Table	of	Contents

# UNITED	STATES	SECURITIES	AND	EXCHANGE	COMMISSION

ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF

THE	SECURITIES	EXCHANGE	ACT	OF	1934

For	the	fiscal	year	ended	December	31,	2014

# The	Goldman	Sachs	Group,	Inc.

(Exact	name	of	registrant	as	specified	in	its	charter)

Delaware

(State	or	other	jurisdiction	of incorporation	or	organization)

200	West	Street

(Address	of	principal	executive	offices)

(Registrant's	telephone	number,	including	area	code)

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

# Title	of	each	class:

Common	stock,	par	value	$.01	per	share

Depositary	Shares,	Each	Representing	1/1,000th	Interest	in	a	Share	of	Floating	Rate

Non-Cumulative	Preferred	Stock,	Series	A

Depositary	Shares,	Each	Representing	1/1,000th	Interest	in	a	Share	of	6.20%

Non-Cumulative	Preferred	Stock,	Series	B

Non-Cumulative	Preferred	Stock,	Series	C

Non-Cumulative	Preferred	Stock,	Series	D

Non-Cumulative	Preferred	Stock,	Series	I

Fixed-to-Floating	Rate	Non-Cumulative	Preferred	Stock,	Series	J

(I.R.S.	Employer Identification	No.)

(Zip	Code)

Name	of	each	exchange	on	which	registered:

New	York	Stock	Exchange

Depositary	Shares,	Each	Representing	1/1,000th	Interest	in	a	Share	of	6.375%

Fixed-to-Floating	Rate	Non-Cumulative	Preferred	Stock,	Series	K New	York	Stock	Exchange

See	Exhibit	99.2	for	debt	and	trust	securities	registered	under	Section	12(b)	of	the	Act

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

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	15(d)	of	the	Act.

Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during	the	preceding	12	months	(or	for such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past	90	days.

Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	and	posted	on	its	corporate	Web	site,	if	any,	every	Interactive	Data	File	required	to	be	submitted	and	posted	pursuant to	Rule	405	of	Regulation	S-T	during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	submit	and	post	such	files).

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	registrant's	knowledge,	in definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	the	Annual	Report	on	Form	10-K	or	any	amendment	to	the	Annual	Report	on	Form	10-K.	x

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

Large	accelerated	filer	x Accelerated	filer	¨ Non-accelerated	filer	¨ Smaller	reporting	company	¨

(Do	not	check	if	a	smaller	reporting	company)

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

As	of	June	30,	2014,	the	aggregate	market	value	of	the	common	stock	of	the	registrant	held	by	non-affiliates	of	the	registrant	was	approximately	$72.4	billion.

As	of	February	6,	2015,	there	were	435,621,157	shares	of	the	registrant's	common	stock	outstanding.

Documents	incorporated	by	reference:	Portions	of	The	Goldman	Sachs	Group,	Inc.'s	Proxy	Statement	for	its	2015	Annual	Meeting	of	Shareholders	are	incorporated	by	reference	in	the	Annual Report	on	Form	10-K	in	response	to	Part	III,	Items	10,	11,	12,	13	and	14.

ANNUAL	REPORT	ON	FORM	10-K	FOR	THE	FISCAL	YEAR	ENDED	DECEMBER	31,	2014

# INDEX

| Form	10-K	Item	Number | Form	10-K	Item	Number | Page	No. |
| :--- | :--- | :--- |
| PART\tI |  | 1 |
| Item\t1 | Business | 1 |
|  | Introduction | 1 |
|  | Our\tBusiness\tSegments\tand\tSegment\tOperating\tResults | 1 |
|  | \t\t\t\tInvestment\tBanking | 2 |
|  | \t\t\t\tInstitutional\tClient\tServices | 3 |
|  | \t\t\t\tInvesting\t&\tLending | 5 |
|  | \t\t\t\tInvestment\tManagement | 5 |
|  | Business\tContinuity\tand\tInformation\tSecurity | 6 |
|  | Employees | 6 |
|  | Competition | 6 |
|  | Regulation | 8 |
|  | Available\tInformation | 23 |
|  | Cautionary\tStatement\tPursuant\tto\tthe\tU.S.\tPrivate\tSecurities\tLitigation\tReform\tAct\tof\t1995 | 24 |
| Item\t1A | Risk\tFactors | 25 |
| Item\t1B | Unresolved\tStaff\tComments | 43 |
| Item\t2 | Properties | 43 |
| Item\t3 | Legal\tProceedings | 43 |
| Item\t4 | \t Mine\tSafety\tDisclosures | 43 |
|  | Executive\tOfficers\tof\tThe\tGoldman\tSachs\tGroup,\tInc. | 44 |
| PART\tII |  | 45 |
| Item\t5 | \t Market\tfor\tRegistrant's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand\tIssuer\tPurchases\tof\tEquity\tSecurities | 45 |
| Item\t6 | Selected\tFinancial\tData | 45 |
| Item\t7 | \t Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations | 46 |
| Item\t7A | \t Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk | 114 |
| Item\t8 | Financial\tStatements\tand\tSupplementary\tData | 115 |
| Item\t9 | Changes\tin\tand\tDisagreements\twith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure | 229 |
| Item\t9A | Controls\tand\tProcedures | 229 |
| Item\t9B | \t Other\tInformation | 229 |
| PART\tIII |  | 229 |
| Item\t10 | Directors,\tExecutive\tOfficers\tand\tCorporate\tGovernance | 229 |
| Item\t11 | Executive\tCompensation | 229 |
| Item\t12 | Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand\tRelated\tStockholder\tMatters | 230 |
| Item\t13 | Certain\tRelationships\tand\tRelated\tTransactions,\tand\tDirector\tIndependence | 230 |
| Item\t14 | Principal\tAccounting\tFees\tand\tServices | 230 |
| PART\tIV |  | 231 |
| Item\t15 | Exhibits,\tFinancial\tStatement\tSchedules | 231 |

THE	GOLDMAN	SACHS	GROUP,	INC.	AND	SUBSIDIARIES

# PART	I

# Introduction

Goldman	 Sachs	 is	 a	 leading	 global	 investment	 banking,	 securities	 and investment	management	firm	that	provides	a	wide	range	of	financial	services	to a	 substantial	 and	 diversified	 client	 base	 that	 includes	 corporations,	 financial institutions,	governments	and	high-net-worth	individuals.

When	we	use	the	terms	"Goldman	Sachs,"	"the	firm,"	"we,"	"us"	and	"our,"	we mean	The	Goldman	Sachs	Group,	Inc.	(Group	Inc.),	a	Delaware	corporation,	and its	consolidated	subsidiaries.

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

As	of	December	2014,	we	had	offices	in	over	30	countries	and	49%	of	our	total staff	was	based	outside	the	Americas.	Our	clients	are	located	worldwide,	and	we are	 an	 active	 participant	 in	 financial	 markets	 around	 the	 world.	 In	 2014,	 we generated	42%	of	our	net	revenues	outside	the	Americas.	For	more	information about	 our	 geographic	 results,	 see	 Note 25 to	 the	 consolidated	 financial statements	in	Part	II,	Item	8	of	the	2014	Form	10-K.

# Our Business Segments and Segment Operating 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.

The	table	below	presents	our	segment	operating	results.

|  | Year	Ended	December	^1 | Year	Ended	December	^1 | Year	Ended	December	^1 | %	of	2014 |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | Net |
| $\tin\tmillions | 2014 | 2013 | 2012 | Revenues |
| Investment\tBanking |  |  |  |  |
| Net\trevenues | \t\t$\t\t6,464 | \t$\t\t6,004 | \t$\t\t4,926 | 19% |
| Operating\texpenses | 3,688 | 3,479 | 3,333 |  |
| Pre-tax\tearnings | \t\t$\t\t2,776 | \t$\t\t2,525 | \t$\t\t1,593 |  |
| Institutional\tClient\tServices |  |  |  |  |
| Net\trevenues | \t\t$15,197 | \t$15,721 | \t$18,124 | 44% |
| Operating\texpenses | 10,880 | 11,792 | 12,490 |  |
| Pre-tax\tearnings | \t\t$\t\t4,317 | \t$\t\t3,929 | \t$\t\t5,634 |  |
| Investing\t&\tLending |  |  |  |  |
| Net\trevenues | \t\t$\t\t6,825 | \t$\t\t7,018 | \t$\t\t5,891 | 20% |
| Operating\texpenses | 2,819 | 2,686 | 2,668 |  |
| Pre-tax\tearnings | \t\t$\t\t4,006 | \t$\t\t4,332 | \t$\t\t3,223 |  |
| Investment\tManagement |  |  |  |  |
| Net\trevenues | \t\t$\t\t6,042 | \t$\t\t5,463 | \t$\t\t5,222 | 17% |
| Operating\texpenses | 4,647 | 4,357 | 4,296 |  |
| Pre-tax\tearnings | \t\t$\t\t1,395 | \t$\t\t1,106 | \t$\t\t\t\t\t926 |  |
| Total\tnet\trevenues | \t\t$34,528 | \t$34,206 | \t$34,163 |  |
| Total\toperating\texpenses\t^2 | 22,171 | 22,469 | 22,956 |  |
| Total\tpre-tax\tearnings | \t\t$12,357 | \t$11,737 | \t$11,207 |  |

1.Financial	information	concerning	our	business	segments	for	2014,	2013	and	2012	is	included in	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations" and	the	"Financial	Statements	and	Supplementary	Data,"	which	are	in	Part	II,	Items	7	and	8, respectively,	of	the	2014	Form	10-K.	See	Note	25	to	the	consolidated	financial	statements	in Part	 II,	 Item	 8	 of	 the	 2014	 Form	 10-K	 for	 a	 summary	 of	 our	 total	 net	 revenues,	 pre-tax earnings	and	net	earnings	by	geographic	region.

2.Includes	charitable	contributions	that	have	not	been	allocated	to	our	segments	of	$137	million for	2014,	$155	million	for	2013	and	$169	million	for	2012.	Operating	expenses	related	to	real estate-related	exit	costs,	previously	not	allocated	to	our	segments,	have	now	been	allocated. This	 allocation	 reflects	 the	 change	 in	 the	 manner	 in	 which	 management	 views	 the performance	 of	 our	 segments.	 Reclassifications	 have	 been	 made	 to	 previously	 reported segment	amounts	to	conform	to	the	current	presentation.

# Investment	Banking

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

Financial Advisory. Financial	 Advisory	 includes	 strategic	 advisory assignments	 with	 respect	 to	 mergers	 and	 acquisitions,	 divestitures,	 corporate defense	activities,	restructurings,	spin-offs	and	risk	management.	In	particular, we	 help	 clients	 execute	 large,	 complex	 transactions	 for	 which	 we	 provide multiple	services,	including	acquisition	financing	and	cross-border	structuring expertise.	 Financial	 Advisory	 also	 includes	 revenues	 from	 derivative transactions	directly	related	to	these	client	advisory	assignments.

We	also	assist	our	clients	in	managing	their	asset	and	liability	exposures	and their	capital.	In	addition,	we	may	provide	lending	commitments	and	bank	loan and	bridge	loan	facilities	in	connection	with	our	advisory	assignments.

Underwriting.	 The other	 core	 activity	 of	 Investment	 Banking	 is	 helping companies	raise	capital	to	fund	their	businesses.	As	a	financial	intermediary,	our job	 is	 to	match	 the	capital	of	our	 investing	clients	—	who	aim	 to	grow	 the savings	of	millions	of	people	—	with	the	needs	of	our	public	and	private	sector clients	 —	 who	 need	 financing	 to	 generate	 growth,	 create	 jobs	 and	 deliver products	and	services.	Our	underwriting	activities	include	public	offerings	and private	 placements,	 including	 local	 and	 cross-border	 transactions,	 of	 a	 wide range	of	securities	and	other	financial	instruments.	Underwriting	also	includes revenues	from	derivative	transactions	entered	into	with	public	and	private	sector clients	in	connection	with	our	underwriting	activities.

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

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

# Institutional	Client	Services

Institutional	Client	Services	serves	our	clients	who	come	to	the	firm	to	buy	and sell	financial	products,	raise	funding	and	manage	risk.	We	do	this	by	acting	as	a market	maker	and	offering	market	expertise	on	a	global	basis.	Institutional	Client Services	 makes	 markets	 and	 facilitates	 client	 transactions	 in	 fixed	 income, equity,	currency	and	commodity	products.	In	addition,	we	make	markets	in	and clear	 client	 transactions	 on	 major	 stock,	 options	 and	 futures	 exchanges worldwide.	 Market	 makers	 provide	 liquidity	 and	 play	 a	 critical	 role	 in	 price discovery,	which	contributes	to	the	overall	efficiency	of	the	capital	markets.	Our willingness	to	make	markets,	commit	capital	and	take	risk	in	a	broad	range	of products	is	crucial	to	our	client	relationships.

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

Through	 our	 global	 sales	 force,	 we	 maintain	 relationships	 with	 our	 clients, receiving	 orders	 and	 distributing	 investment	 research,	 trading	 ideas,	 market information	 and	 analysis.	 As	 a	 market	 maker,	 we	 provide	 prices	 to	 clients globally	across	thousands	of	products	in	all	major	asset	classes	and	markets.	At times	we	take	the	other	side	of	transactions	ourselves	if	a	buyer	or	seller	is	not readily	available	and	at	other	times	we	connect	our	clients	to	other	parties	who want	to	transact.	Much	of	this	connectivity	between	the	firm	and	its	clients	is maintained	 on	 technology	 platforms	 and	 operates	 globally	 wherever	 and whenever	markets	are	open	for	trading.

Institutional	 Client	 Services	 and	 our	 other	 businesses	 are	 supported	 by	 our Global	Investment	Research	division,	which,	as	of	December	2014,	provided fundamental	research	on	more	than	3,600	companies	worldwide	and	more	than 40	national	economies,	as	well	as	on	industries,	currencies	and	commodities.

# Institutional	Client	Services	generates	revenues	in	four	ways:

Ÿ	In	large,	highly	liquid	markets	(such	as	markets	for	U.S.	Treasury	bills,	large capitalization	S&P	500	stocks	or	certain	mortgage	pass-through	securities),	we execute	a	high	volume	of	transactions	for	our	clients	for	modest	spreads	and fees;

Ÿ	In	 less	 liquid	 markets	 (such	 as	 mid-cap	 corporate	 bonds,	 growth	 market currencies	 or	 certain	 non-agency	 mortgage-backed	 securities),	 we	 execute transactions	for	our	clients	for	spreads	and	fees	that	are	generally	somewhat larger;

Ÿ	We	 also	 structure	 and	 execute	 transactions	 involving	 customized	 or	 tailor- made	products	that	address	our	clients'	risk	exposures,	investment	objectives or	other	complex	needs	(such	as	a	jet	fuel	hedge	for	an	airline);	and

Ÿ	We	provide	financing	to	our	clients	for	their	securities	trading	activities,	as well	as	securities	lending	and	other	prime	brokerage	services.

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

Fixed	Income,	Currency	and	Commodities	Client	Execution.	Includes interest	rate	products,	credit	products,	mortgages,	currencies	and	commodities.

Ÿ	Interest	Rate	Products.	 Government	 bonds,	 money	 market	 instruments such	 as	 commercial	 paper,	 treasury	 bills,	 repurchase	 agreements	 and	 other highly	liquid	securities	and	instruments,	as	well	as	interest	rate	swaps,	options and	other	derivatives.

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

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

Ÿ	Currencies.	Most	currencies,	including	growth-market	currencies.

Ÿ	Commodities.	Crude	oil	and	petroleum	products,	natural	gas,	base,	precious and	other	metals,	electricity,	coal,	agricultural	and	other	commodity	products.

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

Equities	Client	Execution.	We	make	markets	in	equity	securities	and	equity- related	products,	including	convertible	securities,	options,	futures	and	over-the- counter	 (OTC)	 derivative	 instruments,	 on	 a	 global	 basis.	As	 a	 principal,	 we facilitate	client	transactions	by	providing	liquidity	to	our	clients	with	large	blocks of	stocks	or	derivatives,	requiring	the	commitment	of	our	capital.

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

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

Commissions	and	Fees.	We	generate	commissions	and	fees	from	executing and	clearing	institutional	client	transactions	on	major	stock,	options	and	futures exchanges	worldwide,	as	well	as	OTC	transactions.	We	provide	our	clients	with access	 to	a	broad	spectrum	of	equity	execution	services,	 including	electronic "low-touch"	 access	 and	 more	 traditional	 "high-touch"	 execution.	 While	 the majority	of	our	equity	trading	activity	is	"low-touch,"	the	majority	of	our	net revenues	continue	to	be	derived	from	our	"high-touch"	activity.	We	expect	both types	of	activity	to	remain	important.

Securities	Services.	Includes	financing,	securities	lending	and	other	prime brokerage	services.

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

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

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

# Investing	&	Lending

Our	investing	and	lending	activities,	which	are	typically	longer-term,	include	the firm's	investing	and	relationship	lending	activities	across	various	asset	classes, primarily	debt	securities	and	loans,	public	and	private	equity	securities,	and	real estate.	These	activities	include	investing	directly	in	publicly	and	privately	traded securities	 and	 in	 loans,	 and	 also	 through	 certain	 investment	 funds	 that	 we manage.	 We	 manage	 a	 diversified	 global	 portfolio	 of	 investments	 in	 equity securities	and	debt	and	other	investments	in	privately	negotiated	transactions, leveraged	buyouts,	acquisitions	and	investments	in	funds	managed	by	external parties.	We	also	provide	financing	to	our	clients.

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

Debt	Securities	and	Loans.	We	make	corporate,	real	estate,	infrastructure and	other	debt	investments.	In	addition,	we	provide	credit	to	corporate	clients through	 loan	 facilities	 and	 to	 high-net-worth	 individuals	 primarily	 through secured	loans.

Other.	Our	other	investments	include	consolidated	investments,	for	which	we have	an	exit	strategy	and	which	are	engaged	in	activities	that	are	not	closely related	to	our	principal	businesses.

# Investment	Management

Investment	Management	provides	 investment	and	wealth	advisory	services	 to help	 clients	 preserve	 and	 grow	 their	 financial	 assets.	 Our	 clients	 include institutions	and	high-net-worth	individuals,	as	well	as	retail	investors	who	access our	products	through	a	network	of	third-party	distributors	around	the	world.

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

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

We	supplement	our	investment	advisory	solutions	for	high-net-worth	clients	with wealth	advisory	services	that	include	income	and	liability	management,	trust	and estate	planning,	philanthropic	giving	and	tax	planning.	We	also	use	the	firm's global	securities	and	derivatives	market-making	capabilities	to	address	clients' specific	investment	needs.

Management	and	Other	Fees.	The	majority	of	revenues	in	management	and other	fees	is	comprised	of	asset-based	fees	on	client	assets.	The	fees	that	we charge	vary	by	asset	class	and	are	affected	by	investment	performance	as	well	as asset	 inflows	 and	 redemptions.	 Other	 fees	 we	 receive	 include	 financial counseling	fees	generated	through	our	wealth	advisory	services	and	fees	related to	the	administration	of	real	estate	assets.

Assets	 under	 supervision	 include	 assets	 under	 management	 and	 other	 client assets.	Assets	under	management	include	client	assets	where	we	earn	a	fee	for managing	assets	on	a	discretionary	basis.	This	includes	net	assets	in	our	mutual funds,	hedge	funds,	credit	funds	and	private	equity	funds	(including	real	estate funds),	 and	 separately	 managed	 accounts	 for	 institutional	 and	 individual investors.	 Other	 client	 assets	 include	 client	 assets	 invested	 with	 third-party managers,	 bank	 deposits	 and	 advisory	 relationships	 where	 we	 earn	 a	 fee	 for advisory	and	other	services,	but	do	not	have	investment	discretion.	Assets	under supervision	 do	 not	 include	 the	 self-directed	 brokerage	 assets	 of	 our	 clients. Long-term	assets	under	supervision	represent	assets	under	supervision	excluding liquidity	products.	Liquidity	products	represent	money	markets	and	bank	deposit assets.

Incentive	 Fees. In	 certain	 circumstances,	 we	 are	 also	 entitled	 to	 receive incentive	 fees	 based	 on	 a	 percentage	 of	 a	 fund's	 or	 a	 separately	 managed account's	return,	or	when	 the	return	exceeds	a	specified	benchmark	or	other performance	targets.	Such	fees	include	overrides,	which	consist	of	the	increased share	of	the	income	and	gains	derived	primarily	from	our	private	equity	funds when	the	return	on	a	fund's	investments	over	the	life	of	the	fund	exceeds	certain threshold	 returns.	 Incentive	 fees	 are	 recognized	 only	 when	 all	 material contingencies	are	resolved.

Transaction	 Revenues.	 We receive	 commissions	 and	 net	 spreads	 for facilitating	transactional	activity	in	high-net-worth	client	accounts.	In	addition, we	earn	net	interest	income	primarily	associated	with	client	deposits	and	margin lending	activity	undertaken	by	such	clients.

# Business	Continuity	and	Information	Security

Business	continuity	and	information	security,	including	cyber	security,	are	high priorities	 for	 Goldman	 Sachs.	 Their	 importance	 has	 been	 highlighted	 by Hurricane	 Sandy	 and	 several	 recent	 highly	 publicized	 cyber	 attacks	 against financial	institutions	and	large	consumer-based	companies	that	resulted	in	the unauthorized	disclosure	of	personal	information	of	clients	and/or	customers,	as well	 as	 other	 cyber	 attacks	 involving	 the	 theft	 and	 destruction	 of	 corporate information.

Our	 Business	 Continuity	 Program	 has	 been	 developed	 to	 provide	 reasonable assurance	of	business	continuity	in	the	event	of	disruptions	at	the	firm's	critical facilities	and	to	comply	with	regulatory	requirements,	including	those	of	FINRA. Because	we	are	a	bank	holding	company,	our	Business	Continuity	Program	is also	subject	to	review	by	the	Federal	Reserve	Board.	The	key	elements	of	the program	 are	 crisis	 planning	 and	 management,	 people	 recovery,	 business recovery,	systems	and	data	recovery,	and	process	improvement.	In	the	area	of information	 security,	 we	 have	 developed	 and	 implemented	 a	 framework	 of principles,	policies	and	technology	to	protect	the	information	provided	to	us	by our	clients	and	that	of	the	firm	from	cyber	attacks	and	other	misappropriation, corruption	 or	 loss.	 Safeguards	 are	 applied	 to	 maintain	 the	 confidentiality, integrity	and	availability	of	information.

# Employees

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

Instilling	the	Goldman	Sachs	culture	in	all	employees	is	a	continuous	process,	in which	 training	 plays	 an	 important	 part.	 All	 employees	 are	 offered	 the opportunity	to	participate	in	education	and	periodic	seminars	that	we	sponsor	at various	locations	throughout	the	world.	Another	important	part	of	instilling	the Goldman	 Sachs	 culture	 is	 our	 employee	 review	 process.	 Employees	 are reviewed	by	supervisors,	co-workers	and	employees	they	supervise	in	a	360- degree	review	process	 that	 is	 integral	 to	our	 team	approach,	and	 includes	an evaluation	 of	 an	 employee's	 performance	 with	 respect	 to	 risk	 management, compliance	and	diversity.	As	of	December	2014,	we	had	34,000	total	staff.

# Competition

The	financial	services	 industry	—	and	all	of	our	businesses	—	are	 intensely competitive,	and	we	expect	them	to	remain	so.	Our	competitors	are	other	entities that	provide	investment	banking,	securities	and	investment	management	services, as	 well	 as	 those	 entities	 that	 make	 investments	 in	 securities,	 commodities, derivatives,	real	estate,	loans	and	other	financial	assets.	These	entities	include brokers	 and	 dealers,	 investment	 banking	 firms,	 commercial	 banks,	 insurance companies,	investment	advisers,	mutual	funds,	hedge	funds,	private	equity	funds and	merchant	banks.	We	compete	with	some	entities	globally	and	with	others	on a	regional,	product	or	niche	basis.	Our	competition	 is	based	on	a	number	of factors,	 including	 transaction	 execution,	 products	 and	 services,	 innovation, reputation	and	price.

Over	 time,	 there	 has	 been	 substantial	 consolidation	 and	 convergence	 among companies	in	the	financial	services	industry	and,	in	particular,	the	credit	crisis caused	numerous	mergers	and	asset	acquisitions	among	 industry	participants. Efforts	by	our	competitors	to	gain	market	share	have	resulted	in	pricing	pressure in	our	investment	banking	and	client	execution	businesses	and	could	result	in pricing	pressure	in	other	of	our	businesses.	Moreover,	we	have	faced,	and	expect to	continue	 to	face,	pressure	 to	retain	market	share	by	committing	capital	 to businesses	 or	 transactions	 on	 terms	 that	 offer	 returns	 that	 may	 not	 be commensurate	 with	 their	 risks.	 In	 particular,	 corporate	 clients	 seek	 such commitments	 (such	 as	 agreements	 to	 participate	 in	 their	 commercial	 paper backstop	or	other	loan	facilities)	from	financial	services	firms	in	connection	with investment	banking	and	other	assignments.

Consolidation	and	convergence	have	significantly	increased	the	capital	base	and geographic	 reach	 of	 some	 of	 our	 competitors,	 and	 have	 also	 hastened	 the globalization	of	the	securities	and	other	financial	services	markets.	As	a	result, we	have	had	to	commit	capital	to	support	our	international	operations	and	to execute	 large	 global	 transactions.	 To	 take	 advantage	 of	 some	 of	 our	 most significant	opportunities,	we	will	have	to	compete	successfully	with	financial institutions	that	are	larger	and	have	more	capital	and	that	may	have	a	stronger local	presence	and	longer	operating	history	outside	the	United	States.	We	also compete	 with	 smaller	 institutions	 that	 offer	 more	 targeted	 services,	 such	 as independent	advisory	firms.	Some	clients	may	perceive	these	firms	to	be	less susceptible	to	potential	conflicts	of	interest	than	we	are,	and,	as	discussed	below, our	ability	to	effectively	compete	with	them	could	be	affected	by	regulations	and limitations	on	activities	that	apply	to	us	but	may	not	apply	to	them.

We	have	experienced	intense	price	competition	in	some	of	our	businesses	in recent	years.	For	example,	over	the	past	several	years	the	increasing	volume	of trades	 executed	 electronically,	 through	 the	 internet	 and	 through	 alternative trading	 systems,	 has	 increased	 the	 pressure	 on	 trading	 commissions,	 in	 that commissions	 for	 "low-touch"	 electronic	 trading	 are	 generally	 lower	 than	 for "high-touch"	non-electronic	trading.	It	appears	that	this	trend	toward	electronic and	other	"low-touch,"	low-commission	trading	will	continue.	In	addition,	we believe	that	we	will	continue	to	experience	competitive	pressures	in	these	and other	areas	in	the	future	as	some	of	our	competitors	seek	to	obtain	market	share by	further	reducing	prices.

The	 provisions	 of	 the	 U.S.	 Dodd-Frank	 Wall	 Street	 Reform	 and	 Consumer Protection	Act	(Dodd-Frank	Act),	the	requirements	promulgated	by	the	Basel Committee	 on	 Banking	 Supervision	 (Basel	 Committee)	 and	 other	 financial regulation	could	affect	our	competitive	position	to	the	extent	that	limitations	on activities,	increased	fees	and	compliance	costs	or	other	regulatory	requirements do	 not	 apply,	 or	 do	 not	 apply	 equally,	 to	 all	 of	 our	 competitors	 or	 are	 not implemented	 uniformly	 across	 different	 jurisdictions.	 For	 example,	 the provisions	of	the	Dodd-Frank	Act	that	prohibit	proprietary	trading	and	restrict investments	in	certain	hedge	and	private	equity	funds	differentiate	between	U.S.- based	 and	 non-U.S.-based	 banking	 organizations	 and	 give	 non-U.S.-based banking	organizations	greater	flexibility	to	trade	outside	of	the	United	States	and to	form	and	invest	in	funds	outside	the	United	States.	Likewise,	the	obligations with	respect	to	derivative	transactions	under	Title	VII	of	the	Dodd-Frank	Act depend,	 in	 part,	 on	 the	 location	 of	 the	 counterparties	 to	 the	 transaction.	The impact	 of	 the	 Dodd-Frank	 Act	 and	 other	 regulatory	 developments	 on	 our competitive	position	will	depend	to	a	large	extent	on	the	manner	in	which	the required	rulemaking	and	regulatory	guidance	evolve,	the	extent	of	international convergence,	and	the	development	of	market	practice	and	structures	under	the new	regulatory	regimes	as	discussed	further	under	"Regulation"	below.

We	also	face	intense	competition	in	attracting	and	retaining	qualified	employees. Our	ability	to	continue	to	compete	effectively	will	depend	upon	our	ability	to attract	 new	 employees,	 retain	 and	 motivate	 our	 existing	 employees	 and	 to continue	 to	 compensate	 employees	 competitively	 amid	 intense	 public	 and regulatory	scrutiny	on	the	compensation	practices	of	large	financial	institutions. Our	pay	practices	and	those	of	certain	of	our	competitors	are	subject	to	review by,	and	the	standards	of,	the	Federal	Reserve	Board	and	regulators	outside	the United	 States,	 including	 the	 Prudential	 Regulation	Authority	 (PRA)	 and	 the Financial	Conduct	Authority	(FCA)	in	the	United	Kingdom.	We	also	compete for	employees	with	institutions	whose	pay	practices	are	not	subject	to	regulatory oversight.	 See	 "Regulation	 —	 Bank	 Holding	 Company	 Regulation"	 and "Regulation	 —	 Compensation	 Practices"	 below	 and	 "Risk	 Factors	 —	 Our businesses	may	be	adversely	affected	if	we	are	unable	to	hire	and	retain	qualified employees"	in	Part	I,	Item	1A	of	the	2014	Form	10-K	for	more	information about	the	regulation	of	our	compensation	practices.

# Regulation

As	 a	 participant	 in	 the	 banking,	 securities,	 investment	 management,	 and derivatives	 industries,	 we	 are	 subject	 to	 extensive	 regulation	 worldwide. Regulatory	bodies	around	the	world	are	generally	charged	with	safeguarding	the integrity	of	the	securities	and	other	financial	markets	and	with	protecting	the interests	of	the	customers	of	market	participants,	including	depositors	in	banking entities	and	the	customers	of	banks,	broker-dealers,	investment	advisers,	swap dealers	and	security-based	swap	dealers.

The	 financial	 services	 industry	 has	 been	 the	 subject	 of	 intense	 regulatory scrutiny	 in	 recent	 years.	 Our	 businesses	 have	 been	 subject	 to	 increasing regulation	 and	 supervision	 in	 the	 United	 States	 and	 other	 countries,	 and	 we expect	this	trend	to	continue	in	the	future.	In	particular,	the	Dodd-Frank	Act, which	was	enacted	in	July	2010,	significantly	altered	the	financial	regulatory regime	within	which	we	operate.	Not	all	the	rules	required	or	expected	to	be implemented	under	the	Dodd-Frank	Act	have	been	proposed	or	adopted,	and certain	of	the	rules	that	have	been	proposed	or	adopted	under	the	Dodd-Frank Act	are	subject	to	phase-in	or	transitional	periods.	The	implications	of	the	Dodd- Frank	 Act	 for	 our	 businesses	 continue	 to	 depend	 to	 a	 large	 extent	 on	 the implementation	of	the	legislation	by	the	Federal	Reserve	Board,	the	FDIC,	the SEC,	 the	 U.S.	 Commodity	 Futures	 Trading	 Commission	 (CFTC)	 and	 other agencies,	as	well	as	the	development	of	market	practices	and	structures	under	the regime	established	by	the	legislation	and	the	implementing	rules.	Other	reforms have	been	adopted	or	are	being	considered	by	other	regulators	and	policy	makers worldwide,	 as	 discussed	 further	 throughout	 this	 section.	We	 will	 continue	 to update	our	business,	risk	management,	and	compliance	practices	to	conform	to developments	in	the	regulatory	environment.

# Bank	Holding	Company	Regulation

Group	Inc.	is	a	bank	holding	company	under	the	Bank	Holding	Company	Act	of 1956	(BHC	Act)	and	a	financial	holding	company	under	amendments	 to	 the BHC	Act	effected	by	the	U.S.	Gramm-Leach-Bliley	Act	of	1999	(GLB	Act).

# Supervision	and	Regulation

As	a	bank	holding	company	and	a	financial	holding	company	under	the	BHC Act,	Group	Inc.	is	subject	to	supervision	and	examination	by	the	Federal	Reserve Board.	Under	the	system	of	"functional	regulation"	established	under	the	BHC Act,	 the	 Federal	 Reserve	 Board	 serves	 as	 the	 primary	 regulator	 of	 our consolidated	organization,	but	generally	defers	to	the	primary	regulators	of	our U.S.	non-bank	subsidiaries	with	respect	to	the	activities	of	those	subsidiaries. Such	"functionally	regulated"	U.S.	non-bank	subsidiaries	include	broker-dealers registered	 with	 the	 SEC,	 such	 as	 our	 principal	 U.S.	 broker-dealer,	 Goldman, Sachs	&	Co.	(GS&Co.),	entities	registered	with	or	regulated	by	the	CFTC	with respect	to	futures-related	and	swaps-related	activities	and	investment	advisers registered	with	the	SEC	with	respect	to	their	investment	advisory	activities.

As	discussed	further	below,	our	principal	U.S.	bank	subsidiary,	GS	Bank	USA, is	supervised	and	regulated	by	the	Federal	Reserve	Board,	the	FDIC,	the	New York	 State	 Department	 of	 Financial	 Services	 and	 the	 Consumer	 Financial Protection	Bureau	(CFPB).	In	addition,	Group	Inc.	has	two	limited	purpose	trust company	subsidiaries	that	are	not	permitted	to	accept	deposits	or	make	loans (other	than	as	incidental	to	their	trust	activities)	and	are	not	insured	by	the	FDIC. The	Goldman	Sachs	Trust	Company,	N.A.,	a	national	banking	association	that	is limited	to	fiduciary	activities,	is	regulated	by	the	Office	of	the	Comptroller	of	the Currency	and	is	a	member	bank	of	the	Federal	Reserve	System.	The	Goldman Sachs	Trust	Company	of	Delaware,	a	Delaware	limited	purpose	trust	company, is	regulated	by	the	Office	of	the	Delaware	State	Bank	Commissioner.

# Activities

The	 BHC	Act	 generally	 restricts	 bank	 holding	 companies	 from	 engaging	 in business	activities	other	than	the	business	of	banking	and	certain	closely	related activities.	 Financial	 holding	 companies,	 however,	 generally	 can	 engage	 in	 a broader	range	of	financial	and	related	activities	than	are	otherwise	permissible for	 bank	 holding	 companies	 as	 long	 as	 they	 continue	 to	 meet	 the	 eligibility requirements	for	financial	holding	companies.	These	requirements	include	that the	 financial	 holding	 company	 and	 each	 of	 its	 U.S.	 depository	 institution subsidiaries	maintain	their	status	as	"well-capitalized"	and	"well-managed."	The broader	range	of	permissible	activities	for	financial	holding	companies	includes underwriting,	dealing	and	making	markets	in	securities	and	making	investments in	 non-financial	 companies.	 In	 addition,	 financial	 holding	 companies	 are permitted	under	the	GLB	Act	to	engage	in	certain	commodities	activities	in	the United	States	that	may	otherwise	be	impermissible	for	bank	holding	companies, so	long	as	the	assets	held	pursuant	to	these	activities	do	not	equal	5%	or	more	of their	consolidated	assets.

The	Federal	Reserve	Board,	however,	has	the	authority	to	limit	our	ability	to conduct	activities	that	would	otherwise	be	permissible	for	a	financial	holding company,	and	will	do	so	if	we	do	not	satisfactorily	meet	certain	requirements	of the	Federal	Reserve	Board.	In	addition,	we	are	required	to	obtain	prior	Federal Reserve	Board	approval	before	engaging	in	certain	banking	and	other	financial activities	both	in	the	United	States	and	abroad.

# Volcker	Rule

In	December	2013,	the	final	rules	to	implement	the	provisions	of	the	Dodd-Frank Act	referred	to	as	the	"Volcker	Rule"	were	adopted.

The	Volcker	Rule	prohibits	"proprietary	trading,"	but	permits	activities	such	as underwriting,	market	making	and	risk-mitigation	hedging.	We	are	also	required to	calculate	daily	quantitative	metrics	on	covered	trading	activities	(as	defined	in the	rule)	and	provide	these	metrics	to	regulators	on	a	monthly	basis.	In	addition, the	Volcker	Rule	limits	the	sponsorship	of,	and	investment	in,	"covered	funds" (as	 defined	 in	 the	 rule)	 by	 banking	 entities,	 including	 Group	 Inc.	 and	 its subsidiaries.	 It	 also	 limits	 certain	 types	 of	 transactions	 between	 us	 and	 our sponsored	funds,	similar	to	the	limitations	on	transactions	between	depository institutions	and	their	affiliates	as	described	below	under	"Regulation	of	GS	Bank USA	—	Transactions	with	Affiliates."	Covered	funds	include	our	private	equity funds,	certain	of	our	credit	and	real	estate	funds,	our	hedge	funds	and	certain other	investment	structures.

We	are	required	to	be	in	compliance	with	the	prohibition	on	proprietary	trading and	 to	 develop	 an	 extensive	 compliance	 program	 by	 July	 2015.	 In December	 2014,	 the	 Federal	 Reserve	 Board	 extended	 the	 compliance	 period through	July	2016	for	investments	in,	and	relationships	with,	covered	funds	that were	in	place	prior	to	December	31,	2013,	and	indicated	that	it	intends	to	further extend	the	compliance	period	through	July	2017.

The	 limitation	 on	 investments	 in	 covered	 funds	 requires	 us	 to	 reduce	 our investment	in	each	such	fund	to	3%	or	less	of	the	fund's	net	asset	value,	and	to reduce	our	aggregate	investment	in	all	such	funds	to	3%	or	less	of	our	Tier	1 capital.	 In	 anticipation	 of	 the	 final	 rule,	 we	 limited	 our	 initial	 investment	 in certain	new	covered	funds	to	3%	of	the	fund's	net	asset	value.

We	continue	to	manage	our	existing	funds,	taking	into	account	the	transition periods	under	the	Volcker	Rule.	We	plan	to	continue	to	conduct	our	investing and	lending	activities	in	ways	that	are	permissible	under	the	Volcker	Rule.

See	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results of	Operations	—	Regulatory	Developments	—	Volcker	Rule"	in	Part	II,	Item	7 of	the	2014	Form	10-K	for	information	about	our	investments	in	covered	funds.

# Leveraged	Lending

During	the	past	several	years,	the	U.S.	federal	bank	regulatory	agencies	have raised	 concerns	 over	 origination	 and	 other	 practices	 in	 leveraged	 lending markets.	 The	 agencies	 have	 issued	 guidance	 that	 focuses	 on	 transaction structures	and	risk	management	frameworks	and	outlined	high-level	principles for	 safe-and-sound	 leveraged	 lending,	 including	 underwriting	 standards, valuation	and	stress	testing.	Although	the	full	impact	of	the	guidance	remains uncertain,	 implementation	 of	 this	 guidance	 and	 any	 related	 changes	 in	 the leveraged	lending	market	could	adversely	affect	our	leveraged	lending	business.

# Capital	and	Liquidity	Requirements

As	a	bank	holding	company,	we	are	subject	to	consolidated	regulatory	capital requirements	administered	by	the	Federal	Reserve	Board,	and	GS	Bank	USA	is subject	to	substantially	similar	capital	requirements	(as	discussed	below),	also administered	by	the	Federal	Reserve	Board.

Under	the	Federal	Reserve	Board's	capital	adequacy	requirements,	Group	Inc. must	 meet	 specific	 regulatory	 capital	 requirements	 that	 involve	 quantitative measures	 of	 assets,	 liabilities	 and	 certain	 off-balance-sheet	 items.	 The sufficiency	 of	 our	 capital	 levels	 is	 also	 subject	 to	 qualitative	 judgments	 by regulators.

Other	 regulated	 subsidiaries,	 including	 GS&Co.	 and	 Goldman	 Sachs International	(GSI),	are	also	subject	to	capital	requirements.	We	expect	Group Inc.,	GS	Bank	USA,	GS&Co.,	GSI	and	other	regulated	subsidiaries	to	become subject	to	increased	capital	requirements	over	time.

Capital	Ratios.	Since	January	1,	2014,	we	have	been	subject	to	the	Federal Reserve	 Board's	 revised	 risk-based	 capital	 and	 leverage	 ratio	 regulations, inclusive	of	certain	transitional	provisions	(Revised	Capital	Framework).	These regulations	are	largely	based	on	the	Basel	Committee's	final	capital	framework for	strengthening	international	capital	standards	(Basel	III),	and	also	implement certain	provisions	of	the	Dodd-Frank	Act.	The	Revised	Capital	Framework	also introduces	a	new	Tier	1	supplementary	leverage	ratio	(supplementary	leverage ratio)	for	Advanced	approach	banking	organizations.

See	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results of	Operations	—	Equity	Capital	Management	and	Regulatory	Capital"	in	Part	II, Item	 7	 of	 the	 2014	 Form	 10-K	 and	 Note	 20	 to	 the	 consolidated	 financial statements	 in	 Part	 II,	 Item	 8	 of	 the	 2014	Form	 10-K	 for	 the	 aspects	 of	 the Revised	 Capital	 Framework	 that	 are	 most	 relevant	 to	 us	 as	 an	 Advanced approach	 banking	 organization,	 including	 information	 about	 our	 Common Equity	Tier	1	(CET1),	CET1	ratio,	Tier	1	capital,	Tier	1	capital	ratio,	Total capital,	Total	capital	ratio,	risk-weighted	assets	(RWAs),	Tier	1	leverage	ratio and	supplementary	 leverage	ratio,	and	for	a	discussion	of	minimum	required ratios.

Liquidity	Ratios	under	Basel	III.	Historically,	regulation	and	monitoring	of bank	and	bank	holding	company	liquidity	has	been	addressed	as	a	supervisory matter,	both	in	the	United	States	and	internationally,	without	required	formulaic measures.	Basel	III,	which	is	subject	to	implementation	by	national	regulators, requires	banks	and	bank	holding	companies	to	measure	their	liquidity	against two	specific	liquidity	tests	that,	although	similar	in	some	respects	to	liquidity measures	 historically	 applied	 by	 banks	 and	 regulators	 for	 management	 and supervisory	purposes,	will	be	mandated	by	regulation.	One	test,	referred	to	as	the liquidity	coverage	ratio	(LCR),	is	designed	to	ensure	that	the	entity	maintains	an adequate	level	of	unencumbered	high-quality	liquid	assets	under	an	acute	short- term	liquidity	stress	scenario.	The	other,	referred	to	as	the	net	stable	funding ratio	 (NSFR),	 is	 designed	 to	 promote	 more	 medium-	 and	 long-term	 stable funding	of	the	assets	and	off-balance-sheet	activities	of	these	entities	over	a	one- year	 time	 horizon.	 These	 requirements	 may	 incentivize	 banking	 entities	 to increase	their	holdings	of	securities	that	qualify	as	high-quality	liquid	assets	and increase	the	use	of	long-term	debt	as	a	funding	source.

During	 2014,	 the	 U.S.	 federal	 bank	 regulatory	 agencies	 approved	 final	 rules implementing	the	LCR	for	Advanced	approach	banking	organizations	that	are generally	consistent	with	the	Basel	Committee's	framework	as	described	above, but	 which	 include	 accelerated	 transitional	 provisions	 and	 more	 stringent requirements	 related	 to	 both	 the	 range	 of	 assets	 that	 qualify	 as	 high-quality liquid	assets	and	cash	outflow	assumptions	for	certain	types	of	funding.	Under the	 accelerated	 transition	 timeline,	 the	 LCR	 became	 effective	 in	 the	 United States	on	January	1,	2015,	with	a	phase-in	period	whereby	firms	must	meet	an 80%	minimum	ratio	in	2015,	which	will	increase	10%	per	year	until	2017.	See "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of Operations	 —	 Liquidity	 Risk	 Management"	 in	 Part	 II,	 Item	 7	 of	 the	 2014 Form	10-K	for	information	about	the	LCR.

During	2014,	the	Basel	Committee	issued	its	final	framework	for	calculation	of the	NSFR.	Under	the	Basel	Committee	framework,	the	NSFR	will	be	effective on	 January	 1,	 2018.	The	 U.S.	 federal	 bank	 regulatory	 agencies	 have	 not	 yet proposed	rules	implementing	the	NSFR	for	U.S.	banking	organizations.	We	are currently	evaluating	the	impact	of	the	Basel	Committee's	NSFR	framework.

The	implementation	of	these	standards,	and	any	amendments	or	modifications adopted	by	the	U.S.	federal	bank	regulatory	agencies,	could	impact	our	liquidity and	funding	requirements	and	practices	in	the	future.

Stress	Tests.	The	Federal	Reserve	Board	has	issued	final	rules	implementing the	 requirements	 of	 the	 Dodd-Frank	 Act	 concerning	 the	 Dodd-Frank	 Act supervisory	stress	tests	to	be	conducted	by	the	Federal	Reserve	Board	and	semi- annual	 company-run	 stress	 tests	 for	 bank	 holding	 companies	 with	 total consolidated	assets	of	$50	billion	or	more.	The	stress	test	rules	require	increased involvement	by	boards	of	directors	in	stress	testing	and	public	disclosure	of	the results	 of	 both	 the	 Federal	 Reserve	 Board's	 annual	 stress	 tests	 and	 a	 bank holding	 company's	 annual	 supervisory	 stress	 tests,	 and	 semi-annual	 internal stress	tests.	Certain	stress	test	requirements	are	also	applicable	to	GS	Bank	USA, as	discussed	below.

Our	 internally	 developed	 severely	 adverse	 scenario	 is	 designed	 to	 stress	 the firm's	 risks	 and	 idiosyncratic	 vulnerabilities	 and	 assess	 the	 firm's	 pro-forma capital	 position	 and	 ratios	 under	 the	 hypothetical	 stressed	 environment.	 We publish	summaries	of	our	annual	and	mid-cycle	stress	tests	results	on	our	web site	as	described	under	"Available	Information"	below.	Our	annual	Dodd-Frank Act	stress	test	submission	is	incorporated	into	the	annual	capital	plans	that	we are	 required	 to	 submit	 to	 the	 Federal	 Reserve	 Board	 as	 part	 of	 the Comprehensive	Capital	Analysis	and	Review	(CCAR).	The	purpose	of	CCAR	is to	 ensure	 that	 large	 bank	 holding	 companies	 have	 robust,	 forward-looking capital	planning	processes	that	account	for	each	institution's	unique	risks	and that	permit	continued	operations	during	times	of	economic	and	financial	stress. As	part	of	CCAR,	the	Federal	Reserve	Board	evaluates	an	institution's	plan	to make	capital	distributions,	such	as	repurchasing	or	redeeming	stock	or	increasing dividend	 payments,	 across	 a	 range	 of	 macro-economic	 and	 firm-specific assumptions.

# Payment	of	Dividends	and	Stock	Repurchases.	Dividend	payments	by

Group	Inc.	to	its	shareholders	and	stock	repurchases	by	Group	Inc.	are	subject	to the	oversight	of	the	Federal	Reserve	Board.	The	dividend	and	share	repurchase policies	of	large	bank	holding	companies,	such	as	Group	Inc.,	are	reviewed	by the	Federal	Reserve	Board,	through	the	CCAR	process,	based	on	capital	plans and	 stress	 tests	 submitted	 by	 the	 bank	 holding	 company,	 and	 are	 assessed against,	among	other	things,	the	bank	holding	company's	ability	to	meet	and exceed	minimum	regulatory	capital	ratios	under	stressed	scenarios,	its	expected sources	and	uses	of	capital	over	the	planning	horizon	under	baseline	and	stressed scenarios,	and	any	potential	impact	of	changes	to	its	business	plan	and	activities on	its	capital	adequacy	and	liquidity.

In	October	2014,	the	Federal	Reserve	Board	issued	a	final	rule	modifying	the regulations	for	capital	planning	and	stress	testing.	The	modifications	change	the dates	for	submitting	the	capital	plan	and	stress	test	results	beginning	with	the 2016	cycle	and	include	a	limitation	on	capital	distributions	to	the	extent	that actual	capital	issuances	are	less	than	the	amount	indicated	in	the	capital	plan submission.

The	Federal	Reserve	Board	informed	us	that	it	did	not	object	to	our	proposed capital	 actions	 through	 the	 first	 quarter	 of	 2015,	 including	 the	 repurchase	 of outstanding	common	stock,	an	increase	in	our	quarterly	common	stock	dividend, and	 the	 possible	 issuance,	 redemption	 and	 modification	 of	 other	 capital securities.	We	submitted	our	2015	capital	plan	and	proposed	capital	actions	to the	Federal	Reserve	Board	in	January	2015	and	expect	to	publish	a	summary	of our	annual	Dodd-Frank	Act	stress	test	results	in	March	2015.

Enhanced	Prudential	Standards.	In	February	2014, the	Federal	Reserve Board	adopted	rules	to	implement	certain	of	the	enhanced	prudential	standards contemplated	by	the	Dodd-Frank	Act.	Effective	on	January	1,	2015,	the	rules require	bank	holding	companies	with	$50	billion	or	more	in	total	consolidated assets	to	comply	with	enhanced	liquidity	and	overall	risk	management	standards, including	a	buffer	of	highly	liquid	assets	based	on	projected	funding	needs	for 30	 days,	 and	 increased	 involvement	 by	 boards	 of	 directors	 in	 liquidity	 and overall	risk	management.	Although	 the	 liquidity	buffer	under	 these	rules	has some	similarities	to	the	LCR	(and	is	described	by	the	agencies	as	complementary to	the	LCR),	it	is	a	separate	requirement	that	is	in	addition	to	the	LCR.	See "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of Operations	—	Risk	Management	and	Risk	Factors	—	Overview	and	Structure	of Risk	Management"	and	"—	Liquidity	Risk	Management"	in	Part	II,	Item	7	of the	2014	Form	10-K	for	information	about	our	risk	management	practices	and liquidity.

# Regulatory	Proposals

In	addition	to	the	regulatory	rule	changes	that	have	already	been	adopted	(as discussed	above),	both	the	Federal	Reserve	Board	and	the	Basel	Committee	have proposed	other	changes,	which	are	discussed	below.	The	full	impact	of	these proposals	on	the	firm	will	not	be	known	with	certainty	until	after	any	resulting rules	 are	 finalized	 and	 market	 practices	 develop	 under	 the	 final	 rules. Furthermore,	 these	 proposals,	 the	 Dodd-Frank	 Act,	 other	 reform	 initiatives proposed	and	announced	by	the	U.S.	federal	bank	regulatory	agencies,	the	Basel Committee,	 and	 other	 governmental	 entities	 and	 regulators	 (including	 the European	Union	(EU),	the	PRA	and	the	FCA)	are	not	in	all	cases	consistent	with one	another,	which	adds	further	uncertainty	to	our	future	capital,	leverage	and liquidity	requirements,	and	those	of	our	subsidiaries.

Federal	Reserve	Board	Proposals.	In	December	2014,	the	Federal	Reserve Board	proposed	a	rule	to	establish	risk-based	capital	surcharges	for	U.S.	Global Systemically	Important	Banks	(G-SIBs).	For	these	institutions,	the	proposed	rule would	 implement	 the	 framework	 developed	 by	 the	 Basel	 Committee	 for assessing	the	global	systemic	importance	of	banking	institutions	and	determining the	range	of	additional	CET1	that	should	be	maintained	by	those	deemed	to	be G-SIBs.	 Under	 the	 Basel	 Committee's	 framework,	 the	 required	 amount	 of additional	CET1	for	G-SIBs	will	initially	range	from	1%	to	2.5%	and	could	be higher	in	the	future	for	a	banking	institution	that	increases	its	systemic	footprint (e.g.,	 by	 increasing	 total	 assets).	 The	 Federal	 Reserve	 Board	 stated	 that	 its framework	would	result	 in	surcharges	higher	 than	 those	calculated	under	 the methodology	 published	 by	 the	 Basel	 Committee,	 with	 expected	 surcharges ranging	 from	 1%	 to	 4.5%.	 The	 proposed	 rule	 treats	 the	 Basel	 Committee's methodology	as	a	floor	and	introduces	an	alternative	calculation	to	determine	the applicable	 surcharge,	 which	 includes	 a	 significantly	 higher	 surcharge	 for systemic	risk	and,	as	part	of	the	calculation	of	the	applicable	surcharge,	a	new factor	 based	 on	 a	 G-SIB's	 use	 of	 short-term	 wholesale	 funding.	 Under	 the Federal	Reserve	Board's	proposed	rule,	U.S.	G-SIBs	would	be	required	to	meet the	capital	surcharges	on	a	phased-in	basis	beginning	in	2016	through	2019.	See "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of Operations	—	Equity	Capital	Management	and	Regulatory	Capital"	in	Part	II, Item	7	of	the	2014	Form	10-K	for	additional	information	about	our	minimum capital	ratios	and	capital	buffers.

In	December	2011,	the	Federal	Reserve	Board	proposed	rules	to	implement	the enhanced	prudential	standards	and	early	remediation	requirements	contemplated by	the	Dodd-Frank	Act.	Although	most	components	of	these	proposals	have	now been	addressed	in	final	rules	that	are	described	above,	the	single-counterparty credit	 limits	and	early	remediation	requirements	are	still	under	consideration. The	 proposed	 single-counterparty	 credit	 limits	 impose	 more	 stringent requirements	 for	 credit	 exposure	 among	 major	 financial	 institutions,	 which (together	with	other	provisions	incorporated	into	the	Basel	III	capital	rules)	may affect	 our	 ability	 to	 transact	 or	 hedge	 with	 other	 financial	 institutions.	 The proposed	early	remediation	rules	are	modeled	on	the	prompt	corrective	action regime,	described	below,	but	are	designed	to	require	action	to	begin	in	earlier stages	of	a	company's	financial	distress,	based	on	a	range	of	triggers,	including capital	and	leverage,	stress	test	results,	liquidity	and	risk	management.

Basel	Committee	and	Financial	Stability	Board	Proposals. 	The	Basel Committee	 published	 its	 final	 guidelines	 for	 calculating	 incremental	 capital requirements	for	domestic	systemically	important	banking	institutions	(D-SIBs). These	guidelines	are	complementary	to	the	framework	outlined	above	for	G- SIBs,	but	are	more	principles-based	in	order	to	provide	an	appropriate	degree	of national	 discretion.	 The	 impact	 of	 these	 guidelines	 on	 the	 regulatory	 capital requirements	of	GS	Bank	USA,	GSI	and	other	of	our	subsidiaries	will	depend	on how	they	are	implemented	by	the	banking	and	non-banking	regulators	in	the United	States	and	other	jurisdictions.

The	Basel	Committee	has	recently	issued	several	updates	which	propose	further changes	to	capital	regulations.	In	particular,	it	has	finalized	a	revised	standard approach	 for	 calculating	 RWAs	 for	 counterparty	 credit	 risk	 on	 derivatives exposures	 ("Standardized	 Approach	 for	 measuring	 Counterparty	 Credit	 Risk exposures,"	known	as	"SA-CCR").	In	addition,	it	has	published	guidelines	for measuring	 and	 controlling	 large	 exposures	 ("Supervisory	 Framework	 for measuring	and	controlling	Large	Exposures"),	and	issued	an	updated	framework for	regulatory	capital	treatment	of	banking	book	securitizations.

The	Basel	Committee	has	also	issued	consultation	papers	on	a	"Fundamental Review	of	the	Trading	Book"	and	on	the	design	of	a	capital	floor	framework based	on	the	standardized	approach.	The	impact	of	all	of	these	developments	on the	firm	(including	RWAs	and	regulatory	capital	ratios)	will	not	be	known	until after	 any	 resulting	 rules	 are	 finalized	 by	 the	 U.S.	 federal	 bank	 regulatory agencies.

In	November	2014,	the	Financial	Stability	Board	issued	a	set	of	principles	and	a term	sheet	on	a	new	minimum	standard	for	"total	loss-absorbing	capacity"	of	G- SIBs	 and	 indicated	 that	 it	 expects	 to	 finalize	 its	 proposal	 by	 late	 2015.	The proposal	would	require	G-SIBs	to	maintain	minimum	ratios	of	regulatory	capital plus	certain	types	of	debt	instruments	to	RWAs	and	leverage	exposure.	Under the	proposal,	the	requirements	will	be	effective	no	earlier	than	January	1,	2019. The	proposal	is	subject	to	change,	and	its	impact	on	us	will	depend	on,	among other	things,	how	it	is	implemented	by	the	U.S.	federal	bank	regulatory	agencies.

# Resolution	and	Recovery	Plans

As	required	by	the	Dodd-Frank	Act,	the	Federal	Reserve	Board	and	FDIC	have jointly	issued	a	rule	requiring	each	bank	holding	company	with	over	$50	billion in	 assets	 and	 each	 designated	 systemically	 important	 financial	 institution	 to provide	to	regulators	an	annual	plan	for	its	rapid	and	orderly	resolution	in	the event	of	material	financial	distress	or	failure	(resolution	plan).	Our	resolution plan	must,	among	other	things,	demonstrate	that	GS	Bank	USA	is	adequately protected	from	risks	arising	from	our	other	entities.	The	regulators'	joint	rule sets	specific	standards	for	the	resolution	plans,	including	requiring	a	detailed resolution	 strategy	 and	 analyses	 of	 the	 company's	 material entities, organizational structure, interconnections and interdependencies,	 and management	information	systems,	among	other	elements.	Group	Inc.	submitted resolution	plans	to	its	regulators	in	2012,	2013	and	2014.	In	August	2014,	the Federal	Reserve	Board	and	the	FDIC	indicated	that	Group	Inc.	and	other	large industry	participants	had	certain	shortcomings	in	the	2013	resolution	plans	that must	 be	 addressed	 in	 the	 2015	 resolution	 plans,	 which	 are	 required	 to	 be submitted	on	or	before	July	1,	2015.	If	we	fail	to	cure	the	deficiencies	in	a	timely manner	and	the	Federal	Reserve	Board	and	the	FDIC	jointly	determine	that	our resolution	plan,	after	any	permitted	resubmission,	is	not	credible,	 the	Federal Reserve	Board	and	the	FDIC	may	jointly	impose	more	stringent	capital,	leverage or	 liquidity	 requirements	 on	 us	 or	 restrictions	 on	 our	 growth,	 activities	 or operations	until	we	submit	a	plan	that	remedies	the	deficiencies.	If	the	Federal Reserve	Board	and	the	FDIC	ultimately	determine	that	we	have	been	unable	to remedy	the	deficiencies,	they	may	jointly	order	us	to	divest	assets	or	operations in	order	to	facilitate	our	orderly	resolution	in	the	event	of	our	failure.

Group	Inc.	is	also	required	by	the	Federal	Reserve	Board	to	submit,	on	an	annual basis,	a	global	recovery	plan	that	outlines	the	steps	that	management	could	take to	reduce	risk,	maintain	sufficient	 liquidity,	and	conserve	capital	 in	 times	of prolonged	stress.	We	have	been	submitting	plans	annually	since	2010.

The	European	Banking	Authority	and	the	national	resolution	authorities	of	the EU	 are	 in	 the	 process	 of	 implementing	 the	 Bank	 Recovery	 and	 Resolution Directive	(BRRD),	which	will	impact	the	firm's	EU-regulated	entities.	Certain	of the	provisions	of	BRRD,	including	the	requirements	for	contractual	recognition of	 the	 "bail-in"	 powers	 of	 EU	 resolution	 authorities	 to	 recapitalize	 a	 failing entity	by	writing	down	its	unsecured	debt	or	converting	its	unsecured	debt	into equity,	came	into	force	on	January	1,	2015,	and	the	remainder	of	the	BRRD's provisions	are	expected	to	be	implemented	by	January	2016.

# Source	of	Strength

Federal	Reserve	Board	policy	historically	has	required	bank	holding	companies to	act	as	a	source	of	strength	to	their	bank	subsidiaries	and	to	commit	capital	and financial	resources	to	support	those	subsidiaries.	The	Dodd-Frank	Act	codifies this	 policy	 as	 a	 statutory	 requirement.	 This	 support	 may	 be	 required	 by	 the Federal	 Reserve	 Board	 at	 times	 when	 we	 might	 otherwise	 determine	 not	 to provide	it.	Capital	loans	by	a	bank	holding	company	to	a	subsidiary	bank	are subordinate	in	right	of	payment	to	deposits	and	to	certain	other	indebtedness	of the	subsidiary	bank.	In	addition,	if	a	bank	holding	company	commits	to	a	federal bank	regulator	that	it	will	maintain	the	capital	of	its	bank	subsidiary,	whether	in response	to	the	Federal	Reserve	Board's	invoking	its	source-of-strength	authority or	in	response	to	other	regulatory	measures,	that	commitment	will	be	assumed by	the	bankruptcy	trustee	and	the	bank	will	be	entitled	to	priority	payment	in respect	 of	 that	 commitment,	 ahead	 of	 other	 creditors	 of	 the	 bank	 holding company.

The	BHC	Act	provides	for	regulation	of	bank	holding	company	activities	by various	 functional	 regulators	 and	 prohibits	 the	 Federal	 Reserve	 Board	 from requiring	a	payment	by	a	holding	company	subsidiary	to	a	depository	institution if	the	functional	regulator	of	that	subsidiary	objects	to	such	payment.	In	such	a case,	 the	 Federal	 Reserve	 Board	 could	 instead	 require	 the	 divestiture	 of	 the depository	institution	and	impose	operating	restrictions	pending	the	divestiture.

# Compensation	Practices

Our	 compensation	 practices	 are	 subject	 to	 oversight	 by	 the	 Federal	 Reserve Board	and,	with	respect	to	some	of	our	subsidiaries	and	employees,	by	other financial	regulatory	bodies	worldwide.	The	scope	and	content	of	compensation regulation	in	the	financial	industry	are	continuing	to	develop,	and	we	expect	that these	regulations	and	resulting	market	practices	will	evolve	over	a	number	of years.

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

The	Financial	Stability	Board	has	released	standards	for	implementing	certain compensation	principles	for	banks	and	other	financial	companies	designed	 to encourage	sound	compensation	practices.	These	standards	are	to	be	implemented by	 local	 regulators.	 In	 the	 EU,	 the	 Fourth	 Capital	 Requirements	 Directive (CRD4)	includes	compensation	provisions	designed	to	implement	the	Financial Stability	Board's	compensation	standards.	These	rules	have	been	implemented by	EU	member	states	and,	among	other	things,	limit	the	ratio	of	variable	to	fixed compensation	 of	 certain	 employees,	 including	 those	 identified	 as	 having	 a material	impact	on	the	risk	profile	of	EU-regulated	entities,	including	GSI.	These requirements	are	in	addition	to	the	guidance	issued	by	U.S.	financial	regulators discussed	above	and	the	Dodd-Frank	Act	provision	discussed	below.

The	Dodd-Frank	Act	requires	the	U.S.	financial	regulators,	including	the	Federal Reserve	Board,	to	establish	joint	regulations	or	guidelines	prohibiting	incentive- based	 payment	 arrangements	 at	 specified	 regulated	 entities	 having	 at	 least $1	 billion in	 total	 assets	 (which	 would	 include	 Group	 Inc.	 and	 some	 of	 its depository	 institution,	 broker-dealer	 and	 investment	 advisor	 subsidiaries)	 that encourage	 inappropriate	 risks	 by	 providing	 an	 executive	 officer,	 employee, director	or	principal	shareholder	with	excessive	compensation,	fees,	or	benefits or	 that	 could	 lead	 to	 material	 financial	 loss	 to	 the	 entity.	 In	 addition,	 these regulators	must	establish	regulations	or	guidelines	requiring	enhanced	disclosure to	regulators	of	incentive-based	compensation	arrangements.	The	initial	version of	these	regulations	was	proposed	by	the	U.S.	financial	regulators	in	early	2011 but	 the	 regulations	 have	 not	 yet	 been	 finalized.	 The	 proposed	 regulations incorporate	 the	 three	 key	 principles	 from	 the	 regulatory	 guidance	 discussed above.	If	the	regulations	are	adopted	in	the	form	proposed,	they	may	restrict	our flexibility	with	respect	to	the	manner	in	which	we	structure	compensation.

# Regulation	of	GS	Bank	USA

Our	 subsidiary,	 GS	 Bank	 USA,	 an	 FDIC-insured,	 New	York	 State-chartered bank	and	a	member	of	the	Federal	Reserve	System,	is	supervised	and	regulated by	the	Federal	Reserve	Board,	the	FDIC,	the	New	York	State	Department	of Financial	 Services	 and	 the	 CFPB,	 and	 is	 subject	 to	 minimum	 capital requirements	(described	below)	that	are	calculated	in	a	manner	similar	to	those applicable	to	bank	holding	companies.	A	number	of	our	activities	are	conducted partially	 or	 entirely	 through	 GS	 Bank	 USA	 and	 its	 subsidiaries,	 including: origination	of	bank	loans;	interest	rate,	credit,	currency	and	other	derivatives; leveraged	finance;	mortgage	origination;	structured	finance;	and	agency	lending.

Under	rules	adopted	by	the	Federal	Reserve	Board	in	2012	under	the	Dodd-Frank Act,	GS	Bank	USA	is	required	to	conduct	stress	tests	on	an	annual	basis,	to submit	the	results	to	the	Federal	Reserve	Board,	and	to	make	a	summary	of	those results	public.	The	rules	require	that	the	board	of	directors	of	GS	Bank	USA, among	other	things,	consider	the	results	of	the	stress	tests	in	the	normal	course	of the	bank's	business	including,	but	not	limited	to,	its	capital	planning,	assessment of	capital	adequacy	and	risk	management	practices.

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

Transactions	with	Affiliates.	Transactions	 between	 GS	 Bank	 USA	 or	 its subsidiaries,	 on	 the	 one	 hand,	 and	 Group	 Inc.	 or	 its	 other	 subsidiaries	 and affiliates,	on	the	other	hand,	are	regulated	by	the	Federal	Reserve	Board.	These regulations	 generally	 limit	 the	 types	 and	 amounts	 of	 transactions	 (including credit	extensions	from	GS	Bank	USA	or	its	subsidiaries	to	Group	Inc.	or	its other	subsidiaries	and	affiliates)	that	may	take	place	and	generally	require	those transactions	to	be	on	market	terms	or	better	to	GS	Bank	USA.	These	regulations generally	 do	 not	 apply	 to	 transactions	 between	 GS	 Bank	 USA	 and	 its subsidiaries.	The	Dodd-Frank	Act	expanded	 the	coverage	and	scope	of	 these regulations,	 including	 by	 applying	 them	 to	 the	 credit	 exposure	 arising	 under derivative	 transactions,	 repurchase	 and	 reverse	 repurchase	 agreements,	 and securities	borrowing	and	lending	transactions.

Federal	and	state	laws	impose	limitations	on	the	payment	of	dividends	by	our depository	 institution	 subsidiaries	 to	 Group	 Inc.	 In	 general,	 the	 amount	 of dividends	 that	 may	 be	 paid	 by	 GS	 Bank	 USA	 or	 our	 national	 bank	 trust company	subsidiary	is	limited	to	the	lesser	of	the	amounts	calculated	under	a "recent	earnings"	test	and	an	"undivided	profits"	test.	Under	the	recent	earnings test,	a	dividend	may	not	be	paid	if	the	total	of	all	dividends	declared	by	the	entity in	any	calendar	year	is	in	excess	of	the	current	year's	net	income	combined	with the	retained	net	 income	of	 the	 two	preceding	years,	unless	 the	entity	obtains prior	regulatory	approval.	Under	the	undivided	profits	test,	a	dividend	may	not be	paid	in	excess	of	the	entity's	"undivided	profits"	(generally,	accumulated	net profits	that	have	not	been	paid	out	as	dividends	or	transferred	to	surplus).	The banking	regulators	have	authority	to	prohibit	or	limit	the	payment	of	dividends if,	in	the	banking	regulator's	opinion,	payment	of	a	dividend	would	constitute	an unsafe	or	unsound	practice	 in	 light	of	 the	financial	condition	of	 the	banking organization.

Deposit	Insurance.	GS	Bank	USA	accepts	deposits,	and	those	deposits	have the	benefit	of	FDIC	insurance	up	to	the	applicable	limits.	The	FDIC's	Deposit Insurance	Fund	is	funded	by	assessments	on	insured	depository	institutions,	such as	 GS	 Bank	 USA.	 The	 amounts	 of	 these	 assessments	 for	 larger	 depository institutions	(generally	those	that	have	$10	billion	in	assets	or	more),	such	as	GS Bank	USA,	are	currently	based	on	the	average	total	consolidated	assets	less	the average	 tangible	 equity	 of	 the	 insured	 depository	 institution	 during	 the assessment	period,	the	supervisory	ratings	of	the	insured	depository	institution and	 specified	 forward-looking	 financial	 measures	 used	 to	 calculate	 the assessment	rate.	The	assessment	rate	is	subject	to	adjustment	by	the	FDIC.

# Prompt	Corrective	Action	and	Capital	Ratios.	The	U.S.	Federal	Deposit

Insurance	Corporation	Improvement	Act	of	1991	(FDICIA),	among	other	things, requires	 the	 federal	 banking	 agencies	 to	 take	 "prompt	 corrective	 action"	 in respect	of	depository	institutions	that	do	not	meet	specified	capital	requirements. FDICIA	 establishes	 five	 capital	 categories	 for	 FDIC-insured	 banks:	 well- capitalized, adequately capitalized, undercapitalized, significantly undercapitalized	and	critically	undercapitalized.

GS	 Bank	 USA	 computes	 its	 CET1,	 Tier	 1	 capital,	 Total	 capital	 and	 Tier	 1 leverage	ratios	in	accordance	with	the	Revised	Capital	Framework.	In	addition, commencing	 January	 1,	 2018,	 GS	 Bank	 USA	 will	 be	 subject	 to	 minimum supplementary	leverage	ratio	requirements.

See	Note	20	to	the	consolidated	financial	statements	in	Part	II,	Item	8	of	the 2014	 Form	 10-K	 and	 "Management's	 Discussion	 and	 Analysis	 of	 Financial Condition	 and	 Results	 of	 Operations	 —	 Equity	 Capital	 Management	 and Regulatory	Capital"	in	Part	II,	Item	7	of	the	2014	Form	10-K	for	information about	 GS	 Bank	 USA's	 regulatory	 capital	 ratios	 and	 supplementary	 leverage ratio.

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

The	prompt	corrective	action	regulations	apply	only	to	depository	institutions and	not	to	bank	holding	companies	such	as	Group	Inc.	However,	the	Federal Reserve	Board	is	authorized	to	take	appropriate	action	at	the	holding	company level,	 based	 upon	 the	 undercapitalized	 status	 of	 the	 holding	 company's depository	 institution	 subsidiaries.	 In	 certain	 instances	 relating	 to	 an undercapitalized	 depository	 institution	 subsidiary,	 the	 bank	 holding	 company would	 be	 required	 to	 guarantee	 the	 performance	 of	 the	 undercapitalized subsidiary's	capital	restoration	plan	and	might	be	liable	for	civil	money	damages for	failure	to	fulfill	its	commitments	on	that	guarantee.	Furthermore,	in	the	event of	the	bankruptcy	of	the	holding	company,	the	guarantee	would	take	priority over	the	holding	company's	general	unsecured	creditors,	as	described	under	"— Source	of	Strength"	above.

Resolution	Plan.	The	FDIC	issued	a	rule	requiring	each	insured	depository institution	with	$50	billion	or	more	in	assets,	such	as	GS	Bank	USA,	to	provide	a resolution	plan.	Similar	to	our	resolution	plan	for	Group	Inc.,	our	resolution	plan for	GS	Bank	USA	must,	among	other	things,	demonstrate	that	it	is	adequately protected	from	risks	arising	from	our	other	entities.	GS	Bank	USA	submitted	its 2013	resolution	plan	to	its	regulators	in	September	2013	and	its	2014	resolution plan	 in	June	2014.	In	December	2014,	 the	FDIC	 issued	guidance	relating	 to insured	 depository	 institutions'	 resolution	 plans.	 GS	 Bank	 USA's	 2015 resolution	plan	is	required	to	be	submitted	on	or	before	July	1,	2015.

# Insolvency	of	an	Insured	Depository	Institution	or	a	Bank	Holding Company

Under	the	Federal	Deposit	Insurance	Act	of	1950,	if	the	FDIC	is	appointed	as conservator	or	receiver	for	an	insured	depository	institution	such	as	GS	Bank USA,	upon	its	insolvency	or	in	certain	other	events,	the	FDIC	has	broad	powers, including	the	power:

Ÿ	To	transfer	any	of	the	depository	institution's	assets	and	liabilities	to	a	new obligor,	including	a	newly	formed	"bridge"	bank,	without	the	approval	of	the depository	institution's	creditors;

Ÿ	To	 enforce	 the	 depository	 institution's	 contracts	 pursuant	 to	 their	 terms without	regard	to	any	provisions	triggered	by	the	appointment	of	the	FDIC	in that	capacity;	or

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

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

The	 Dodd-Frank	 Act	 created	 a	 new	 resolution	 regime	 (known	 as	 "orderly liquidation	authority")	for	bank	holding	companies	and	their	affiliates	that	are systemically	 important	 and	 certain	 non-bank	 financial	 companies.	 Under	 the orderly	 liquidation	authority,	 the	FDIC	may	be	appointed	as	receiver	for	 the systemically	important	institution	and	its	failed	non-bank	subsidiaries	if,	among other	conditions,	it	is	determined	at	the	time	of	the	institution's	failure	that	it	is in	default	or	in	danger	of	default	and	the	failure	poses	a	risk	to	the	stability	of	the U.S.	financial	system.

If	the	FDIC	is	appointed	as	receiver	under	the	orderly	liquidation	authority,	then the	powers	of	the	receiver,	and	the	rights	and	obligations	of	creditors	and	other parties	 who	 have	 dealt	 with	 the	 institution,	 would	 be	 determined	 under	 the orderly	liquidation	authority,	and	not	under	the	bankruptcy	or	insolvency	law that	 would	 otherwise	 apply.	 The	 powers	 of	 the	 receiver	 under	 the	 orderly liquidation	authority	were	generally	based	on	the	powers	of	the	FDIC	as	receiver for	depository	institutions	under	the	Federal	Deposit	Insurance	Act.	Substantial differences	 in	 the	 rights	 of	 creditors	 exist	 between	 the	 orderly	 liquidation authority	and	the	U.S.	Bankruptcy	Code,	including	the	right	of	the	FDIC	under the	orderly	liquidation	authority	to	disregard	the	strict	priority	of	creditor	claims in	 some	 circumstances,	 the	 use	 of	 an	 administrative	 claims	 procedure	 to determine	 creditors'	 claims	 (as	 opposed	 to	 the	 judicial	 procedure	 utilized	 in bankruptcy	 proceedings),	 and	 the	 right	 of	 the	 FDIC	 to	 transfer	 claims	 to	 a "bridge"	entity.	In	addition,	the	orderly	liquidation	authority	limits	the	ability	of creditors	 to	 enforce	 certain	 contractual	 cross-defaults	 against	 affiliates	 of	 the institution	in	receivership.

The	 orderly	 liquidation	 authority	 provisions	 of	 the	 Dodd-Frank	Act	 became effective	 upon	 enactment.	The	 FDIC	 has	 completed	 several	 rulemakings	 and taken	other	actions	under	the	orderly	liquidation	authority,	including	the	issuance of	a	notice	in	December	2013	describing	some	elements	of	its	"single	point	of entry"	 or	 "SPOE"	 strategy	 pursuant	 to	 the	 orderly	 liquidation	 authority provisions	of	the	Dodd-Frank	Act.	Under	this	strategy,	the	FDIC	would,	among other	things,	resolve	a	failed	financial	holding	company	by	transferring	its	assets to	a	"bridge"	holding	company.

