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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017 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

incorporation or organization)(I.R.S. Employer

Identification No.)

200 West Street 10282New York, N.Y.

(Address of principal executive offices)(Zip Code)

(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 ExchangeDepositary Shares, Each Representing 1/1,000th Interest in a Share of Floating RateNon-Cumulative Preferred Stock, Series A New York Stock ExchangeDepositary Shares, Each Representing 1/1,000th Interest in a Share of 6.20%Non-Cumulative Preferred Stock, Series B New York Stock ExchangeDepositary Shares, Each Representing 1/1,000th Interest in a Share of Floating RateNon-Cumulative Preferred Stock, Series C New York Stock ExchangeDepositary Shares, Each Representing 1/1,000th Interest in a Share of Floating RateNon-Cumulative Preferred Stock, Series D New York Stock ExchangeDepositary 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 ExchangeDepositary 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 ExchangeDepository Shares, Each Representing 1/1,000th Interest in a Share of 6.30%Non-Cumulative Preferred Stock, Series N New York Stock ExchangeSee 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 of1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject tosuch 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 Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that theregistrant 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 onForm 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, a smaller reporting company,or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerginggrowth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Emerging growth company

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

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

As of June 30, 2017, the aggregate market value of the common stock of the registrant held by non-affiliates of the registrant was approximately$84.9 billion.

As of February 9, 2018, there were 379,887,039 shares of the registrants common stock outstanding.

Documents incorporated by reference: Portions of The Goldman Sachs Group, Inc.s Proxy Statement for its 2018 Annual Meeting ofShareholders are incorporated by reference in the Annual Report on Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14.

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIESANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017

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 2

Investing & Lending 4

Investment Management 4

Business Continuity and Information Security 5

Employees 5

Competition 6

Regulation 7

Available Information 21

Cautionary Statement Pursuant to the U.S. Private SecuritiesLitigation Reform Act of 1995 22

Item 1A

Risk Factors 23

Item 1B

Unresolved Staff Comments 42

Item 2

Properties 42

Item 3

Legal Proceedings 43

Item 4

Mine Safety Disclosures 43

Executive Officers of The Goldman Sachs Group, Inc. 43

PART II 44

Item 5

Market for Registrants Common Equity, Related StockholderMatters and Issuer Purchases of Equity Securities 44

Item 6

Selected Financial Data 44

Page No.

Item 7

Managements Discussion and Analysis of Financial Conditionand Results of Operations 45

Introduction 45

Executive Overview 46

Business Environment 47

Critical Accounting Policies 48

Recent Accounting Developments 50

Use of Estimates 50

Results of Operations 51

Balance Sheet and Funding Sources 64

Equity Capital Management and Regulatory Capital 69

Regulatory Matters and Developments 75

Off-Balance-Sheet Arrangements and Contractual Obligations 75

Risk Management 77

Overview and Structure of Risk Management 77

Liquidity Risk Management 82

Market Risk Management 89

Credit Risk Management 94

Operational Risk Management 99

Model Risk Management 101

Item 7A

Quantitative and Qualitative Disclosures About Market Risk 101

Goldman Sachs 2017 Form 10-K

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

INDEX

Page No.

Item 8

Financial Statements and Supplementary Data 102

Managements Report on Internal Control over FinancialReporting 102

Report of Independent Registered Public Accounting Firm 103

Consolidated Financial Statements 104

Consolidated Statements of Earnings 104

Consolidated Statements of Comprehensive Income 105

Consolidated Statements of Financial Condition 106

Consolidated Statements of Changes in Shareholders Equity 107

Consolidated Statements of Cash Flows 108

Notes to Consolidated Financial Statements 109

Note 1. Description of Business 109

Note 2. Basis of Presentation 109

Note 3. Significant Accounting Policies 110

Note 4. Financial Instruments Owned and FinancialInstruments Sold, But Not Yet Purchased 117

Note 5. Fair Value Measurements 118

Note 6. Cash Instruments 119

Note 7. Derivatives and Hedging Activities 125

Note 8. Fair Value Option 136

Note 9. Loans Receivable 142

Note 10. Collateralized Agreements and Financings 146

Note 11. Securitization Activities 150

Note 12. Variable Interest Entities 152

Note 13. Other Assets 155

Note 14. Deposits 158

Note 15. Short-Term Borrowings 159

Note 16. Long-Term Borrowings 159

Note 17. Other Liabilities and Accrued Expenses 162

Note 18. Commitments, Contingencies and Guarantees 162

Note 19. Shareholders Equity 166

Note 20. Regulation and Capital Adequacy 169

Note 21. Earnings Per Common Share 178

Note 22. Transactions with Affiliated Funds 178

Note 23. Interest Income and Interest Expense 179

Page No.

Note 24. Income Taxes 179

Note 25. Business Segments 182

Note 26. Credit Concentrations 184

Note 27. Legal Proceedings 185

Note 28. Employee Benefit Plans 191

Note 29. Employee Incentive Plans 192

Note 30. Parent Company 194

Supplemental Financial Information 196

Quarterly Results 196

Common Stock Price Range 196

Common Stock Performance 196

Selected Financial Data 197

Statistical Disclosures 197

Item 9

Changes in and Disagreements with Accountants on Accountingand Financial Disclosure 203

Item 9A

Controls and Procedures 203

Item 9B

Other Information 203

PART III 203

Item 10

Directors, Executive Officers and Corporate Governance 203

Item 11

Executive Compensation 203

Item 12

Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters 204

Item 13

Certain Relationships and Related Transactions, and DirectorIndependence 204

Item 14

Principal Accounting Fees and Services 204

PART IV 205

Item 15

Exhibits, Financial Statement Schedules 205

SIGNATURES 210

Goldman Sachs 2017 Form 10-K


PART IItem 1. BusinessIntroduction

Goldman Sachs is a leading global investment banking,securities and investment management firm that provides awide range of financial services to a substantial anddiversified client base that includes corporations, financialinstitutions, governments and individuals.

When we use the terms Goldman Sachs, the firm,we, us and our, we mean The Goldman SachsGroup, Inc. (Group Inc. or parent company), a Delawarecorporation, and its consolidated subsidiaries.

References to this Form 10-K are to our Annual Reporton Form 10-K for the year ended December 31, 2017. Allreferences to 2017, 2016 and 2015 refer to our years ended,or the dates, as the context requires, December 31, 2017,December 31, 2016 and December 31, 2015, respectively.

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

As of December 2017, we had offices in over 30 countriesand 48% of our total staff was based outside the Americas.Our clients are located worldwide and we are an activeparticipant in financial markets around the world. In 2017,we generated 39% of our net revenues outside theAmericas. For further information about our geographicresults, see Note 25 to the consolidated financial statementsin Part II, Item 8 of this Form 10-K.

Our Business Segments and SegmentOperating Results

We report our activities in four business segments:Investment Banking, Institutional Client Services,Investing & Lending and Investment Management.

The chart below presents our four business segments.

Firmwide

InvestmentBanking

InstitutionalClient

Services

Investing &Lending

InvestmentManagement

Managementand Other Fees

Incentive Fees

TransactionRevenues

EquitySecurities

DebtSecurities and

Loans

Fixed Income,Currency andCommodities

Client Execution

Equities

EquitiesClient

Execution

Commissionsand Fees

SecuritiesServices

FinancialAdvisory

Underwriting

EquityUnderwriting

DebtUnderwriting

The table below presents our segment operating results.

Year Ended December % of 2017Net

Revenues$ in millions 2017 2016 2015

Investment BankingNet revenues $ 7,371 $ 6,273 $ 7,027 23%Operating expenses 3,526 3,437 3,713Pre-tax earnings $ 3,845 $ 2,836 $ 3,314

Institutional Client ServicesNet revenues $11,902 $14,467 $15,151 37%Operating expenses 9,692 9,713 13,938Pre-tax earnings $ 2,210 $ 4,754 $ 1,213

Investing & LendingNet revenues $ 6,581 $ 4,080 $ 5,436 21%Operating expenses 2,796 2,386 2,402Pre-tax earnings $ 3,785 $ 1,694 $ 3,034

Investment ManagementNet revenues $ 6,219 $ 5,788 $ 6,206 19%Operating expenses 4,800 4,654 4,841Pre-tax earnings $ 1,419 $ 1,134 $ 1,365

Total net revenues $32,073 $30,608 $33,820Total operating expenses 20,941 20,304 25,042Total pre-tax earnings $11,132 $10,304 $ 8,778

Goldman Sachs 2017 Form 10-K 1


In the table above:

Financial information related to our business segmentsfor 2017, 2016 and 2015 is included in ManagementsDiscussion and Analysis of Financial Condition andResults of Operations and Financial Statements andSupplementary Data, which are in Part II, Items 7 and 8,respectively, of this Form 10-K. See Note 25 to theconsolidated financial statements in Part II, Item 8 of thisForm 10-K for a summary of our total net revenues,pre-tax earnings and net earnings by geographic region.

