Weighted Assets                               Equity Exposures in the Banking Book
Credit RWAs (as summarized in Table 4 above) also
include the following components:                               Overview
                                                                We make investments, both directly and indirectly through
Cleared Transactions. RWAs for cleared transactions             funds that we manage, in public and private equity
and default fund contributions (defined as payments made        securities, as well as in debt securities and loans and real
by clearing members to central clearing agencies pursuant to    estate entities. We also enter into commitments to make
mutualized loss arrangements) are calculated based on           such investments. These investments are typically longer-
specific rules within the Capital Framework. A majority of      term in nature and are primarily held for capital appreciation
our exposures on centrally cleared transactions are to          purposes. Equity investments that are not consolidated are
counterparties that are considered to be Qualifying Central     classified for regulatory capital purposes as banking book
Counterparties in accordance with the Capital Framework.        equity exposures.
Such exposures arise from the following cleared products:
OTC derivatives, exchange-traded derivatives, and               See “Note 6. Cash Instruments” and “Note 13. Other
securities financing transactions. These exposures are          Assets” for further information on our equity investments;
required to be risk weighted at either 2% or 4% based on the    “Note 18. Commitments, Contingencies and Guarantees”
specified criteria.                                             for information on our equity investment commitments; and
                                                                “Note 22. Transactions with Affiliated Funds” for a
Other Assets. Other assets primarily include property,          description of transactions with affiliated funds, in Part I,
leasehold improvements and equipment, deferred tax assets,      Item 1 “Financial Statements” in our Quarterly Report on
and assets for which there is no defined capital methodology    Form 10-Q.
or that are not material. RWAs for other assets are generally
based on the carrying value plus a percentage of the notional   Risk Management
amount of off-balance-sheet exposures, and are typically        Our equity investments and investment commitments are
risk weighted at 100%.                                          subject to comprehensive risk management processes
                                                                through which we assess investment opportunities, and
                                                                monitor, evaluate and manage the risks associated with such
                                                                investments.

                                                                Risk management governance starts with the Board, which
                                                                both directly and through its committees oversees our risk
                                                                management policies and practices.

                                                                Prior to making an investment, or entering into an
                                                                investment commitment, opportunities are subject to
                                                                rigorous due diligence review by both investment
                                                                professionals and control side functions and approval by the
                                                                relevant divisional investment committee and, where
                                                                appropriate, firmwide transactional committees such as the
                                                                Firmwide Investment Policy Committee and the Firmwide
                                                                Reputational Risk Committee. The committees consider,
                                                                among other matters, the risks and rewards of the
                                                                opportunity, as well as factors such as balance sheet usage
                                                                and risk measures such as stress tests.

                                                                On an ongoing basis, our equity exposures are reviewed by
                                                                senior management and the Firmwide Risk Committee.

                                                                                                 March 2019 | Pillar 3 Disclosures   15
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