In	November	2014,	we,	along	with	a	number	of	other	major	global	banking organizations,	adhered	to	a	new	International	Swaps	and	Derivatives	Association Resolution	 Stay	 Protocol	 (the	 ISDA	 Protocol)	 that	 was	 developed	 in coordination	 with	 the	 Financial	 Stability	 Board	 and	 that	 took	 effect	 in January	2015.	The	ISDA	Protocol	imposes	a	stay	on	certain	cross-default	and early	 termination	 rights	 within	 standard	 ISDA	 derivatives	 contracts	 between adhering	parties	in	the	event	that	one	of	them	is	subject	to	resolution	in	its	home jurisdiction,	including	a	resolution	under	the	orderly	liquidation	authority	in	the United	States.	The	ISDA	Protocol	is	expected	to	be	adopted	more	broadly	in	the future,	 following	 the	 adoption	 of	 regulations	 by	 banking	 regulators,	 and expanded	to	include	instances	where	a	U.S.	financial	holding	company	becomes subject	to	proceedings	under	the	U.S.	bankruptcy	code.

# Broker-Dealer	and	Securities	Regulation

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

In	addition,	state	securities	and	other	regulators	also	have	regulatory	or	oversight authority	over	GS&Co.	Similarly,	our	businesses	are	also	subject	to	regulation by	 various	 non-U.S.	 governmental	 and	 regulatory	 bodies	 and	 self-regulatory authorities	in	virtually	all	countries	where	we	have	offices,	as	discussed	further under	"Other	Regulation"	below.	GSEC	and	one	of	its	subsidiaries	are	registered U.S.	broker-dealers	and	are	regulated	by	the	SEC,	the	NYSE	and	FINRA.	For	a discussion	 of	 net	 capital	 requirements	 applicable	 to	 GS&Co.	 and	 GSEC,	 see Note	20	to	the	consolidated	financial	statements	in	Part	II,	Item	8	of	the	2014 Form	10-K.

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

The	Dodd-Frank	Act	will	result	in	additional	regulation	by	the	SEC,	the	CFTC and	other	regulators	of	our	broker-dealer	and	regulated	subsidiaries	in	a	number of	respects.	The	legislation	calls	for	the	imposition	of	expanded	standards	of	care by	 market	 participants	 in	 dealing	 with	 clients	 and	 customers,	 including	 by providing	the	SEC	with	authority	to	adopt	rules	establishing	fiduciary	duties	for broker-dealers	and	directing	the	SEC	to	examine	and	improve	sales	practices	and disclosure	by	broker-dealers	and	investment	advisers.

Our	broker-dealer	and	other	subsidiaries	will	also	be	affected	by	rules	recently adopted	by	federal	agencies	pursuant	to	the	Dodd-Frank	Act	that	require	any person	who	organizes	or	initiates	an	asset-backed	security	transaction	to	retain	a portion	 (generally,	 at	 least	 five	 percent)	 of	 any	 credit	 risk	 that	 the	 person conveys	to	a	third	party.	Securitizations	will	also	be	affected	by	rules	proposed by	the	SEC	in	September	2011	to	implement	the	Dodd-Frank	Act's	prohibition against	securitization	participants	engaging	in	any	transaction	that	would	involve or	result	in	any	material	conflict	of	interest	with	an	investor	in	a	securitization transaction.	 The	 proposed	 rules	 would	 exempt	 bona	 fide	 market-making activities	and	risk-mitigating	hedging	activities	in	connection	with	securitization activities	from	the	general	prohibition.

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

# Swaps,	Derivatives	and	Commodities	Regulation

The	commodity	futures,	commodity	options	and	swaps	industry	in	the	United States	is	subject	to	regulation	under	the	U.S.	Commodity	Exchange	Act.	The CFTC	 is	 the	 federal	 agency	 charged	 with	 the	 administration	 of	 the	 CEA.	 In addition,	the	SEC	is	the	federal	agency	charged	with	the	regulation	of	security- based	swaps.	Several	of	Goldman	Sachs'	subsidiaries,	including	GS&Co.	and GSEC,	are	registered	with	the	CFTC	and	act	as	futures	commission	merchants, commodity	pool	operators,	commodity	trading	advisors	or	(as	discussed	below) swap	dealers,	and	are	subject	to	CFTC	regulations.	The	rules	and	regulations	of various	self-regulatory	organizations,	such	as	the	Chicago	Board	of	Trade	and the	 Chicago	 Mercantile	 Exchange,	 other	 futures	 exchanges	 and	 the	 National Futures	Association,	also	govern	the	commodity	futures,	commodity	options	and swaps	activities	of	these	entities.	In	addition,	Goldman	Sachs	Financial	Markets, L.P.	 is	 registered	 with	 the	 SEC	 as	 an	 OTC	 derivatives	 dealer	 and	 conducts certain	OTC	derivatives	activities.

The	 Dodd-Frank	 Act	 provides	 for	 significantly	 increased	 regulation	 of,	 and restrictions	 on,	 derivative	 markets	 and	 transactions.	 In	 particular,	 the	 Dodd- Frank	Act	imposes	the	following	requirements	relating	to	swaps	and	security- based	swaps:

Ÿ	Real-time	public	and	regulatory	reporting	of	trade	information	for	swaps	and security-based	swaps	and	large	trader	reporting	for	swaps;

Ÿ	Registration	of	swap	dealers	and	major	swap	participants	with	the	CFTC	and of	 security-based	 swap	 dealers	 and	 major	 security-based	 swap	 participants with	the	SEC;

Ÿ	Position	 limits that cap exposure to derivatives on certain physical commodities;

Ÿ	Mandated	 clearing	 through	 central	 counterparties	 and	 execution	 through regulated	 exchanges	 or	 electronic	 facilities	 for	 certain	 swaps	 and	 security- based	swaps;

Ÿ	New	 business	 conduct	 standards	 and	 other	 requirements	 for	 swap	 dealers, major	 swap	 participants,	 security-based	 swap	 dealers	 and	 major	 security- based	 swap	 participants,	 covering	 their	 relationships	 with	 counterparties, internal	oversight	and	compliance	structures,	conflict	of	interest	rules,	internal information	 barriers,	 general	 and	 trade-specific	 record-keeping	 and	 risk management;

Ÿ	Margin	 requirements for trades that are not cleared through a central counterparty;	and

Ÿ	Entity-level	capital	requirements	for	swap	dealers,	major	swap	participants, security-based	swap	dealers,	and	major	security-based	swap	participants.

The	terms	"swaps"	and	"security-based	swaps"	are	generally	defined	broadly	for purposes	of	 these	requirements,	and	can	 include	a	wide	variety	of	derivative instruments	 in	 addition	 to	 those	 conventionally	 called	 swaps.	 The	 definition includes	 certain	 forward	 contracts,	 options,	 certain	 loan	 participations	 and guarantees	of	swaps,	subject	to	certain	exceptions,	and	relates	to	a	wide	variety of	underlying	assets	or	obligations,	including	currencies,	commodities,	interest or	other	monetary	rates,	yields,	indices,	securities,	credit	events,	loans	and	other financial	obligations.

The	CFTC	is	responsible	for	issuing	rules	relating	to	swaps,	swap	dealers	and major	swap	participants,	and	the	SEC	is	responsible	for	issuing	rules	relating	to security-based	 swaps,	 security-based	 swap	 dealers	 and	 major	 security-based swap	 participants.	 Although	 the	 CFTC	 has	 not	 yet	 finalized	 its	 margin requirements	 or	 capital	 regulations,	 certain	 of	 the	 requirements,	 including registration	 of	 swap	 dealers,	 mandatory	 clearing	 of	 certain	 swaps,	 business conduct	standards	and	real-time	public	trade	reporting,	have	taken	effect	already under	CFTC	rules,	and	the	SEC	and	the	CFTC	have	finalized	the	definitions	of	a number	of	key	terms.	Finally,	the	CFTC	has	commenced	making	determinations regarding	 which	 swaps	 must	 be	 traded	 on	 swap	 execution	 facilities	 or exchanges,	 and	 certain	 interest	 rate	 swaps	 and	 credit	 default	 swaps	 are	 now subject	to	these	trade-execution	requirements.	The	CFTC	is	expected	to	continue to	make	such	determinations	during	2015.

In	September	2014,	the	U.S.	federal	bank	regulatory	agencies	(acting	jointly) and	 the	 CFTC	 issued	 separate	 but	 similar	 proposals	 that	 would	 impose mandatory	margining	requirements	for	certain	swaps	that	are	not	cleared.

The	 SEC	 has	 proposed	 rules	 to	 impose	 margin,	 capital	 and	 segregation requirements	 for	 security-based	 swap	 dealers	 and	 major	 security-based	 swap participants.	The	SEC	has	also	proposed	rules	relating	to	registration	of	security- based	swap	dealers	and	major	security-based	swap	participants,	trade	reporting and	real-time	reporting,	and	business	conduct	requirements	for	security-based swap	 dealers	 and	 major	 security-based	 swap	 participants.	 The	 SEC	 has proposed,	 but	 not	 yet	 finalized,	 rules	 that	 would	 govern	 the	 design	 of	 new trading	 venues	 for	 security-based	 swaps	 and	 establish	 the	 process	 for determining	which	products	must	be	traded	on	these	venues.

We	have	registered	certain	subsidiaries	as	"swap	dealers"	under	the	CFTC	rules, including	GS&Co.,	GS	Bank	USA,	GSI	and	J.	Aron	&	Company.	We	expect that	these	entities,	and	our	businesses	more	broadly,	will	be	subject	to	significant and	developing	regulation	and	regulatory	oversight	 in	connection	with	swap- related	activities.

Similar	regulations	have	been	proposed	or	adopted	in	jurisdictions	outside	the United	States,	 including	 the	adoption	of	standardized	execution	and	clearing, margining	and	reporting	requirements	for	OTC	derivatives.	For	instance,	the	EU has	established	regulatory	requirements	for	OTC	derivatives	activities	under	the European	Market	Infrastructure	Regulation,	including	requirements	relating	to portfolio	reconciliation	and	reporting,	which	have	already	taken	effect,	as	well	as requirements	relating	to	clearing	and	margining	for	uncleared	derivatives,	which are	currently	expected	to	be	finalized	during	2015.

The	 full	 application	 of	 new	 derivatives	 rules	 across	 different	 national	 and regulatory	 jurisdictions	 has	 not	 yet	 been	 fully	 established.	 In	 July	 2013,	 the CFTC	finalized	guidance	and	timing	on	the	cross-border	regulation	of	swaps	and announced	that	it	had	reached	an	understanding	with	the	European	Commission regarding	 the	 cross-border	 regulation	 of	 derivatives	 and	 the	 common	 goals underlying	their	respective	regulations.	In	June	2014,	the	SEC	issued	rules	and guidance	 on	 cross-border	 security-based	 swap	 activities.	 However,	 specific determinations	 of	 the	 extent	 to	 which	 regulators	 in	 each	 of	 the	 relevant jurisdictions	will	defer	to	regulations	in	other	jurisdictions	have	not	yet	been completed.	 The	 full	 impact	 of	 the	 various	 U.S.	 and	 non-U.S.	 regulatory developments	in	this	area	will	not	be	known	with	certainty	until	all	the	rules	are finalized	and	implemented	and	market	practices	and	structures	develop	under	the final	rules.

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

In	addition,	as	a	result	of	our	power-related	and	commodities	activities,	we	are subject	to	energy,	environmental	and	other	governmental	laws	and	regulations, as	discussed	under	"Risk	Factors	—	Our	commodities	activities,	particularly	our physical	commodities	activities,	subject	us	to	extensive	regulation	and	involve certain	potential	risks,	including	environmental,	reputational	and	other	risks	that may	expose	us	to	significant	liabilities	and	costs"	in	Part	I,	Item	1A	of	the	2014 Form	10-K.

# Investment	Management	Regulation

Our	 investment	 management	 business	 is	 subject	 to	 significant	 regulation	 in numerous	 jurisdictions	 around	 the	 world	 relating	 to,	 among	 other	 things,	 the safeguarding	 of	 client	 assets,	 offerings	 of	 funds,	 marketing	 activities, transactions	among	affiliates	and	our	management	of	client	funds.

Certain	of	our	subsidiaries	are	registered	with,	and	subject	to	oversight	by,	the SEC	as	investment	advisers.	In	July	2014,	the	SEC	adopted	amendments	to	the rules	that	govern	SEC-registered	money	market	mutual	funds.	The	new	rules require	institutional	prime	money	market	funds	to	value	their	portfolio	securities using	 market-based	 factors	 and	 to	 sell	 and	 redeem	 their	 shares	 based	 on	 a floating	net	asset	value.	In	addition,	the	rules	allow,	in	certain	circumstances,	for the	board	of	directors	of	money	market	mutual	funds	to	impose	liquidity	fees	and redemption	 gates	 and	 also	 require	 additional	 disclosure,	 reporting	 and	 stress testing.	We	are	currently	evaluating	the	impact	of	the	rules.	The	firm's	money market	mutual	funds	will	be	required	to	comply	with	the	amendments	relating	to floating	net	asset	value,	fees	and	redemption	gates	in	2016,	with	certain	reporting requirements	becoming	effective	in	2015.

# Other	Regulation

The	 U.S.	 and	 non-U.S.	 government	 agencies,	 regulatory	 bodies	 and	 self- regulatory	organizations,	as	well	as	state	securities	commissions	and	other	state regulators	 in	 the	 United	 States,	 are	 empowered	 to	 conduct	 administrative proceedings	 that	 can	 result	 in	 censure,	 fine,	 the	 issuance	 of	 cease-and-desist orders,	 or	 the	 suspension	 or	 expulsion	 of	 a	 regulated	 entity	 or	 its	 directors, officers	or	employees.	In	addition,	a	number	of	our	other	activities	require	us	to obtain	licenses,	adhere	to	applicable	regulations	and	be	subject	to	the	oversight of	various	regulators	in	the	jurisdictions	in	which	we	conduct	these	activities. Regulatory	 oversight	 has	 been	 increasing,	 as	 well	 as	 the	 level	 of	 fines	 and penalties	imposed	by	regulatory	agencies.	Our	subsidiaries	are	subject	to	various and	 numerous	 requests	 for	 information,	 investigations	 and	 proceedings,	 and sanctions	have	been	imposed	for	infractions	of	various	regulations	relating	to	our activities.

In	 Europe,	 we	 provide	 investment	 services	 that	 are	 subject	 to	 oversight	 by national	 regulators	 as	 well	 as	 EU	 regulators.	 These	 investment	 services	 are regulated	 in	 accordance	 with	 national	 laws,	 many	 of	 which	 implement	 EU directives,	 and	 increasingly	 by	 directly	 applicable	 EU	 regulations.	 These national	 and	 EU	 laws	 require,	 among	 other	 things,	 compliance	 with	 certain capital	 adequacy	 standards,	 customer	 protection	 requirements	 and	 market conduct	and	trade	reporting	rules.

We	 provide	 investment	 services	 in	 and	 from	 the	 United	 Kingdom	 under	 the regulation	 of	 the	 PRA	 and	 the	 FCA.	 GSI,	 our	 regulated	 U.K.	 broker-dealer subsidiary,	is	subject	to	the	capital	requirements	imposed	by	the	PRA.	Other subsidiaries,	including	Goldman	Sachs	International	Bank	(GSIB),	our	regulated U.K.	bank,	are	also	regulated	by	the	PRA	and	the	FCA.	As	of	December	2014, GSI	 and	 GSIB	 were	 in	 compliance	 with	 the	 PRA	 capital	 requirements.	 See "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of Operations	—	Equity	Capital	Management	and	Regulatory	Capital	—	Subsidiary Capital	Requirements"	in	Part	II,	Item	7	of	the	2014	Form	10-K	for	information about	GSI's	capital	ratios.

Various	 of	 our	 other	 entities	 are	 regulated	 by	 the	 banking	 and	 securities regulatory	 authorities	 of	 the	 European	 countries	 in	 which	 they	 operate, including,	among	others,	the	Federal	Financial	Supervisory	Authority	(BaFin) and	the	Bundesbank	in	Germany,	the	Autorité	de	Contrôle	Prudentiel	and	the Autorité	 des	 Marchés	 Financiers	 in	 France,	 the	 Central	 Bank	 of	 the	 Russian Federation	 and	 the	 Swiss	 Financial	 Market	 Supervisory	 Authority.	 In November	2014,	a	new	Single	Supervisory	Mechanism	became	effective,	under which	 the	European	Central	Bank	and	national	supervisors	both	have	certain regulatory	responsibilities	for	banks	in	participating	EU	member	states.	While the	U.K.	does	not	participate	in	this	new	mechanism,	it	gives	new	powers	to	the European	Central	Bank	to	take	regulatory	action	with	regard	to	the	firm's	banks in	Germany	and	France.

The	EU	finalized	the	Markets	in	Financial	Instruments	Regulation	and	a	revision of	the	Markets	in	Financial	Instruments	Directive,	both	of	which	will	become effective	 in	 January	 2017.	 These	 will	 include	 new	 market	 structure-related, reporting,	investor	protection-related	and	organizational	requirements,	including requirements	on	pre-	and	post-trade	transparency,	requirements	to	use	certain venues	 when	 trading	 financial	 instruments	 (which	 includes	 certain	 derivative instruments),	requirements	affecting	 the	way	 investment	managers	can	obtain research,	 powers	 of	 regulators	 to	 impose	 position	 limits	 and	 provisions	 on regulatory	sanctions.

The	 EU	 and	 national	 financial	 legislators	 and	 regulators	 have	 proposed	 or adopted	numerous	further	market	reforms	that	may	impact	our	businesses.	These include	stricter	capital	and	liquidity	requirements,	including	finalized	legislation to	implement	Basel	III	capital	requirements	for	certain	of	our	EU	subsidiaries (such	 as	 GSI).	These	 market	 reforms	 also	 include	 rules	 on	 the	 separation	 of certain	 trading	activities	from	deposit	 taking	and	on	 indices	 that	are	used	as benchmarks	 for	 financial	 instruments	 or	 funds.	 In	 addition,	 the	 European Commission,	 the	 European	 Securities	 Market	 Authority	 and	 the	 European Banking	Authority	have	announced	or	are	formulating	regulatory	standards	and other	measures	which	will	impact	our	European	operations.	Certain	Goldman Sachs	 entities	 are	 also	 regulated	 by	 the	 European	 securities,	 derivatives	 and commodities	exchanges	of	which	they	are	members.

In	September	2011,	the	European	Commission	published	a	draft	proposal	for	a common	system	of	financial	transactions	tax.	The	proposed	financial	transactions tax	 is	 broad	 in	 scope	 and	 would	 apply	 to	 transactions	 in	 a	 wide	 variety	 of financial	 instruments	 and	 derivatives.	 The	 draft	 legislation	 is	 still	 subject	 to agreement	by	the	EU	member	states,	as	well	as	legislative	approval,	and	the	full impact	of	the	proposal	will	not	be	known	until	the	legislation	is	finalized.

Goldman	Sachs	Japan	Co.,	Ltd.	(GSJCL),	our	regulated	Japanese	broker-dealer, is	 subject	 to	 the	 capital	 requirements	 imposed	 by	 Japan's	 Financial	 Services Agency.	As	 of	 December	 2014,	 GSJCL	 was	 in	 compliance	 with	 its	 capital adequacy	requirements.	GSJCL	is	also	regulated	by	the	Tokyo	Stock	Exchange, the	 Osaka	 Exchange,	 the	 Tokyo	 Financial	 Exchange,	 the	 Japan	 Securities Dealers	Association,	the	Tokyo	Commodity	Exchange,	Securities	and	Exchange Surveillance	 Commission,	 Bank	 of	 Japan,	 the	 Ministry	 of	 Finance	 and	 the Ministry	of	Economy,	Trade	and	Industry,	among	others.

Also,	 the	 Securities	 and	 Futures	 Commission	 in	 Hong	 Kong,	 the	 Monetary Authority	 of	 Singapore,	 the	 China	 Securities	 Regulatory	 Commission,	 the Korean	Financial	Supervisory	Service,	the	Reserve	Bank	of	India,	the	Securities and	 Exchange	 Board	 of	 India,	 the	 Australian	 Securities	 and	 Investments Commission	 and	 the	Australian	 Securities	 Exchange,	 among	 others,	 regulate various	 of	 our	 subsidiaries	 and	 also	 have	 capital	 standards	 and	 other requirements	comparable	to	the	rules	of	the	SEC.	Various	other	Goldman	Sachs entities	are	regulated	by	the	banking	and	regulatory	authorities	in	jurisdictions	in which	Goldman	Sachs	operates,	including,	among	others,	Brazil	and	Dubai.

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

In	addition,	we	are	subject	to	laws	and	regulations	worldwide,	including	the	U.S. Foreign	Corrupt	Practices	Act	and	the	U.K.	Bribery	Act,	relating	to	corrupt	and illegal	payments	to,	and	hiring	practices	with	regard	to,	government	officials	and others.	 The	 obligation	 of	 financial	 institutions,	 including	 Goldman	 Sachs,	 to identify	their	clients,	to	monitor	for	and	report	suspicious	transactions,	to	monitor direct	and	indirect	payments	to	government	officials,	to	respond	to	requests	for information	by	regulatory	authorities	and	law	enforcement	agencies,	and	to	share information	with	other	financial	 institutions,	has	required	 the	 implementation and	 maintenance	 of	 internal	 practices,	 procedures	 and	 controls	 that	 have increased,	and	may	continue	to	increase,	our	costs,	and	any	failure	with	respect to	 our	 programs	 in	 this	 area	 could	 subject	 us	 to	 substantial	 liability	 and regulatory	fines.

As	discussed	above,	many	of	our	subsidiaries	are	subject	to	regulatory	capital requirements	in	jurisdictions	throughout	the	world.	Subsidiaries	not	subject	to separate	regulation	may	hold	capital	to	satisfy	local	tax	guidelines,	rating	agency requirements	or	 internal	policies,	 including	policies	concerning	 the	minimum amount	of	capital	a	subsidiary	should	hold	based	upon	its	underlying	risk.

Certain	of	our	businesses	are	subject	to	compliance	with	regulations	enacted	by U.S.	federal	and	state	governments,	the	EU	or	other	jurisdictions	and/or	enacted by	various	regulatory	organizations	or	exchanges	relating	to	the	privacy	of	the information	of	clients,	employees	or	others,	and	any	failure	to	comply	with	these regulations	could	expose	us	to	liability	and/or	reputational	damage.

# Available	Information

Our	 internet	 address	 is	www.gs.com	and	the	investor	relations	section	of	our web	 site	 is	 located	 at	www.gs.com/shareholders.	 We	 make	 available	 free	 of charge	through	the	investor	relations	section	of	our	web	site,	annual	reports	on Form	10-K,	quarterly	reports	on	Form	10-Q	and	current	reports	on	Form	8-K	and amendments	to	those	reports	filed	or	furnished	pursuant	to	Section	13(a)	or	15(d) of	the	U.S.	Securities	Exchange	Act	of	1934	(Exchange	Act),	as	well	as	proxy statements,	as	soon	as	reasonably	practicable	after	we	electronically	file	such material	 with,	 or	 furnish	 it	 to,	 the	 SEC.	Also	 posted	 on	 our	 web	 site,	 and available	 in	 print	 upon	 request	 of	 any	 shareholder	 to	 our	 Investor	 Relations Department,	are	our	certificate	of	incorporation	and	by-laws,	charters	for	our Audit	Committee,	Risk	Committee,	Compensation	Committee,	and	Corporate Governance,	 Nominating	 and	 Public	 Responsibilities	 Committee,	 our	 Policy Regarding	Director	Independence	Determinations,	our	Policy	on	Reporting	of Concerns	Regarding	Accounting	and	Other	Matters,	our	Corporate	Governance Guidelines	 and	 our	 Code	 of	 Business	 Conduct	 and	 Ethics	 governing	 our directors,	officers	and	employees.	Within	the	time	period	required	by	the	SEC, we	will	post	on	our	web	site	any	amendment	to	the	Code	of	Business	Conduct and	Ethics	and	any	waiver	applicable	to	any	executive	officer,	director	or	senior financial	officer.

In	addition,	our	web	site	includes	information	concerning:

Ÿ	Purchases	 and	 sales	 of	 our	 equity	 securities	 by	 our	 executive	 officers	 and directors;

Ÿ	Disclosure	relating	to	certain	non-GAAP	financial	measures	(as	defined	in	the SEC's	 Regulation	 G)	 that	 we	 may	 make	 public	 orally,	 telephonically,	 by webcast,	by	broadcast	or	by	similar	means	from	time	to	time;

# Ÿ	Dodd-Frank	Act	stress	test	results;	and

Ÿ	The	firm's	risk	management	practices	and	regulatory	capital	ratios,	as	required under	 the	 disclosure-related	 provisions	 of	 the	 Revised	 Capital	 Framework, which	are	based	on	the	third	pillar	of	Basel	III.

Our	 Investor	 Relations	 Department	 can	 be	 contacted	 at	The	 Goldman	 Sachs Group,	Inc.,	200	West	Street,	29th	Floor,	New	York,	New	York	10282,	Attn: Investor Relations, telephone: 212-902-0300, e-mail: gs-investor-relations@gs.com.

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

We	have	included	or	incorporated	by	reference	in	the	2014	Form	10-K,	and	from time	 to	 time	 our	 management	 may	 make,	 statements	 that	 may	 constitute "forward-looking	statements"	within	the	meaning	of	the	safe	harbor	provisions of	the	U.S.	Private	Securities	Litigation	Reform	Act	of	1995.	Forward-looking statements	 are	 not	 historical	 facts,	 but	 instead	 represent	 only	 our	 beliefs regarding	future	events,	many	of	which,	by	their	nature,	are	inherently	uncertain and	 outside	 our	 control.	 These	 statements	 include	 statements	 other	 than historical	information	or	statements	of	current	condition	and	may	relate	to	our future	 plans	 and	 objectives	 and	 results,	 among	 other	 things,	 and	 may	 also include	statements	about	the	effect	of	changes	to	the	capital	and	leverage	rules applicable	to	banks	and	bank	holding	companies,	the	impact	of	the	Dodd-Frank Act	 on	 our	 businesses	 and	 operations,	 and	 various	 legal	 proceedings	 or mortgage-related	 contingencies	 as	 set	 forth	 under	 "Legal	 Proceedings"	 and "Certain	Mortgage-Related	Contingencies"	in	Notes	27	and	18,	respectively,	to the	consolidated	financial	statements	in	Part	II,	Item	8	of	the	2014	Form	10-K,	as well	as	statements	about	the	results	of	our	Dodd-Frank	Act	and	firm	stress	tests, statements	about	the	objectives	and	effectiveness	of	our	business	continuity	plan, information	 security	 program,	 risk	 management	 and	 liquidity	 policies, statements	about	trends	in	or	growth	opportunities	for	our	businesses,	statements about	our	future	status,	activities	or	reporting	under	U.S.	or	non-U.S.	banking and	 financial	 regulation,	 and	 statements	 about	 our	 investment	 banking transaction	backlog.

By	identifying	these	statements	for	you	in	this	manner,	we	are	alerting	you	to	the possibility	that	our	actual	results	and	financial	condition	may	differ,	possibly materially,	from	the	anticipated	results	and	financial	condition	indicated	in	these forward-looking	statements.	Important	factors	that	could	cause	our	actual	results and	 financial	 condition	 to	 differ	 from	 those	 indicated	 in	 the	 forward-looking statements	 include,	 among	 others,	 those	 discussed	 below	 and	 under	 "Risk Factors"	in	Part	I,	Item	1A	of	the	2014	Form	10-K.

In	the	case	of	statements	about	our	investment	banking	transaction	backlog,	such statements	are	subject	to	the	risk	that	the	terms	of	these	transactions	may	be modified	or	that	they	may	not	be	completed	at	all;	therefore,	the	net	revenues,	if any,	 that	 we	 actually	 earn	 from	 these	 transactions	 may	 differ,	 possibly materially,	from	those	currently	expected.	Important	factors	that	could	result	in	a modification	of	the	terms	of	a	transaction	or	a	transaction	not	being	completed include,	 in	 the	 case	 of	 underwriting	 transactions,	 a	 decline	 or	 continued weakness	in	general	economic	conditions,	outbreak	of	hostilities,	volatility	in	the securities	markets	generally	or	an	adverse	development	with	respect	to	the	issuer of	the	securities	and,	in	the	case	of	financial	advisory	transactions,	a	decline	in the	 securities	 markets,	 an	 inability	 to	 obtain	 adequate	 financing,	 an	 adverse development	with	respect	to	a	party	to	the	transaction	or	a	failure	to	obtain	a required	regulatory	approval.	For	a	discussion	of	other	important	factors	 that could	adversely	affect	our	investment	banking	transactions,	see	"Risk	Factors" in	Part	I,	Item	1A	of	the	2014	Form	10-K.

We	 have	 voluntarily	 provided	 in	 this	 filing	 information	 regarding	 the	 firm's capital	 ratios,	 including	 the	 estimated	 CET1	 ratios	 under	 the	Advanced	 and Standardized	approaches	on	a	fully	phased-in	basis,	as	well	as	 the	LCR	and estimated	supplementary	leverage	ratios	for	the	firm	and	GS	Bank	USA.	The statements	with	respect	to	these	estimated	ratios	are	forward-looking	statements, based	 on	 our	 current	 interpretation,	 expectations	 and	 understandings	 of	 the relevant	 regulatory	 rules	 and	 guidance,	 and	 reflect	 significant	 assumptions concerning	 the	 treatment	 of	 various	 assets	 and	 liabilities	 and	 the	 manner	 in which	the	ratios	are	calculated.	As	a	result,	the	methods	used	to	calculate	these ratios	 may	 differ,	 possibly	 materially,	 from	 those	 used	 in	 calculating	 the estimates	for	any	future	voluntary	disclosures	as	well	as	those	used	when	such ratios	are	required	to	be	disclosed.	The	ultimate	methods	of	calculating	the	ratios will	 depend	 on,	 among	 other	 things,	 implementation	 guidance	 or	 further rulemaking	from	the	U.S.	federal	bank	regulatory	agencies	and	the	development of	market	practices	and	standards.

# Item	1A.				Risk	Factors

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

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

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

Our	financial	performance	is	highly	dependent	on	the	environment	in	which	our businesses	operate.	A	favorable	business	environment	is	generally	characterized by,	among	other	factors,	high	global	gross	domestic	product	growth,	transparent, liquid	and	efficient	capital	markets,	 low	 inflation,	high	business	and	 investor confidence,	 stable	 geopolitical	 conditions,	 regulatory	 certainty	 and	 strong business	earnings.	Unfavorable	or	uncertain	economic	and	market	conditions	can be	 caused	 by:	 concerns	 about	 sovereign	 defaults;	 uncertainty	 in	 U.S.	 federal fiscal	or	monetary	policy,	the	U.S.	federal	debt	ceiling	and	the	continued	funding of	the	U.S.	government;	uncertainty	about	the	timing	and	nature	of	regulatory reforms;	declines	in	economic	growth,	business	activity	or	investor	or	business confidence;	limitations	on	the	availability	or	increases	in	the	cost	of	credit	and capital;	increases	in	inflation,	interest	rates,	exchange	rate	volatility,	default	rates or	the	price	of	basic	commodities;	outbreaks	of	hostilities	or	other	geopolitical instability;	corporate,	political	or	other	scandals	that	reduce	investor	confidence in	 capital	 markets;	 extreme	 weather	 events	 or	 other	 natural	 disasters	 or pandemics;	or	a	combination	of	these	or	other	factors.

In	2008	and	through	early	2009,	the	financial	services	industry	and	the	securities markets	generally	were	materially	and	adversely	affected	by	significant	declines in	the	values	of	nearly	all	asset	classes	and	by	a	serious	lack	of	liquidity.	Since 2011,	 concerns	 about	 European	 sovereign	 debt	 risk	 and	 its	 impact	 on	 the European	 banking	 system,	 and	 about	 changes	 in	 market	 conditions	 or	 actual changes	in	market	conditions,	have	resulted,	at	times,	in	significant	volatility while	negatively	impacting	the	levels	of	client	activity.

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

Our	revenues	and	profitability	and	those	of	our	competitors	have	been	and	will continue	to	be	impacted	by	requirements	relating	to	capital,	leverage,	minimum liquidity	and	 long-term	funding	 levels,	requirements	related	 to	resolution	and recovery	planning,	derivatives	clearing	and	margin	rules	and	levels	of	regulatory oversight,	as	well	as	limitations	on	whether	and	how	certain	business	activities may	be	carried	out	by	financial	institutions.	Although	interest	rates	are	at	or	near historically	 low	 levels,	financial	 institution	returns	have	also	been	negatively impacted	by	increased	funding	costs	due	in	part	to	the	withdrawal	of	perceived government	support	of	such	institutions	in	the	event	of	future	financial	crises.	In addition,	liquidity	in	the	financial	markets	may	also	be	negatively	impacted	as market	participants	and	market	practices	and	structures	adjust	to	new	regulations.

The	degree	to	which	these	and	other	changes	resulting	from	the	financial	crisis will	have	a	long-term	impact	on	the	profitability	of	financial	institutions	will depend	on	the	final	interpretation	and	implementation	of	new	regulations,	the manner	in	which	markets,	market	participants	and	financial	institutions	adapt	to the	new	landscape,	and	the	prevailing	economic	and	financial	market	conditions. However,	 there	 is	 a	 risk	 that	 such	 changes	 will,	 at	 least	 in	 the	 near-term, continue	to	negatively	impact	the	absolute	level	of	revenues,	profitability	and return	on	equity	at	our	firm	and	at	other	financial	institutions.

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

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

There	is	also	the	risk	that	new	laws	or	regulations	or	changes	in	enforcement	of existing	laws	or	regulations	applicable	to	our	businesses	or	those	of	our	clients, including	capital,	 liquidity,	 leverage	and	margin	requirements,	restrictions	on leveraged	 lending	 or	 other	 business	 practices,	 reporting	 requirements,	 tax burdens	and	compensation	restrictions,	could	be	imposed	on	a	limited	subset	of financial	institutions	(either	based	on	size,	activities,	geography	or	other	criteria), which	 may	 adversely	 affect	 our	 ability	 to	 compete	 effectively	 with	 other institutions	that	are	not	affected	in	the	same	way.	In	addition,	regulation	imposed on	 financial	 institutions	 or	 market	 participants	 generally,	 such	 as	 taxes	 on financial	 transactions,	 could	 adversely	 impact	 levels	 of	 market	 activity	 more broadly,	and	thus	impact	our	businesses.

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

U.S.	and	non-U.S.	regulatory	developments,	in	particular	the	Dodd-Frank	Act and	Basel	III,	have	significantly	altered	the	regulatory	framework	within	which we	operate	and	may	adversely	affect	our	competitive	position	and	profitability. As	discussed	further	under	"Business	—	Regulation,"	in	Part	I,	Item	1	of	the 2014	Form	10-K,	in	December	2013,	final	rules	were	adopted	to	implement	the provisions	of	the	Dodd-Frank	Act	referred	to	as	the	"Volcker	Rule,"	which	will prohibit	proprietary	trading	and	will	limit	our	sponsorship	of,	and	investment	in, covered	funds.	Based	on	what	we	know	as	of	the	date	of	this	filing,	we	do	not expect	the	impact	of	the	prohibition	on	proprietary	trading	to	be	material	to	our financial	condition,	results	of	operations	or	cash	flows.

However,	given	that	the	rule	is	highly	complex,	and	its	full	impact	will	not	be known	until	market	practices	are	fully	developed,	the	implementation	of	the	rule and	 the	 related	 market	 changes	 could	 negatively	 impact	 our	 businesses	 and expose	us	to	increased	liability	for	inadvertent	breaches	and	reporting	failures. Among	 the	 other	 aspects	 of	 the	 Dodd-Frank	 Act	 most	 likely	 to	 affect	 our businesses	are:	increased	capital,	liquidity	and	reporting	requirements;	increased regulation	 of	 and	 restrictions	 on	 OTC	 derivatives	 markets	 and	 transactions; limitations	 on	 incentive	 compensation;	 limitations	 on	 affiliate	 transactions; requirements	to	reorganize	or	limit	activities	in	connection	with	recovery	and resolution	 planning;	 increased	 deposit	 insurance	 assessments;	 and	 increased standards	of	care	for	broker-dealers	in	dealing	with	clients.	The	implementation of	higher	capital	requirements,	the	liquidity	coverage	ratio	and	the	net	stable funding	 ratio	 under	 Basel	 III	 may	 also	 adversely	 affect	 our	 profitability	 and competitive	position,	particularly	 if	 the	requirements	do	not	apply,	or	do	not apply	 equally,	 to	 our	 competitors	 or	 are	 not	 implemented	 uniformly	 across jurisdictions.

As	 discussed	 under	 "Business	 —	 Regulation	 —	 Capital	 and	 Liquidity Requirements	 —	 Payment	 of	 Dividends	 and	 Stock	 Repurchases"	 in	 Part	 I, Item	1	of	the	2014	Form	10-K,	Group	Inc.'s	proposed	capital	actions	and	capital plan	are	reviewed	by	the	Federal	Reserve	Board	as	part	of	the	CCAR	process.	If the	Federal	Reserve	Board	objects	to	our	proposed	capital	actions	in	our	capital plan,	Group	Inc.	could	be	prohibited	from	taking	such	capital	actions,	including increasing	or	paying	dividends	on	common	or	preferred	stock	or	repurchasing common	stock	or	other	capital	securities.	Our	inability	to	carry	out	our	proposed capital	actions	could,	among	other	things,	prevent	us	from	returning	capital	to our	shareholders	and	impact	our	return	on	equity.

We	 are	 also	 subject	 to	 laws	 and	 regulations	 relating	 to	 the	 privacy	 of	 the information	of	clients,	employees	or	others,	and	any	failure	to	comply	with	these regulations	could	expose	us	to	liability	and/or	reputational	damage.	In	addition, our	 businesses	 are	 increasingly	 subject	 to	 laws	 and	 regulations	 relating	 to surveillance,	encryption	and	data	on-shoring	 in	 the	 jurisdictions	 in	which	we operate.	Compliance	with	these	laws	and	regulations	may	require	us	to	change our	 policies,	 procedures	 and	 technology	 for	 information	 security	 (including cyber	security),	which	could,	among	other	things,	make	us	more	vulnerable	to cyber	 attacks	 and	 misappropriation,	 corruption	 or	 loss	 of	 information	 or technology.

In	 addition,	 the	 attorneys	 general	 of	 a	 number	 of	 states	 have	 filed	 lawsuits against	financial	institutions	alleging,	among	other	things,	that	the	centralized system	of	recording	mortgages	and	designating	a	common	entity	as	the	mortgage holder	is	in	violation	of	state	law,	and	other	authorities	have	brought	similar actions	or	indicated	that	they	are	contemplating	bringing	such	actions.	If	this system	and	related	practices	are	deemed	invalid,	it	may	call	into	question	the validity	 or	 enforceability	 of	 certain	 mortgage-related	 obligations	 under securitizations	and	other	transactions	in	which	we	have	participated,	negatively impact	 the	 market	 for	 mortgages	 and	 mortgage-related	 products	 and	 our mortgage-related	activities,	or	subject	us	to	additional	costs	or	penalties.

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

For	a	discussion	of	the	extensive	regulation	to	which	our	businesses	are	subject, see	"Business	—	Regulation"	in	Part	I,	Item	1	of	the	2014	Form	10-K.

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

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

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

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

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

We	post	collateral	to	support	our	obligations	and	receive	collateral	to	support	the obligations	 of	 our	 clients	 and	 counterparties	 in	 connection	 with	 our	 client execution	businesses.	When	the	value	of	the	assets	posted	as	collateral	declines, the	party	posting	the	collateral	may	need	to	provide	additional	collateral	or,	if possible,	reduce	its	trading	position.	A	classic	example	of	such	a	situation	is	a "margin	call"	in	connection	with	a	brokerage	account.	Therefore,	declines	in	the value	of	asset	classes	used	as	collateral	mean	 that	either	 the	cost	of	funding positions	is	increased	or	the	size	of	positions	is	decreased.	If	we	are	the	party providing	collateral,	this	can	increase	our	costs	and	reduce	our	profitability	and if	we	are	the	party	receiving	collateral,	this	can	also	reduce	our	profitability	by reducing	 the	 level	 of	 business	 done	 with	 our	 clients	 and	 counterparties.	 In addition,	volatile	or	less	liquid	markets	increase	the	difficulty	of	valuing	assets which	can	lead	to	costly	and	time-consuming	disputes	over	asset	values	and	the level	of	required	collateral,	as	well	as	increased	credit	risk	to	the	recipient	of	the collateral	due	to	delays	in	receiving	adequate	collateral.

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

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

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

In	addition,	we	may	incur	significant	unrealized	gains	or	losses	due	solely	to changes	in	our	credit	spreads	or	those	of	third	parties,	as	these	changes	may affect	the	fair	value	of	our	derivative	instruments	and	the	debt	securities	that	we hold	or	issue,	which	may	in	turn	adversely	affect	our	results	of	operations	and capital	ratios.

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

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

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

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

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

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

# Our	investment	management	business	may	be	affected	by	the	poor investment	performance	of	our	investment	products.

Poor	investment	returns	in	our	investment	management	business,	due	to	either general	market	conditions	or	underperformance	(relative	to	our	competitors	or	to benchmarks)	by	funds	or	accounts	that	we	manage	or	investment	products	that we	design	or	sell,	affects	our	ability	to	retain	existing	assets	and	to	attract	new clients	 or	 additional	 assets	 from	 existing	 clients.	 This	 could	 affect	 the management	and	incentive	fees	that	we	earn	on	assets	under	supervision	or	the commissions	and	net	spreads	that	we	earn	for	selling	other	investment	products, such	as	structured	notes	or	derivatives.

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

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

The	 models	 that	 we	 use	 to	 assess	 and	 control	 our	 risk	 exposures	 reflect assumptions	about	the	degrees	of	correlation	or	lack	thereof	among	prices	of various	asset	classes	or	other	market	indicators.	In	times	of	market	stress	or	other unforeseen	circumstances,	such	as	occurred	during	2008	and	early	2009,	and	to some	 extent	 since	 2011,	 previously	 uncorrelated	 indicators	 may	 become correlated,	or	conversely	previously	correlated	indicators	may	move	in	different directions.	 These	 types	 of	 market	 movements	 have	 at	 times	 limited	 the effectiveness	of	our	hedging	strategies	and	have	caused	us	to	incur	significant losses,	and	they	may	do	so	in	the	future.	These	changes	in	correlation	can	be exacerbated	where	other	market	participants	are	using	risk	or	 trading	models with	assumptions	or	algorithms	that	are	similar	to	ours.	In	these	and	other	cases, it	may	be	difficult	to	reduce	our	risk	positions	due	to	the	activity	of	other	market participants	or	widespread	market	dislocations,	including	circumstances	where asset	values	are	declining	significantly	or	no	market	exists	for	certain	assets.

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

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

For	a	further	discussion	of	our	risk	management	policies	and	procedures,	see "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of Operations	—	Risk	Management	and	Risk	Factors"	in	Part	II,	Item	7	of	the	2014 Form	10-K.

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

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

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

Further,	our	ability	to	sell	assets	may	be	impaired	if	other	market	participants	are seeking	to	sell	similar	assets	at	the	same	time,	as	is	likely	to	occur	in	a	liquidity or	 other	 market	 crisis	 or	 in	 response	 to	 changes	 to	 rules	 or	 regulations.	 In addition,	financial	institutions	with	which	we	interact	may	exercise	set-off	rights or	 the	 right	 to	 require	 additional	 collateral,	 including	 in	 difficult	 market conditions,	which	could	further	impair	our	access	to	liquidity.

Our	credit	ratings	are	important	to	our	liquidity.	A	reduction	in	our	credit	ratings could	 adversely	 affect	 our	 liquidity	 and	 competitive	 position,	 increase	 our borrowing	costs,	limit	our	access	to	the	capital	markets	or	trigger	our	obligations under	 certain	 provisions	 in	 some	 of	 our	 trading	 and	 collateralized	 financing contracts.	Under	these	provisions,	counterparties	could	be	permitted	to	terminate contracts	 with	 Goldman	 Sachs	 or	 require	 us	 to	 post	 additional	 collateral. Termination	of	our	trading	and	collateralized	financing	contracts	could	cause	us to	sustain	losses	and	impair	our	liquidity	by	requiring	us	to	find	other	sources	of financing	or	to	make	significant	cash	payments	or	securities	movements.	Certain rating	agencies	have	indicated	that	the	Dodd-Frank	Act	could	result	in	the	rating agencies	 reducing	 their	 assumed	 level	 of	 government	 support	 and	 therefore result	 in	 ratings	 downgrades	 for	 certain	 large	 financial	 institutions,	 including Goldman	 Sachs.	As	 of	 December	 2014,	 each	 of	 Standard	 &	 Poor's	 Ratings Services	and	Ratings	and	Investment	Information,	Inc.	had	 issued	a	negative outlook	on	our	long-term	credit	ratings.	As	of	December	2014,	in	the	event	of	a one-notch	 and	 two-notch	 downgrade	 of	 our	 credit	 ratings	 our	 counterparties could	have	called	for	additional	collateral	or	termination	payments	related	to	our net	derivative	liabilities	under	bilateral	agreements	in	an	aggregate	amount	of $1.07	billion	and	$2.82	billion,	respectively.	A	downgrade	by	any	one	rating agency,	depending	on	the	agency's	relative	ratings	of	the	firm	at	the	time	of	the downgrade,	 may	 have	 an	 impact	 which	 is	 comparable	 to	 the	 impact	 of	 a downgrade	by	all	rating	agencies.	For	a	further	discussion	of	our	credit	ratings, see	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results of	 Operations	 —	 Liquidity	 Risk	 Management	 —	 Credit	 Ratings"	 in	 Part	 II, Item	7	of	the	2014	Form	10-K.

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

Regulatory	changes	relating	to	liquidity	may	also	negatively	impact	our	results of	 operations	 and	 competitive	 position.	 Recently,	 numerous	 regulations	 have been	adopted	or	proposed,	and	additional	regulations	are	under	consideration,	to introduce	more	stringent	liquidity	requirements	for	large	financial	institutions. These	regulations	and	others	being	considered	address,	among	other	matters, liquidity	 stress	 testing,	 minimum	 liquidity	 requirements,	 wholesale	 funding, limitations	on	the	issuance	of	short-term	debt	and	structured	notes.	These	may overlap	 with,	 and	 be	 impacted	 by,	 other	 regulatory	 changes,	 including	 new guidance	on	 the	 treatment	of	brokered	deposits	and	 the	capital,	 leverage	and resolution	and	recovery	frameworks	applicable	to	large	financial	institutions,	as well	as	proposals	relating	to	minimum	long-term	debt	requirements	and	 total loss-absorbing	 capacity.	 Given	 the	 overlap	 and	 complex	 interactions	 among these	new	and	prospective	regulations,	they	may	have	unintended	cumulative effects,	and	their	full	impact	will	remain	uncertain	until	implementation	of	post- financial	crisis	regulatory	reform	is	complete.

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

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

In	addition,	our	status	as	a	bank	holding	company	subjects	us	 to	heightened regulation	and	increased	regulatory	scrutiny	by	the	Federal	Reserve	Board	with respect	to	transactions	between	GS	Bank	USA	and	entities	that	are	or	could	be viewed	as	affiliates	of	ours.

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

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

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

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

As	a	result	of	the	2008	financial	crisis,	there	has	been	a	trend	towards	increased regulation	and	supervision	of	our	subsidiaries	by	the	governments	and	regulators in	the	countries	in	which	those	subsidiaries	are	located	or	do	business.	Concerns about	protecting	clients	and	creditors	of	financial	institutions	that	are	controlled by	persons	or	entities	located	outside	of	the	country	in	which	such	entities	are located	or	do	business	have	caused	or	may	cause	a	number	of	governments	and regulators	to	take	additional	steps	to	"ring	fence"	such	entities	in	order	to	protect clients	 and	 creditors	 of	 such	 entities	 in	 the	 event	 of	 financial	 difficulties involving	such	entities.	The	result	has	been	and	may	continue	to	be	additional limitations	on	our	ability	to	efficiently	move	capital	and	liquidity	among	our affiliated	entities,	 thereby	 increasing	 the	overall	 level	of	capital	and	 liquidity required	by	the	firm	on	a	consolidated	basis.

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

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

See	"Business	—	Regulation"	in	Part	I,	Item	1	of	the	2014	Form	10-K	for	a further	discussion	of	regulatory	restrictions.

# The	 application	 of regulatory	 strategies	 and requirements in the United	 States	 and	 non-U.S. jurisdictions to facilitate the	 orderly resolution	of	large	financial	institutions	could	create	greater	risk	of loss	for	Group	Inc.'s	security	holders.

As discussed under "Business	 —	 Regulation	 — Insolvency of an Insured Depository	Institution	or	a	Bank	Holding	Company,"	if	the	FDIC	is	appointed	as receiver	 under the	 orderly liquidation authority, the rights	 of	 Group Inc.'s creditors	 would	 be	 determined	 under the	 orderly liquidation authority, and substantial differences exist in the rights of creditors between the orderly liquidation	authority	and	the	U.S.	Bankruptcy	Code,	including	the	right	of	the FDIC	under	the	orderly	liquidation	authority	to	disregard	the	strict	priority	of creditor	 claims in	 some	 circumstances,	 which	 could	 have	 a	 material	 adverse effect	on	debt	holders.

Although	the	FDIC's	single	point	of	entry	strategy	is	intended	to	result	in	better outcomes	 for	 creditors in	 connection	 with the	 resolution	 of	 a large	 financial institution,	it	is	possible	that	this	may	not	occur.	One	goal	of	the	FDIC's	single point	of	entry	strategy	is	to	resolve	a	large	financial	institution	in	a	manner	that would, among other things, impose losses on shareholders, debt holders (including	holders	of	structured	notes)	and	other	creditors	of	the	top-tier	holding company	and	permit	the	holding	company's	subsidiaries	to	continue	to	operate. It	is	possible	that	the	application	of	the	single	point	of	entry	strategy	could	result in	greater	losses	to	Group	Inc.'s	security	holders,	including	holders	of	structured notes and	 other	 debt securities, than the losses that could result from the application	of	a	bankruptcy	proceeding	or	a	different	resolution	strategy	for	the firm.

In	addition,	certain	 jurisdictions,	 including	 the	United	Kingdom	and	 the	EU, have	implemented,	or	are	considering,	changes	to	resolution	regimes	to	provide resolution	authorities	with	the	ability	to	recapitalize	a	failing	entity	by	writing down	its	unsecured	debt	or	converting	its	unsecured	debt	into	equity.	Such	"bail- in"	powers	are	intended	to	enable	the	recapitalization	of	a	failing	institution	by allocating	losses	to	its	shareholders	and	unsecured	debt	holders.	U.S.	and	non- U.S.	regulators	are	also	considering	requirements	that	large	financial	institutions and	certain	of	their	subsidiaries	maintain	minimum	amounts	of	equity	and	debt (total	loss-absorbing	capacity)	that	would	absorb	losses	in	the	event	of	failure.

Our	resolution	plan	assumes	that,	in	certain	adverse	scenarios,	Group	Inc.	would recapitalize	 certain	 major	 subsidiaries,	 including	 through	 the	 forgiveness	 of intercompany	indebtedness.	If	these	recapitalization	actions	were	unsuccessful	in stabilizing	 these	 subsidiaries,	 Group	 Inc.'s	 financial	 condition	 would	 be adversely	 impacted	 and	 equity	 and	 debt	 holders	 of	 Group	 Inc.	 may	 as	 a consequence	be	in	a	worse	position	than	if	the	recapitalizations	did	not	occur.

In	August	2014,	the	Federal	Reserve	Board	and	the	FDIC	indicated	that	Group Inc.,	along	with	other	large	industry	participants,	had	certain	shortcomings	in	the 2013	resolution	plans	that	must	be	addressed	in	the	2015	resolution	plans.	If Group	 Inc.	 is	 unable	 to	 effectively	 address	 these	 shortcomings,	 the	 Federal Reserve	Board	and	the	FDIC	could,	after	any	permitted	resubmission,	find	our resolution	 plan	 not	 credible	 and	 require	 us	 to	 hold	 more	 capital,	 change	 our business	structure	or	dispose	of	businesses,	which	could	have	a	negative	impact on	our	ability	to	return	capital	to	shareholders,	financial	condition,	results	of operations	or	competitive	position.

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

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

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

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

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

# Concentration	of	risk	increases	the	potential	for	significant	losses in	 our	 market-making,	 underwriting,	 investing	 and	 lending activities.

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

Rules	 adopted	 under	 the	 Dodd-Frank	 Act	 require	 issuers	 of	 asset-backed securities	and	any	person	who	organizes	and	initiates	an	asset-backed	securities transaction	 to	 retain	 economic	 exposure	 to	 the	 asset,	 which	 is	 likely	 to significantly	increase	the	cost	to	us	of	engaging	in	securitization	activities.	Our inability	to	reduce	our	credit	risk	by	selling,	syndicating	or	securitizing	these positions,	including	during	periods	of	market	stress,	could	negatively	affect	our results	of	operations	due	to	a	decrease	in	the	fair	value	of	the	positions,	including due	 to	 the	 insolvency	 or	 bankruptcy	 of	 the	 borrower,	 as	 well	 as	 the	 loss	 of revenues	associated	with	selling	such	securities	or	loans.

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

# The financial services industry is both highly competitive and interrelated.

The	 financial	 services	 industry	 and	 all	 of	 our	 businesses	 are	 intensely competitive,	and	we	expect	them	to	remain	so.	We	compete	on	the	basis	of	a number	of	factors,	including	transaction	execution,	our	products	and	services, innovation,	 reputation,	 creditworthiness	 and	 price.	 Over	 time,	 there	 has	 been substantial	 consolidation	 and	 convergence	 among	 companies	 in	 the	 financial services	 industry.	 This	 trend	 accelerated	 over	 recent	 years	 as	 a	 result	 of numerous	mergers	and	asset	acquisitions	among	industry	participants.	This	trend has	also	hastened	the	globalization	of	the	securities	and	other	financial	services markets.

As	a	result,	we	have	had	to	commit	capital	to	support	our	international	operations and	 to	 execute	 large	 global	 transactions.	 To	 the	 extent	 we	 expand	 into	 new business	areas	and	new	geographic	regions,	we	will	face	competitors	with	more experience	 and	 more	 established	 relationships	 with	 clients,	 regulators	 and industry	participants	in	the	relevant	market,	which	could	adversely	affect	our ability	to	expand.	Governments	and	regulators	have	recently	adopted	regulations, imposed	 taxes,	 adopted	 compensation	 restrictions	 or	 otherwise	 put	 forward various	proposals	that	have	or	may	impact	our	ability	to	conduct	certain	of	our businesses	 in	 a	 cost-effective	 manner	 or	 at	 all	 in	 certain	 or	 all	 jurisdictions, including	 proposals	 relating	 to	 restrictions	 on	 the	 type	 of	 activities	 in	 which financial	institutions	are	permitted	to	engage.	These	or	other	similar	rules,	many of	which	do	not	apply	to	all	our	U.S.	or	non-U.S.	competitors,	could	impact	our ability	to	compete	effectively.

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

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

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

A	 number	 of	 our	 recent	 and	 planned	 business	 initiatives	 and	 expansions	 of existing	 businesses	 may	 bring	 us	 into	 contact,	 directly	 or	 indirectly,	 with individuals	and	entities	that	are	not	within	our	traditional	client	and	counterparty base	and	expose	us	 to	new	asset	classes	and	new	markets.	For	example,	we continue	to	transact	business	and	invest	in	new	regions,	including	a	wide	range of	emerging	and	growth	markets.	Furthermore,	in	a	number	of	our	businesses, including	where	we	make	markets,	invest	and	lend,	we	directly	or	indirectly	own interests	in,	or	otherwise	become	affiliated	with	the	ownership	and	operation	of public	services,	such	as	airports,	toll	roads	and	shipping	ports,	as	well	as	physical commodities,	 mines,	 commodity	 warehouses	 and	 other	 commodities infrastructure	 components,	 both	 within	 and	 outside	 the	 United	 States. Deteriorating	 market	 conditions	 may	 lead	 to	 an	 increase	 in	 opportunities	 to acquire	distressed	assets	and	we	may	determine	opportunistically	to	increase	our exposure	to	these	types	of	assets.

These	activities	expose	us	to	new	and	enhanced	risks,	including	risks	associated with	 dealing	 with	 governmental	 entities,	 reputational	 concerns	 arising	 from dealing	with	less	sophisticated	counterparties	and	investors,	greater	regulatory scrutiny	 of	 these	 activities,	 increased	 credit-related,	 market,	 sovereign	 and operational	 risks,	 risks	 arising	 from	 accidents	 or	 acts	 of	 terrorism,	 and reputational	concerns	with	the	manner	in	which	these	assets	are	being	operated or	held.

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

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

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

As	a	signatory	to	the	ISDA	Protocol,	we	may	not	be	able	to	exercise	remedies against	counterparties	and,	as	this	new	regime	has	not	yet	been	tested,	we	may suffer	risks	or	 losses	 that	we	would	not	have	expected	 to	suffer	 if	we	could immediately	close	out	transactions	upon	a	termination	event.	The	ISDA	Protocol contemplates	adoption	of	 implementing	regulations	by	various	U.S.	and	non- U.S.	regulators,	and	the	ISDA	Protocol's	impact	will	depend	on,	among	other things,	how	it	is	implemented.

Derivative	 contracts	 and	 other	 transactions,	 including	 secondary	 bank	 loan purchases	and	sales,	entered	into	with	third	parties	are	not	always	confirmed	by the	counterparties	or	settled	on	a	timely	basis.	While	the	transaction	remains unconfirmed	or	during	any	delay	 in	settlement,	we	are	subject	 to	heightened credit	and	operational	risk	and	in	the	event	of	a	default	may	find	it	more	difficult to	 enforce	 our	 rights.	 In	 addition,	 as	 new	 complex	 derivative	 products	 are created,	 covering	 a	 wider	 array	 of	 underlying	 credit	 and	 other	 instruments, disputes	about	the	terms	of	the	underlying	contracts	could	arise,	which	could impair	our	ability	to	effectively	manage	our	risk	exposures	from	these	products and	 subject	 us	 to	 increased	 costs.	 The	 provisions	 of	 the	 Dodd-Frank	 Act requiring	central	clearing	of	credit	derivatives	and	other	OTC	derivatives,	or	a market	shift	toward	standardized	derivatives,	could	reduce	the	risk	associated with	 such	 transactions,	 but	 under	 certain	 circumstances	 could	 also	 limit	 our ability	to	develop	derivatives	that	best	suit	the	needs	of	our	clients	and	to	hedge our	own	risks,	and	could	adversely	affect	our	profitability	and	increase	our	credit exposure	to	such	platform.

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

Our	performance	is	largely	dependent	on	the	talents	and	efforts	of	highly	skilled individuals;	 therefore,	 our	 continued	 ability	 to	 compete	 effectively	 in	 our businesses,	 to	 manage	 our	 businesses	 effectively	 and	 to	 expand	 into	 new businesses	and	geographic	areas	depends	on	our	ability	to	attract	new	talented and	 diverse	 employees	 and	 to	 retain	 and	 motivate	 our	 existing	 employees. Factors	that	affect	our	ability	to	attract	and	retain	such	employees	include	our compensation	and	benefits,	and	our	reputation	as	a	successful	business	with	a culture	of	fairly	hiring,	training	and	promoting	qualified	employees.

Competition	 from	 within	 the	 financial	 services	 industry	 and	 from	 businesses outside	the	financial	services	industry	for	qualified	employees	has	often	been intense.	This	is	particularly	the	case	in	emerging	and	growth	markets,	where	we are	 often	 competing	 for	 qualified	 employees	 with	 entities	 that	 have	 a significantly	greater	presence	or	more	extensive	experience	in	the	region.

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

As	described	further	 in	"Business	—	Regulation	—	Bank	Holding	Company Regulation"	and	"	—	Regulation	—	Compensation	Practices"	in	Part	I,	Item	1	of the	2014	Form	10-K,	our	compensation	practices	are	subject	to	review	by,	and the	standards	of,	the	Federal	Reserve	Board.	As	a	large	financial	and	banking institution,	we	are	subject	to	limitations	on	compensation	practices	(which	may or	may	not	affect	our	competitors)	by	the	Federal	Reserve	Board,	the	PRA,	the FCA,	the	FDIC	and	other	regulators	worldwide.	These	limitations,	including	any imposed	by	or	as	a	result	of	future	legislation	or	regulation,	may	require	us	to alter	our	compensation	practices	in	ways	that	could	adversely	affect	our	ability	to attract	and	retain	talented	employees.

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

Governmental	scrutiny	from	regulators,	legislative	bodies	and	law	enforcement agencies	with	respect	to	matters	relating	to	compensation,	our	business	practices, our	past	actions	and	other	matters	has	increased	dramatically	in	the	past	several years.	 The	 financial	 crisis	 and	 the	 current	 political	 and	 public	 sentiment regarding	financial	institutions	has	resulted	in	a	significant	amount	of	adverse press	coverage,	as	well	as	adverse	statements	or	charges	by	regulators	or	other government	 officials.	 Press	 coverage	 and	 other	 public	 statements	 that	 assert some	 form	 of	 wrongdoing	 often	 result	 in	 some	 type	 of	 investigation	 by regulators,	legislators	and	law	enforcement	officials	or	in	lawsuits.

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

Certain	 regulators,	 including	 the	 SEC,	 have	 announced	 policies	 that	 make	 it more	 likely	 that	 they	 will	 seek	 an	 admission	 of	 wrongdoing	 as	 part	 of	 any settlement	of	a	matter	brought	by	them	against	a	regulated	entity	or	individual, which	could	lead	to	increased	exposure	to	civil	litigation	and	could	adversely affect	our	reputation	and	ability	to	do	business	in	certain	jurisdictions	with	so- called	"bad	actor"	disqualification	laws	and	could	have	other	negative	effects.

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

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

As	our	client	base,	and	our	geographical	reach	expands,	and	the	volume,	speed, frequency	and	complexity	of	transactions,	especially	electronic	transactions	(as well	as	the	requirements	to	report	such	transactions	on	a	real-time	basis	to	clients, regulators	and	exchanges)	increases,	developing	and	maintaining	our	operational systems	and	infrastructure	becomes	more	challenging,	and	the	risk	of	systems	or human	 error	 in	 connection	 with	 such	 transactions	 increases,	 as	 well	 as	 the potential	 consequences	 of	 such	 errors	 due	 to	 the	 speed	 and	 volume	 of transactions	 involved	 and	 the	 potential	 difficulty	 associated	 with	 discovering such	errors	quickly	enough	to	limit	the	resulting	consequences.

Our	 financial,	 accounting,	 data	 processing	 or	 other	 operational	 systems	 and facilities	may	fail	to	operate	properly	or	become	disabled	as	a	result	of	events that	are	wholly	or	partially	beyond	our	control,	such	as	a	spike	in	transaction volume,	adversely	affecting	our	ability	to	process	these	transactions	or	provide these	 services.	 We	 must	 continuously	 update	 these	 systems	 to	 support	 our operations	and	growth	and	to	respond	to	changes	in	regulations	and	markets,	and invest	heavily	in	systemic	controls	and	training	to	ensure	that	such	transactions do	not	violate	applicable	rules	and	regulations	or,	due	to	errors	in	processing such	transactions,	adversely	affect	markets,	our	clients	and	counterparties	or	the firm.

Systems	 enhancements	 and	 updates,	 as	 well	 as	 the	 requisite	 training,	 entail significant	costs	and	create	risks	associated	with	implementing	new	systems	and integrating	them	with	existing	ones.

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

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

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

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

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

Our	 operations	 rely	 on	 the	 secure	 processing,	 storage	 and	 transmission	 of confidential	and	other	information	in	our	computer	systems	and	networks.	There have	been	several	recent	highly	publicized	cases	involving	financial	services	and consumer-based	 companies	 reporting	 the	 unauthorized	 disclosure	 of	 client	 or customer	information,	as	well	as	cyber	attacks	involving	the	dissemination,	theft and	destruction	of	corporate	information	or	other	assets,	as	a	result	of	failure	to follow	procedures	by	employees	or	contractors	or	as	a	result	of	actions	by	third- parties,	including	actions	by	foreign	governments.

We	 are	 regularly	 the	 target	 of	 attempted	 cyber	 attacks,	 including	 denial-of- service	 attacks,	 and	 must	 continuously	 monitor	 and	 develop	 our	 systems	 to protect	 our	 technology	 infrastructure	 and	 data	 from	 misappropriation	 or corruption.	In	addition,	due	 to	our	 interconnectivity	with	 third-party	vendors, central	agents,	exchanges,	clearing	houses	and	other	financial	institutions,	we could	be	adversely	impacted	if	any	of	them	is	subject	to	a	successful	cyber	attack or	other	information	security	event.	Although	we	take	protective	measures	and endeavor	 to	 modify	 them	 as	 circumstances	 warrant,	 our	 computer	 systems, software	 and	 networks	 may	 be	 vulnerable	 to	 unauthorized	 access,	 misuse, computer	viruses	or	other	malicious	code	and	other	events	that	could	have	a security	 impact.	 If	 one	 or	 more	 of	 such	 events	 occur,	 this	 potentially	 could jeopardize	 our	 or	 our	 clients'	 or	 counterparties'	 confidential	 and	 other information	 processed	 and	 stored	 in,	 and	 transmitted	 through,	 our	 computer systems	and	networks,	or	otherwise	cause	interruptions	or	malfunctions	in	our, our	clients',	our	counterparties'	or	third	parties'	operations,	which	could	impact their	 ability	 to	 transact	 with	 us	 or	 otherwise	 result	 in	 significant	 losses	 or reputational	damage.

The	increased	use	of	mobile	and	cloud	technologies	can	heighten	these	and	other operational	risks.	We	expect	to	expend	significant	additional	resources	on	an ongoing	 basis	 to	 modify	 our	 protective	 measures	 and	 to	 investigate	 and remediate	vulnerabilities	or	other	exposures,	and	we	may	be	subject	to	litigation and	 financial	 losses	 that	 are	 either	 not	 insured	 against	 or	 not	 fully	 covered through	any	insurance	maintained	by	us.

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

Notwithstanding	the	proliferation	of	technology	and	technology-based	risk	and control	systems,	our	businesses	ultimately	rely	on	human	beings	as	our	greatest resource,	and	from	time-to-time,	they	make	mistakes	that	are	not	always	caught immediately	by	our	technological	processes	or	by	our	other	procedures	which are	intended	to	prevent	and	detect	such	errors.	These	can	include	calculation errors,	 mistakes	 in	 addressing	 emails,	 errors	 in	 software	 development	 or implementation,	 or	 simple	 errors	 in	 judgment.	 We	 strive	 to	 eliminate	 such human	 errors	 through	 training,	 supervision,	 technology	 and	 by	 redundant processes	 and	 controls.	 Human	 errors,	 even	 if	 promptly	 discovered	 and remediated,	can	result	in	material	losses	and	liabilities	for	the	firm.

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

We	face	significant	legal	risks	in	our	businesses,	and	the	volume	of	claims	and amount	 of	 damages	 and	 penalties	 claimed	 in	 litigation	 and	 regulatory proceedings	 against	 financial	 institutions	 remain	 high.	 See	 Note	 27	 to	 the consolidated	financial	statements	in	Part	II,	Item	8	of	the	2014	Form	10-K	for	a discussion	of	certain	legal	proceedings	in	which	we	are	involved	and	Note	18	to the	consolidated	financial	statements	in	Part	II,	Item	8	of	the	2014	Form	10-K	for information	 regarding	 certain	 mortgage-related	 contingencies.	 Our	 experience has	 been	 that	 legal	 claims	 by	 customers	 and	 clients	 increase	 in	 a	 market downturn	 and	 that	 employment-related	 claims	 increase	 following	 periods	 in which	 we	 have	 reduced	 our	 staff.	 Additionally,	 governmental	 entities	 are plaintiffs	in	certain	of	the	legal	proceedings	in	which	we	are	involved,	and	we may	face	future	actions	or	claims	by	the	same	or	other	governmental	entities.

Recently,	 significant	 settlements	 by	 several	 large	 financial	 institutions	 with governmental	 entities	 have	 been	 publicly	 announced.	 The	 trend	 of	 large settlements	with	governmental	entities	may	adversely	affect	the	outcomes	for other	 financial	 institutions	 in	 similar	 actions,	 especially	 where	 governmental officials	have	announced	that	the	large	settlements	will	be	used	as	the	basis	or	a template	 for	 other	 settlements.	 The	 uncertain	 regulatory	 enforcement environment	makes	it	difficult	to	estimate	probable	losses,	which	can	lead	to substantial	disparities	between	legal	reserves	and	subsequent	actual	settlements or	penalties.	Further,	the	SEC	has	announced	a	policy	of	seeking	admissions	of liability	in	certain	settled	cases,	which	could	adversely	impact	the	defense	of private	 litigation	 or	 result	 in	 penalties	 or	 limitations	 in	 business	 under	 "bad actor"	statutes	in	jurisdictions	in	which	we	operate.

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

Technology	 is	 fundamental	 to	 our	 business	 and	 our	 industry.	The	 growth	 of electronic	 trading	 and	 the	 introduction	 of	 new	 technologies	 is	 changing	 our businesses	and	presenting	us	with	new	challenges.	Securities,	futures	and	options transactions	are	increasingly	occurring	electronically,	both	on	our	own	systems and	 through	 other	 alternative	 trading	 systems,	 and	 it	 appears	 that	 the	 trend toward	alternative	trading	systems	will	continue	and	probably	accelerate.	Some of	these	alternative	trading	systems	compete	with	us,	particularly	our	exchange- based	market-making	activities,	and	we	may	experience	continued	competitive pressures	in	these	and	other	areas.	In	addition,	the	increased	use	by	our	clients	of low-cost	 electronic	 trading	 systems	 and	 direct	 electronic	 access	 to	 trading markets	could	cause	a	reduction	 in	commissions	and	spreads.	As	our	clients increasingly	 use	 our	 systems	 to	 trade	 directly	 in	 the	 markets,	 we	 may	 incur liabilities	 as	 a	 result	 of	 their	 use	 of	 our	 order	 routing	 and	 execution infrastructure.	We	have	invested	significant	resources	into	the	development	of electronic	 trading	 systems	 and	 expect	 to	 continue	 to	 do	 so,	 but	 there	 is	 no assurance	that	the	revenues	generated	by	these	systems	will	yield	an	adequate return	on	our	investment,	particularly	given	the	relatively	lower	commissions arising	from	electronic	trades.

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

As	 part	 of	 our	 commodities	 business,	 we	 purchase	 and	 sell	 certain	 physical commodities	and	arrange	for	their	storage	and	transport.	In	our	investing	and lending	businesses,	we	invest	in	entities	that	engage	in	the	production,	storage, transportation,	 marketing	 and	 trading	 of	 numerous	 commodities.	 The commodities	involved	in	these	activities	and	investments	may	include	crude	oil, oil	products,	natural	gas,	electric	power,	agricultural	products,	metals	(base	and precious),	 minerals	 (including	 unenriched	 uranium),	 emission	 credits,	 coal, freight,	liquefied	natural	gas	and	related	products	and	indices.

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

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

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

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

We	may	also	be	required	to	divest	or	discontinue	certain	of	these	activities	for regulatory	or	legal	reasons.	If	that	occurs,	the	firm	may	receive	a	value	that	is less	 than	 the	 then	 carrying	 value,	 as	 the	 firm	 may	 be	 unable	 to	 exit	 these activities	in	an	orderly	transaction.

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

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

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

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

In	addition,	 there	have	been	a	number	of	highly	publicized	cases	around	 the world,	involving	actual	or	alleged	fraud	or	other	misconduct	by	employees	in	the financial	services	industry	in	recent	years,	and	we	run	the	risk	that	employee misconduct	could	occur.	This	misconduct	has	included	and	may	include	in	the future	the	theft	of	proprietary	information,	including	proprietary	software.	It	is not	always	possible	to	deter	or	prevent	employee	misconduct	and	the	precautions we	 take	 to	 prevent	 and	 detect	 this	 activity	 have	 not	 been	 and	 may	 not	 be effective	in	all	cases.

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

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

# Item	1B.				Unresolved	Staff	Comments

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

# Item	2.				Properties

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

We	have	offices	at	30	Hudson	Street	in	Jersey	City,	New	Jersey,	which	we	own and	which	include	approximately	1.6	million	gross	square	feet	of	office	space.

We	 have	 additional	 offices	 and	 commercial	 space	 in	 the	 United	 States	 and elsewhere	in	the	Americas,	which	together	comprise	approximately	2.5	million square	feet	of	leased	and	owned	space.

In	Europe,	the	Middle	East	and	Africa,	we	have	offices	that	total	approximately 1.5	million	square	feet	of	leased	and	owned	space.	Our	European	headquarters	is located	in	London	at	Peterborough	Court,	pursuant	to	a	lease	expiring	in	2026. In	total,	we	have	offices	with	approximately	1.1	million	square	feet	in	London, relating	to	various	properties.

In	Asia	 (including	 India),	Australia	 and	 New	 Zealand,	 we	 have	 offices	 with approximately	1.9	million	square	feet.	Our	headquarters	 in	 this	region	are	 in Tokyo,	at	the	Roppongi	Hills	Mori	Tower,	and	in	Hong	Kong,	at	the	Cheung Kong	Center.	In	Japan,	we	currently	have	offices	with	approximately	220,000 square	feet,	the	majority	of	which	have	leases	that	will	expire	in	2018.	In	Hong Kong,	we	currently	have	offices	with	approximately	315,000	square	feet,	 the majority	of	which	have	leases	that	will	expire	in	2017.

In	 the	 preceding	 paragraphs,	 square	 footage	 figures are provided only for properties	that	are	used	in	the	operation	of	our	businesses.

See	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results of	 Operations	 — Off-Balance-Sheet	 Arrangements and Contractual Obligations	—	Contractual	Obligations"	in	Part	II,	Item	7	of	the	2014	Form	10- K	for	a	discussion	of	exit	costs	we	may	incur	in	the	future	to	the	extent	we (i)	reduce	our	space	capacity	or	(ii)	commit	to,	or	occupy,	new	properties	in	the locations	in	which	we	operate	and,	consequently,	dispose	of	existing	space	that had	been	held	for	potential	growth.

# Item	3.				Legal	Proceedings

We	are	involved	in	a	number	of	judicial,	regulatory	and	arbitration	proceedings concerning	matters	arising	 in	connection	with	 the	conduct	of	our	businesses. Many	of	these	proceedings	are	in	early	stages,	and	many	of	these	cases	seek	an indeterminate	 amount	 of	 damages.	 However,	 we	 believe,	 based	 on	 currently available	information,	that	the	results	of	such	proceedings,	in	the	aggregate,	will not	 have	 a	 material	 adverse	 effect	 on	 our	 financial	 condition,	 but	 may	 be material	to	our	operating	results	for	any	particular	period,	depending,	in	part, upon	 the	operating	results	for	such	period.	Given	 the	range	of	 litigation	and investigations	presently	under	way,	our	litigation	expenses	can	be	expected	to remain	 high.	 See	 "Management's	 Discussion	 and	 Analysis	 of	 Financial Condition	and	Results	of	Operations	—	Use	of	Estimates"	in	Part	II,	Item	7	of the	2014	Form	10-K.	See	Note	27	to	the	consolidated	financial	statements	in Part	II,	Item	8	of	the	2014	Form	10-K	for	information	about	certain	judicial, regulatory	and	legal	proceedings.

# Item	4.				Mine	Safety	Disclosures

Not	applicable.

# Executive	Officers	of	The	Goldman	Sachs	Group,	Inc.

Set	forth	below	are	the	name,	age,	present	title,	principal	occupation	and	certain biographical	information	for	our	executive	officers.	All	of	our	executive	officers have	been	appointed	by	and	serve	at	the	pleasure	of	our	board	of	directors.

# Lloyd	C.	Blankfein,	60

Mr.	 Blankfein	 has	 been	 our	 Chairman and	 Chief	 Executive	 Officer since June	2006,	and	a	director	since	April	2003.

Mr.	Cohen	has	been	an	Executive	Vice	President	of	Goldman	Sachs	and	our

Global	Head	of	Compliance	since	February	2004.

Mr.	 Cohn	 has	 been	 our	 President	 and	 Chief	 Operating	 Officer (or	 Co-Chief

Operating	Officer)	and	a	director	since	June	2006.