Operating expenses included $3.37 billion recorded inInstitutional Client Services in 2015 related to thesettlement agreement with the Residential Mortgage-Backed Securities Working Group of the U.S. FinancialFraud Enforcement Task Force. See Note 27 to theconsolidated financial statements in Part II, Item 8 of ourAnnual Report on Form 10-K for the year endedDecember 31, 2015 for further information.

All operating expenses have been allocated to oursegments except for charitable contributions of$127 million for 2017, $114 million for 2016 and$148 million for 2015.

Investment BankingInvestment Banking serves public and private sector clientsaround the world. We provide financial advisory servicesand help companies raise capital to strengthen and growtheir businesses. We seek to develop and maintain long-term relationships with a diverse global group ofinstitutional clients, including governments, states andmunicipalities. Our goal is to deliver to our institutionalclients the entire resources of the firm in a seamless fashion,with investment banking serving as the main initial point ofcontact with Goldman Sachs.

Financial Advisory. Financial Advisory includes strategicadvisory assignments with respect to mergers andacquisitions, divestitures, corporate defense activities,restructurings, spin-offs and risk management. Inparticular, we help clients execute large, complextransactions for which we provide multiple services,including cross-border structuring expertise. FinancialAdvisory also includes revenues from derivativetransactions directly related to these client advisoryassignments. We also assist our clients in managing theirasset and liability exposures and their capital.

Underwriting. The other core activity of InvestmentBanking is helping companies raise capital to fund theirbusinesses. As a financial intermediary, our job is to matchthe capital of our investing clients, who aim to grow thesavings of millions of people, with the needs of our publicand private sector clients, who need financing to generategrowth, create jobs and deliver products and services. Ourunderwriting activities include public offerings and privateplacements, including local and cross-border transactionsand acquisition financing, of a wide range of securities andother financial instruments, including loans. Underwritingalso includes revenues from derivative transactions enteredinto with public and private sector clients in connectionwith our underwriting activities.

Equity Underwriting. We underwrite common andpreferred stock and convertible and exchangeablesecurities. We regularly receive mandates for large, complextransactions and have held a leading position in worldwidepublic common stock offerings and worldwide initial publicofferings for many years.

Debt Underwriting. We underwrite and originate varioustypes of debt instruments, including investment-grade andhigh-yield debt, bank loans and bridge loans, including inconnection with acquisition financing, and emerging- andgrowth-market debt, which may be issued by, amongothers, corporate, sovereign, municipal and agency issuers.In addition, we underwrite and originate structuredsecurities, which include mortgage-related securities andother asset-backed securities.

Institutional Client ServicesInstitutional Client Services serves our clients who come tous to buy and sell financial products, raise funding andmanage risk. We do this by acting as a market maker andoffering market expertise on a global basis. InstitutionalClient Services makes markets and facilitates clienttransactions in fixed income, equity, currency andcommodity products. In addition, we make markets in andclear client transactions on major stock, options and futuresexchanges worldwide.

As a market maker, we provide prices to clients globallyacross thousands of products in all major asset classes andmarkets. At times we take the other side of transactionsourselves if a buyer or seller is not readily available and atother times we connect our clients to other parties whowant to transact. Our willingness to make markets, commitcapital and take risk in a broad range of products is crucialto our client relationships. Market makers provide liquidityand play a critical role in price discovery, which contributesto the overall efficiency of the capital markets.

2 Goldman Sachs 2017 Form 10-K


Our clients are primarily institutions that are professionalmarket participants, including investment entities whoseultimate clients include individual investors investing fortheir retirement, buying insurance or putting aside surpluscash in a deposit account.

Through our global sales force, we maintain relationshipswith our clients, receiving orders and distributinginvestment research, trading ideas, market information andanalysis. Much of this connectivity between us and ourclients is maintained on technology platforms and operatesglobally wherever and whenever markets are open fortrading.

Institutional Client Services and our other businesses aresupported by our Global Investment Research division,which, as of December 2017, provided fundamentalresearch on approximately 3,000 companies worldwideand more than 40 national economies, as well as onindustries, currencies and commodities.

Institutional Client Services generates revenues in thefollowing ways:

In large, highly liquid markets (such as markets forU.S. Treasury bills, large capitalization S&P 500stocks or certain mortgage pass-through securities), weexecute a high volume of transactions for our clients;

In less liquid markets (such as mid-cap corporatebonds, growth market currencies or certainnon-agency mortgage-backed securities), we executetransactions for our clients for spreads and fees thatare generally somewhat larger than those charged inmore liquid markets;

We also structure and execute transactions involvingcustomized or tailor-made products that address ourclients risk exposures, investment objectives or othercomplex needs (such as a jet fuel hedge for an airline);

We provide financing to our clients for their securitiestrading activities, as well as securities lending andother prime brokerage services; and

In connection with our market-making activities, wemaintain inventory, typically for a short period oftime, in response to, or in anticipation of, clientdemand. We also hold inventory to actively manageour risk exposures that arise from these market-making activities. We carry our inventory at fair valuewith changes in valuation reflected in net revenues.

Institutional Client Services activities are organized by assetclass and include both cash and derivativeinstruments. Cash refers to trading the underlyinginstrument (such as a stock, bond or barrel of oil).Derivative refers to instruments that derive their valuefrom underlying asset prices, indices, reference rates andother inputs, or a combination of these factors (such as anoption, which is the right or obligation to buy or sell acertain bond or stock index on a specified date in the futureat a certain price, or an interest rate swap, which is theagreement to convert a fixed rate of interest into a floatingrate or vice versa).

Fixed Income, Currency and Commodities ClientExecution. Includes client execution activities related tomaking markets in both cash and derivative instruments forinterest rate products, credit products, mortgages,currencies and commodities.

Interest Rate Products. Government bonds (includinginflation-linked securities) across maturities, othergovernment-backed securities, repurchase agreements,and interest rate swaps, options and other derivatives.

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

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

Currencies. Currency options, spot/forwards and otherderivatives on G-10 currencies and emerging-marketproducts.

Commodities. Commodity derivatives and, to a lesserextent, physical commodities, involving crude oil andpetroleum products, natural gas, base, precious and othermetals, electricity, coal, agricultural and othercommodity products.



Equities. Includes equities client execution, commissionsand fees, and securities services.

Equities Client Execution. We make markets in equitysecurities and equity-related products, including exchange-traded funds, convertible securities, options, futures andover-the-counter (OTC) derivative instruments, on a globalbasis. As a principal, we facilitate client transactions byproviding liquidity to our clients, including with largeblocks of stocks or derivatives, requiring the commitmentof our capital.

We also structure and make markets in derivatives onindices, industry groups, financial measures and individualcompany stocks. We develop strategies and provideinformation about portfolio hedging and restructuring andasset allocation transactions for our clients. We also workwith our clients to create specially tailored instruments toenable sophisticated investors to establish or liquidateinvestment positions or undertake hedging strategies. Weare one of the leading participants in the trading anddevelopment of equity derivative instruments.

Our exchange-based market-making activities includemaking markets in stocks and exchange-traded funds,futures and options on major exchanges worldwide.

Commissions and Fees. We generate commissions andfees from executing and clearing institutional clienttransactions on major stock, options and futures exchangesworldwide, as well as OTC transactions. We provide ourclients with access to a broad spectrum of equity executionservices, including electronic low-touch access and morecomplex high-touch execution through both traditionaland electronic platforms.

Securities Services. Includes financing, securities lendingand other prime brokerage services.

Financing Services. We provide financing to our clientsfor their securities trading activities through margin loansthat are collateralized by securities, cash or otheracceptable collateral. We earn a spread equal to thedifference between the amount we pay for funds and theamount we receive from our client.

Securities Lending Services. We provide services thatprincipally involve borrowing and lending securities tocover institutional clients short sales and borrowingsecurities to cover our short sales and otherwise to makedeliveries into the market. In addition, we are an activeparticipant in broker-to-broker securities lending andthird-party agency lending activities.

Other Prime Brokerage Services. We earn fees byproviding clearing, settlement and custody servicesglobally. In addition, we provide our hedge fund andother clients with a technology platform and reportingwhich enables them to monitor their security portfoliosand manage risk exposures.

Investing & LendingOur investing and lending activities, which are typicallylonger-term, include our investing and relationship lendingactivities across various asset classes, primarily debtsecurities and loans, public and private equity securities,infrastructure and real estate. These activities includemaking investments, some of which are consolidated,through our merchant banking business and our specialsituations group. Some of these investments are madeindirectly through funds that we manage. We also providefinancing to corporate clients and individuals, includingbank loans, personal loans and mortgages.

Equity Securities. We make corporate, real estate,infrastructure and other equity-related investments.

Debt Securities and Loans. We make corporate, realestate, infrastructure and other debt investments. Inaddition, we provide credit to clients through loan facilitiesand through secured loans, including secured loans to retailclients through our digital platform, Goldman SachsPrivate Bank Select (GS Select). We also make unsecuredloans to and accept deposits from retail clients through ourdigital platform, Marcus: by Goldman Sachs (Marcus).

Investment ManagementInvestment Management provides investment and wealthadvisory services to help clients preserve and grow theirfinancial assets. Our clients include institutions andhigh-net-worth individuals, as well as retail investors whoprimarily access our products through a network of third-party distributors around the world.

We manage client assets across a broad range of assetclasses and investment strategies, including equity, fixedincome and alternative investments. Alternativeinvestments primarily includes hedge funds, credit funds,private equity, real estate, currencies, commodities, andasset allocation strategies. Our investment offerings includethose managed on a fiduciary basis by our portfoliomanagers as well as strategies managed by third-partymanagers. We offer our investments in a variety ofstructures, including separately managed accounts, mutualfunds, private partnerships, and other commingled vehicles.



We also provide customized investment advisory solutionsdesigned to address our clients investment needs. Thesesolutions begin with identifying clients objectives andcontinue through portfolio construction, ongoing assetallocation and risk management and investment realization.We draw from a variety of third-party managers as well asour proprietary offerings to implement solutions for clients.

We supplement our investment advisory solutions forhigh-net-worth clients with wealth advisory services thatinclude income and liability management, trust and estateplanning, philanthropic giving and tax planning. We alsouse our global securities and derivatives market-makingcapabilities to address clients specific investment needs.

Management and Other Fees. The majority of revenuesin management and other fees is comprised of asset-basedfees on client assets. The fees that we charge vary by assetclass and distribution channel and are affected byinvestment performance as well as asset inflows andredemptions. Other fees we receive primarily includefinancial planning and counseling fees generated throughour wealth advisory services provided by our subsidiary,The Ayco Company, L.P.

Assets under supervision include client assets where we earna fee for managing assets on a discretionary basis. Thisincludes net assets in our mutual funds, hedge funds, creditfunds and private equity funds (including real estate funds),and separately managed accounts for institutional andindividual investors. Assets under supervision also includeclient assets invested with third-party managers, bankdeposits and advisory relationships where we earn a fee foradvisory and other services, but do not have investmentdiscretion. Assets under supervision do not include the self-directed brokerage assets of our clients. Long-term assetsunder supervision represent assets under supervisionexcluding liquidity products. Liquidity products representmoney market and bank deposit assets.

Incentive Fees. In certain circumstances, we are alsoentitled to receive incentive fees based on a percentage of afunds or a separately managed accounts return, or whenthe return exceeds a specified benchmark or otherperformance targets. Such fees include overrides, whichconsist of the increased share of the income and gainsderived primarily from our private equity and credit fundswhen the return on a funds investments over the life of thefund exceeds certain threshold returns.

Transaction Revenues. We receive commissions and netspreads for facilitating transactional activity inhigh-net-worth client accounts. In addition, we earn netinterest income primarily associated with client depositsand margin lending activity undertaken by such clients.

Business Continuity and InformationSecurity

Business continuity and information security, includingcyber security, are high priorities for Goldman Sachs. Theirimportance has been highlighted by numerous highlypublicized events in recent years, including (i) cyber attacksagainst financial institutions, governmental agencies, largeconsumer-based companies and other organizations thatresulted in the unauthorized disclosure of personalinformation of clients and customers and other sensitive orconfidential information, the theft and destruction ofcorporate information and requests for ransom payments,and (ii) extreme weather events.

Our Business Continuity & Technology Resilience Programhas been developed to provide reasonable assurance ofbusiness continuity in the event of disruptions at our criticalfacilities or systems and to comply with regulatoryrequirements, including those of FINRA. Because we are aBHC, our Business Continuity & Technology ResilienceProgram is also subject to review by the FRB. The keyelements of the program are crisis management, businesscontinuity, technology resilience, business recovery,assurance and verification, and process improvement. Inthe area of information security, we have developed andimplemented a framework of principles, policies andtechnology designed to protect the information provided tous by our clients and our own information from cyberattacks and other misappropriation, corruption or loss.Safeguards are designed to maintain the confidentiality,integrity and availability of information.

Employees

Management believes that a major strength and principalreason for the success of Goldman Sachs is the quality anddedication of our people and the shared sense of being partof a team. We strive to maintain a work environment thatfosters professionalism, excellence, diversity, cooperationamong our employees worldwide and high standards ofbusiness ethics.



Instilling the Goldman Sachs culture in all employees is acontinuous process, in which training plays an importantpart. All employees are offered the opportunity to participatein education and periodic seminars that we sponsor atvarious locations throughout the world. Another importantpart of instilling the Goldman Sachs culture is our employeereview process. Employees are reviewed by supervisors,co-workers and employees they supervise in a 360-degreereview process that is integral to our team approach, andincludes an evaluation of an employees performance withrespect to risk management, compliance and diversity. As ofDecember 2017, we had 36,600 total staff.

Competition

The financial services industry and all of our businesses areintensely competitive, and we expect them to remain so.Our competitors are other entities that provide investmentbanking, securities and investment management servicesand retail lending and deposit-taking products, as well asthose entities that make investments in securities,commodities, derivatives, real estate, loans and otherfinancial assets. These entities include brokers and dealers,investment banking firms, commercial banks, insurancecompanies, investment advisers, mutual funds, hedge funds,private equity funds, merchant banks, consumer financecompanies and financial technology and other internet-based companies. We compete with some entities globallyand with others on a regional, product or niche basis. Ourcompetition is based on a number of factors, includingtransaction execution, products and services, innovation,reputation and price.

There has been substantial consolidation and convergenceamong companies in the financial services industry.Moreover, we have faced, and expect to continue to face,pressure to retain market share by committing capital tobusinesses or transactions on terms that offer returns thatmay not be commensurate with their risks. In particular,corporate clients seek such commitments (such asagreements to participate in their loan facilities) fromfinancial services firms in connection with investmentbanking and other assignments.

Consolidation and convergence have significantly increasedthe capital base and geographic reach of some of ourcompetitors, and have also hastened the globalization of thesecurities and other financial services markets. As a result,we have had to commit capital to support our internationaloperations and to execute large global transactions. To takeadvantage of some of our most significant opportunities,we will have to compete successfully with financialinstitutions that are larger and have more capital and thatmay have a stronger local presence and longer operatinghistory outside the U.S.

We also compete with smaller institutions that offer moretargeted services, such as independent advisory firms. Someclients may perceive these firms to be less susceptible topotential conflicts of interest than we are, and, as describedbelow, our ability to effectively compete with them could beaffected by regulations and limitations on activities thatapply to us but may not apply to them.

A number of our businesses are subject to intense pricecompetition. Efforts by our competitors to gain marketshare have resulted in pricing pressure in our investmentbanking and client execution businesses and could result inpricing pressure in other of our businesses. For example, theincreasing volume of trades executed electronically,through the internet and through alternative tradingsystems, has increased the pressure on trading commissions,in that commissions for electronic trading are generallylower than for non-electronic trading. It appears that thistrend toward low-commission trading will continue. Pricecompetition has also led to compression in the differencebetween the price at which a market participant is willing tosell an instrument and the price at which another marketparticipant is willing to buy it (i.e., bid/offer spread), whichhas affected our market-making businesses. In addition, webelieve that we will continue to experience competitivepressures in these and other areas in the future as some ofour competitors seek to obtain market share by furtherreducing prices, and as we enter into or expand ourpresence in markets that may rely more heavily onelectronic trading and execution.

We also compete on the basis of the types of financialproducts that we and our competitors offer. In somecircumstances, our competitors may offer financialproducts that we do not offer and our clients may prefer.