Ms.	 Cooper	 has	 been	 an	 Executive	 Vice	 President	 of	 Goldman	 Sachs	 since April	 2011	 and	 our	 Global	 Head	 of	 Human	 Capital	 Management	 since March	2008.	From	2002	to	2008,	she	served	in	various	positions	at	the	firm, including	sales	management	within	the	Securities	Division.

Mr.	 Palm	 has	 been	 an	 Executive	 Vice	 President	 of	 Goldman	 Sachs	 since May	 1999,	 and	 our	 General	 Counsel	 and	 head	 or	 co-head	 of	 the	 Legal Department	since	May	1992.

Mr.	 Rogers	 has	 been	 an	 Executive	 Vice	 President	 of	 Goldman	 Sachs	 since April	 2011	 and	 Chief	 of	 Staff	 and	 Secretary	 to	 the	 Board	 of	 Directors	 of Goldman	Sachs	since	December	2001.

# Harvey	M.	Schwartz,	50

Mr.	Schwartz	has	been	an	Executive	Vice	President	of	Goldman	Sachs	and	our Chief	 Financial	 Officer	 since	 January	 2013.	 From	 February	 2008	 to January	2013,	Mr.	Schwartz	was	global	co-head	of	the	Securities	Division.

# Mark	Schwartz,	60

Mr.	Schwartz	has	been	a	Vice	Chairman	of	Goldman	Sachs	and	Chairman	of Goldman	Sachs	Asia	Pacific	since	rejoining	the	firm	in	June	2012.	From	2006	to June	2012,	he	was	Chairman	of	MissionPoint	Capital	Partners,	an	investment firm	he	co-founded.

# Michael	S.	Sherwood,	49

Mr.	 Sherwood	 has	 been	 a	 Vice	 Chairman	 of	 Goldman	 Sachs	 since February	2008	and	co-chief	executive	officer	of	Goldman	Sachs	International since	2005.	He	assumed	responsibility	for	coordinating	the	firm's	business	and activities	around	Growth	Markets	in	November	2013.

# John	S.	Weinberg,	58

Mr.	Weinberg	has	been	a	Vice	Chairman	of	Goldman	Sachs	since	June	2006.	He currently	 focuses	 on	 client	 development	 and	 initiatives	 across	 our	 major divisions.	He	was	a	co-head	of	Goldman	Sachs'	Investment	Banking	Division from	December	2002	to	December	2014.

# PART	II

# Item	 5. 	 Market for	 Registrant's	 Common	 Equity, Related	Stockholder	Matters	and Issuer	Purchases	of Equity	Securities

The	 principal	 market	 on	 which	 our	 common	 stock	 is	 traded	 is	 the	 NYSE. Information	relating	to	the	high	and	low	sales	prices	per	share	of	our	common stock,	as	reported	by	the	Consolidated	Tape	Association,	for	each	full	quarterly period	during	2012,	2013	and	2014	is	set	forth	under	the	heading	"Supplemental Financial	Information	—	Common	Stock	Price	Range"	in	Part	II,	Item	8	of	the 2014	Form	10-K.	As	of	February	6,	2015,	there	were	10,230	holders	of	record	of our	common	stock.

The	declaration	of	dividends	by	Group	Inc.	is	subject	to	the	discretion	of	our Board.	 Our	 Board	 will	 take	 into	 account	 such	 matters	 as	 general	 business conditions,	 our	 financial	 results,	 capital	 requirements,	 contractual,	 legal	 and regulatory	restrictions	on	the	payment	of	dividends	by	us	to	our	shareholders	or by	our	subsidiaries	to	us,	the	effect	on	our	debt	ratings	and	such	other	factors	as our	Board	may	deem	relevant.	See	"Business	—	Regulation"	in	Part	I,	Item	1	of the	2014	Form	10-K	for	a	discussion	of	potential	regulatory	limitations	on	our receipt	of	funds	from	our	regulated	subsidiaries	and	our	payment	of	dividends	to shareholders	of	Group	Inc.

The	table	below	sets	forth	the	information	with	respect	to	purchases	made	by	or on	behalf	of	Group	Inc.	or	any	"affiliated	purchaser"	(as	defined	in	Rule	10b- 18(a)(3)	 under	 the	 Exchange	 Act),	 of	 our	 common	 stock	 during	 the	 fourth quarter	of	our	year	ended	December	2014.

|  | Total<br>Number<br>of	Shares<br>Purchased | Average<br>Price<br>Paid	Per<br>Share | Total<br>Number<br>of	Shares<br>Purchased<br>as	Part	of<br>Publicly<br>Announced<br>Plans	or<br>Programs^1 | Maximum<br>Number<br>of	Shares<br>That	May<br>Yet	Be<br>Purchased<br>Under	the<br>Plans	or<br>Programs^1 |
| :--- | :--- | :--- | :--- | :--- |
| Month\t#1 |  |  |  |  |
| (October\t1,\t2014\tto |  |  |  |  |
| October\t31,\t2014) | 1,759,498 | $181.86 | 1,759,498 | 30,235,389 |
| Month\t#2 |  |  |  |  |
| (November\t1,\t2014\tto |  |  |  |  |
| November\t30,\t2014) | 2,728,586 | 189.98 | 2,728,586 | 27,506,803 |
| Month\t#3 |  |  |  |  |
| (December\t1,\t2014\tto |  |  |  |  |
| December\t31,\t2014) | 2,156,373^\t2 | 190.95 | 2,155,759 | 25,351,044 |
| Total | 6,644,457 |  | 6,643,843 |  |

1.On	March	21,	2000,	we	announced	 that	our	Board	had	approved	a	repurchase	program, pursuant	to	which	up	to	15	million	shares	of	our	common	stock	may	be	repurchased.	This repurchase	program	was	 increased	by	an	aggregate	of	430	million	shares	by	resolutions of	our	Board	adopted	 from	June	2001	 through	April	2013.	We	use	our	share	repurchase program	to	help	maintain	the	appropriate	level	of	common	equity.	The	repurchase	program	is effected	 primarily	 through	 regular	 open-market	 purchases	 (which	 may	 include	 repurchase plans	designed	to	comply	with	Rule	10b5-1),	the	amounts	and	timing	of	which	are	determined primarily	 by	 the	 firm's	 current	 and	 projected	 capital	 position,	 but	 which	 may	 also	 be influenced	by	general	market	conditions	and	the	prevailing	price	and	trading	volumes	of	our common	stock.	The	repurchase	program	has	no	set	expiration	or	termination	date.	Prior	to repurchasing	common	stock,	the	firm	must	receive	confirmation	that	the	Board	of	Governors of	the	Federal	Reserve	System	does	not	object	to	such	capital	actions.

2.Includes	614	shares	remitted	by	employees	to	satisfy	minimum	statutory	withholding	taxes	on equity-based	awards	that	were	delivered	to	employees	during	the	period.

Information	relating	to	compensation	plans	under	which	our	equity	securities	are authorized	for	issuance	is	presented	in	Part	III,	Item	12	of	the	2014	Form	10-K.

# Item	6.				Selected	Financial	Data

The	Selected	Financial	Data	table	is	set	forth	under	Part	II,	Item	8	of	the	2014 Form	10-K.

# Item	7.				Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations

|  | Page	No. |
| :--- | :--- |
| Introduction | 47 |
| Executive\tOverview | 48 |
| Business\tEnvironment | 49 |
| Critical\tAccounting\tPolicies | 50 |
| Recent\tAccounting\tDevelopments | 53 |
| Use\tof\tEstimates | 53 |
| Results\tof\tOperations | 54 |
| Balance\tSheet\tand\tFunding\tSources | 67 |
| Equity\tCapital\tManagement\tand\tRegulatory\tCapital | 74 |
| Regulatory\tDevelopments | 81 |
| Off-Balance-Sheet\tArrangements\tand\tContractual\tObligations | 83 |
| Risk\tManagement\tand\tRisk\tFactors | 85 |
| \t\t\t\tOverview\tand\tStructure\tof\tRisk\tManagement | 86 |
| \t\t\t\tLiquidity\tRisk\tManagement | 91 |
| \t\t\t\tMarket\tRisk\tManagement | 98 |
| \t\t\t\tCredit\tRisk\tManagement | 104 |
| \t\t\t\tOperational\tRisk\tManagement | 112 |
| \t\t\t\tCertain\tRisk\tFactors\tThat\tMay\t\tAffect\tOur\tBusinesses | 113 |

# Management's	Discussion	and	Analysis

The	Goldman	Sachs	Group,	Inc.	(Group	Inc.)	 is	a	 leading	global	 investment banking,	securities	and	investment	management	firm	that	provides	a	wide	range of	financial	services	 to	a	substantial	and	diversified	client	base	 that	 includes corporations,	financial	institutions,	governments	and	high-net-worth	individuals. Founded	in	1869,	the	firm	is	headquartered	in	New	York	and	maintains	offices in	all	major	financial	centers	around	the	world.

We	 report	 our	 activities	 in	 four	 business	 segments:	 Investment	 Banking, Institutional	Client	Services,	Investing	&	Lending	and	Investment	Management. See	"Results	of	Operations"	below	for	further	information	about	our	business segments.

When	we	use	the	terms	"Goldman	Sachs,"	"the	firm,"	"we,"	"us"	and	"our,"	we mean	Group	Inc.,	a	Delaware	corporation,	and	its	consolidated	subsidiaries.

References	to	"the	2014	Form	10-K"	are	to	our	Annual	Report	on	Form	10-K	for the	year	ended	December	31,	2014.	All	references	to	"the	consolidated	financial statements"	or	"Supplemental	Financial	Information"	are	to	Part	II,	Item	8	of	our Annual	 Report	 on	 Form	 10-K	 for	 the	 year	 ended	 December	 31,	 2014.	 All references	to	2014,	2013	and	2012	refer	to	our	years	ended,	or	the	dates,	as	the context requires,	 December 31, 2014,	 December 31, 2013	 and December	31,	2012,	respectively.	Any	reference	to	a	future	year	refers	to	a	year ending	on	December	31	of	that	year.	Certain	reclassifications	have	been	made	to previously	reported	amounts	to	conform	to	the	current	presentation.

In	 this	 discussion	 and	 analysis	 of	 our	 financial	 condition	 and	 results	 of operations,	we	have	included	information	that	may	constitute	"forward-looking statements"	within	the	meaning	of	the	safe	harbor	provisions	of	the	U.S.	Private Securities	Litigation	Reform	Act	of	1995.	Forward-looking	statements	are	not historical	facts,	but	instead	represent	only	our	beliefs	regarding	future	events, many	of	which,	by	their	nature,	are	inherently	uncertain	and	outside	our	control. This	 information	 includes	 statements	 other	 than	 historical	 information	 or statements	of	current	condition	and	may	relate	to	our	future	plans	and	objectives and	results,	among	other	things,	and	may	also	include	statements	about	the	effect of	changes	to	the	capital	and	leverage	rules	applicable	to	banks	and	bank	holding companies,	the	impact	of	the	Dodd-Frank	Act	on	our	businesses	and	operations, and	 various	 legal	 proceedings	 or	 mortgage-related	 contingencies	 as	 set	 forth under	"Legal	Proceedings"	and	 "Certain	 Mortgage-Related	 Contingencies"	 in Notes	27	and	18,	respectively,	to	the	consolidated	financial	statements,	as	well as	 statements	 about	 the	 results	 of	 our	 Dodd-Frank	Act	 and	 firm	 stress	 tests, statements	about	the	objectives	and	effectiveness	of	our	business	continuity	plan, information	 security	 program,	 risk	 management	 and	 liquidity	 policies, statements	about	trends	in	or	growth	opportunities	for	our	businesses,	statements about	our	future	status,	activities	or	reporting	under	U.S.	or	non-U.S.	banking and	 financial	 regulation,	 and	 statements	 about	 our	 investment	 banking transaction	backlog.

By	identifying	these	statements	for	you	in	this	manner,	we	are	alerting	you	to	the possibility	that	our	actual	results	and	financial	condition	may	differ,	possibly materially,	from	the	anticipated	results	and	financial	condition	indicated	in	these forward-looking	statements.	Important	factors	that	could	cause	our	actual	results and	financial	condition	to	differ	from	those	indicated	in	these	forward-looking statements	include,	among	others,	those	discussed	below	under	"Certain	Risk Factors	That	May	Affect	Our	Businesses"	as	well	as	"Risk	Factors"	in	Part	I, Item	1A	of	the	2014	Form	10-K	and	"Cautionary	Statement	Pursuant	to	the	U.S. Private	Securities	Litigation	Reform	Act	of	1995"	in	Part	I,	Item	1	of	the	2014 Form	10-K.

# Executive	Overview

Net	revenues	were	$34.53	billion	for	2014,	essentially	unchanged	compared	with 2013,	as	higher	net	revenues	in	both	Investment	Management	and	Investment Banking,	reflecting	strong	performances	in	these	businesses,	were	largely	offset by	 slightly	 lower	 net	 revenues	 in	 both	 Institutional	 Client	 Services	 and Investing	&	Lending.

Operating	 expenses	 were $22.17 billion	 for	 2014,	 essentially	 unchanged compared	with	2013.	Non-compensation	expenses	were	slightly	lower	compared with	the	prior	year,	primarily	reflecting	lower	net	provisions	for	litigation	and regulatory	 proceedings,	 while	 compensation	 and	 benefits	 expenses	 were essentially	unchanged.

During	 2014,	 as	 part	 of	 a	 firmwide	 initiative	 to	 reduce	 activities	 with	 lower returns,	 total	 assets	 were	 reduced	 by $55 billion	 to $856 billion	 as	 of December	2014,	while	pre-tax	margin	improved	approximately	150	basis	points to	35.8%.

We	 also	 maintained	 strong	 capital	 ratios	 and	 liquidity,	 while	 returning $6.52	billion	of	capital	to	shareholders	during	2014.	During	the	year,	the	firm repurchased 31.8	 million shares	 of	 its	 common	 stock	 for	 a	 total	 cost	 of $5.47	billion	and	paid	common	dividends	of	$1.05	billion.	Our	Common	Equity Tier	1	ratio	 2	was	12.2%	as	of	December	2014,	under	the	Basel	III	Advanced approach	reflecting	the	applicable	transitional	provisions.	In	addition,	our	global core	liquid	assets	 3	were	$183	billion	as	of	December	2014.

Net	revenues	were	$34.21	billion	for	2013,	essentially	unchanged	compared	with 2012,	as	significantly	higher	net	revenues	in	Investment	Banking	and	higher	net revenues	in	both	Investing	&	Lending	and	Investment	Management	were	offset by	lower	net	revenues	in	Institutional	Client	Services.

Operating	expenses	were	$22.47	billion	for	2013,	2%	lower	than	2012,	as	both compensation	and	benefits	expenses	and	non-compensation	expenses	decreased slightly.	 The	 decline	 in	 non-compensation	 expenses	 reflected	 the	 sale	 of	 a majority	stake	in	our	Americas	reinsurance	business	and	lower	depreciation	and amortization	expenses,	partially	offset	by	higher	net	provisions	for	litigation	and regulatory	proceedings.

During	2013,	the	firm	repurchased	39.3	million	shares	of	its	common	stock	for	a total	cost	of	$6.17	billion,	while	maintaining	strong	capital	levels.	In	addition, our	global	core	liquid	assets	 3	were	$184	billion	as	of	December	2013.

See	 "Results	 of	 Operations	 —	 Segment	 Operating	 Results"	 below	 for information	about	net	revenues	and	pre-tax	earnings	for	each	of	our	business segments.

Our	businesses,	by	their	nature,	do	not	produce	predictable	earnings.	Our	results in	any	given	period	can	be	materially	affected	by	conditions	in	global	financial markets,	 economic	 conditions	 generally	 and	 other	 factors.	 For	 a	 further discussion	of	the	factors	that	may	affect	our	future	operating	results,	see	"Certain Risk	Factors	That	May	Affect	Our	Businesses"	below,	as	well	as	"Risk	Factors" in	Part	I,	Item	1A	of	the	2014	Form	10-K.

1.Tangible	book	value	per	common	share	is	a	non-GAAP	measure	and	may	not	be	comparable	to	similar	non-GAAP	measures	used	by	other	companies.	See	"Balance	Sheet	and	Funding	Sources —	Balance	Sheet	Analysis	and	Metrics"	below	for	further	information	about	our	calculation	of	tangible	book	value	per	common	share.

2.See	Note	20	to	the	consolidated	financial	statements	for	further	information	about	our	capital	ratios.

3.See	"Risk	Management	and	Risk	Factors	—	Liquidity	Risk	Management"	for	further	information	about	our	global	core	liquid	assets.

# Business	Environment

During	2014,	real	gross	domestic	product	(GDP)	growth	appeared	stable	and subdued	in	most	major	economies,	supported	by	solid	private	sector	growth	in the	 United	 States	 and	 the	 reduction	 of	 fiscal	 headwinds,	 particularly	 in	 the United	States	and	the	Euro	area.	Ongoing	U.S.	labor	market	improvements	and robust	 U.S.	 consumer	 activity	 were	 notable	 trends	 in	 2014.	 Monetary	 policy generally	 remained	 accommodative,	 helping	 most	 major	 advanced-economy equity	markets	to	increase	during	the	year,	while	longer-dated	government	bond yields	 generally	 declined.	 During	 the	 second	 half	 of	 2014,	 the	 U.S.	 dollar strengthened	and	oil	prices	declined.	Although	macroeconomic	conditions	were fairly	stable,	U.S.	equity	market	volatility	increased	towards	the	end	of	the	year, alongside	political	uncertainty,	particularly	 in	Greece,	Russia	and	 the	Middle East,	as	well	as	short-lived	Ebola	concerns.	In	 investment	banking,	 industry- wide	 underwriting	 activity	 remained	 strong	 in	 both	 equity	 and	 debt,	 and industry-wide	completed	mergers	and	acquisitions	activity	increased	compared with	 2013.	 Industry-wide	 announced	 mergers	 and	 acquisitions	 activity significantly	 increased	compared	with	2013.	For	a	further	discussion	of	how market	conditions	may	affect	our	businesses,	see	"Certain	Risk	Factors	That May	Affect	Our	Businesses"	below,	as	well	as	"Risk	Factors"	in	Part	I,	Item	1A of	the	2014	Form	10-K.

# Global

During	2014,	real	GDP	growth	appeared	to	improve	in	advanced	economies	and slow	in	emerging	markets.	Developed	market	growth	improvements	were	largest in	the	United	Kingdom	and	Euro	area,	while	Japan's	growth	declined	and	the United	 States'	 growth	 improvement	 was	 modest.	 In	 emerging	 markets, headwinds	 from	 slowing	 domestic	 demand	 offset	 improving	 current	 account balances	and	contributed	to	a	general	slowdown	in	growth.	Unemployment	rates in	both	the	United	States	and	United	Kingdom	declined	in	2014	and	at	faster paces	 than	 in	 2013.	 The	 Euro	 area	 unemployment	 rate	 declined	 in	 2014, following	an	increase	in	2013.	The	U.S.	Federal	Reserve	ended	its	monthly	asset purchase	program	in	the	fourth	quarter	of	2014,	after	tapering	its	purchases	for several	months.	The	European	Central	Bank	(ECB)	reduced	its	policy	interest rate	twice	during	the	year,	and	along	with	the	Bank	of	Japan	(BOJ),	announced further	easing	policies.

# United	States

In	the	United	States,	real	GDP	increased	by	2.4%	in	2014,	compared	with	an increase	of	2.2%	 in	2013.	Consumer	expenditures	growth	and	business	fixed investment	growth	both	improved,	while	residential	investment	growth	slowed. The	pickup	in	consumer	expenditures	was	primarily	driven	by	growth	in	real disposable	income,	which	contracted	in	2013.	Measures	of	consumer	confidence improved,	as	the	unemployment	rate	fell	during	the	year.	House	prices,	housing starts	 and	 house	 sales	 increased	 in	 2014,	 but	 the	 pace	 of	 improvements, particularly	 for	 starts	 and	 sales,	 slowed	 compared	 with	 2013.	 Measures	 of inflation	were	mostly	stable	during	2014.	The	U.S.	Federal	Reserve	maintained its	federal	funds	rate	at	a	target	range	of	zero	to	0.25%	during	the	year,	ended	its monthly	 program	 to	 purchase	 U.S.	 Treasury	 securities	 and	 mortgage-backed securities	 in	 the	 fourth	 quarter	 of	 2014	 and	 kept	 forward	 guidance	 broadly unchanged.	The	yield	on	the	10-year	U.S.	Treasury	note	declined	by	87	basis points	during	2014	to	2.17%.	In	equity	markets,	the	NASDAQ	Composite	Index, the	S&P	500	Index	and	the	Dow	Jones	Industrial	Average	increased	by	13%, 11%	and	8%,	respectively,	during	2014.

# Europe

In	 the	 Euro	 area,	 real	 GDP	 increased	 by	 0.9%	 in	 2014,	 compared	 with	 a contraction	 of 0.4% in	 2013.	 While	 an	 improvement	 from	 2013,	 growth remained	at	a	suppressed	level.	Fixed	investment	and	consumer	spending	both grew	 modestly	 in	 2014,	 after	 contracting	 in	 2013,	 and	 measures	 of	 inflation remain	subdued.	The	ECB	cut	the	main	refinancing	operations	and	deposit	rates by	20	basis	points	to	0.05%	and	(0.20)%,	respectively,	announced	a	purchase program	for	asset-backed	securities	and	covered	bonds	in	the	fourth	quarter	of 2014,	and	discussed	the	possibility	of	a	quantitative	easing	program	targeting sovereign	bonds.	The	Euro	depreciated	by	12%	against	the	U.S.	dollar.	In	the United	 Kingdom,	 real	 GDP	 increased	 by	 2.6%	 in	 2014,	 compared	 with	 an increase	of	1.7%	in	2013.	The	Bank	of	England	maintained	its	official	bank	rate at	0.50%.	The	British	pound	depreciated	by	6%	against	the	U.S.	dollar.	Yields	on 10-year	government	bonds	in	the	region	generally	fell	during	the	year.	In	equity markets,	the	DAX	Index	and	the	Euro	Stoxx	50	Index	increased	by	3%	and	1%, respectively,	while	the	FTSE	100	Index	and	the	CAC	40	Index	decreased	by	3% and	1%,	respectively,	during	2014.

In	Japan,	real	GDP	had	no	growth	in	2014,	a	sharp	slowdown	compared	with	an increase	of	1.6%	in	2013.	Real	GDP	contracted	significantly	during	the	second and	third	quarters	of	2014,	as	consumer	expenditures	fell,	in	part	resulting	from a	consumption	tax	hike	in	April.	However,	real	GDP	picked	up	again	 in	 the fourth	 quarter	 of	 2014.	 Although	 measures	 of	 inflation	 increased	 in	 2014, inflation	remained	below	the	BOJ's	2%	inflation	target	excluding	the	impact	of the	consumption	tax	hike.	During	the	fourth	quarter	of	2014,	the	BOJ	announced further	 quantitative	 and	 qualitative	 monetary	 easing	 and	 removed	 the	 2-year timing	target	for	achieving	2%	price	stability,	making	the	timeframe	open	ended. During	the	year,	the	yield	on	10-year	Japanese	government	bonds	declined,	the U.S.	dollar	appreciated	by	14%	against	the	Japanese	yen	and,	in	equity	markets, the	Nikkei	225	Index	increased	by	7%.

In	China,	real	GDP	increased	by	7.4%	in	2014,	compared	with	7.7%	in	2013. Measures	of	inflation	remained	moderate	and	the	People's	Bank	of	China	cut	its one-year	lending	rate	by	40	basis	points	during	the	fourth	quarter	of	2014.	The U.S.	dollar	appreciated	by	2%	against	the	Chinese	yuan	and,	in	equity	markets, the	 Shanghai	 Composite	 Index	 increased	 by 53%, as	 regulatory	 changes influenced	sentiment.	In	contrast,	in	Hong	Kong,	the	Hang	Seng	Index	increased by	1%.

In	India,	real	GDP	increased	at	a	solid	pace	in	both	2014	and	2013.	The	rate	of wholesale	inflation	declined	compared	with	2013.	The	U.S.	dollar	appreciated	by 2%	 against the	 Indian	 rupee	 and,	 in	 equity	 markets,	 the	 BSE	 Sensex	 Index increased	by	30%	during	2014.

# Other	Markets

In	Brazil,	estimated	real	GDP	had	no	growth	in	2014,	compared	with	an	increase of 2.5% in	 2013,	 as	 private	 consumption	 growth	 decelerated	 and	 fixed investment	spending	contracted.	The	U.S.	dollar	appreciated	by	12%	against	the Brazilian	real	and,	in	equity	markets,	the	Bovespa	Index	decreased	by	3%.	In Russia,	real	GDP	increased	by	0.6%	in	2014,	compared	with	an	increase	of	1.3% in	 2013.	 Tensions	 related	 to	 the	 political	 situation	 in	 Ukraine	 and	 Russia generated	concern	during	the	year.	The	U.S.	dollar	appreciated	by	76%	against the	Russian	ruble	and,	in	equity	markets,	the	MICEX	Index	decreased	by	7% during	2014.

# Critical	Accounting	Policies

# Fair	Value

Fair	 Value	 Hierarchy. Financial	 instruments	 owned,	 at	 fair	 value	 and Financial	instruments	sold,	but	not	yet	purchased,	at	fair	value	(i.e.,	inventory), as	well	as	certain	other	financial	assets	and	financial	liabilities,	are	reflected	in our	consolidated	statements	of	financial	condition	at	fair	value	(i.e.,	marked-to- market),	with	related	gains	or	losses	generally	recognized	in	our	consolidated statements	of	earnings.	The	use	of	fair	value	to	measure	financial	instruments	is fundamental	 to	 our	 risk	 management	 practices	 and	 is	 our	 most	 critical accounting	policy.

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

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

Instruments	categorized	within	level	3	of	the	fair	value	hierarchy	are	those	which require	 one	 or	 more	 significant	 inputs	 that	 are	 not	 observable.	 As	 of December	2014	and	December	2013,	level	3	financial	assets	represented	4.9% and	 4.4%,	 respectively,	 of	 our	 total	 assets.	Absent	 evidence	 to	 the	 contrary, instruments	 classified	 within	 level	 3	 of	 the	 fair	 value	 hierarchy	 are	 initially valued	at	transaction	price,	which	is	considered	to	be	the	best	initial	estimate	of fair	value.	Subsequent	to	the	transaction	date,	we	use	other	methodologies	to determine	fair	value,	which	vary	based	on	the	type	of	instrument.	Estimating	the fair	value	of	level	3	financial	instruments	requires	judgments	to	be	made.	These judgments	include:

Ÿ	Determining	 the	 appropriate	 valuation	 methodology	 and/or	 model	 for	 each type	of	level	3	financial	instrument;

Ÿ	Determining	model	 inputs	based	on	an	evaluation	of	all	relevant	empirical market	data,	including	prices	evidenced	by	market	transactions,	interest	rates, credit	spreads,	volatilities	and	correlations;	and

Ÿ	Determining	 appropriate	 valuation	 adjustments, including those related to illiquidity	or	counterparty	credit	quality.

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

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

Price	Verification.	All	financial	instruments	at	fair	value	in	levels	1,	2	and	3 of	 the	 fair	 value	 hierarchy	 are	 subject	 to	 our	 independent	 price	 verification process.	 The	 objective	 of	 price	 verification	 is	 to	 have	 an	 informed	 and independent	opinion	with	regard	to	the	valuation	of	financial	instruments	under review.	Instruments	that	have	one	or	more	significant	inputs	which	cannot	be corroborated	by	external	market	data	are	classified	within	level	3	of	the	fair	value hierarchy.	Price	verification	strategies	utilized	by	our	independent	control	and support	functions	include:

Ÿ	Trade	 Comparison.	 Analysis	 of trade	 data	 (both	 internal	 and	 external where	available) is	used to	determine the	most	relevant	pricing	 inputs	and valuations.

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

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

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

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

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

Ÿ	Backtesting.	Valuations	are	corroborated	by	comparison	to	values	realized upon	sales.

See	 Notes	 5	 through	 8	 to	 the	 consolidated financial statements for further information	about	fair	value	measurements.

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

Review	 of	 Valuation	 Models.	 The firm's	 independent	 model	 validation group,	 consisting	 of	 quantitative	 professionals	 who	 are	 separate	 from	 model developers,	 performs	 an	 independent	 model	 approval	 process.	 This	 process incorporates	a	review	of	a	diverse	set	of	model	and	trade	parameters	across	a broad	range	of	values	(including	extreme	and/or	improbable	conditions)	in	order to	critically	evaluate:

Ÿ	The	 model's	 suitability for	 valuation	 and risk	 management	 of	 a	 particular instrument	type;

Ÿ	The	model's	accuracy	in	reflecting	the	characteristics	of	the	related	product and	its	significant	risks;

Ÿ	The	suitability	of	the	calculation	techniques	incorporated	in	the	model;

Ÿ	The	model's	consistency	with	models	for	similar	products;	and

Ÿ	The	model's	sensitivity	to	input	parameters	and	assumptions.

New	or	changed	models	are	reviewed	and	approved	prior	to	being	put	into	use. Models	 are	 evaluated	 and	 re-approved	 annually	 to	 assess	 the	 impact	 of	 any changes	 in	 the	 product	 or	 market	 and	 any	 market	 developments	 in	 pricing theories.

# Level	3	Financial	Assets	at	Fair	Value.	 Total	level	3	financial	assets	were

See	 Notes	 5	 through	 8	 to	 the	 consolidated	 financial	 statements	 for	 further information	about	level	3	financial	assets,	including	changes	in	level	3	financial assets	and	related	fair	value	measurements.

# Goodwill	and	Identifiable	Intangible	Assets

Goodwill.	Goodwill	is	the	cost	of	acquired	companies	in	excess	of	the	fair	value of	 net	 assets,	 including	 identifiable	 intangible	 assets,	 at	 the	 acquisition	 date. Goodwill	 is	 assessed	 annually	 in	 the	 fourth	 quarter	 for	 impairment,	 or	 more frequently	if	events	occur	or	circumstances	change	that	indicate	an	impairment may	exist,	by	first	assessing	qualitative	factors	to	determine	whether	it	is	more likely	than	not	that	the	fair	value	of	a	reporting	unit	is	less	than	its	carrying amount.	 If	 the	 results	 of	 the	 qualitative	 assessment	 are	 not	 conclusive,	 a quantitative	goodwill	test	would	be	performed	by	comparing	the	estimated	fair value	of	each	reporting	unit	with	its	estimated	net	book	value.

During	the	fourth	quarter	of	2014,	we	assessed	goodwill	for	impairment.	The qualitative	assessment	required	management	to	make	judgments	and	to	evaluate several	 factors,	 which	 included,	 but	 were	 not	 limited	 to,	 macroeconomic conditions,	 industry	 and	 market	 considerations,	 cost	 factors,	 overall	 financial performance,	 entity-specific	 events,	 events	 affecting	 reporting	 units	 and sustained	changes	in	our	stock	price.	Based	on	our	evaluation	of	these	factors, we	determined	that	it	was	more	likely	than	not	that	the	fair	value	of	each	of	the reporting	 units	 exceeded	 its	 respective	 carrying	 amount,	 and	 therefore,	 we determined	 that	 goodwill	 was	 not	 impaired	 and	 that	 a	 quantitative	 goodwill impairment	test	was	not	required.

If	 we	 experience	 a	 prolonged	 or	 severe	 period	 of	 weakness	 in	 the	 business environment	or	financial	markets,	our	goodwill	could	be	impaired	in	the	future. In	addition,	significant	changes	 to	critical	 inputs	of	 the	quantitative	goodwill impairment	test	(e.g.,	cost	of	equity)	could	cause	the	estimated	fair	value	of	our reporting	units	to	decline,	which	could	result	in	an	impairment	of	goodwill	in	the future.

See	Note	13	to	the	consolidated	financial	statements	for	further	information about	our	goodwill.

Identifiable Intangible	 Assets.	 We amortize	 our	 identifiable	 intangible assets	over	their	estimated	useful	lives	using	the	straight-line	method	or	based	on economic	 usage	 for	 certain	 commodities-related	 intangibles.	 Identifiable intangible	 assets	 are	 tested	 for	 impairment	 whenever	 events	 or	 changes	 in circumstances	suggest	that	an	asset's	or	asset	group's	carrying	value	may	not	be fully	recoverable.	See	Note	13	to	the	consolidated	financial	statements	for	the carrying	value	and	estimated	remaining	useful	lives	of	our	identifiable	intangible assets	by	major	asset	class.

A	 prolonged	 or	 severe	 period	 of	 market	 weakness,	 or	 significant	 changes	 in regulation	could	adversely	impact	our	businesses	and	impair	the	value	of	our identifiable	 intangible	 assets.	 In	 addition,	 certain	 events	 could	 indicate	 a potential	 impairment	 of	 our	 identifiable	 intangible	 assets,	 including	 weaker business	performance	resulting	in	a	decrease	in	our	customer	base	and	decreases in	revenues	from	commodities-related	transportation	rights,	customer	contracts and	 relationships.	 Management	 judgment	 is	 required	 to	 evaluate	 whether indications	of	potential	impairment	have	occurred,	and	to	test	intangible	assets for	impairment	if	required.

An	impairment,	generally	calculated	as	the	difference	between	the	estimated	fair value	and	the	carrying	value	of	an	asset	or	asset	group,	is	recognized	if	the	total of	the	estimated	undiscounted	cash	flows	relating	to	the	asset	or	asset	group	is less	than	the	corresponding	carrying	value.

See	 Note	 13	 to	 the	 consolidated	 financial	 statements for information	 about impairments	of	our	identifiable	intangible	assets.

# Recent	Accounting	Developments

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

# Use	of	Estimates

The	 use	 of	 generally	 accepted	 accounting	 principles	 requires	 management	 to make	certain	estimates	and	assumptions.	In	addition	to	the	estimates	we	make	in connection	with	fair	value	measurements,	and	the	accounting	for	goodwill	and identifiable	 intangible	 assets,	 the	 use	 of	 estimates	 and	 assumptions	 is	 also important	 in	determining	provisions	for	 losses	 that	may	arise	from	 litigation, regulatory	proceedings	and	tax	audits.

We	estimate	and	provide	for	potential	losses	that	may	arise	out	of	litigation	and regulatory	proceedings	to	the	extent	that	such	losses	are	probable	and	can	be reasonably	estimated.	In	addition,	we	estimate	 the	upper	end	of	 the	range	of reasonably	possible	aggregate	loss	in	excess	of	the	related	reserves	for	litigation proceedings	where	the	firm	believes	the	risk	of	loss	is	more	than	slight.	See Notes	18	and	27	to	the	consolidated	financial	statements	for	information	about certain	judicial,	regulatory	and	legal	proceedings.

Significant	 judgment	 is	 required	 in	 making	 these	 estimates	 and	 our	 final liabilities	may	ultimately	be	materially	different.	Our	total	estimated	liability	in respect	of	litigation	and	regulatory	proceedings	is	determined	on	a	case-by-case basis	 and	 represents	 an	 estimate	 of	 probable	 losses	 after	 considering,	 among other	factors,	the	progress	of	each	case	or	proceeding,	our	experience	and	the experience	of	others	in	similar	cases	or	proceedings,	and	the	opinions	and	views of	legal	counsel.

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

# Results	of	Operations

The	composition	of	our	net	revenues	has	varied	over	time	as	financial	markets and	the	scope	of	our	operations	have	changed.	The	composition	of	net	revenues can	 also	 vary	 over the shorter term	 due to fluctuations in	 U.S.	 and	 global economic	and	market	conditions.	See	"Certain	Risk	Factors	That	May	Affect Our	 Businesses"	 below	 and	 "Risk	 Factors" in	 Part I, Item	 1A	 of the	 2014 Form	 10-K for	 a further	 discussion	 of the impact	 of	 economic	 and	 market conditions	on	our	results	of	operations.

# Financial	Overview

The	table	below	presents	an	overview	of	our	financial	results.

| $	in	millions,	except |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| per\tshare\tamounts | 2014 | 2013 | 2012 |
| Net\trevenues | \t\t$34,528 | \t$34,206 | \t $34,163 |
| Pre-tax\tearnings | 12,357 | 11,737 | 11,207 |
| Net\tearnings | 8,477 | 8,040 | 7,475 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders | 8,077 | 7,726 | 7,292 |
| Diluted\tearnings\tper\tcommon\tshare | 17.07 | 15.46 | 14.13 |
| Return\ton\taverage\tcommon\tshareholders'\tequity\t^1 | 11.2% | 11.0% | 10.7% |

1.ROE	is	computed	by	dividing	net	earnings	applicable	to	common	shareholders	by	average monthly	 common	 shareholders'	 equity.	 The table	 below	 presents	 our	 average	 common shareholders'	equity.

|  | Average	for	the<br>Year	Ended	December | Average	for	the<br>Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Total\tshareholders'\tequity | \t$80,839 | \t$77,353 | \t$72,530 |
| Preferred\tstock | (8,585) | (6,892) | (4,392) |
| Common\tshareholders'\tequity | \t$72,254 | \t$70,461 | \t$68,138 |

# The	table	below	presents	selected	financial	ratios.

|  | Year	Ended	December | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- | :--- |
|  | 2014 | 2013 | 2012 |
| Net\tearnings\tto\taverage\tassets | 0.9% | 0.9% | 0.8% |
| Return\ton\taverage\ttotal\tshareholders'\tequity\t^1 | \t\t10.5% | \t10.4%\t\t\t\t\t10.3% | \t10.4%\t\t\t\t\t10.3% |
| Total\taverage\tequity\tto\taverage\tassets | 9.0% | 8.2% | 7.7% |
| Dividend\tpayout\tratio\t^2 | \t\t13.2% | \t13.3%\t\t\t\t\t12.5% | \t13.3%\t\t\t\t\t12.5% |

1.Return	 on	 average total	 shareholders'	 equity is	 computed	 by	 dividing	 net	 earnings	 by average	monthly	total	shareholders'	equity.

2.Dividend	 payout ratio is	 computed	 by	 dividing	 dividends	 declared	 per	 common	 share	 by diluted	earnings	per	common	share.

# Net	Revenues

The table	 below	 presents	 our	 net revenues	 by line item	 on the	 consolidated statements	of	earnings.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Investment\tbanking | \t\t$\t\t6,464 | \t$\t\t6,004\t\t\t\t\t$\t\t4,941 | \t$\t\t6,004\t\t\t\t\t$\t\t4,941 |
| Investment\tmanagement | 5,748 | 5,194 | 4,968 |
| Commissions\tand\tfees | 3,316 | 3,255 | 3,161 |
| Market\tmaking | 8,365 | 9,368 | 11,348 |
| Other\tprincipal\ttransactions | 6,588 | 6,993 | 5,865 |
| Total\tnon-interest\trevenues | 30,481 | 30,814 | 30,283 |
| Interest\tincome | 9,604 | 10,060 | 11,381 |
| Interest\texpense | 5,557 | 6,668 | 7,501 |
| Net\tinterest\tincome | 4,047 | 3,392 | 3,880 |
| Total\tnet\trevenues | \t\t$34,528 | \t$34,206\t\t\t\t\t$34,163 | \t$34,206\t\t\t\t\t$34,163 |

# In	the	table	above:

Ÿ	"Investment	banking"	is	comprised	of	revenues	(excluding	net	interest)	from financial advisory and underwriting assignments, as	 well as derivative transactions	directly	related	to	these	assignments.	These	activities	are	included in	our	Investment	Banking	segment.

Ÿ	"Investment	management"	is	comprised	of	revenues	(excluding	net	interest) from	providing	investment	management	services	to	a	diverse	set	of	clients,	as well	as	wealth	advisory	services	and	certain	transaction	services	to	high-net- worth	individuals	and	families.	These	activities	are	included	in	our	Investment Management	segment.

Ÿ	"Commissions and fees" is comprised of revenues from executing and clearing	 client transactions	 on	 major	 stock,	 options	 and futures	 exchanges worldwide,	as	well	as	over-the-counter	(OTC)	transactions.	These	activities are	included	in	our	Institutional	Client	Services	and	Investment	Management segments.

Ÿ	"Market	making"	is	comprised	of	revenues	(excluding	net	interest)	from	client execution	activities	related	to	making	markets	in	interest	rate	products,	credit products,	 mortgages, currencies, commodities and equity	 products.	 These activities	are	included	in	our	Institutional	Client	Services	segment.

Ÿ	"Other principal transactions" is comprised of revenues (excluding net interest)	from	our	investing	activities	and	the	origination	of	loans	to	provide financing to clients. In addition, "Other principal transactions" includes revenues	related	to	our	consolidated	investments.	These	activities	are	included in	our	Investing	&	Lending	segment.

Net	revenues	on	the	consolidated	statements	of	earnings	were	$34.53	billion	for 2014,	essentially	unchanged	compared	with	2013,	reflecting	higher	net	interest income,	investment	management	revenues	and	investment	banking	revenues,	as well	as	slightly	higher	commissions	and	fees,	largely	offset	by	lower	market- making	revenues	and	other	principal	transactions	revenues.

During	2014,	the	operating	environment	was	favorable	for	investment	banking activities,	as	industry-wide	underwriting	activity	was	strong	and	industry-wide mergers	and	acquisitions	activity	 increased.	Improved	asset	prices	resulted	 in appreciation	in	the	value	of	client	assets	in	investment	management.	In	addition, other	principal	transactions	were	impacted	by	favorable	company-specific	events and	 strong	 corporate	 performance.	 However,	 the	 operating	 environment remained	challenging	for	market-making	activities	as	economic	uncertainty	and low	volatility	levels	contributed	to	generally	low	levels	of	activity,	particularly	in fixed	income	products.	If	macroeconomic	concerns	continue	over	the	long	term, and	 client	 activity	 levels	 in	 investment	 banking	 broadly	 decline	 or	 market- making	activity	levels	remain	low,	or	if	asset	prices	were	to	decline,	net	revenues would	likely	be	negatively	impacted.	See	"Segment	Operating	Results"	below for	further	information	about	material	trends	and	uncertainties	that	may	impact our	results	of	operations.

Non-Interest	Revenues.	Investment	banking	revenues	on	 the	consolidated statements	of	earnings	were	$6.46	billion	for	2014,	8%	higher	than	2013,	due	to significantly	 higher	 revenues	 in	 financial	 advisory,	 reflecting	 an	 increase	 in industry-wide	 completed	 mergers	 and	 acquisitions,	 primarily	 in	 the	 United States.	Revenues	in	underwriting	were	essentially	unchanged	compared	with	a strong	2013,	as	industry-wide	activity	levels	remained	high.	Revenues	in	debt underwriting	were	slightly	lower	compared	with	2013,	reflecting	lower	revenues from	 commercial	 mortgage-related	 activity,	 while	 revenues	 in	 equity underwriting	were	slightly	higher,	principally	from	initial	public	offerings.

Investment	 management	 revenues	 on	 the	 consolidated	 statements	 of	 earnings were $5.75 billion	 for	 2014, 11% higher	 than	 2013,	 reflecting	 higher management	 and	 other	 fees,	 primarily	 due	 to	 higher	 average	 assets	 under supervision,	as	well	as	higher	incentive	fees	and	transaction	revenues.

Commissions	 and	 fees	 on	 the	 consolidated	 statements	 of	 earnings	 were $3.32	billion	for	2014,	2%	higher	than	2013,	due	to	higher	commissions	and	fees in	both	Europe	and	the	United	States,	reflecting	generally	higher	client	activity, consistent	with	increases	in	listed	cash	equity	market	volumes	in	these	regions.

Market-making	 revenues	 on	 the	 consolidated	 statements	 of	 earnings	 were $8.37	billion	for	2014,	11%	lower	than	2013.	Results	for	2014	included	a	gain	of $289	million	($270	million	of	which	was	recorded	at	extinguishment	in	the	third quarter)	related	to	the	extinguishment	of	certain	of	our	junior	subordinated	debt. Excluding	this	gain	and	a	gain	of	$211	million	on	the	sale	of	a	majority	stake	in our	 European	 insurance	 business	 in	 2013,	 the	 decrease	 in	 market-making revenues	 compared	 with	 2013	 reflected	 significantly	 lower	 revenues	 in	 both credit	products	and	equity	derivatives,	lower	revenues	in	mortgages	and	the	sale of	our	Americas	reinsurance	business	in	2013.	These	decreases	were	partially offset	 by	 significantly	 higher	 revenues	 in	 commodities,	 as	 well	 as	 higher revenues	in	equity	cash	products,	currencies	and	interest	rate	products.

Other	principal	transactions	revenues	on	the	consolidated	statements	of	earnings were	$6.59	billion	for	2014,	6%	lower	than	2013.	Net	gains	from	investments	in equity	securities	were	slightly	lower	due	to	a	significant	decrease	in	net	gains from	investments	in	public	equities,	as	movements	in	global	equity	prices	during 2014	were	less	favorable	compared	with	2013,	partially	offset	by	an	increase	in net	gains	from	investments	in	private	equities,	primarily	driven	by	company- specific	events.	Net	gains	from	debt	securities	and	loans	were	slightly	higher than	2013,	primarily	due	to	sales	of	certain	investments	during	2014.	Revenues related	to	our	consolidated	investments	were	significantly	lower	compared	with 2013,	 reflecting	 a	 decrease	 in	 operating	 revenues	 from	 commodities-related consolidated	investments.

Net	Interest	Income.	Net	interest	income	on	the	consolidated	statements	of earnings	 was	 $4.05	 billion	 for	 2014,	 19%	 higher	 than	 2013.	 The	 increase compared	with	2013	was	primarily	due	to	lower	interest	expense	resulting	from	a reduction	 in	 our	 total	 liabilities,	 lower	 costs	 of	 long-term	 funding	 due	 to	 a decline	 in	 interest	 rates	 and	 the	 impact	 of	 rebates	 in	 the	 securities	 services business,	partially	offset	by	lower	interest	income	due	to	a	reduction	in	our	total assets.	See	"Supplemental	Financial	Information	—	Statistical	Disclosures	— Distribution	 of	 Assets,	 Liabilities	 and	 Shareholders'	 Equity"	 for	 further information	about	our	sources	of	net	interest	income.

Net	revenues	on	the	consolidated	statements	of	earnings	were	$34.21	billion	for 2013,	essentially	unchanged	compared	with	2012.	2013	included	significantly higher	 investment	 banking	 revenues,	 as	 well	 as	 higher	 other	 principal transactions	 revenues	 and	 investment	 management	 revenues.	 In	 addition, commissions	and	fees	were	slightly	higher	compared	with	2012.	These	increases were	 offset	 by	 lower	 market-making	 revenues	 and	 lower	 net	 interest	 income compared	with	2012.

During	 2013,	 a	 significant	 increase	 in	 global	 equity	 prices	 contributed	 to improved	 industry-wide	 equity	 underwriting	 activity	 in	 investment	 banking, appreciation	in	the	value	of	client	assets	in	investment	management	and	net	gains from	 investments	 in	 public	 equities	 in	 other	 principal	 transactions.	 Other principal	transactions	were	also	impacted	by	favorable	company-specific	events and	strong	corporate	performance,	and	industry-wide	debt	underwriting	activity in	investment	banking	remained	solid,	as	interest	rates	remained	low.	However, macroeconomic	 concerns	 continued	 to	 weigh	 on	 industry-wide	 mergers	 and acquisitions	 activity	 in	 investment	 banking,	 and	 contributed	 to	 a	 challenging operating	environment	for	market-making	activities,	resulting	in	fluctuations	in activity	levels	during	2013.	See	"Segment	Operating	Results"	below	for	further information	about	material	trends	and	uncertainties	that	may	impact	our	results of	operations.

Non-Interest	Revenues.	Investment	banking	revenues	on	 the	consolidated statements	 of	 earnings	 were	 $6.00	 billion	 for	 2013,	 22%	 higher	 than	 2012, reflecting	significantly	higher	revenues	in	underwriting,	due	to	strong	revenues in	 both	 equity	 and	 debt	 underwriting.	 Revenues	 in	 equity	 underwriting	 were significantly	higher	compared	with	2012,	reflecting	an	increase	in	client	activity, particularly	 in	 initial	 public	 offerings.	 Revenues	 in	 debt	 underwriting	 were significantly	higher	compared	with	2012,	principally	due	to	leveraged	finance activity.	Revenues	in	financial	advisory	were	essentially	unchanged	compared with	2012.

Investment	 management	 revenues	 on	 the	 consolidated	 statements	 of	 earnings were	$5.19	billion	for	2013,	5%	higher	than	2012,	reflecting	higher	management and	other	fees,	primarily	due	to	higher	average	assets	under	supervision.

Commissions	 and	 fees	 on	 the	 consolidated	 statements	 of	 earnings	 were $3.26	 billion	 for	 2013,	 slightly	 higher	 than	 2012,	 primarily	 reflecting	 higher commissions	 and	 fees	 in	Asia	 and	 Europe.	 During	 2013,	 our	 average	 daily volumes	 were	 higher	 in	 Asia	 and	 Europe	 and	 lower	 in	 the	 United	 States compared	with	2012,	consistent	with	listed	cash	equity	market	volumes.

Market-making	 revenues	 on	 the	 consolidated	 statements	 of	 earnings	 were $9.37	billion	for	2013,	17%	lower	than	2012.	The	decrease	compared	with	2012 was	primarily	due	to	significantly	lower	revenues	in	equity	products,	mortgages and	interest	rate	products,	as	well	as	lower	revenues	in	currencies.	The	decrease in	equity	products	was	due	to	the	sale	of	our	Americas	reinsurance	business	in 2013,	the	sale	of	our	hedge	fund	administration	business	in	2012	(2012	included a	gain	on	sale	of	$494	million)	and	lower	revenues	in	derivatives,	partially	offset by	significantly	higher	revenues	in	cash	products	compared	with	2012.	Revenues in	commodities	were	higher,	while	revenues	in	credit	products	were	essentially unchanged	compared	with	2012.	In	December	2013,	we	completed	the	sale	of	a majority	 stake	 in	 our	 European	 insurance	 business	 and	 recognized	 a	 gain	 of $211	million.

Other	principal	transactions	revenues	on	the	consolidated	statements	of	earnings were	 $6.99	 billion	 for	 2013,	 19%	 higher	 than	 2012,	 reflecting	 a	 significant increase	in	net	gains	from	investments	in	equity	securities,	driven	by	company- specific	 events	 and	 stronger	 corporate	 performance,	 as	 well	 as	 significantly higher	global	equity	prices.	In	addition,	net	gains	from	debt	securities	and	loans were	 slightly	 higher,	 while	 revenues	 related	 to	 our	 consolidated	 investments were	lower	compared	with	2012.

Net	Interest	Income.	Net	interest	income	on	the	consolidated	statements	of earnings	 was	 $3.39	 billion	 for	 2013,	 13%	 lower	 than	 2012.	 The	 decrease compared	 with	 2012	 was	 primarily	 due	 to	 lower	 average	 yields	 on	 financial instruments	owned,	at	fair	value,	partially	offset	by	lower	interest	expense	on financial	instruments	sold,	but	not	yet	purchased,	at	fair	value	and	collateralized financings. See "Supplemental Financial	 Information	 — Statistical Disclosures	—	Distribution	of	Assets,	Liabilities	and	Shareholders'	Equity"	for further	information	about	our	sources	of	net	interest	income.

# Operating	Expenses

Our	operating	expenses	are	primarily	 influenced	by	compensation,	headcount and	levels	of	business	activity.	In	addition,	see	"Use	of	Estimates"	for	expenses that	may	arise	from	 litigation	and	regulatory	proceedings.	Compensation	and benefits	 includes	 salaries,	 discretionary	 compensation,	 amortization	 of	 equity awards	 and	 other	 items	 such	 as	 benefits.	 Discretionary	 compensation	 is significantly	impacted	by,	among	other	factors,	the	level	of	net	revenues,	overall financial	performance,	prevailing	labor	markets,	business	mix,	the	structure	of our	share-based	compensation	programs	and	the	external	environment.

The	table	below	presents	our	operating	expenses	and	total	staff	(which	includes employees,	consultants	and	temporary	staff).

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Compensation\tand\tbenefits | \t\t$12,691 | \t$12,613 | \t $12,944 |
| Brokerage,\tclearing,\texchange\tand\tdistribution\tfees | 2,501 | 2,341 | 2,208 |
| Market\tdevelopment | 549 | 541 | 509 |
| Communications\tand\ttechnology | 779 | 776 | 782 |
| Depreciation\tand\tamortization | 1,337 | 1,322 | 1,738 |
| Occupancy | 827 | 839 | 875 |
| Professional\tfees | 902 | 930 | 867 |
| Insurance\treserves\t^1 | — | 176 | 598 |
| Other\texpenses | 2,585 | 2,931 | 2,435 |
| Total\tnon-compensation\texpenses | 9,480 | 9,856 | 10,012 |
| Total\toperating\texpenses | \t\t$22,171 | \t$22,469 | \t $22,956 |
| Total\tstaff\tat\tperiod-end | 34,000 | 32,900 | 32,400 |

1.Consists	 of	 changes	 in	 reserves	 related	 to	 our	Americas	 reinsurance	 business,	 including interest	 credited	 to	 policyholder	 account	 balances,	 and	 expenses	 related	 to	 property catastrophe	reinsurance	claims.	In	April	2013,	we	completed	the	sale	of	a	majority	stake	in our	Americas	reinsurance	business	and	no	longer	consolidate	this	business.

2014	 versus	 2013.	 Operating	 expenses	 on	 the	 consolidated	 statements	 of earnings	 were	 $22.17	 billion	 for	 2014,	 essentially	 unchanged	 compared	 with 2013.	Compensation	and	benefits	expenses	on	 the	consolidated	statements	of earnings	 were	 $12.69	 billion	 for	 2014,	 essentially	 unchanged	 compared	 with 2013.	The	ratio	of	compensation	and	benefits	to	net	revenues	for	2014	was	36.8% compared	with	36.9%	for	2013.	Total	staff	increased	3%	during	2014.

Non-compensation	 expenses	 on	 the	 consolidated	 statements	 of	 earnings	 were $9.48	billion	for	2014,	4%	lower	than	2013.	The	decrease	compared	with	2013 included	a	decrease	in	other	expenses,	due	to	lower	net	provisions	for	litigation and	regulatory	proceedings	and	lower	operating	expenses	related	to	consolidated investments,	as	well	as	a	decline	in	insurance	reserves,	reflecting	the	sale	of	our Americas	reinsurance	business	in	2013.	These	decreases	were	partially	offset	by an	increase	in	brokerage,	clearing,	exchange	and	distribution	fees.	Net	provisions for	litigation	and	regulatory	proceedings	for	2014	were	$754	million	compared with	 $962	 million	 for	 2013	 (both	 primarily	 comprised	 of	 net	 provisions	 for mortgage-related	 matters).	 2014	 included	 a	 charitable	 contribution	 of $137	million	to	Goldman	Sachs	Gives,	our	donor-advised	fund.	Compensation was	reduced	to	fund	this	charitable	contribution	to	Goldman	Sachs	Gives.	The firm	 asks	 its	 participating	 managing	 directors	 to	 make	 recommendations regarding	potential	charitable	recipients	for	this	contribution.

Non-compensation	 expenses	 on	 the	 consolidated	 statements	 of	 earnings	 were $9.86	billion	for	2013,	2%	lower	than	2012.	The	decrease	compared	with	2012 included	 a	 decline	 in	 insurance	 reserves,	 reflecting	 the	 sale	 of	 our	Americas reinsurance	business,	and	a	decrease	in	depreciation	and	amortization	expenses, primarily	 reflecting	 lower	 impairment	 charges	 and	 lower	 operating	 expenses related	to	consolidated	investments.	These	decreases	were	partially	offset	by	an increase	 in	 other	 expenses,	 due	 to	 higher	 net	 provisions	 for	 litigation	 and regulatory	 proceedings,	 and	 higher	 brokerage,	 clearing,	 exchange	 and distribution	 fees.	 Net	 provisions	 for	 litigation	 and	 regulatory	 proceedings	 for 2013	were	$962	million	(primarily	comprised	of	net	provisions	for	mortgage- related	matters)	compared	with	$448	million	for	2012	(including	a	settlement with	the	Board	of	Governors	of	the	Federal	Reserve	System	(Federal	Reserve Board)	 regarding	 the	 independent	 foreclosure	 review).	 2013	 included	 a charitable	 contribution	 of	 $155	 million	 to	 Goldman	 Sachs	 Gives,	 our	 donor- advised	fund.	Compensation	was	reduced	to	fund	this	charitable	contribution	to Goldman	 Sachs	 Gives.	The	 firm	 asks	 its	 participating	 managing	 directors	 to make	 recommendations	 regarding	 potential	 charitable	 recipients	 for	 this contribution.

# Provision	for	Taxes

The	effective	income	tax	rate	for	2013	was	31.5%,	down	from	33.3%	for	2012. The	decrease	from	33.3%	to	31.5%	was	primarily	due	to	a	determination	that certain	non-U.S.	earnings	will	be	permanently	reinvested	abroad.

In	December	2014,	the	rules	related	to	the	deferral	of	U.S.	tax	on	certain	non- repatriated	 active	 financing	 income	 were	 extended retroactively to January	 1,	 2014	 through	 December	 31,	 2014.	 The	 expiration	 of	 these	 rules effective	December	31,	2014	is	not	expected	to	have	a	material	impact	on	our effective	tax	rate	for	2015.

In	March	2014,	New	York	State	enacted	executive	budget	legislation	for	the 2014-2015	fiscal	year	which	changes	the	taxation	of	corporations	doing	business in	the	state.	This	change	did	not	have	a	material	impact	on	our	effective	tax	rate for	2014,	and	we	do	not	expect	it	will	have	a	material	impact	on	our	effective	tax rate	for	2015.

# Segment	Operating	Results

The	 table	 below	 presents the	 net revenues,	 operating expenses and	 pre-tax earnings	of	our	segments.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Investment\tBanking |  |  |  |
| Net\trevenues | \t\t$\t\t6,464 | \t$\t\t6,004 | \t $\t\t4,926 |
| Operating\texpenses | 3,688 | 3,479 | 3,333 |
| Pre-tax\tearnings | \t\t$\t\t2,776 | \t$\t\t2,525 | \t $\t\t1,593 |
| Institutional\tClient\tServices |  |  |  |
| Net\trevenues | \t\t$15,197 | \t$15,721 | \t $18,124 |
| Operating\texpenses | 10,880 | 11,792 | 12,490 |
| Pre-tax\tearnings | \t\t$\t\t4,317 | \t$\t\t3,929 | \t $\t\t5,634 |
| Investing\t&amp;\tLending |  |  |  |
| Net\trevenues | \t\t$\t\t6,825 | \t$\t\t7,018 | \t $\t\t5,891 |
| Operating\texpenses | 2,819 | 2,686 | 2,668 |
| Pre-tax\tearnings | \t\t$\t\t4,006 | \t$\t\t4,332 | \t $\t\t3,223 |
| Investment\tManagement |  |  |  |
| Net\trevenues | \t\t$\t\t6,042 | \t$\t\t5,463 | \t $\t\t5,222 |
| Operating\texpenses | 4,647 | 4,357 | 4,296 |
| Pre-tax\tearnings | \t\t$\t\t1,395 | \t$\t\t1,106 | \t $\t\t\t\t\t926 |
| Total\tnet\trevenues | \t\t$34,528 | \t$34,206 | \t $34,163 |
| Total\toperating\texpenses^\t1 | 22,171 | 22,469 | 22,956 |
| Total\tpre-tax\tearnings | \t\t$12,357 | \t$11,737 | \t $11,207 |

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

The	 cost	 drivers	 of	 Goldman	 Sachs	 taken	 as	 a	 whole	 —	 compensation, headcount	and	levels	of	business	activity	—	are	broadly	similar	in	each	of	our business	segments.	Compensation	and	benefits	expenses	within	our	segments reflect,	among	other	factors,	the	overall	performance	of	Goldman	Sachs	as	well as	the	performance	of	individual	businesses.	Consequently,	pre-tax	margins	in one	segment	of	our	business	may	be	significantly	affected	by	the	performance	of our	other	business	segments.	A	discussion	of	segment	operating	results	follows.

Our	Investment	Banking	segment	is	comprised	of:

Financial	Advisory.	Includes	strategic	advisory	assignments	with	respect	to mergers and acquisitions, divestitures, corporate defense activities, restructurings,	spin-offs,	risk	management	and	derivative	 transactions	directly related	to	these	client	advisory	assignments.

Underwriting. Includes	 public	 offerings	 and	 private	 placements,	 including local	and	cross-border	transactions,	of	a	wide	range	of	securities,	loans	and	other financial	instruments,	and	derivative	transactions	directly	related	to	these	client underwriting	activities.

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

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Financial\tAdvisory | \t\t$2,474 | \t$1,978 | \t$1,975 |
| Equity\tunderwriting | 1,750 | 1,659 | 987 |
| Debt\tunderwriting | 2,240 | 2,367 | 1,964 |
| Total\tUnderwriting | 3,990 | 4,026 | 2,951 |
| Total\tnet\trevenues | 6,464 | 6,004 | 4,926 |
| Operating\texpenses | 3,688 | 3,479 | 3,333 |
| Pre-tax\tearnings | \t\t$2,776 | \t$2,525 | \t$1,593 |

The	 table	below	presents	our	financial	advisory	and	underwriting transaction volumes.^	1

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tbillions | 2014 | 2013 | 2012 |
| Announced\tmergers\tand\tacquisitions | \t\t$1,002 | \t$\t\t\t620 | \t$\t\t\t745 |
| Completed\tmergers\tand\tacquisitions | 659 | 632 | 575 |
| Equity\tand\tequity-related\tofferings\t^2 | 78 | 91 | 58 |
| Debt\tofferings\t^3 | 268 | 280 | 243 |

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

2.Includes	 Rule	 144A	 and	 public	 common	 stock	 offerings,	 convertible	 offerings	 and rights offerings.

3.Includes non-convertible preferred stock, mortgage-backed securities, asset-backed securities	and taxable	municipal	debt. Includes	publicly	registered	and	Rule	144A issues. Excludes	leveraged	loans.

Net	revenues	in	Financial	Advisory	were	$2.47	billion,	25%	higher	than	2013, reflecting	 an	 increase	 in	 industry-wide	 completed	 mergers	 and	 acquisitions, primarily	in	the	United	States.	Net	revenues	in	Underwriting	were	$3.99	billion, essentially	unchanged	compared	with	a	strong	2013,	as	industry-wide	activity levels	 remained	 high.	 Net	 revenues	 in	 debt	 underwriting	 were	 slightly	 lower compared	with	2013,	reflecting	lower	net	revenues	from	commercial	mortgage- related	activity,	while	net	revenues	in	equity	underwriting	were	slightly	higher, principally	from	initial	public	offerings.

During	 2014,	 Investment	 Banking	 operated	 in	 an	 environment	 generally characterized	by	strong	industry-wide	underwriting	activity	in	both	equity	and debt,	 and	 an	 increase	 in	 industry-wide	 completed	 mergers	 and	 acquisitions activity	compared	with	2013.	Industry-wide	announced	mergers	and	acquisitions activity	 significantly	 increased	 compared	 with	 2013.	 In	 the	 future,	 if	 market conditions	become	less	favorable,	and	client	activity	levels	broadly	decline,	net revenues	in	Investment	Banking	would	likely	be	negatively	impacted.

During	2014,	our	investment	banking	transaction	backlog	increased	significantly due	to	a	significant	increase	in	estimated	net	revenues	from	potential	advisory transactions.	 Estimated	 net	 revenues	 from	 potential	 underwriting	 transactions were	lower	compared	with	the	end	of	2013,	as	a	significant	decrease	in	estimated net	 revenues	 from	 potential	 equity	 underwriting	 transactions,	 particularly	 in initial	 public	 offerings,	 was	 partially	 offset	 by	 an	 increase	 in	 estimated	 net revenues	 from	 potential	 debt	 underwriting	 transactions,	 reflecting	 increases across	most	products.

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

Operating	expenses	were	$3.69	billion	for	2014,	6%	higher	than	2013,	primarily due	 to	 increased	 compensation	 and	 benefits	 expenses,	 reflecting	 higher	 net revenues.	Pre-tax	earnings	were	$2.78	billion	in	2014,	10%	higher	than	2013.

Net	revenues	in	Financial	Advisory	were	$1.98	billion,	essentially	unchanged compared	with	2012.	Net	revenues	 in	Underwriting	were	$4.03	billion,	36% higher	 than	 2012,	 due	 to	 strong	 net	 revenues	 in	 both	 equity	 and	 debt underwriting.	 Net	 revenues	 in	 equity	 underwriting	 were	 significantly	 higher compared	 with	 2012,	 reflecting	 an	 increase	 in	 client	 activity,	 particularly	 in initial	 public	 offerings.	 Net	 revenues	 in	 debt	 underwriting	 were	 significantly higher	compared	with	2012,	principally	due	to	leveraged	finance	activity.

During	 2013,	 Investment	 Banking	 operated	 in	 an	 environment	 generally characterized	 by	 improved	 industry-wide	 equity	 underwriting activity, particularly	 in	 initial	 public	 offerings,	 as	 global	 equity	 prices	 significantly increased	during	the	year.	In	addition,	industry-wide	debt	underwriting	activity remained	solid,	and	included	significantly	higher	leveraged	finance	activity,	as interest	 rates	 remained	 low.	 However,	 ongoing	 macroeconomic	 concerns continued	to	weigh	on	investment	banking	activity	as	industry-wide	mergers	and acquisitions	activity	declined	compared	with	2012.

During	2013,	our	investment	banking	transaction	backlog	increased	significantly due	to	significantly	higher	estimated	net	revenues	from	both	potential	advisory transactions	 and	 potential	 underwriting	 transactions.	 The	 increase	 in underwriting	reflects	significantly	higher	estimated	net	revenues	from	potential equity	underwriting	transactions,	primarily	in	initial	public	offerings,	and	higher estimated	net	revenues	from	potential	debt	underwriting	transactions,	principally from	leveraged	finance	activity.

Operating	expenses	were	$3.48	billion	for	2013,	4%	higher	than	2012,	due	to increased	compensation	and	benefits	expenses,	primarily	resulting	from	higher net	 revenues.	 Pre-tax	 earnings	 were	 $2.53	 billion	 in	 2013,	 59%	 higher	 than 2012.

Our	Institutional	Client	Services	segment	is	comprised	of:

Fixed	Income,	Currency	and	Commodities	Client	Execution.	Includes client	execution	activities	related	to	making	markets	in	interest	rate	products, credit	products,	mortgages,	currencies	and	commodities.

Equities. Includes	 client	 execution	 activities	 related	 to	 making	 markets	 in equity	 products	 and	 commissions	 and	 fees	 from	 executing	 and	 clearing institutional	client	transactions	on	major	stock,	options	and	futures	exchanges worldwide,	as	well	as	OTC	transactions.	Equities	also	includes	our	securities services	business,	which	provides	financing,	securities	lending	and	other	prime brokerage	services	to	institutional	clients,	including	hedge	funds,	mutual	funds, pension	funds	and	foundations,	and	generates	revenues	primarily	in	the	form	of interest	rate	spreads	or	fees.

The	table	below	presents	the	operating	results	of	our	Institutional	Client	Services segment.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Fixed\tIncome,\tCurrency\tand |  |  |  |
| Commodities\tClient\tExecution | \t\t$\t\t8,461 | \t$\t\t8,651 | \t $\t\t9,914 |
| Equities\tclient\texecution\t^1 | 2,079 | 2,594 | 3,171 |
| Commissions\tand\tfees | 3,153 | 3,103 | 3,053 |
| Securities\tservices | 1,504 | 1,373 | 1,986 |
| Total\tEquities | 6,736 | 7,070 | 8,210 |
| Total\tnet\trevenues | 15,197 | 15,721 | 18,124 |
| Operating\texpenses | 10,880 | 11,792 | 12,490 |
| Pre-tax\tearnings | \t\t$\t\t4,317 | \t$\t\t3,929 | \t $\t\t5,634 |

1.Net	revenues	related	to	the	Americas	reinsurance	business	were	$317	million	for	2013	and $1.08	 billion for	 2012. In	 April	 2013,	 we	 completed the	 sale	 of	 a	 majority	 stake in	 our Americas	reinsurance	business	and	no	longer	consolidate	this	business.

2014 versus 2013.	 Net	 revenues	 in	 Institutional	 Client	 Services	 were $15.20	billion	for	2014,	3%	lower	than	2013.	Results	for	2014	included	a	gain	of $289	million	($270	million	of	which	was	recorded	at	extinguishment	in	the	third quarter)	related	to	the	extinguishment	of	certain	of	our	junior	subordinated	debt, of	 which $168 million	 was	 included	 in	 Fixed	 Income,	 Currency	 and Commodities	Client	Execution	and	$121	million	in	Equities	($30	million	and $91	 million included	 in	 equities	 client	 execution	 and	 securities	 services, respectively).

Net	 revenues	 in	 Fixed	 Income,	 Currency	 and	 Commodities	 Client	 Execution were	$8.46	billion	for	2014,	2%	lower	than	2013.	Excluding	the	gain	related	to the	extinguishment	of	debt	in	2014	and	a	gain	of	$211	million	on	the	sale	of	a majority	stake	in	our	European	insurance	business	in	2013,	net	revenues	in	Fixed Income,	 Currency	 and	 Commodities	 Client	 Execution	 were	 slightly	 lower compared	with	2013.	This	decline	reflected	significantly	lower	net	revenues	in credit	products	and	slightly	lower	net	revenues	in	both	interest	rate	products	and mortgages.	The	decrease	in	credit	products	primarily	reflected	difficult	market- making	conditions,	particularly	during	the	second	half	of	2014,	and	generally low	levels	of	activity.	These	results	were	largely	offset	by	significantly	higher	net revenues	in	commodities	and	higher	net	revenues	in	currencies.	The	increase	in commodities	 reflected	 more	 favorable	 market-making	 conditions	 in	 certain energy	 products,	 primarily	 during	 the	 first	 quarter	 of	 2014.	 The	 increase	 in currencies	 reflected	 a	 stronger	 performance	 towards	 the	 end	 of	 the	 year,	 as activity	levels	improved	and	volatility	was	higher.

Net	 revenues	 in	 Equities	 were	 $6.74	 billion	 for	 2014,	 5%	 lower	 than	 2013. Excluding	 the	 gain	 related	 to	 the	 extinguishment	 of	 debt	 in	 2014	 and	 net revenues	of	$317	million	related	to	the	sale	of	a	majority	stake	in	our	Americas reinsurance	 business	 in	 2013,	 net	 revenues	 in	 Equities	 were	 slightly	 lower compared	with	2013.	This	decline	reflected	lower	net	revenues	in	derivatives, partially	offset	by	slightly	higher	commissions	and	fees	and	slightly	higher	net revenues	in	securities	services.	The	increase	in	securities	services	net	revenues reflected	 the	 impact	 of	 higher	 average	 customer	 balances.	 The	 increase	 in commissions	and	fees	was	due	to	higher	commissions	and	fees	in	both	Europe and	the	United	States,	reflecting	generally	higher	client	activity,	consistent	with increases	in	listed	cash	equity	market	volumes	in	these	regions.

The	net	gain	attributable	to	the	impact	of	changes	in	our	own	credit	spreads	on borrowings	 for	 which	 the	 fair	 value	 option	 was	 elected	 was	 $144	 million ($108	 million and $36	 million related	 to	 Fixed	 Income,	 Currency	 and Commodities	Client	Execution	and	equities	client	execution,	respectively)	for 2014,	compared	with	a	net	loss	of	$296	million	($220	million	and	$76	million related	 to	 Fixed	 Income,	 Currency	 and	 Commodities	 Client	 Execution	 and equities	client	execution,	respectively)	for	2013.

During	2014,	Institutional	Client	Services	continued	to	operate	in	a	challenging environment,	as	economic	uncertainty	contributed	to	subdued	risk	appetite	for our	clients	and	generally	low	levels	of	activity,	particularly	in	credit	products, interest	rate	products	and	mortgages.	In	addition,	volatility	levels	remained	low, although	volatility	increased	in	certain	businesses	towards	the	end	of	the	year. Debt	markets	were	also	impacted	by	the	widening	of	high-yield	credit	spreads and	the	decline	in	oil	prices	during	the	second	half	of	the	year,	which	contributed to	 low	 liquidity,	 particularly	 in	 credit.	 Equity	 markets,	 however,	 generally increased	during	the	year.	If	macroeconomic	concerns	continue	over	the	long term	and	activity	levels	remain	low,	net	revenues	in	Fixed	Income,	Currency	and Commodities	 Client	 Execution	 and	 Equities	 would	 likely	 continue	 to	 be negatively	impacted.

Operating	expenses	were	$10.88	billion	for	2014,	8%	lower	than	2013,	due	to decreased	compensation	and	benefits	expenses,	reflecting	lower	net	revenues, lower	 net	 provisions	 for	 litigation	 and	 regulatory	 proceedings,	 and	 lower expenses	as	a	result	of	the	sale	of	a	majority	stake	in	our	Americas	reinsurance business.	Pre-tax	earnings	were	$4.32	billion	in	2014,	10%	higher	than	2013.

Net	 revenues	 in	 Fixed	 Income,	 Currency	 and	 Commodities	 Client	 Execution were	$8.65	billion	for	2013,	13%	lower	than	2012,	reflecting	significantly	lower net	 revenues	 in	 interest	 rate	 products	 compared	 with	 a	 solid	 2012,	 and significantly	lower	net	revenues	in	mortgages	compared	with	a	strong	2012.	The decrease	in	interest	rate	products	and	mortgages	primarily	reflected	the	impact	of a	more	challenging	environment	and	lower	activity	levels	compared	with	2012. In	addition,	net	revenues	in	currencies	were	slightly	lower,	while	net	revenues	in credit	 products	 and	 commodities	 were	 essentially	 unchanged	 compared	 with 2012.	 In	 December	 2013,	 we	 completed	 the	 sale	 of	 a	 majority	 stake	 in	 our European	insurance	business	and	recognized	a	gain	of	$211	million.

Net	revenues	in	Equities	were	$7.07	billion	for	2013,	14%	lower	compared	with 2012,	due	to	the	sale	of	our	Americas	reinsurance	business	 1	in	2013	and	the	sale of	 our	 hedge	 fund	 administration	 business	 in	 2012.	 Net	 revenues	 in	 equities client	 execution	 (excluding	 net	 revenues	 from	 our	 Americas	 reinsurance business)	were	higher	compared	with	2012,	including	significantly	higher	net revenues	in	cash	products,	partially	offset	by	significantly	lower	net	revenues	in derivatives.	Commissions	and	fees	were	slightly	higher	compared	with	2012, reflecting	higher	commissions	and	fees	in	Asia	and	Europe,	partially	offset	by lower	commissions	and	fees	in	the	United	States.	Our	average	daily	volumes during	2013	were	higher	in	Asia	and	Europe	and	 lower	 in	 the	United	States compared	 with	 2012,	 consistent	 with	 listed	 cash	 equity	 market	 volumes. Securities	services	net	revenues	were	significantly	lower	compared	with	2012, primarily	due	to	the	sale	of	our	hedge	fund	administration	business	in	2012	(2012 included	a	gain	on	sale	of	$494	million).	During	2013,	Equities	operated	in	an environment	 characterized	 by	 a	 significant	 increase	 in	 global	 equity	 prices, particularly	in	Japan	and	the	U.S.,	and	generally	lower	volatility	levels.

The	net	loss	attributable	to	the	impact	of	changes	in	our	own	credit	spreads	on borrowings	 for	 which	 the	 fair	 value	 option	 was	 elected	 was	 $296	 million ($220	 million and $76	 million related	 to	 Fixed	 Income,	 Currency	 and Commodities	Client	Execution	and	equities	client	execution,	respectively)	for 2013,	compared	with	a	net	loss	of	$714	million	($433	million	and	$281	million related	 to	 Fixed	 Income,	 Currency	 and	 Commodities	 Client	 Execution	 and equities	client	execution,	respectively)	for	2012.

During	2013,	Institutional	Client	Services	operated	in	a	challenging	environment that	required	continual	reassessment	of	the	outlook	for	the	global	economy,	as uncertainty	about	when	the	U.S.	Federal	Reserve	would	begin	tapering	its	asset purchase	program,	as	well	as	constant	global	political	risk	and	uncertainty,	were interspersed	with	improvements	in	the	U.S.	economy	over	the	course	of	the	year. As	 a	 result,	 our	 clients'	 risk	 appetite	 and	 activity	 levels	 fluctuated	 during 2013.	Compared	with	2012,	activity	levels	were	generally	lower,	global	equity prices	significantly	increased	and	credit	spreads	tightened.

Operating	expenses	were	$11.79	billion	for	2013,	6%	lower	than	2012,	due	to decreased	compensation	and	benefits	expenses,	primarily	resulting	from	lower net	revenues,	and	lower	expenses	as	a	result	of	the	sale	of	a	majority	stake	in	our Americas	reinsurance	business	 in	April	2013.	These	decreases	were	partially offset	 by	 increased	 net	 provisions	 for	 litigation	 and	 regulatory	 proceedings, primarily	comprised	of	net	provisions	for	mortgage-related	matters,	and	higher brokerage,	 clearing,	 exchange	 and	 distribution	 fees.	 Pre-tax	 earnings	 were $3.93	billion	in	2013,	30%	lower	than	2012.

Investing	 &	 Lending	 includes	 our	 investing	 activities	 and	 the	 origination	 of loans	to	provide	financing	to	clients.	These	investments	and	loans	are	typically longer-term	in	nature.	We	make	investments,	some	of	which	are	consolidated, directly	 and	 indirectly	 through	 funds	 that	 we	 manage,	 in	 debt	 securities	 and loans,	public	and	private	equity	securities,	and	real	estate	entities.

The	 table	 below	 presents the	 operating results	 of	 our Investing	 &	 Lending segment.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Equity\tsecurities | \t\t$3,813 | \t$3,930\t\t\t\t\t$2,800 | \t$3,930\t\t\t\t\t$2,800 |
| Debt\tsecurities\tand\tloans | 2,165 | 1,947 | 1,850 |
| Other^\t1 | 847 | 1,141 | 1,241 |
| Total\tnet\trevenues | 6,825 | 7,018 | 5,891 |
| Operating\texpenses | 2,819 | 2,686 | 2,668 |
| Pre-tax\tearnings | \t\t$4,006 | \t$4,332\t\t\t\t\t$3,223 | \t$4,332\t\t\t\t\t$3,223 |

1.Includes	net	revenues	of	$325	million	for	2014,	$329	million	for	2013	and	$362	million	for 2012 related to	 Metro International	 Trade	 Services	 LLC.	 We	 completed the	 sale	 of this consolidated	investment	in	December	2014.

2014	versus	2013.	Net	revenues	in	Investing	&	Lending	were	$6.83	billion	for 2014,	3%	lower	than	2013.	Net	gains	from	investments	in	equity	securities	were slightly	 lower	due	 to	a	significant	decrease	 in	net	gains	from	 investments	 in public	 equities,	 as	 movements	 in	 global	 equity	 prices	 during	 2014	 were	 less favorable	compared	with	2013,	partially	offset	by	an	increase	in	net	gains	from investments	in	private	equities,	primarily	driven	by	company-specific	events.	Net revenues	 from	 debt	 securities	 and	 loans	 were	 higher	 than	 2013,	 reflecting	 a significant	increase	in	net	interest	income,	primarily	driven	by	increased	lending, and	a	slight	increase	in	net	gains,	primarily	due	to	sales	of	certain	investments during	2014.	Other	net	revenues,	related	to	our	consolidated	investments,	were significantly	 lower	 compared	 with	 2013,	 reflecting	 a	 decrease	 in	 operating revenues	from	commodities-related	consolidated	investments.

During	2014,	net	revenues	in	Investing	&	Lending	generally	reflected	favorable company-specific	events,	including	initial	public	offerings	and	financings,	and strong	 corporate	 performance,	 as	 well	 as	 net	 gains	 from	 sales	 of	 certain investments.	However,	concerns	about	the	outlook	for	the	global	economy	and uncertainty	 over	 the	 impact	 of	 financial	 regulatory	 reform	 continue	 to	 be meaningful	considerations	for	the	global	marketplace.	If	equity	markets	decline or	credit	spreads	widen,	net	revenues	in	Investing	&	Lending	would	likely	be negatively	impacted.

Operating	expenses	were	$2.82	billion	for	2014,	5%	higher	than	2013,	reflecting higher	compensation	and	benefits	expenses,	partially	offset	by	lower	expenses related	to	consolidated	investments.	Pre-tax	earnings	were	$4.01	billion	in	2014, 8%	lower	than	2013.

2013	versus	2012.	Net	revenues	in	Investing	&	Lending	were	$7.02	billion	for 2013,	19%	higher	than	2012,	reflecting	a	significant	increase	in	net	gains	from investments	in	equity	securities,	driven	by	company-specific	events	and	stronger corporate	performance,	as	well	as	significantly	higher	global	equity	prices.	In addition,	net	gains	and	net	interest	income	from	debt	securities	and	loans	were slightly	 higher,	 while	 other	 net	 revenues,	 related	 to	 our	 consolidated investments,	were	lower	compared	with	2012.

During	2013,	net	revenues	in	Investing	&	Lending	generally	reflected	favorable company-specific	events	and	strong	corporate	performance,	as	well	as	the	impact of	significantly	higher	global	equity	prices	and	tighter	corporate	credit	spreads.

Operating	 expenses	 were $2.69 billion	 for	 2013,	 essentially	 unchanged compared	 with	 2012.	 Operating	 expenses	 during	 2013	 included	 lower impairment	 charges	 and	 lower	 operating	 expenses	 related	 to	 consolidated investments,	partially	offset	by	increased	compensation	and	benefits	expenses due	 to	 higher	 net	 revenues	 compared	 with	 2012.	 Pre-tax	 earnings	 were $4.33	billion	in	2013,	34%	higher	than	2012.

Investment	Management	provides	investment	management	services	and	offers investment	 products	 (primarily	 through	 separately	 managed	 accounts	 and commingled	vehicles,	such	as	mutual	funds	and	private	investment	funds)	across all	major	asset	classes	 to	a	diverse	set	of	 institutional	and	 individual	clients. Investment	Management	also	offers	wealth	advisory	services,	including	portfolio management	 and	 financial	 counseling,	 and	 brokerage	 and	 other	 transaction services	to	high-net-worth	individuals	and	families.

Assets	under	supervision	 typically	generate	fees	as	a	percentage	of	net	asset value,	which	vary	by	asset	class	and	are	affected	by	investment	performance	as well	 as	 asset	 inflows	 and	 redemptions.	 Asset	 classes	 such	 as	 alternative investment	 and	 equity	 assets	 typically	 generate	 higher	 fees	 relative	 to	 fixed income	 and	 liquidity	 product	 assets.	 The	 average	 effective	 management	 fee (which	 excludes	 non-asset-based	 fees)	 we	 earned	 on	 our	 assets	 under supervision	was	40	basis	points	for	both	2014	and	2013,	and	39	basis	points	for 2012.

In	certain	circumstances,	we	are	also	entitled	to	receive	incentive	fees	based	on	a percentage	of	a	fund's	or	a	separately	managed	account's	return,	or	when	the return	exceeds	a	specified	benchmark	or	other	performance	 targets.	Incentive fees	are	recognized	only	when	all	material	contingencies	are	resolved.

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

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Management\tand\tother\tfees | \t\t$4,800 | \t$4,386\t\t\t\t\t$4,105 | \t$4,386\t\t\t\t\t$4,105 |
| Incentive\tfees | 776 | 662 | 701 |
| Transaction\trevenues | 466 | 415 | 416 |
| Total\tnet\trevenues | 6,042 | 5,463 | 5,222 |
| Operating\texpenses | 4,647 | 4,357 | 4,296 |
| Pre-tax\tearnings | \t\t$1,395 | \t$1,106\t\t\t\t\t$\t\t\t926 | \t$1,106\t\t\t\t\t$\t\t\t926 |

The tables	 below	 present	 our	 period-end	 assets	 under	 supervision (AUS)	 by asset	class	and	by	distribution	channel.

|  | As	of	December | As	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tbillions | 2014 | 2013 | 2012 |
| Assets\tunder\tmanagement | \t\t$1,027 | \t$\t\t\t919\t\t\t\t\t$\t\t\t854 | \t$\t\t\t919\t\t\t\t\t$\t\t\t854 |
| Other\tclient\tassets | 151 | 123 | 111 |
| Total\tAUS | \t\t$1,178 | \t$1,042\t\t\t\t\t$\t\t\t965 | \t$1,042\t\t\t\t\t$\t\t\t965 |
| Asset\tClass |  |  |  |
| Alternative\tinvestments^\t1 | \t\t$\t\t\t143 | \t$\t\t\t142\t\t\t\t\t$\t\t\t151 | \t$\t\t\t142\t\t\t\t\t$\t\t\t151 |
| Equity | 236 | 208 | 153 |
| Fixed\tincome | 516 | 446 | 411 |
| Long-term\tAUS | 895 | 796 | 715 |
| Liquidity\tproducts | 283 | 246 | 250 |
| Total\tAUS | \t\t$1,178 | \t$1,042\t\t\t\t\t$\t\t\t965 | \t$1,042\t\t\t\t\t$\t\t\t965 |
| Distribution\tChannel |  |  |  |
| Directly\tdistributed: |  |  |  |
| Institutional | \t\t$\t\t\t412 | \t$\t\t\t363\t\t\t\t\t$\t\t\t343 | \t$\t\t\t363\t\t\t\t\t$\t\t\t343 |
| High-net-worth\tindividuals | 363 | 330 | 294 |
| Third-party\tdistributed: |  |  |  |
| Institutional,\thigh-net-worth\tindividuals\tand\tretail | 403 | 349 | 328 |
| Total\tAUS | \t\t$1,178 | \t$1,042\t\t\t\t\t$\t\t\t965 | \t$1,042\t\t\t\t\t$\t\t\t965 |

1.Primarily includes hedge funds, credit funds, private equity, real estate, currencies, commodities	and	asset	allocation	strategies.

The	 table below presents a summary of the changes in our assets under supervision.

1.Net	inflows	in	long-term	assets	under	supervision	include	$19	billion	of	fixed	income	asset inflows	in	connection	with	our	acquisition	of	Deutsche	Asset	&	Wealth	Management's	stable value	business.	Net	inflows	in	liquidity	products	include	$6	billion	of	inflows	in	connection	with our	acquisition	of	RBS	Asset	Management's	money	market	funds.

2.Fixed	income	flows	include	$10	billion	in	assets	managed	by	the	firm	related	to	our	Americas reinsurance	business,	in	which	a	majority	stake	was	sold	in	April	2013,	that	were	previously excluded	from	assets	under	supervision	as	they	were	assets	of	a	consolidated	subsidiary.

3.Includes	$34	billion	of	fixed	income	asset	inflows	in	connection	with	our	acquisition	of	Dwight Asset	Management	Company	LLC	and	$5	billion	of	fixed	income	and	equity	asset	outflows related	to	our	liquidation	of	Goldman	Sachs	Asset	Management	Korea	Co.,	Ltd.

The	table	below	presents	our	average	monthly	assets	under	supervision	by	asset class.

|  | Average	for	the<br>Year	Ended	December | Average	for	the<br>Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tbillions | 2014 | 2013\t\t\t\t\t2012 | 2013\t\t\t\t\t2012 |
| Alternative\tinvestments | \t\t$\t\t\t145 | \t$\t\t\t145\t\t\t\t\t$149 | \t$\t\t\t145\t\t\t\t\t$149 |
| Equity | 225 | 180 | 153 |
| Fixed\tincome | 499 | 425 | 384 |
| Long-term\tAUS | 869 | 750 | 686 |
| Liquidity\tproducts | 248 | 235 | 238 |
| Total\tAUS | \t\t$1,117 | \t$\t\t\t985\t\t\t\t\t$924 | \t$\t\t\t985\t\t\t\t\t$924 |

2014 versus 2013. Net	 revenues	 in	 Investment	 Management	 were $6.04	billion	for	2014,	11%	higher	than	2013,	reflecting	higher	management	and other	fees,	primarily	due	to	higher	average	assets	under	supervision,	as	well	as higher	 incentive	 fees	 and	 transaction	 revenues.	 During	 the	 year,	 total	 assets under	 supervision	 increased	 $136	 billion	 to	 $1.18	 trillion.	 Long-term	 assets under	 supervision	 increased	 $99	 billion,	 including	 net	 inflows	 of	 $74	 billion (including	 $19	 billion	 of	 fixed	 income	 asset	 inflows	 in	 connection	 with	 our acquisition	of	Deutsche	Asset	&	Wealth	Management's	stable	value	business) and	net	market	appreciation	of	$25	billion,	both	primarily	in	fixed	income	and equity	 assets.	 In	 addition,	 liquidity	 products	 increased	 $37	 billion	 (including $6 billion	 of	 inflows	 in	 connection	 with	 our	 acquisition	 of	 RBS	 Asset Management's	money	market	funds).

During	 2014,	 Investment	 Management	 operated	 in	 an	 environment	 generally characterized	by	improved	asset	prices,	primarily	in	equity	and	fixed	 income assets,	resulting	in	appreciation	in	the	value	of	client	assets.	In	addition,	the	mix of	average	assets	under	supervision	shifted	slightly	from	liquidity	products	to long-term	assets	under	supervision,	due	to	growth	in	fixed	income	and	equity assets,	compared	with	2013.	In	 the	future,	 if	asset	prices	were	 to	decline,	or investors	 favor	 asset	 classes	 that	 typically	 generate	 lower	 fees	 or	 investors withdraw	their	assets,	net	revenues	in	Investment	Management	would	likely	be negatively	impacted.	In	addition,	concerns	about	the	global	economic	outlook could	result	in	downward	pressure	on	assets	under	supervision.

Operating	expenses	were	$4.65	billion	for	2014,	7%	higher	than	2013,	primarily due	 to	 increased	 compensation	 and	 benefits	 expenses,	 reflecting	 higher	 net revenues,	and	higher	fund	distribution	fees.	Pre-tax	earnings	were	$1.40	billion in	2014,	26%	higher	than	2013.

2013 versus 2012. Net	 revenues	 in	 Investment	 Management	 were $5.46	billion	for	2013,	5%	higher	than	2012,	reflecting	higher	management	and other	 fees,	 primarily	 due	 to	 higher	 average	 assets	 under	 supervision.	 During 2013,	total	assets	under	supervision	increased	$77	billion	to	$1.04	trillion.	Long- term	assets	under	supervision	 increased	$81	billion,	 including	net	 inflows	of $41	billion	(including	$10	billion	of	fixed	income	asset	inflows	managed	by	the firm	related	to	our	Americas	reinsurance	business,	in	which	a	majority	stake	was sold	in	April	2013,	that	were	previously	excluded	from	assets	under	supervision as	 they	 were	 assets	 of	 a	 consolidated	 subsidiary),	 reflecting	 inflows	 in	 fixed income	and	equity	assets,	partially	offset	by	outflows	in	alternative	investment assets.	 Net	 market	 appreciation	 of	 $40	 billion	 during	 2013	 was	 primarily	 in equity	assets.	Liquidity	products	decreased	$4	billion.

During	 2013,	 Investment	 Management	 operated	 in	 an	 environment	 generally characterized	 by	 improved	 asset	 prices,	 particularly	 in	 equities,	 resulting	 in appreciation	in	the	value	of	client	assets.	In	addition,	the	mix	of	average	assets under	supervision	shifted	slightly	compared	with	2012	from	liquidity	products	to long-term	assets	under	supervision,	primarily	due	to	growth	in	equity	and	fixed income	assets.

Operating	expenses	were	$4.36	billion	for	2013,	up	slightly	compared	to	2012, due	to	increased	compensation	and	benefits	expenses,	primarily	resulting	from higher	net	revenues.	Pre-tax	earnings	were	$1.11	billion	in	2013,	19%	higher than	2012.

# Geographic	Data

See	Note	25	to	the	consolidated	financial	statements	for	a	summary	of	our	total net	revenues,	pre-tax	earnings	and	net	earnings	by	geographic	region.

# Balance	Sheet	and	Funding	Sources

# Balance	Sheet	Management

One	of	our	most	important	risk	management	disciplines	is	our	ability	to	manage the	size	and	composition	of	our	balance	sheet.	While	our	asset	base	changes	due to	client	activity,	market	fluctuations	and	business	opportunities,	the	size	and composition	of	our	balance	sheet	reflect	(i)	our	overall	risk	tolerance,	(ii)	our ability	to	access	stable	funding	sources	and	(iii)	the	amount	of	equity	capital	we hold.	 See	 "Equity	 Capital	 Management	 and	 Regulatory	 Capital	 —	 Equity Capital	 Management"	 for	 information	 about	 our	 equity	 capital	 management process.

Although	our	balance	sheet	fluctuates	on	a	day-to-day	basis,	our	total	assets	at quarterly	and	year-end	dates	are	generally	not	materially	different	from	those occurring	within	our	reporting	periods.

In	order	to	ensure	appropriate	risk	management,	we	seek	to	maintain	a	liquid balance	sheet	and	have	processes	in	place	to	dynamically	manage	our	assets	and liabilities	 which	 include	 (i)	 quarterly	 planning,	 (ii)	 business-specific	 limits, (iii)	monitoring	of	key	metrics	and	(iv)	scenario	analyses.

Quarterly	Planning.	We	prepare	a	quarterly	balance	sheet	plan	that	combines our	projected	total	assets	and	composition	of	assets	with	our	expected	funding sources	 for	 the	 upcoming	 quarter.	 The	 objectives	 of	 this	 quarterly	 planning process	are:

Ÿ	To	develop	our	near-term	balance	sheet	projections,	taking	into	account	the general	state	of	the	financial	markets	and	expected	business	activity	levels,	as well	as	current	regulatory	requirements;

Ÿ	To	determine	the	target	amount,	tenor	and	type	of	funding	to	raise,	based	on our	projected	assets	and	forecasted	maturities;	and

Ÿ	To	allow	business	risk	managers	and	managers	from	our	independent	control and	support	functions	to	objectively	evaluate	balance	sheet	limit	requests	from business	 managers	 in	 the	 context	 of	 the	 firm's	 overall	 balance	 sheet constraints,	including	the	firm's	liability	profile	and	equity	capital	levels,	and key	 metrics.	 Limits	 are	 typically	 set	 at	 levels	 that	 will	 be	 periodically exceeded,	rather	than	at	levels	which	reflect	our	maximum	risk	appetite.

To	 prepare	 our	 quarterly	 balance	 sheet	 plan,	 business	 risk	 managers	 and managers	 from	 our	 independent	 control	 and	 support	 functions	 meet	 with business	 managers	 to	 review	 current	 and	 prior	 period	 metrics	 and	 discuss expectations	for	the	upcoming	quarter.	The	specific	metrics	reviewed	include asset	and	liability	size	and	composition,	aged	inventory,	limit	utilization,	risk and	performance	measures,	and	capital	usage.

Our	consolidated	quarterly	plan,	including	our	balance	sheet	plans	by	business, funding	projections,	and	projected	key	metrics,	 is	reviewed	by	 the	Firmwide Finance	Committee.	See	"Overview	and	Structure	of	Risk	Management"	for	an overview	of	our	risk	management	structure.

Business-Specific	Limits.	The	Firmwide	Finance	Committee	sets	asset	and liability	limits	for	each	business	and	aged	inventory	limits	for	certain	financial instruments	 as	 a	 disincentive	 to	 hold	 inventory	 over	 longer	 periods	 of	 time. These	limits	are	set	at	levels	which	are	close	to	actual	operating	levels	in	order	to ensure	 prompt	 escalation	 and	 discussion	 among	 business	 managers	 and managers	in	our	independent	control	and	support	functions	on	a	routine	basis. The	Firmwide	Finance	Committee	reviews	and	approves	balance	sheet	limits	on a	quarterly	basis	and	may	also	approve	changes	in	limits	on	an	ad	hoc	basis	in response	to	changing	business	needs	or	market	conditions.	Requests	for	changes in	limits	are	evaluated	after	giving	consideration	to	their	impact	on	key	firm metrics.	Compliance	with	limits	is	monitored	on	a	daily	basis	by	business	risk managers,	as	well	as	managers	in	our	independent	control	and	support	functions.

Monitoring	of	Key	Metrics.	We	monitor	key	balance	sheet	metrics	daily	both by	business	and	on	a	consolidated	basis,	including	asset	and	liability	size	and composition,	aged	inventory,	limit	utilization,	risk	measures	and	capital	usage. We	allocate	assets	to	businesses	and	review	and	analyze	movements	resulting from	new	business	activity	as	well	as	market	fluctuations.

Scenario	Analyses.	We	conduct	scenario	analyses	including	as	part	of	the Comprehensive	 Capital	 Analysis	 and	 Review	 (CCAR)	 and	 Dodd-Frank	 Act Stress	 Tests	 (DFAST)	 as	 well	 as	 our	 resolution	 and	 recovery	 planning.	 See "Equity	 Capital	 Management	 and	 Regulatory	 Capital	 —	 Equity	 Capital Management"	below	for	further	information.	These	scenarios	cover	short-term and	 long-term	 time	 horizons	 using	 various	 macroeconomic	 and	 firm-specific assumptions,	based	on	a	range	of	economic	scenarios.	We	use	these	analyses	to assist	 us	 in	 developing	 our	 longer-term	 balance	 sheet	 management	 strategy, including	 the	 level	 and	 composition	 of	 assets,	 funding	 and	 equity	 capital. Additionally,	 these	 analyses	 help	 us	 develop	 approaches	 for	 maintaining appropriate	funding,	liquidity	and	capital	across	a	variety	of	situations,	including a	severely	stressed	environment.

# Balance	Sheet	Allocation

In	addition	to	preparing	our	consolidated	statements	of	financial	condition	 in accordance	with	U.S.	GAAP,	we	prepare	a	balance	sheet	that	generally	allocates assets	 to	our	businesses,	which	 is	a	non-GAAP	presentation	and	may	not	be comparable	to	similar	non-GAAP	presentations	used	by	other	companies.	We believe	 that	 presenting	 our	 assets	 on	 this	 basis	 is	 meaningful	 because	 it	 is consistent	with	the	way	management	views	and	manages	risks	associated	with the	firm's	assets	and	better	enables	investors	to	assess	the	liquidity	of	the	firm's assets.	The	table	below	presents	our	balance	sheet	allocation.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Global\tCore\tLiquid\tAssets\t(GCLA) | \t\t$182,947 | \t$184,070 |
| Other\tcash | 7,805 | 5,793 |
| GCLA\tand\tcash | 190,752 | 189,863 |
| Secured\tclient\tfinancing | 210,641 | 263,386 |
| Inventory | 230,667 | 255,534 |
| Secured\tfinancing\tagreements | 74,767 | 79,635 |
| Receivables | 47,317 | 39,557 |
| Institutional\tClient\tServices | 352,751 | 374,726 |
| Public\tequity | 4,041 | 4,308 |
| Private\tequity | 17,979 | 16,236 |
| Debt^\t1 | 24,768 | 23,274 |
| Loans\treceivable^\t2 | 28,938 | 14,895 |
| Other | 3,771 | 2,310 |
| Investing\t&amp;\tLending | 79,497 | 61,023 |
| Total\tinventory\tand\trelated\tassets | 432,248 | 435,749 |
| Other\tassets | 22,599 | 22,509 |
| Total\tassets | \t\t$856,240 | \t$911,507 |

respectively,	of	direct	loans	primarily	extended	to	corporate	and	private	wealth	management clients	that	are	accounted	for	at	fair	value.

2.See	 Note	 9 to the	 consolidated financial	 statements for further information	 about loans receivable.

Below	is	a	description	of	the	captions	in	the	table	above.

Ÿ	Global	Core	Liquid	Assets	and	Cash. 	We	maintain	substantial	liquidity to	meet	a	broad	range	of	potential	cash	outflows	and	collateral	needs	in	the event	of	a	stressed	environment.	See	"Liquidity	Risk	Management"	below	for details	 on	 the	 composition	 and	 sizing	 of	 our	 "Global	 Core	 Liquid	Assets" (GCLA),	previously	Global	Core	Excess	(GCE).	In	addition	to	our	GCLA,	we maintain	 other	 operating	 cash	 balances,	 primarily	 for	 use	 in	 specific currencies,	entities,	or	jurisdictions	where	we	do	not	have	immediate	access	to parent	company	liquidity.

Ÿ	Secured	Client	Financing.	We	provide	collateralized	financing	for	client positions,	 including	 margin	 loans	 secured	 by	 client	 collateral,	 securities borrowed,	 and	 resale	 agreements	 primarily	 collateralized	 by	 government obligations.	As	a	result	of	client	activities,	we	are	required	to	segregate	cash and	securities	to	satisfy	regulatory	requirements.	Our	secured	client	financing arrangements,	which	are	generally	short-term,	are	accounted	for	at	fair	value or	 at	 amounts	 that	 approximate	 fair	 value,	 and	 include	 daily	 margin requirements	to	mitigate	counterparty	credit	risk.

Ÿ	Institutional	Client	Services.	In	Institutional	Client	Services,	we	maintain inventory	 positions	 to	 facilitate	 market-making	 in	 fixed	 income,	 equity, currency	 and	 commodity	 products.	Additionally,	 as	 part	 of	 market-making activities,	we	enter	into	resale	or	securities	borrowing	arrangements	to	obtain securities	which	we	can	use	to	cover	transactions	in	which	we	or	our	clients have	 sold	 securities	 that	 have	 not	 yet	 been	 purchased.	 The	 receivables	 in Institutional	Client	Services	primarily	relate	to	securities	transactions.

Ÿ	Investing	&	Lending.	In	Investing	&	Lending,	we	make	investments	and originate	loans	to	provide	financing	to	clients.	These	investments	and	loans	are typically	longer-term	in	nature.	We	make	investments,	directly	and	indirectly through	funds	that	we	manage,	in	debt	securities,	loans,	public	and	private equity	securities,	real	estate	entities	and	other	investments.

Ÿ	Other	Assets.	Other	assets	are	generally	less	liquid,	non-financial	assets, including	 property,	 leasehold	 improvements	 and	 equipment,	 goodwill	 and identifiable	 intangible	assets,	 income	 tax-related	receivables,	equity-method investments,	assets	classified	as	held	for	sale	and	miscellaneous	receivables.

The	tables	below	present	the	reconciliation	of	this	balance	sheet	allocation	to	our U.S.	GAAP	balance	sheet.	In	the	tables	below,	total	assets	for	Institutional	Client Services	and	Investing	&	Lending	represent	inventory	and	related	assets.	These amounts	differ	from	total	assets	by	business	segment	disclosed	in	Note	25	to	the consolidated	financial

statements	because	total	assets	disclosed	in	Note	25	include	allocations	of	our GCLA	and	cash,	secured	client	financing	and	other	assets.	See	"Balance	Sheet Analysis	and	Metrics"	below	for	explanations	on the	changes in	our	balance sheet	from	December	2013	to	December	2014.

|  |  |  | As	of	December	2014 |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | GCLA\nand\tCash^\t1 | Secured\nClient\nFinancing | Institutional\nClient\nServices | Investing\t&amp;\nLending | Other\nAssets | Total\nAssets |
| Cash\tand\tcash\tequivalents | \t $\t\t57,600 | $\t\t\t\t\t\t\t\t\t— | $\t\t\t\t\t\t\t\t\t— | $\t\t\t\t\t\t\t— | \t$\t\t\t\t\t\t\t— | \t$\t\t57,600 |
| Cash\tand\tsecurities\tsegregated\tfor\tregulatory\tand\tother\tpurposes | — | 51,716 | — | — | — | 51,716 |
| Securities\tpurchased\tunder\tagreements\tto\tresell\tand\tfederal\tfunds\tsold | 66,928 | 34,506 | 24,940 | 1,564 | — | 127,938 |
| Securities\tborrowed | 32,311 | 78,584 | 49,827 | — | — | 160,722 |
| Receivables\tfrom\tbrokers,\tdealers\tand\tclearing\torganizations | — | 8,908 | 21,656 | 107 | — | 30,671 |
| Receivables\tfrom\tcustomers\tand\tcounterparties | — | 36,927 | 25,661 | 1,220 | — | 63,808 |
| Loans\treceivable | — | — | — | 28,938 | — | 28,938 |
| Financial\tinstruments\towned,\tat\tfair\tvalue | 33,913 | — | 230,667 | 47,668 | — | 312,248 |
| Other\tassets | — | — | — | — | 22,599 | 22,599 |
| Total\tassets | \t $190,752 | $210,641 | $352,751 | $79,497 | \t$22,599 | \t$856,240 |

|  |  |  | As	of	December	2013 |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | GCLA\nand\tCash^\t1 | Secured\nClient\nFinancing | Institutional\nClient\nServices | Investing\t&amp;\nLending | Other\nAssets | Total\nAssets |
| Cash\tand\tcash\tequivalents | \t $\t\t61,133 | $\t\t\t\t\t\t\t\t\t— | $\t\t\t\t\t\t\t\t\t— | $\t\t\t\t\t\t\t— | \t$\t\t\t\t\t\t\t— | \t$\t\t61,133 |
| Cash\tand\tsecurities\tsegregated\tfor\tregulatory\tand\tother\tpurposes | — | 49,671 | — | — | — | 49,671 |
| Securities\tpurchased\tunder\tagreements\tto\tresell\tand\tfederal\tfunds\tsold | 64,595 | 61,510 | 35,081 | 546 | — | 161,732 |
| Securities\tborrowed | 25,113 | 94,899 | 44,554 | — | — | 164,566 |
| Receivables\tfrom\tbrokers,\tdealers\tand\tclearing\torganizations | — | 6,650 | 17,098 | 92 | — | 23,840 |
| Receivables\tfrom\tcustomers\tand\tcounterparties | — | 50,656 | 22,459 | 925 | — | 74,040 |
| Loans\treceivable | — | — | — | 14,895 | — | 14,895 |
| Financial\tinstruments\towned,\tat\tfair\tvalue | 39,022 | — | 255,534 | 44,565 | — | 339,121 |
| Other\tassets | — | — | — | — | 22,509 | 22,509 |
| Total\tassets | \t $189,863 | $263,386 | $374,726 | $61,023 | \t$22,509 | \t$911,507 |

1.Includes	unencumbered	cash,	U.S.	government	and	federal	agency	obligations	(including	highly	liquid	U.S.	federal	agency	mortgage-backed	obligations),	and	German,	French,	Japanese	and	United Kingdom	government	obligations.

# Balance	Sheet	Analysis	and	Metrics

During	2014,	we	undertook	an	initiative	to	reduce	our	balance	sheet	in	response to	regulatory	developments,	 to	 improve	 the	overall	efficiency	of	our	balance sheet	and	to	position	the	firm	to	provide	additional	risk	capacity	to	our	clients. We	 performed	 a	 comprehensive	 analysis	 of	 our	 balance	 sheet	 and	 identified opportunities	for	reduction,	primarily	related	to	lower	return	activities	within	our matched	book	and	other	secured	client	financing	activities.

As	of	December	2014,	total	assets	on	our	consolidated	statements	of	financial condition	 were $856.24 billion,	 a	 decrease	 of $55.27 billion	 from December	2013.	This	decrease	was	primarily	due	to	a	decrease	in	collateralized agreements	 of	 $37.64	 billion,	 principally	 reflecting	 a	 decline	 in	 the	 matched book	 and	 a	 decrease	 in	 financial	 instruments	 owned,	 at	 fair	 value	 of $26.87	 billion,	 primarily	 due	 to	 a	 decrease	 in	 U.S.	 government	 and	 federal agency	obligations.	These	decreases	were	partially	offset	by	an	increase	in	loans receivable	of	$14.04	billion.

As	of	December	2014,	total	liabilities	on	our	consolidated	statements	of	financial condition	 were $773.44 billion,	 a	 decrease	 of $59.60 billion	 from December	2013.	This	decrease	was	primarily	due	to	a	decrease	in	collateralized financings	of	$91.75	billion,	due	to	client	activity	and	firm	financing	activity, including	a	decline	in	the	matched	book.	This	decrease	was	partially	offset	by	an increase	in	deposits	of	$12.20	billion	primarily	used	to	fund	the	growth	in	our loans	 receivable,	 an	 increase	 in	 payables	 to	 customers	 and	 counterparties	 of $7.52 billion	 and	 an	 increase	 in	 unsecured	 long-term	 borrowings	 of $6.61	billion.

As	of	December	2014,	our	total	securities	sold	under	agreements	to	repurchase, accounted	for	as	collateralized	financings,	were	$88.22	billion,	which	was	3% lower	and	26%	lower	than	the	daily	average	amount	of	repurchase	agreements during	 the	 quarter	 ended	 and	 year	 ended	 December	 2014,	 respectively.	 The decrease	in	our	repurchase	agreements	relative	to	the	daily	average	during	2014 resulted	from	a	decrease	in	client	and	firm	financing	activity	during	the	second half	of	the	year,	including	a	reduction	in	our	matched	book,	primarily	resulting from	a	firmwide	initiative	to	reduce	activities	with	lower	returns.

As	of	December	2013,	our	total	securities	sold	under	agreements	to	repurchase, accounted	for	as	collateralized	financings,	were	$164.78	billion,	which	was	5% higher	and	4%	higher	than	the	daily	average	amount	of	repurchase	agreements during	 the	 quarter	 ended	 and	 year	 ended	 December	 2013,	 respectively.	 The increase	in	our	repurchase	agreements	relative	to	the	daily	average	during	2013 was	primarily	due	to	an	increase	in	client	activity	at	the	end	of	the	period.

The	level	of	our	repurchase	agreements	fluctuates	between	and	within	periods, primarily	due	to	providing	clients	with	access	to	highly	liquid	collateral,	such	as U.S.	 government	 and	 federal	 agency,	 and	 investment-grade	 sovereign obligations	through	collateralized	financing	activities.

The table	 below	 presents information	 about	 our	 assets,	 unsecured long-term borrowings,	shareholders'	equity	and	leverage	ratios.

Ÿ	The	leverage	ratio	equals	total	assets	divided	by	total	shareholders'	equity	and measures	the	proportion	of	equity	and	debt	the	firm	is	using	to	finance	assets. This	ratio	is	different	from	the	Tier	1	leverage	ratio	included	in	Note	20	to	the consolidated	financial	statements.

Ÿ	The	debt	to	equity	ratio	equals	unsecured	long-term	borrowings	divided	by total	shareholders'	equity.

The	table	below	presents	information	about	our	shareholders'	equity	and	book value	 per	 common share, including the reconciliation	 of total shareholders' equity	to	tangible	common	shareholders'	equity.

Ÿ	Tangible	common	shareholders'	equity	equals	total	shareholders'	equity	less preferred	stock,	goodwill	and	identifiable	intangible	assets.	We	believe	that tangible	common	shareholders'	equity	is	meaningful	because	it	is	a	measure that	 we	 and	 investors	 use	 to	 assess	 capital	 adequacy.	 Tangible	 common shareholders'	equity	is	a	non-GAAP	measure	and	may	not	be	comparable	to similar	non-GAAP	measures	used	by	other	companies.

Ÿ	Book	value	per	common	share	and	tangible	book	value	per	common	share	are based	on	common	shares	outstanding,	including	restricted	stock	units	(RSUs) granted	to	employees	with	no	future	service	requirements,	of	451.5	million	and 467.4	million	as	of	December	2014	and	December	2013,	respectively.	We believe	 that	 tangible	 book	 value	 per	 common	 share	 (tangible	 common shareholders'	equity	divided	by	common	shares	outstanding,	including	RSUs granted	 to	 employees	 with	 no	 future	 service	 requirements)	 is	 meaningful because	it	is	a	measure	that	we	and	investors	use	to	assess	capital	adequacy. Tangible	book	value	per	common	share	is	a	non-GAAP	measure	and	may	not be	comparable	to	similar	non-GAAP	measures	used	by	other	companies.

# Funding	Sources

Our	primary	sources	of	funding	are	secured	financings,	unsecured	long-term	and short-term	borrowings,	and	deposits.	We	seek	to	maintain	broad	and	diversified funding	 sources	 globally	 across	 products,	 programs,	 markets,	 currencies	 and creditors	to	avoid	funding	concentrations.

We	raise	funding	through	a	number	of	different	products,	including:

Ÿ	Collateralized	 financings,	 such	 as repurchase	 agreements,	 securities loaned and	other	secured	financings;

Ÿ	Long-term	 unsecured	 debt	 (including	 structured	 notes)	 through	 syndicated U.S.	registered	offerings,	U.S.	registered	and	Rule	144A	medium-term	note programs,	offshore	medium-term	note	offerings	and	other	debt	offerings;

Ÿ	Savings	 and	 demand	 deposits	 through	 deposit	 sweep	 programs and time deposits	through	internal	and	third-party	broker-dealers;	and

Ÿ	Short-term	 unsecured	 debt	 through	 U.S.	 and	 non-U.S.	 hybrid	 financial instruments,	 commercial	 paper	 and	 promissory	 note	 issuances	 and	 other methods.

Our	funding	is	primarily	raised	in	U.S.	dollar,	Euro,	British	pound	and	Japanese yen.	We	generally	distribute	our	funding	products	through	our	own	sales	force and	 third-party	 distributors,	 to	 a	 large,	 diverse	 creditor	 base	 in	 a	 variety	 of markets	in	the	Americas,	Europe	and	Asia.	We	believe	that	our	relationships with	 our	 creditors	 are	 critical	 to	 our	 liquidity.	 Our	 creditors	 include	 banks, governments,	 securities	 lenders,	 pension	 funds,	 insurance	 companies,	 mutual funds	and	individuals.	We	have	imposed	various	internal	guidelines	to	monitor creditor	concentration	across	our	funding	programs.

Secured	Funding.	We	fund	a	significant	amount	of	inventory	on	a	secured basis.	Secured	funding	 is	 less	sensitive	 to	changes	 in	our	credit	quality	 than unsecured	funding,	due	to	our	posting	of	collateral	to	our	lenders.	Nonetheless, we	continually	analyze	the	refinancing	risk	of	our	secured	funding	activities, taking	into	account	trade	tenors,	maturity	profiles,	counterparty	concentrations, collateral	eligibility	and	counterparty	rollover	probabilities.	We	seek	to	mitigate our	 refinancing	 risk	 by	 executing	 term	 trades	 with	 staggered	 maturities, diversifying	 counterparties,	 raising	 excess	 secured	 funding,	 and	 pre-funding residual	risk	through	our	GCLA.

We	seek	to	raise	secured	funding	with	a	term	appropriate	for	the	liquidity	of	the assets	that	are	being	financed,	and	we	seek	longer	maturities	for	secured	funding collateralized	by	asset	classes	that	may	be	harder	 to	fund	on	a	secured	basis especially	during	times	of	market	stress.	Substantially	all	of	our	secured	funding, excluding	funding	collateralized	by	liquid	government	obligations,	is	executed for	 tenors	 of	 one	 month	 or	 greater.	Assets	 that	 may	 be	 harder	 to	 fund	 on	 a secured	basis	during	times	of	market	stress	include	certain	financial	instruments in	 the	 following	 categories:	 mortgage	 and	 other	 asset-backed	 loans	 and securities,	 non-investment-grade	 corporate	 debt	 securities,	 equities	 and convertible	debentures	and	emerging	market	securities.	Assets	that	are	classified as	level	3	in	the	fair	value	hierarchy	are	generally	funded	on	an	unsecured	basis. See	 Notes 5 and 6 to	 the	 consolidated	 financial	 statements	 for	 further information	 about	 the	 classification	 of	 financial	 instruments	 in	 the	 fair	 value hierarchy	 and	 "—	 Unsecured	 Long-Term	 Borrowings"	 below	 for	 further information	about	 the	use	of	unsecured	 long-term	borrowings	as	a	source	of funding.

The	 weighted	 average	 maturity	 of	 our	 secured	 funding,	 excluding	 funding collateralized	 by	 highly	 liquid	 securities	 eligible	 for	 inclusion	 in	 our	 GCLA, exceeded	120	days	as	of	December	2014.

A	majority	of	our	secured	funding	for	securities	not	eligible	for	inclusion	in	the GCLA	is	executed	through	term	repurchase	agreements	and	securities	lending contracts.	 We	 also	 raise	 financing	 through	 other	 types	 of	 collateralized financings,	such	as	secured	loans	and	notes.	In	December	2014,	Goldman	Sachs Bank	 USA	 (GS	 Bank	 USA)	 received	 approval	 to	 access	 funding	 from	 the Federal	 Home	 Loan	 Bank.	As	 of	 December	 2014,	 we	 had	 not	 accessed	 this funding.	In	addition,	GS	Bank	USA	has	access	to	funding	through	the	Federal Reserve	Bank	discount	window.	While	we	do	not	rely	on	this	funding	in	our liquidity	 planning	 and	 stress	 testing,	 we	 maintain	 policies	 and	 procedures necessary	to	access	this	funding	and	test	discount	window	borrowing	procedures.

Unsecured Long-Term Borrowings.	 We issue unsecured long-term borrowings	as	a	source	of	funding	for	inventory	and	other	assets	and	to	finance	a portion	of	our	GCLA.	We	issue	in	different	tenors,	currencies	and	products	to maximize	the	diversification	of	our	investor	base.	The	chart	below	presents	our quarterly	unsecured long-term	borrowings	maturity	profile through the	fourth quarter	of	2020	as	of	December	2014.

The	weighted	average	maturity	of	our	unsecured long-term	borrowings	as	of December	2014	was	approximately	eight	years.	To	mitigate	refinancing	risk,	we seek	to	limit	the	principal	amount	of	debt	maturing	on	any	one	day	or	during	any week	or	year.	We	enter	into	interest	rate	swaps

to	 convert	 a	 substantial	 portion	 of	 our	 unsecured long-term	 borrowings into floating-rate	obligations	in	order	to	manage	our	exposure	to	interest	rates.	See Note	16	to	the	consolidated	financial	statements	for	further	information	about our	unsecured	long-term	borrowings.

Deposits.	As	part	of	our	efforts	to	diversify	our	funding	base,	we	raise	deposits mainly	through	GS	Bank	USA	and	Goldman	Sachs	International	Bank	(GSIB). The	tables	below	present	the	types	and	sources	of	our	deposits.

|  | Savings	and |  |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | Demand^\t1 | Time^\t2 | Total |
| Private\tbank\tdeposits^\t3 | $33,590 | \t$\t\t1,609 | \t$35,199 |
| Certificates\tof\tdeposit | — | 25,908 | 25,908 |
| Deposit\tsweep\tprograms^\t4 | 15,691 | — | 15,691 |
| Institutional | 12 | 6,198 | 6,210 |
| Total^\t5 | $49,293 | \t$33,715 | \t$83,008 |

| $	in	millions | Demand^	1 | Time^	2 | Total |
| :--- | :--- | :--- | :--- |
| Private\tbank\tdeposits^\t3 | $30,475 | \t$\t\t\t\t\t212 | \t$30,687 |
| Certificates\tof\tdeposit | — | 19,709 | 19,709 |
| Deposit\tsweep\tprograms^\t4 | 15,511 | — | 15,511 |
| Institutional | 33 | 4,867 | 4,900 |
| Total^\t5 | $46,019 | \t$24,788 | \t$70,807 |

1.Represents	deposits	with	no	stated	maturity.

2.Weighted	 average	 maturity	 of	 approximately three	 years	 as	 of	 both	 December	 2014	 and December	2013. 3.Substantially	 all	 were from	 overnight	 deposit	 sweep	 programs related to	 private	 wealth management	clients.

4.Represents	long-term	contractual	agreements	with	several	U.S.	broker-dealers	who	sweep client	cash	to	FDIC-insured	deposits.

5.Deposits	insured	by	the	FDIC	as	of	December	2014	and	December	2013	were	approximately $45.72	billion	and	$41.22	billion,	respectively.

Unsecured Short-Term Borrowings. A	 significant	 portion	 of	 our unsecured	short-term	borrowings	was	originally	long-term	debt	that	is	scheduled to	mature	within	one	year	of	the	reporting	date.	We	use	unsecured	short-term borrowings	to	finance	liquid	assets	and	for	other	cash	management	purposes.	We issue	hybrid	financial	instruments,	commercial	paper	and	promissory	notes.

As	 of	 December	 2014	 and	 December	 2013,	 our	 unsecured	 short-term borrowings,	including	the	current	portion	of	unsecured	long-term	borrowings, were $44.54 billion	 and $44.69 billion,	 respectively.	 See	 Note 15 to	 the consolidated	financial	statements	for	further	 information	about	our	unsecured short-term	borrowings.

# Equity	Capital	Management	and	Regulatory	Capital

Capital	 adequacy	 is	 of	 critical	 importance	 to	 us.	 Our	 objective	 is	 to	 be conservatively	capitalized	in	terms	of	the	amount	and	composition	of	our	equity base,	both	relative	to	our	risk	exposures	and	compared	to	external	requirements and	 benchmarks.	 Accordingly,	 we	 have	 in	 place	 a	 comprehensive	 capital management	policy	that	provides	a	framework	and	set	of	guidelines	to	assist	us in	determining	the	level	and	composition	of	capital	that	we	target	and	maintain.

# Equity	Capital	Management

We	determine	the	appropriate	level	and	composition	of	our	equity	capital	by considering	 multiple	 factors	 including	 our	 current	 and	 future	 consolidated regulatory	capital	requirements,	 the	results	of	our	capital	planning	and	stress testing	process	and	other	factors	such	as	rating	agency	guidelines,	subsidiary capital	 requirements,	 the	 business	 environment,	 conditions	 in	 the	 financial markets,	and	assessments	of	potential	future	losses	due	to	adverse	changes	in	our business	 and	 market	 environments.	 Our	 capital	 planning	 and	 stress	 testing process	incorporates	our	internally	designed	stress	tests	and	those	required	under CCAR	and	DFAST	rules,	and	is	also	designed	to	identify	and	measure	material risks	associated	with	our	business	activities,	including	market	risk,	credit	risk and	operational	risk.	We	project	sources	and	uses	of	capital	given	a	range	of business	environments,	including	stressed	conditions.	In	addition,	as	part	of	our comprehensive	capital	management	policy,	we	maintain	a	contingency	capital plan	that	provides	a	framework	for	analyzing	and	responding	to	an	actual	or perceived	capital	shortfall.

We	principally	manage	the	level	and	composition	of	our	equity	capital	through issuances	and	repurchases	of	our	common	stock.	We	may	also,	from	time	to time,	issue	or	repurchase	our	preferred	stock,	junior	subordinated	debt	issued	to trusts,	 and	 other	 subordinated	 debt	 or	 other	 forms	 of	 capital	 as	 business conditions	warrant.	Prior	to	any	repurchases,	we	must	receive	confirmation	that the	Federal	Reserve	Board	does	not	object	to	such	capital	actions.	We	manage our	capital	requirements	and	the	levels	of	our	capital	usage	principally	by	setting limits	on	balance	sheet	assets	and/or	 limits	on	risk,	 in	each	case	both	at	 the consolidated	 and	 business	 levels.	 See	 Notes	 16	 and	 19	 to	 the	 consolidated financial	 statements	 for	 further	 information	 about	 our	 preferred	 stock,	 junior subordinated	debt	issued	to	trusts	and	other	subordinated	debt.

Capital	Planning	and	Stress	Testing	Process.	 Our	capital	planning	and stress	testing	process	incorporates	our	internally	designed	stress	tests	and	those required	 under	 CCAR	 and	 DFAST.	 The	 process	 is	 designed	 to	 identify	 and measure	material	risks	associated	with	our	business	activities.	We	also	perform an	internal	risk-based	capital	assessment,	attribute	capital	usage	to	each	of	our businesses	 and	 maintain	 a	 contingency	 capital	 plan.	 The	 following	 is	 a description	of	our	capital	planning	and	stress	testing	process:

Ÿ	Stress	Testing.	Our	stress	testing	process	incorporates	an	internal	capital adequacy	 assessment	 with	 the	 objective	 of	 ensuring	 that	 the	 firm	 is appropriately	capitalized	relative	to	the	risks	in	our	business.	As	part	of	our assessment,	we	project	sources	and	uses	of	capital	given	a	range	of	business environments,	including	stressed	conditions.	Our	stress	tests	incorporate	our internally	 designed	 stress	 scenarios,	 including	 our	 internally	 developed severely	adverse	scenario,	and	those	required	under	CCAR	and	DFAST	rules, and	 are	 designed	 to	 capture	 our	 specific	 vulnerabilities	 and	 risks	 and	 to analyze	whether	we	hold	an	appropriate	amount	of	capital.	Our	goal	is	to	hold sufficient	 capital	 to	 ensure	 we	 remain	 adequately	 capitalized	 after experiencing	 a	 severe	 stress	 event.	 Our	 assessment	 of	 capital	 adequacy	 is viewed	in	tandem	with	our	assessment	of	liquidity	adequacy	and	is	integrated into	our	overall	risk	management	structure,	governance	and	policy	framework. We	 provide	 additional	 information	 about	 our	 stress	 test	 processes	 and	 a summary	 of	 the	 results	 on	 our	 web	 site	 as	 described	 under	 "Business	 — Available	Information"	in	Part	I,	Item	1	of	the	2014	Form	10-K.

Ÿ	Internal	Risk-Based	Capital	Assessment.	Our	capital	planning	process includes	 an	 internal	 risk-based	 capital	 assessment.	 This	 assessment incorporates	 market	 risk,	 credit	 risk	 and	 operational	 risk.	 Market	 risk	 is calculated	by	using	Value-at-Risk	(VaR)	calculations	supplemented	by	risk- based	add-ons	which	include	risks	related	to	rare	events	(tail	risks).	Credit	risk utilizes	assumptions	about	our	counterparties'	probability	of	default	and	the size	of	our	losses	in	the	event	of	a	default.	Operational	risk	is	calculated	based on	scenarios	incorporating	multiple	types	of	operational	failures	as	well	as incorporating	internal	and	external	actual	loss	experience.	Backtesting	is	used to	gauge	the	effectiveness	of	models	at	capturing	and	measuring	relevant	risks.

Ÿ	Capital	Attribution.	We	attribute	capital	usage	to	each	of	our	businesses based	upon	regulatory	capital	requirements	as	well	as	our	internal	risk-based capital	assessment.	We	manage	 the	 levels	of	our	capital	usage	based	upon balance	 sheet	 and	 risk	 limits,	 as	 well	 as	 capital	 return	 analyses	 of	 our businesses	based	on	our	capital	attribution.	We	also	attribute	risk-weighted assets	 (RWAs)	 to	 our	 business	 segments.	 As	 of	 December	 2014, approximately	70%	of	RWAs	calculated	under	the	Basel	III	Advanced	Rules, subject	 to	 transitional	provisions,	were	attributed	 to	our	Institutional	Client Services	segment	and	substantially	all	of	the	remaining	RWAs	were	attributed to	our	Investing	&	Lending	segment.

Ÿ	Contingency Capital Plan.	 As part	 of	 our	 comprehensive	 capital management	policy,	we	maintain	a	contingency	capital	plan.	Our	contingency capital	plan	provides	a	framework	for	analyzing	and	responding	to	a	perceived or	 actual	 capital	 deficiency,	 including,	 but	 not	 limited	 to,	 identification	 of drivers	of	a	capital	deficiency,	as	well	as	mitigants	and	potential	actions.	It outlines	the	appropriate	communication	procedures	to	follow	during	a	crisis period,	 including	 internal	 dissemination	 of	 information	 as	 well	 as	 timely communication	with	external	stakeholders.

As	required	by	the	Federal	Reserve	Board's	annual	CCAR	rules,	we	submit	a capital	plan	for	review	by	the	Federal	Reserve	Board.	The	purpose	of	the	Federal Reserve	 Board's	 review	 is	 to	 ensure	 that	 we	 have	 a	 robust,	 forward-looking capital	 planning	 process	 that	 accounts	 for	 our	 unique	 risks	 and	 that	 permits continued	operation	during	times	of	economic	and	financial	stress.

The	Federal	Reserve	Board	evaluates	us	based,	in	part,	on	whether	we	have	the capital	necessary	to	continue	operating	under	the	baseline	and	stress	scenarios provided	 by	 the	 Federal	 Reserve	 Board	 and	 those	 developed	 internally.	This evaluation	also	takes	into	account	our	process	for	identifying	risk,	our	controls and	 governance	 for	 capital	 planning,	 and	 our	 guidelines	 for	 making	 capital planning	decisions.	In	addition,	the	Federal	Reserve	Board	evaluates	our	plan	to make	 capital	 distributions	 (i.e.,	 dividend	 payments	 and	 repurchases	 or redemptions	of	stock,	subordinated	debt	or	other	capital	securities)	and	 issue capital,	 across	 a	 range	 of	 macroeconomic	 scenarios	 and	 firm-specific assumptions.

In	addition,	the	DFAST	rules	require	us	to	conduct	stress	tests	on	a	semi-annual basis	and	publish	a	summary	of	certain	results.	The	annual	DFAST	submission is	 incorporated	 into	 our	 CCAR	 submission.	The	 Federal	 Reserve	 Board	 also conducts	its	own	annual	stress	tests	and	publishes	a	summary	of	certain	results.

We	 submitted	 our	 initial	 2014	 CCAR	 to	 the	 Federal	 Reserve	 Board	 in January	2014	and,	based	on	the	Federal	Reserve	Board	feedback,	we	submitted revised	capital	actions	in	March	2014.	The	Federal	Reserve	Board	informed	us that	it	did	not	object	to	our	revised	capital	actions,	including	the	repurchase	of outstanding	common	stock,	an	increase	in	our	quarterly	common	stock	dividend and	 the	 possible	 issuance,	 redemption	 and	 modification	 of	 other	 capital securities	 through	 the	first	quarter	of	2015.	We	published	a	summary	of	our annual	DFAST	results	in	March	2014.	See	"Business	—	Available	Information" in	Part	I,	Item	1	of	the	2014	Form	10-K.	We	submitted	our	2015	CCAR	to	the Federal	Reserve	Board	in	January	2015	and	expect	to	publish	a	summary	of	our annual	DFAST	results	in	March	2015.

In	addition,	we	submitted	the	results	of	our	mid-cycle	DFAST	to	the	Federal Reserve	Board	in	July	2014	and	published	a	summary	of	our	mid-cycle	DFAST results	 under	 our	 internally	 developed	 severely	 adverse	 scenario	 in September	2014.	We	provide	additional	information	on	our	internal	stress	test processes,	our	internally	developed	severely	adverse	scenario	used	for	mid-cycle DFAST	 and	 a	 summary	 of	 the	 results	 on	 our	 web	 site	 as	 described	 under "Business	—	Available	Information"	in	Part	I,	Item	1	of	the	2014	Form	10-K.

In	 addition,	 the	 rules	 adopted	 by	 the	 Federal	 Reserve	 Board	 under	 the	 U.S. Dodd-Frank	 Wall	 Street	 Reform	 and	 Consumer	 Protection	Act	 (Dodd-Frank Act)	require	GS	Bank	USA	to	conduct	stress	tests	on	an	annual	basis	and	publish a	summary	of	certain	results.	GS	Bank	USA	submitted	its	2014	annual	DFAST stress	results	 to	 the	Federal	Reserve	Board	 in	January	2014	and	published	a summary	of	its	results	in	March	2014.	See	"Business	—	Available	Information" in	Part	I,	Item	1	of	the	2014	Form	10-K.	GS	Bank	USA	submitted	its	2015 annual	DFAST	results	to	the	Federal	Reserve	Board	in	January	2015	and	expects to	publish	a	summary	of	its	results	in	March	2015.

Share	Repurchase	Program.	We	use	our	share	repurchase	program	to	help maintain	the	appropriate	level	of	common	equity.	The	repurchase	program	 is effected	primarily	through	regular	open-market	purchases	(which	may	include repurchase	plans	designed	to	comply	with	Rule	10b5-1),	the	amounts	and	timing of	which	are	determined	primarily	by	our	current	and	projected	capital	position, but	 which	 may	 also	 be	 influenced	 by	 general	 market	 conditions	 and	 the prevailing	price	and	trading	volumes	of	our	common	stock.

As	of	December	2014,	under	 the	share	repurchase	program	approved	by	 the Board	of	Directors	of	Group	Inc.	(Board),	we	can	repurchase	up	to	25.4	million additional	shares	of	common	stock;	however,	prior	to	any	such	repurchases,	we must	receive	confirmation	that	the	Federal	Reserve	Board	does	not	object	to	such capital	 actions.	 See	 "Market	 for	 Registrant's	 Common	 Equity,	 Related Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities"	in	Part	II,	Item	5 of	the	2014	Form	10-K	and	Note	19	to	the	consolidated	financial	statements	for additional	information	about	our	share	repurchase	program	and	see	above	for information	about	our	capital	planning	and	stress	testing	process.

We	are	required	by	the	Federal	Reserve	Board	and	the	FDIC	to	submit	an	annual plan	that	describes	our	strategy	for	a	rapid	and	orderly	resolution	in	the	event	of material	financial	distress	or	failure	(resolution	plan).	We	are	also	required	by the	Federal	Reserve	Board	to	submit,	on	an	annual	basis,	a	global	recovery	plan that	 outlines	 the	 steps	 that	 management	 could	 take	 to	 reduce	 risk,	 maintain sufficient	 liquidity,	 and	 conserve	 capital	 in	 times	 of	 prolonged	 stress.	 We submitted	our	2013	resolution	plan	in	September	2013	and	our	2014	resolution plan	in	June	2014.	In	August	2014,	the	Federal	Reserve	Board	and	the	FDIC indicated	that	we	and	other	large	industry	participants	had	certain	shortcomings in	the	2013	resolution	plans	that	must	be	addressed	in	the	2015	resolution	plans, which	are	required	to	be	submitted	on	or	before	July	1,	2015.

In	addition,	GS	Bank	USA	is	required	by	the	FDIC	to	submit	a	resolution	plan. GS	Bank	USA	submitted	its	2013	resolution	plan	in	September	2013	and	its 2014	 resolution	 plan	 in	 June	 2014.	 GS	 Bank	 USA's	 2015	 resolution	 plan	 is required	to	be	submitted	on	or	before	July	1,	2015.

# Rating	Agency	Guidelines

The	credit	rating	agencies	assign	credit	ratings	to	the	obligations	of	Group	Inc., which	 directly	 issues	 or	 guarantees	 substantially	 all	 of	 the	 firm's	 senior unsecured	 obligations.	 Goldman,	 Sachs	 &	 Co.	 (GS&Co.),	 Goldman	 Sachs International	(GSI)	and	GSIB	have	been	assigned	long-	and	short-term	issuer ratings	by	certain	credit	rating	agencies.	GS	Bank	USA	has	also	been	assigned long-	and	short-term	issuer	ratings,	as	well	as	ratings	on	its	long-term	and	short- term	bank	deposits.	In	addition,	credit	rating	agencies	have	assigned	ratings	to debt	obligations	of	certain	other	subsidiaries	of	Group	Inc.

The	 level	and	composition	of	our	equity	capital	are	among	 the	many	factors considered	in	determining	our	credit	ratings.	Each	agency	has	its	own	definition of	 eligible	 capital	 and	 methodology	 for	 evaluating	 capital	 adequacy,	 and assessments	are	generally	based	on	a	combination	of	factors	rather	than	a	single calculation.	 See	 "Liquidity	 Risk	 Management	 —	 Credit	 Ratings"	 for	 further information	about	credit	ratings	of	Group	Inc.,	GS	Bank	USA,	GSIB,	GS&Co. and	GSI.

# Consolidated	Regulatory	Capital

As	of	December	2013,	we	were	subject	to	the	risk-based	capital	regulations	of the	Federal	Reserve	Board	that	were	based	on	the	Basel	I	Capital	Accord	of	the Basel	Committee	on	Banking	Supervision	(Basel	Committee),	and	incorporated the	 revised	 market	 risk	 regulatory	 capital	 requirements	 (together,	 the	 Prior Capital	Rules).

As	of	January	1,	2014,	we	became	subject	to	the	Federal	Reserve	Board's	revised risk-based	 capital	 and	 leverage	 regulations,	 subject	 to	 certain	 transitional provisions	(Revised	Capital	Framework).	These	regulations	are	largely	based	on the	Basel	Committee's	final	capital	framework	for	strengthening	international capital	standards	(Basel	III)	and	also	implement	certain	provisions	of	the	Dodd- Frank	 Act.	 Under	 the	 Revised	 Capital	 Framework,	 we	 are	 an	 "Advanced approach"	banking	organization.

We	were	notified	in	the	first	quarter	of	2014	that	we	had	completed	a	"parallel run"	 to	 the	 satisfaction	 of	 the	 Federal	 Reserve	 Board,	 as	 required	 under	 the Revised	 Capital	 Framework.	 As	 such,	 additional	 changes	 in	 our	 capital requirements	became	effective	on	April	1,	2014.

Beginning	on	January	1,	2014,	regulatory	capital	was	calculated	based	on	the Revised	Capital	Framework.	Beginning	on	April	1,	2014,	there	were	no	changes to	the	calculation	of	regulatory	capital,	but	RWAs	were	calculated	using	(i)	the Prior	Capital	Rules,	adjusted	for	certain	items	related	to	capital	deductions	under the	previous	definition	of	regulatory	capital	and	for	the	phase-in	of	new	capital deductions	(Hybrid	Capital	Rules),	and	(ii)	the	Advanced	approach	and	market risk	 rules	 set	 out	 in	 the	 Revised	 Capital	 Framework	 (together,	 the	 Basel	 III Advanced	Rules).	The	lower	of	the	ratios	calculated	under	the	Hybrid	Capital Rules	and	those	calculated	under	the	Basel	III	Advanced	Rules	are	our	binding regulatory	capital	requirements.

As	 a	 result	 of	 the	 changes	 in	 the	 applicable	 capital	 framework	 in	 2014,	 our capital	ratios	as	of	December	2014	and	those	as	of	December	2013	included	in Note	20	to	the	consolidated	financial	statements	were	calculated	on	a	different basis	 and,	 accordingly,	 are	 not	 comparable.	 See	 Note	 20	 to	 the	 consolidated financial	statements	for	our	capital	ratios	as	of	December	2013,	a	description	of the	Prior	Capital	Rules,	and	for	additional	information	about	the	Revised	Capital Framework,	including	the	transitional	arrangements	related	to	new	deductions from	Common	Equity	Tier	1	(CET1)	and	information	about	RWAs.

Effective	on	January	1,	2015,	regulatory	capital	continues	to	be	calculated	under the	Revised	Capital	Framework,	but	RWAs	are	required	to	be	calculated	under the	Basel	III	Advanced	Rules,	as	well	as	the	Standardized	approach	and	market risk	rules	set	out	in	the	Revised	Capital	Framework	(together,	the	Standardized Capital	Rules)	as	discussed	in	Note	20	to	the	consolidated	financial	statements. The	lower	of	the	ratios	calculated	under	the	Basel	III	Advanced	Rules	and	those calculated	 under	 the	 Standardized	 Capital	 Rules	 are	 our	 binding	 regulatory capital	requirements.

# Minimum	Capital	Ratios	and	Capital	Buffers

The	 table	 below	 presents	 the	 minimum	 ratios	 under	 the	 Revised	 Capital Framework	as	of	December	2014	and	January	2015,	as	well	as	the	minimum ratios	 that	 we	 expect	 will	 apply	 at	 the	 end	 of	 the	 transitional	 provisions beginning	January	2019.

|  | December	2014 | January	2015 | January	2019 |
| :--- | :--- | :--- | :--- |
|  | Minimum\tRatio^\t1 | Minimum\tRatio^\t1 | Minimum\tRatio |
| CET1\tratio | 4.0% | 4.5% | 8.5%^\t4 |
| Tier\t1\tcapital\tratio | 5.5% | 6.0% | 10.0%^\t4 |
| Total\tcapital\tratio | 8.0%^\t3 | 8.0%^\t3 | 12.0%^\t4 |
| Tier\t1\tleverage\tratio^\t2 | 4.0% | 4.0% | 4.0% |

1.Does	not	reflect	the	capital	conservation	buffer	or	provisional	Global	Systemically	Important Banks	(G-SIB)	buffer	discussed	below.

2.Tier	1	leverage	ratio	is	defined	as	Tier	1	capital	divided	by	average	adjusted	total	assets (which	 includes	 adjustments	 for	 goodwill	 and	 identifiable	 intangible	 assets,	 and	 certain investments	in	nonconsolidated	financial	institutions).

3.In	order	to	meet	the	quantitative	requirements	for	being	"well-capitalized"	under	the	Federal Reserve	Board's	capital	regulations,	the	firm	must	meet	a	higher	required	minimum	Total capital	ratio	of	10.0%.

4.Includes the	 required	 increases	 in	 minimum	 ratios	 on	 January 1, 2015,	 the	 capital conservation	 buffer	 of	 2.5%	 and	 a	 provisional	 G-SIB	 buffer	 of	 1.5%	 under	 the	 Basel Committee's	methodology	discussed	below.

The	table	below	presents	the	supplementary	leverage	ratio.	See	"Supplementary Leverage	Ratio"	below	for	further	information.

1.Includes	the	minimum	requirement	of	3.0%	and	a	buffer	of	2.0%	discussed	below.

Under	the	Revised	Capital	Framework,	on	January	1,	2015,	the	minimum	CET1 ratio	 increased	 from	 4.0%	 to	 4.5%	 and	 the	 minimum	 Tier	 1	 capital	 ratio increased	 from 5.5% to 6.0%. In	 addition,	 these	 minimum	 ratios	 will	 be supplemented	by	a	new	capital	conservation	buffer,	consisting	entirely	of	capital that	 qualifies	 as	 CET1,	 that	 phases	 in,	 beginning	 on	 January 1, 2016,	 in increments	 of 0.625% per	 year	 until	 it	 reaches 2.5% of	 RWAs	 on January	1,	2019.

The	 January	 2019	 minimum	 ratios	 in	 the	 table	 above	 assume	 the	 future implementation	 of	 an	 additional	 preliminary	 buffer	 for	 G-SIBs.	 Under	 the methodology	 published	 by	 the	 Basel	 Committee,	 the	 required	 amount	 of additional	CET1	for	these	institutions	will	initially	range	from	1%	to	2.5%	and could	be	higher	in	the	future	for	a	banking	institution	that	increases	its	systemic footprint	 (e.g.,	 by	 increasing	 total	 assets).	 In	 November	 2014,	 the	 Financial Stability	Board	(established	at	the	direction	of	the	leaders	of	the	Group	of	20) indicated	that,	based	on	our	2013	financial	data,	we	would	be	required	to	hold	an additional	1.5%	of	CET1	as	a	G-SIB.

In	December	2014,	 the	Federal	Reserve	Board	proposed	a	rule	which	would establish	risk-based	capital	surcharges	for	U.S.	G-SIBs	that	are	higher	than	those required	by	the	Basel	Committee.	Under	the	proposed	rule,	U.S.	G-SIBs	would be	 required	 to	 meet	 these	 higher	 capital	 surcharges	 on	 a	 phased-in	 basis, beginning	in	2016	through	2019.	The	proposed	rule	treats	the	Basel	Committee's methodology	as	a	floor	and	introduces	an	alternative	calculation	to	determine	the applicable	 surcharge,	 which	 includes	 a	 significantly	 higher	 surcharge	 for systemic	risk	and,	as	part	of	the	calculation	of	the	applicable	surcharge,	a	new factor	 based	 on	 a	 G-SIB's	 use	 of	 short-term	 wholesale	 funding.	 Under	 a preliminary	assessment	of	the	proposed	rule,	our	surcharge	has	been	estimated to	 be 100 basis	 points	 higher	 than	 the 1.5% surcharge	 under	 the	 Basel Committee's	 methodology.	 The	 table	 above	 does	 not	 reflect	 this	 additional surcharge.	 This	 preliminary	 estimate	 is	 subject	 to	 significant	 interpretive assumptions	and	may	change	in	the	future,	perhaps	materially,	due	to,	among other	things	(i)	any	changes	in	the	final	rule,	the	interpretations	we	have	made, or	data	used	in	the	calculation;	(ii)	changes	in	foreign	exchange	rates,	which	may have	the	effect	of	increasing	or	decreasing	the	proportion	of	the	systemic	risk measures	applicable	to	U.S.	G-SIBs;	(iii)	increases	or	decreases	in	any	of	the indicators	 used	 in	 the	 assessment	 of	 our	 systemic	 risk,	 including	 our	 use	 of short-term	wholesale	funding;	or	(iv)	increases	or	decreases	in	indicators	at	any of	the	other	banks	that	are	included	in	the	Basel	Committee's	methodology.

The	Revised	Capital	Framework	also	provides	a	new	counter-cyclical	capital buffer	of	up	to	2.5%	(and	also	consisting	entirely	of	CET1),	to	be	imposed	in	the event	that	national	supervisors	deem	it	necessary	in	order	to	counteract	excessive credit	growth.	The	table	above	does	not	reflect	this	buffer.

Our	regulators	could	change	these	buffers	in	the	future.	As	a	result,	the	minimum ratios	we	are	subject	to	as	of	January	1,	2019	could	be	higher	than	the	amounts presented	in	the	table	above.

# Fully	Phased-in	Capital	Ratios

The	table	below	presents	our	estimated	ratio	of	CET1	to	RWAs	calculated	under the	Basel	III	Advanced	Rules	and	 the	Standardized	Capital	Rules	on	a	fully phased-in	basis.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Common\tshareholders'\tequity | \t\t$\t\t73,597 | \t$\t\t71,267 |
| Deductions\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets,\tnet\tof\ndeferred\ttax\tliabilities | (3,196) | (3,468) |
| Deductions\tfor\tinvestments\tin\tnonconsolidated\tfinancial\tinstitutions | (4,928) | (9,091) |
| Other\tadjustments | (1,213) | (489) |
| CET1 | \t\t$\t\t64,260 | \t$\t\t58,219 |
| Basel\tIII\tAdvanced\tRWAs | \t\t$577,869 | \t$594,662 |
| Basel\tIII\tAdvanced\tCET1\tratio | 11.1% | 9.8% |
| Standardized\tRWAs | \t\t$627,444 | \t$635,092 |
| Standardized\tCET1\tratio | 10.2% | 9.2% |

Although	 the	 fully	 phased-in	 capital	 ratios	 are	 not	 applicable	 until	 2019,	 we believe	that	the	estimated	ratios	in	the	table	above	are	meaningful	because	they are	measures	that	we,	our	regulators	and	investors	use	to	assess	our	ability	to meet	 future	 regulatory	 capital	 requirements.	 The	 estimated	 fully	 phased-in Basel	III	Advanced	and	Standardized	CET1	ratios	are	non-GAAP	measures	as	of both	December	2014	and	December	2013	and	may	not	be	comparable	to	similar non-GAAP	 measures	 used	 by	 other	 companies	 (as	 of	 those	 dates).	 These estimated	 ratios	 are	 based	 on	 our	 current	 interpretation,	 expectations	 and understanding	of	the	Revised	Capital	Framework	and	may	evolve	as	we	discuss its	interpretation	and	application	with	our	regulators.

See	Note	20	to	the	consolidated	financial	statements	for	information	about	our transitional	capital	ratios,	which	represent	our	binding	ratios	as	of	December 2014.

Ÿ	The	deduction	for	goodwill	and	identifiable	intangible	assets,	net	of	deferred tax	 liabilities,	 represents	 goodwill	 of	 $3.65	 billion	 and	 $3.71	 billion	 as	 of December	2014	and	December	2013,	respectively,	and	identifiable	intangible assets	 of $515	 million and $671	 million as	 of	 December	 2014	 and December	 2013,	 respectively,	 net	 of	 associated	 deferred	 tax	 liabilities	 of $964	million	and	$908	million	as	of	December	2014	and	December	2013, respectively.

Ÿ	The	 deduction	 for	 investments	 in	 nonconsolidated	 financial	 institutions represents	 the	 amount	 by	 which	 our	 investments	 in	 the	 capital	 of nonconsolidated	 financial	 institutions	 exceed	 certain	 prescribed	 thresholds. The	 decrease	 from	 December	 2013	 to	 December	 2014	 primarily	 reflects reductions	in	our	fund	investments.

Ÿ	Other	adjustments	primarily	 include	 the	overfunded	portion	of	our	defined benefit	pension	plan	obligation,	net	of	associated	deferred	tax	liabilities,	and disallowed	 deferred	 tax	 assets,	 credit	 valuation	 adjustments	 on	 derivative liabilities	and	debt	valuation	adjustments,	as	well	as	other	required	credit	risk- based	deductions.

# Supplementary	Leverage	Ratio

The	Revised	Capital	Framework	introduces	a	new	supplementary	leverage	ratio for	 Advanced	 approach	 banking	 organizations.	 Under	 amendments	 to	 the Revised	Capital	Framework,	the	U.S.	federal	bank	regulatory	agencies	approved a	final	rule	that	implements	the	supplementary	leverage	ratio	aligned	with	the definition	of	leverage	established	by	the	Basel	Committee.	The	supplementary leverage	ratio	compares	Tier	1	capital	to	a	measure	of	leverage	exposure,	defined as	the	sum	of	our	quarterly	average	assets	less	certain	deductions	plus	certain off-balance-sheet	exposures,	including	a	measure	of	derivatives	exposures	and commitments.	 The	 Revised	 Capital	 Framework	 requires	 a	 minimum supplementary	leverage	ratio	of	5.0%	(comprised	of	the	minimum	requirement of	3.0%	and	a	2.0%	buffer)	for	U.S.	banks	deemed	to	be	G-SIBs,	effective	on January	1,	2018.	Certain	disclosures	regarding	the	supplementary	leverage	ratio are	required	beginning	in	the	first	quarter	of	2015.

As	of	December	2014,	our	estimated	supplementary	leverage	ratio	was	5.0%, including	Tier	1	capital	on	a	fully	phased-in	basis	of	$73.17	billion	(CET1	of $64.26	billion	plus	perpetual	non-cumulative	preferred	stock	of	$9.20	billion less	other	adjustments	of	$290	million)	divided	by	total	leverage	exposure	of $1.45	trillion	(total	quarterly	average	assets	of	$873	billion	plus	adjustments	of $579 billion,	 primarily	 comprised	 of	 off-balance-sheet	 exposure	 related	 to derivatives	and	commitments).

We	 believe	 that	 the	 estimated	 supplementary	 leverage	 ratio	 is	 meaningful because	it	is	a	measure	that	we,	our	regulators	and	investors	use	to	assess	our ability	 to	 meet	 future	 regulatory	 capital	 requirements.	 The	 supplementary leverage	ratio	is	a	non-GAAP	measure	and	may	not	be	comparable	to	similar non-GAAP	measures	used	by	other	companies.

This	 estimated	 supplementary	 leverage	 ratio	 is	 based	 on	 our	 current interpretation	and	understanding	of	the	U.S.	federal	bank	regulatory	agencies' final	rule	and	may	evolve	as	we	discuss	its	interpretation	and	application	with our	regulators.

# Subsidiary	Capital	Requirements

Many	 of	 our	 subsidiaries,	 including	 GS	 Bank	 USA	 and	 our	 broker-dealer subsidiaries,	are	subject	to	separate	regulation	and	capital	requirements	of	the jurisdictions	in	which	they	operate.

GS	Bank	USA.	GS	Bank	USA	is	subject	to	minimum	capital	requirements	that are	calculated	in	a	manner	similar	to	those	applicable	to	bank	holding	companies and	 computes	 its	 capital	 ratios	 in	 accordance	 with	 the	 regulatory	 capital requirements	applicable	to	state	member	banks,	which	are	based	on	the	Revised Capital	 Framework.	 The	 capital	 regulations	 also	 include	 requirements	 with respect	 to	 leverage.	See	Note	20	 to	 the	consolidated	financial	statements	for further	 information	about	 the	Revised	Capital	Framework	as	 it	relates	 to	GS Bank	 USA,	 including	 GS	 Bank	 USA's	 capital	 ratios	 and	 required	 minimum ratios.

The	Basel	Committee	published	its	final	guidelines	for	calculating	incremental capital	requirements	for	domestic	systemically	important	banking	institutions. These	guidelines	are	complementary	to	the	framework	outlined	above	for	G- SIBs.	The	impact	of	these	guidelines	on	the	regulatory	capital	requirements	of GS	 Bank	 USA	 will	 depend	 on	 how	 they	 are	 implemented	 by	 the	 banking regulators	in	the	United	States.