The provisions of the U.S. Dodd-Frank Wall Street Reformand Consumer Protection Act (Dodd-Frank Act), therequirements promulgated by the Basel Committee onBanking Supervision (Basel Committee) and other financialregulation could affect our competitive position to theextent that limitations on activities, increased fees andcompliance costs or other regulatory requirements do notapply, or do not apply equally, to all of our competitors orare not implemented uniformly across differentjurisdictions. For example, the provisions of the Dodd-Frank Act that prohibit proprietary trading and restrictinvestments in certain hedge and private equity fundsdifferentiate between U.S.-based and non-U.S.-basedbanking organizations and give non-U.S.-based bankingorganizations greater flexibility to trade outside of the U.S.and to form and invest in funds outside the U.S.



Likewise, the obligations with respect to derivativetransactions under Title VII of the Dodd-Frank Act depend,in part, on the location of the counterparties to thetransaction. The impact of the Dodd-Frank Act and otherregulatory developments on our competitive position willdepend to a large extent on the manner in which therequired rulemaking and regulatory guidance evolve, theextent of international convergence, and the developmentof market practice and structures under the new regulatoryregimes as described further in Regulation below.

We also face intense competition in attracting and retainingqualified employees. Our ability to continue to competeeffectively will depend upon our ability to attract newemployees, retain and motivate our existing employees andto continue to compensate employees competitively amidintense public and regulatory scrutiny on the compensationpractices of large financial institutions. Our pay practicesand those of certain of our competitors are subject toreview by, and the standards of, the FRB and otherregulators inside and outside the U.S., including thePrudential Regulation Authority (PRA) and the FinancialConduct Authority (FCA) in the U.K. We also compete foremployees with institutions whose pay practices are notsubject to regulatory oversight. See Regulation Compensation Practices below and Risk Factors Ourbusinesses may be adversely affected if we are unable to hireand retain qualified employees in Part I, Item 1A of thisForm 10-K for further information about the regulation ofour compensation practices.

Regulation

As a participant in the global financial services industry, weare subject to extensive regulation and supervisionworldwide. The Dodd-Frank Act, and the rules thereunder,significantly altered the U.S. financial regulatory regimewithin which we operate and the new Markets in FinancialInstruments Regulation and Markets in FinancialInstruments Directive (collectively, MiFID II) havesignificantly revised the regulatory regime for our Europeanoperations. The capital, liquidity and leverage ratios basedon the Basel Committees final capital framework forstrengthening international capital standards (Basel III), asimplemented by the FRB, the PRA and FCA and othernational regulators, have also had a significant impact onour businesses. The Basel Committee is the primary globalstandard setter for prudential bank regulation, and itsmember jurisdictions implement regulations based on itsstandards and guidelines.

The Basel Committees standards are not effective in anyjurisdiction until rules implementing such standards havebeen implemented by the relevant regulators in suchjurisdiction.

The implications of such regulations for our businessescontinue to depend to a large extent on theirimplementation by the relevant regulators globally, as wellas the development of market practices and structuresunder the regime established by such regulations.

Other reforms have been adopted or are being consideredby regulators and policy makers worldwide, as describedfurther throughout this section. Recent developments haveadded additional uncertainty to the implementation, scopeand timing of regulatory reforms. Such developments alsoinclude potential deregulation in some areas. InFebruary 2017, the President of the U.S. issued an executiveorder identifying core principles for the administrationsfinancial services regulatory policy and directing theSecretary of the Treasury, in consultation with the heads ofother financial regulatory agencies, to evaluate how thecurrent regulatory framework promotes or inhibits theprinciples and what actions have been, and are being, takento promote the principles. In response to the executiveorder, the U.S. Department of the Treasury issued during2017 the first three of four reports recommending a numberof comprehensive changes in the current regulatory systemfor U.S. depository institutions, the U.S. capital marketsand the U.S. asset management and insurance industries. Inaddition, in February 2018, the U.S. Department of theTreasury issued a report that recommends reforming theorderly liquidation authority (OLA) under the Dodd-FrankAct and amending the U.S. Bankruptcy Code to make abankruptcy proceeding a more effective resolution methodfor large financial institutions.

Goldman Sachs International (GSI) and Goldman SachsInternational Bank (GSIB), our principal E.U. operatingsubsidiaries, are incorporated and headquartered in theU.K. and, as such, are subject to E.U. legal and regulatoryrequirements, based on directly binding regulations of theE.U. and the implementation of E.U. directives by the U.K.Both currently benefit from non-discriminatory access toE.U. clients and infrastructure based on E.U. treaties andE.U. legislation, including cross-border passportingarrangements and specific arrangements for theestablishment of E.U. branches. As a result of the U.K.snotification to the European Council of its decision to leavethe E.U. (Brexit), there is considerable uncertainty as to theregulatory regime that will be applicable in the U.K. and theregulatory framework that will govern transactions andbusiness undertaken by our U.K. subsidiaries in theremaining E.U. countries.



Banking Supervision and RegulationGroup Inc. is a BHC under the U.S. Bank HoldingCompany Act of 1956 (BHC Act) and an FHC underamendments to the BHC Act effected by the U.S. Gramm-Leach-Bliley Act of 1999 (GLB Act), and is subject tosupervision and examination by the FRB, as our primaryregulator. In August 2017, the FRB proposed a new ratingsystem for large financial institutions, such as us, which isintended to align with the FRBs existing supervisoryprogram for large financial institutions and which wouldinclude component ratings for capital planning, liquidityrisk management, and governance and controls. InAugust 2017 and January 2018, the FRB proposed relatedguidance for the governance and controls component.These proposals reflect the FRBs focus on compliance withlaws and regulations related to consumer protection in itsevaluations of large financial institutions.

Certain of our subsidiaries are regulated by the banking andsecurities regulatory authorities of the countries in whichthey operate.

Under the system of functional regulation establishedunder the BHC Act, the primary regulators of our U.S.non-bank subsidiaries directly regulate the activities ofthose subsidiaries, with the FRB exercising a supervisoryrole. Such functionally regulated U.S. non-banksubsidiaries include broker-dealers registered with the SEC,such as our principal U.S. broker-dealer, Goldman Sachs &Co. LLC (GS&Co.), entities registered with or regulated bythe CFTC with respect to futures-related and swaps-relatedactivities and investment advisers registered with the SECwith respect to their investment advisory activities.

Our principal U.S. bank subsidiary, GS Bank USA, issupervised and regulated by the FRB, the FDIC, the NewYork State Department of Financial Services (NYDFS) andthe U.S. Consumer Financial Protection Bureau. A numberof our activities are conducted partially or entirely throughGS Bank USA and its subsidiaries, including: origination ofbank loans; personal loans and mortgages; interest rate,credit, currency and other derivatives; leveraged finance;deposit-taking; and agency lending. Our retail-orientedactivities are subject to extensive regulation and supervisionby federal and state regulators with regard to consumerprotection laws, including laws relating to fair lending andother practices in connection with marketing and providingretail financial products.

GSI, our regulated U.K. broker-dealer subsidiary, which is adesignated investment firm, and GSIB, our regulated U.K.bank and principal non-U.S. bank subsidiary, are regulatedby the PRA and the FCA. GSI provides broker-dealerservices in and from the U.K., and GSIB acts as a primarydealer for European government bonds and is involved inmarket making in European government bonds, lending(including securities lending) and deposit-taking activities.

Capital, Leverage and Liquidity Requirements. Thefirm and GS Bank USA are subject to consolidatedregulatory capital and leverage requirements set forth bythe FRB. GSI and GSIB are subject to capital requirementsprescribed in the E.U. Capital Requirements Regulation(CRR) and the E.U. Fourth Capital Requirements Directive(CRD IV).

Under the FRBs capital adequacy requirements, the firmand GS Bank USA must meet specific regulatory capitalrequirements that involve quantitative measures of assets,liabilities and certain off-balance-sheet items. Thesufficiency of our capital levels is also subject to qualitativejudgments by regulators. The firm and GS Bank USA arealso subject to liquidity requirements established by theU.S. federal bank regulatory agencies, and GSI and GSIBare subject to similar requirements established by U.K.regulatory authorities.

Capital Ratios. We are subject to the FRBs risk-basedcapital and leverage regulations, subject to certaintransitional provisions (Capital Framework). The CapitalFramework is largely based on Basel III and alsoimplements certain provisions of the Dodd-Frank Act.Under the Capital Framework, we are an Advancedapproach banking organization and have been designatedas a global systemically important bank (G-SIB).

The Capital Framework provides for an additional capitalratio requirement that phases in over time and consists ofthree components: (i) for capital conservation (capitalconservation buffer), (ii) as a consequence of ourdesignation as a G-SIB (G-SIB buffer) and (iii) forcountercyclicality (countercyclical capital buffer). Theadditional capital ratio requirement must be satisfiedentirely with capital that qualifies as Common EquityTier 1 (CET1).