In	addition,	under	Federal	Reserve	Board	rules,	commencing	on	January	1,	2018, in	order	to	be	considered	a	"well-capitalized"	depository	institution,	GS	Bank USA	 must	 have	 a	 supplementary	 leverage	 ratio	 of	 6.0%	 or	 greater.	 As	 of December	2014,	GS	Bank	USA's	estimated	supplementary	leverage	ratio	under this	rule	and	on	a	fully	phased-in	basis	was	6.0%.	This	estimated	supplementary leverage	ratio	is	based	on	our	current	interpretation	and	understanding	of	this rule	and	may	evolve	as	we	discuss	its	interpretation	and	application	with	our regulators.

GSI.	Our	regulated	U.K.	broker-dealer,	GSI,	is	one	of	the	firm's	principal	non- U.S.	 regulated	 subsidiaries	 and	 is	 regulated	 by	 the	 Prudential	 Regulation Authority	 (PRA)	 and	 the	 Financial	 Conduct	 Authority	 (FCA).	 Effective	 on January	1,	2014,	GSI	became	subject	to	capital	regulations	which	are	largely based	on	Basel	III	as	 implemented	 in	 the	European	Union	(EU)	 through	 the Capital	 Requirements	 Directives	 and	 which,	 similar	 to	 the	 Revised	 Capital Framework,	also	introduce	leverage	ratio	reporting	requirements	in	the	future. As	of	December	2014,	GSI	had	an	estimated	CET1	ratio	of	9.7%,	an	estimated Tier	1	capital	ratio	of	9.7%	and	an	estimated	Total	capital	ratio	of	12.7%	(all including	approximately	80	basis	points	of	2014	unaudited	results).	These	ratios will	be	finalized	upon	the	completion	of	the	2014	GSI	audit.	Under	PRA	rules, as	of	December	2014,	GSI	is	required	to	maintain	a	minimum	CET1	ratio	of 4.0%,	 Tier 1 capital	 ratio	 of 5.5%, and	 Total	 capital	 ratio	 of 8.0%. In January	2015,	the	minimum	CET1	ratio	requirement	increased	to	4.5%,	and	the minimum	Tier	1	capital	ratio	requirement	increased	to	6.0%.	GSI's	future	capital requirements	may	also	be	impacted	by	developments	such	as	the	introduction	of capital	buffers	as	described	above	in	"—	Minimum	Capital	Ratios	and	Capital Buffers."

As	of	December	2013,	GSI	was	subject	to	capital	regulations,	which	were	based on	the	Basel	Committee's	June	2006	Framework	(Basel	II)	as	modified	by	the Basel	 Committee's	 February	 2011	 Revisions	 to	 the	 Basel	 II	 market	 risk framework	 and	 as	 implemented	 in	 the	 EU	 through	 the	 Capital	 Requirements Directives.	As	of	December	2013,	GSI	had	a	Tier	1	capital	ratio	of	14.4%	and	a Total	capital	ratio	of	18.5%.

Other	Subsidiaries.	We	expect	that	the	capital	requirements	of	several	of	our subsidiaries	are	likely	to	increase	in	the	future	due	to	the	various	developments arising	from	the	Basel	Committee,	the	Dodd-Frank	Act,	and	other	governmental entities	and	regulators.	See	Note	20	to	the	consolidated	financial	statements	for information	about	the	capital	requirements	of	our	other	regulated	subsidiaries.

Subsidiaries	not	subject	 to	separate	regulatory	capital	requirements	may	hold capital	to	satisfy	local	tax	and	legal	guidelines,	rating	agency	requirements	(for entities	 with	 assigned	 credit	 ratings)	 or	 internal	 policies,	 including	 policies concerning	the	minimum	amount	of	capital	a	subsidiary	should	hold	based	on	its underlying	level	of	risk.	In	certain	instances,	Group	Inc.	may	be	limited	in	its ability	to	access	capital	held	at	certain	subsidiaries	as	a	result	of	regulatory,	tax or	other	constraints.	As	of	December	2014	and	December	2013,	Group	Inc.'s equity	 investment	 in	 subsidiaries	 was $79.70 billion	 and $73.39 billion, respectively,	compared	with	its	total	shareholders'	equity	of	$82.80	billion	and $78.47	billion,	respectively.

Our	 capital	 invested	 in	 non-U.S.	 subsidiaries	 is	 generally	 exposed	 to	 foreign exchange	risk,	substantially	all	of	which	is	managed	through	a	combination	of derivatives	and	non-U.S.	denominated	debt.

Guarantees	 of	 Subsidiaries.	 Group Inc.	 has	 guaranteed	 the	 payment obligations	 of	 GS&Co.,	 GS	 Bank	 USA,	 and	 Goldman	 Sachs	 Execution	 & Clearing,	 L.P.	 (GSEC),	 in	 each	 case	 subject	 to	 certain	 exceptions.	 In November	2008,	Group	Inc.	contributed	subsidiaries	into	GS	Bank	USA,	and Group	Inc.	agreed	 to	guarantee	certain	 losses,	 including	credit-related	 losses, relating	 to	 assets	 held	 by	 the	 contributed	 entities.	 In	 connection	 with	 this guarantee,	Group	Inc.	also	agreed	to	pledge	to	GS	Bank	USA	certain	collateral, including	interests	in	subsidiaries	and	other	illiquid	assets.

# Regulatory	Developments

Our	businesses	are	subject	to	significant	and	evolving	regulation.	The	Dodd- Frank	Act,	enacted	in	July	2010,	significantly	altered	the	financial	regulatory regime	within	which	we	operate.	In	addition,	other	reforms	have	been	adopted	or are	 being	 considered	 by	 other	 regulators	 and	 policy	 makers	 worldwide.	 We expect	that	the	principal	areas	of	impact	from	regulatory	reform	for	us	will	be increased	 regulatory	 capital	 requirements	 and	 increased	 regulation	 and restriction	 on	 certain	 activities.	 However,	 given	 that	 many	 of	 the	 new	 and proposed	rules	are	highly	complex,	the	full	impact	of	regulatory	reform	will	not be	known	until	the	rules	are	implemented	and	market	practices	develop	under	the final	regulations.

There	 has	 been	 increased	 regulation	 of,	 and	 limitations	 on,	 our	 activities, including	 the	 Dodd-Frank	 Act	 prohibition	 on	 "proprietary	 trading"	 and	 the limitation	on	the	sponsorship	of,	and	investment	in,	covered	funds	(as	defined	in the	Volcker	Rule).	In	addition,	there	is	increased	regulation	of,	and	restrictions on,	OTC	derivatives	markets	and	transactions,	particularly	related	to	swaps	and security-based	swaps.

See	"Business	—	Regulation"	in	Part	I,	Item	1	of	the	2014	Form	10-K	for	more information	about	the	laws,	rules	and	regulations	and	proposed	laws,	rules	and regulations	that	apply	to	us	and	our	operations.	In	addition,	see	Note	20	to	the consolidated	financial	statements	for	information	about	regulatory	developments as	they	relate	to	our	regulatory	capital	and	leverage	ratios,	and	"Liquidity	Risk Management	—	Liquidity	Regulatory	Framework"	below	for	information	about the	U.S.	federal	bank	regulatory	agencies'	final	rules	implementing	the	liquidity coverage	ratio.

The	Volcker	Rule	prohibits	"proprietary	trading,"	but	permits	activities	such	as underwriting,	market	making	and	risk-mitigation	hedging.	We	are	also	required to	calculate	daily	quantitative	metrics	on	covered	trading	activities	(as	defined	in the	rule)	and	provide	these	metrics	to	regulators	on	a	monthly	basis.	We	are required	to	be	in	compliance	with	the	prohibition	on	proprietary	trading	and	to develop	an	extensive	compliance	program	by	July	2015.	Based	on	what	we	know as	of	the	date	of	this	filing,	we	do	not	expect	the	impact	of	the	prohibition	on proprietary	trading	to	be	material	to	our	financial	condition,	results	of	operations or	cash	flows.	However,	the	rule	is	highly	complex,	and	its	impact	will	not	be known	until	market	practices	are	fully	developed.

In	addition	to	the	prohibition	on	proprietary	trading,	the	Volcker	Rule	limits	the sponsorship	of,	and	investment	in,	"covered	funds"	(as	defined	in	the	rule)	by banking	entities,	including	Group	Inc.	and	its	subsidiaries.	It	also	limits	certain types	 of	 transactions	 between	 us	 and	 our	 sponsored	 funds,	 similar	 to	 the limitations	on	transactions	between	depository	institutions	and	their	affiliates	as described	in	"Business	—	Regulation"	in	Part	I,	Item	1	of	the	2014	Form	10-K. Covered	funds	include	our	private	equity	funds,	certain	of	our	credit	and	real estate	 funds,	 our	 hedge	 funds	 and	 certain	 other	 investment	 structures.	 The limitation	on	investments	in	covered	funds	requires	us	to	reduce	our	investment in	each	such	fund	to	3%	or	less	of	the	fund's	net	asset	value,	and	to	reduce	our aggregate	investment	in	all	such	funds	to	3%	or	less	of	our	Tier	1	capital.	In anticipation	of	the	final	rule,	we	limited	our	initial	investment	in	certain	new covered	funds	to	3%	of	the	fund's	net	asset	value.

Our	current	investment	in	funds	that	are	calculated	using	NAV	is	$9.84	billion	as disclosed	 in	 Note	 6	 to	 the	 consolidated	 financial	 statements.	 In	 order	 to	 be compliant	with	the	Volcker	Rule,	we	will	be	required	 to	reduce	most	of	our interests	in	these	funds	by	the	prescribed	compliance	date.	The	Federal	Reserve Board	extended	the	conformance	period	through	July	2016	for	investments	in, and	 relationships	 with,	 covered	 funds	 that	 were	 in	 place	 prior	 to December 31, 2013,	 and	 indicated	 that	 it	 intends	 to	 further	 extend	 the conformance	period	through	July	2017.	We	currently	expect	to	be	able	to	exit substantially	 all	 such	 interests	 in	 these	 funds	 in	 orderly	 transactions	 prior	 to July	 2017,	 subject	 to	 market	 conditions.	 However,	 to	 the	 extent	 that	 the underlying	investments	of	particular	funds	are	not	sold,	we	may	be	required	to sell	our	interests	in	such	funds.	If	that	occurs,	we	may	receive	a	value	for	our interests	 that	 is	 less	 than	 the	 then	carrying	value	as	 there	could	be	a	 limited secondary	market	for	these	investments	and	we	may	be	unable	to	sell	them	in orderly	transactions.

Although	our	net	revenues	from	our	interests	in	private	equity,	credit,	real	estate and	hedge	funds	may	vary	from	period	to	period,	our	aggregate	net	revenues from	these	investments	were	approximately	3%	and	6%	of	our	aggregate	total net	revenues	over	the	last	10	years	and	5	years,	respectively.

# Off-Balance-Sheet	Arrangements

# and	Contractual	Obligations

We	have	various	types	of	off-balance-sheet	arrangements	that	we	enter	into	in the	ordinary	course	of	business.	Our	involvement	in	these	arrangements	can	take many	different	forms,	including:

Ÿ	Purchasing	or	retaining	residual	and	other	interests	in	special	purpose	entities such	as	mortgage-backed	and	other	asset-backed	securitization	vehicles;

Ÿ	Holding	 senior	 and	 subordinated	 debt,	 interests	 in	 limited	 and	 general partnerships,	 and	 preferred	 and	 common	 stock	 in	 other	 nonconsolidated vehicles;

Ÿ	Entering	 into	 interest	 rate,	 foreign	 currency,	 equity,	 commodity	 and	 credit derivatives,	including	total	return	swaps;

Ÿ	Entering	into	operating	leases;	and

Ÿ	Providing	guarantees,	 indemnifications, loan	 commitments, letters	 of	 credit and	representations	and	warranties.

We	enter	into	these	arrangements	for	a	variety	of	business	purposes,	including securitizations.	The	securitization	vehicles	that	purchase	mortgages,	corporate bonds,	and	other	types	of	financial	assets	are	critical	to	the	functioning	of	several significant	 investor	 markets,	 including	 the	 mortgage-backed	 and	 other	 asset- backed	 securities	 markets,	 since	 they	 offer	 investors	 access	 to	 specific	 cash flows	and	risks	created	through	the	securitization	process.

We	 also	 enter	 into	 these	 arrangements	 to	 underwrite	 client	 securitization transactions;	 provide	 secondary	 market	 liquidity;	 make	 investments	 in performing	and	nonperforming	debt,	equity,	real	estate	and	other	assets;	provide investors	with	credit-linked	and	asset-repackaged	notes;	and	receive	or	provide letters	of	credit	to	satisfy	margin	requirements	and	to	facilitate	the	clearance	and settlement	process.

Our	financial	interests	in,	and	derivative	transactions	with,	such	nonconsolidated entities	are	generally	accounted	for	at	fair	value,	in	the	same	manner	as	our	other financial	 instruments,	 except	 in	 cases	 where	 we	 apply	 the	 equity	 method	 of accounting.

The	table	below	presents	where	a	discussion	of	our	various	off-balance-sheet arrangements	may	be	found	in	the	2014	Form	10-K.	In	addition,	see	Note	3	to the	 consolidated	 financial	 statements	 for	 a	 discussion	 of	 our	 consolidation policies.

Type	of	Off-Balance-Sheet	Arrangement 	Disclosure	in	Form	10-K Variable interests and other obligations, including contingent obligations, arising from	 variable interests in	 nonconsolidated VIEs See	 Note	 12 to the	 consolidated financial statements.

Leases, letters	 of	 credit,	 and lending	 and other	commitments

Guarantees

See "Contractual	 Obligations" below and Note 18 to the consolidated financial statements. See "Contractual	 Obligations" below and Note 18 to the consolidated financial statements.

See "Credit	 Risk	 Management	 —	 Credit Exposures	—	OTC	Derivatives"	below	and Notes	 4,	 5,	 7	 and	 18 to the	 consolidated financial	statements.

# Contractual	Obligations

We	have	certain	contractual	obligations	which	require	us	to	make	future	cash payments.	 These	 contractual	 obligations	 include	 our	 unsecured	 long-term borrowings,	secured	long-term	financings,	time	deposits	and	contractual	interest payments,	all	of	which	are	included	in	our	consolidated	statements	of	financial condition.	Our	obligations	to	make

future	 cash	 payments	 also	 include	 certain	 off-balance-sheet	 contractual obligations	 such	 as	 purchase	 obligations,	 minimum	 rental	 payments	 under noncancelable	leases	and	commitments	and	guarantees.	The	table	below	presents our	contractual	obligations,	commitments	and	guarantees	as	of	December	2014.

|  |  | 2016	- | 2018	- | 2020	- |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2015 | 2017 | 2019 | Thereafter | Total |
| Amounts\trelated\tto\ton-balance-sheet\tobligations |  |  |  |  |  |
| Time\tdeposits | \t$\t\t\t\t\t\t\t\t\t— | \t$\t\t\t\t7,830 | \t$\t\t5,308 | $\t\t5,704 | \t $\t\t18,842 |
| Secured\tlong-term\tfinancings | — | 5,104 | 1,403 | 742 | 7,249 |
| Unsecured\tlong-term\tborrowings | — | 44,342 | 40,345 | 82,884 | 167,571 |
| Contractual\tinterest\tpayments | 6,859 | 12,172 | 4,850 | 37,535 | 61,416 |
| Subordinated\tliabilities\tissued\tby\tconsolidated\tVIEs | 3 | — | — | 840 | 843 |
| Amounts\trelated\tto\toff-balance-sheet\tarrangements |  |  |  |  |  |
| Commitments\tto\textend\tcredit | 15,154 | 23,235 | 50,423 | 7,137 | 95,949 |
| Contingent\tand\tforward\tstarting\tresale\tand\tsecurities\tborrowing\tagreements | 34,343 | 557 | 325 | — | 35,225 |
| Forward\tstarting\trepurchase\tand\tsecured\tlending\tagreements | 8,180 | — | — | — | 8,180 |
| Letters\tof\tcredit | 280 | 14 | 10 | 4 | 308 |
| Investment\tcommitments^\t1 | 1,684 | 2,818 | 25 | 637 | 5,164 |
| Other\tcommitments | 6,136 | 87 | 42 | 56 | 6,321 |
| Minimum\trental\tpayments | 321 | 566 | 416 | 870 | 2,173 |
| Derivative\tguarantees | 351,308 | 150,989 | 51,927 | 58,511 | 612,735 |
| Securities\tlending\tindemnifications | 27,567 | — | — | — | 27,567 |
| Other\tfinancial\tguarantees | 471 | 935 | 1,390 | 1,690 | 4,486 |

1.$2.83	billion	of	commitments	to	covered	funds	(as	defined	by	the	Volcker	Rule)	are	included	in	the	2015	and	2016-2017	columns.	We	expect	that	substantially	all	of	these	commitments	will	not	be called.

Ÿ	Obligations	 maturing	 within	 one	 year	 of	 our	 financial	 statement	 date	 or redeemable	within	one	year	of	our	financial	statement	date	at	the	option	of	the holder	are	excluded	and	are	treated	as	short-term	obligations.

Ÿ	Obligations	that	are	repayable	prior	to	maturity	at	our	option	are	reflected	at their	contractual	maturity	dates	and	obligations	that	are	redeemable	prior	to maturity	at	the	option	of	the	holders	are	reflected	at	the	dates	such	options become	exercisable.

Ÿ	Amounts	included	in	the	table	do	not	necessarily	reflect	the	actual	future	cash flow	 requirements	 for	 these	 arrangements	 because	 commitments	 and guarantees	represent	notional	amounts	and	may	expire	unused	or	be	reduced or	cancelled	at	the	counterparty's	request.

Ÿ	Due	to	the	uncertainty	of	the	timing	and	amounts	that	will	ultimately	be	paid, our	liability	for	unrecognized	tax	benefits	has	been	excluded.	See	Note	24	to the	 consolidated	 financial	 statements	 for	 further	 information	 about	 our unrecognized	tax	benefits.

Ÿ	Unsecured	long-term	borrowings	includes	$9.54	billion	of	adjustments	to	the carrying	value	of	certain	unsecured	long-term	borrowings	resulting	from	the application	of	hedge	accounting.

Ÿ	The	aggregate	contractual	principal	amount	of	secured	long-term	financings and	 unsecured	 long-term	 borrowings	 for	 which	 the	 fair	 value	 option	 was elected	 exceeded	 the	 related	 fair	 value	 by	 $203	 million	 and	 $163	 million, respectively.

Ÿ	Contractual	 interest	payments	represents	estimated	future	 interest	payments related	to	unsecured	long-term	borrowings,	secured	long-term	financings	and time	deposits	based	on	applicable	 interest	rates	as	of	December	2014,	and includes	stated	coupons,	if	any,	on	structured	notes.

See	 Notes 15 and 18 to	 the	 consolidated	 financial	 statements	 for	 further information	about	our	short-term	borrowings	and	commitments	and	guarantees, respectively.

As	 of	 December	 2014,	 our	 unsecured	 long-term	 borrowings	 were $167.57	billion,	with	maturities	extending	to	2061,	and	consisted	principally	of senior	 borrowings.	 See	 Note	 16	 to	 the	 consolidated	 financial	 statements	 for further	information	about	our	unsecured	long-term	borrowings.

As	of	December	2014,	our	future	minimum	rental	payments,	net	of	minimum sublease	 rentals	 under	 noncancelable	 leases,	 were	 $2.17	 billion.	 These	 lease commitments,	principally	for	office	space,	expire	on	various	dates	through	2069. Certain	agreements	are	subject	to	periodic	escalation	provisions	for	increases	in real	estate	taxes	and	other	charges.	See	Note	18	to	the	consolidated	financial statements	for	further	information	about	our	leases.

Our	 occupancy	 expenses	 include	 costs	 associated	 with	 office	 space	 held	 in excess	 of	 our	 current	 requirements.	 This	 excess	 space,	 the	 cost	 of	 which	 is charged	to	earnings	as	incurred,	is	being	held	for	potential	growth	or	to	replace currently	occupied	space	that	we	may	exit	in	the	future.	We	regularly	evaluate our	current	and	future	space	capacity	in	relation	to	current	and	projected	staffing levels.	 For	 2014,	 total	 occupancy	 expenses	 for	 space	 held	 in	 excess	 of	 our current	requirements	and	exit	costs	related	to	our	office	space	were	not	material. We	may	 incur	exit	costs	 in	 the	future	 to	 the	extent	we	(i)	reduce	our	space capacity	or	(ii)	commit	to,	or	occupy,	new	properties	in	the	locations	in	which	we operate	 and,	 consequently,	 dispose	 of	 existing	 space	 that	 had	 been	 held	 for potential	growth.	These	exit	costs	may	be	material	to	our	results	of	operations	in a	given	period.

# Risk	Management	and	Risk	Factors

Risks	 are	 inherent	 in	 our	 business	 and	 include	 liquidity,	 market,	 credit, operational,	legal,	regulatory	and	reputational	risks.	For	a	further	discussion	of our	 risk	 management	 processes,	 see	 "—	 Overview	 and	 Structure	 of	 Risk Management"	 below.	 Our	 risks	 include	 the	 risks	 across	 our	 risk	 categories, regions	or	global	businesses,	as	well	as	those	which	have	uncertain	outcomes and	have	the	potential	to	materially	impact	our	financial	results,	our	liquidity and	 our	 reputation.	 For	 a	 further	 discussion	 of	 our	 areas	 of	 risk,	 see "—	Liquidity	Risk	Management,"	"—	Market	Risk	Management,"	"—	Credit Risk	Management,"	"—	Operational	Risk	Management"	and	"—	Certain	Risk Factors	That	May	Affect	Our	Businesses"	below.

# Overview	and	Structure	of	Risk Management

# Overview

We	 believe	 that	 effective	 risk	 management	 is	 of	 primary	 importance	 to	 the success	 of	 the	 firm.	Accordingly,	 we	 have	 comprehensive	 risk	 management processes	through	which	we	monitor,	evaluate	and	manage	the	risks	we	assume in	conducting	our	activities.	These	include	market,	credit,	liquidity,	operational, legal,	 regulatory	 and	 reputational	 risk	 exposures.	 Our	 risk	 management framework	 is	built	around	 three	core	components:	governance,	processes	and people.

Governance.	Risk	management	governance	starts	with	our	Board,	which	plays an	 important	 role	 in	 reviewing	 and	 approving	 risk	 management	 policies	 and practices,	 both	 directly	 and	 through	 its	 committees,	 including	 its	 Risk Committee.	 The	 Board	 also	 receives	 regular	 briefings	 on	 firmwide	 risks, including	market	risk,	liquidity	risk,	credit	risk	and	operational	risk	from	our independent	control	and	support	functions,	including	the	chief	risk	officer,	and on	matters	impacting	our	reputation	from	the	chair	of	our	Firmwide	Client	and Business	Standards	Committee.	The	chief	risk	officer,	as	part	of	the	review	of	the firmwide	risk	portfolio,	regularly	advises	the	Risk	Committee	of	the	Board	of relevant	risk	metrics	and	material	exposures.	Next,	at	the	most	senior	levels	of the	firm,	our	leaders	are	experienced	risk	managers,	with	a	sophisticated	and detailed	 understanding	 of	 the	 risks	 we	 take.	 Our	 senior	 managers	 lead	 and participate	 in	 risk-oriented	 committees,	 as	 do	 the	 leaders	 of	 our	 independent control	and	support	functions	—	including	those	in	Compliance,	Controllers,	our Credit	Risk	Management	department	(Credit	Risk	Management),	Human	Capital Management,	 Legal,	 our	 Market	 Risk	 Management	 department	 (Market	 Risk Management),	 Operations,	 our	 Operational	 Risk	 Management	 department (Operational	Risk	Management),	Tax,	Technology	and	Treasury.

Our	governance	structure	provides	the	protocol	and	responsibility	for	decision- making	 on	 risk	 management	 issues	 and	 ensures	 implementation	 of	 those decisions.	We	make	extensive	use	of	risk-related	committees	that	meet	regularly and	serve	as	an	important	means	to	facilitate	and	foster	ongoing	discussions	to identify,	manage	and	mitigate	risks.

We	 maintain	 strong	 communication	 about	 risk	 and	 we	 have	 a	 culture	 of collaboration	 in	 decision-making	 among	 the	 revenue-producing units, independent	control	and	support	functions,	committees	and	senior	management. While	we	believe	that	the	first	line	of	defense	in	managing	risk	rests	with	the managers	 in	our	revenue-producing	units,	we	dedicate	extensive	resources	 to independent	control	and	support	functions	in	order	to	ensure	a	strong	oversight structure	and	an	appropriate	segregation	of	duties.	We	regularly	reinforce	our strong	culture	of	escalation	and	accountability	across	all	divisions	and	functions.

Processes.	We	 maintain	 various	 processes	 and	 procedures	 that	 are	 critical components	of	our	risk	management.	First	and	foremost	is	our	daily	discipline	of marking	substantially	all	of	our	 inventory	 to	current	market	 levels.	Goldman Sachs	 carries	 its	 inventory	 at	 fair	 value,	 with	 changes	 in	 valuation	 reflected immediately	in	our	risk	management	systems	and	in	net	revenues.	We	do	so because	we	believe	this	discipline	is	one	of	the	most	effective	tools	for	assessing and	managing	risk	and	that	it	provides	transparent	and	realistic	insight	into	our financial	exposures.

We	also	apply	a	rigorous	framework	of	limits	to	control	risk	across	multiple transactions,	products,	businesses	and	markets.	This	includes	setting	credit	and market	risk	limits	at	a	variety	of	levels	and	monitoring	these	limits	on	a	daily basis.	Limits	are	typically	set	at	levels	that	will	be	periodically	exceeded,	rather than	at	levels	which	reflect	our	maximum	risk	appetite.	This	fosters	an	ongoing dialogue	 on	 risk	 among	 revenue-producing	 units,	 independent	 control	 and support	 functions,	 committees	 and	 senior	 management,	 as	 well	 as	 rapid escalation	of	risk-related	matters.	See	"Market	Risk	Management"	and	"Credit Risk	Management"	for	further	information	about	our	risk	limits.

Active	 management	 of	 our	 positions	 is	 another	 important	 process.	 Proactive mitigation	of	our	market	and	credit	exposures	minimizes	the	risk	that	we	will	be required	to	take	outsized	actions	during	periods	of	stress.

We	also	focus	on	the	rigor	and	effectiveness	of	our	risk	systems.	The	goal	of	our risk	management	technology	is	to	get	the	right	information	to	the	right	people	at the	 right	 time,	 which	 requires	 systems	 that	 are	 comprehensive,	 reliable	 and timely.	 We	 devote	 significant	 time	 and	 resources	 to	 our	 risk	 management technology	to	ensure	that	it	consistently	provides	us	with	complete,	accurate	and timely	information.

People.	Even	the	best	technology	serves	only	as	a	tool	for	helping	to	make informed	 decisions	 in	 real	 time	 about	 the	 risks	 we	 are	 taking.	 Ultimately, effective	risk	management	requires	our	people	to	interpret	our	risk	data	on	an ongoing	 and	 timely	 basis	 and	 adjust	 risk	 positions	 accordingly.	 In	 both	 our revenue-producing	units	and	our	independent	control	and	support	functions,	the experience	 of	 our	 professionals,	 and	 their	 understanding	 of	 the	 nuances	 and limitations	 of	 each	 risk	 measure,	 guide	 us	 in	 assessing	 exposures	 and maintaining	them	within	prudent	levels.

We	 reinforce	 a	 culture	 of	 effective	 risk	 management	 in	 our	 training	 and development	 programs	 as	 well	 as	 the	 way	 we	 evaluate	 performance,	 and recognize	 and	 reward	 our	 people.	 Our	 training	 and	 development	 programs, including	certain	sessions	 led	by	our	most	senior	 leaders,	are	focused	on	 the importance	of	risk	management,	client	relationships	and	reputational	excellence. As	 part	 of	 our	 annual	 performance	 review	 process,	 we	 assess	 reputational excellence	 including	 how	 an	 employee	 exercises	 good	 risk	 management	 and reputational	 judgment,	 and	 adheres	 to	 our	 code	 of	 conduct	 and	 compliance policies.	Our	review	and	reward	processes	are	designed	 to	communicate	and reinforce	 to	our	professionals	 the	 link	between	behavior	and	how	people	are recognized,	the	need	to	focus	on	our	clients	and	our	reputation,	and	the	need	to always	act	in	accordance	with	the	highest	standards	of	the	firm.

# Structure

Ultimate	oversight	of	risk	is	the	responsibility	of	our	Board.	The	Board	oversees risk	 both	 directly	 and	 through	 its	 committees,	 including	 its	 Risk	 Committee. Within	the	firm,	a	series	of	committees	with	specific	risk	management	mandates have	 oversight	 or	 decision-making	 responsibilities	 for	 risk	 management activities.	Committee	membership	generally	consists	of	senior	managers	from both	 our	 revenue-producing	 units	 and	 our	 independent	 control	 and	 support functions.	We	have	established	procedures	for	these	committees	to	ensure	that appropriate	information	barriers	are	in	place.	Our	primary	risk	committees,	most of	which	also	have	additional	sub-committees	or	working	groups,	are	described below.	In	addition	to	these	committees,	we	have	other	risk-oriented	committees which	provide	oversight	for	different	businesses,	activities,	products,	regions	and legal	 entities.	All	 of	 our	 firmwide,	 regional	 and	 divisional	 committees	 have responsibility	 for	 considering	 the	 impact	 of	 transactions	 and	 activities	 which they	oversee	on	our	reputation.

Membership	of	our	risk	committees	is	reviewed	regularly	and	updated	to	reflect changes	 in	 the	 responsibilities	 of	 the	 committee	 members.	 Accordingly,	 the length	 of	 time	 that	 members	 serve	 on	 the	 respective	 committees	 varies	 as determined	 by	 the	 committee	 chairs	 and	 based	 on	 the	 responsibilities	 of	 the members	within	the	firm.

In	addition,	independent	control	and	support	functions,	which	report	to	the	chief financial	 officer,	 the	 chief	 risk	 officer,	 the	 general	 counsel	 and	 the	 chief administrative	officer,	are	responsible	for	day-to-day	oversight	or	monitoring	of risk,	 as	 discussed	 in	 greater	 detail	 in	 the	 following	 sections.	 Internal	Audit, which	reports	to	the	Audit	Committee	of	the	Board	and	includes	professionals with	a	broad	range	of	audit	and	industry	experience,	including	risk	management expertise,	is	responsible	for	independently	assessing	and	validating	key	controls within	the	risk	management	framework.

The	 chart	 below	 presents	 an	 overview	 of	 our risk	 management	 governance structure,	highlighting	the

oversight	of	our	Board,	our	key	risk-related	committees	and	the	independence	of our	control	and	support	functions.

Management	Committee.	The	Management	Committee	oversees	our	global activities,	 including	 all	 of	 our	 independent	 control	 and	 support	 functions.	 It provides	this	oversight	directly	and	through	authority	delegated	to	committees	it has	established.	This	committee	is	comprised	of	our	most	senior	leaders,	and	is chaired	 by	 our	 chief	 executive	 officer.	 The	 Management	 Committee	 has established	various	committees	with	delegated	authority	and	the	chairperson	of the	 Management	 Committee	 appoints	 the	 chairpersons	 of	 these	 committees. Most	 members	 of	 the	 Management	 Committee	 are	 also	 members	 of	 other firmwide,	divisional	and	regional	committees.	The	following	are	the	committees that	are	principally	involved	in	firmwide	risk	management.

Firmwide	Client	and	Business	Standards	Committee. 	The	Firmwide Client	and	Business	Standards	Committee	assesses	and	makes	determinations regarding	business	standards	and	practices,	reputational	risk	management,	client relationships	and	client	service,	is	chaired	by	our	president	and	chief	operating officer,	 and	 reports	 to	 the	 Management	 Committee.	This	 committee	 also	 has responsibility	 for	 overseeing	 recommendations	 of	 the	 Business	 Standards Committee.	This	committee	periodically	updates	and	receives	guidance	from	the Public	Responsibilities	Subcommittee	of	the	Corporate	Governance,	Nominating and	 Public	 Responsibilities	 Committee	 of	 the	 Board.	 This	 committee	 has established	the	following	risk-related	committees	that	report	to	it:

Ÿ	Firmwide New	 Activity Committee. The	 Firmwide	 New	 Activity Committee	is	responsible	for	reviewing	new	activities	and	for	establishing	a process	 to	 identify	 and	 review	 previously	 approved	 activities	 that	 are significant	and	that	have	changed	in	complexity	and/or	structure	or	present different	reputational	and	suitability	concerns	over	time	to	consider	whether these	activities	remain	appropriate.	This	committee	is	co-chaired	by	our	head of	 operations/chief	 operating	 officer	 for	 Europe,	 Middle	 East	 and	 Africa (EMEA)	and	the	chief	administrative	officer	of	our	Investment	Management Division,	who	are	appointed	by	the	Firmwide	Client	and	Business	Standards Committee	chairperson.

Ÿ	Firmwide	Suitability	Committee.	The	Firmwide	Suitability	Committee	is responsible	 for	 setting	 standards	 and	 policies	 for	 product,	 transaction	 and client	 suitability	 and	 providing	 a	 forum	 for	 consistency	 across	 divisions, regions	and	products	on	suitability	assessments.	This	committee	also	reviews suitability	 matters	 escalated	 from	 other	 committees.	This	 committee	 is	 co- chaired	by	the	deputy	head	of	our	Global	Compliance	Division	and	the	co- head	 of	 Global	 Fixed	 Income,	 Currency	 and	 Commodities	 Sales,	 who	 are appointed	 by	 the	 Firmwide	 Client	 and	 Business	 Standards	 Committee chairperson.

Firmwide	 Risk	 Committee.	 The	 Firmwide	 Risk	 Committee	 is	 globally responsible	for	the	ongoing	monitoring	and	management	of	our	financial	risks. Through	 both	 direct	 and	 delegated	 authority,	 the	 Firmwide	 Risk	 Committee approves	firmwide,	product,	divisional	and	business-level	limits	for	both	market and	 credit	 risks,	 approves	 sovereign	 credit	 risk	 limits	 and	 reviews	 results	 of stress	 tests	and	scenario	analyses.	This	committee	 is	co-chaired	by	our	chief financial	 officer	 and	 our	 chief	 risk	 officer,	 and	 reports	 to	 the	 Management Committee.	 The	 following	 are	 the	 primary	 committees	 that	 report	 to	 the Firmwide	 Risk	 Committee.	 The	 chairperson	 of	 the	 Securities	 Division	 Risk Committee	is	appointed	by	the	chairpersons	of	the	Firmwide	Risk	Committee; the	 chairpersons	 of	 the	 Credit	 Policy	 and	 Firmwide	 Operational	 Risk Committees	 are	 appointed	 by	 our	 chief	 risk	 officer;	 the	 chairpersons	 of	 the Firmwide	Finance	Committee,	the	Firmwide	Technology	Risk	Committee,	the Firmwide	Model	Risk	Control	Committee	and	the	Global	Business	Resilience Committee	 are	 appointed	 by	 the	 Firmwide	 Risk	 Committee;	 and	 the chairpersons	of	the	Firmwide	Investment	Policy	Committee	are	appointed	by	our president	 and	 chief	 operating	 officer	 in	 conjunction	 with	 our	 chief	 financial officer.

Ÿ	Securities	 Division	 Risk	 Committee.	 The Securities	 Division	 Risk Committee	sets	market	risk	limits,	subject	to	overall	firmwide	risk	limits,	for the	Securities	Division	based	on	a	number	of	risk	measures,	including	but	not limited	to	VaR,	stress	tests,	scenario	analyses	and	balance	sheet	levels.	This committee	is	chaired	by	the	chief	risk	officer	of	our	Securities	Division.

Ÿ	Credit	Policy	Committee.	The	Credit	Policy	Committee	establishes	and reviews	broad	firmwide	credit	policies	and	parameters	that	are	implemented by	Credit	Risk	Management.	This	committee	is	chaired	by	our	chief	credit officer.

# Ÿ	Firmwide	Operational	Risk	Committee.	The	Firmwide	Operational	Risk

Committee	 provides	 oversight	 of	 the	 ongoing	 development	 and implementation	 of	 our	 operational	 risk	 policies,	 framework	 and methodologies,	 and	 monitors	 the	 effectiveness	 of	 operational risk management.	This	committee	is	co-chaired	by	a	managing	director	in	Credit Risk	Management	and	a	managing	director	in	Operational	Risk	Management.

Ÿ	Firmwide	 Finance	 Committee.	 The	 Firmwide	 Finance	 Committee	 has oversight	 responsibility	 for	 liquidity	 risk,	 the	 size	 and	 composition	 of	 our balance	sheet	and	capital	base,	and	credit	ratings.	This	committee	regularly reviews	 our	 liquidity,	 balance	 sheet,	 funding	 position	 and	 capitalization, approves	related	policies,	and	makes	recommendations	as	to	any	adjustments to	 be	 made	 in	 light	 of	 current	 events,	 risks,	 exposures	 and	 regulatory requirements.	As	a	part	of	such	oversight,	among	other	things,	this	committee reviews	and	approves	balance	sheet	limits	and	the	size	of	our	GCLA.	This committee	is	co-chaired	by	our	chief	financial	officer	and	our	global	treasurer.

# Ÿ	Firmwide	Technology	Risk	Committee.	The	Firmwide	Technology	Risk

Committee	reviews	matters	related	to	the	design,	development,	deployment and	use	of	 technology.	This	committee	oversees	cyber	security	matters,	as well	 as	 technology	 risk	 management	 frameworks	 and	 methodologies,	 and monitors	 their	 effectiveness.	 This	 committee	 is	 co-chaired	 by	 our	 chief information	officer	and	the	head	of	Global	Investment	Research.

Ÿ	Firmwide Investment	 Policy	 Committee.	 The	 Firmwide Investment Policy	Committee	reviews,	approves	and	sets	policies,	and	provides	oversight, for	certain	illiquid	principal	investments.	This	committee	is	co-chaired	by	the head	 of	 our	 Merchant	 Banking	 Division	 and	 a	 co-head	 of	 our	 Securities Division.

# Ÿ	Firmwide	Model	Risk	Control	Committee.	The	Firmwide	Model	Risk

Control	 Committee	 is	 responsible	 for	 oversight	 of	 the	 development	 and implementation	of	model	risk	controls,	which	includes	governance,	policies and	procedures	related	to	our	reliance	on	financial	models.	This	committee	is chaired	by	our	chief	market	risk	officer.

Ÿ	Global Business Resilience Committee. The	 Global	 Business Resilience	 Committee	 is	 responsible	 for	 oversight	 of	 business	 resilience initiatives,	promoting	increased	levels	of	security	and	resilience,	and	reviewing certain	operating	risks	related	to	business	resilience.	This	committee	is	chaired by	our	chief	administrative	officer.

The	following	committees	report	jointly	to	the	Firmwide	Risk	Committee	and the	Firmwide	Client	and	Business	Standards	Committee:

Ÿ	Firmwide Commitments Committee. The	 Firmwide	 Commitments Committee	reviews	our	underwriting	and	distribution	activities	with	respect	to equity	and	equity-related	product	offerings,	and	sets	and	maintains	policies and	 procedures	 designed	 to	 ensure	 that	 legal,	 reputational,	 regulatory	 and business	standards	are	maintained	on	a	global	basis.	In	addition	to	reviewing specific	 transactions,	 this	committee	periodically	conducts	general	strategic reviews	of	sectors	and	products	and	establishes	policies	in	connection	with transaction	 practices.	 This	 committee	 is	 co-chaired	 by	 our	 senior	 strategy officer	and	the	co-head	of	Global	Mergers	&	Acquisitions,	who	are	appointed by	the	Firmwide	Client	and	Business	Standards	Committee	chairperson.

Ÿ	Firmwide	Capital	Committee.	The	Firmwide	Capital	Committee	provides approval	 and	 oversight	 of	 debt-related	 transactions,	 including	 principal commitments	of	our	capital.	This	committee	aims	to	ensure	that	business	and reputational	 standards	 for	 underwritings	 and	 capital	 commitments	 are maintained	 on	 a	 global	 basis.	 This	 committee	 is	 co-chaired	 by	 our	 global treasurer	and	the	head	of	credit	finance	for	EMEA	who	are	appointed	by	the Firmwide	Risk	Committee	chairpersons.

Investment	 Management	 Division	 Risk	 Committee.	 The Investment Management	Division	Risk	Committee	is	responsible	for	the	ongoing	monitoring and	control	of	global	market,	counterparty	credit	and	liquidity	risks	associated with	the	activities	of	our	investment	management	businesses.	The	head	of	risk management	 for	 the	 Investment	 Management	 Division	 is	 the	 chair	 of	 this committee.	The	Investment	Management	Division	Risk	Committee	reports	to	our chief	risk	officer.

# Conflicts	Management

Conflicts	of	interest	and	our	approach	to	dealing	with	them	are	fundamental	to our	 client	 relationships,	 our	 reputation	 and	 our	 long-term	 success.	 The	 term "conflict	of	interest"	does	not	have	a	universally	accepted	meaning,	and	conflicts can	 arise	 in	 many	 forms	 within	 a	 business	 or	 between	 businesses.	 The responsibility	for	identifying	potential	conflicts,	as	well	as	complying	with	our policies	and	procedures,	is	shared	by	the	entire	firm.

We	 have	 a	 multilayered	 approach	 to	 resolving	 conflicts	 and	 addressing reputational	risk.	Our	senior	management	oversees	policies	related	to	conflicts resolution,	 and,	 in	 conjunction	 with	 the	 Business	 Selection	 and	 Conflicts Resolution	 Group,	 the	 Legal	 Department	 and	 Compliance	 Division,	 the Firmwide	 Client	 and	 Business	 Standards	 Committee,	 and	 other	 internal committees,	formulates	policies,	standards	and	principles,	and	assists	in	making judgments	regarding	the	appropriate	resolution	of	particular	conflicts.	Resolving potential	 conflicts	 necessarily	 depends	 on	 the	 facts	 and	 circumstances	 of	 a particular	situation	and	the	application	of	experienced	and	informed	judgment.

As	 a	 general	 matter,	 the	 Business	 Selection	 and	 Conflicts	 Resolution	 Group reviews	 all	 financing	 and	 advisory	 assignments	 in	 Investment	 Banking	 and certain	investing,	lending	and	other	activities	of	the	firm.	In	addition,	we	have various	 transaction	 oversight	 committees,	 such	 as	 the	 Firmwide	 Capital, Commitments	and	Suitability	Committees	and	other	committees	across	the	firm that	also	review	new	underwritings,	loans,	investments	and	structured	products. These	groups	and	committees	work	with	internal	and	external	counsel	and	the Compliance	Division	to	evaluate	and	address	any	actual	or	potential	conflicts.

We	regularly	assess	our	policies	and	procedures	that	address	conflicts	of	interest in	 an	 effort	 to	 conduct	 our	 business	 in	 accordance	 with	 the	 highest	 ethical standards	and	in	compliance	with	all	applicable	laws,	rules,	and	regulations.

# Liquidity	Risk	Management

Liquidity	is	of	critical	importance	to	financial	institutions.	Most	of	the	failures	of financial	 institutions	have	occurred	 in	 large	part	due	 to	 insufficient	 liquidity. Accordingly,	we	have	in	place	a	comprehensive	and	conservative	set	of	liquidity and	funding	policies	to	address	both	firm-specific	and	broader	industry	or	market liquidity	events.	Our	principal	objective	is	to	be	able	to	fund	the	firm	and	to enable	our	core	businesses	to	continue	to	serve	clients	and	generate	revenues, even	under	adverse	circumstances.

We	manage	liquidity	risk	according	to	the	following	principles:

Global	 Core	 Liquid	 Assets.	 We	 maintain substantial	 liquidity	 (GCLA, previously	GCE)	to	meet	a	broad	range	of	potential	cash	outflows	and	collateral needs	in	a	stressed	environment.

Asset-Liability	Management.	We	assess	anticipated	holding	periods	for	our assets	and	their	expected	liquidity	in	a	stressed	environment.	We	manage	the maturities	 and	 diversity	 of	 our	 funding	 across	 markets,	 products	 and counterparties,	and	seek	to	maintain	liabilities	of	appropriate	tenor	relative	to	our asset	base.

Contingency	Funding	Plan.	 We	 maintain	 a	 contingency	 funding	 plan	 to provide	a	framework	for	analyzing	and	responding	to	a	liquidity	crisis	situation or	periods	of	market	stress.	This	framework	sets	forth	the	plan	of	action	to	fund normal	business	activity	in	emergency	and	stress	situations.	These	principles	are discussed	in	more	detail	below.

# Global	Core	Liquid	Assets

Our	most	important	liquidity	policy	is	to	pre-fund	our	estimated	potential	cash and	collateral	needs	during	a	liquidity	crisis	and	hold	this	liquidity	in	the	form	of unencumbered,	highly	liquid	securities	and	cash.	We	believe	that	the	securities held	in	our	GCLA	would	be	readily	convertible	to	cash	in	a	matter	of	days, through	liquidation,	by	entering	into	repurchase	agreements	or	from	maturities	of resale	 agreements,	 and	 that	 this	 cash	 would	 allow	 us	 to	 meet	 immediate obligations	without	needing	to	sell	other	assets	or	depend	on	additional	funding from	credit-sensitive	markets.

As	of	December	2014	and	December	2013,	the	fair	value	of	the	securities	and certain	overnight	cash	deposits	included	in	our	GCLA,	totaled	$182.95	billion and	$184.07	billion,	respectively.	Based	on	the	results	of	our	internal	liquidity risk	 models,	 discussed	 below,	 as	 well	 as	 our	 consideration	 of	 other	 factors including,	but	not	limited	to,	an	assessment	of	our	potential	intraday	liquidity needs	and	a	qualitative	assessment	of	the	condition	of	the	financial	markets	and the	 firm,	 we	 believe	 our	 liquidity	 position	 as	 of	 both	 December	 2014	 and December	2013	was	appropriate.

The	table	below	presents	the	fair	value	of	the	securities	and	certain	overnight cash	deposits	that	are	included	in	our	GCLA.

|  | Average	for	the<br>Year	Ended	December | Average	for	the<br>Year	Ended	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| U.S.\tdollar-denominated | \t\t$134,223 | \t$136,824 |
| Non-U.S.\tdollar-denominated | 45,410 | 45,826 |
| Total | \t\t$179,633 | \t$182,650 |

The	 U.S.	 dollar-denominated	 GCLA	 is	 composed	 of	 (i)	 unencumbered	 U.S. government	and	federal	agency	obligations	(including	highly	liquid	U.S.	federal agency	mortgage-backed	obligations),	all	of	which	are	eligible	as	collateral	in Federal	Reserve	open	market	operations	and	(ii)	certain	overnight	U.S.	dollar cash	 deposits.	The	 non-U.S.	 dollar-denominated	 GCLA	 is	 composed	 of	 only unencumbered	 German,	 French,	 Japanese	 and	 United	 Kingdom	 government obligations	and	certain	overnight	cash	deposits	in	highly	liquid	currencies.	We strictly	 limit	 our	 GCLA	 to	 this	 narrowly	 defined	 list	 of	 securities	 and	 cash because	they	are	highly	liquid,	even	in	a	difficult	funding	environment.	We	do not	include	other	potential	sources	of	excess	liquidity	in	our	GCLA,	such	as	less liquid	unencumbered	securities	or	committed	credit	facilities.

The	table	below	presents	the	fair	value	of	our	GCLA	by	asset	class.

|  | Average	for	the<br>Year	Ended	December | Average	for	the<br>Year	Ended	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Overnight\tcash\tdeposits | \t\t$\t\t57,177 | \t$\t\t61,265 |
| U.S.\tgovernment\tobligations | 62,838 | 76,019 |
| U.S.\tfederal\tagency\tobligations, |  |  |
| including\thighly\tliquid\tU.S. |  |  |
| federal\tagency\tmortgage- |  |  |
| backed\tobligations | 16,722 | 2,551 |
| German,\tFrench,\tJapanese |  |  |
| and\tUnited\tKingdom |  |  |
| government\tobligations | 42,896 | 42,815 |
| Total | \t\t$179,633 | \t$182,650 |

The	table	below	presents	the	GCLA	of	Group	Inc.	and	our	major	broker-dealer and	bank	subsidiaries.

|  | Average	for	the<br>Year	Ended	December | Average	for	the<br>Year	Ended	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Group\tInc. | \t\t$\t\t37,699 | \t$\t\t29,752 |
| Major\tbroker-dealer\tsubsidiaries | 89,549 | 93,103 |
| Major\tbank\tsubsidiaries | 52,385 | 59,795 |
| Total | \t\t$179,633 | \t$182,650 |

Our	GCLA	reflects	the	following	principles:

Ÿ	The	first	days	or	weeks	of	a	liquidity	crisis	are	the	most	critical	to	a	company's survival;

Ÿ	Focus	must	be	maintained	on	all	potential	cash	and	collateral	outflows,	not just	 disruptions	 to	 financing	 flows.	 Our	 businesses	 are	 diverse,	 and	 our liquidity	needs	are	determined	by	many	factors,	including	market	movements, collateral	 requirements	 and	 client	 commitments,	 all	 of	 which	 can	 change dramatically	in	a	difficult	funding	environment;

Ÿ	During	a	 liquidity	crisis,	credit-sensitive	funding,	 including	unsecured	debt and	some	types	of	secured	financing	agreements,	may	be	unavailable,	and	the terms	(e.g.,	 interest	rates,	collateral	provisions	and	 tenor)	or	availability	of other	types	of	secured	financing	may	change;	and

Ÿ	As	a	result	of	our	policy	to	pre-fund	liquidity	that	we	estimate	may	be	needed in	 a	 crisis,	 we	 hold	 more	 unencumbered	 securities	 and	 have	 larger	 debt balances	than	our	businesses	would	otherwise	require.	We	believe	 that	our liquidity	 is	 stronger	 with	 greater	 balances	 of	 highly	 liquid	 unencumbered securities,	even	though	it	increases	our	total	assets	and	our	funding	costs.

We	believe	 that	our	GCLA	provides	us	with	a	resilient	source	of	funds	 that would	be	available	in	advance	of	potential	cash	and	collateral	outflows	and	gives us	significant	flexibility	in	managing	through	a	difficult	funding	environment.

In	order	 to	determine	 the	appropriate	size	of	our	GCLA,	we	use	an	 internal liquidity	model,	referred	to	as	the	Modeled	Liquidity	Outflow,	which	captures and	quantifies	our	liquidity	risks.	We	also	consider	other	factors	including,	but not	limited	to,	an	assessment	of	our	potential	intraday	liquidity	needs	through	an additional	internal	liquidity	model,	referred	to	as	the	Intraday	Liquidity	Model, and	a	qualitative	assessment	of	the	condition	of	the	financial	markets	and	the firm.

We	 distribute	 our	 GCLA	 across	 entities,	 asset	 types,	 and	 clearing	 agents	 to provide	us	with	sufficient	operating	liquidity	to	ensure	timely	settlement	in	all major	markets,	even	in	a	difficult	funding	environment.

We	 maintain	 our	 GCLA	 to	 enable	 us	 to	 meet	 current	 and	 potential	 liquidity requirements	 of	 our	 parent	 company,	 Group	 Inc.,	 and	 its	 subsidiaries.	 Our Modeled	 Liquidity	 Outflow	 and	 Intraday	 Liquidity	 Model	 incorporate	 a consolidated	requirement	for	Group	Inc.	as	well	as	a	standalone	requirement	for each	of	our	major	broker-dealer	and	bank	subsidiaries.	Liquidity	held	directly	in each	of	these	major	subsidiaries	is	intended	for	use	only	by	that	subsidiary	to meet	its	liquidity	requirements	and	is	assumed	not	to	be	available	to	Group	Inc. unless	(i)	legally	provided	for	and	(ii)	there	are	no	additional	regulatory,	tax	or other	 restrictions.	 In	 addition,	 the	 Modeled	 Liquidity	 Outflow	 and	 Intraday Liquidity	Model	also	incorporate	a	broader	assessment	of	standalone	liquidity requirements	for	other	subsidiaries	and	we	hold	a	portion	of	our	GCLA	directly at	 Group	 Inc.	 to	 support	 such	 requirements.	 In	 addition	 to	 the	 GCLA,	 we maintain	 cash	 balances	 in	 several	 of	 our	 other	 entities,	 primarily	 for	 use	 in specific	currencies,	entities,	or	jurisdictions	where	we	do	not	have	immediate access	to	parent	company	liquidity.

In	addition	to	our	GCLA,	we	have	a	significant	amount	of	other	unencumbered cash	 and	 "Financial	 instruments	 owned,	 at	 fair	 value,"	 including	 other government	 obligations,	 high-grade	 money	 market	 securities,	 corporate obligations,	 marginable	 equities,	 loans	 and	 cash	 deposits	 not	 included	 in	 our GCLA.	 The	 fair	 value	 of	 these	 assets	 averaged	 $94.52	 billion	 for	 2014	 and $90.77	billion	for	2013.	We	do	not	consider	these	assets	liquid	enough	to	be eligible	for	our	GCLA.

Modeled	Liquidity	Outflow.	Our	Modeled	Liquidity	 Outflow	 is	 based	 on conducting	 multiple	 scenarios	 that	 include	 combinations	 of	 market-wide	 and firm-specific	 stress.	 These	 scenarios	 are	 characterized	 by	 the	 following qualitative	elements:

Ÿ	Severely	 challenged	 market	 environments,	 including	 low	 consumer	 and corporate	 confidence,	 financial	 and	 political	 instability,	 adverse	 changes	 in market	values,	including	potential	declines	in	equity	markets	and	widening	of credit	spreads;	and

Ÿ	A	 firm-specific	 crisis	 potentially	 triggered	 by	 material	 losses, reputational damage,	litigation,	executive	departure,	and/or	a	ratings	downgrade.

The	following	are	 the	critical	modeling	parameters	of	 the	Modeled	Liquidity Outflow:

Ÿ	Liquidity	needs	over	a	30-day	scenario;

Ÿ	A	two-notch	downgrade	of	our	long-term	senior	unsecured	credit	ratings;

Ÿ	A	 combination	 of	 contractual	 outflows,	 such	 as	 upcoming	 maturities	 of unsecured	 debt,	 and	 contingent	 outflows	 (e.g.,	 actions	 though	 not contractually	required,	we	may	deem	necessary	in	a	crisis).	We	assume	that most	contingent	outflows	will	occur	within	the	initial	days	and	weeks	of	a crisis;

# Ÿ	No	issuance	of	equity	or	unsecured	debt;

Ÿ	No	support	from	government	funding	facilities.	Although	we	have	access	to various	central	bank	funding	programs,	we	do	not	assume	reliance	on	them	as a	source	of	funding	in	a	liquidity	crisis;	and

Ÿ	No	asset	liquidation,	other	than	the	GCLA.

The	 Modeled	 Liquidity	 Outflow	 is	 calculated	 and	 reported	 to	 senior management	on	a	daily	basis.	We	regularly	refine	our	model	to	reflect	changes	in market	or	economic	conditions	and	our	business	mix.

The	potential	contractual	and	contingent	cash	and	collateral	outflows	covered	in our	Modeled	Liquidity	Outflow	include:

# Unsecured	Funding

Ÿ	Contractual:	 All	 upcoming	 maturities	 of	 unsecured	 long-term	 debt, commercial	paper,	promissory	notes	and	other	unsecured	funding	products. We	assume	that	we	will	be	unable	to	issue	new	unsecured	debt	or	rollover	any maturing	debt.

Ÿ	Contingent:	Repurchases	of	our	outstanding	long-term	debt,	commercial	paper and	hybrid	financial	instruments	in	the	ordinary	course	of	business	as	a	market maker.

# Deposits

Ÿ	Contractual:	All	upcoming	maturities	of	term	deposits.	We	assume	that	we	will be	unable	to	raise	new	term	deposits	or	rollover	any	maturing	term	deposits.

Ÿ	Contingent:	Withdrawals	of	bank	deposits	that	have	no	contractual	maturity. The	withdrawal	assumptions	reflect,	among	other	factors,	the	type	of	deposit, whether	 the	 deposit	 is	 insured	 or	 uninsured,	 and	 our	 relationship	 with	 the depositor.

# Secured	Funding

Ÿ	Contractual:	A	portion	of	upcoming	contractual	maturities	of	secured	funding due	to	either	the	inability	to	refinance	or	the	ability	to	refinance	only	at	wider haircuts	(i.e.,	on	 terms	which	require	us	 to	post	additional	collateral).	Our assumptions	 reflect,	 among	 other	 factors,	 the	 quality	 of	 the	 underlying collateral,	counterparty	roll	probabilities	(our	assessment	of	the	counterparty's likelihood	of	continuing	to	provide	funding	on	a	secured	basis	at	the	maturity of	the	trade)	and	counterparty	concentration.

Ÿ	Contingent:	Adverse	changes	in	value	of	financial	assets	pledged	as	collateral for	 financing	 transactions,	 which	 would	 necessitate	 additional	 collateral postings	under	those	transactions.

# OTC	Derivatives

Ÿ	Contingent:	Collateral	postings	to	counterparties	due	to	adverse	changes	in	the value	of	our	OTC	derivatives,	excluding	 those	 that	are	cleared	and	settled through	central	counterparties	(OTC-cleared).

Ÿ	Contingent:	Other	outflows	of	cash	or	collateral	related	to	OTC	derivatives, excluding	OTC-cleared,	including	the	impact	of	trade	terminations,	collateral substitutions,	collateral	disputes,	loss	of	rehypothecation	rights,	collateral	calls or	 termination	 payments	 required	 by	 a	 two-notch	 downgrade	 in	 our	 credit ratings,	 and	 collateral	 that	 has	 not	 been	 called	 by	 counterparties,	 but	 is available	to	them.

# Exchange-Traded	and	OTC-cleared	Derivatives

Ÿ	Contingent:	Variation	margin	postings	required	due	to	adverse	changes	in	the value	of	our	outstanding	exchange-traded	and	OTC-cleared	derivatives.

Ÿ	Contingent:	An	increase	in	initial	margin	and	guaranty	fund	requirements	by derivative	clearing	houses.

# Customer	Cash	and	Securities

Ÿ	Contingent:	Liquidity	outflows	associated	with	our	prime	brokerage	business, including	 withdrawals	 of	 customer	 credit	 balances,	 and	 a	 reduction	 in customer	 short	 positions,	 which	 may	 serve	 as	 a	 funding	 source	 for	 long positions.

# Firm	Securities

Ÿ	Contingent:	 Liquidity	 outflows	 associated	 with	 a	 reduction	 or	 composition change	in	firm	short	positions,	which	may	serve	as	a	funding	source	for	long positions.

# Unfunded	Commitments

Ÿ	Contingent:	Draws	on	our	unfunded	commitments.	Draw	assumptions	reflect, among	other	things,	the	type	of	commitment	and	counterparty.

# Other

Ÿ	Other	upcoming	large	cash	outflows,	such	as	tax	payments.

Intraday	 Liquidity	 Model.	 Our Intraday	 Liquidity	 Model	 measures	 our intraday	 liquidity	 needs	 using	 a	 scenario	 analysis	 characterized	 by	 the	 same qualitative	elements	as	our	Modeled	Liquidity	Outflow.	The	model	assesses	the risk	of	increased	intraday	liquidity	requirements	during	a	scenario	where	access to	sources	of	intraday	liquidity	may	become	constrained.

The	following	are	key	modeling	elements	of	the	Intraday	Liquidity	Model:

Ÿ	Liquidity	needs	over	a	one-day	settlement	period; Ÿ	Delays	in	receipt	of	counterparty	cash	payments;

Ÿ	A	 reduction	 in	 the availability	 of intraday credit lines at	 our third-party clearing	agents;	and

Ÿ	Higher	settlement	volumes	due	to	an	increase	in	activity.

We	regularly	refine	our	model	to	reflect	changes	in	market	conditions,	business mix	and	operational	processes.

# Asset-Liability	Management

Our	 liquidity	 risk	 management	 policies	 are	 designed	 to	 ensure	 we	 have	 a sufficient	amount	of	financing,	even	when	funding	markets	experience	persistent stress.	We	seek	to	maintain	a	long-dated	and	diversified	funding	profile,	taking into	consideration	the	characteristics	and	liquidity	profile	of	our	assets.

# Our	approach	to	asset-liability	management	includes:

Ÿ	Conservatively	managing	the	overall	characteristics	of	our	funding	book,	with a	focus	on	maintaining	long-term,	diversified	sources	of	funding	in	excess	of our	 current	 requirements.	 See	 "Balance	 Sheet	 and	 Funding	 Sources	 — Funding	Sources"	for	additional	details;

Ÿ	Actively	managing	and	monitoring	our	asset	base,	with	particular	focus	on	the liquidity,	holding	period	and	our	ability	to	fund	assets	on	a	secured	basis.	This enables	us	to	determine	the	most	appropriate	funding	products	and	tenors.	See "Balance	 Sheet	 and	 Funding	 Sources	 —	 Balance	 Sheet	 Management"	 for more	 detail	 on	 our	 balance	 sheet	 management	 process	 and	 "—	 Funding Sources	—	Secured	Funding"	for	more	detail	on	asset	classes	that	may	be harder	to	fund	on	a	secured	basis;	and

Ÿ	Raising	secured	and	unsecured	financing	that	has	a	long	tenor	relative	to	the liquidity	profile	of	our	assets.	This	reduces	the	risk	that	our	liabilities	will come	due	in	advance	of	our	ability	to	generate	liquidity	from	the	sale	of	our assets.	Because	we	maintain	a	highly	liquid	balance	sheet,	the	holding	period of	 certain	 of	 our	 assets	 may	 be	 materially	 shorter	 than	 their	 contractual maturity	dates.

Our	goal	is	to	ensure	that	we	maintain	sufficient	liquidity	to	fund	our	assets	and meet	 our	 contractual	 and	 contingent	 obligations	 in	 normal	 times	 as	 well	 as during	 periods	 of	 market	 stress.	 Through	 our	 dynamic	 balance	 sheet management	process,	we	use	actual	and	projected	asset	balances	to	determine secured	and	unsecured	funding	requirements.	Funding	plans	are	reviewed	and approved	by	the	Firmwide	Finance	Committee	on	a	quarterly	basis.	In	addition, senior	 managers	 in	 our	 independent	 control	 and	 support	 functions	 regularly analyze,	and	the	Firmwide	Finance	Committee	reviews,	our	consolidated	total capital	position	(unsecured	long-term	borrowings	plus	total	shareholders'	equity) so	that	we	maintain	a	level	of	long-term	funding	that	is	sufficient	to	meet	our long-term	financing	requirements.	In	a	liquidity	crisis,	we	would	first	use	our GCLA	in	order	to	avoid	reliance	on	asset	sales	(other	than	our	GCLA).	However, we	recognize	that	orderly	asset	sales	may	be	prudent	or	necessary	in	a	severe	or persistent	liquidity	crisis.

Subsidiary	 Funding	 Policies.	 The	 majority	 of	 our	 unsecured	 funding	 is raised	by	Group	Inc.	which	lends	the	necessary	funds	to	its	subsidiaries,	some	of which	 are	 regulated,	 to	 meet	 their	 asset	 financing,	 liquidity	 and	 capital requirements.	In	addition,	Group	Inc.	provides	its	regulated	subsidiaries	with	the necessary	 capital	 to	 meet	 their	 regulatory	 requirements.	 The	 benefits	 of	 this approach	to	subsidiary	funding	are	enhanced	control	and	greater	flexibility	to meet	the	funding	requirements	of	our	subsidiaries.	Funding	is	also	raised	at	the subsidiary	 level	 through	 a	 variety	 of	 products,	 including	 secured	 funding, unsecured	borrowings	and	deposits.

Our	intercompany	funding	policies	assume	that,	unless	legally	provided	for,	a subsidiary's	funds	or	securities	are	not	freely	available	to	its	parent	company	or other	subsidiaries.	In	particular,	many	of	our	subsidiaries	are	subject	to	laws	that authorize	 regulatory	 bodies	 to	 block	 or	 reduce	 the	 flow	 of	 funds	 from	 those subsidiaries	to	Group	Inc.	Regulatory	action	of	that	kind	could	impede	access	to funds	that	Group	Inc.	needs	to	make	payments	on	its	obligations.	Accordingly, we	assume	that	the	capital	provided	to	our	regulated	subsidiaries	is	not	available to	 Group	 Inc.	 or	 other	 subsidiaries	 and	 any	 other	 financing	 provided	 to	 our regulated	subsidiaries	is	not	available	until	the	maturity	of	such	financing.

Group	 Inc.	 has	 provided	 substantial	 amounts	 of	 equity	 and	 subordinated indebtedness,	directly	or	indirectly,	to	its	regulated	subsidiaries.	For	example,	as of	December	2014,	Group	Inc.	had	$29.90	billion	of	equity	and	subordinated indebtedness	 invested	 in	 GS&Co.,	 its	 principal	 U.S.	 registered	 broker-dealer; $27.68	 billion invested	 in	 GSI,	 a	 regulated	 U.K.	 broker-dealer;	 $2.28	 billion invested	 in	 GSEC,	 a	 U.S.	 registered	 broker-dealer;	 $2.68	 billion	 invested	 in Goldman	Sachs	Japan	Co.,	Ltd.	(GSJCL),	a	regulated	Japanese	broker-dealer; $23.50	billion	invested	in	GS	Bank	USA,	a	regulated	New	York	State-chartered bank;	and	$3.53	billion	invested	in	GSIB,	a	regulated	U.K.	bank.	Group	Inc.	also provided,	 directly	 or	 indirectly,	 $80.23	 billion	 of	 unsubordinated	 loans	 and $8.61	 billion	 of	 collateral	 to	 these	 entities,	 substantially	 all	 of	 which	 was	 to GS&Co.,	GSI,	GSJCL	and	GS	Bank	USA,	as	of	December	2014.	In	addition,	as of	December	2014,	Group	Inc.	had	significant	amounts	of	capital	invested	in	and loans	to	its	other	regulated	subsidiaries.

# Contingency	Funding	Plan

The	Goldman	Sachs	Contingency	Funding	Plan	sets	out	the	plan	of	action	we would	use	to	fund	business	activity	in	crisis	situations	and	periods	of	market stress.	The	contingency	funding	plan	outlines	a	list	of	potential	risk	factors,	key reports	and	metrics	that	are	reviewed	on	an	ongoing	basis	to	assist	in	assessing the	 severity	 of,	 and	 managing	 through,	 a	 liquidity	 crisis	 and/or	 market dislocation.	The	contingency	funding	plan	also	describes	in	detail	our	potential responses	 if	 our	 assessments	 indicate	 that	 we	 have	 entered	 a	 liquidity	 crisis, which	include	pre-funding	for	what	we	estimate	will	be	our	potential	cash	and collateral	needs	as	well	as	utilizing	secondary	sources	of	liquidity.	Mitigants	and action	items	to	address	specific	risks	which	may	arise	are	also	described	and assigned	to	individuals	responsible	for	execution.

The	 contingency	 funding	 plan	 identifies	 key	 groups	 of	 individuals	 to	 foster effective	coordination,	control	and	distribution	of	information,	all	of	which	are critical	in	the	management	of	a	crisis	or	period	of	market	stress.	The	contingency funding	plan	also	details	 the	responsibilities	of	 these	groups	and	 individuals, which	 include	 making	 and	 disseminating	 key	 decisions,	 coordinating	 all contingency	activities	throughout	the	duration	of	the	crisis	or	period	of	market stress,	implementing	liquidity	maintenance	activities	and	managing	internal	and external	communication.

# Liquidity	Regulatory	Framework

The	Basel	Committee's	international	framework	for	liquidity	risk	measurement, standards	and	monitoring	calls	for	a	liquidity	coverage	ratio	(LCR),	designed	to ensure	that	banks	and	bank	holding	companies	maintain	an	adequate	level	of unencumbered	high-quality	liquid	assets	based	on	expected	net	cash	outflows under	an	acute	short-term	liquidity	stress	scenario.

During	2014,	the	Office	of	the	Comptroller	of	the	Currency,	the	Federal	Reserve Board	and	the	FDIC	approved	the	final	rules	on	minimum	liquidity	standards that	are	generally	consistent	with	the	Basel	Committee's	framework	as	described above,	 but	 include	 accelerated	 transition	 provisions,	 and	 more	 stringent requirements	 related	 to	 both	 the	 range	 of	 assets	 that	 qualify	 as	 high-quality liquid	assets	and	cash	outflow	assumptions	for	certain	types	of	funding	and	other liquidity	 risks.	 Under	 the	 accelerated	 transition	 timeline,	 the	 LCR	 became effective	in	the	United	States	on	January	1,	2015,	with	a	phase-in	period	whereby firms	have	an	80%	minimum	in	2015,	which	will	increase	by	10%	per	year	until 2017.	As	 of	 December	 2014,	 our	 calculation	 of	 the	 LCR	 exceeds	 the	 fully phased-in	minimum	requirement,	however	this	is	based	on	our	interpretation	and understanding	 of	 the	 finalized	 framework	 and	 may	 evolve	 as	 we	 review	 our interpretation	and	application	with	our	regulators.

The	Basel	Committee's	international	framework	for	liquidity	risk	measurement, standards	 and	 monitoring	 also	 calls	 for	 a	 net	 stable	 funding	 ratio	 (NSFR), designed	to	promote	more	medium-	and	long-term	stable	funding	of	the	assets and	off-balance-sheet	activities	of	banks	and	bank	holding	companies	over	a one-year	time	horizon.	In	2014,	the	Basel	Committee	issued	the	final	rules	on	the calculation	of	the	NSFR	which	requires	banks	and	bank	holding	companies	to maintain	a	stable	funding	profile	in	relation	to	the	composition	of	their	assets and	 off-balance-sheet	 activities.	 Under	 the	 Basel	 Committee	 framework,	 the NSFR	will	be	effective	on	January	1,	2018.	The	U.S.	federal	bank	regulatory agencies	have	not	yet	proposed	rules	implementing	the	NSFR	for	U.S.	banking organizations.	We	are	currently	evaluating	the	impact	of	the	Basel	Committee's NSFR	framework.

The	implementation	of	these	rules,	and	any	amendments	adopted	by	the	U.S. federal	 bank	 regulatory	 agencies,	 could	 impact	 our	 liquidity	 and	 funding requirements	and	practices	in	the	future.

# Credit	Ratings

We	 rely	 on	 the	 short-term	 and	 long-term	 debt	 capital	 markets	 to	 fund	 a significant	portion	of	our	day-to-day	operations	and	the	cost	and	availability	of debt	 financing	 is	 influenced	 by	 our	 credit	 ratings.	 Credit	 ratings	 are	 also important	when	we	are	competing	in	certain	markets,	such	as	OTC	derivatives, and	 when	 we	 seek	 to	 engage	 in	 longer-term	 transactions.	 See	 "Certain	 Risk Factors	That	May	Affect	Our	Businesses"	below	and	"Risk	Factors"	in	Part	I, Item	1A	of	the	2014	Form	10-K	for	a	discussion	of	the	risks	associated	with	a reduction	in	our	credit	ratings.

The	table	below	presents	the	unsecured	credit	ratings	by	DBRS,	Inc.	(DBRS), Fitch,	Inc.	(Fitch),	Moody's	Investors	Service	(Moody's),	Standard	&	Poor's Ratings	Services	(S&P),	and	Rating	and	Investment	Information,	Inc.	(R&I)	and outlook	of	Group	Inc.

|  | DBRS | Fitch | Moody's | S&amp;P | R&amp;I |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Short-term\tDebt | \t\t R-1\t(middle) | F1 | P-2 | A-2 | a-1 |
| Long-term\tDebt^\t1 | A\t(high) | A | Baa1 | A- | A+ |
| Subordinated\tDebt | A | A- | Baa2 | BBB+ | A |
| Trust\tPreferred^\t2 | A | BBB- | Baa3 | BB | N/A |
| Preferred\tStock^\t3 | BBB\t(high) | BB+ | Ba2 | BB | N/A |
| Ratings\tOutlook | Stable\t\t\t\tStable | Stable\t\t\t\tStable | Stable | \t Negative | \t Negative |

1.Fitch,	 Moody's	 and	 S&P	 include	 the	 senior	 guaranteed	 trust	 securities issued	 by	 Murray Street	Investment	Trust	I	and	Vesey	Street	Investment	Trust	I.

2.Trust	preferred	securities	issued	by	Goldman	Sachs	Capital	I.

3.DBRS,	Fitch,	Moody's	and	S&P	include	Group	Inc.'s	non-cumulative	preferred	stock	and	the APEX	issued	by	Goldman	Sachs	Capital	II	and	Goldman	Sachs	Capital	III.

The	table	below	presents	the	unsecured	credit	ratings	of	GS	Bank	USA,	GSIB, GS&Co.	and	GSI.	During	the	fourth	quarter	of	2014,	S&P	raised	its	outlook	of GS	Bank	USA,	GSIB,	GS&Co.	and	GSI	from	negative	to	stable	as	a	result	of	its review	 of	 these	 subsidiaries'	 operating	 trends	 in	 the	 current	 regulatory environment.

We	believe	our	credit	ratings	are	primarily	based	on	the	credit	rating	agencies' assessment	of:

Ÿ	Our	liquidity,	market,	credit	and	operational	risk	management	practices;

Ÿ	The	level	and	variability	of	our	earnings;

# Ÿ	Our	capital	base;

Ÿ	Our	franchise,	reputation	and	management;

Ÿ	Our	corporate	governance;	and

Ÿ	The	external	operating	environment,	including,	in	some	cases,	the	assumed level	of	government	or	other	systemic	support.

Certain	of	our	derivatives	have	been	transacted	under	bilateral	agreements	with counterparties	who	may	require	us	to	post	collateral	or	terminate	the	transactions based	on	changes	in	our	credit	ratings.	We	assess	the	impact	of	these	bilateral agreements	by	determining	 the	collateral	or	 termination	payments	 that	would occur	assuming	a	downgrade	by	all	rating	agencies.	A	downgrade	by	any	one rating	agency,	depending	on	the	agency's	relative	ratings	of	us	at	the	time	of	the downgrade,	 may	 have	 an	 impact	 which	 is	 comparable	 to	 the	 impact	 of	 a downgrade	by	all	rating	agencies.	We	allocate	a	portion	of	our	GCLA	to	ensure we	would	be	able	to	make	the	additional	collateral	or	termination	payments	that may	be	required	in	the	event	of	a	two-notch	reduction	in	our	long-term	credit ratings,	as	well	as	collateral	that	has	not	been	called	by	counterparties,	but	is available	 to	 them.	 The	 table	 below	 presents	 the	 additional	 collateral	 or termination	 payments	 related	 to	 our	 net	 derivative	 liabilities	 under	 bilateral agreements	that	could	have	been	called	at	the	reporting	date	by	counterparties	in the	event	of	a	one-notch	and	two-notch	downgrade	in	our	credit	ratings.

# Cash	Flows

As	 a	 global	 financial	 institution,	 our	 cash	 flows	 are	 complex	 and	 bear	 little relation	 to	 our	 net	 earnings	 and	 net	 assets.	 Consequently,	 we	 believe	 that traditional	 cash	 flow	 analysis	 is	 less	 meaningful	 in	 evaluating	 our	 liquidity position	 than	 the	 liquidity	 and	 asset-liability	 management	 policies	 described above.	 Cash	 flow	 analysis	 may,	 however,	 be	 helpful	 in	 highlighting	 certain macro	trends	and	strategic	initiatives	in	our	businesses.

Year	Ended	December	2014.	Our	cash	and	cash	equivalents	decreased	by $3.53	billion	to	$57.60	billion	at	the	end	of	2014.	We	used	$22.53	billion	in	net cash	for	operating	and	investing	activities,	which	reflects	an	initiative	to	reduce our	 balance	 sheet,	 and	 the	 funding	 of	 loans	 receivable.	 We	 generated $19.00	billion in	net	cash	from	financing	activities	from	an	 increase	 in	bank deposits	and	net	proceeds	from	issuances	of	unsecured	long-term	borrowings, partially	offset	by	repurchases	of	common	stock.

Year	Ended	December	2013.	Our	cash	and	cash	equivalents	decreased	by $11.54	billion	to	$61.13	billion	at	the	end	of	2013.	We	generated	$4.54	billion	in net	 cash	 from	 operating	 activities.	 We	 used	 net	 cash	 of	 $16.08	 billion	 for investing	 and	 financing	 activities,	 primarily	 to	 fund	 loans	 receivable	 and repurchases	of	common	stock.

Year	Ended	December	2012.	Our	cash	and	cash	equivalents	increased	by $16.66	billion	to	$72.67	billion	at	the	end	of	2012.	We	generated	$9.14	billion	in net	cash	from	operating	and	investing	activities.	We	generated	$7.52	billion	in net	cash	from	financing	activities	from	an	increase	in	bank	deposits,	partially offset	by	net	repayments	of	unsecured	and	secured	long-term	borrowings.

# Market	Risk	Management

Market	risk	is	the	risk	of	loss	in	the	value	of	our	inventory,	as	well	as	certain other	 financial	 assets	 and	 financial	 liabilities,	 due	 to	 changes	 in	 market conditions.	 We	 employ	 a	 variety	 of	 risk	 measures,	 each	 described	 in	 the respective	sections	below,	to	monitor	market	risk.	We	hold	inventory	primarily for	market	making	for	our	clients	and	for	our	investing	and	lending	activities. Our	inventory	therefore	changes	based	on	client	demands	and	our	investment opportunities.	 Our	 inventory	 is	 accounted	 for	 at	 fair	 value	 and	 therefore fluctuates	on	a	daily	basis,	with	the	related	gains	and	losses	included	in	"Market making,"	and	"Other	principal	transactions."	Categories	of	market	risk	include the	following:

Ÿ	Interest	rate	risk:	results	from	exposures	to	changes	in	the	level,	slope	and curvature	 of	 yield	 curves,	 the	 volatilities	 of	 interest	 rates,	 mortgage prepayment	speeds	and	credit	spreads;

Ÿ	Equity	price	risk:	results	from	exposures	to	changes	in	prices	and	volatilities	of individual	equities,	baskets	of	equities	and	equity	indices;

Ÿ	Currency	rate	risk:	results	from	exposures	to	changes	in	spot	prices,	forward prices	and	volatilities	of	currency	rates;	and

Ÿ	Commodity	 price	 risk:	 results	 from	 exposures	 to	 changes	 in	 spot	 prices, forward	prices	and	volatilities	of	commodities,	such	as	crude	oil,	petroleum products,	natural	gas,	electricity,	and	precious	and	base	metals.

# Market	Risk	Management	Process

We	manage	our	market	risk	by	diversifying	exposures,	controlling	position	sizes and	 establishing	 economic	 hedges	 in	 related	 securities	 or	 derivatives.	 This includes:

Ÿ	Accurate	and	timely	exposure	information	incorporating	multiple	risk	metrics;

# Ÿ	A	dynamic	limit	setting	framework;	and

Ÿ	Constant	communication	among	revenue-producing	units,	risk	managers	and senior	management.

Market	Risk	Management,	which	is	independent	of	the	revenue-producing	units and	reports	to	our	chief	risk	officer,	has	primary	responsibility	for	assessing, monitoring	and	managing	market	risk	at	the	firm.	We	monitor	and	control	risks through	 strong	 firmwide	 oversight	 and	 independent	 control	 and	 support functions	across	our	global	businesses.

Managers	in	revenue-producing	units	are	accountable	for	managing	risk	within prescribed	limits.	These	managers	have	in-depth	knowledge	of	their	positions, markets	and	the	instruments	available	to	hedge	their	exposures.

Managers	 in	 revenue-producing	 units	 and	 Market	 Risk	 Management	 discuss market	 information,	 positions	 and	 estimated	 risk	 and	 loss	 scenarios	 on	 an ongoing	basis.

# Risk	Measures

Market	Risk	Management	produces	risk	measures	and	monitors	 them	against market	 risk	 limits	 set	 by	 our	 risk	 committees.	 These	 measures	 reflect	 an extensive	 range	 of	 scenarios	 and	 the	 results	 are	 aggregated	 at	 trading	 desk, business	and	firmwide	levels.

We	use	a	variety	of	risk	measures	to	estimate	the	size	of	potential	losses	for	both moderate	and	more	extreme	market	moves	over	both	short-term	and	long-term time	horizons.	Our	primary	risk	measures	are	VaR,	which	is	used	for	shorter- term	 periods,	 and	 stress	 tests.	 Our	 risk	 reports	 detail	 key	 risks,	 drivers	 and changes	 for	 each	 desk	 and	 business,	 and	 are	 distributed	 daily	 to	 senior management	of	both	our	revenue-producing	units	and	our	independent	control and	support	functions.

# Value-at-Risk

VaR	 is	 the	 potential	 loss	 in	 value	 due	 to	 adverse	 market	 movements	 over	 a defined	time	horizon	with	a	specified	confidence	level.	For	positions	included	in VaR,	 see	 "—	 Financial	 Statement	 Linkages	 to	 Market	 Risk	 Measures."	 We typically	employ	a	one-day	time	horizon	with	a	95%	confidence	level.	We	use	a single	VaR	model	which	captures	risks	including	interest	rates,	equity	prices, currency	 rates	 and	 commodity	 prices.	 As	 such,	 VaR	 facilitates	 comparison across	 portfolios	 of	 different	 risk	 characteristics.	 VaR	 also	 captures	 the diversification	of	aggregated	risk	at	the	firmwide	level.

We	are	aware	of	the	inherent	limitations	to	VaR	and	therefore	use	a	variety	of risk	measures	in	our	market	risk	management	process.	Inherent	limitations	to VaR	include:

Ÿ	VaR	does	not	estimate	potential	losses	over	longer	time	horizons	where	moves may	be	extreme;

Ÿ	VaR	does	not	take	account	of	the	relative	liquidity	of	different	risk	positions; and

Ÿ	Previous	moves	in	market	risk	factors	may	not	produce	accurate	predictions	of all	future	market	moves.

When	 calculating	 VaR,	 we	 use	 historical	 simulations	 with	 full	 valuation	 of approximately	70,000	market	factors.	VaR	is	calculated	at	a	position	level	based on	simultaneously	shocking	the	relevant	market	risk	factors	for	that	position.	We sample	from	five	years	of	historical	data	to	generate	the	scenarios	for	our	VaR calculation.	The	historical	data	is	weighted	so	that	the	relative	importance	of	the data	 reduces	 over	 time.	 This	 gives	 greater	 importance	 to	 more	 recent observations	and	reflects	current	asset	volatilities,	which	improves	the	accuracy of	our	estimates	of	potential	loss.	As	a	result,	even	if	our	positions	included	in VaR	were	unchanged,	our	VaR	would	increase	with	increasing	market	volatility and	vice	versa.

Given	its	reliance	on	historical	data,	VaR	is	most	effective	in	estimating	risk exposures	in	markets	in	which	there	are	no	sudden	fundamental	changes	or	shifts in	market	conditions.

# Our	VaR	measure	does	not	include:

Ÿ	Positions that	are	best	measured	and	monitored	using	sensitivity	measures; and

Ÿ	The	 impact	 of	 changes	 in	 counterparty	 and	 our	 own	 credit	 spreads	 on derivatives,	 as	 well	 as	 changes	 in	 our	 own	 credit	 spreads	 on	 unsecured borrowings	for	which	the	fair	value	option	was	elected.

# Stress	Testing

Stress	testing	is	a	method	of	determining	the	effect	of	various	hypothetical	stress scenarios.	We	use	stress	testing	to	examine	risks	of	specific	portfolios	as	well	as the	 potential	 impact	 of	 significant	 risk	 exposures	 across	 the	 firm.	 We	 use	 a variety	of	stress	testing	techniques	to	calculate	the	potential	loss	from	a	wide range	of	market	moves	on	our	portfolios,	including	sensitivity	analysis,	scenario analysis	 and	 firmwide	 stress	 tests.	The	 results	 of	 our	 various	 stress	 tests	 are analyzed	together	for	risk	management	purposes.

Sensitivity	analysis	is	used	to	quantify	the	impact	of	a	market	move	in	a	single risk	 factor	 across	 all	 positions	 (e.g.,	 equity	 prices	 or	 credit	 spreads)	 using	 a variety	of	defined	market	shocks,	ranging	from	those	that	could	be	expected	over a	one-day	time	horizon	up	to	those	that	could	take	many	months	to	occur.	We also	use	sensitivity	analysis	 to	quantify	 the	 impact	of	 the	default	of	a	single corporate	entity,	which	captures	the	risk	of	large	or	concentrated	exposures.

Scenario	analysis	is	used	to	quantify	the	impact	of	a	specified	event,	including how	the	event	impacts	multiple	risk	factors	simultaneously.	For	example,	for sovereign	stress	testing	we	calculate	potential	direct	exposure	associated	with our	sovereign	inventory	as	well	as	the	corresponding	debt,	equity	and	currency exposures	associated	with	our	non-sovereign	inventory	that	may	be	impacted	by the	sovereign	distress.	When	conducting	scenario	analysis,	we	typically	consider a	 number	 of	 possible	 outcomes	 for	 each	 scenario,	 ranging	 from	 moderate	 to severely	adverse	market	impacts.	In	addition,	these	stress	tests	are	constructed using	both	historical	events	and	forward-looking	hypothetical	scenarios.

Firmwide	stress	testing	combines	market,	credit,	operational	and	liquidity	risks into	 a	 single	 combined	 scenario.	 Firmwide	 stress	 tests	 are	 primarily	 used	 to assess	capital	adequacy	as	part	of	our	capital	planning	and	stress	testing	process; however,	we	also	ensure	that	firmwide	stress	testing	is	integrated	into	our	risk governance	framework.	This	includes	selecting	appropriate	scenarios	to	use	for our	capital	planning	and	stress	testing	process.	See	"Equity	Capital	Management and	 Regulatory	 Capital	 —	 Equity	 Capital	 Management"	 above	 for	 further information.

Unlike	 VaR	 measures,	 which	 have	 an	 implied	 probability	 because	 they	 are calculated	 at	 a	 specified	 confidence	 level,	 there	 is	 generally	 no	 implied probability	that	our	stress	test	scenarios	will	occur.	Instead,	stress	tests	are	used to	model	both	moderate	and	more	extreme	moves	in	underlying	market	factors. When	estimating	potential	loss,	we	generally	assume	that	our	positions	cannot be	reduced	or	hedged	(although	experience	demonstrates	that	we	are	generally able	to	do	so).

Stress	test	scenarios	are	conducted	on	a	regular	basis	as	part	of	our	routine	risk management	process	and	on	an	ad	hoc	basis	in	response	to	market	events	or concerns.	Stress	 testing	 is	an	 important	part	of	our	risk	management	process because	it	allows	us	to	quantify	our	exposure	to	tail	risks,	highlight	potential	loss concentrations,	undertake	risk/reward	analysis,	and	assess	and	mitigate	our	risk positions.

# Limits

We	use	risk	limits	at	various	levels	in	the	firm	(including	firmwide,	product	and business)	 to	 govern	 risk	 appetite	 by	 controlling	 the	 size	 of	 our	 exposures	 to market	risk.	Limits	are	set	based	on	VaR	and	on	a	range	of	stress	tests	relevant	to our	exposures.	Limits	are	reviewed	frequently	and	amended	on	a	permanent	or temporary	basis	to	reflect	changing	market	conditions,	business	conditions	or tolerance	for	risk.

The	Firmwide	Risk	Committee	sets	market	risk	limits	at	firmwide	and	product levels	and	our	Securities	Division	Risk	Committee	sets	sub-limits	for	market- making	and	investing	activities	at	a	business	level.	The	purpose	of	the	firmwide limits	is	to	assist	senior	management	in	controlling	our	overall	risk	profile.	Sub- limits	set	the	desired	maximum	amount	of	exposure	that	may	be	managed	by any	particular	business	on	a	day-to-day	basis	without	additional	levels	of	senior management	 approval,	 effectively	 leaving	 day-to-day	 trading	 decisions	 to individual	desk	managers	and	traders.	Accordingly,	sub-limits	are	a	management tool	designed	to	ensure	appropriate	escalation	rather	than	to	establish	maximum risk	 tolerance.	 Sub-limits	 also	 distribute	 risk	 among	 various	 businesses	 in	 a manner	that	is	consistent	with	their	level	of	activity	and	client	demand,	taking into	account	the	relative	performance	of	each	area.

Our	market	risk	limits	are	monitored	daily	by	Market	Risk	Management,	which is	responsible	for	identifying	and	escalating,	on	a	timely	basis,	instances	where limits	 have	 been	 exceeded.	 The	 business-level	 limits	 that	 are	 set	 by	 the Securities	Division	Risk	Committee	are	subject	to	the	same	scrutiny	and	limit escalation	policy	as	the	firmwide	limits.

When	a	risk	limit	has	been	exceeded	(e.g.,	due	to	changes	in	market	conditions, such	as	 increased	volatilities	or	changes	 in	correlations),	 it	 is	reported	 to	 the appropriate	risk	committee	and	a	discussion	takes	place	with	the	relevant	desk managers,	 after	 which	 either	 the	 risk	 position	 is	 reduced	 or	 the	 risk	 limit	 is temporarily	or	permanently	increased.

# Model	Review	and	Validation

Our	VaR	and	stress	testing	models	are	subject	to	review	and	validation	by	our independent	model	validation	group.	This	review	includes:

Ÿ	A	critical	evaluation	of	the	model,	its	theoretical	soundness	and	adequacy	for intended	use;

Ÿ	Verification	of	the	testing	strategy	utilized	by	the	model	developers	to	ensure that	the	model	functions	as	intended;	and

Ÿ	Verification	of	the	suitability	of	the	calculation	techniques	incorporated	in	the model.

Our	VaR	and	stress	testing	models	are	regularly	reviewed	and	enhanced	in	order to	incorporate	changes	in	the	composition	of	positions	included	in	our	market risk	measures,	as	well	as	variations	in	market	conditions.	Prior	to	implementing significant	 changes	 to	 our	 assumptions	 and/or	 models,	 we	 perform	 model validation	 and	 test	 runs.	 Significant	 changes	 to	 our	 VaR	 and	 stress	 testing models	are	reviewed	with	our	chief	risk	officer	and	chief	financial	officer,	and approved	by	the	Firmwide	Risk	Committee.

We	evaluate	the	accuracy	of	our	VaR	model	through	daily	backtesting	(i.e.,	by comparing	daily	trading	net	revenues	to	the	VaR	measure	calculated	as	of	the prior	business	day)	at	the	firmwide	 level	and	for	each	of	our	businesses	and major	regulated	subsidiaries.

# Systems

We	have	made	a	significant	investment	in	technology	to	monitor	market	risk including:

Ÿ	An	independent	calculation	of	VaR	and	stress	measures;

Ÿ	Risk	measures	calculated	at	individual	position	levels;

Ÿ	Attribution	of	risk	measures	to	individual	risk	factors	of	each	position;

Ÿ	The	ability	to	report	many	different	views	of	the	risk	measures	(e.g.,	by	desk, business,	product	type	or	legal	entity);	and

Ÿ	The	ability	to	produce	ad	hoc	analyses	in	a	timely	manner.

# Metrics

We	analyze	VaR	at	the	firmwide	level	and	a	variety	of	more	detailed	levels, including	by	risk	category,	business,	and	region.	The	tables	below	present,	by risk	category,	average	daily	VaR	and	period-end	VaR,	as	well	as	the	high	and low	VaR	for	the	period.	Diversification	effect	in	the	tables	below	represents	the difference	 between	 total	 VaR	 and	 the	 sum	 of	 the	 VaRs	 for	 the	 four	 risk categories.	This	 effect	 arises	 because	 the	 four	 market	 risk	 categories	 are	 not perfectly	correlated.

The	following	table	presents	average	daily	VaR.

| $	in	millions | Year	Ended	December | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- | :--- |
| Risk\tCategories | \t2014 | \t2013 | \t2012 |
| Interest\trates | \t $\t51 | \t $\t63 | \t $\t78 |
| Equity\tprices | 26 | 32 | 26 |
| Currency\trates | 19 | 17 | 14 |
| Commodity\tprices | 21 | 19 | 22 |
| Diversification\teffect | (45) | (51) | (54) |
| Total | \t $\t72 | \t $\t80 | \t $\t86 |

Our	average	daily	VaR	decreased	to	$72	million	in	2014	from	$80	million	in 2013,	 primarily	 reflecting	 a	 decrease	 in	 the	 interest	 rates	 category	 due	 to decreased	exposures	and	lower	levels	of	volatility,	and	a	decrease	in	the	equity prices	 category	 principally	 due	 to	 lower	 levels	 of	 volatility.	These	 decreases were	 partially	 offset	 by	 a	 decrease	 in	 the	 diversification	 benefit	 across	 risk categories.

Our	average	daily	VaR	decreased	to	$80	million	in	2013	from	$86	million	in 2012,	primarily	reflecting	a	decrease	in	the	interest	rates	category	principally	due to	lower	levels	of	volatility	and	decreased	exposures.	This	decrease	was	partially offset	by	an	increase	in	the	equity	prices	category	principally	due	to	increased exposures.

The	following	table	presents	year-end	VaR,	and	high	and	low	VaR.

| $	in	millions | As	of	December | As	of	December | Year	Ended<br>December	2014 | Year	Ended<br>December	2014 |
| :--- | :--- | :--- | :--- | :--- |
| Risk\tCategories | \t\t\t\t\t\t\t2014 | \t2013 | \t\t\tHigh | \t Low |
| Interest\trates | $\t53 | \t $\t59 | $\t\t71 | $37 |
| Equity\tprices | 19 | 35 | 80 | 16 |
| Currency\trates | 24 | 16 | 36 | 10 |
| Commodity\tprices | 23 | 20 | 30 | 15 |
| Diversification\teffect | (42) | (45) |  |  |
| Total | $\t77 | \t $\t85 | $116 | $51 |

Our	daily	VaR	decreased	to	$77	million	as	of	December	2014	from	$85	million as	 of	 December	 2013,	 primarily	 reflecting	 a	 decrease	 in	 the	 equity	 prices category	 principally	 due	 to	 decreased	 exposures.	This	 decrease	 was	 partially offset	by	an	increase	in	the	currency	rates	category	principally	due	to	increased exposures.

During	2014,	the	firmwide	VaR	risk	limit	was	not	exceeded,	raised	or	reduced.

During	2013,	the	firmwide	VaR	risk	limit	was	not	exceeded	and	was	reduced	on one	occasion	due	to	lower	levels	of	volatility.

The	chart	below	reflects	our	daily	VaR	over	the	last	four	quarters.

Daily	trading	net	revenues	are	compared	with	VaR	calculated	as	of	the	end	of	the prior	business	day.	Trading	losses	incurred	on	a	single	day	exceeded	our	95% one-day	VaR	 on	 one	 occasion	 during	 2014	 (i.e.,	 a	 VaR	 exception).	 Trading losses	incurred	on	a	single	day	did	not	exceed	our	95%	one-day	VaR	during 2013.

During	periods	in	which	we	have	significantly	more	positive	net	revenue	days than	net	revenue	loss	days,	we	expect	to	have	fewer	VaR	exceptions	because, under	normal	conditions,	our	business	model	generally	produces	positive

net	revenues.	In	periods	in	which	our	franchise	revenues	are	adversely	affected, we	generally	have	more	loss	days,	resulting	in	more	VaR	exceptions.	The	daily market-making	revenues	used	to	determine	VaR	exceptions	reflect	the	impact	of any	intraday	activity,	including	bid/offer	net	revenues,	which	are	more	likely than	not	to	be	positive	by	their	nature.

The	 chart	 below	 presents	 the	 frequency	 distribution	 of	 our	 daily trading	 net revenues	for	substantially	all	positions	included	in	VaR	for	2014.

# Sensitivity	Measures

Certain	portfolios	and	individual	positions	are	not	included	in	VaR	because	VaR is	not	the	most	appropriate	risk	measure.	Other	sensitivity	measures	we	use	to analyze	market	risk	are	described	below.

10%	 Sensitivity	 Measures.	 The table	 below	 presents	 market	 risk	 for inventory	 positions	 that	 are	 not	 included	 in	 VaR.	 The	 market	 risk	 of	 these positions	is	determined	by	estimating	the	potential	reduction	in	net	revenues	of	a 10%	 decline in	 the	 underlying	 asset	 value.	 Equity	 positions	 below	 relate	 to private	and	restricted	public	equity	securities,	including	interests	in	funds	that invest	in	corporate	equities	and	real	estate	and	interests	in	hedge	funds,	which are	 included	 in	 "Financial	 instruments	 owned,	 at	 fair	 value."	 Debt	 positions include	 interests	 in	funds	 that	 invest	 in	corporate	mezzanine	and	senior	debt instruments,	loans	backed	by	commercial	and	residential	real	estate,	corporate bank	loans	and	other	corporate	debt,	including	acquired	portfolios	of	distressed loans.	These	debt	positions	are	included	in	"Financial	instruments	owned,	at	fair value."	 See	 Note 6 to	 the	 consolidated	 financial	 statements	 for	 further information	about	cash	instruments.	These	measures	do	not	reflect	diversification benefits	across	asset	categories	or	across	other	market	risk	measures.

Credit Spread Sensitivity on	 Derivatives and	 Borrowings. 	 VaR excludes	the	impact	of	changes	in	counterparty	and	our	own	credit	spreads	on derivatives	 as	 well	 as	 changes	 in	 our	 own	 credit	 spreads	 on	 unsecured borrowings	for	which	the	fair	value	option	was	elected.	The	estimated	sensitivity to	a	one	basis	point	increase	in	credit	spreads	(counterparty	and	our	own)	on derivatives	was	a	gain	of	$3	million	and	$4	million	(including	hedges)	as	of December	 2014	 and	 December	 2013,	 respectively.	 In	 addition,	 the	 estimated sensitivity	to	a	one	basis	point	increase	in	our	own	credit	spreads	on	unsecured borrowings	for	which	the	fair	value	option	was	elected	was	a	gain	of	$10	million and	$8	million	(including	hedges)	as	of	December	2014	and	December	2013, respectively.	 However,	 the	 actual	 net	 impact	 of	 a	 change	 in	 our	 own	 credit spreads	 is	 also	 affected	 by	 the	 liquidity,	 duration	 and	 convexity	 (as	 the sensitivity	is	not	linear	to	changes	in	yields)	of	those	unsecured	borrowings	for which	the	fair	value	option	was	elected,	as	well	as	the	relative	performance	of any	hedges	undertaken.

Interest	 Rate	 Sensitivity.	 "Loans receivable"	 as	 of	 December	 2014	 and December	 2013	 were $28.94 billion	 and $14.90 billion,	 respectively, substantially	all	of	which	had	floating	interest	rates.	As	of	December	2014	and December	2013,	the	estimated	sensitivity	to	a	100	basis	point	increase	in	interest rates	 on	 such	 loans	 was $254	 million and	 $136	 million,	 respectively,	 of additional	 interest	 income	over	a	12-month	period,	which	does	not	 take	 into account	 the	 potential	 impact	 of	 an	 increase	 in	 costs	 to	 fund	 such	 loans.	 See Note	9	 to	 the	consolidated	financial	statements	for	further	 information	about loans	receivable.

# Other	Market	Risk	Considerations

In	addition,	as	of	December	2014	and	December	2013,	we	had	commitments	and held	loans	for	which	we	have	obtained	credit	loss	protection	from	Sumitomo Mitsui	 Financial	 Group,	 Inc.	 See	 Note 18 to	 the	 consolidated	 financial statements	for	further	information	about	such	lending	commitments.

Additionally,	we	make	investments	accounted	for	under	the	equity	method	and we	also	make	direct	investments	in	real	estate,	both	of	which	are	included	in "Other	assets."	Direct	investments	in	real	estate	are	accounted	for	at	cost	less accumulated	depreciation.	See	Note	13	to	the	consolidated	financial	statements for	information	about	"Other	assets."

# Financial	Statement	Linkages	to	Market	Risk	Measures

We	employ	a	variety	of	risk	measures,	each	described	in	the	respective	sections above,	to	monitor	market	risk	across	the	consolidated	statements	of	financial condition	and	consolidated	statements	of	earnings.	The	related	gains	and	losses on	 these	 positions	 are	 included	 in	 "Market	 making,"	 "Other	 principal transactions,"	 "Interest	 income"	 and	 "Interest	 expense."	 The	 table	 below presents	certain	categories	in	our	consolidated	statements	of	financial	condition and	the	market	risk	measures	used	to	assess	those	assets	and	liabilities.	Certain categories	on	the	consolidated	statements	of	financial	condition	are	incorporated in	more	than	one	risk	measure.

# Categories	on	the

# Consolidated	Statements	of

# Financial	Condition	Included in	Market	Risk	Measures

# Market	Risk	Measures

Collateralized	financings Ÿ			Securities	sold	under	agreements	to repurchase,	at	fair	value Ÿ				Securities	loaned,	at fair	value Ÿ				Other	secured	financings,	at	fair	value Ÿ				VaR

Financial	instruments	sold,	but not	yet	purchased,	at	fair	value Ÿ				VaR Ÿ				Credit	Spread Sensitivity	—	Derivatives

Ÿ				VaR Ÿ				Credit	Spread Sensitivity	—	Borrowings

# Credit	Risk	Management

Credit	risk	represents	the	potential	for	loss	due	to	the	default	or	deterioration	in credit	 quality	 of	 a	 counterparty	 (e.g.,	 an	 OTC	 derivatives	 counterparty	 or	 a borrower)	or	an	issuer	of	securities	or	other	instruments	we	hold.	Our	exposure to	credit	risk	comes	mostly	from	client	transactions	in	OTC	derivatives	and	loans and	lending	commitments.	Credit	risk	also	comes	from	cash	placed	with	banks, securities	 financing	 transactions	 (i.e.,	 resale	 and	 repurchase	 agreements	 and securities	 borrowing	 and	 lending	 activities)	 and	 receivables	 from	 brokers, dealers,	clearing	organizations,	customers	and	counterparties.

Credit	Risk	Management,	which	is	independent	of	the	revenue-producing	units and	reports	to	our	chief	risk	officer,	has	primary	responsibility	for	assessing, monitoring	and	managing	credit	risk	at	the	firm.	The	Credit	Policy	Committee and	 the	 Firmwide	 Risk	 Committee	 establish	 and	 review	 credit	 policies	 and parameters.	In	addition,	we	hold	other	positions	that	give	rise	to	credit	risk	(e.g., bonds	held	in	our	inventory	and	secondary	bank	loans).	These	credit	risks	are captured	 as	 a	 component	 of	 market	 risk	 measures,	 which	 are	 monitored	 and managed	by	Market	Risk	Management,	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 Management.

Policies	 authorized	 by	 the	 Firmwide	 Risk	 Committee	 and	 the	 Credit	 Policy Committee	 prescribe	 the	 level	 of	 formal	 approval	 required	 for	 us	 to	 assume credit	exposure	to	a	counterparty	across	all	product	areas,	taking	into	account any	applicable	netting	provisions,	collateral	or	other	credit	risk	mitigants.

# Credit	Risk	Management	Process

Effective	management	of	credit	risk	requires	accurate	and	timely	information,	a high	level	of	communication	and	knowledge	of	customers,	countries,	industries and	products.	Our	process	for	managing	credit	risk	includes:

Ÿ	Approving	transactions	and	setting	and	communicating	credit	exposure	limits;

Ÿ	Monitoring	compliance	with	established	credit	exposure	limits;

Ÿ	Assessing the likelihood that a counterparty	 will	 default	 on its	 payment obligations;

Ÿ	Measuring	our	current	and	potential	credit	exposure	and	losses	resulting	from counterparty	default;

Ÿ	Reporting	of	credit	exposures	to	senior	management,	the	Board	and	regulators;

Ÿ	Use	of	credit	risk	mitigants,	including	collateral	and	hedging;	and

Ÿ	Communication	and	collaboration	with	other	independent	control	and	support functions	such	as	operations,	legal	and	compliance.

As	part	of	the	risk	assessment	process,	Credit	Risk	Management	performs	credit reviews	which	include	initial	and	ongoing	analyses	of	our	counterparties.	For substantially	all	of	our	credit	exposures,	the	core	of	our	process	is	an	annual counterparty	credit	review.	A	credit	review	is	an	independent	analysis	of	the capacity	 and	 willingness	 of	 a	 counterparty	 to	 meet	 its	 financial	 obligations, resulting	in	an	internal	credit	rating.	The	determination	of	internal	credit	ratings also	incorporates	assumptions	with	respect	to	the	nature	of	and	outlook	for	the counterparty's	industry,	and	the	economic	environment.	Senior	personnel	within Credit	 Risk	 Management,	 with	 expertise	 in	 specific	 industries,	 inspect	 and approve	credit	reviews	and	internal	credit	ratings.

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	 on	 our	 aggregate	 credit	 risk	 by	 product,	 internal credit	rating,	industry,	country	and	region.

# Risk	Measures	and	Limits

We	 measure	 our	 credit	 risk	 based	 on	 the	 potential	 loss	 in	 an	 event	 of	 non- payment	by	a	counterparty.	For	derivatives	and	securities	financing	transactions, the	primary	measure	is	potential	exposure,	which	is	our	estimate	of	the	future exposure	 that	 could	 arise	 over	 the	 life	 of	 a	 transaction	 based	 on	 market movements	within	a	specified	confidence	 level.	Potential	exposure	 takes	 into account	netting	and	collateral	arrangements.	For	loans	and	lending	commitments, the	primary	measure	is	a	function	of	the	notional	amount	of	the	position.	We	also monitor	credit	risk	in	terms	of	current	exposure,	which	is	the	amount	presently owed	to	us	after	taking	into	account	applicable	netting	and	collateral.

We	use	credit	limits	at	various	levels	(counterparty,	economic	group,	industry, country)	to	control	the	size	of	our	credit	exposures.	Limits	for	counterparties	and economic	 groups	 are	 reviewed	 regularly	 and	 revised	 to	 reflect	 changing	 risk appetites	 for	 a	 given	 counterparty	 or	 group	 of	 counterparties.	 Limits	 for industries	and	countries	are	based	on	our	risk	tolerance	and	are	designed	to	allow for	 regular	 monitoring,	 review,	 escalation	 and	 management	 of	 credit	 risk concentrations.

# Stress	Tests/Scenario	Analysis

We	use	regular	stress	tests	to	calculate	the	credit	exposures,	including	potential concentrations	 that	 would	 result	 from	 applying	 shocks	 to	 counterparty	 credit ratings	or	credit	risk	factors	(e.g.,	currency	rates,	interest	rates,	equity	prices). These	 shocks	 include	 a	 wide	 range	 of	 moderate	 and	 more	 extreme	 market movements.	Some	of	our	stress	 tests	 include	shocks	 to	multiple	risk	factors, consistent	with	the	occurrence	of	a	severe	market	or	economic	event.	In	the	case of	 sovereign	 default,	 we	 estimate	 the	 direct	 impact	 of	 the	 default	 on	 our sovereign	 credit	 exposures,	 changes	 to	 our	 credit	 exposures	 arising	 from potential	 market	 moves	 in	 response	 to	 the	 default,	 and	 the	 impact	 of	 credit market	deterioration	on	corporate	borrowers	and	counterparties	that	may	result from	the	sovereign	default.	Unlike	potential	exposure,	which	is	calculated	within a	specified	confidence	 level,	with	a	stress	 test	 there	 is	generally	no	assumed probability	of	these	events	occurring.

We	run	stress	tests	on	a	regular	basis	as	part	of	our	routine	risk	management processes	and	conduct	 tailored	stress	 tests	on	an	ad	hoc	basis	 in	response	 to market	 developments.	 Stress	 tests	 are	 regularly	 conducted	 jointly	 with	 our market	and	liquidity	risk	functions.

# Risk	Mitigants

To	 reduce	 our	 credit	 exposures	 on	 derivatives	 and	 securities	 financing transactions,	 we	 may	 enter	 into	 netting	 agreements	 with	 counterparties	 that permit	us	to	offset	receivables	and	payables	with	such	counterparties.	We	may also	 reduce	 credit	 risk	 with	 counterparties	 by	 entering	 into	 agreements	 that enable	us	to	obtain	collateral	from	them	on	an	upfront	or	contingent	basis	and/or to	terminate	transactions	if	the	counterparty's	credit	rating	falls	below	a	specified level.	We	monitor	the	fair	value	of	the	collateral	on	a	daily	basis	to	ensure	that our	 credit	 exposures	 are	 appropriately	 collateralized.	 We	 seek	 to	 minimize exposures	 where	 there	 is	 a	 significant	 positive	 correlation	 between	 the creditworthiness	 of	 our	 counterparties	 and	 the	 market	 value	 of	 collateral	 we receive.

For	 loans	 and	 lending	 commitments,	 depending	 on	 the	 credit	 quality	 of	 the borrower	and	other	characteristics	of	the	transaction,	we	employ	a	variety	of potential	risk	mitigants.	Risk	mitigants	include:	collateral	provisions,	guarantees, covenants,	structural	seniority	of	the	bank	loan	claims	and,	for	certain	lending commitments,	provisions	in	the	legal	documentation	that	allow	us	to	adjust	loan amounts,	pricing,	structure	and	other	terms	as	market	conditions	change.	The type	 and	 structure	 of	 risk	 mitigants	 employed	 can	 significantly	 influence	 the degree	of	credit	risk	involved	in	a	loan	or	lending	commitment.

When	we	do	not	have	sufficient	visibility	into	a	counterparty's	financial	strength or	when	we	believe	a	counterparty	requires	support	from	its	parent	company,	we may	obtain	third-party	guarantees	of	the	counterparty's	obligations.	We	may	also mitigate	our	credit	risk	using	credit	derivatives	or	participation	agreements.

# Credit	Exposures

As	 of	 December	 2014,	 our	 credit	 exposures	 increased	 as	 compared	 with December	 2013,	 primarily	 reflecting	 increases	 in	 loans	 and	 lending commitments.	 The	 percentage	 of	 our	 credit	 exposure	 arising	 from	 non- investment-grade	 counterparties	 (based	 on	 our	 internally	 determined	 public rating	agency	equivalents)	increased	from	December	2013,	primarily	reflecting an	 increase	 in	 loans	 and	 lending	 commitments.	 During	 2014,	 the	 number	 of counterparty	defaults	was	essentially	unchanged	as	compared	with	2013,	and such	defaults	primarily	occurred	within	 loans	and	 lending	commitments.	The total	number	of	counterparty	defaults	remained	low,	representing	less	than	0.5% of	all	counterparties.	Estimated	losses	associated	with	counterparty	defaults	were higher	compared	with	the	prior	year.	However,	such	estimated	losses	were	not material	to	the	firm.	Our	credit	exposures	are	described	further	below.

Cash	 and	 Cash	 Equivalents.	 Cash and	 cash	 equivalents	 include	 both interest-bearing	and	non-interest-bearing	deposits.	To	mitigate	the	risk	of	credit loss,	 we	 place	 substantially	 all	 of	 our	 deposits	 with	 highly-rated	 banks	 and central	banks.

OTC	Derivatives.	Our	credit	exposure	on	OTC	derivatives	arises	primarily from	our	market-making	activities.	As	a	market	maker,	we	enter	into	derivative transactions	 to	 provide	 liquidity	 to	 clients	 and	 to	 facilitate	 the	 transfer	 and hedging	of	 their	risks.	We	also	enter	 into	derivatives	 to	manage	market	risk exposures.	We	manage	our	credit	exposure	on	OTC	derivatives	using	the	credit risk	process,	measures,	limits	and	risk	mitigants	described	above.

Derivatives	are	reported	on	a	net-by-counterparty	basis	(i.e.,	the	net	payable	or receivable	for	derivative	assets	and	liabilities	for	a	given	counterparty)	when	a legal	right	of	setoff	exists	under	an	enforceable	netting	agreement.	Derivatives are	accounted	for	at	fair	value,	net	of	cash	collateral	received	or	posted	under enforceable	credit	support	agreements.	We	generally	enter	into	OTC	derivatives transactions	 under	 bilateral	 collateral	 arrangements	 with	 daily	 exchange	 of collateral.

As	 credit	 risk	 is	 an	 essential	 component	 of	 fair	 value,	 we	 include	 a	 credit valuation	 adjustment	 (CVA)	 in	 the	 fair	 value	 of	 derivatives	 to	 reflect counterparty	 credit	 risk,	 as	 described	 in	 Note	 7	 to	 the	 consolidated	 financial statements.	CVA	is	a	function	of	the	present	value	of	expected	exposure,	the probability	of	counterparty	default	and	the	assumed	recovery	upon	default.

The	tables	below	present	the	distribution	of	our	exposure	to	OTC	derivatives	by tenor,	based	on	expected	duration	for	mortgage-related	credit	derivatives	and generally	on	remaining	contractual	maturity	for	other	derivatives,	both	before and	after	the	effect	of	collateral	and	netting	agreements.	Receivable	and	payable balances	 for	 the	 same	 counterparty	 across	 tenor	 categories	 are	 netted	 under enforceable	 netting	 agreements,	 and	 cash	 collateral	 received	 is	 netted	 under enforceable	credit	support	agreements.	Receivable	and	payable	balances	with	the same	counterparty	in	the	same	tenor	category	are	netted	within

such	 tenor	category.	Net	credit	exposure	 in	 the	 tables	below	represents	OTC derivative	assets,	all	of	which	are	included	in	"Financial	instruments	owned,	at fair	 value,"	 less	 cash	 collateral	 and	 the	 fair	 value	 of	 securities	 collateral, primarily	 U.S.	 government	 and	 federal	 agency	 obligations	 and	 non-U.S. government	and	agency	obligations,	received	under	credit	support	agreements, which	management	considers	when	determining	credit	risk,	but	such	collateral	is not	 eligible	 for	 netting	 under	 U.S.	 GAAP.	The	 categories	 shown	 reflect	 our internally	determined	public	rating	agency	equivalents.

|  |  |  |  |  |  | OTC | Net |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | 0\t-\t12 | 1\t-\t5 | 5\tYears |  |  | Derivative | Credit |
| Credit\tRating\tEquivalent | Months | Years | or\tGreater | Total | Netting | Assets | Exposure |
| AAA/Aaa | \t$\t\t1,119 | \t$\t\t\t\t\t898 | $\t\t\t\t3,500 | \t$\t\t\t\t5,517 | \t$\t\t\t\t(2,163) | $\t\t3,354 | $\t\t3,135 |
| AA/Aa2 | 8,260 | 12,182 | 40,443 | 60,885 | (42,513) | 18,372 | 12,453 |
| A/A2 | 13,719 | 18,949 | 26,649 | 59,317 | (44,147) | 15,170 | 9,493 |
| BBB/Baa2 | 7,049 | 8,758 | 26,087 | 41,894 | (28,321) | 13,573 | 9,577 |
| BB/Ba2\tor\tlower | 4,959 | 6,226 | 5,660 | 16,845 | (7,062) | 9,783 | 8,506 |
| Unrated | 79 | 363 | 160 | 602 | (117) | 485 | 188 |
| Total | \t$35,185 | \t$47,376 | $102,499 | \t$185,060 | \t$(124,323) | $60,737 | $43,352 |
|  |  |  |  | As\tof\tDecember\t2013 |  |  |  |
|  |  |  |  |  |  | OTC | Net |
| $\tin\tmillions | 0\t-\t12 | 1\t-\t5 | 5\tYears |  |  | Derivative | Credit |

| Credit	Rating	Equivalent | Months | Years | or	Greater | Total | Netting | Assets | Exposure |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| AAA/Aaa | \t$\t\t\t\t\t473 | \t$\t\t1,470 | $\t\t\t\t2,450 | \t$\t\t\t\t4,393 | \t$\t\t\t\t(2,087) | $\t\t2,306 | $\t\t2,159 |
| AA/Aa2 | 3,463 | 7,642 | 29,926 | 41,031 | (27,918) | 13,113 | 8,596 |
| A/A2 | 12,693 | 25,666 | 29,701 | 68,060 | (48,803) | 19,257 | 11,188 |
| BBB/Baa2 | 4,377 | 10,112 | 24,013 | 38,502 | (29,213) | 9,289 | 5,952 |
| BB/Ba2\tor\tlower | 2,972 | 6,188 | 4,271 | 13,431 | (5,357) | 8,074 | 6,381 |
| Unrated | 1,289 | 45 | 238 | 1,572 | (9) | 1,563 | 1,144 |
| Total | \t$25,267 | \t$51,123 | $\t\t90,599 | \t$166,989 | \t$(113,387) | $53,602 | $35,420 |
|  |  |  |  |  | Goldman\tSachs\t2014\tForm\t10-K | Goldman\tSachs\t2014\tForm\t10-K | 107 |

Lending	and	Financing	Activities.	We	manage	our	lending	and	financing activities	 using	 the	 credit	 risk	 process,	 measures,	 limits	 and	 risk	 mitigants described	above.	Other	lending	positions,	including	secondary	trading	positions, are	risk-managed	as	a	component	of	market	risk.

Ÿ	Lending	Activities.	Our	lending	activities	include	lending	to	investment- grade	 and	 non-investment-grade	 corporate	 borrowers.	 Loans	 and	 lending commitments	associated	with	these	activities	are	principally	used	for	operating liquidity	 and	 general	 corporate	 purposes	 or	 in	 connection	 with	 contingent acquisitions.	Our	lending	activities	also	include	extending	loans	to	borrowers that	are	secured	by	commercial	and	other	real	estate.	See	the	tables	below	for further	information	about	our	credit	exposures	associated	with	these	lending activities.

Ÿ	Securities	Financing	Transactions.	We	enter into	securities	financing transactions	in	order	to,	among	other	things,	facilitate	client	activities,	invest excess	cash,	acquire	securities	to	cover	short	positions	and	finance	certain	firm activities.	 We	 bear	 credit	 risk	 related	 to	 resale	 agreements	 and	 securities borrowed	 only	 to	 the	 extent	 that	 cash	 advanced	 or	 the	 value	 of	 securities pledged	or	delivered	to	the	counterparty	exceeds	the	value	of	the	collateral received.	 We	 also	 have	 credit	 exposure	 on	 repurchase	 agreements	 and securities	loaned	to	the	extent	that	the	value	of	securities	pledged	or	delivered to	 the	 counterparty	 for	 these	 transactions	 exceeds	 the	 amount	 of	 cash	 or collateral	 received.	 Securities	 collateral	 obtained	 for	 securities	 financing transactions	 primarily	 includes	 U.S.	 government	 and	 federal	 agency obligations	 and	 non-U.S.	 government	 and	 agency	 obligations.	 We	 had approximately $36 billion	 and $29 billion	 as	 of	 December	 2014	 and December	2013,	respectively,	of	credit	exposure	related	to	securities	financing transactions	reflecting	both	netting	agreements	and	collateral	that	management considers	 when	 determining	 credit	 risk.	 As	 of	 both	 December	 2014	 and December	2013,	substantially	all	of	our	credit	exposure	related	to	securities financing	transactions	was	with	investment-grade	financial	institutions,	funds and	governments,	primarily	located	in	the	Americas	and	EMEA.

Ÿ	Other	 Credit	 Exposures.	 We are	 exposed	 to	 credit	 risk	 from	 our receivables	from	brokers,	dealers	and	clearing	organizations	and	customers and	 counterparties.	 Receivables	 from	 brokers,	 dealers	 and	 clearing organizations	 are	 primarily	 comprised	 of	 initial	 cash	 margin	 placed	 with clearing	organizations	and	receivables	related	to	sales	of	securities	which	have traded,	but	not	yet	settled.	These	receivables	generally	have	minimal	credit risk	due	to	the	low	probability	of	clearing	organization	default	and	the	short- term	nature	of	receivables	related	to	securities	settlements.	Receivables	from customers	 and	 counterparties	 are	 generally	 comprised	 of	 collateralized receivables	 related	 to	 customer	 securities	 transactions	 and	 generally	 have minimal	credit	risk	due	to	both	the	value	of	the	collateral	received	and	the short-term	nature	of	these	receivables.	Our	net	credit	exposure	related	to	these activities	was	approximately	$26	billion	and	$18	billion	as	of	December	2014 and	 December	 2013,	 respectively,	 and	 was	 primarily	 comprised	 of	 initial margin	 (both	 cash	 and	 securities)	 placed	 with	 investment-grade	 clearing organizations.	The	regional	breakdown	of	our	net	credit	exposure	related	to these	 activities	 was	 approximately 48% and 55% in	 the	 Americas, approximately	13%	and	10%	in	Asia,	and	approximately	39%	and	35%	in EMEA	as	of	December	2014	and	December	2013,	respectively.

In	addition,	we	extend	other	loans	and	lending	commitments	to	our	private wealth	management	clients	that	are	primarily	secured	by	residential	real	estate, securities	or	other	assets.	The	gross	exposure	related	to	such	loans	and	lending commitments	 was	 approximately $17 billion	 and $11 billion	 as	 of December	2014	and	December	2013,	respectively,	and	was	substantially	all concentrated	in	the	Americas	region.	The	fair	value	of	the	collateral	received against	such	loans	and	lending	commitments	exceeded	the	gross	exposure	as of	both	December	2014	and	December	2013.

# Credit	Exposure	by	Industry,	Region	and	Credit	Quality

The	tables	below	present	our	credit	exposures	related	to	cash,	OTC	derivatives, and	loans	and	lending	commitments	(excluding	credit	exposures	described	above in	"Securities	Financing	Transactions"	and	"Other	Credit	Exposures")	broken down	by	industry,	region	and	credit	quality.	In	the	"Credit	Exposure	by	Industry" table	below,	to	be

consistent	 with changes in the	 manner in	 which	 management	 views credit exposure,	 we introduced new industries, aggregated certain industries and realigned exposures between industry classifications.	 Reclassifications have been	made	for	December	2013	to	conform	to	the	current	presentation.

| $	in	millions | Cash<br>as	of	December | Cash<br>as	of	December | OTC	Derivatives<br>as	of	December | OTC	Derivatives<br>as	of	December | Loans	and	Lending<br>Commitments<br>as	of	December | Loans	and	Lending<br>Commitments<br>as	of	December |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Credit\tExposure\tby\tIndustry | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Funds | \t$\t\t\t\t\t\t\t96 | \t$\t\t\t\t\t109 | \t$13,114 | \t$10,063 | \t$\t\t\t\t1,706 | \t$\t\t\t\t\t\t\t727 |
| Financial\tInstitutions | 12,469 | 9,994 | 15,051 | 16,374 | 11,316 | 9,910 |
| Consumer,\tRetail\t&amp;\tHealthcare | — | — | 3,325 | 5,041 | 30,216 | 27,891 |
| Sovereign | 45,029 | 51,024 | 10,004 | 8,603 | 450 | 276 |
| Municipalities\t&amp;\tNonprofit | — | — | 4,303 | 2,902 | 541 | 458 |
| Natural\tResources\t&amp;\tUtilities | — | — | 5,741^\t1 | 5,295 | 24,275^\t1 | 21,478 |
| Real\tEstate | 6 | 6 | 407 | 388 | 12,366 | 8,550 |
| Technology,\tMedia\t&amp;\tTelecommunications | — | — | 2,995 | 2,123 | 20,633 | 14,962 |
| Diversified\tIndustrials | — | — | 4,321 | 1,733 | 16,392 | 16,085 |
| Other | — | — | 1,476 | 1,080 | 11,998 | 4,988 |
| Total | \t$57,600 | \t$61,133 | \t$60,737 | \t$53,602 | \t$129,893 | \t$105,325 |

1.See	"—	Selected	Country	and	Industry	Exposures	—	Industry	Exposures"	below	for	information	about	our	credit	and	market	exposure	to	the	oil	and	gas	industry.

| $	in	millions | Cash<br>as	of	December | Cash<br>as	of	December | OTC	Derivatives<br>as	of	December | OTC	Derivatives<br>as	of	December | Loans	and	Lending<br>Commitments<br>as	of	December | Loans	and	Lending<br>Commitments<br>as	of	December |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Credit\tExposure\tby\tRegion | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Americas | \t$45,599 | \t$54,470 | \t$22,032 | \t$21,423 | \t$\t\t91,378 | \t $\t\t77,710 |
| EMEA | 1,666 | 2,143 | 31,295 | 25,983 | 34,397 | 25,222 |
| Asia | 10,335 | 4,520 | 7,410 | 6,196 | 4,118 | 2,393 |
| Total | \t$57,600 | \t$61,133 | \t$60,737 | \t$53,602 | \t$129,893 | \t $105,325 |

| $	in	millions | Cash<br>as	of	December | Cash<br>as	of	December | OTC	Derivatives<br>as	of	December | OTC	Derivatives<br>as	of	December | Loans	and	Lending<br>Commitments<br>as	of	December | Loans	and	Lending<br>Commitments<br>as	of	December |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Credit\tExposure\tby\tCredit\tQuality\t(Credit\tRating\tEquivalent) | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| AAA/Aaa | \t$38,778 | \t$50,519 | \t$\t\t3,354 | \t$\t\t2,306 | \t$\t\t\t\t3,969 | \t $\t\t\t\t3,079 |
| AA/Aa2 | 4,598 | 2,748 | 18,372 | 13,113 | 8,097 | 7,001 |
| A/A2 | 13,346 | 6,821 | 15,170 | 19,257 | 22,623 | 23,250 |
| BBB/Baa2 | 730 | 527 | 13,573 | 9,289 | 35,706 | 30,496 |
| BB/Ba2\tor\tlower | 148 | 518 | 9,783 | 8,074 | 58,670 | 41,114 |
| Unrated | — | — | 485 | 1,563 | 828 | 385 |
| Total | \t$57,600 | \t$61,133 | \t$60,737 | \t$53,602 | \t$129,893 | \t $105,325 |
|  |  |  | Goldman\tSachs\t2014\tForm\t10-K | Goldman\tSachs\t2014\tForm\t10-K | Goldman\tSachs\t2014\tForm\t10-K | 109 |

# Selected	Country	and	Industry	Exposures

The	section	below	provides	information	about	our	credit	and	market	exposure	to certain	countries	and	industries	that	have	had	heightened	focus	due	to	recent events	and	broad	market	concerns.	Credit	exposure	represents	the	potential	for loss	due	 to	 the	default	or	deterioration	 in	credit	quality	of	a	counterparty	or borrower.	Market	exposure	represents	the	potential	for	loss	in	value	of	our	long and	short	inventory	due	to	changes	in	market	prices.	There	is	no	overlap	between the	credit	and	market	exposures	in	the	amounts	below.	We	determine	the	country of	risk	by	the	location	of	the	counterparty,	issuer	or	underlier's	assets,	where they	generate	revenue,	the	country	in	which	they	are	headquartered,	and/or	the government	whose	policies	affect	their	ability	to	repay	their	obligations.

Country	Exposures.	During	2014,	the	political	situations	in	Iraq,	Russia	and Ukraine	have	negatively	affected	market	sentiment	toward	those	countries.	In addition,	the	U.S.	and	the	EU	have	imposed	sanctions	against	certain	Russian individuals	and	institutions,	and	Argentina	has	defaulted	on	its	sovereign	debt. The	decline	in	oil	prices	has	also	raised	substantial	concerns	about	Venezuela and	its	sovereign	debt.	In	addition,	recent	events	in	Greece	have	led	to	renewed concerns	about	its	economic	and	financial	stability.

As	of	December	2014,	our	total	credit	exposure	to	Russia	was	$416	million	and was	 substantially	 all	 with	 non-sovereign	 counterparties	 or	 borrowers.	 Such exposure	was	comprised	of	$257	million	(including	the	benefit	of	$14	million	of cash	 and	 securities	 collateral)	 related	 to	 securities	 financing	 transactions	 and other	 secured	 receivables, $104 million	 related	 to	 loans	 and	 lending commitments	and	$55	million	(including	 the	benefit	of	$190	million	of	cash collateral)	related	to	OTC	derivatives.	In	addition,	our	total	market	exposure	to Russia	as	of	December	2014	was	$447	million,	which	was	primarily	with	non- sovereign	issuers	or	underliers.	Such	exposure	was	comprised	of	$309	million related	to	credit	derivatives,	$117	million	related	to	debt	and	$21	million	related to	 equities.	 Subsequent	 to	 December	 2014,	 Russia's	 sovereign	 debt	 was downgraded	by	S&P	and	Fitch.	These	downgrades	did	not	have	a	material	effect on	our	financial	condition,	results	of	operations,	liquidity	or	capital	resources.

As	of	December	2014,	our	total	credit	exposure	to	Greece	was	$1.0	billion	and was	primarily	with	non-sovereign	counterparties	or	borrowers.	Such	exposure was	comprised	of	$694	million	(including	the	benefit	of	$1.2	billion	of	cash	and securities	collateral)	related	to	securities	financing	transactions	and	other	secured receivables	 and	 $317	 million	 (including	 the	 benefit	 of	 $590	 million	 of	 cash collateral)	related	to	OTC	derivatives.	In	addition,	our	total	market	exposure	to Greece	as	of	December	2014	was	$54	million,	which	was	primarily	with	non- sovereign	issuers	or	underliers.

Our	total	credit	and	market	exposure	to	Argentina,	Iraq,	Ukraine	and	Venezuela as	of	December	2014	was	not	material.

We	economically	hedge	our	exposure	to	written	credit	derivatives	by	entering into	 offsetting	 purchased	 credit	 derivatives	 with	 identical	 underliers.	 Where possible,	we	endeavor	to	match	the	tenor	and	credit	default	terms	of	such	hedges to	 that	 of	 our	 written	 credit	 derivatives.	 Substantially	 all	 purchased	 credit derivatives	related	to	Russia	and	Greece	are	both	bought	from	investment-grade counterparties	domiciled	outside	of	these	countries	and	are	collateralized	with cash.	As	of	December	2014,	the	gross	purchased	and	written	credit	derivative notionals	 for	 single-name	 and	 index	 credit	 default	 swaps	 (included	 in	 credit derivatives	above)	were	$21.1	billion	and	$21.7	billion,	respectively,	related	to Russia	 and $2.2 billion	 and $2.1 billion,	 respectively,	 related	 to	 Greece. Including	netting	under	legally	enforceable	netting	agreements,	the	purchased and	written	credit	derivative	notionals	for	single-name	and	index	credit	default swaps	 were	 $3.6	 billion	 and	 $4.3	 billion,	 respectively,	 related	 to	 Russia	 and $908 million	 and $812 million,	 respectively,	 related	 to	 Greece	 as	 of December	2014.	These	notionals	are	not	representative	of	our	exposure	because they	exclude	available	netting	under	legally	enforceable	netting	agreements	on other	 derivatives	 outside	 of	 these	 countries	 and	 collateral	 received	 or	 posted under	credit	support	agreements.	For	information	about	the	nature	of	or	payout under	trigger	events	related	to	written	and	purchased	credit	protection	contracts see	Note	7	to	the	consolidated	financial	statements.

During	 2012,	 and	 continuing	 into	 early	 2013,	 there	 were	 concerns	 about European	sovereign	debt	risk	and	its	impact	on	the	European	banking	system,	as a	 number	 of	 European	 member	 states,	 including	 Ireland,	 Italy,	 Portugal	 and Spain,	 experienced	 significant	 credit	 deterioration.	 Although	 many	 of	 the immediate	 concerns	 have	 subsided,	 some	 of	 the	 countries	 in	 the	 region	 face long-term	 economic	 and	 financial	 challenges.	 As	 of	 December	 2014,	 our aggregate	 credit	 and	 market	 exposure	 to	 these	 four	 European	 countries	 was $10.1 billion ($8.8 billion	 of	 credit	 exposure	 and $1.3 billion	 of	 market exposure),	including	$4.0	billion	to	Ireland,	$3.1	billion	to	Italy,	$439	million	to Portugal	 and	 $2.6	 billion	 to	 Spain.	We	 continue	 to	 closely	 monitor	 our	 risk exposure	to	these	four	countries	as	part	of	our	risk	management	process.

To	supplement	our	regular	stress	tests,	we	conduct	tailored	stress	tests	on	an	ad hoc	basis	in	response	to	specific	market	events	that	we	deem	significant.	For example,	 in	 response	 to	 the	 Euro	 area	 debt	 crisis,	 we	 conducted	 stress	 tests intended	 to	 estimate	 the	 direct	 and	 indirect	 impact	 that	 might	 result	 from	 a variety	of	possible	events	involving	certain	European	member	states,	including sovereign	defaults	and	the	exit	of	one	or	more	countries	from	the	Euro	area.	In the	stress	tests,	described	in	"Market	Risk	Management	—	Stress	Testing"	and "Credit	Risk	Management	—	Stress	Tests/Scenario	Analysis,"	we	estimated	the direct	impact	of	the	event	on	our	credit	and	market	exposures	resulting	from shocks	to	risk	factors	including,	but	not	limited	to,	currency	rates,	interest	rates, and	equity	prices.	The	parameters	of	these	shocks	varied	based	on	the	scenario reflected	 in	 each	 stress	 test.	 We	 also	 estimated	 the	 indirect	 impact	 on	 our exposures	arising	from	potential	market	moves	in	response	to	the	event,	such	as the	 impact	 of	 credit	 market	 deterioration	 on	 corporate	 borrowers	 and counterparties	along	with	 the	shocks	 to	 the	risk	factors	described	above.	We reviewed	estimated	losses	produced	by	the	stress	tests	in	order	to	understand their	magnitude,	highlight	potential	loss	concentrations,	and	assess	and	mitigate our	exposures	where	necessary.

The	Euro	area	exit	scenarios	included	analysis	of	the	impacts	on	exposure	that might	 result	 from	 the	 redenomination	 of	 assets	 in	 the	 exiting	 country	 or countries.	We	also	tested	our	operational	and	risk	management	readiness	and capability	 to	respond	 to	a	redenomination	event.	Constructing	stress	 tests	for these	 scenarios	 requires	 many	 assumptions	 about	 how	 exposures	 might	 be directly	impacted	and	how	resulting	secondary	market	moves	would	indirectly impact	 such	 exposures.	 Given	 the	 multiple	 parameters	 involved	 in	 such scenarios,	losses	from	such	events	are	inherently	difficult	to	quantify	and	may materially	differ	from	our	estimates.

See	"Liquidity	Risk	Management	—	Global	Core	Liquid	Assets	—	Modeled Liquidity	Outflow,"	"Market	Risk	Management	—	Stress	Testing"	and	"Credit Risk	Management	—	Stress	Tests/Scenario	Analysis"	for	further	discussion.

Industry	Exposures.	Significant	declines	in	the	price	of	oil	have	led	to	market concerns	regarding	the	creditworthiness	of	certain	companies	in	the	oil	and	gas industry.	As	of	December	2014,	our	credit	exposure	to	oil	and	gas	companies related	 to	 loans	 and	 lending	 commitments	 was	 $10.9	 billion	 ($2.1	 billion	 of loans	 and $8.8 billion	 of	 lending	 commitments).	 Such	 exposure	 included $5.1	 billion	 of	 exposure	 to	 non-investment-grade	 counterparties ($1.9	 billion related	to	loans	and	$3.2	billion	related	to	lending	commitments).	Our	clients	in the	oil	and	gas	industry	also	use	derivatives	to	hedge	their	exposure	to	oil	prices. As	of	December	2014,	our	credit	exposure	related	to	derivatives	and	receivables with	oil	and	gas	companies	was	$1.7	billion,	substantially	all	of	which	were	with investment-grade	 counterparties.	As	 of	 December	 2014,	 our	 market	 exposure related	to	oil	and	gas	companies	was	$805	million,	substantially	all	of	which	was to	non-investment-grade	issuers	or	underliers.

# Operational	Risk	Management

Operational	risk	is	the	risk	of	loss	resulting	from	inadequate	or	failed	internal processes,	 people	 and	 systems	 or	 from	 external	 events.	 Our	 exposure	 to operational	risk	arises	from	routine	processing	errors	as	well	as	extraordinary incidents,	such	as	major	systems	failures.	Potential	types	of	loss	events	related	to internal	and	external	operational	risk	include:

Ÿ	Clients,	products	and	business	practices;

# Ÿ	Execution,	delivery	and	process	management;

Ÿ	Business	disruption	and	system	failures;

Ÿ	Employment	practices	and	workplace	safety;

# Ÿ	Damage	to	physical	assets;

Ÿ	Internal	fraud;	and Ÿ	External	fraud.

We	maintain	a	comprehensive	control	framework	designed	to	provide	a	well- controlled	environment	to	minimize	operational	risks.	The	Firmwide	Operational Risk	Committee,	along	with	the	support	of	regional	or	entity-specific	working groups	 or	 committees,	 provides	 oversight	 of	 the	 ongoing	 development	 and implementation	 of	 our	 operational	 risk	 policies	 and	 framework.	 Operational Risk	Management	is	a	risk	management	function	independent	of	our	revenue- producing	 units,	 reports	 to	 our	 chief	 risk	 officer,	 and	 is	 responsible	 for developing	 and	 implementing	 policies,	 methodologies	 and	 a	 formalized framework	for	operational	risk	management	with	 the	goal	of	minimizing	our exposure	to	operational	risk.

# Operational	Risk	Management	Process

Managing	operational	risk	requires	timely	and	accurate	information	as	well	as	a strong	control	culture.	We	seek	to	manage	our	operational	risk	through:

Ÿ	The	training,	supervision	and	development	of	our	people;

Ÿ	The	active	participation	of	senior	management	in	identifying	and	mitigating key	operational	risks	across	the	firm;

Ÿ	Independent	control	and	support	functions	that	monitor	operational	risk	on	a daily	 basis,	 and	 implementation	 of	 extensive	 policies	 and	 procedures,	 and controls	designed	to	prevent	the	occurrence	of	operational	risk	events;

Ÿ	Proactive	 communication	 between	 our	 revenue-producing units and our independent	control	and	support	functions;	and

Ÿ	A	network	of	systems	throughout	the	firm	to	facilitate	the	collection	of	data used	to	analyze	and	assess	our	operational	risk	exposure.

We	 combine	 top-down	 and	 bottom-up	 approaches	 to	 manage	 and	 measure operational	risk.	From	a	top-down	perspective,	our	senior	management	assesses firmwide	 and	 business	 level	 operational	 risk	 profiles.	 From	 a	 bottom-up perspective,	 revenue-producing	 units	 and	 independent	 control	 and	 support functions	are	responsible	for	risk	management	on	a	day-to-day	basis,	including identifying,	mitigating,	and	escalating	operational	risks	to	senior	management.

Our	 operational	 risk	 framework	 is	 in	 part	 designed	 to	 comply	 with	 the operational	risk	measurement	rules	under	Basel	III	and	has	evolved	based	on	the changing	 needs	 of	 our	 businesses	 and	 regulatory	 guidance.	 Our	 framework comprises	the	following	practices:

Ÿ	Risk	identification	and	reporting;

Ÿ	Risk	measurement;	and

# Ÿ	Risk	monitoring.

Internal	 Audit	 performs	 an	 independent	 review	 of	 our	 operational	 risk framework,	including	our	key	controls,	processes	and	applications,	on	an	annual basis	to	assess	the	effectiveness	of	our	framework.

The	core	of	our	operational	risk	management	framework	is	risk	identification and	 reporting.	 We	 have	 a	 comprehensive	 data	 collection	 process,	 including firmwide	policies	and	procedures,	for	operational	risk	events.

We	have	established	policies	that	require	managers	in	our	revenue-producing units	and	our	independent	control	and	support	functions	to	escalate	operational risk	events.	When	operational	risk	events	are	identified,	our	policies	require	that the	 events	 be	 documented	 and	 analyzed	 to	 determine	 whether	 changes	 are required	in	our	systems	and/or	processes	to	further	mitigate	the	risk	of	future events.

In	addition,	our	firmwide	systems	capture	internal	operational	risk	event	data, key	 metrics	 such	 as	 transaction	 volumes,	 and	 statistical	 information	 such	 as performance	 trends.	 We	 use	 an	 internally-developed	 operational	 risk management	application	to	aggregate	and	organize	this	information.	Managers from	 both	 revenue-producing	 units	 and	 independent	 control	 and	 support functions	 analyze	 the	 information	 to	 evaluate	 operational	 risk	 exposures	 and identify	businesses,	activities	or	products	with	heightened	levels	of	operational risk.	We	also	provide	periodic	operational	risk	reports	to	senior	management, risk	committees	and	the	Board.

# Risk	Measurement

We	measure	our	operational	risk	exposure	over	a	twelve-month	time	horizon using	both	statistical	modeling	and	scenario	analyses,	which	involve	qualitative assessments	of	the	potential	frequency	and	extent	of	potential	operational	risk losses,	for	each	of	our	businesses.	Operational	risk	measurement	incorporates qualitative	and	quantitative	assessments	of	factors	including:

Ÿ	Internal	and	external	operational	risk	event	data;

# Ÿ	Assessments	of	our	internal	controls;

Ÿ	Evaluations	of	the	complexity	of	our	business	activities;

Ÿ	The	degree	of	and	potential	for	automation	in	our	processes; Ÿ	New	product	information;

Ÿ	The	legal	and	regulatory	environment;

Ÿ	Changes	in	the	markets	for	our	products	and	services,	including	the	diversity and	sophistication	of	our	customers	and	counterparties;	and

Ÿ	The	liquidity	of	the	capital	markets	and	the	reliability	of	the	infrastructure	that supports	the	capital	markets.

The	 results	 from	 these	 scenario	 analyses	 are	 used	 to	 monitor	 changes	 in operational	 risk	 and	 to	 determine	 business	 lines	 that	 may	 have	 heightened exposure	 to	 operational	 risk.	 These	 analyses	 ultimately	 are	 used	 in	 the determination	of	the	appropriate	level	of	operational	risk	capital	to	hold.

We	 evaluate	 changes	 in	 the	 operational	 risk	 profile	 of	 the	 firm	 and	 its businesses,	 including	 changes	 in	 business	 mix	 or	 jurisdictions	 in	 which	 we operate,	by	monitoring	the	factors	noted	above	at	a	firmwide	level.	We	have	both detective	 and	 preventive	 internal	 controls,	 which	 are	 designed	 to	 reduce	 the frequency	 and	 severity	 of	 operational	 risk	 losses	 and	 the	 probability	 of operational	risk	events.	We	monitor	the	results	of	assessments	and	independent internal	audits	of	these	internal	controls.

# Certain	Risk	Factors	That	May	Affect	Our	Businesses

We	face	a	variety	of	risks	that	are	substantial	and	inherent	in	our	businesses, including	market,	liquidity,	credit,	operational,	legal,	regulatory	and	reputational risks.	For	a	discussion	of	how	management	seeks	to	manage	some	of	these	risks, see	"Overview	and	Structure	of	Risk	Management."	A	summary	of	the	more important	 factors	 that	 could	 affect	 our	 businesses	 follows.	 For	 a	 further discussion	of	these	and	other	important	factors	that	could	affect	our	businesses, financial	condition,	results	of	operations,	cash	flows	and	 liquidity,	see	"Risk Factors"	in	Part	I,	Item	1A	of	the	2014	Form	10-K.

Ÿ	Our	 businesses,	 profitability	 and	 liquidity	 may	 be	 adversely	 affected	 by deterioration	in	the	credit	quality	of,	or	defaults	by,	third	parties	who	owe	us money,	securities	or	other	assets	or	whose	securities	or	obligations	we	hold. Ÿ	Concentration	 of	 risk	 increases	 the	 potential	 for	 significant losses in	 our market-making,	underwriting,	investing	and	lending	activities.

# Item	 7A. 	 Quantitative	 and	 Qualitative	 Disclosures About	Market	Risk

Quantitative	and	qualitative	disclosures	about	market	risk	are	set	forth	under "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of Operations	—	Overview	and	Structure	of	Risk	Management"	in	Part	II,	Item	7	of the	2014	Form	10-K.

# Item	8.				Financial	Statements	and	Supplementary	Data

|  |  | Page	No. |
| :--- | :--- | :--- |
| Management's\tReport\ton\tInternal\tControl\tover\tFinancial\tReporting |  | 116 |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm |  | 117 |
| Consolidated\tFinancial\tStatements |  | 118 |
| Consolidated\tStatements\tof\tEarnings |  | 118 |
| Consolidated\tStatements\tof\tComprehensive\tIncome |  | 119 |
| Consolidated\tStatements\tof\tFinancial\tCondition |  | 120 |
| Consolidated\tStatements\tof\tChanges\tin\tShareholders'\tEquity |  | 121 |
| Consolidated\tStatements\tof\tCash\tFlows |  | 122 |
| Notes\tto\tConsolidated\tFinancial\tStatements |  | 123 |
| Note\t1.\t\t\t\t\t\t\tDescription\tof\tBusiness |  | 123 |
| Note\t2.\t\t\t\t\t\t\tBasis\tof\tPresentation |  | 123 |
| Note\t3.\t\t\t\t\t\t\tSignificant\tAccounting\tPolicies |  | 124 |
| \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tPurchased,at\tFair\tValue |  | 129 |
| Note\t5.\t\t\t\t\t\t\tFair\tValue\tMeasurements |  | 130 |
| Note\t6.\t\t\t\t\t\t\tCash\tInstruments |  | 132 |
| Note\t7.\t\t\t\t\t\t\tDerivatives\tand\tHedging\tActivities |  | 141 |
| Note\t8.\t\t\t\t\t\t\tFair\tValue\tOption |  | 156 |
| Note\t9.\t\t\t\t\t\t\tLoans\tReceivable |  | 163 |
| Note\t10.\t\t\t\t\tCollateralized\tAgreements\tand\tFinancings |  | 165 |
| Note\t11.\t\t\t\t\tSecuritization\tActivities |  | 169 |
| Note\t12.\t\t\t\t\tVariable\tInterest\tEntities |  | 172 |
| Note\t13.\t\t\t\t\tOther\tAssets |  | 176 |
| Note\t14.\t\t\t\t\tDeposits |  | 180 |
| Note\t15.\t\t\t\t\tShort-Term\tBorrowings |  | 180 |
| Note\t16.\t\t\t\t\tLong-Term\tBorrowings |  | 181 |
| Note\t17.\t\t\t\t\tOther\tLiabilities\tand\tAccrued\tExpenses |  | 183 |
| Note\t18.\t\t\t\t\tCommitments,\tContingencies\tand\tGuarantees |  | 184 |
| Note\t19.\t\t\t\t\tShareholders'\tEquity |  | 190 |
| Note\t20.\t\t\t\t\tRegulation\tand\tCapital\tAdequacy |  | 193 |
| Note\t21.\t\t\t\t\tEarnings\tPer\tCommon\tShare |  | 203 |
| Note\t22.\t\t\t\t\tTransactions\twith\tAffiliated\tFunds |  | 203 |
| Note\t23.\t\t\t\t\tInterest\tIncome\tand\tInterest\tExpense |  | 204 |
| Note\t24.\t\t\t\t\tIncome\tTaxes |  | 204 |
| Note\t25.\t\t\t\t\tBusiness\tSegments |  | 207 |
| Note\t26.\t\t\t\t\tCredit\tConcentrations |  | 209 |
| Note\t27.\t\t\t\t\tLegal\tProceedings |  | 210 |
| Note\t28.\t\t\t\t\tEmployee\tBenefit\tPlans |  | 218 |
| Note\t29.\t\t\t\t\tEmployee\tIncentive\tPlans |  | 219 |
| Note\t30.\t\t\t\t\tParent\tCompany |  | 221 |
| Supplemental\tFinancial\tInformation |  | 222 |
| Quarterly\tResults |  | 222 |
| Common\tStock\tPrice\tRange |  | 223 |
| Common\tStock\tPerformance |  | 223 |
| Selected\tFinancial\tData |  | 224 |
| Statistical\tDisclosures |  | 225 |
|  | Goldman\tSachs\t2014\tForm\t10-K | 115 |

# Management's	Report	on	Internal	Control	over	Financial	Reporting

Management	of	The	Goldman	Sachs	Group,	Inc.,	together	with	its	consolidated subsidiaries	(the	firm),	is	responsible	for	establishing	and	maintaining	adequate internal	 control	 over	 financial	 reporting.	 The	 firm's	 internal	 control	 over financial	 reporting	 is	 a	 process	 designed	 under	 the	 supervision	 of	 the	 firm's principal	 executive	 and	 principal	 financial	 officers	 to	 provide	 reasonable assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation	of the	firm's	financial	statements	for	external	reporting	purposes	in	accordance	with U.S.	generally	accepted	accounting	principles.

As	of	December	31,	2014,	management	conducted	an	assessment	of	the	firm's internal	control	over	financial	reporting	based	on	the	framework	established	in Internal	Control	—	Integrated	Framework	(2013)	issued	by	the	Committee	of Sponsoring	Organizations	of	the	Treadway	Commission	(COSO).	Based	on	this assessment,	management	has	determined	 that	 the	firm's	 internal	control	over financial	reporting	as	of	December	31,	2014	was	effective.

Our	internal	control	over	financial	reporting	includes	policies	and	procedures that	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately and	 fairly	 reflect	 transactions	 and	 dispositions	 of	 assets;	 provide	 reasonable assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of financial	 statements	 in	 accordance	 with	 U.S.	 generally	 accepted	 accounting principles,	and	that	receipts	and	expenditures	are	being	made	only	in	accordance with	authorizations	of	management	and	the	directors	of	the	firm;	and	provide reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized acquisition,	use	or	disposition	of	 the	firm's	assets	 that	could	have	a	material effect	on	our	financial	statements.

The	firm's	internal	control	over	financial	reporting	as	of	December	31,	2014	has been	audited	by	PricewaterhouseCoopers	LLP,	an	independent	registered	public accounting	firm,	as	stated	in	their	report	appearing	on	page	117,	which	expresses an	unqualified	opinion	on	the	effectiveness	of	the	firm's	internal	control	over financial	reporting	as	of	December	31,	2014.

# Report	of	Independent	Registered	Public	Accounting	Firm

To	the	Board	of	Directors	and	the	Shareholders	of The	Goldman	Sachs	Group,	Inc.:

In	our	opinion,	the	consolidated	financial	statements	listed	in	the	accompanying index	 present	 fairly,	 in	 all	 material	 respects,	 the	 financial	 position	 of	 The Goldman	 Sachs	 Group,	 Inc.	 and	 its	 subsidiaries	 (the	 Company)	 at December	31,	2014	and	2013,	and	the	results	of	its	operations	and	its	cash	flows for	each	of	the	three	years	in	the	period	ended	December	31,	2014,	in	conformity with	accounting	principles	generally	accepted	in	the	United	States	of	America. Also	in	our	opinion,	the	Company	maintained,	in	all	material	respects,	effective internal	 control	 over	 financial	 reporting	 as	 of	 December	 31,	 2014,	 based	 on criteria	established	in	Internal	Control	—	Integrated	Framework	(2013)	issued by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission (COSO).	 The	 Company's	 management	 is	 responsible	 for	 these	 financial statements,	for	maintaining	effective	internal	control	over	financial	reporting	and for	its	assessment	of	the	effectiveness	of	internal	control	over	financial	reporting, included	in	Management's	Report	on	Internal	Control	over	Financial	Reporting appearing	 on	 page	 116.	 Our	 responsibility	 is	 to	 express	 opinions	 on	 these financial	 statements	 and	 on	 the	 Company's	 internal	 control	 over	 financial reporting	based	on	our	audits.	We	conducted	our	audits	in	accordance	with	the standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States). Those	standards	require	that	we	plan	and	perform	the	audits	to	obtain	reasonable assurance	 about	 whether	 the	 financial	 statements	 are	 free	 of	 material misstatement	and	whether	effective	internal	control	over	financial	reporting	was maintained	 in	 all	 material	 respects.	 Our	 audits	 of	 the	 financial	 statements included	 examining,	 on	 a	 test	 basis,	 evidence	 supporting	 the	 amounts	 and disclosures	in	the	financial	statements,	assessing	the	accounting	principles	used and	 significant	 estimates	 made	 by	 management,	 and	 evaluating	 the	 overall financial	 statement	 presentation.	 Our	 audit	 of	 internal	 control	 over	 financial reporting	included	obtaining	an	understanding	of	internal	control	over	financial reporting,	 assessing	 the	 risk	 that	 a	 material	 weakness	 exists,	 and	 testing	 and evaluating	the	design	and	operating	effectiveness	of	internal	control	based	on	the assessed	risk.	Our	audits	also	included	performing	such	other	procedures	as	we considered	necessary	in	the	circumstances.	We	believe	that	our	audits	provide	a reasonable	basis	for	our	opinions.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and the	preparation	of	financial	statements	for	external	purposes	in	accordance	with generally	 accepted	 accounting	 principles.	A	 company's	 internal	 control	 over financial	reporting	includes	those	policies	and	procedures	that	(i)	pertain	to	the maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the transactions	 and	 dispositions	 of	 the	 assets	 of	 the	 company;	 (ii)	 provide reasonable	 assurance	 that	 transactions	 are	 recorded	 as	 necessary	 to	 permit preparation	 of	 financial	 statements	 in	 accordance	 with	 generally	 accepted accounting	principles,	and	 that	receipts	and	expenditures	of	 the	company	are being	made	only	in	accordance	with	authorizations	of	management	and	directors of	the	company;	and	(iii)	provide	reasonable	assurance	regarding	prevention	or timely	 detection	 of	 unauthorized	 acquisition,	 use,	 or	 disposition	 of	 the company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may not	 prevent	 or	 detect	 misstatements.	 Also,	 projections	 of	 any	 evaluation	 of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance with	the	policies	or	procedures	may	deteriorate.