The capital conservation buffer began to phase in onJanuary 1, 2016 and will continue to do so in increments of0.625% per year until it reaches 2.5% of risk-weightedassets (RWAs) on January 1, 2019. The G-SIB buffer alsobegan to phase in on January 1, 2016 and will continue todo so through January 1, 2019.

The countercyclical capital buffer, of up to 2.5%, isdesigned to counteract systemic vulnerabilities and appliesonly to Advanced approach banking organizations. Thecountercyclical capital buffer is currently set at zeropercent. Several other national supervisors have also startedto require countercyclical capital buffers. The G-SIB andcountercyclical capital buffers applicable to us couldchange in the future and, as a result, the minimum capitalratios to which we are subject could change.

GS Bank USA also computes its capital ratios in accordancewith the Capital Framework as an Advanced approachbanking organization.

The Basel Committee has published final guidelines forcalculating incremental capital ratio requirements forbanking institutions that are systemically significant from adomestic but not global perspective (D-SIBs). If theseguidelines are implemented by national regulators, they willapply to, among others, certain subsidiaries of G-SIBs.These guidelines are in addition to the framework forG-SIBs, but are more principles-based. CRD IV and theCRR provide that institutions that are systemicallyimportant at the E.U. or member state level, known as othersystemically important institutions (O-SIIs), may be subjectto additional capital ratio requirements of up to 2% ofCET1, according to their degree of systemic importance(O-SII buffers). O-SIIs are identified annually, along withtheir applicable buffers. The PRA has identified GoldmanSachs Group UK Limited (GSG UK), the parent company ofGSI and GSIB, as an O-SII. GSG UKs O-SII buffer iscurrently set at zero percent.

In January 2016, the Basel Committee finalized a revisedframework for calculating minimum capital requirementsfor market risk, which is expected to increase market riskcapital requirements for most banking organizations. InDecember 2017, the Basel Committee extended theimplementation date for the revised market risk frameworkuntil January 1, 2022, noting that the extension wouldallow for a review of the calibration of the framework.

In December 2017, the Basel Committee also publishedstandards that it described as the finalization of the Basel IIIpost-crisis regulatory reforms. These standards introducean aggregate output floor comparing capital requirementsunder the Basel Committees standardized and internallymodeled approaches, and they also revise the BaselCommittees standardized and model-based approaches forcredit risk, provide a new standardized approach foroperational risk capital and revise the frameworks forcredit valuation adjustment risk and the leverage ratio. TheBasel Committee has proposed that national regulatorsimplement these standards effective on January 1, 2022,with the output floor being phased in throughJanuary 1, 2027.

The U.S. federal bank regulatory agencies have notproposed rules implementing the December 2017 standardsor the revisions to the Basel Committees market riskframework for U.S. banking organizations. InNovember 2016, the European Commission proposedamendments to the CRR to implement the revisions to themarket risk framework for certain E.U. financialinstitutions, which would be effective two years after theamendments are incorporated into the CRR.

The Basel Committee has also:

Finalized a revised standard approach for calculatingRWAs for counterparty credit risk on derivativesexposures (Standardized Approach for measuringCounterparty Credit Risk exposures, known asSA-CCR);

Published an updated framework for the regulatorycapital treatment of securitization exposures(Securitization Framework);

Published guidelines for measuring and controlling largeexposures (Supervisory Framework for measuring andcontrolling Large Exposures); and

Issued consultation papers on, among other matters,changes to the G-SIB assessment methodology.

See Managements Discussion and Analysis of FinancialCondition and Results of Operations Equity CapitalManagement and Regulatory Capital in Part II, Item 7 ofthis Form 10-K and Note 20 to the consolidated financialstatements in Part II, Item 8 of this Form 10-K forinformation about our, GS Bank USAs and GSIs capitalratios and minimum required ratios.



As described in Other Restrictions below, inSeptember 2016, the FRB issued a proposed rule thatwould, among other things, require FHCs to holdadditional capital in connection with covered physicalcommodity activities.

Leverage Ratios. Under the Capital Framework, the firmand GS Bank USA are subject to Tier 1 leveragerequirements established by the FRB. The CapitalFramework also introduced a supplementary leverage ratiofor Advanced approach banking organizations whichbecame effective January 1, 2018 and implements theBasel III leverage ratio framework.

In November 2016, the European Commission proposedamendments to the CRR to implement a 3% minimumleverage ratio requirement for certain E.U. financialinstitutions, including GSI and GSIB, which wouldimplement the Basel III leverage ratio framework.

See Managements Discussion and Analysis of FinancialCondition and Results of Operations Equity CapitalManagement and Regulatory Capital in Part II, Item 7 ofthis Form 10-K and Note 20 to the consolidated financialstatements in Part II, Item 8 of this Form 10-K forinformation about the firms and GS Bank USAs Tier 1leverage ratios and supplementary leverage ratios, andGSIs leverage ratio.

Liquidity Ratios. The Basel Committees internationalframework for liquidity risk measurement, standards andmonitoring requires banking organizations to measure theirliquidity against two specific liquidity tests.

The Liquidity Coverage Ratio (LCR) issued by the U.S.federal bank regulatory agencies and applicable to both thefirm and GS Bank USA is generally consistent with the BaselCommittees framework and is designed to ensure that abanking organization maintains an adequate level ofunencumbered high-quality liquid assets equal to or greaterthan the expected net cash outflows under an acute short-term liquidity stress scenario. We disclose, on a quarterlybasis, our average daily LCR over the quarter. SeeAvailable Information below.

The LCR rule issued by the European Commission andapplicable to GSI and GSIB became effective in the U.K. onOctober 1, 2015, and fully phased in on January 1, 2018.

The Basel Committees net stable funding ratio (NSFR) isdesigned to promote medium- and long-term stable fundingof the assets and off-balance-sheet activities of bankingorganizations over a one-year time horizon. The NSFRframework requires banking organizations to maintain aminimum NSFR of 100%.

In May 2016, the U.S. federal bank regulatory agenciesissued a proposed rule that would implement an NSFR forlarge U.S. banking organizations, including the firm and GSBank USA. The proposal would require bankingorganizations to ensure they have stable funding over aone-year time horizon. In November 2016, the EuropeanCommission proposed amendments to the CRR toimplement the NSFR for certain E.U. financial institutions,which would be effective two years after it is incorporatedinto the CRR. Neither the U.S. federal bank regulatoryagencies nor the European Commission have released afinal rule.

The enhanced prudential standards implemented by theFRB under the Dodd-Frank Act require BHCs, includingGroup Inc., with $50 billion or more in total consolidatedassets (covered BHCs) to comply with enhanced liquidityand overall risk management standards, including a level ofhighly liquid assets based on projected funding needs for30 days, and increased involvement by boards of directorsin liquidity and overall risk management. Although theliquidity requirement under these rules has some similaritiesto the LCR, it is a separate requirement.

See Managements Discussion and Analysis of FinancialCondition and Results of Operations RiskManagement Overview and Structure of RiskManagement and Liquidity Risk Management inPart II, Item 7 of this Form 10-K for information about theLCR and NSFR, as well as our risk management practicesand liquidity.

Stress Tests. As a covered BHC, we are subject to theDodd-Frank Act annual supervisory stress tests conductedby the FRB and semi-annual company-run stress tests.

We publish summaries of our annual and mid-cycle stresstests results on our website as described in AvailableInformation below.

Our annual stress test submission is incorporated into theannual capital plans that we submit to the FRB as part ofthe Comprehensive Capital Analysis and Review (CCAR)of large BHCs, which is designed to ensure that capitalplanning processes will permit continued operations bysuch institutions during times of economic and financialstress. As part of CCAR, the FRB evaluates an institutionsplan to make capital distributions, such as repurchasing orredeeming stock or increasing dividend payments, across arange of macroeconomic and firm-specific assumptionsbased on the institutions and the FRBs stress tests. If theFRB objects to an institutions capital plan, the institution isgenerally prohibited from making capital distributionsother than distributions to which the FRB has not objected.In addition, an institution faces limitations on capitaldistributions to the extent that actual capital issuances areless than the amounts indicated in its capital plan.



GS Bank USA is also required to conduct stress tests on anannual basis, to submit the results to the FRB, and topublicly disclose a summary of those results. GSI and GSIBalso have their own capital planning and stress testingprocess, which incorporates internally designed stress testsand those required under the PRAs Internal CapitalAdequacy Assessment Process.