# /s/	PRICEWATERHOUSECOOPERS	LLP

# Consolidated	Statements	of	Earnings

|  | Year	Ended	December | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- | :--- |
| in\tmillions,\texcept\tper\tshare\tamounts | 2014 | 2013 | 2012 |
| Revenues |  |  |  |
| Investment\tbanking | \t$\t\t6,464 | \t$\t\t6,004 | \t$\t\t4,941 |
| Investment\tmanagement | 5,748 | 5,194 | 4,968 |
| Commissions\tand\tfees | 3,316 | 3,255 | 3,161 |
| Market\tmaking | 8,365 | 9,368 | 11,348 |
| Other\tprincipal\ttransactions | 6,588 | 6,993 | 5,865 |
| Total\tnon-interest\trevenues | 30,481 | 30,814 | 30,283 |
| Interest\tincome | 9,604 | 10,060 | 11,381 |
| Interest\texpense | 5,557 | 6,668 | 7,501 |
| Net\tinterest\tincome | 4,047 | 3,392 | 3,880 |
| Net\trevenues,\tincluding\tnet\tinterest\tincome | 34,528 | 34,206 | 34,163 |
| Operating\texpenses |  |  |  |
| Compensation\tand\tbenefits | 12,691 | 12,613 | 12,944 |
| Brokerage,\tclearing,\texchange\tand\tdistribution\tfees | 2,501 | 2,341 | 2,208 |
| Market\tdevelopment | 549 | 541 | 509 |
| Communications\tand\ttechnology | 779 | 776 | 782 |
| Depreciation\tand\tamortization | 1,337 | 1,322 | 1,738 |
| Occupancy | 827 | 839 | 875 |
| Professional\tfees | 902 | 930 | 867 |
| Insurance\treserves | — | 176 | 598 |
| Other\texpenses | 2,585 | 2,931 | 2,435 |
| Total\tnon-compensation\texpenses | 9,480 | 9,856 | 10,012 |
| Total\toperating\texpenses | 22,171 | 22,469 | 22,956 |
| Pre-tax\tearnings | 12,357 | 11,737 | 11,207 |
| Provision\tfor\ttaxes | 3,880 | 3,697 | 3,732 |
| Net\tearnings | 8,477 | 8,040 | 7,475 |
| Preferred\tstock\tdividends | 400 | 314 | 183 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders | \t$\t\t8,077 | \t$\t\t7,726 | \t$\t\t7,292 |
| Earnings\tper\tcommon\tshare |  |  |  |
| Basic | \t$\t\t17.55 | \t$\t\t16.34 | \t$\t\t14.63 |
| Diluted | 17.07 | 15.46 | 14.13 |
| Average\tcommon\tshares\toutstanding |  |  |  |
| Basic | 458.9 | 471.3 | 496.2 |
| Diluted | 473.2 | 499.6 | 516.1 |

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

# Consolidated	Statements	of	Comprehensive	Income

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Net\tearnings | \t $8,477 | $8,040 | $7,475 |
| Other\tcomprehensive\tincome/(loss)\tadjustments,\tnet\tof\ttax:\nCurrency\ttranslation | (109) | (50) | (89) |
| Pension\tand\tpostretirement\tliabilities | (102) | 38 | 168 |
| Available-for-sale\tsecurities | — | (327) | 244 |
| Cash\tflow\thedges | (8) | 8 | — |
| Other\tcomprehensive\tincome/(loss) | (219) | (331) | 323 |
| Comprehensive\tincome | \t $8,258 | $7,709 | $7,798 |
|  | Goldman\tSachs\t2014\tForm\t10-K | Goldman\tSachs\t2014\tForm\t10-K | 119 |

# Consolidated	Statements	of	Financial	Condition

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions,\texcept\tper\tshare\tamounts | 2014 | 2013 |
| Assets |  |  |
| Cash\tand\tcash\tequivalents | \t $\t\t57,600 | \t $\t\t61,133 |
| Cash\tand\tsecurities\tsegregated\tfor\tregulatory\tand\tother\tpurposes\t(includes\t$34,291\tand\t$31,937\tat\tfair\tvalue\tas\tof\tDecember\t2014\tand\tDecember\t2013,\trespectively) | 51,716 | 49,671 |
| Collateralized\tagreements: |  |  |
| Securities\tpurchased\tunder\tagreements\tto\tresell\tand\tfederal\tfunds\tsold\t(includes\t$126,036\tand\t$161,297\tat\tfair\tvalue\tas\tof\tDecember\t2014\tand\tDecember\t2013, |  |  |
| respectively) | 127,938 | 161,732 |
| Securities\tborrowed\t(includes\t$66,769\tand\t$60,384\tat\tfair\tvalue\tas\tof\tDecember\t2014\tand\tDecember\t2013,\trespectively) | 160,722 | 164,566 |
| Receivables:\nBrokers,\tdealers\tand\tclearing\torganizations | 30,671 | 23,840 |
| Customers\tand\tcounterparties\t(includes\t$6,944\tand\t$7,416\tat\tfair\tvalue\tas\tof\tDecember\t2014\tand\tDecember\t2013,\trespectively) | 63,808 | 74,040 |
| Loans\treceivable | 28,938 | 14,895 |
| Financial\tinstruments\towned,\tat\tfair\tvalue\t(includes\t$64,473\tand\t$62,348\tpledged\tas\tcollateral\tas\tof\tDecember\t2014\tand\tDecember\t2013,\trespectively) | 312,248 | 339,121 |
| Other\tassets\t(includes\t$18\tat\tfair\tvalue\tas\tof\tDecember\t2013) | 22,599 | 22,509 |
| Total\tassets | \t $856,240 | \t $911,507 |
| Liabilities\tand\tshareholders'\tequity |  |  |
| Deposits\t(includes\t$13,523\tand\t$7,255\tat\tfair\tvalue\tas\tof\tDecember\t2014\tand\tDecember\t2013,\trespectively) | \t $\t\t83,008 | \t $\t\t70,807 |
| Collateralized\tfinancings:\nSecurities\tsold\tunder\tagreements\tto\trepurchase,\tat\tfair\tvalue | 88,215 | 164,782 |
| Securities\tloaned\t(includes\t$765\tand\t$973\tat\tfair\tvalue\tas\tof\tDecember\t2014\tand\tDecember\t2013,\trespectively) | 5,570 | 18,745 |
| Other\tsecured\tfinancings\t(includes\t$21,450\tand\t$23,591\tat\tfair\tvalue\tas\tof\tDecember\t2014\tand\tDecember\t2013,\trespectively) | 22,809 | 24,814 |
| Payables:\nBrokers,\tdealers\tand\tclearing\torganizations | 6,636 | 5,349 |
| Customers\tand\tcounterparties | 206,936 | 199,416 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased,\tat\tfair\tvalue | 132,083 | 127,426 |
| Unsecured\tshort-term\tborrowings,\tincluding\tthe\tcurrent\tportion\tof\tunsecured\tlong-term\tborrowings\t(includes\t$18,826\tand\t$19,067\tat\tfair\tvalue\tas\tof\tDecember\t2014\tand\nDecember\t2013,\trespectively) | 44,540 | 44,692 |
| Unsecured\tlong-term\tborrowings\t(includes\t$16,005\tand\t$11,691\tat\tfair\tvalue\tas\tof\tDecember\t2014\tand\tDecember\t2013,\trespectively) | 167,571 | 160,965 |
| Other\tliabilities\tand\taccrued\texpenses\t(includes\t$831\tand\t$388\tat\tfair\tvalue\tas\tof\tDecember\t2014\tand\tDecember\t2013,\trespectively) | 16,075 | 16,044 |
| Total\tliabilities | 773,443 | 833,040 |
| Commitments,\tcontingencies\tand\tguarantees |  |  |
| Shareholders'\tequity |  |  |
|  | 9,200 | 7,200 |
| respectively,\tand\t430,259,102\tand\t446,359,012\tshares\toutstanding\tas\tof\tDecember\t2014\tand\tDecember\t2013,\trespectively | 9 | 8 |
| Share-based\tawards | 3,766 | 3,839 |
|  | — | — |
| Additional\tpaid-in\tcapital | 50,049 | 48,998 |
| Retained\tearnings | 78,984 | 71,961 |
| Accumulated\tother\tcomprehensive\tloss | (743) | (524) |
|  | (58,468) | (53,015) |
| Total\tshareholders'\tequity | 82,797 | 78,467 |
| Total\tliabilities\tand\tshareholders'\tequity | \t $856,240 | \t $911,507 |

# Consolidated	Statements	of	Changes	in	Shareholders'	Equity

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Preferred\tstock |  |  |  |
| Balance,\tbeginning\tof\tyear | $\t\t\t7,200 | $\t\t\t6,200 | $\t\t\t3,100 |
| Issued | 2,000 | 1,000 | 3,100 |
| Balance,\tend\tof\tyear | 9,200 | 7,200 | 6,200 |
| Common\tstock |  |  |  |
| Balance,\tbeginning\tof\tyear | 8 | 8 | 8 |
| Issued | 1 | — | — |
| Balance,\tend\tof\tyear | 9 | 8 | 8 |
| Share-based\tawards |  |  |  |
| Balance,\tbeginning\tof\tyear | 3,839 | 3,298 | 5,681 |
| Issuance\tand\tamortization\tof\tshare-based\tawards | 2,079 | 2,017 | 1,368 |
| Delivery\tof\tcommon\tstock\tunderlying\tshare-based\tawards | (1,725) | (1,378) | (3,659) |
| Forfeiture\tof\tshare-based\tawards | (92) | (79) | (90) |
| Exercise\tof\tshare-based\tawards | (335) | (19) | (2) |
| Balance,\tend\tof\tyear | 3,766 | 3,839 | 3,298 |
| Additional\tpaid-in\tcapital |  |  |  |
| Balance,\tbeginning\tof\tyear | 48,998 | 48,030 | 45,553 |
| Delivery\tof\tcommon\tstock\tunderlying\tshare-based\tawards | 2,206 | 1,483 | 3,939 |
| Cancellation\tof\tshare-based\tawards\tin\tsatisfaction\tof\twithholding\ttax\trequirements | (1,922) | (599) | (1,437) |
| Preferred\tstock\tissuance\tcosts | (20) | (9) | (13) |
| Excess\tnet\ttax\tbenefit/(provision)\trelated\tto\tshare-based\tawards | 788 | 94 | (11) |
| Cash\tsettlement\tof\tshare-based\tawards | (1) | (1) | (1) |
| Balance,\tend\tof\tyear | 50,049 | 48,998 | 48,030 |
| Retained\tearnings |  |  |  |
| Balance,\tbeginning\tof\tyear | 71,961 | 65,223 | 58,834 |
| Net\tearnings | 8,477 | 8,040 | 7,475 |
| Dividends\tand\tdividend\tequivalents\tdeclared\ton\tcommon\tstock\tand\tshare-based\tawards | (1,054) | (988) | (903) |
| Dividends\tdeclared\ton\tpreferred\tstock | (400) | (314) | (183) |
| Balance,\tend\tof\tyear | 78,984 | 71,961 | 65,223 |
| Accumulated\tother\tcomprehensive\tloss |  |  |  |
| Balance,\tbeginning\tof\tyear | (524) | (193) | (516) |
| Other\tcomprehensive\tincome/(loss) | (219) | (331) | 323 |
| Balance,\tend\tof\tyear | (743) | (524) | (193) |
| Stock\theld\tin\ttreasury,\tat\tcost |  |  |  |
| Balance,\tbeginning\tof\tyear | (53,015) | (46,850) | (42,281) |
| Repurchased | (5,469) | (6,175) | (4,637) |
| Reissued | 49 | 40 | 77 |
| Other | (33) | (30) | (9) |
| Balance,\tend\tof\tyear | (58,468) | (53,015) | (46,850) |
| Total\tshareholders'\tequity | $\t82,797 | $\t78,467 | $\t75,716 |
|  | Goldman\tSachs\t2014\tForm\t10-K | Goldman\tSachs\t2014\tForm\t10-K | 121 |

# Consolidated	Statements	of	Cash	Flows

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Cash\tflows\tfrom\toperating\tactivities |  |  |  |
| Net\tearnings | $\t\t\t8,477 | $\t\t\t8,040 | $\t\t\t7,475 |
| Adjustments\tto\treconcile\tnet\tearnings\tto\tnet\tcash\tprovided\tby/(used\tfor)\toperating\tactivities\nDepreciation\tand\tamortization | 1,337 | 1,322 | 1,738 |
| Deferred\tincome\ttaxes | 495 | 29 | (356) |
| Share-based\tcompensation | 2,085 | 2,015 | 1,319 |
| Gain\ton\tsale\tof\thedge\tfund\tadministration\tbusiness | — | — | (494) |
| Gain\ton\tsale\tof\tEuropean\tinsurance\tbusiness | — | (211) | — |
| Gain\ton\textinguishment\tof\tjunior\tsubordinated\tdebt | (289) | — | — |
| Changes\tin\toperating\tassets\tand\tliabilities\nCash\tand\tsecurities\tsegregated\tfor\tregulatory\tand\tother\tpurposes | (2,046) | (143) | 10,817 |
| Receivables\tand\tpayables\t(excluding\tloans\treceivable),\tnet | 12,328 | (3,682) | (20,499) |
| Collateralized\ttransactions\t(excluding\tother\tsecured\tfinancings),\tnet | (52,104) | (51,669) | 76,558 |
| Financial\tinstruments\towned,\tat\tfair\tvalue | 27,547 | 51,079 | (48,783) |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased,\tat\tfair\tvalue | 4,642 | 933 | (18,867) |
| Other,\tnet | (10,095) | (3,170) | 3,971 |
| Net\tcash\tprovided\tby/(used\tfor)\toperating\tactivities | (7,623) | 4,543 | 12,879 |
| Cash\tflows\tfrom\tinvesting\tactivities |  |  |  |
| Purchase\tof\tproperty,\tleasehold\timprovements\tand\tequipment | (678) | (706) | (961) |
| Proceeds\tfrom\tsales\tof\tproperty,\tleasehold\timprovements\tand\tequipment | 30 | 62 | 49 |
| Business\tacquisitions,\tnet\tof\tcash\tacquired | (1,732) | (2,274) | (593) |
| Proceeds\tfrom\tsales\tof\tinvestments | 1,514 | 2,503 | 1,195 |
| Purchase\tof\tavailable-for-sale\tsecurities | — | (738) | (5,220) |
| Proceeds\tfrom\tsales\tof\tavailable-for-sale\tsecurities | — | 817 | 4,537 |
| Loans\treceivable,\tnet | (14,043) | (8,392) | (2,741) |
| Net\tcash\tused\tfor\tinvesting\tactivities | (14,909) | (8,728) | (3,734) |
| Cash\tflows\tfrom\tfinancing\tactivities |  |  |  |
| Unsecured\tshort-term\tborrowings,\tnet | 1,659 | 1,336 | (1,952) |
| Other\tsecured\tfinancings\t(short-term),\tnet | (837) | (7,272) | 1,540 |
| Proceeds\tfrom\tissuance\tof\tother\tsecured\tfinancings\t(long-term) | 6,900 | 6,604 | 4,687 |
| Repayment\tof\tother\tsecured\tfinancings\t(long-term),\tincluding\tthe\tcurrent\tportion | (7,636) | (3,630) | (11,576) |
| Proceeds\tfrom\tissuance\tof\tunsecured\tlong-term\tborrowings | 39,857 | 30,851 | 27,734 |
| Repayment\tof\tunsecured\tlong-term\tborrowings,\tincluding\tthe\tcurrent\tportion | (28,138) | (30,473) | (36,435) |
| Purchase\tof\ttrust\tpreferred\tsecurities | (1,611) | — | — |
| Derivative\tcontracts\twith\ta\tfinancing\telement,\tnet | 643 | 874 | 1,696 |
| Deposits,\tnet | 12,201 | 683 | 24,015 |
| Common\tstock\trepurchased | (5,469) | (6,175) | (4,640) |
| Dividends\tand\tdividend\tequivalents\tpaid\ton\tcommon\tstock,\tpreferred\tstock\tand\tshare-based\tawards | (1,454) | (1,302) | (1,086) |
| Proceeds\tfrom\tissuance\tof\tpreferred\tstock,\tnet\tof\tissuance\tcosts | 1,980 | 991 | 3,087 |
| Proceeds\tfrom\tissuance\tof\tcommon\tstock,\tincluding\texercise\tof\tshare-based\tawards | 123 | 65 | 317 |
| Excess\ttax\tbenefit\trelated\tto\tshare-based\tawards | 782 | 98 | 130 |
| Cash\tsettlement\tof\tshare-based\tawards | (1) | (1) | (1) |
| Net\tcash\tprovided\tby/(used\tfor)\tfinancing\tactivities | 18,999 | (7,351) | 7,516 |
| Net\tincrease/(decrease)\tin\tcash\tand\tcash\tequivalents | (3,533) | (11,536) | 16,661 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 61,133 | 72,669 | 56,008 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $\t57,600 | $\t61,133 | $\t72,669 |

# SUPPLEMENTAL	DISCLOSURES:

Non-cash	activities:

During	2014,	the	firm	exchanged	$1.58	billion	of	Trust	Preferred	Securities,	common	beneficial	interests	and	senior	guaranteed	trust	securities	held	by	the	firm	for	$1.87	billion	of	the	firm's	junior subordinated	debt	held	by	the	issuing	trusts.	Following	the	exchange,	this	junior	subordinated	debt	was	extinguished.

During	2014,	the	firm	sold	certain	consolidated	investments	and	provided	seller	financing,	which	resulted	in	a	non-cash	increase	to	loans	receivable	of	$115	million.

During	2012,	the	firm	assumed	$77	million	of	debt	in	connection	with	business	acquisitions.

# Notes	to	Consolidated	Financial	Statements

# Description	of	Business

The	Goldman	Sachs	Group,	Inc.	(Group	Inc.),	a	Delaware	corporation,	together with	 its	 consolidated	 subsidiaries	 (collectively,	 the	 firm),	 is	 a	 leading	 global investment	banking,	securities	and	investment	management	firm	that	provides	a wide	range	of	financial	services	to	a	substantial	and	diversified	client	base	that includes	 corporations,	 financial	 institutions,	 governments	 and	 high-net-worth individuals.	 Founded	 in	 1869,	 the	 firm	 is	 headquartered	 in	 New	 York	 and maintains	offices	in	all	major	financial	centers	around	the	world.

The	firm	reports	its	activities	in	the	following	four	business	segments:

The	firm	provides	a	broad	range	of	investment	banking	services	to	a	diverse group	of	corporations,	financial	institutions,	investment	funds	and	governments. Services	 include	 strategic	 advisory	 assignments	 with	 respect	 to	 mergers	 and acquisitions,	divestitures,	corporate	defense	activities,	restructurings,	spin-offs and	risk	management,	and	debt	and	equity	underwriting	of	public	offerings	and private	 placements,	 including	 local	 and	 cross-border	 transactions,	 as	 well	 as derivative	transactions	directly	related	to	these	activities.

The	 firm	 facilitates	 client	 transactions	 and	 makes	 markets	 in	 fixed	 income, equity,	 currency	 and	 commodity	 products,	 primarily	 with	 institutional	 clients such	as	corporations,	financial	institutions,	investment	funds	and	governments. The	firm	also	makes	markets	in	and	clears	client	transactions	on	major	stock, options	 and	 futures	 exchanges	 worldwide	 and	 provides	 financing,	 securities lending	and	other	prime	brokerage	services	to	institutional	clients.

The	firm	invests	in	and	originates	loans	to	provide	financing	to	clients.	These investments	 and	 loans	 are	 typically	 longer-term	 in	 nature.	 The	 firm	 makes investments,	 some	 of	 which	 are	 consolidated,	 directly	 and	 indirectly	 through funds	 that	 the	firm	manages,	 in	debt	securities	and	 loans,	public	and	private equity	securities,	and	real	estate	entities.

The	 firm	 provides	 investment	 management	 services	 and	 offers	 investment products	 (primarily	 through	 separately	 managed	 accounts	 and	 commingled vehicles,	such	as	mutual	funds	and	private	investment	funds)	across	all	major asset	classes	to	a	diverse	set	of	institutional	and	individual	clients.	The	firm	also offers	wealth	advisory	services,	including	portfolio	management	and	financial counseling,	 and	 brokerage	 and	 other	 transaction	 services	 to	 high-net-worth individuals	and	families.

# Basis	of	Presentation

These	 consolidated	 financial	 statements	 are	 prepared	 in	 accordance	 with accounting	principles	generally	accepted	in	the	United	States	(U.S.	GAAP)	and include	the	accounts	of	Group	Inc.	and	all	other	entities	in	which	the	firm	has	a controlling	financial	interest.	Intercompany	transactions	and	balances	have	been eliminated.

All	references	to	2014,	2013	and	2012	refer	to	the	firm's	years	ended,	or	the dates,	 as	 the	 context	 requires,	 December	 31,	 2014,	 December	 31,	 2013	 and December	31,	2012,	respectively.	Any	reference	to	a	future	year	refers	to	a	year ending	on	December	31	of	that	year.	Certain	reclassifications	have	been	made	to previously	reported	amounts	to	conform	to	the	current	presentation.

# Significant	Accounting	Policies

The	firm's	significant	accounting	policies	include	when	and	how	to	measure	the fair	 value	 of	 assets	 and	 liabilities,	 accounting for	 goodwill	 and identifiable intangible	assets,	and	when	to	consolidate	an	entity.	See	Notes	5	through	8	for policies	 on	 fair	 value	 measurements,	 Note	 13 for	 policies	 on	 goodwill	 and identifiable	 intangible	 assets,	 and	 below and Note 12 for policies on consolidation	 accounting.	All	 other	 significant	 accounting	 policies	 are	 either discussed	below	or	included	in	the	following	footnotes:

# Consolidation

The	 firm	 consolidates	 entities	 in	 which	 the	 firm	 has	 a	 controlling	 financial interest.	The	firm	determines	whether	it	has	a	controlling	financial	interest	in	an entity	 by	 first	 evaluating	 whether	 the	 entity	 is	 a	 voting	 interest	 entity	 or	 a variable	interest	entity	(VIE).

Voting	Interest	Entities.	Voting	interest	entities	are	entities	in	which	(i)	the total	equity	investment	at	risk	 is	sufficient	 to	enable	 the	entity	 to	finance	 its activities	independently	and	(ii)	the	equity	holders	have	the	power	to	direct	the activities	of	the	entity	that	most	significantly	impact	its	economic	performance, the	 obligation	 to	 absorb	 the	 losses	 of	 the	 entity	 and	 the	 right	 to	 receive	 the residual	 returns	 of	 the	 entity.	The	 usual	 condition	 for	 a	 controlling	 financial interest	in	a	voting	interest	entity	is	ownership	of	a	majority	voting	interest.	If	the firm	 has	 a	 majority	 voting	 interest	 in	 a	 voting	 interest	 entity,	 the	 entity	 is consolidated.

Variable	Interest	Entities.	 A	VIE	is	an	entity	that	lacks	one	or	more	of	the characteristics	of	a	voting	interest	entity.	The	firm	has	a	controlling	financial interest	in	a	VIE	when	the	firm	has	a	variable	interest	or	interests	that	provide	it with	 (i)	 the	 power	 to	 direct	 the	 activities	 of	 the	VIE	 that	 most	 significantly impact	the	VIE's	economic	performance	and	(ii)	the	obligation	to	absorb	losses of	the	VIE	or	the	right	to	receive	benefits	from	the	VIE	that	could	potentially	be significant	to	the	VIE.	See	Note	12	for	further	information	about	VIEs.

Equity-Method	Investments.	 When the	 firm	 does	 not	 have	 a	 controlling financial	interest	in	an	entity	but	can	exert	significant	influence	over	the	entity's operating	and	financial	policies,	the	investment	is	accounted	for	either	(i)	under the	equity	method	of	accounting	or	(ii)	at	fair	value	by	electing	the	fair	value option	available	under	U.S.	GAAP.	Significant	influence	generally	exists	when the	 firm	 owns	 20%	 to	 50%	 of	 the	 entity's	 common	 stock	 or	 in-substance common	stock.

In	general,	the	firm	accounts	for	investments	acquired	after	the	fair	value	option became	 available,	 at	 fair	 value.	 In	 certain	 cases,	 the	 firm	 applies	 the	 equity method	of	accounting	to	new	investments	that	are	strategic	in	nature	or	closely related	to	the	firm's	principal	business	activities,	when	the	firm	has	a	significant degree	of	involvement	in	the	cash	flows	or	operations	of	the	investee	or	when cost-benefit	 considerations	 are	 less	 significant.	 See	 Note 13 for	 further information	about	equity-method	investments.

Investment	Funds.	The	firm	has	formed	numerous	 investment	funds	with third-party	investors.	These	funds	are	typically	organized	as	limited	partnerships or	 limited	 liability	 companies	 for	 which	 the	 firm	 acts	 as	 general	 partner	 or manager.	Generally,	the	firm	does	not	hold	a	majority	of	the	economic	interests in	these	funds.	These	funds	are	usually	voting	interest	entities	and	generally	are not	consolidated	because	third-party	investors	typically	have	rights	to	terminate the	funds	or	to	remove	the	firm	as	general	partner	or	manager.	Investments	in these	funds	are	included	in	"Financial	instruments	owned,	at	fair	value."	See Notes	6,	18	and	22	for	further	information	about	investments	in	funds.

Preparation	of	these	consolidated	financial	statements	requires	management	to make	certain	estimates	and	assumptions,	the	most	important	of	which	relate	to fair	 value	 measurements,	 accounting	 for	 goodwill	 and	 identifiable	 intangible assets,	and	the	provisions	for	losses	that	may	arise	from	litigation,	regulatory proceedings	and	tax	audits.	These	estimates	and	assumptions	are	based	on	the best	available	information	but	actual	results	could	be	materially	different.

# Revenue	Recognition

# Financial	 Assets	 and	 Financial	 Liabilities	 at	 Fair	 Value. 	 Financial

instruments	 owned,	 at	 fair	 value	 and	 Financial	 instruments	 sold,	 but	 not	 yet purchased,	at	fair	value	are	recorded	at	fair	value	either	under	 the	fair	value option	or	in	accordance	with	other	U.S.	GAAP.	In	addition,	the	firm	has	elected to	account	for	certain	of	its	other	financial	assets	and	financial	liabilities	at	fair value	by	electing	the	fair	value	option.	The	fair	value	of	a	financial	instrument	is the	amount	that	would	be	received	to	sell	an	asset	or	paid	to	transfer	a	liability	in an	 orderly	 transaction	 between	 market	 participants	 at	 the	 measurement	 date. Financial	assets	are	marked	to	bid	prices	and	financial	liabilities	are	marked	to offer	prices.	Fair	value	measurements	do	not	include	transaction	costs.	Fair	value gains	 or	 losses	 are	 generally	 included	 in	 "Market	 making"	 for	 positions	 in Institutional	Client	Services	and	"Other	principal	transactions"	for	positions	in Investing	&	Lending.	See	Notes	5	through	8	for	further	information	about	fair value	measurements.

Investment Banking. Fees	 from	 financial	 advisory	 assignments	 and underwriting	revenues	are	recognized	in	earnings	when	the	services	related	to	the underlying	 transaction	 are	 completed	 under	 the	 terms	 of	 the	 assignment. Expenses	associated	with	such	transactions	are	deferred	until	the	related	revenue is	 recognized	 or	 the	 assignment	 is	 otherwise	 concluded.	 Expenses	 associated with	financial	advisory	assignments	are	recorded	as	non-compensation	expenses, net	of	client	reimbursements.	Underwriting	revenues	are	presented	net	of	related expenses.

Investment	Management.	The	firm	earns	 management	 fees	 and	 incentive fees	for	investment	management	services.	Management	fees	for	mutual	funds	are calculated	as	a	percentage	of	daily	net	asset	value	and	are	received	monthly. Management	 fees	 for	 hedge	 funds	 and	 separately	 managed	 accounts	 are calculated	 as	 a	 percentage	 of	 month-end	 net	 asset	 value	 and	 are	 generally received	quarterly.	Management	fees	for	private	equity	funds	are	calculated	as	a percentage	 of	 monthly	 invested	 capital	 or	 commitments	 and	 are	 received quarterly,	semi-annually	or	annually,	depending	on	the	fund.	All	management fees	are	recognized	over	the	period	that	the	related	service	is	provided.	Incentive fees	are	calculated	as	a	percentage	of	a	fund's	or	separately	managed	account's return,	or	excess	return	above	a	specified	benchmark	or	other	performance	target. Incentive	fees	are	generally	based	on	investment	performance	over	a	12-month period	or	over	the	life	of	a	fund.	Fees	that	are	based	on	performance	over	a	12- month	 period	 are	 subject	 to	 adjustment	 prior	 to	 the	 end	 of	 the	 measurement period.	For	fees	that	are	based	on	investment	performance	over	the	life	of	the fund,	 future	 investment	 underperformance	 may	 require	 fees	 previously distributed	to	the	firm	to	be	returned	to	the	fund.	Incentive	fees	are	recognized only	 when	 all	 material	 contingencies	 have	 been	 resolved.	 Management	 and incentive	fee	revenues	are	included	in	"Investment	management"	revenues.

The	firm	makes	payments	to	brokers	and	advisors	related	to	the	placement	of	the firm's	 investment	 funds.	 These	 payments	 are	 computed	 based	 on	 either	 a percentage	 of	 the	 management	 fee	 or	 the	 investment	 fund's	 net	 asset	 value. Where	the	firm	is	principal	to	the	arrangement,	such	costs	are	recorded	on	a gross	 basis	 and	 included	 in	 "Brokerage,	 clearing,	 exchange	 and	 distribution fees,"	and	where	the	firm	is	agent	to	the	arrangement,	such	costs	are	recorded	on a	net	basis	in	"Investment	management"	revenues.

Commissions	 and	 Fees.	 The firm	 earns	 "Commissions	 and	 fees"	 from executing	and	clearing	client	transactions	on	stock,	options	and	futures	markets, as	 well	 as	 over-the-counter	 (OTC)	 transactions.	 Commissions	 and	 fees	 are recognized	on	the	day	the	trade	is	executed.

# Transfers	of	Assets

Transfers	of	assets	are	accounted	for	as	sales	when	the	firm	has	relinquished control	over	the	assets	transferred.	For	transfers	of	assets	accounted	for	as	sales, any	related	gains	or	losses	are	recognized	in	net	revenues.	Assets	or	liabilities that	 arise	 from	 the	 firm's	 continuing	 involvement	 with	 transferred	 assets	 are measured	at	fair	value.	For	transfers	of	assets	that	are	not	accounted	for	as	sales, the	assets	remain	in	"Financial	instruments	owned,	at	fair	value"	and	the	transfer is	accounted	for	as	a	collateralized	financing,	with	the	related	interest	expense recognized	over	the	life	of	the	transaction.	See	Note	10	for	further	information about	transfers	of	assets	accounted	for	as	collateralized	financings	and	Note	11 for	further	information	about	transfers	of	assets	accounted	for	as	sales.

# Cash	and	Cash	Equivalents

The	firm	defines	cash	equivalents	as	highly	liquid	overnight	deposits	held	in	the ordinary	course	of	business.	As	of	December	2014	and	December	2013,	"Cash and	cash	equivalents"	included	$5.79	billion	and	$4.14	billion,	respectively,	of cash	and	due	from	banks,	and	$51.81	billion	and	$56.99	billion,	respectively,	of interest-bearing	deposits	with	banks.

# Receivables	from	Customers	and	Counterparties

Receivables	from	customers	and	counterparties	generally	relate	to	collateralized transactions.	 Such	 receivables	 are	 primarily	 comprised	 of	 customer	 margin loans,	 certain	 transfers	 of	 assets	 accounted	 for	 as	 secured	 loans	 rather	 than purchases	at	fair	value	and	collateral	posted	in	connection	with	certain	derivative transactions.	Certain	of	the	firm's	receivables	from	customers	and	counterparties are	accounted	for	at	fair	value	under	the	fair	value	option,	with	changes	in	fair value	generally	included	in	"Market	making"	revenues.	See	Note	8	for	further information	about	receivables	from	customers	and	counterparties	accounted	for at	fair	value	under	the	fair	value	option.

Receivables	from	customers	and	counterparties	not	accounted	for	at	fair	value are	 accounted	 for	 at	 amortized	 cost	 net	 of	 estimated	 uncollectible	 amounts, which	 generally	 approximates	 fair	 value.	 While	 these	 items	 are	 carried	 at amounts	that	approximate	fair	value,	they	are	not	accounted	for	at	fair	value under	the	fair	value	option	or	at	fair	value	in	accordance	with	other	U.S.	GAAP and	 therefore	 are	 not	 included	 in	 the	 firm's	 fair	 value	 hierarchy	 in	 Notes	 6 through	 8.	 Had	 these	 items	 been	 included	 in	 the	 firm's	 fair	 value	 hierarchy, substantially	all	would	have	been	classified	in	level	2	as	of	December	2014	and December	2013.	Interest	on	receivables	from	customers	and	counterparties	 is recognized	over	the	life	of	the	transaction	and	included	in	"Interest	income."

# Receivables	from	and	Payables	to	Brokers,	Dealers	and	Clearing Organizations

Receivables	from	and	payables	to	brokers,	dealers	and	clearing	organizations	are accounted	for	at	cost	plus	accrued	interest,	which	generally	approximates	fair value.	 While	 these	 receivables	 and	 payables	 are	 carried	 at	 amounts	 that approximate	fair	value,	they	are	not	accounted	for	at	fair	value	under	the	fair value	option	or	at	fair	value	in	accordance	with	other	U.S.	GAAP	and	therefore are	not	included	in	the	firm's	fair	value	hierarchy	in	Notes	6	through	8.	Had these	receivables	and	payables	been	included	in	the	firm's	fair	value	hierarchy, substantially	all	would	have	been	classified	in	level	2	as	of	December	2014	and December	2013.

# Payables	to	Customers	and	Counterparties

Payables	to	customers	and	counterparties	primarily	consist	of	customer	credit balances	related	to	the	firm's	prime	brokerage	activities.	Payables	to	customers and	 counterparties	 are	 accounted	 for	 at	 cost	 plus	 accrued	 interest,	 which generally	approximates	fair	value.	While	these	payables	are	carried	at	amounts that	approximate	fair	value,	they	are	not	accounted	for	at	fair	value	under	the	fair value	option	or	at	fair	value	in	accordance	with	other	U.S.	GAAP	and	therefore are	not	included	in	the	firm's	fair	value	hierarchy	in	Notes	6	through	8.	Had these	payables	been	included	in	the	firm's	fair	value	hierarchy,	substantially	all would	have	been	classified	in	level	2	as	of	December	2014	and	December	2013. Interest	on	payables	to	customers	and	counterparties	is	recognized	over	the	life of	the	transaction	and	included	in	"Interest	expense."

# Offsetting	Assets	and	Liabilities

To	reduce	credit	exposures	on	derivatives	and	securities	financing	transactions, the	 firm	 may	 enter	 into	 master	 netting	 agreements	 or	 similar	 arrangements (collectively,	 netting	 agreements)	 with	 counterparties	 that	 permit	 it	 to	 offset receivables	 and	 payables	 with	 such	 counterparties.	A	 netting	 agreement	 is	 a contract	with	a	counterparty	that	permits	net	settlement	of	multiple	transactions with	that	counterparty,	including	upon	the	exercise	of	termination	rights	by	a non-defaulting	party.	Upon	exercise	of	such	termination	rights,	all	transactions governed	by	the	netting	agreement	are	terminated	and	a	net	settlement	amount	is calculated.	In	addition,	the	firm	receives	and	posts	cash	and	securities	collateral with	respect	to	its	derivatives	and	securities	financing	transactions,	subject	to	the terms	 of	 the	 related	 credit	 support	 agreements	 or	 similar	 arrangements (collectively,	 credit	 support	 agreements).	 An	 enforceable	 credit	 support agreement	grants	the	non-defaulting	party	exercising	termination	rights	the	right to	liquidate	the	collateral	and	apply	the	proceeds	to	any	amounts	owed.	In	order to	 assess	 enforceability	 of	 the	 firm's	 right	 of	 setoff	 under	 netting	 and	 credit support	 agreements,	 the	 firm	 evaluates	 various	 factors	 including	 applicable bankruptcy	laws,	local	statutes	and	regulatory	provisions	in	the	jurisdiction	of	the parties	to	the	agreement.

Derivatives	are	reported	on	a	net-by-counterparty	basis	(i.e.,	the	net	payable	or receivable	for	derivative	assets	and	liabilities	for	a	given	counterparty)	in	the consolidated	statements	of	financial	condition	when	a	legal	right	of	setoff	exists under	an	enforceable	netting	agreement.	Resale	and	repurchase	agreements	and securities	borrowed	and	loaned	transactions	with	the	same	term	and	currency	are presented	 on	 a	 net-by-counterparty	 basis	 in	 the	 consolidated	 statements	 of financial	condition	when	such	transactions	meet	certain	settlement	criteria	and are	subject	to	netting	agreements.

In	the	consolidated	statements	of	financial	condition,	derivatives	are	reported	net of	 cash	 collateral	 received	 and	 posted	 under	 enforceable	 credit	 support agreements,	 when	 transacted	 under	 an	 enforceable	 netting	 agreement.	 In	 the consolidated	 statements	 of	 financial	 condition,	 resale	 and	 repurchase agreements,	 and	 securities	 borrowed	 and	 loaned,	 are	 not	 reported	 net	 of	 the related	 cash	 and	 securities	 received	 or	 posted	 as	 collateral.	 See	 Note	 10	 for further	 information	about	collateral	received	and	pledged,	 including	rights	 to deliver	or	repledge	collateral.	See	Notes	7	and	10	for	further	information	about offsetting.

# Foreign	Currency	Translation

Assets	and	liabilities	denominated	in	non-U.S.	currencies	are	translated	at	rates of	exchange	prevailing	on	the	date	of	the	consolidated	statements	of	financial condition	and	revenues	and	expenses	are	translated	at	average	rates	of	exchange for	the	period.	Foreign	currency	remeasurement	gains	or	losses	on	transactions in	 nonfunctional	 currencies	 are	 recognized	 in	 earnings.	 Gains	 or	 losses	 on translation	 of	 the	 financial	 statements	 of	 a	 non-U.S.	 operation,	 when	 the functional	currency	is	other	than	the	U.S.	dollar,	are	included,	net	of	hedges	and taxes,	in	the	consolidated	statements	of	comprehensive	income.

Investment	Companies	(ASC	946). 	In	June	2013,	the	FASB	issued	ASU No.	 2013-08,	 "Financial	 Services	 —	 Investment	 Companies	 (Topic	 946)	 — Amendments	to	the	Scope,	Measurement,	and	Disclosure	Requirements."	ASU No.	2013-08	clarifies	the	approach	to	be	used	for	determining	whether	an	entity is	 an	 investment	 company	 and	 provides	 new	 measurement	 and	 disclosure requirements.	ASU	No.	2013-08	was	effective	for	interim	and	annual	reporting periods	in	fiscal	years	that	began	after	December	15,	2013.	Adoption	of	ASU No.	2013-08	on	January	1,	2014	did	not	affect	the	firm's	financial	condition, results	of	operations,	or	cash	flows.

Inclusion	of	the	Fed	Funds	Effective	Swap	Rate	(or	Overnight	Index Swap	 Rate)	 as	 a	 Benchmark Interest	 Rate for	 Hedge	Accounting Purposes	(ASC	815). In	 July	 2013,	 the	 FASB	 issued	ASU	 No.	 2013-10, "Derivatives	and	Hedging	(Topic	815)	—	Inclusion	of	the	Fed	Funds	Effective Swap	Rate	(or	Overnight	Index	Swap	Rate)	as	a	Benchmark	Interest	Rate	for Hedge	Accounting	 Purposes."	ASU	 No.	 2013-10	 permits	 the	 use	 of	 the	 Fed Funds	Effective	Swap	Rate	(OIS)	as	a	U.S.	benchmark	interest	rate	for	hedge accounting	purposes.	The	ASU	also	removes	the	restriction	on	using	different benchmark	 rates	 for	 similar	 hedges.	 ASU	 No.	 2013-10	 was	 effective	 for qualifying	new	or	redesignated	hedging	relationships	entered	 into	on	or	after July 17, 2013	 and	 adoption	 did	 not	 materially	 affect	 the	 firm's	 financial condition,	results	of	operations,	or	cash	flows.

# Reporting	Discontinued	Operations	and	Disclosures	of	Disposals	of

Components	of	an	Entity.	In	April	2014,	the	FASB	issued	ASU	No.	2014- 08,	"Presentation	of	Financial	Statements	(Topic	205)	and	Property,	Plant,	and Equipment	(Topic	360)	—	Reporting	Discontinued	Operations	and	Disclosures of	 Disposals	 of	 Components	 of	 an	 Entity."	 ASU	 No.	 2014-08	 limits discontinued	operations	reporting	to	disposals	of	components	of	an	entity	that represent	strategic	shifts	that	have	(or	will	have)	a	major	effect	on	an	entity's operations	 and	 financial	 results.	 The	ASU	 requires	 expanded	 disclosures	 for discontinued	operations	and	disposals	of	individually	significant	components	of an	entity	that	do	not	qualify	for	discontinued	operations	reporting.	The	ASU	is effective	 for	 disposals	 and	 components	 classified	 as	 held	 for	 sale	 that	 occur within	annual	periods	beginning	on	or	after	December	15,	2014,	and	interim periods	within	those	years.	Early	adoption	is	permitted.	The	firm	early	adopted ASU	 No.	 2014-08	 in	 2014	 and	 adoption	 did	 not	 materially	 affect	 the	 firm's financial	condition,	results	of	operations,	or	cash	flows.

Revenue	from	Contracts	with	Customers	(ASC	606). 	In	May	2014,	the FASB	 issued	 ASU	 No.	 2014-09,	 "Revenue	 from	 Contracts	 with	 Customers (Topic	 606)."	 ASU	 No.	 2014-09	 provides	 comprehensive	 guidance	 on	 the recognition	of	revenue	from	customers	arising	from	the	transfer	of	goods	and services.	The	ASU	also	provides	guidance	on	accounting	for	certain	contract costs,	and	requires	new	disclosures.	ASU	No.	2014-09	is	effective	for	annual reporting	periods	beginning	after	December	15,	2016,	including	interim	periods within	that	reporting	period.	Early	adoption	is	not	permitted.	The	firm	is	still evaluating	the	effect	of	the	ASU	on	its	financial	condition,	results	of	operations, and	cash	flows.

Measuring the	 Financial	 Assets	 and the	 Financial	 Liabilities	 of	 a Consolidated Collateralized Financing Entity (ASC 810). In August	 2014,	 the	 FASB	 issued	 ASU	 No.	 2014-13,	 "Consolidation (Topic	810)	—	Measuring	the	Financial	Assets	and	the	Financial	Liabilities	of	a Consolidated	 Collateralized	 Financing	 Entity	 (CFE)."	 ASU	 No.	 2014-13 provides	an	alternative	to	reflect	changes	in	the	fair	value	of	the	financial	assets and	the	financial	liabilities	of	the	CFE	by	measuring	either	the	fair	value	of	the assets	or	liabilities,	whichever	is	more	observable.	ASU	No.	2014-13	provides new	disclosure	requirements	for	those	electing	this	approach,	and	is	effective	for interim	and	annual	periods	beginning	after	December	15,	2015.	Early	adoption is	permitted.	Adoption	of	ASU	No.	2014-13	will	not	materially	affect	the	firm's financial	condition,	results	of	operations,	or	cash	flows.

# Repurchase-to-Maturity	Transactions,	Repurchase	Financings,	and

Disclosures	(ASC	860).	In	June	2014,	the	FASB	issued	ASU	No.	2014-11, "Transfers	and	Servicing	(Topic	860)	—	Repurchase-to-Maturity	Transactions, Repurchase	 Financings,	 and	 Disclosures."	 ASU	 No.	 2014-11	 changes	 the accounting	for	repurchase-	and	resale-to-maturity	agreements	by	requiring	that such	agreements	be	recognized	as	financing	arrangements,	and	requires	that	a transfer	 of	 a	 financial	 asset	 and	 a	 repurchase	 agreement	 entered	 into contemporaneously	be	accounted	for	separately.	ASU	No.	2014-11	also	requires additional	disclosures	about	certain	transferred	financial	assets	accounted	for	as sales	and	certain	securities	financing	transactions.	The	accounting	changes	and additional	disclosures	about	certain	transferred	financial	assets	accounted	for	as sales	are	effective	for	the	first	interim	and	annual	reporting	periods	beginning after	 December	 15,	 2014.	 The	 additional	 disclosures	 for	 securities	 financing transactions	 are	 required	 for	 annual	 reporting	 periods	 beginning	 after December 15, 2014	 and	 for	 interim	 reporting	 periods	 beginning	 after March	15,	2015.	Adoption	of	the	accounting	changes	in	ASU	No.	2014-11	on January	1,	2015	did	not	materially	affect	the	firm's	financial	condition,	results	of operations,	or	cash	flows.

Amendments to the Consolidation Analysis (ASC 810). In February	2015,	the	FASB	issued	ASU	No.	2015-02,	"Consolidation	(Topic	810) —	Amendments	to	the	Consolidation	Analysis."	ASU	No.	2015-02	eliminates the	 deferral	 of	 the	 requirements	 of	 ASU	 No.	 2009-17,	 "Consolidations (Topic	810)	—	Improvements	to	Financial	Reporting	by	Enterprises	Involved with	 Variable	 Interest	 Entities"	 for	 certain	 interests	 in	 investment	 funds	 and provides	a	scope	exception	from	Topic	810	for	certain	investments	in	money market	funds.	The	ASU	also	makes	several	modifications	to	the	consolidation guidance	for	VIEs	and	general	partners'	investments	in	limited	partnerships,	as well	as	modifications	to	the	evaluation	of	whether	limited	partnerships	are	VIEs or	voting	interest	entities.	ASU	No.	2015-02	is	effective	for	interim	and	annual reporting	 periods	 beginning	 after	 December 15, 2015.	 Early	 adoption	 is permitted.	Adoption	of	ASU	No.	2015-02	is	not	expected	to	materially	affect	the firm's	financial	condition,	results	of	operations,	or	cash	flows.

# Financial Instruments Owned, at Fair Value and Financial	Instruments	Sold,	But	Not	Yet	Purchased,	at Fair	Value

Financial	instruments	owned,	at	fair	value	and	financial	instruments	sold,	but	not yet	purchased,	at	fair	value	are	accounted	for	at	fair	value	either	under	the	fair value	option	or	in	accordance	with	other	U.S.	GAAP.	See	Note	8	for	further information	about	other	financial	assets	and

financial	 liabilities	 accounted	 for	 at	 fair	 value	 primarily	 under	 the	 fair	 value option.	The	table	below	presents	the	firm's	financial	instruments	owned,	at	fair value,	including	those	pledged	as	collateral,	and	financial	instruments	sold,	but not	yet	purchased,	at	fair	value.

|  | As	of	December	2014 | As	of	December	2014 | As	of	December	2013 | As	of	December	2013 |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Financial |  | Financial |
| $\tin\tmillions | Financial\nInstruments\nOwned | Instruments\nSold,\tBut\nNot\tYet\nPurchased | Financial\nInstruments\nOwned | Instruments\nSold,\tBut\nNot\tYet\nPurchased |
| Commercial\tpaper,\tcertificates\tof\tdeposit,\ttime\tdeposits\tand\tother\nmoney\tmarket\tinstruments | $\t\t\t\t3,654 | $\t\t\t\t\t\t\t\t\t\t\t\t— | $\t\t\t\t8,608 | \t $\t\t\t\t\t\t\t\t\t\t\t\t— |
| U.S.\tgovernment\tand\tfederal\tagency\tobligations | 48,002 | 12,762 | 71,072 | 20,920 |
| Non-U.S.\tgovernment\tand\tagency\tobligations | 37,059 | 20,500 | 40,944 | 26,999 |
| Mortgage\tand\tother\tasset-backed\tloans\tand\tsecurities:\nLoans\tand\tsecurities\tbacked\tby\tcommercial\treal\testate | 6,582^\t1 | 1 | 6,596^\t1 | 1 |
| Loans\tand\tsecurities\tbacked\tby\tresidential\treal\testate | 11,717^\t2 | — | 9,025^\t2 | 2 |
| Bank\tloans\tand\tbridge\tloans | 15,613 | 464^\t4 | 17,400 | 925^\t4 |
| Corporate\tdebt\tsecurities | 21,603 | 5,800 | 17,412 | 5,253 |
| State\tand\tmunicipal\tobligations | 1,203 | — | 1,476 | 51 |
| Other\tdebt\tobligations | 3,257^\t3 | 2 | 3,129^\t3 | 4 |
| Equities\tand\tconvertible\tdebentures | 96,442 | 28,314 | 101,024 | 22,583 |
| Commodities | 3,846 | 1,224 | 4,556 | 966 |
| Subtotal | 248,978 | 69,067 | 281,242 | 77,704 |
| Derivatives | 63,270 | 63,016 | 57,879 | 49,722 |
| Total | $312,248 | $132,083 | $339,121 | $127,426 |
|  |  | Goldman\tSachs\t2014\tForm\t10-K | Goldman\tSachs\t2014\tForm\t10-K | 129 |

1.Includes	$4.41	billion	and	$3.75	billion	of	loans	backed	by	commercial	real	estate	as	of	December	2014	and	December	2013,	respectively.

2.Includes	$6.43	billion	and	$4.17	billion	of	loans	backed	by	residential	real	estate	as	of	December	2014	and	December	2013,	respectively.

3.Includes	$618	million	and	$681	million	of	loans	backed	by	consumer	loans	and	other	assets	as	of	December	2014	and	December	2013,	respectively.

4.Primarily	relates	to	the	fair	value	of	unfunded	lending	commitments	for	which	the	fair	value	option	was	elected.

# Gains and Losses from Market Making and Other Principal Transactions

The	table	below	presents	"Market	making"	revenues	by	major	product	type,	as well	 as	 "Other	 principal	 transactions"	 revenues.	 These	 gains/(losses)	 are primarily	related	 to	 the	firm's	financial	 instruments	owned,	at	fair	value	and financial	instruments	sold,	but	not	yet	purchased,	at	fair	value,	including	both derivative	and	non-derivative	financial	instruments.	These	gains/(losses)	exclude related	interest	income	and	interest	expense.	See	Note	23	for	further	information about	interest	income	and	interest	expense.

The	gains/(losses)	 in	 the	 table	below	are	not	representative	of	 the	manner	 in which	 the	 firm	 manages	 its	 business	 activities	 because	 many	 of	 the	 firm's market-making	 and	 client	 facilitation	 strategies	 utilize	 financial	 instruments across	various	product	types.	Accordingly,	gains	or	losses	in	one	product	type frequently	offset	gains	or	losses	in	other	product	types.	For	example,	most	of	the firm's	longer-term	derivatives	across	product	types	are	sensitive	to	changes	in interest	 rates	 and	 may	 be	 economically	 hedged	 with	 interest	 rate	 swaps. Similarly,	a	significant	portion	of	the	firm's	cash	instruments	and	derivatives across	 product	 types	 has	 exposure	 to	 foreign	 currencies	 and	 may	 be economically	hedged	with	foreign	currency	contracts.

| $	in	millions |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| Product\tType | 2014 | 2013 | 2012 |
| Interest\trates | \t$\t(5,316)^\t2 | \t$\t\t\t\t\t930 | \t$\t\t4,445 |
| Credit | 2,982 | 1,845 | 4,263 |
| Currencies | 6,566 | 2,446 | (1,001) |
| Equities | 2,683 | 2,655 | 2,482 |
| Commodities | 1,450 | 902 | 492 |
| Other | — | 590^\t3 | 667^\t4 |
| Market\tmaking | 8,365 | 9,368 | 11,348 |
| Other\tprincipal\ttransactions\t^1 | 6,588 | 6,993 | 5,865 |
| Total | \t$14,953 | \t$16,361 | \t$17,213 |

1.Other	 principal	 transactions	 are	 included	 in	 the	 firm's	 Investing	 &	 Lending	 segment.	 See Note	 25	 for	 net	 revenues,	 including	 net	 interest	 income,	 by	 product	 type	 for	 Investing	 & Lending,	as	well	as	the	amount	of	net	interest	income	included	in	Investing	&	Lending.	The "Other"	 category	 in	 Note	 25	 relates	 to	 the	 firm's	 consolidated	 investments,	 and	 primarily includes	commodities	and	real	estate-related	net	revenues.

2.Includes	a	gain	of	$289	million	($270	million	of	which	was	recorded	at	extinguishment	in	the third	quarter)	related	to	the	extinguishment	of	certain	of	the	firm's	junior	subordinated	debt. See	Note	16	for	further	information.

3.Includes	 a	 gain	 of	 $211	 million	 on the	 sale	 of	 a	 majority	 stake in the firm's	 European insurance	business.

4.Includes	a	gain	of	$494	million	on	the	sale	of	the	firm's	hedge	fund	administration	business.

# Fair	Value	Measurements

The	fair	value	of	a	financial	instrument	is	the	amount	that	would	be	received	to sell	 an	 asset	 or	 paid	 to	 transfer	 a	 liability	 in	 an	 orderly	 transaction	 between market	participants	at	the	measurement	date.	Financial	assets	are	marked	to	bid prices	 and	 financial	 liabilities	 are	 marked	 to	 offer	 prices.	 Fair	 value measurements	 do	 not	 include	 transaction	 costs.	 The	 firm	 measures	 certain financial	 assets	 and	 financial	 liabilities	 as	 a	 portfolio	 (i.e.,	 based	 on	 its	 net exposure	to	market	and/or	credit	risks).

The	best	evidence	of	fair	value	is	a	quoted	price	in	an	active	market.	If	quoted prices	in	active	markets	are	not	available,	fair	value	is	determined	by	reference	to prices	for	similar	instruments,	quoted	prices	or	recent	transactions	in	less	active markets,	 or	 internally	 developed	 models	 that	 primarily	 use	 market-based	 or independently	sourced	parameters	as	inputs	including,	but	not	limited	to,	interest rates,	 volatilities,	 equity	 or	 debt	 prices,	 foreign	 exchange	 rates,	 commodity prices,	 credit	 spreads	 and	 funding	 spreads	 (i.e.,	 the	 spread,	 or	 difference, between	the	interest	rate	at	which	a	borrower	could	finance	a	given	financial instrument	relative	to	a	benchmark	interest	rate).

U.S.	GAAP	has	a	three-level	fair	value	hierarchy	for	disclosure	of	fair	value measurements.	 The	 fair	 value	 hierarchy	 prioritizes	 inputs	 to	 the	 valuation techniques	 used	 to	 measure	 fair	 value,	 giving	 the	 highest	 priority	 to	 level	 1 inputs	and	the	lowest	priority	to	level	3	inputs.	A	financial	instrument's	level	in the	fair	value	hierarchy	is	based	on	the	lowest	level	of	input	that	is	significant	to its	fair	value	measurement.

The	fair	value	hierarchy	is	as	follows:

Level	1.	Inputs	are	unadjusted	quoted	prices	in	active	markets	to	which	the	firm had	access	at	the	measurement	date	for	identical,	unrestricted	assets	or	liabilities.

Level	 2. Inputs to valuation techniques are observable, either directly or indirectly.

Level	 3.	 One or	 more inputs to valuation techniques are significant and unobservable.

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

See	Notes	6	through	8	for	further	information	about	fair	value	measurements	of cash	instruments,	derivatives	and	other	financial	assets	and	financial	liabilities accounted	 for	 at	 fair	 value	 primarily	 under	 the	 fair	 value	 option	 (including information	about	unrealized	gains	and	losses	related	to	level	3	financial	assets and	financial	liabilities,	and	transfers	in	and	out	of	level	3),	respectively.

The	table	below	presents	financial	assets	and	financial	liabilities	accounted	for at	fair	value	under	the	fair	value	option	or	in	accordance	with	other	U.S.	GAAP. In	the	table	below,	counterparty	and	cash	collateral	netting	represents	the	impact on	derivatives	of	netting	across	levels	of	the	fair	value	hierarchy.	Netting	among positions	classified	in	the	same	level	is	included	in	that	level.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Total\tlevel\t1\tfinancial\tassets | $\t140,221 | $156,030 |
| Total\tlevel\t2\tfinancial\tassets | 468,678 | 499,480 |
| Total\tlevel\t3\tfinancial\tassets | 42,005 | 40,013 |
| Counterparty\tand\tcash\tcollateral\tnetting | (104,616) | (95,350) |
| Total\tfinancial\tassets\tat\tfair\tvalue | $\t546,288 | $600,173 |
| Total\tassets^\t1 | $\t856,240 | $911,507 |
| Total\tlevel\t3\tfinancial\tassets\tas\ta\tpercentage\tof\tTotal\tassets | 4.9% | 4.4% |
| Total\tlevel\t3\tfinancial\tassets\tas\ta\tpercentage\tof\tTotal\tfinancial\nassets\tat\tfair\tvalue | 7.7% | 6.7% |
| Total\tlevel\t1\tfinancial\tliabilities | $\t\t\t59,697 | $\t\t68,412 |
| Total\tlevel\t2\tfinancial\tliabilities | 253,364 | 300,583 |
| Total\tlevel\t3\tfinancial\tliabilities | 15,904 | 12,046 |
| Counterparty\tand\tcash\tcollateral\tnetting | (37,267) | (25,868) |
| Total\tfinancial\tliabilities\tat\tfair\tvalue | $\t291,698 | $355,173 |
| Total\tlevel\t3\tfinancial\tliabilities\tas\ta\tpercentage\tof\tTotal\tfinancial\nliabilities\tat\tfair\tvalue | 5.5% | 3.4% |

1.Includes approximately $834 billion and $890 billion as of December 2014 and December	 2013, respectively, that is	 carried	 at fair	 value	 or	 at	 amounts that	 generally approximate	fair	value.

The	table	below	presents	a	summary	of	Total	level	3	financial	assets.	See	Notes 6	through	8	for	further	information	about	level	3	financial	assets.

|  | Level	3	Financial	Assets<br>as	of	December | Level	3	Financial	Assets<br>as	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Cash\tinstruments | $34,875 | $32,639 |
| Derivatives | 7,074 | 7,076 |
| Other\tfinancial\tassets | 56 | 298 |
| Total | $42,005 | $40,013 |

Level 3 financial	 assets	 as	 of	 December	 2014	 increased	 compared	 with December	 2013,	 reflecting	 an	 increase	 in	 cash	 instruments.	 See	 Note	 6	 for further	information	about	changes	in	level	3	cash	instruments.

# Cash	Instruments

Cash	instruments	include	U.S.	government	and	federal	agency	obligations,	non- U.S.	government	and	agency	obligations,	bank	loans	and	bridge	loans,	corporate debt	 securities,	 equities	 and	 convertible	 debentures,	 and	 other	 non-derivative financial	 instruments	 owned	 and	 financial	 instruments	 sold,	 but	 not	 yet purchased.	See	below	for	the	types	of	cash	instruments	included	in	each	level	of the	fair	value	hierarchy	and	the	valuation	techniques	and	significant	inputs	used to	determine	their	fair	values.	See	Note	5	for	an	overview	of	the	firm's	fair	value measurement	policies.

# Level	1	Cash	Instruments

Level	1	cash	instruments	include	U.S.	government	obligations	and	most	non- U.S.	government	obligations,	actively	traded	listed	equities,	certain	government agency	obligations	and	money	market	instruments.	These	instruments	are	valued using	quoted	prices	for	identical	unrestricted	instruments	in	active	markets.

The	firm	defines	active	markets	for	equity	 instruments	based	on	 the	average daily	 trading	 volume	 both	 in	 absolute	 terms	 and	 relative	 to	 the	 market capitalization	 for	 the	 instrument.	 The	 firm	 defines	 active	 markets	 for	 debt instruments	based	on	both	the	average	daily	trading	volume	and	the	number	of days	with	trading	activity.

Level	2	cash	instruments	include	commercial	paper,	certificates	of	deposit,	time deposits,	 most	 government	 agency	 obligations,	 certain	 non-U.S.	 government obligations,	 most	 corporate	 debt	 securities,	 commodities,	 certain	 mortgage- backed	loans	and	securities,	certain	bank	loans	and	bridge	loans,	restricted	or less	 liquid	 listed	 equities,	 most	 state	 and	 municipal	 obligations	 and	 certain lending	commitments.

Valuations	of	level	2	cash	instruments	can	be	verified	to	quoted	prices,	recent trading	activity	for	identical	or	similar	instruments,	broker	or	dealer	quotations	or alternative	 pricing	 sources	 with	 reasonable	 levels	 of	 price	 transparency. Consideration	is	given	to	the	nature	of	the	quotations	(e.g.,	indicative	or	firm) and	 the	 relationship	 of	 recent	 market	 activity	 to	 the	 prices	 provided	 from alternative	pricing	sources.

Valuation	adjustments	are	typically	made	to	level	2	cash	instruments	(i)	if	the cash	instrument	is	subject	to	transfer	restrictions	and/or	(ii)	for	other	premiums and	liquidity	discounts	that	a	market	participant	would	require	to	arrive	at	fair value.	Valuation	adjustments	are	generally	based	on	market	evidence.

Level	3	cash	instruments	have	one	or	more	significant	valuation	inputs	that	are not	observable.	Absent	evidence	to	the	contrary,	level	3	cash	instruments	are initially	valued	at	transaction	price,	which	is	considered	to	be	the	best	initial estimate	 of	 fair	 value.	 Subsequently,	 the	 firm	 uses	 other	 methodologies	 to determine	fair	value,	which	vary	based	on	 the	 type	of	 instrument.	Valuation inputs	 and	 assumptions	 are	 changed	 when	 corroborated	 by	 substantive observable	evidence,	including	values	realized	on	sales	of	financial	assets.

# Valuation	Techniques	and	Significant	Inputs

The	table	below	presents	the	valuation	techniques	and	the	nature	of	significant inputs.	These	valuation	techniques	and

significant	inputs	are	generally	used	to	determine	the	fair	values	of	each	type	of level	3	cash	instrument.

# Level	3	Cash	Instruments Valuation	Techniques	and	Significant	Inputs

Significant	inputs	are	generally	determined	based	on	relative	value	analyses,	which	incorporate	comparisons	both	to	prices	of	credit	default swaps	that	reference	the	same	or	similar	underlying	instrument	or	entity	and	to	other	debt	instruments	for	the	same	issuer	for	which observable	prices	or	broker	quotations	are	available.	Significant	inputs	include:

Ÿ				Market	yields	implied	by	transactions	of	similar	or	related	assets	and/or	current	levels	and	trends	of	market	indices	such	as	CDX	and LCDX	(indices	that	track	the	performance	of	corporate	credit	and	loans,	respectively)

Ÿ				Market	yields	implied	by	transactions	of	similar	or	related	assets	and/or	current	levels	and	trends	of	market	indices	such	as	CDX, LCDX	and	MCDX	(an	index	that	tracks	the	performance	of	municipal	obligations)

# Ÿ				Transactions	in	similar	instruments

Ÿ				Discounted	cash	flow	techniques

Ÿ				Third-party	appraisals

Ÿ				Net	asset	value	per	share	(NAV)

The	firm	also	considers	changes	in	the	outlook	for	the	relevant	industry	and	financial	performance	of	the	issuer	as	compared	to	projected performance.	Significant	inputs	include:

# Ÿ				Market	and	transaction	multiples

Ÿ				Discount	rates,	long-term	growth	rates,	earnings	compound	annual	growth	rates	and	capitalization	rates

Ÿ					For	equity	instruments	with	debt-like	features:	market	yields	implied	by	transactions	of	similar	or	related	assets,	current	performance and	recovery	assumptions,	and	duration

# Significant	Unobservable	Inputs

The	tables	below	present	the	ranges	of	significant	unobservable	inputs	used	to value	the	firm's	level	3	cash	instruments.	These	ranges	represent	the	significant unobservable	 inputs	 that	 were	 used	 in	 the	 valuation	 of	 each	 type	 of	 cash instrument.	Weighted	averages	in	the	tables	below	are	calculated	by	weighting each	input	by	the	relative	fair	value	of	the	respective	financial	instruments.	The ranges	 and	 weighted	 averages	 of	 these	 inputs	 are	 not	 representative	 of	 the appropriate	inputs	to	use	when

calculating	the	fair	value	of	any	one	cash	instrument.	For	example,	the	highest multiple	 presented	 in	 the	 tables	 below	 for	 private	 equity	 investments	 is appropriate	 for	 valuing	 a	 specific	 private	 equity	 investment	 but	 may	 not	 be appropriate	for	valuing	any	other	private	equity	 investment.	Accordingly,	 the ranges	of	 inputs	presented	below	do	not	represent	uncertainty	 in,	or	possible ranges	of,	fair	value	measurements	of	the	firm's	level	3	cash	instruments.

1.The	fair	value	of	any	one	instrument	may	be	determined	using	multiple	valuation	techniques.	For	example,	market	comparables	and	discounted	cash	flows	may	be	used	together	to	determine	fair value.	Therefore,	the	level	3	balance	encompasses	both	of	these	techniques.

Increases	in	yield,	discount	rate,	capitalization	rate,	duration	or	cumulative	loss rate	used	in	the	valuation	of	the	firm's	level	3	cash	instruments	would	result	in	a lower	fair	value	measurement,	while	increases	in	recovery	rate,	basis,	multiples, long-term	growth	rate	or	compound	annual

growth	 rate	 would	 result	 in	 a	 higher	 fair	 value	 measurement.	 Due	 to	 the distinctive	 nature	 of	 each	 of	 the	 firm's	 level 3 cash	 instruments,	 the interrelationship	of	inputs	is	not	necessarily	uniform	within	each	product	type.

# Fair	Value	of	Cash	Instruments	by	Level

The	 tables	 below	 present,	 by	 level	 within	 the	 fair	 value	 hierarchy,	 cash instrument	 assets	 and	 liabilities,	 at	 fair	 value.	 Cash	 instrument	 assets	 and liabilities	are	included	in

"Financial	instruments	owned,	at	fair	value"	and	"Financial	instruments	sold,	but not	yet	purchased,	at	fair	value,"	respectively.

|  | Cash	Instrument	Assets	at	Fair	Value	as	of	December	2014 | Cash	Instrument	Assets	at	Fair	Value	as	of	December	2014 | Cash	Instrument	Assets	at	Fair	Value	as	of	December	2014 | Cash	Instrument	Assets	at	Fair	Value	as	of	December	2014 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Total |
| Commercial\tpaper,\tcertificates\tof\tdeposit,\ttime\tdeposits\tand\nother\tmoney\tmarket\tinstruments | $\t\t\t\t\t\t\t\t\t\t— | $\t\t3,654 | $\t\t\t\t\t\t\t— | $\t\t\t\t3,654 |
| U.S.\tgovernment\tand\tfederal\tagency\tobligations | 18,540 | 29,462 | — | 48,002 |
| Non-U.S.\tgovernment\tand\tagency\tobligations | 30,255 | 6,668 | 136 | 37,059 |
| Mortgage\tand\tother\tasset-backed\tloans\tand\tsecurities:\nLoans\tand\tsecurities\tbacked\tby\tcommercial\treal\testate | — | 3,188 | 3,394 | 6,582 |
| Loans\tand\tsecurities\tbacked\tby\tresidential\treal\testate | — | 9,172 | 2,545 | 11,717 |
| Bank\tloans\tand\tbridge\tloans | — | 8,267 | 7,346 | 15,613 |
| Corporate\tdebt\tsecurities | 249 | 17,539 | 3,815 | 21,603 |
| State\tand\tmunicipal\tobligations | — | 1,093 | 110 | 1,203 |
| Other\tdebt\tobligations | — | 2,387 | 870 | 3,257 |
| Equities\tand\tconvertible\tdebentures | 69,711 | 10,072 | 16,659^\t2 | 96,442 |
| Commodities | — | 3,846 | — | 3,846 |
| Total^\t1 | $118,755 | $95,348 | $34,875 | $248,978 |

|  | Cash	Instrument	Liabilities	at	Fair	Value	as	of	December	2014 | Cash	Instrument	Liabilities	at	Fair	Value	as	of	December	2014 | Cash	Instrument	Liabilities	at	Fair	Value	as	of	December	2014 | Cash	Instrument	Liabilities	at	Fair	Value	as	of	December	2014 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Total |
| U.S.\tgovernment\tand\tfederal\tagency\tobligations | $\t\t12,746 | $\t\t\t\t\t\t\t16 | $\t\t\t\t\t\t\t— | $\t\t12,762 |
| Non-U.S.\tgovernment\tand\tagency\tobligations | 19,256 | 1,244 | — | 20,500 |
| Mortgage\tand\tother\tasset-backed\tloans\tand\tsecurities:\nLoans\tand\tsecurities\tbacked\tby\tcommercial\treal\testate | — | 1 | — | 1 |
| Bank\tloans\tand\tbridge\tloans | — | 286 | 178 | 464 |
| Corporate\tdebt\tsecurities | — | 5,741 | 59 | 5,800 |
| Other\tdebt\tobligations | — | — | 2 | 2 |
| Equities\tand\tconvertible\tdebentures | 27,587 | 722 | 5 | 28,314 |
| Commodities | — | 1,224 | — | 1,224 |
| Total | $\t\t59,589 | $\t\t9,234 | $\t\t\t\t\t244 | $\t\t69,067 |

1.Includes	collateralized	debt	obligations	(CDOs)	and	collateralized	loan	obligations	(CLOs)	backed	by	real	estate	and	corporate	obligations	of	$234	million	in	level	2	and	$1.34	billion	in	level	3.

2.Includes	$14.93	billion	of	private	equity	investments,	$1.17	billion	of	investments	in	real	estate	entities	and	$562	million	of	convertible	debentures.

|  | Cash	Instrument	Assets	at	Fair	Value	as	of	December	2013 | Cash	Instrument	Assets	at	Fair	Value	as	of	December	2013 | Cash	Instrument	Assets	at	Fair	Value	as	of	December	2013 | Cash	Instrument	Assets	at	Fair	Value	as	of	December	2013 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Total |
| Commercial\tpaper,\tcertificates\tof\tdeposit,\ttime\tdeposits\tand\nother\tmoney\tmarket\tinstruments | $\t\t\t\t\t\t\t216 | $\t\t\t\t8,392 | $\t\t\t\t\t\t\t\t— | $\t\t\t\t8,608 |
| U.S.\tgovernment\tand\tfederal\tagency\tobligations | 29,582 | 41,490 | — | 71,072 |
| Non-U.S.\tgovernment\tand\tagency\tobligations | 29,451 | 11,453 | 40 | 40,944 |
| Mortgage\tand\tother\tasset-backed\tloans\tand\tsecurities:\nLoans\tand\tsecurities\tbacked\tby\tcommercial\treal\testate | — | 3,904 | 2,692 | 6,596 |
| Loans\tand\tsecurities\tbacked\tby\tresidential\treal\testate | — | 7,064 | 1,961 | 9,025 |
| Bank\tloans\tand\tbridge\tloans | — | 8,076 | 9,324 | 17,400 |
| Corporate\tdebt\tsecurities | 240 | 14,299 | 2,873 | 17,412 |
| State\tand\tmunicipal\tobligations | — | 1,219 | 257 | 1,476 |
| Other\tdebt\tobligations | — | 2,322 | 807 | 3,129 |
| Equities\tand\tconvertible\tdebentures | 76,945 | 9,394 | 14,685^\t2 | 101,024 |
| Commodities | — | 4,556 | — | 4,556 |
| Total^\t1 | $136,434 | $112,169 | $32,639 | $281,242 |

|  | Cash	Instrument	Liabilities	at	Fair	Value	as	of	December	2013 | Cash	Instrument	Liabilities	at	Fair	Value	as	of	December	2013 | Cash	Instrument	Liabilities	at	Fair	Value	as	of	December	2013 | Cash	Instrument	Liabilities	at	Fair	Value	as	of	December	2013 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Total |
| U.S.\tgovernment\tand\tfederal\tagency\tobligations | $\t\t20,871 | $\t\t\t\t\t\t\t\t\t49 | $\t\t\t\t\t\t\t\t— | $\t\t20,920 |
| Non-U.S.\tgovernment\tand\tagency\tobligations | 25,325 | 1,674 | — | 26,999 |
| Mortgage\tand\tother\tasset-backed\tloans\tand\tsecurities:\nLoans\tand\tsecurities\tbacked\tby\tcommercial\treal\testate | — | — | 1 | 1 |
| Loans\tand\tsecurities\tbacked\tby\tresidential\treal\testate | — | 2 | — | 2 |
| Bank\tloans\tand\tbridge\tloans | — | 641 | 284 | 925 |
| Corporate\tdebt\tsecurities | 10 | 5,241 | 2 | 5,253 |
| State\tand\tmunicipal\tobligations | — | 50 | 1 | 51 |
| Other\tdebt\tobligations | — | 3 | 1 | 4 |
| Equities\tand\tconvertible\tdebentures | 22,107 | 468 | 8 | 22,583 |
| Commodities | — | 966 | — | 966 |
| Total | $\t\t68,313 | $\t\t\t\t9,094 | $\t\t\t\t\t297 | $\t\t77,704 |

1.Includes	CDOs	and	CLOs	backed	by	real	estate	and	corporate	obligations	of	$746	million	in	level	2	and	$2.03	billion	in	level	3.

# Transfers	Between	Levels	of	the	Fair	Value	Hierarchy

Transfers	between	levels	of	the	fair	value	hierarchy	are	reported	at	the	beginning of	the	reporting	period	in	which	they	occur.	During	2014,	transfers	into	level	2 from	 level	1	of	cash	 instruments	were	$60	million,	 including	$47	million	of public	equity	securities	and	$13	million	of	U.S.	government	and	federal	agency obligations	due	to	decreased	market	activity	in	these	instruments.	Transfers	into level	1	from	level	2	of	cash	instruments	were	$92	million,	reflecting	transfers	of public	equity	securities	due	to	increased	market	activity	in	these	instruments.

During	 2013,	 transfers	 into	 level	 2 from level	 1	 of	 cash instruments	 were $1	 million,	 reflecting	 transfers	 of	 public	 equity securities	 due to	 decreased market	activity	in	these	instruments.	Transfers	into	level	1	from	level	2	of	cash instruments	 were	 $79	 million,	 reflecting transfers	 of	 public	 equity	 securities, primarily	due	to	increased	market	activity	in	these	instruments.

See	level	3	rollforward	below	for	information	about	transfers	between	level	2 and	level	3.

# Level	3	Rollforward

If	a	cash	instrument	asset	or	liability	was	transferred	to	level	3	during	a	reporting period,	its	entire	gain	or	loss	for	the	period	is	included	in	level	3.

Level	3	cash	instruments	are	frequently	economically	hedged	with	level	1	and level 2 cash	 instruments	 and/or	 level 1, level 2 or	 level 3 derivatives. Accordingly,	gains	or	losses	that	are	reported	in	level	3	can	be	partially	offset	by gains	or	losses	attributable	to	level	1	or	level	2	cash

instruments	and/or	level	1,	level	2	or	level	3	derivatives.	As	a	result,	gains	or losses	included	in	the	level	3	rollforward	below	do	not	necessarily	represent	the overall	impact	on	the	firm's	results	of	operations,	liquidity	or	capital	resources.

The	tables	below	present	changes	in	fair	value	for	all	cash	instrument	assets	and liabilities	categorized	as	level	3	as	of	the	end	of	the	year.	Purchases	in	the	tables below	include	both	originations	and	secondary	market	purchases.