Dividends and Stock Repurchases. Dividend paymentsby Group Inc. to its shareholders and stock repurchases byGroup Inc. are subject to the oversight of the FRB.

U.S. federal and state laws impose limitations on thepayment of dividends by U.S. depository institutions, suchas GS Bank USA. In general, the amount of dividends thatmay be paid by GS Bank USA is limited to the lesser of theamounts calculated under a recent earnings test and anundivided profits test. Under the recent earnings test, adividend may not be paid if the total of all dividendsdeclared by the entity in any calendar year is in excess of thecurrent years net income combined with the retained netincome of the two preceding years, unless the entity obtainsprior regulatory approval. Under the undivided profits test,a dividend may not be paid in excess of the entitysundivided profits (generally, accumulated net profits thathave not been paid out as dividends or transferred tosurplus).

The applicable U.S. banking regulators have authority toprohibit or limit the payment of dividends if, in the bankingregulators opinion, payment of a dividend wouldconstitute an unsafe or unsound practice in light of thefinancial condition of the banking organization. The BHCAct prohibits the FRB from requiring a payment by a BHCsubsidiary to a depository institution if the functionalregulator of that subsidiary objects to such payment. Insuch a case, the FRB could instead require the divestiture ofthe depository institution and impose operating restrictionspending the divestiture.

Source of Strength. The Dodd-Frank Act requires BHCsto act as a source of strength to their bank subsidiaries andto commit capital and financial resources to support thosesubsidiaries. This support may be required by the FRB attimes when we might otherwise determine not to provide it.Capital loans by a BHC to a subsidiary bank aresubordinate in right of payment to deposits and to certainother indebtedness of the subsidiary bank. In addition, if aBHC commits to a U.S. federal banking agency that it willmaintain the capital of its bank subsidiary, whether inresponse to the FRBs invoking its source-of-strengthauthority or in response to other regulatory measures, thatcommitment will be assumed by the bankruptcy trustee forthe BHC and the bank will be entitled to priority paymentin respect of that commitment, ahead of other creditors ofthe BHC.

Transactions between Affiliates. Transactions betweenGS Bank USA or its subsidiaries, on the one hand, andGroup Inc. or its other subsidiaries and affiliates, on theother hand, are regulated by the FRB. These regulationsgenerally limit the types and amounts of transactions(including credit extensions from GS Bank USA or itssubsidiaries to Group Inc. or its other subsidiaries andaffiliates) that may take place and generally require thosetransactions to be on market terms or better to GS BankUSA or its subsidiaries. These regulations generally do notapply to transactions between GS Bank USA and itssubsidiaries. The Dodd-Frank Act expanded the coverageand scope of these regulations, including by applying themto the credit exposure arising under derivative transactions,repurchase and reverse repurchase agreements, andsecurities borrowing and lending transactions.

Resolution and Recovery. Group Inc. is required by theFRB and the FDIC to submit a periodic plan for its rapidand orderly resolution in the event of material financialdistress or failure (resolution plan). Our resolution planmust, among other things, demonstrate that GS Bank USAis adequately protected from risks arising from our otherentities. If the regulators jointly determine that aninstitution has failed to remediate identified shortcomingsin its resolution plan and that its resolution plan, after anypermitted resubmission, is not credible or would notfacilitate an orderly resolution under the U.S. BankruptcyCode, the regulators may jointly impose more stringentcapital, leverage or liquidity requirements or restrictions ongrowth, activities or operations or may jointly order theinstitutions to divest assets or operations in order tofacilitate orderly resolution in the event of failure. See RiskFactors The application of Group Inc.s proposedresolution strategy could result in greater losses for GroupInc.s security holders, and failure to address shortcomingsin our resolution plan could subject us to increasedregulatory requirements in Part I, Item 1A of thisForm 10-K and Managements Discussion and Analysis ofFinancial Condition and Results of Operations Regulatory Matters and Developments Resolution andRecovery Plans in Part II, Item 7 of this Form 10-K forfurther information about our resolution plan.



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

The FDIC has issued a rule requiring each insureddepository institution with $50 billion or more in assets,such as GS Bank USA, to provide a resolution plan. Ourresolution plan for GS Bank USA must, among other things,demonstrate that it is adequately protected from risksarising from our other entities.

In September 2017, the FRB issued a final rule imposingrestrictions on qualified financial contracts (QFCs) enteredinto by G-SIBs. The rule will begin to phase in onJanuary 1, 2019 and will be fully effective onJanuary 1, 2020. This rule is intended to facilitate theorderly resolution of a failed G-SIB by limiting the ability ofthe G-SIB to enter into a QFC unless (i) the counterpartywaives certain termination rights in such contracts arisingupon the entry of the G-SIB or one of its affiliates intoresolution, (ii) the contracts do not prohibit transfers ofcredit enhancement that satisfy certain standards, and(iii) the counterparty agrees that the QFCs will be subject tothe special resolution regimes set forth in the Dodd-FrankAct OLA and the Federal Deposit Insurance Act of 1950(FDIA), described below. Compliance can be achieved byadhering to the ISDA Protocol described below.

We, along with a number of other major global bankingorganizations, adhere to the International Swaps andDerivatives Association Resolution Stay Protocol (ISDAProtocol), which was developed and updated incoordination with the Financial Stability Board (FSB), aninternational body that sets standards and coordinates thework of national financial authorities and internationalstandard-setting bodies. The ISDA Protocol imposes a stayon certain cross-default and early termination rights withinstandard ISDA derivative contracts and securities financingtransactions between adhering parties in the event that oneof them is subject to resolution in its home jurisdiction,including a resolution under the OLA or the FDIA in theU.S. The ISDA Protocol is expected to be adopted morebroadly in the future, following the phase-in of QFCregulations adopted by banking regulators (including theFRBs final rule on QFCs) that impose additionalrequirements in order for G-SIBs, such as us, to enter intoQFCs with counterparties that do not adhere to the ISDAProtocol.

The E.U. Bank Recovery and Resolution Directive (BRRD)establishes a framework for the recovery and resolution offinancial institutions in the E.U., such as GSI and GSIB. TheBRRD provides national supervisory authorities with toolsand powers to pre-emptively address potential financialcrises in order to promote financial stability and minimizetaxpayers exposure to losses. The BRRD requires E.U.member states to grant bail-in powers to E.U. resolutionauthorities to recapitalize a failing entity by writing downits unsecured debt or converting its unsecured debt intoequity. Financial institutions in the E.U. must provide thatnew contracts enable such actions and also amendpre-existing contracts governed by non-E.U. law to enablesuch actions, if the financial institutions could incurliabilities under such pre-existing contracts.

The BRRD also subjects financial institutions to aminimum requirement for own funds and eligible liabilities(MREL) so that they can be resolved without causingfinancial instability and without recourse to public funds inthe event of a failure. The Bank of Englands rules onMREL are described below in Total Loss-AbsorbingCapacity.

Total Loss-Absorbing Capacity. In December 2016, theFRB adopted a final rule establishing loss-absorbency andrelated requirements for parent companies of U.S. G-SIBs,such as Group Inc. The rule will be effective inJanuary 2019 with no phase-in period. The rule addressesU.S. implementation of the FSBs total loss-absorbingcapacity (TLAC) principles and term sheet on minimumTLAC requirements for G-SIBs. The rule (i) establishesminimum TLAC requirements, (ii) establishes minimumeligible long-term debt (i.e., debt that is unsecured, has amaturity greater than one year from issuance and satisfiescertain additional criteria) requirements, (iii) prohibitscertain BHC transactions and (iv) caps the amount of G-SIBliabilities that are not eligible long-term debt.

The rule also prohibits a U.S. G-SIB from (i) guaranteeingliabilities of subsidiaries that are subject to earlytermination provisions if the parent company of a U.S.G-SIB enters into an insolvency or receivership proceeding,subject to an exception for guarantees permitted by rules ofthe U.S. federal banking agencies imposing restrictions onQFCs; (ii) incurring liabilities guaranteed by subsidiaries;(iii) issuing short-term debt; or (iv) entering into derivativesand certain other financial contracts with externalcounterparties.



Additionally, the rule caps, at 5% of the value of the U.S.G-SIBs eligible TLAC, the amount of unsecurednon-contingent third-party liabilities that are not eligiblelong-term debt that could rank equally with or junior toeligible long-term debt.

In October 2016, the Basel Committee issued a finalstandard to implement capital deductions for bankingorganizations relating to TLAC holdings of other G-SIBs.

The FSB issued a final TLAC standard requiring certainmaterial subsidiaries of a G-SIB organized outside of theG-SIBs home country, such as GSI and GSIB, to maintainamounts of TLAC directly or indirectly from the parentcompany. In July 2017, the FSB issued a final set of guidingprinciples on the implementation of the TLACrequirements applicable to material subsidiaries.

The BRRD subjects institutions to MREL, which isgenerally consistent with the FSBs TLAC standard. InOctober 2017, the Bank of England published aconsultation paper on internal MREL, which would requirea material U.K. subsidiary of an overseas banking group,such as GSI, to meet a minimum internal MRELrequirement to facilitate the transfer of losses to itsresolution entity, which for GSI is Group Inc. Thetransitional minimum internal MREL requirement wouldphase in from January 1, 2019, becoming fully effectivefrom January 1, 2022.

In November 2016, the European Commission proposedamendments to the CRR and BRRD that are designed toimplement the FSBs minimum TLAC requirement forG-SIBs commencing January 1, 2019. The proposal wouldrequire subsidiaries of a non-E.U. G-SIB that account formore than 5% of its RWAs, operating income or leverageexposure, such as GSI, to meet 90% of the requirementapplicable to E.U. G-SIBs.

In November 2016, the European Commission alsoproposed an amendment to CRD IV that would require anon-E.U. G-SIB, such as us, to establish an E.U.intermediate holding company (E.U. IHC) if the firm hastwo or more of certain types of E.U. financial institutionsubsidiaries, including broker-dealers and banks, such asGSI and GSIB. The European Commission also proposedamendments to the CRR that would require E.U. IHCs tosatisfy MREL requirements and certain other prudentialrequirements. These proposals are subject to adoption atthe E.U. level and, for the directives, implementingrulemakings by E.U. member states, which have not yetoccurred.

Insolvency of an Insured Depository Institution or aBank Holding Company. Under the FDIA, if the FDIC isappointed as conservator or receiver for an insureddepository institution such as GS Bank USA, upon itsinsolvency or in certain other events, the FDIC has broadpowers, including the power:

To transfer any of the depository institutions assets andliabilities to a new obligor, including a newly formedbridge bank, without the approval of the depositoryinstitutions creditors;

To enforce the depository institutions contracts pursuantto their terms without regard to any provisions triggeredby the appointment of the FDIC in that capacity; or

To repudiate or disaffirm any contract or lease to whichthe depository institution is a party, the performance ofwhich is determined by the FDIC to be burdensome andthe disaffirmance or repudiation of which is determinedby the FDIC to promote the orderly administration of thedepository institution.

In addition, the claims of holders of domestic depositliabilities and certain claims for administrative expensesagainst an insured depository institution would be affordeda priority over other general unsecured claims, includingdeposits at non-U.S. branches and claims of debtholders ofthe institution, in the liquidation or other resolution ofsuch an institution by any receiver. As a result, whether ornot the FDIC ever sought to repudiate any debt obligationsof GS Bank USA, the debtholders (other than depositors)would be treated differently from, and could receive, ifanything, substantially less than, the depositors of GS BankUSA.

The Dodd-Frank Act created a new resolution regime(known as OLA) for BHCs and their affiliates that aresystemically important and certain non-bank financialcompanies. Under OLA, the FDIC may be appointed asreceiver for the systemically important institution and itsfailed non-bank subsidiaries if, upon the recommendationof applicable regulators, the U.S. Secretary of the Treasurydetermines, among other things, that the institution is indefault or in danger of default, that the institutions failurewould have serious adverse effects on the U.S. financialsystem and that resolution under OLA would avoid ormitigate those effects.



If the FDIC is appointed as receiver under OLA, then thepowers of the receiver, and the rights and obligations ofcreditors and other parties who have dealt with theinstitution, would be determined under OLA, and notunder the bankruptcy or insolvency law that wouldotherwise apply. The powers of the receiver under OLAwere generally based on the powers of the FDIC as receiverfor depository institutions under the FDIA.

Substantial differences in the rights of creditors existbetween OLA and the U.S. Bankruptcy Code, including theright of the FDIC under OLA to disregard the strict priorityof creditor claims in some circumstances, the use of anadministrative claims procedure to determine creditorsclaims (as opposed to the judicial procedure utilized inbankruptcy proceedings), and the right of the FDIC totransfer claims to a bridge entity. In addition, OLA limitsthe ability of creditors to enforce certain contractual cross-defaults against affiliates of the institution in receivership.The FDIC has issued a notice that it would resolve a failedFHC by transferring its assets to a bridge holdingcompany under its single point of entry or SPOEstrategy pursuant to OLA.

FDIC Insurance. Deposits at GS Bank USA have the benefitof FDIC insurance up to the applicable limits. The FDICsDeposit Insurance Fund is funded by assessments oninsured depository institutions. GS Bank USAs assessment(subject to adjustment by the FDIC) is currently based on itsaverage total consolidated assets less its average tangibleequity during the assessment period, its supervisory ratingsand specified forward-looking financial measures used tocalculate the assessment rate.

The reserve ratio for the Deposit Insurance Fund is 1.35%of total insured deposits. A surcharge on the assessments oflarger depository institutions (including GS Bank USA)applies through the earlier of the quarter that the reserveratio first reaches or exceeds 1.35% andDecember 31, 2018. If the reserve ratio does not reach1.35% by December 31, 2018, the FDIC will impose ashortfall assessment on larger depository institutions(including GS Bank USA).

Prompt Corrective Action. The U.S. Federal DepositInsurance Corporation Improvement Act of 1991 (FDICIA)requires the U.S. federal bank regulatory agencies to takeprompt corrective action in respect of depositoryinstitutions that do not meet specified capital requirements.FDICIA establishes five capital categories for FDIC-insuredbanks: well-capitalized, adequately capitalized,undercapitalized, significantly undercapitalized andcritically undercapitalized.

An institution may be downgraded to, or deemed to be in, acapital category that is lower than is indicated by its capitalratios if it is determined to be in an unsafe or unsoundcondition or if it receives an unsatisfactory examinationrating with respect to certain matters. FDICIA imposesprogressively more restrictive constraints on operations,management and capital distributions, as the capitalcategory of an institution declines. Failure to meet thecapital requirements could also require a depositoryinstitution to raise capital. Ultimately, criticallyundercapitalized institutions are subject to the appointmentof a receiver or conservator, as described in Insolvency ofan Insured Depository Institution or a Bank HoldingCompany above.

The prompt corrective action regulations do not apply toBHCs. However, the FRB is authorized to take appropriateaction at the BHC level, based upon the undercapitalizedstatus of the BHCs depository institution subsidiaries. Incertain instances relating to an undercapitalized depositoryinstitution subsidiary, the BHC would be required toguarantee the performance of the undercapitalizedsubsidiarys capital restoration plan and might be liable forcivil money damages for failure to fulfill its commitmentson that guarantee. Furthermore, in the event of thebankruptcy of the BHC, the guarantee would take priorityover the BHCs general unsecured creditors, as described inSource of Strength above.

Activities. The Dodd-Frank Act and the BHC Actgenerally restrict BHCs from engaging in business activitiesother than the business of banking and certain closelyrelated activities.

Volcker Rule. The provisions of the Dodd-Frank Actreferred to as the Volcker Rule became effective inJuly 2015. The Volcker Rule prohibits proprietarytrading, but permits activities such as underwriting,market making and risk-mitigation hedging, requires anextensive compliance program and includes additionalreporting and record-keeping requirements. The reportingrequirements include calculating daily quantitative metricson covered trading activities (as defined in the rule) andproviding these metrics to regulators on a monthly basis.



In addition, the Volcker Rule limits the sponsorship of, andinvestment in, covered funds (as defined in the rule) bybanking entities, including us. It also limits certain types oftransactions between us and our sponsored funds, similarto the limitations on transactions between depositoryinstitutions and their affiliates. Covered funds include ourprivate equity funds, certain of our credit and real estatefunds, our hedge funds and certain other investmentstructures. The limitation on investments in covered fundsrequires us to reduce our investment in each such fund to3% or less of the funds net asset value, and to reduce ouraggregate investment in all such funds to 3% or less of ourTier 1 capital.

The FRB has extended the conformance period to July 2022for our investments in, and relationships with, certainlegacy illiquid funds (as defined in the Volcker Rule) thatwere in place prior to December 2013. See Note 6 to theconsolidated financial statements in Part II, Item 8 of thisForm 10-K for further information about our investmentsin such funds.

Other Restrictions. FHCs generally can engage in abroader range of financial and related activities than areotherwise permissible for BHCs as long as they continue tomeet the eligibility requirements for FHCs. The broaderrange of permissible activities for FHCs includesunderwriting, dealing and making markets in securities andmaking investments in non-FHCs (merchant bankingactivities). In addition, certain FHCs are permitted underthe GLB Act to engage in certain commodities activities inthe U.S. that may otherwise be impermissible for BHCs, solong as the assets held pursuant to these activities do notequal 5% or more of their consolidated assets.

The FRB, however, has the authority to limit an FHCsability to conduct activities that would otherwise bepermissible, and will likely do so if the FHC does notsatisfactorily meet certain requirements of the FRB. Forexample, if an FHC or any of its U.S. depository institutionsubsidiaries ceases to maintain its status as well-capitalizedor well-managed, the FRB may impose corrective capitaland/or managerial requirements, as well as additionallimitations or conditions. If the deficiencies persist, the FHCmay be required to divest its U.S. depository institutionsubsidiaries or to cease engaging in activities other than thebusiness of banking and certain closely related activities.

If any insured depository institution subsidiary of an FHCfails to maintain at least a satisfactory rating under theCommunity Reinvestment Act, the FHC would be subjectto restrictions on certain new activities and acquisitions.

In addition, we are required to obtain prior FRB approvalbefore engaging in certain banking and other financialactivities both within and outside the U.S.

In September 2016, the FRB issued a proposed rule which,if adopted, would impose new requirements on the physicalcommodity activities and certain merchant bankingactivities of FHCs. The proposed rule would, among otherthings, (i) require FHCs to hold additional capital inconnection with covered physical commodity activities,including merchant banking investments in companiesengaged in physical commodity activities; (ii) tighten thequantitative limits on permissible physical trading activity;and (iii) establish new public reporting requirements on thenature and extent of FHCs physical commodity holdingsand activities. In addition, in a September 2016 report, theFRB recommended that Congress repeal (i) the authority ofFHCs to engage in merchant banking activities; and (ii) theauthority described above for certain FHCs to engage incertain otherwise permissible commodities activities.

In March 2016, the FRB issued a revised proposalregarding single counterparty credit limits, which wouldimpose more stringent requirements for credit exposuresamong major financial institutions. Such limits (togetherwith other provisions incorporated into the Basel III capitalrules) may affect our ability to transact or hedge with otherfinancial institutions. In addition, the FRB has proposedearly remediation requirements, which are modeled on theprompt corrective action regime, described in PromptCorrective Action above, but are designed to requireaction to begin in earlier stages of a companys financialdistress, based on a range of triggers, including capital andleverage, stress test results, liquidity and risk management.

In addition, New York State banking law imposes lendinglimits (which take into account credit exposure fromderivative transactions) and other requirements that couldimpact the manner and scope of GS Bank USAs activities.



The U.S. federal bank regulatory agencies have issuedguidance that focuses on transaction structures and riskmanagement frameworks and that outlines high-levelprinciples for safe-and-sound leveraged lending, includingunderwriting standards, valuation and stress testing. Thisguidance has, among other things, limited the percentageamount of debt that can be included in certain transactions.The status of this guidance is uncertain as the U.S.Government Accountability Office has determined that it isa rule subject to review under the Congressional ReviewAct.

Broker-Dealer and Securities RegulationOur broker-dealer subsidiaries are subject to regulationsthat cover all aspects of the securities business, includingsales methods, trade practices, use and safekeeping ofclients funds and securities, capital structure, record-keeping, the financing of clients purchases, and theconduct of directors, officers and employees. In the U.S., theSEC is the federal agency responsible for the administrationof the federal securities laws. GS&Co. is registered as abroker-dealer, a municipal advisor and an investmentadviser with the SEC and as a broker-dealer in all 50 statesand the District of Columbia. U.S. self-regulatoryorganizations, such as FINRA and the NYSE, adopt rulesthat apply to, and examine, broker-dealers such as GS&Co.

In addition, U.S. state securities and other U.S. regulatorsalso have regulatory or oversight authority over GS&Co.Similarly, our businesses are also subject to regulation byvarious non-U.S. governmental and regulatory bodies andself-regulatory authorities in virtually all countries wherewe have offices, as described further below, as well as inOther Regulation. For a description of net capitalrequirements applicable to GS&Co., see Note 20 to theconsolidated financial statements in Part II, Item 8 of thisForm 10-K.

In Europe, we provide broker-dealer services that aresubject to oversight by national regulators. These servicesare regulated in accordance with national laws, many ofwhich implement E.U. directives, and, increasingly, bydirectly applicable E.U. regulations. These national andE.U. laws require, among other things, compliance withcertain capital adequacy standards, customer protectionrequirements and market conduct and trade reporting rules.

Goldman Sachs Japan Co., Ltd. (GSJCL), our regulatedJapanese broker-dealer, is subject to capital requirementsimposed by Japans Financial Services Agency. GSJCL isalso regulated by the Tokyo Stock Exchange, the OsakaExchange, the Tokyo Financial Exchange, the JapanSecurities Dealers Association, the Tokyo CommodityExchange, Securities and Exchange SurveillanceCommission, Bank of Japan, the Ministry of Finance andthe Ministry of Economy, Trade and Industry, amongothers.

Also, the Securities and Futures Commission in HongKong, the Monetary Authority of Singapore, the ChinaSecurities Regulatory Commission, the Korean FinancialSupervisory Service, the Reserve Bank of India, theSecurities and Exchange Board of India, the AustralianSecurities and Investments Commission and the AustralianSecurities Exchange, among others, regulate various of oursubsidiaries and also have capital standards and otherrequirements comparable to the rules of the SEC. Variousof our other subsidiaries are regulated by the banking andregulatory authorities in jurisdictions in which we operate,including, among others, Brazil and Dubai.

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

The Dodd-Frank Act will result in additional regulation bythe SEC, the CFTC and other regulators of our broker-dealer and regulated subsidiaries in a number of respects.The law calls for the imposition of expanded standards ofcare by market participants in dealing with clients andcustomers, including by providing the SEC with authorityto adopt rules establishing fiduciary duties for broker-dealers and directing the SEC to examine and improve salespractices and disclosure by broker-dealers and investmentadvisers.

In addition, in June 2017, the U.S. Department of Laborsconflict of interest rule under the Employee RetirementIncome Security Act of 1974 (ERISA) went into effect. Therule broadens the circumstances under which a firm and/ora financial advisor is considered a fiduciary when providingcertain recommendations to retirement clients and requiresthat such recommendations be in the best interest of clients.As a result, we have made changes to some of our servicesand offerings for retirement clients.



Our U.S. broker-dealer and other U.S. subsidiaries are alsosubject to rules adopted by U.S. federal agencies pursuantto the Dodd-Frank Act that require any person whoorganizes or initiates certain asset-backed securitiestransactions to retain a portion (generally, at least fivepercent) of any credit risk that the person conveys to a thirdparty. For certain securitization transactions, retention bythird-party purchasers may satisfy this requirement.Securitizations would also be affected by rules proposed bythe SEC to implement the Dodd-Frank Acts prohibitionagainst securitization participants engaging in anytransaction that would involve or result in any materialconflict of interest with an investor in a securitizationtransaction. The proposed rules would exempt bona fidemarket-making activities and risk-mitigating hedgingactivities in connection with securitization activities fromthe general prohibition.

The SEC, FINRA and regulators in various non-U.S.jurisdictions have imposed both conduct-based anddisclosure-based requirements with respect to researchreports and research analysts and may impose additionalregulations.

Swaps, Derivatives and Commodities RegulationThe commodity futures, commodity options and swapsindustry in the U.S. is subject to regulation under the U.S.Commodity Exchange Act (CEA). The CFTC is the U.S.federal agency charged with the administration of the CEA.In addition, the SEC is the U.S. federal agency charged withthe regulation of security-based swaps. The rules andregulations of various self-regulatory organizations, such asthe Chicago Mercantile Exchange, other futures exchangesand the National Futures Association, also governcommodity futures, commodity options and swapsactivities.

The terms swaps and security-based swaps include awide variety of derivative instruments in addition to thoseconventionally referred to as swaps (including certainforward contracts and options), and relate to a wide varietyof underlying assets or obligations, including currencies,commodities, interest or other monetary rates, yields,indices, securities, credit events, loans and other financialobligations.

CFTC rules require registration of swap dealers, mandatoryclearing and execution of interest rate and credit defaultswaps and real-time public reporting and adherence tobusiness conduct standards for all in-scope swaps. InDecember 2016, the CFTC proposed revised capitalregulations for swap dealers that are not subject to theca