Level	3	Cash	Instrument	Assets	at	Fair	Value	for	the	Year	Ended	December	2014

|  |  | Net | relating	to |  |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Balance, | realized | instruments |  |  |  | Transfers | Transfers | Balance, |
|  | beginning | gains/ | still\theld\tat |  |  |  | into | out\tof | end\tof |
| $\tin\tmillions | of\tyear | (losses) | year-end | \tPurchases | Sales | \tSettlements | level\t3 | level\t3 | year |
| Non-U.S.\tgovernment\tand\tagency\tobligations | $\t\t\t\t\t\t\t40 | $\t\t\t\t\t\t\t7 | $\t\t\t\t\t\t\t3 | $\t\t\t\t\t\t\t95 | \t$\t\t\t\t\t(20) | $\t\t\t\t\t\t\t\t3 | $\t\t\t\t\t\t\t8 | $\t\t\t\t\t\t\t— | $\t\t\t\t\t136 |
| Mortgage\tand\tother\tasset-backed\tloans\tand\tsecurities:\nLoans\tand\tsecurities\tbacked\tby\tcommercial\treal\testate | 2,692 | 173 | 64 | 1,891 | (436) | (977) | 176 | (189) | 3,394 |
| Loans\tand\tsecurities\tbacked\tby\tresidential\treal\testate | 1,961 | 123 | 224 | 1,008 | (363) | (497) | 235 | (146) | 2,545 |
| Bank\tloans\tand\tbridge\tloans | 9,324 | 696 | (194) | 3,863 | (1,367) | (4,673) | 294 | (597) | 7,346 |
| Corporate\tdebt\tsecurities | 2,873 | 252 | (9) | 2,645 | (1,031) | (926) | 427 | (416) | 3,815 |
| State\tand\tmunicipal\tobligations | 257 | 4 | 3 | 12 | (112) | (2) | 25 | (77) | 110 |
| Other\tdebt\tobligations | 807 | 24 | 41 | 448 | (212) | (164) | 21 | (95) | 870 |
| Equities\tand\tconvertible\tdebentures | 14,685 | 131 | 2,557 | 3,596 | (1,902) | (1,443) | 1,300 | (2,265) | 16,659 |
| Total | $32,639 | $1,410^\t1 | $2,689^\t1 | $13,558 | \t$(5,443) | $(8,679) | $2,486 | $(3,785) | $34,875 |

# Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2014

|  |  | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2014 | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2014 | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2014 | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2014 | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2014 | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2014 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | Net\tunrealized |  |  |  |  |  |  |
|  |  |  | (gains)/losses |  |  |  |  |  |  |
|  |  | Net | relating\tto |  |  |  |  |  |  |
|  | Balance, | realized | instruments |  |  |  | Transfers | Transfers | Balance, |
|  | beginning | (gains)/ | still\theld\tat |  |  |  | into | out\tof | end\tof |
| $\tin\tmillions | of\tyear | losses | year-end | \tPurchases | Sales | \tSettlements | level\t3 | level\t3 | year |
| Total | $\t\t\t\t\t297 | $\t\t\t(12) | $\t\t\t\t\t\t\t1 | $\t\t\t\t(223) | \t$\t\t\t\t121 | $\t\t\t\t\t\t23 | $\t\t\t\t\t49 | $\t\t\t\t\t(12) | $\t\t\t\t\t244 |

1.The	aggregate	amounts	include	gains	of	approximately	$247	million,	$2.98	billion	and	$875	million	reported	in	"Market	making,"	"Other	principal	transactions"	and	"Interest	income,"	respectively.

The	net	unrealized	gain	on	level	3	cash	instruments	of	$2.69	billion	(reflecting	a $2.69	 billion	 gain	 on	 cash	 instrument	 assets	 and	 a	 $1	 million	 loss	 on	 cash instrument	 liabilities)	 for	 2014	 primarily	 reflected	 gains	 on	 private	 equity investments	principally	driven	by	company-specific	events	and	strong	corporate performance.

Transfers	 out	 of	 level	 3	 during	 2014	 primarily	 reflected	 transfers	 of	 certain private	 equity	 investments,	 bank	 loan	 and	 bridge	 loans	 and	 corporate	 debt securities	to	level	2	principally	due	to	increased	price	transparency	as	a	result	of market	evidence,	including	market	transactions	in	these	instruments.

Transfers	into	level	3	during	2014	primarily	reflected	transfers	of	certain	private equity	investments	and	corporate	debt	securities	from	level	2	principally	due	to reduced	price	transparency	as	a	result	of	a	lack	of	market	evidence,	including fewer	market	transactions	in	these	instruments.

|  |  | Net | relating	to |  |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Balance, | realized | instruments |  |  |  | Transfers | Transfers | Balance, |
|  | beginning | gains/ | still\theld\tat |  |  |  | into | out\tof | end\tof |
| $\tin\tmillions | of\tyear | (losses) | year-end | \tPurchases | Sales\t\t\t\t \tSettlements | Sales\t\t\t\t \tSettlements | level\t3 | level\t3 | year |
| Non-U.S.\tgovernment\tand\tagency\tobligations | $\t\t\t\t\t\t\t26 | $\t\t\t\t\t\t\t7 | $\t\t\t\t\t\t\t5 | $\t\t\t\t\t12 | \t$\t\t\t\t\t(20) | $\t\t\t\t\t\t\t— | $\t\t\t\t\t\t10 | $\t\t\t\t\t\t\t— | \t $\t\t\t\t\t\t\t40 |
| Mortgage\tand\tother\tasset-backed\tloans\tand\tsecurities:\nLoans\tand\tsecurities\tbacked\tby\tcommercial\treal\testate | 3,389 | 206 | 224 | 733 | (894) | (1,055) | 262 | (173) | 2,692 |
| Loans\tand\tsecurities\tbacked\tby\tresidential\treal\testate | 1,619 | 143 | 150 | 660 | (467) | (269) | 209 | (84) | 1,961 |
| Bank\tloans\tand\tbridge\tloans | 11,235 | 529 | 444 | 3,725 | (2,390) | (4,778) | 942 | (383) | 9,324 |
| Corporate\tdebt\tsecurities | 2,821 | 407 | 398 | 1,140 | (1,584) | (576) | 404 | (137) | 2,873 |
| State\tand\tmunicipal\tobligations | 619 | 6 | (2) | 134 | (492) | (2) | 6 | (12) | 257 |
| Other\tdebt\tobligations | 1,185 | 47 | 38 | 648 | (445) | (161) | 14 | (519) | 807 |
| Equities\tand\tconvertible\tdebentures | 14,855 | 189 | 1,709 | 1,866 | (862) | (1,610) | 882 | (2,344) | 14,685 |
| Total | $35,749 | $1,534^\t1 | $2,966^\t1 | $8,918 | \t$(7,154) | $(8,451) | $2,729 | $(3,652) | \t $32,639 |

|  |  | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2013 | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2013 | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2013 | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2013 | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2013 | Level	3	Cash	Instrument	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2013 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | Net\tunrealized |  |  |  |  |  |  |
|  |  |  | (gains)/losses |  |  |  |  |  |  |
|  |  | Net | relating\tto |  |  |  |  |  |  |
|  | Balance, | realized | instruments |  |  |  | Transfers | Transfers | Balance, |
|  | beginning | (gains)/ | still\theld\tat |  |  |  | into | out\tof | end\tof |
| $\tin\tmillions | of\tyear | losses | year-end | \tPurchases | Sales\t\t\t\t \tSettlements | Sales\t\t\t\t \tSettlements | level\t3 | level\t3 | year |
| Total | $\t\t\t\t\t642 | $\t\t\t\t\t\t(1) | $\t\t\t\t(64) | $\t\t(432) | \t$\t\t\t\t269 | $\t\t\t\t\t\t\t\t8 | $\t\t\t\t\t35 | $\t\t\t(160) | \t $\t\t\t\t\t297 |

1.The	aggregate	amounts	include	gains	of	approximately	$1.09	billion,	$2.69	billion	and	$723	million	reported	in	"Market	making,"	"Other	principal	transactions"	and	"Interest	income,"	respectively.

The	net	unrealized	gain	on	level	3	cash	instruments	of	$3.03	billion	(reflecting $2.97	 billion	 on	 cash	 instrument	 assets	 and	 $64	 million	 on	 cash	 instrument liabilities)	for	2013	primarily	consisted	of	gains	on	private	equity	investments, principally	driven	by	strong	corporate	performance,	bank	loans	and	bridge	loans, primarily	due	to	tighter	credit	spreads	and	favorable	company-specific	events, and	corporate	debt	securities,	primarily	due	to	tighter	credit	spreads.

Transfers	into	level	3	during	2013	primarily	reflected	transfers	of	certain	bank loans	and	bridge	loans	and	private	equity	investments	from	level	2,	principally due	to	a	lack	of	market	transactions	in	these	instruments.

Transfers	 out	 of	 level	 3	 during	 2013	 primarily	 reflected	 transfers	 of	 certain private	equity	investments	to	level	2,	principally	due	to	increased	transparency of	market	prices	as	a	result	of	market	transactions	in	these	instruments.

# Investments	in	Funds	That	Are	Calculated	Using	Net	Asset	Value

# Per	Share

Cash	instruments	at	fair	value	include	investments	in	funds	that	are	calculated based	on	the	net	asset	value	per	share	(NAV)	of	the	investment	fund.	The	firm uses	NAV	as	its	measure	of	fair	value	for	fund	investments	when	(i)	the	fund investment	does	not	have	a	readily	determinable	fair	value	and	(ii)	the	NAV	of the	investment	fund	is	calculated	in	a	manner	consistent	with	the	measurement principles	 of	 investment	 company	 accounting,	 including	 measurement	 of	 the underlying	investments	at	fair	value.

The	firm's	investments	in	funds	that	are	calculated	using	NAV	primarily	consist of	 investments	 in	firm-sponsored	private	equity,	credit,	real	estate	and	hedge funds	where	the	firm	co-invests	with	third-party	investors.

Private	equity	funds	primarily	invest	in	a	broad	range	of	industries	worldwide	in a	 variety	 of	 situations,	 including	 leveraged	 buyouts,	 recapitalizations,	 growth investments	and	distressed	investments.	Credit	funds	generally	invest	in	loans and	other	fixed	income	instruments	and	are	focused	on	providing	private	high- yield	 capital	 for	 mid-	 to	 large-sized	 leveraged	 and	 management	 buyout transactions,	 recapitalizations,	 financings,	 refinancings,	 acquisitions	 and restructurings	for	private	equity	firms,	private	family	companies	and	corporate issuers.	Real	estate	funds	 invest	globally,	primarily	 in	real	estate	companies, loan	portfolios,	debt	recapitalizations	and	property.	The	private	equity,	credit	and real	estate	funds	are	primarily	closed-end	funds	in	which	the	firm's	investments are	generally	not	eligible	for	redemption.	Distributions	will	be	received	from these	funds	as	the	underlying	assets	are	liquidated	or	distributed.

The	firm	also	invests	in	hedge	funds,	primarily	multi-disciplinary	hedge	funds that	employ	a	fundamental	bottom-up	investment	approach	across	various	asset classes	 and	 strategies	 including	 long/short	 equity,	 credit,	 convertibles,	 risk arbitrage,	 special	 situations	 and	 capital	 structure	 arbitrage.	 As	 of	 December 2014,	the	firm's	investments	in	hedge	funds	primarily	include	interests	where	the underlying	assets	are	illiquid	in	nature,	and	proceeds	from	redemptions	will	not be	received	until	the	underlying	assets	are	liquidated	or	distributed.

Many	 of	 the	 funds	 described	 above	 are	 "covered	 funds"	 as	 defined	 by	 the Volcker	 Rule	 of	 the	 U.S.	 Dodd-Frank	 Wall	 Street	 Reform	 and	 Consumer Protection	 Act	 (Dodd-Frank	 Act).	 The	 Board	 of	 Governors	 of	 the	 Federal Reserve	 System	 (Federal	 Reserve	 Board)	 extended	 the	 conformance	 period through	July	2016	for	investments	in,	and	relationships	with,	covered	funds	that were	in	place	prior	to	December	31,	2013,	and	indicated	that	it	intends	to	further extend	the	conformance	period	through	July	2017.

The	 firm	 continues	 to	 manage	 its	 existing	 funds,	 taking	 into	 account	 the extension	 outlined	 above.	 Since	 March	 2012,	 the	 firm	 has	 redeemed $2.97	billion	of	its	interests	in	hedge	funds,	including	$762	million	during	2014 and	$1.15	billion	during	2013.	In	order	to	be	compliant	with	the	Volcker	Rule, the	firm	will	be	required	to	reduce	most	of	its	interests	in	the	funds	in	the	table below	by	the	prescribed	compliance	date.

The	 tables	 below	 present	 the	 fair	 value	 of	 the	 firm's	 investments in, and unfunded	commitments	to,	funds	that	are	calculated	using	NAV.

1.The	decreases	from	December	2013	to	December	2014	primarily	reflect	both	cash	and	in- kind	distributions	received	and	the	related	cancellations	of	the	firm's	commitments	to	certain credit	funds.

# Derivatives	and	Hedging	Activities

# Derivative	Activities

Derivatives	are	instruments	that	derive	their	value	from	underlying	asset	prices, indices,	 reference	 rates	 and	 other	 inputs,	 or	 a	 combination	 of	 these	 factors. Derivatives	may	be	traded	on	an	exchange	(exchange-traded)	or	they	may	be privately	negotiated	contracts,	which	are	usually	referred	to	as	OTC	derivatives. Certain	of	the	firm's	OTC	derivatives	are	cleared	and	settled	through	central clearing	 counterparties	 (OTC-cleared),	 while	 others	 are	 bilateral	 contracts between	two	counterparties	(bilateral	OTC).

Market-Making.	As	a	market	maker,	the	firm	enters	into	derivative	transactions to	provide	liquidity	to	clients	and	to	facilitate	the	transfer	and	hedging	of	their risks.	In	this	capacity,	the	firm	typically	acts	as	principal	and	is	consequently required	 to	 commit	 capital	 to	 provide	 execution.	 As	 a	 market	 maker,	 it	 is essential	 to	 maintain	 an	 inventory	 of	 financial	 instruments	 sufficient	 to	 meet expected	client	and	market	demands.

Risk	Management.	The	firm	also	enters	into	derivatives	to	actively	manage risk	 exposures	 that	 arise	 from	 its	 market-making	 and	 investing	 and	 lending activities	in	derivative	and	cash	instruments.	The	firm's	holdings	and	exposures are	hedged,	in	many	cases,	on	either	a	portfolio	or	risk-specific	basis,	as	opposed to	an	 instrument-by-instrument	basis.	The	offsetting	 impact	of	 this	economic hedging	is	reflected	in	the	same	business	segment	as	the	related	revenues.	In addition,	the	firm	may	enter	into	derivatives	designated	as	hedges	under	U.S. GAAP.	These	derivatives	are	used	to	manage	interest	rate	exposure	in	certain fixed-rate	 unsecured	 long-term	 and	 short-term	 borrowings,	 and	 deposits,	 to manage	foreign	currency	exposure	on	 the	net	 investment	 in	certain	non-U.S. operations,	and	to	manage	the	exposure	to	the	variability	in	cash	flows	associated with	the	forecasted	sales	of	certain	energy	commodities	by	one	of	the	firm's consolidated	investments.

The	firm	enters	into	various	types	of	derivatives,	including:

Ÿ	Futures	and	Forwards.	Contracts	that	commit	counterparties	to	purchase or	sell	financial	instruments,	commodities	or	currencies	in	the	future.

Ÿ	Swaps.	Contracts	that	require	counterparties	to	exchange	cash	flows	such	as currency	or	interest	payment	streams.	The	amounts	exchanged	are	based	on	the specific	 terms	 of	 the	 contract	 with	 reference	 to	 specified	 rates,	 financial instruments,	commodities,	currencies	or	indices.

Ÿ	Options.	Contracts	in	which	the	option	purchaser	has	the	right,	but	not	the obligation,	to	purchase	from	or	sell	to	the	option	writer	financial	instruments, commodities	or	currencies	within	a	defined	time	period	for	a	specified	price.

Derivatives	are	reported	on	a	net-by-counterparty	basis	(i.e.,	the	net	payable	or receivable	for	derivative	assets	and	liabilities	for	a	given	counterparty)	when	a legal	right	of	setoff	exists	under	an	enforceable	netting	agreement	(counterparty netting).	 Derivatives	 are	 accounted	 for	 at	 fair	 value,	 net	 of	 cash	 collateral received	or	posted	under	enforceable	credit	support	agreements	(cash	collateral netting).	Derivative	assets	and	liabilities	are	included	in	"Financial	instruments owned,	at	fair	value"	and	"Financial	instruments	sold,	but	not	yet	purchased,	at fair	value,"	respectively.	Substantially	all	gains	and	 losses	on	derivatives	not designated	 as	 hedges	 under	ASC	 815	 are	 included	 in	 "Market	 making"	 and "Other	principal	transactions."

The	tables	below	present	the	fair	value	of	derivatives	on	a	net-by-counterparty basis.

|  | As	of	December	2014 | As	of	December	2014 |
| :--- | :--- | :--- |
| $\tin\tmillions | Derivative\nAssets | Derivative\nLiabilities |
| Exchange-traded | $\t\t2,533 | $\t\t2,070 |
| OTC | 60,737 | 60,946 |
| Total | $63,270 | $63,016 |

|  | As	of	December	2013 |  |
| :--- | :--- | :--- |
| $\tin\tmillions | Derivative\nAssets | Derivative\nLiabilities |
| Exchange-traded | $\t\t4,277 | $\t\t6,366 |
| OTC | 53,602 | 43,356 |
| Total | $57,879 | $49,722 |
|  | Goldman\tSachs\t2014\tForm\t10-K | 141 |

The	table	below	presents	the	fair	value	and	the	notional	amount	of	derivative contracts	by	major	product	type	on	a	gross	basis.	Gross	fair	values	exclude	the effects	 of	 both	 counterparty	 netting	 and	 collateral,	 and	 therefore	 are	 not representative	of	the	firm's	exposure.	The	table	below	also	presents	the	amounts of	 counterparty	 and	 cash	 collateral	 netting	 in	 the	 consolidated	 statements	 of financial	condition,	as	well	as	cash	and	securities	collateral	posted	and	received under	enforceable	credit	support	agreements

that	do	not	meet	the	criteria	for	netting	under	U.S.	GAAP.	Where	the	firm	has received	or	posted	collateral	under	credit	support	agreements,	but	has	not	yet determined	such	agreements	are	enforceable,	the	related	collateral	has	not	been netted	in	the	table	below.	Notional	amounts,	which	represent	the	sum	of	gross long	and	short	derivative	contracts,	provide	an	indication	of	the	volume	of	the firm's	derivative	activity	and	do	not	represent	anticipated	losses.

|  |  | As	of	December	2014 |  |  | As	of	December	2013 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Derivative | Derivative | Notional | Derivative | Derivative | Notional |
| $\tin\tmillions | Assets | Liabilities | Amount | Assets | Liabilities | Amount |
| Derivatives\tnot\taccounted\tfor\tas\thedges |  |  |  |  |  |  |
| Interest\trates | \t$\t\t\t786,362 | $739,607 | \t$47,112,518 | \t$\t\t641,186 | \t $587,110 | \t$44,110,483 |
| Exchange-traded | 228 | 238 | 3,151,865 | 157 | 271 | 2,366,448 |
| OTC-cleared | 351,801 | 330,298 | 30,408,636 | 266,230 | 252,596 | 24,888,301 |
| Bilateral\tOTC | 434,333 | 409,071 | 13,552,017 | 374,799 | 334,243 | 16,855,734 |
| Credit | 54,848 | 50,154 | 2,500,958 | 60,751 | 56,340 | 2,946,376 |
| OTC-cleared | 5,812 | 5,663 | 378,099 | 3,943 | 4,482 | 348,848 |
| Bilateral\tOTC | 49,036 | 44,491 | 2,122,859 | 56,808 | 51,858 | 2,597,528 |
| Currencies | 109,916 | 108,607 | 5,566,203 | 70,757 | 63,659 | 4,311,971 |
| Exchange-traded | 69 | 69 | 17,214 | 98 | 122 | 23,908 |
| OTC-cleared | 100 | 96 | 13,304 | 88 | 97 | 11,319 |
| Bilateral\tOTC | 109,747 | 108,442 | 5,535,685 | 70,571 | 63,440 | 4,276,744 |
| Commodities | 28,990 | 28,546 | 669,479 | 18,007 | 18,228 | 701,101 |
| Exchange-traded | 7,683 | 7,166 | 321,378 | 4,323 | 3,661 | 346,057 |
| OTC-cleared | 313 | 315 | 3,036 | 11 | 12 | 135 |
| Bilateral\tOTC | 20,994 | 21,065 | 345,065 | 13,673 | 14,555 | 354,909 |
| Equities | 58,931 | 58,649 | 1,525,495 | 56,719 | 55,472 | 1,406,499 |
| Exchange-traded | 9,592 | 9,636 | 541,711 | 10,544 | 13,157 | 534,840 |
| Bilateral\tOTC | 49,339 | 49,013 | 983,784 | 46,175 | 42,315 | 871,659 |
| Subtotal | 1,039,047 | 985,563 | 57,374,653 | 847,420 | 780,809 | 53,476,430 |
| Derivatives\taccounted\tfor\tas\thedges |  |  |  |  |  |  |
| Interest\trates | 14,272 | 262 | 126,498 | 11,403 | 429 | 132,879 |
| OTC-cleared | 2,713 | 228 | 31,109 | 1,327 | 27 | 10,637 |
| Bilateral\tOTC | 11,559 | 34 | 95,389 | 10,076 | 402 | 122,242 |
| Currencies | 125 | 16 | 9,636 | 74 | 56 | 9,296 |
| OTC-cleared | 12 | 3 | 1,205 | 1 | 10 | 869 |
| Bilateral\tOTC | 113 | 13 | 8,431 | 73 | 46 | 8,427 |
| Commodities | — | — | — | 36 | — | 335 |
| Exchange-traded | — | — | — | — | — | 23 |
| Bilateral\tOTC | — | — | — | 36 | — | 312 |
| Subtotal | 14,397 | 278 | 136,134 | 11,513 | 485 | 142,510 |
| Gross\tfair\tvalue/notional\tamount\tof\tderivatives | \t$1,053,444^\t1 | $985,841^\t1 | \t$57,510,787 | $858,933^\t1 | \t $781,294^\t1 | \t$53,618,940 |
| Amounts\tthat\thave\tbeen\toffset\tin\tthe\tconsolidated\tstatements\tof\tfinancial\tcondition |  |  |  |  |  |  |
| Counterparty\tnetting | (886,670) | (886,670) |  | (707,411) | (707,411) |  |
| Exchange-traded | (15,039) | (15,039) |  | (10,845) | (10,845) |  |
| OTC-cleared | (335,792) | (335,792) |  | (254,756) | (254,756) |  |
| Bilateral\tOTC | (535,839) | (535,839) |  | (441,810) | (441,810) |  |
| Cash\tcollateral\tnetting | (103,504) | (36,155) |  | (93,643) | (24,161) |  |
| OTC-cleared | (24,801) | (738) |  | (16,353) | (2,515) |  |
| Bilateral\tOTC | (78,703) | (35,417) |  | (77,290) | (21,646) |  |
| Fair\tvalue\tincluded\tin\tfinancial\tinstruments\towned/financial\tinstruments\tsold,\tbut\tnot\tyet\npurchased | \t$\t\t\t\t\t63,270 | $\t\t63,016 |  | $\t\t57,879 | \t $\t\t49,722 |  |
| Amounts\tthat\thave\tnot\tbeen\toffset\tin\tthe\tconsolidated\tstatements\tof\tfinancial\tcondition |  |  |  |  |  |  |
| Cash\tcollateral\treceived/posted | (980) | (2,940) |  | (636) | (2,806) |  |
| Securities\tcollateral\treceived/posted | (14,742) | (18,159) |  | (13,225) | (10,521) |  |
| Total | \t$\t\t\t\t\t47,548 | $\t\t41,917 |  | $\t\t44,018 | \t $\t\t36,395 |  |

1.Includes	derivative	assets	and	derivative	liabilities	of	$25.93	billion	and	$26.19	billion,	respectively,	as	of	December	2014,	and	derivative	assets	and	derivative	liabilities	of	$23.18	billion	and $23.46	billion,	respectively,	as	of	December	2013,	which	are	not	subject	to	an	enforceable	netting	agreement	or	are	subject	to	a	netting	agreement	that	the	firm	has	not	yet	determined	to	be enforceable.

# Valuation	Techniques	for	Derivatives

The	firm's	level	2	and	level	3	derivatives	are	valued	using	derivative	pricing models	(e.g.,	discounted	cash	flow	models,	correlation	models,	and	models	that incorporate	 option	 pricing	 methodologies,	 such	 as	 Monte	 Carlo	 simulations). Price	transparency	of	derivatives	can	generally	be	characterized	by	product	type.

Ÿ	Interest	 Rate. In	 general,	 the	 key	 inputs	 used	 to	 value	 interest	 rate derivatives	are	transparent,	even	for	most	long-dated	contracts.	Interest	rate swaps	 and	 options	 denominated	 in	 the	 currencies	 of	 leading	 industrialized nations	are	characterized	by	high	trading	volumes	and	tight	bid/offer	spreads. Interest	rate	derivatives	that	reference	indices,	such	as	an	inflation	index,	or the	shape	of	the	yield	curve	(e.g.,	10-year	swap	rate	vs.	2-year	swap	rate)	are more	complex,	but	the	key	inputs	are	generally	observable.

Ÿ	Credit.	 Price	 transparency	 for	 credit	 default	 swaps,	 including	 both	 single names	and	baskets	of	credits,	varies	by	market	and	underlying	reference	entity or	obligation.	Credit	default	swaps	that	reference	indices,	large	corporates	and major	 sovereigns	 generally	 exhibit	 the	 most	 price	 transparency.	 For	 credit default	swaps	with	other	underliers,	price	transparency	varies	based	on	credit rating,	 the	 cost	 of	 borrowing	 the	 underlying	 reference	 obligations,	 and	 the availability	 of	 the	 underlying	 reference	 obligations	 for	 delivery	 upon	 the default	of	the	issuer.	Credit	default	swaps	that	reference	loans,	asset-backed securities	 and	 emerging	 market	 debt	 instruments	 tend	 to	 have	 less	 price transparency	 than	 those	 that	 reference	 corporate	 bonds.	 In	 addition,	 more complex	credit	derivatives,	such	as	those	sensitive	to	the	correlation	between two	 or	 more	 underlying	 reference	 obligations,	 generally	 have	 less	 price transparency.

Ÿ	Currency.	Prices	for	currency	derivatives	based	on	 the	exchange	rates	of leading	industrialized	nations,	including	those	with	longer	tenors,	are	generally transparent.	 The	 primary	 difference	 between	 the	 price	 transparency	 of developed	and	emerging	market	currency	derivatives	is	that	emerging	markets tend	to	be	observable	for	contracts	with	shorter	tenors.

Ÿ	Commodity.	 Commodity	 derivatives	 include	 transactions	 referenced	 to energy	(e.g.,	oil	and	natural	gas),	metals	(e.g.,	precious	and	base)	and	soft commodities	 (e.g.,	 agricultural).	 Price	 transparency	 varies	 based	 on	 the underlying	 commodity,	 delivery	 location,	 tenor	 and	 product	 quality	 (e.g., diesel	fuel	compared	to	unleaded	gasoline).	In	general,	price	transparency	for commodity	derivatives	is	greater	for	contracts	with	shorter	tenors	and	contracts that	 are	 more	 closely	 aligned	 with	 major	 and/or	 benchmark	 commodity indices.

Ÿ	Equity.	 Price	 transparency	 for	 equity	 derivatives	 varies	 by	 market	 and underlier.	Options	on	indices	and	the	common	stock	of	corporates	included	in major	equity	indices	exhibit	the	most	price	transparency.	Equity	derivatives generally	have	observable	market	prices,	except	for	contracts	with	long	tenors or	reference	prices	that	differ	significantly	from	current	market	prices.	More complex	equity	derivatives,	such	as	those	sensitive	to	the	correlation	between two	or	more	individual	stocks,	generally	have	less	price	transparency.

Liquidity	is	essential	to	observability	of	all	product	types.	If	transaction	volumes decline,	 previously	 transparent	 prices	 and	 other	 inputs	 may	 become unobservable.	Conversely,	even	highly	structured	products	may	at	times	have trading	volumes	large	enough	to	provide	observability	of	prices	and	other	inputs. See	Note	5	for	an	overview	of	the	firm's	fair	value	measurement	policies.

# Level	1	Derivatives

Level	1	derivatives	include	short-term	contracts	for	future	delivery	of	securities when	 the	 underlying	 security	 is	 a	 level	 1	 instrument,	 and	 exchange-traded derivatives	if	they	are	actively	traded	and	are	valued	at	their	quoted	market	price.

Level	2	derivatives	include	OTC	derivatives	for	which	all	significant	valuation inputs	are	corroborated	by	market	evidence	and	exchange-traded	derivatives	that are	 not	 actively	 traded	 and/or	 that	 are	 valued	 using	 models	 that	 calibrate	 to market-clearing	levels	of	OTC	derivatives.	In	evaluating	the	significance	of	a valuation	input,	the	firm	considers,	among	other	factors,	a	portfolio's	net	risk exposure	to	that	input.

The	 selection	 of	 a	 particular	 model	 to	 value	 a	 derivative	 depends	 on	 the contractual	terms	of	and	specific	risks	inherent	in	the	instrument,	as	well	as	the availability	of	pricing	information	in	the	market.	For	derivatives	that	trade	in liquid	 markets,	 model	 selection	 does	 not	 involve	 significant	 management judgment	because	outputs	of	models	can	be	calibrated	to	market-clearing	levels.

Valuation	models	require	a	variety	of	inputs,	such	as	contractual	terms,	market prices,	yield	curves,	discount	rates	(including	those	derived	from	interest	rates	on collateral	 received	 and	 posted	 as	 specified	 in	 credit	 support	 agreements	 for collateralized	 derivatives),	 credit	 curves,	 measures	 of	 volatility,	 prepayment rates,	loss	severity	rates	and	correlations	of	such	inputs.	Significant	inputs	to	the valuations	of	level	2	derivatives	can	be	verified	to	market	transactions,	broker	or dealer	quotations	or	other	alternative	pricing	sources	with	reasonable	levels	of price	transparency.	Consideration	is	given	to	the	nature	of	the	quotations	(e.g., indicative	or	firm)	and	the	relationship	of	recent	market	activity	to	the	prices provided	from	alternative	pricing	sources.

Level	3	derivatives	are	valued	using	models	which	utilize	observable	level	1 and/or	level	2	inputs,	as	well	as	unobservable	level	3	inputs.

Ÿ	For	the	majority	of	the	firm's	interest	rate	and	currency	derivatives	classified within	level	3,	significant	unobservable	inputs	include	correlations	of	certain currencies	and	interest	rates	(e.g.,	the	correlation	between	Euro	inflation	and Euro	interest	rates)	and	specific	interest	rate	volatilities.

Ÿ	For	level	3	credit	derivatives,	significant	unobservable	inputs	include	illiquid credit	spreads	and	upfront	credit	points,	which	are	unique	to	specific	reference obligations	 and	 reference	 entities,	 recovery	 rates	 and	 certain	 correlations required	 to	 value	 credit	 and	 mortgage	 derivatives	 (e.g.,	 the	 likelihood	 of default	of	the	underlying	reference	obligation	relative	to	one	another).

Ÿ	For	 level 3 equity	 derivatives,	 significant	 unobservable	 inputs	 generally include	equity	volatility	inputs	for	options	that	are	very	long-dated	and/or	have strike	prices	that	differ	significantly	from	current	market	prices.	In	addition, the	valuation	of	certain	structured	trades	requires	the	use	of	level	3	correlation inputs,	 such	 as	 the	 correlation	 of	 the	 price	 performance	 of	 two	 or	 more individual	stocks	or	the	correlation	of	the	price	performance	for	a	basket	of stocks	to	another	asset	class	such	as	commodities.

Ÿ	For	 level	 3	 commodity	 derivatives,	 significant	 unobservable	 inputs	 include volatilities	for	options	with	strike	prices	that	differ	significantly	from	current market	prices	and	prices	or	spreads	for	certain	products	for	which	the	product quality	or	physical	location	of	the	commodity	is	not	aligned	with	benchmark indices.

Subsequent	to	the	initial	valuation	of	a	level	3	derivative,	the	firm	updates	the level	1	and	level	2	inputs	to	reflect	observable	market	changes	and	any	resulting gains	 and	 losses	 are	 recorded	 in	 level	 3.	 Level	 3	 inputs	 are	 changed	 when corroborated	by	evidence	such	as	similar	market	transactions,	third-party	pricing services	and/or	broker	or	dealer	quotations	or	other	empirical	market	data.	In circumstances	 where	 the	 firm	 cannot	 verify	 the	 model	 value	 by	 reference	 to market	transactions,	it	is	possible	that	a	different	valuation	model	could	produce a	materially	different	estimate	of	fair	value.	See	below	for	further	information about	significant	unobservable	inputs	used	in	the	valuation	of	level	3	derivatives.

# Valuation	Adjustments

Valuation	adjustments	are	integral	to	determining	the	fair	value	of	derivative portfolios	 and	 are	 used	 to	 adjust	 the	 mid-market	 valuations	 produced	 by derivative	 pricing	 models	 to	 the	 appropriate	 exit	 price	 valuation.	 These adjustments	incorporate	bid/offer	spreads,	the	cost	of	liquidity,	credit	valuation adjustments	and	funding	valuation	adjustments,	which	account	for	the	credit	and funding	risk	inherent	in	the	uncollateralized	portion	of	derivative	portfolios.	The firm	 also	 makes	 funding	 valuation	 adjustments	 to	 collateralized	 derivatives where	the	terms	of	the	agreement	do	not	permit	the	firm	to	deliver	or	repledge collateral	 received.	 Market-based	 inputs	 are	 generally	 used	 when	 calibrating valuation	adjustments	to	market-clearing	levels.

In	addition,	for	derivatives	that	include	significant	unobservable	inputs,	the	firm makes	model	or	exit	price	adjustments	to	account	for	the	valuation	uncertainty present	in	the	transaction.

The	tables	below	present	the	ranges	of	significant	unobservable	inputs	used	to value	the	firm's	level	3	derivatives	as	well	as	averages	and	medians	of	these inputs.	The	ranges	represent	the	significant	unobservable	inputs	that	were	used	in the	 valuation	 of	 each	 type	 of	 derivative.	 Averages	 represent	 the	 arithmetic average	of	the	inputs	and	are	not	weighted	by	the	relative	fair	value	or	notional of	 the	 respective	 financial	 instruments.	An	 average	 greater	 than	 the	 median indicates	that	the	majority	of	inputs	are	below	the	average.	The	ranges,	averages and	medians	of	these

inputs	are	not	representative	of	the	appropriate	inputs	to	use	when	calculating	the fair	value	of	any	one	derivative.	For	example,	the	highest	correlation	presented in	 the	 tables	 below	 for	 interest	 rate	 derivatives	 is	 appropriate	 for	 valuing	 a specific	interest	rate	derivative	but	may	not	be	appropriate	for	valuing	any	other interest	rate	derivative.	Accordingly,	the	ranges	of	inputs	presented	below	do	not represent	uncertainty	in,	or	possible	ranges	of,	fair	value	measurements	of	the firm's	level	3	derivatives.

1.The	range	of	unobservable	inputs	for	correlation	across	derivative	product	types	(i.e.,	cross-asset	correlation)	was	(34)%	to	80%	(Average:	33%	/	Median:	35%)	as	of	December	2014.

2.The	fair	value	of	any	one	instrument	may	be	determined	using	multiple	valuation	techniques.	For	example,	option	pricing	models	and	discounted	cash	flows	models	are	typically	used	together	to determine	fair	value.	Therefore,	the	level	3	balance	encompasses	both	of	these	techniques.

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

1.The	range	of	unobservable	inputs	for	correlation	across	derivative	product	types	(i.e.,	cross-asset	correlation)	was	(42)%	to	78%	(Average:	25%	/	Median:	30%)	as	of	December	2013.

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

# Range	of	Significant	Unobservable	Inputs

The	 following	 provides	 further	 information	 about	 the	 ranges	 of	 significant unobservable	inputs	used	to	value	the	firm's	level	3	derivative	instruments.

Ÿ	Correlation.	Ranges	for	correlation	cover	a	variety	of	underliers	both	within one	 market	 (e.g.,	 equity	 index	 and	 equity	 single	 stock	 names)	 and	 across markets	(e.g.,	correlation	of	an	interest	rate	and	a	foreign	exchange	rate),	as well	as	across	regions.	Generally,	cross-asset	correlation	inputs	are	used	to value	 more	 complex	 instruments	 and	 are	 lower	 than	 correlation	 inputs	 on assets	within	the	same	derivative	product	type.

Ÿ	Volatility.	Ranges	for	volatility	cover	numerous	underliers	across	a	variety	of markets,	maturities	and	strike	prices.	For	example,	volatility	of	equity	indices is	generally	lower	than	volatility	of	single	stocks.

Ÿ	Credit	spreads,	upfront	credit	points	and	recovery	rates.	The	ranges for	credit	spreads,	upfront	credit	points	and	recovery	rates	cover	a	variety	of underliers	 (index	 and	 single	 names),	 regions,	 sectors,	 maturities	 and	 credit qualities	 (high-yield	 and	 investment-grade).	 The	 broad	 range	 of	 this population	gives	rise	to	the	width	of	the	ranges	of	significant	unobservable inputs.

Ÿ	Commodity	prices	and	spreads.	The	ranges	for	commodity	prices	and spreads	cover	variability	in	products,	maturities	and	locations.

# Sensitivity	 of	 Fair	 Value	 Measurement to	 Changes in	 Significant Unobservable	Inputs

The	following	provides	a	description	of	the	directional	sensitivity	of	the	firm's level	3	fair	value	measurements	to	changes	in	significant	unobservable	inputs,	in isolation.	Due	to	the	distinctive	nature	of	each	of	the	firm's	level	3	derivatives, the	 interrelationship	of	 inputs	 is	not	necessarily	uniform	within	each	product type.

Ÿ	Correlation.	 In	 general,	 for	 contracts	 where	 the	 holder	 benefits	 from	 the convergence	of	the	underlying	asset	or	index	prices	(e.g.,	interest	rates,	credit spreads,	foreign	exchange	rates,	inflation	rates	and	equity	prices),	an	increase in	correlation	results	in	a	higher	fair	value	measurement.

Ÿ	Volatility.	In	general,	for	purchased	options	an	increase	in	volatility	results	in a	higher	fair	value	measurement.

Ÿ	Credit	spreads,	upfront	credit	points	and	recovery	rates.	In	general, the	 fair	 value	 of	 purchased	 credit	 protection	 increases	 as	 credit	 spreads	 or upfront	 credit	 points	 increase	 or	 recovery	 rates	 decrease.	 Credit	 spreads, upfront	credit	points	and	recovery	rates	are	strongly	related	to	distinctive	risk factors	of	the	underlying	reference	obligations,	which	include	reference	entity- specific	factors	such	as	 leverage,	volatility	and	 industry,	market-based	risk factors,	 such	 as	 borrowing	 costs	 or	 liquidity	 of	 the	 underlying	 reference obligation,	and	macroeconomic	conditions.

Ÿ	Commodity	 prices	 and	 spreads. In	 general,	 for	 contracts	 where	 the holder	is	receiving	a	commodity,	an	increase	in	the	spread	(price	difference from	a	benchmark	index	due	to	differences	in	quality	or	delivery	location)	or price	results	in	a	higher	fair	value	measurement.

# Fair	Value	of	Derivatives	by	Level

The	tables	below	present	the	fair	value	of	derivatives	on	a	gross	basis	by	level and	major	product	type	as	well	as	the	impact	of	netting.	The	gross	fair	values exclude the effects	 of	 both counterparty	 netting and collateral	 netting, and therefore	are	not	representative	of	the	firm's	exposure.

Counterparty	netting	is	reflected	in	each	level	to	the	extent	that	receivable	and payable balances are netted within the same level and is included in "Counterparty	and	cash	collateral	netting."	Where the	counterparty	netting is across	levels,	the	netting	is	reflected	in	"Cross-Level	Netting."

|  |  |  |  | Cross-Level | Collateral |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | \t Level\t1 | Level\t2 | Level\t3 | Netting | Netting | Total |
| Interest\trates | $123 | $\t\t\t800,028 | \t $\t\t\t\t\t483 | $\t\t\t\t\t\t— | $\t\t\t\t\t\t\t\t\t\t— | $\t\t\t800,634 |
| Credit | — | 47,190 | 7,658 | — | — | 54,848 |
| Currencies | — | 109,891 | 150 | — | — | 110,041 |
| Commodities | — | 28,124 | 866 | — | — | 28,990 |
| Equities | 175 | 58,122 | 634 | — | — | 58,931 |
| Gross\tfair\tvalue\tof\tderivative\tassets | 298 | 1,043,355 | 9,791 | — | — | 1,053,444 |
| Counterparty\tand\tcash\tcollateral\tnetting | — | (882,841) | (2,717) | (1,112) | (103,504) | (990,174) |
| Fair\tvalue\tincluded\tin\tfinancial\tinstruments\towned | $298 | $\t\t\t160,514 | \t $\t\t7,074 | $(1,112) | $(103,504) | $\t\t\t\t\t63,270 |

|  |  |  |  | Cross-Level | Collateral |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | \t Level\t1 | Level\t2 | Level\t3 | Netting | Netting | Total |
| Interest\trates | $\t\t14 | $\t\t\t739,332 | \t $\t\t\t\t\t523 | $\t\t\t\t\t\t— | $\t\t\t\t\t\t\t\t\t\t— | $\t\t\t739,869 |
| Credit | — | 46,026 | 4,128 | — | — | 50,154 |
| Currencies | — | 108,206 | 417 | — | — | 108,623 |
| Commodities | — | 26,538 | 2,008 | — | — | 28,546 |
| Equities | 94 | 56,546 | 2,009 | — | — | 58,649 |
| Gross\tfair\tvalue\tof\tderivative\tliabilities | 108 | 976,648 | 9,085 | — | — | 985,841 |
| Counterparty\tand\tcash\tcollateral\tnetting | — | (882,841) | (2,717) | (1,112) | (36,155) | (922,825) |
| Fair\tvalue\tincluded\tin\tfinancial\tinstruments\tsold,\nbut\tnot\tyet\tpurchased | $108 | $\t\t\t\t\t93,807 | \t $\t\t6,368 | $(1,112) | $\t\t(36,155) | $\t\t\t\t\t63,016 |

|  |  |  |  | Cross-Level | Collateral |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Netting | Netting | Total |
| Interest\trates | $\t\t91 | $\t\t\t652,104 | \t $\t\t\t\t\t394 | $\t\t\t\t\t\t— | $\t\t\t\t\t\t\t\t\t\t— | $\t\t\t652,589 |
| Credit | — | 52,834 | 7,917 | — | — | 60,751 |
| Currencies | — | 70,481 | 350 | — | — | 70,831 |
| Commodities | — | 17,517 | 526 | — | — | 18,043 |
| Equities | 3 | 55,826 | 890 | — | — | 56,719 |
| Gross\tfair\tvalue\tof\tderivative\tassets | 94 | 848,762 | 10,077 | — | — | 858,933 |
| Counterparty\tand\tcash\tcollateral\tnetting | — | (702,703) | (3,001) | (1,707) | (93,643) | (801,054) |
| Fair\tvalue\tincluded\tin\tfinancial\tinstruments\towned | $\t\t94 | $\t\t\t146,059 | \t $\t\t7,076 | $(1,707) | $\t\t(93,643) | $\t\t\t\t\t57,879 |

|  |  |  |  | Cross-Level | Collateral |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Netting | Netting | Total |
| Interest\trates | $\t\t93 | $\t\t\t586,966 | \t $\t\t\t\t\t480 | $\t\t\t\t\t\t— | $\t\t\t\t\t\t\t\t\t\t— | $\t\t\t587,539 |
| Credit | — | 52,599 | 3,741 | — | — | 56,340 |
| Currencies | — | 63,165 | 550 | — | — | 63,715 |
| Commodities | — | 17,762 | 466 | — | — | 18,228 |
| Equities | 6 | 53,617 | 1,849 | — | — | 55,472 |
| Gross\tfair\tvalue\tof\tderivative\tliabilities | 99 | 774,109 | 7,086 | — | — | 781,294 |
| Counterparty\tand\tcash\tcollateral\tnetting | — | (702,703) | (3,001) | (1,707) | (24,161) | (731,572) |
| Fair\tvalue\tincluded\tin\tfinancial\tinstruments\tsold,\nbut\tnot\tyet\tpurchased | $\t\t99 | $\t\t\t\t\t71,406 | \t $\t\t4,085 | $(1,707) | $\t\t(24,161) | $\t\t\t\t\t49,722 |

If	a	derivative	was	transferred	to	level	3	during	a	reporting	period,	its	entire	gain or	loss	for	the	period	is	included	in	level	3.	Transfers	between	levels	are	reported at	the	beginning	of	the	reporting	period	in	which	they	occur.	In	the	tables	below, negative	amounts	for	transfers	into	level	3	and	positive	amounts	for	transfers	out of	level	3	represent	net	transfers	of	derivative	liabilities.

Gains	and	losses	on	level	3	derivatives	should	be	considered	in	the	context	of	the following:

Ÿ	A	derivative	with	level	1	and/or	level	2	inputs	is	classified	in	level	3	in	its entirety	if	it	has	at	least	one	significant	level	3	input.

Ÿ	If	there	is	one	significant	level	3	input,	the	entire	gain	or	loss	from	adjusting only	observable	inputs	(i.e.,	level	1	and	level	2	inputs)	is	classified	as	level	3.

Ÿ	Gains	or	losses	that	have	been	reported	in	level	3	resulting	from	changes	in level	1	or	level	2	inputs	are	frequently	offset	by	gains	or	losses	attributable	to level 1 or	 level 2 derivatives	 and/or	 level 1, level 2 and	 level 3 cash instruments.	As	 a	 result,	 gains/(losses)	 included	 in	 the	 level	 3	 rollforward below	do	not	necessarily	represent	the	overall	impact	on	the	firm's	results	of operations,	liquidity	or	capital	resources.

The	tables	below	present	changes	in	fair	value	for	all	derivatives	categorized	as level	3	as	of	the	end	of	the	year.

Level	3	Derivative	Assets	and	Liabilities	at	Fair	Value	for	the	Year	Ended	December	2014

|  | Asset/ |  | gains/(losses) |  |  |  |  |  | Asset/ |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | (liability) | Net | relating\tto |  |  |  |  |  | (liability) |
|  | balance, | realized | instruments |  |  |  | Transfers | Transfers | balance, |
|  | beginning | gains/ | still\theld\tat |  |  |  | into | out\tof | end\tof |
| $\tin\tmillions | of\tyear | (losses) | year-end | \tPurchases | Sales | \tSettlements | level\t3 | level\t3 | year |
| Interest\trates\t—\tnet | $\t\t\t\t(86) | $\t\t(50) | $\t\t\t(101) | $\t\t97 | \t$\t\t\t\t\t\t\t(2) | $\t\t\t\t\t\t92 | $\t\t\t14 | $\t\t\t\t(4) | $\t\t\t\t\t(40) |
| Credit\t—\tnet | 4,176 | 64 | 1,625 | 151 | (138) | (1,693) | (194) | (461) | 3,530 |
| Currencies\t—\tnet | (200) | (70) | (175) | 19 | — | 172 | (9) | (4) | (267) |
| Commodities\t—\tnet | 60 | (19) | (1,096) | 38 | (272) | 95 | 84 | (32) | (1,142) |
| Equities\t—\tnet | (959) | (48) | (436) | 344 | (979) | 270 | (115) | 548 | (1,375) |
| Total\tderivatives\t—\tnet | $2,991 | $(123)\t^1 | $\t\t\t(183)^\t1 | $649 | \t$(1,391) | $(1,064) | $(220) | $\t\t\t47 | $\t\t\t\t706 |

1.The	aggregate	amounts	include	losses	of	approximately	$276	million	and	$30	million	reported	in	"Market	making"	and	"Other	principal	transactions,"	respectively.

The	net	unrealized	 loss	on	 level	3	derivatives	of	$183	million	for	2014	was primarily	attributable	to	the	impact	of	a	decrease	in	commodity	prices	on	certain commodity	derivatives,	a	decrease	in	equity	prices	on	certain	equity	derivatives, and	 the	 impact	 of	 changes	 in	 foreign	 exchange	 rates	 on	 certain	 currency derivatives,	largely	offset	by	the	impact	of	tighter	credit	spreads	and	a	decrease in	interest	rates	on	certain	credit	derivatives.

Transfers	into	level	3	derivatives	during	2014	primarily	reflected	transfers	of certain	credit	derivative	liabilities	from	level	2,	principally	due	to	unobservable credit	spread	inputs	becoming	significant	to	the	valuation	of	these	derivatives and	transfers	of	certain	equity	derivative	liabilities	from	level	2,	primarily	due	to reduced	transparency	of	volatility	inputs	used	to	value	these	derivatives.

Transfers	out	of	level	3	derivatives	during	2014	primarily	reflected	transfers	of certain	equity	derivative	liabilities	to	level	2,	principally	due	to	unobservable correlation	 inputs	 no	 longer	 being	 significant	 to	 the	 valuation	 of	 these derivatives,	and	transfers	of	certain	credit	derivative	assets	to	level	2,	principally due	to	unobservable	credit	spread	inputs	no	longer	being	significant	to	the	net risk	of	certain	portfolios.

|  | Asset/ |  | gains/(losses) |  |  |  |  |  | Asset/ |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | (liability) | Net | relating\tto |  |  |  |  |  | (liability) |
|  | balance, | realized | instruments |  |  |  | Transfers | Transfers | balance, |
|  | beginning | gains/ | still\theld\tat |  |  |  | into | out\tof | end\tof |
| $\tin\tmillions | of\tyear | (losses) | year-end | \tPurchases | \tSales | \tSettlements | level\t3 | level\t3 | year |
| Interest\trates\t—\tnet | $\t\t(355) | $\t\t(78) | $\t\t\t\t168 | $\t\t\t\t1 | \t$\t\t\t\t(8) | $\t\t\t\t196 | $\t\t\t(9) | $\t\t\t\t(1) | $\t\t\t\t(86) |
| Credit\t—\tnet | 6,228 | (1) | (977) | 201 | (315) | (1,508) | 695 | (147) | 4,176 |
| Currencies\t—\tnet | 35 | (93) | (419) | 22 | (6) | 169 | 139 | (47) | (200) |
| Commodities\t—\tnet | (304) | (6) | 58 | 21 | (48) | 281 | 50 | 8 | 60 |
| Equities\t—\tnet | (1,248) | (67) | (202) | 77 | (472) | 1,020 | (15) | (52) | (959) |
| Total\tderivatives\t—\tnet | $4,356 | $(245)\t^1 | $(1,372)^\t1 | $322 | \t$(849) | $\t\t\t\t158 | $860 | $(239) | $2,991 |

1.The	aggregate	amounts	include	losses	of	approximately	$1.29	billion	and	$324	million	reported	in	"Market	making"	and	"Other	principal	transactions,"	respectively.

The	 net	 unrealized	 loss	 on	 level 3 derivatives	 of $1.37 billion	 for	 2013 principally	resulted	from	changes	in	level	2	inputs	and	was	primarily	attributable to	losses	on	certain	credit	derivatives,	principally	due	to	the	impact	of	tighter credit	 spreads,	 and	 losses	 on	 certain	 currency	 derivatives,	 primarily	 due	 to changes	in	foreign	exchange	rates.

Transfers	into	level	3	derivatives	during	2013	primarily	reflected	transfers	of credit	derivative	assets	from	level	2,	principally	due	to	reduced	transparency	of upfront	credit	points	and	correlation	inputs	used	to	value	these	derivatives.

Transfers	out	of	level	3	derivatives	during	2013	primarily	reflected	transfers	of certain	credit	derivatives	to	level	2,	principally	due	to	unobservable	credit	spread and	 correlation	 inputs	 no	 longer	 being	 significant	 to	 the	 valuation	 of	 these derivatives	 and	 unobservable	 inputs	 not	 being	 significant	 to	 the	 net	 risk	 of certain	portfolios.

# Impact	of	Credit	Spreads	on	Derivatives

On	an	ongoing	basis, the	firm	realizes	gains	or losses	relating to	changes in credit risk through the	 unwind	 of	 derivative	 contracts	 and	 changes in	 credit mitigants.

The	net	gain/(loss),	including	hedges,	attributable	to	the	impact	of	changes	in credit	exposure	and	credit	spreads	(counterparty	and	the	firm's)	on	derivatives was	$135	million	for	2014,	$(66)	million	for	2013	and	$(735)	million	for	2012.

# Bifurcated	Embedded	Derivatives

The	table	below	presents	the	fair	value	and	the	notional	amount	of	derivatives that	 have	 been	 bifurcated from their related	 borrowings.	 These	 derivatives, which	are	recorded	at	fair	value,	primarily	consist	of	interest	rate,	equity	and commodity	products	and	are	included	in	"Unsecured	short-term	borrowings"	and "Unsecured	long-term	borrowings"	with	the	related	borrowings.	See	Note	8	for further	information.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Fair\tvalue\tof\tassets | \t\t$\t\t\t390 | \t$\t\t\t285 |
| Fair\tvalue\tof\tliabilities | 690 | 373 |
| Net\tliability | \t\t$\t\t\t300 | \t$\t\t\t\t\t88 |
| Notional\tamount | \t\t$7,735 | \t$7,580 |

The	tables	below	present	the	fair	values	of	OTC	derivative	assets	and	liabilities by tenor	 and	 major	 product type.	 Tenor is	 based	 on	 expected	 duration for mortgage-related credit derivatives and generally on remaining contractual maturity	for	other	derivatives.	Counterparty	netting	within	the	same	product	type and	tenor	category	is	included	within

such	product	type	and	tenor	category.	Counterparty	netting	across	product	types within	the	same	tenor	category	is	included	in	"Counterparty	and	cash	collateral netting."	Where	the	counterparty	netting	is	across	tenor	categories,	the	netting	is reflected	in	"Cross-Tenor	Netting."

|  | 0	-	12 | 1	-	5 | 5	Years	or | Cross-Tenor | Cash	Collateral |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Months | Years | Greater | Netting | Netting | Total |
| Interest\trates | \t $\t\t7,064 | \t $25,049 | $\t\t90,553 | $\t\t\t\t\t\t\t\t\t— | $\t\t\t\t\t\t\t\t\t\t\t— | $\t122,666 |
| Credit | 1,696 | 6,093 | 5,707 | — | — | 13,496 |
| Currencies | 17,835 | 9,897 | 6,386 | — | — | 34,118 |
| Commodities | 8,298 | 4,068 | 161 | — | — | 12,527 |
| Equities | 4,771 | 9,285 | 3,750 | — | — | 17,806 |
| Counterparty\tand\tcash\tcollateral\tnetting | (4,479) | (7,016) | (4,058) | (20,819) | (103,504) | (139,876) |
| Total | \t $35,185 | \t $47,376 | $102,499 | $(20,819) | $\t(103,504) | $\t\t\t60,737 |
|  |  | OTC\tDerivative\tLiabilities\tas\tof\tDecember\t2014 | OTC\tDerivative\tLiabilities\tas\tof\tDecember\t2014 | OTC\tDerivative\tLiabilities\tas\tof\tDecember\t2014 |  |  |
|  | 0\t-\t12 | 1\t-\t5 | 5\tYears\tor | Cross-Tenor | Cash\tCollateral |  |

| $	in	millions | Months | Years | Greater | Netting | Netting | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Interest\trates | \t $\t\t7,001 | \t $17,649 | $\t\t37,242 | $\t\t\t\t\t\t\t\t\t— | $\t\t\t\t\t\t\t\t\t\t\t— | $\t\t\t61,892 |
| Credit | 2,154 | 4,942 | 1,706 | — | — | 8,802 |
| Currencies | 18,549 | 7,667 | 6,482 | — | — | 32,698 |
| Commodities | 5,686 | 4,105 | 2,810 | — | — | 12,601 |
| Equities | 7,064 | 6,845 | 3,571 | — | — | 17,480 |
| Counterparty\tand\tcash\tcollateral\tnetting | (4,479) | (7,016) | (4,058) | (20,819) | (36,155) | (72,527) |
| Total | \t $35,975 | \t $34,192 | $\t\t47,753 | $(20,819) | $\t\t\t(36,155) | $\t\t\t60,946 |
|  |  |  | OTC\tDerivative\tAssets\tas\tof\tDecember\t2013 | OTC\tDerivative\tAssets\tas\tof\tDecember\t2013 |  |  |
|  | 0\t-\t12 | 1\t-\t5 | 5\tYears\tor | Cross-Tenor | Cash\tCollateral |  |

| $	in	millions | Months | Years | Greater | Netting | Netting | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Interest\trates | \t $\t\t7,235 | \t $26,029 | $\t\t75,731 | $\t\t\t\t\t\t\t\t\t— | $\t\t\t\t\t\t\t\t\t\t\t — | $\t108,995 |
| Credit | 1,233 | 8,410 | 5,787 | — | — | 15,430 |
| Currencies | 9,499 | 8,478 | 7,361 | — | — | 25,338 |
| Commodities | 2,843 | 4,040 | 143 | — | — | 7,026 |
| Equities | 7,016 | 9,229 | 4,972 | — | — | 21,217 |
| Counterparty\tand\tcash\tcollateral\tnetting | (2,559) | (5,063) | (3,395) | (19,744) | (93,643) | (124,404) |
| Total | \t $25,267 | \t $51,123 | $\t\t90,599 | $(19,744) | $\t\t\t(93,643) | $\t\t\t53,602 |
|  |  |  | OTC\tDerivative\tLiabilities\tas\tof\tDecember\t2013 | OTC\tDerivative\tLiabilities\tas\tof\tDecember\t2013 |  |  |
|  | 0\t-\t12 | 1\t-\t5 | 5\tYears\tor | Cross-Tenor | Cash\tCollateral |  |

| $	in	millions | Months | Years | Greater | Netting | Netting | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Interest\trates | \t $\t\t5,019 | \t $16,910 | $\t\t21,903 | $\t\t\t\t\t\t\t\t\t— | $\t\t\t\t\t\t\t\t\t\t\t— | $\t\t\t43,832 |
| Credit | 2,339 | 6,778 | 1,901 | — | — | 11,018 |
| Currencies | 8,843 | 5,042 | 4,313 | — | — | 18,198 |
| Commodities | 3,062 | 2,424 | 2,387 | — | — | 7,873 |
| Equities | 6,325 | 6,964 | 4,068 | — | — | 17,357 |
| Counterparty\tand\tcash\tcollateral\tnetting | (2,559) | (5,063) | (3,395) | (19,744) | (24,161) | (54,922) |
| Total | \t $23,029 | \t $33,055 | $\t\t31,177 | $(19,744) | $\t\t\t(24,161) | $\t\t\t43,356 |
|  |  |  |  | Goldman\tSachs\t2014\tForm\t10-K | Goldman\tSachs\t2014\tForm\t10-K | 151 |

# Derivatives	with	Credit-Related	Contingent	Features

Certain	of	the	firm's	derivatives	have	been	transacted	under	bilateral	agreements with	counterparties	who	may	require	the	firm	to	post	collateral	or	terminate	the transactions	based	on	changes	in	the	firm's	credit	ratings.	The	firm	assesses	the impact	of	these	bilateral	agreements	by	determining	the	collateral	or	termination payments	 that	 would	 occur	 assuming	 a	 downgrade	 by	 all	 rating	 agencies.	A downgrade	by	any	one	rating	agency,	depending	on	the	agency's	relative	ratings of	 the	 firm	 at	 the	 time	 of	 the	 downgrade,	 may	 have	 an	 impact	 which	 is comparable	to	the	impact	of	a	downgrade	by	all	rating	agencies.

The	 table	below	presents	 the	aggregate	fair	value	of	net	derivative	 liabilities under	 such	 agreements	 (excluding	 application	 of	 collateral	 posted	 to	 reduce these	 liabilities),	 the	 related	 aggregate	 fair	 value	 of	 the	 assets	 posted	 as collateral,	and	the	additional	collateral	or	termination	payments	that	could	have been	called	at	the	reporting	date	by	counterparties	in	the	event	of	a	one-notch and	two-notch	downgrade	in	the	firm's	credit	ratings.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Net\tderivative\tliabilities\tunder\tbilateral\tagreements | \t\t$35,764 | \t $22,176 |
| Collateral\tposted | 30,824 | 18,178 |
| Additional\tcollateral\tor\ttermination\tpayments\tfor\ta\tone-notch\ndowngrade | 1,072 | 911 |
| Additional\tcollateral\tor\ttermination\tpayments\tfor\ta\ttwo-notch\ndowngrade | 2,815 | 2,989 |

# Credit	Derivatives

The	firm	enters	into	a	broad	array	of	credit	derivatives	in	locations	around	the world	to	facilitate	client	transactions	and	to	manage	the	credit	risk	associated with	market-making	and	investing	and	lending	activities.	Credit	derivatives	are actively	managed	based	on	the	firm's	net	risk	position.

Credit	 derivatives	 are	 individually	 negotiated	 contracts	 and	 can	 have	 various settlement	 and	 payment	 conventions.	 Credit	 events	 include	 failure	 to	 pay, bankruptcy,	 acceleration	 of	 indebtedness,	 restructuring,	 repudiation	 and dissolution	of	the	reference	entity.

Credit	Default	Swaps.	Single-name	credit	default	swaps	protect	the	buyer against	the	loss	of	principal	on	one	or	more	bonds,	loans	or	mortgages	(reference obligations)	in	the	event	the	issuer	(reference	entity)	of	the	reference	obligations suffers	 a	 credit	 event.	 The	 buyer	 of	 protection	 pays	 an	 initial	 or	 periodic premium	to	the	seller	and	receives	protection	for	the	period	of	the	contract.	If there	is	no	credit	event,	as	defined	in	the	contract,	the	seller	of	protection	makes no	payments	to	the	buyer	of	protection.	However,	if	a	credit	event	occurs,	the seller	of	protection	is	required	to	make	a	payment	to	the	buyer	of	protection, which	is	calculated	in	accordance	with	the	terms	of	the	contract.

Credit	Indices,	Baskets	and	Tranches.	Credit	derivatives	may	reference	a basket	of	single-name	credit	default	swaps	or	a	broad-based	index.	If	a	credit event	occurs	in	one	of	the	underlying	reference	obligations,	the	protection	seller pays	 the	protection	buyer.	The	payment	 is	 typically	a	pro-rata	portion	of	 the transaction's	total	notional	amount	based	on	the	underlying	defaulted	reference obligation.	In	certain	transactions,	the	credit	risk	of	a	basket	or	index	is	separated into	various	portions	(tranches),	each	having	different	levels	of	subordination. The	 most	 junior	 tranches	 cover	 initial	 defaults	 and	 once	 losses	 exceed	 the notional	amount	of	these	junior	tranches,	any	excess	loss	is	covered	by	the	next most	senior	tranche	in	the	capital	structure.

Total	 Return	 Swaps.	 A total	 return	 swap	 transfers	 the	 risks	 relating	 to economic	performance	of	a	reference	obligation	from	the	protection	buyer	to	the protection	seller.	Typically,	 the	protection	buyer	receives	from	 the	protection seller	a	floating	rate	of	interest	and	protection	against	any	reduction	in	fair	value of	the	reference	obligation,	and	in	return	the	protection	seller	receives	the	cash flows	associated	with	the	reference	obligation,	plus	any	increase	in	the	fair	value of	the	reference	obligation.

Credit	Options.	In	a	credit	option,	the	option	writer	assumes	the	obligation	to purchase	or	sell	a	reference	obligation	at	a	specified	price	or	credit	spread.	The option	purchaser	buys	the	right,	but	does	not	assume	the	obligation,	to	sell	the reference	obligation	to,	or	purchase	it	from,	the	option	writer.	The	payments	on credit	options	depend	either	on	a	particular	credit	spread	or	 the	price	of	 the reference	obligation.

The	firm	economically	hedges	its	exposure	to	written	credit	derivatives	primarily by	entering	into	offsetting	purchased	credit	derivatives	with	identical	underliers. Substantially	all	of	the	firm's	purchased	credit	derivative	transactions	are	with financial	 institutions	 and	 are	 subject	 to	 stringent	 collateral	 thresholds.	 In addition,	upon	the	occurrence	of	a	specified	trigger	event,	the	firm	may	take possession	 of	 the	 reference	 obligations	 underlying	 a	 particular	 written	 credit derivative,	and	consequently	may,	upon	liquidation	of	the	reference	obligations, recover	amounts	on	the	underlying	reference	obligations	in	the	event	of	default.

As	of	December	2014,	written	and	purchased	credit	derivatives	had	total	gross notional	amounts	of	$1.22	trillion	and	$1.28	trillion,	respectively,	for	total	net notional	purchased	protection	of	$59.35	billion.	As	of	December	2013,	written and	 purchased	 credit	 derivatives	 had	 total	 gross	 notional	 amounts	 of $1.43	trillion	and	$1.52	trillion,	respectively,	for	total	net	notional	purchased protection	of	$81.55	billion.	Substantially	all	of	the	firm's	written	and	purchased credit	derivatives	are	in	the	form	of	credit	default	swaps.

The	 table	 below	 presents	 certain information	 about	 credit	 derivatives. In the table	below:

Ÿ	Fair	values	exclude	 the	effects	of	both	netting	of	receivable	balances	with payable	balances	under	enforceable	netting	agreements,	and	netting	of	cash received	or	posted	under	enforceable	credit	support	agreements,	and	therefore are	not	representative	of	the	firm's	credit	exposure.

Ÿ	Tenor	is	based	on	expected	duration	for	mortgage-related	credit	derivatives and	on	remaining	contractual	maturity	for	other	credit	derivatives.

Ÿ	The	credit	spread	on	the	underlier,	together	with	the	tenor	of	the	contract,	are indicators	 of	 payment/performance	 risk.	 The	 firm	 is	 less	 likely	 to	 pay	 or otherwise	be	required	to	perform	where	the	credit	spread	and	the	tenor	are lower.

|  |  |  |  |  | Maximum	Payout/Notional | Maximum	Payout/Notional |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Maximum\tPayout/Notional\tAmount\nof\tWritten\tCredit\tDerivatives\tby\tTenor | Maximum\tPayout/Notional\tAmount\nof\tWritten\tCredit\tDerivatives\tby\tTenor |  | Amount\tof\tPurchased\nCredit\tDerivatives | Amount\tof\tPurchased\nCredit\tDerivatives | Fair\tValue\tof\nWritten\tCredit\tDerivatives | Fair\tValue\tof\nWritten\tCredit\tDerivatives |  |
|  |  |  |  |  | Offsetting | Other |  |  |  |
|  |  |  |  |  | Purchased | Purchased |  |  | Net |
|  | 0\t-\t12 | 1\t-\t5 | 5\tYears\tor |  | Credit | Credit |  |  | Asset/ |
| $\tin\tmillions | Months | Years | Greater | Total | Derivatives^\t1 | Derivatives^\t2 | Asset | \t Liability | (Liability) |
| As\tof\tDecember\t2014 |  |  |  |  |  |  |  |  |  |
| Credit\tspread\ton\tunderlier |  |  |  |  |  |  |  |  |  |
| (basis\tpoints) |  |  |  |  |  |  |  |  |  |
| 0\t-\t250 | \t$261,591 | \t$\t\t\t775,784 | $68,830 | \t$1,106,205 | \t$1,012,874 | $152,465 | \t $28,004 | \t$\t\t3,629 | \t$\t24,375 |
| 251\t-\t500 | 7,726 | 37,255 | 5,042 | 50,023 | 41,657 | 8,426 | 1,542 | 2,266 | (724) |
| 501\t-\t1,000 | 8,449 | 18,046 | 1,309 | 27,804 | 26,240 | 1,949 | 112 | 1,909 | (1,797) |
| Greater\tthan\t1,000 | 8,728 | 26,834 | 1,279 | 36,841 | 33,112 | 3,499 | 82 | 13,943 | (13,861) |
| Total | \t$286,494 | \t$\t\t\t857,919 | $76,460 | \t$1,220,873 | \t$1,113,883 | $166,339 | \t $29,740 | \t$21,747 | \t$\t\t\t7,993 |
| As\tof\tDecember\t2013 |  |  |  |  |  |  |  |  |  |
| Credit\tspread\ton\tunderlier |  |  |  |  |  |  |  |  |  |
| (basis\tpoints) |  |  |  |  |  |  |  |  |  |
| 0\t-\t250 | \t$286,029 | \t$\t\t\t950,126 | $79,241 | \t$1,315,396 | \t$1,208,334 | $183,665 | \t$ 32,508 | \t$\t\t4,396 | \t$\t28,112 |
| 251\t-\t500 | 7,148 | 42,570 | 10,086 | 59,804 | 44,642 | 16,884 | 2,837 | 1,147 | 1,690 |
| 501\t-\t1,000 | 3,968 | 18,637 | 1,854 | 24,459 | 22,748 | 2,992 | 101 | 1,762 | (1,661) |
| Greater\tthan\t1,000 | 5,600 | 27,911 | 1,226 | 34,737 | 30,510 | 6,169 | 514 | 12,436 | (11,922) |
| Total | \t$302,745 | \t$1,039,244 | $92,407 | \t$1,434,396 | \t$1,306,234 | $209,710 | \t$ 35,960 | \t$19,741 | \t$\t16,219 |
|  |  |  |  |  |  |  | Goldman\tSachs\t2014\tForm\t10-K | Goldman\tSachs\t2014\tForm\t10-K | 153 |

1.Offsetting	purchased	credit	derivatives	represent	the	notional	amount	of	purchased	credit	derivatives	that	economically	hedge	written	credit	derivatives	with	identical	underliers.

2.This	purchased	protection	represents	the	notional	amount	of	all	other	purchased	credit	derivatives	not	included	in	"Offsetting	Purchased	Credit	Derivatives."

# Hedge	Accounting

The	firm	applies	hedge	accounting	for	(i)	certain	 interest	rate	swaps	used	 to manage	the	interest	rate	exposure	of	certain	fixed-rate	unsecured	long-term	and short-term	borrowings	and	certain	fixed-rate	certificates	of	deposit,	(ii)	certain foreign	currency	forward	contracts	and	foreign	currency-denominated	debt	used to	manage	foreign	currency	exposures	on	the	firm's	net	investment	in	certain non-U.S.	 operations	 and	 (iii)	 certain	 commodities-related	 swap	 and	 forward contracts	used	to	manage	the	exposure	to	the	variability	in	cash	flows	associated with	the	forecasted	sales	of	certain	energy	commodities	by	one	of	the	firm's consolidated	investments.

To	qualify	for	hedge	accounting,	the	derivative	hedge	must	be	highly	effective	at reducing	the	risk	from	the	exposure	being	hedged.	Additionally,	the	firm	must formally	document	the	hedging	relationship	at	inception	and	test	the	hedging relationship	at	least	on	a	quarterly	basis	to	ensure	the	derivative	hedge	continues to	be	highly	effective	over	the	life	of	the	hedging	relationship.

# Fair	Value	Hedges

The	 firm	 designates	 certain	 interest	 rate	 swaps	 as	 fair	 value	 hedges.	 These interest	rate	swaps	hedge	changes	 in	fair	value	attributable	 to	 the	designated benchmark	interest	rate	(e.g.,	London	Interbank	Offered	Rate	(LIBOR)	or	OIS), effectively	 converting	 a	 substantial	 portion	 of	 fixed-rate	 obligations	 into floating-rate	obligations.

The	 firm	 applies	 a	 statistical	 method	 that	 utilizes	 regression	 analysis	 when assessing	the	effectiveness	of	its	fair	value	hedging	relationships	in	achieving offsetting	changes	in	the	fair	values	of	the	hedging	instrument	and	the	risk	being hedged	 (i.e.,	 interest	 rate	 risk).	 An	 interest	 rate	 swap	 is	 considered	 highly effective	in	offsetting	changes	in	fair	value	attributable	to	changes	in	the	hedged risk	when	the	regression	analysis	results	in	a	coefficient	of	determination	of	80% or	greater	and	a	slope	between	80%	and	125%.

For	qualifying	fair	value	hedges,	gains	or	losses	on	derivatives	are	included	in "Interest	expense."	The	change	in	fair	value	of	the	hedged	item	attributable	to	the risk	 being	 hedged	 is	 reported	 as	 an	 adjustment	 to	 its	 carrying	 value	 and	 is subsequently	amortized	into	interest	expense	over	its	remaining	life.	Gains	or losses	resulting	from	hedge	ineffectiveness	are	included	in	"Interest	expense." When	a	derivative	is	no	longer	designated	as	a	hedge,	any	remaining	difference between	the	carrying	value	and	par	value	of	the	hedged	item	is	amortized	to interest	expense	over	the	remaining	life	of	the	hedged	item	using	the	effective interest	method.	See	Note	23	for	further	information	about	interest	income	and interest	expense.

The	 table	 below	 presents	 the	 gains/(losses)	 from	 interest	 rate	 derivatives accounted	for	as	hedges,	the	related	hedged	borrowings	and	bank	deposits,	and the	 hedge	 ineffectiveness	 on	 these	 derivatives,	 which	 primarily	 consists	 of amortization	of	prepaid	credit	spreads	resulting	from	the	passage	of	time.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Interest\trate\thedges | \t\t$\t1,936\t\t\t\t\t$(8,683) | \t\t$\t1,936\t\t\t\t\t$(8,683) | \t$(2,383) |
| Hedged\tborrowings\tand\tbank\tdeposits | (2,451) | 6,999 | 665 |
| Hedge\tineffectiveness | \t\t$\t\t\t(515)\t\t\t\t$(1,684) | \t\t$\t\t\t(515)\t\t\t\t$(1,684) | \t$(1,718) |

# Net	Investment	Hedges

The	firm	seeks	to	reduce	the	impact	of	fluctuations	in	foreign	exchange	rates	on its	 net	 investment	 in	 certain	 non-U.S.	 operations	 through	 the	 use	 of	 foreign currency	forward	contracts	and	foreign	currency-denominated	debt.	For	foreign currency	forward	contracts	designated	as	hedges,	the	effectiveness	of	the	hedge is	assessed	based	on	the	overall	changes	in	the	fair	value	of	the	forward	contracts (i.e.,	based	on	changes	in	forward	rates).	For	foreign	currency-denominated	debt designated	 as	 a	 hedge,	 the	 effectiveness	 of	 the	 hedge	 is	 assessed	 based	 on changes	in	spot	rates.

For	 qualifying	 net	 investment	 hedges,	 the	 gains	 or	 losses	 on	 the	 hedging instruments,	to	the	extent	effective,	are	included	in	"Currency	translation"	within the	consolidated	statements	of	comprehensive	income.

The	table	below	presents	the	gains/(losses)	from	net	investment	hedging.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | \t\t2014 | \t2013 | 2012 |
| Foreign\tcurrency\tforward\tcontract\thedges | \t\t$576 | \t$150 | \t$(233) |
| Foreign\tcurrency-denominated\tdebt\thedges | 202 | 470 | 347 |

The	 gain/(loss)	 related	 to	 ineffectiveness	 and	 the	 gain/(loss)	 reclassified	 to earnings	from	accumulated	other	comprehensive	income/(loss)	were	not	material for	2014,	2013	or	2012.

As	of	December	2014	and	December	2013,	the	firm	had	designated	$1.36	billion and	$1.97	billion,	respectively,	of	foreign	currency-denominated	debt,	included in	"Unsecured	long-term	borrowings"	and	"Unsecured	short-term	borrowings," as	hedges	of	net	investments	in	non-U.S.	subsidiaries.

# Cash	Flow	Hedges

Beginning	in	2013,	the	firm	designated	certain	commodities-related	swap	and forward	contracts	as	cash	flow	hedges.	These	swap	and	forward	contracts	hedged the	firm's	exposure	to	the	variability	in	cash	flows	associated	with	the	forecasted sales	 of	 certain	 energy	 commodities	 by	 one	 of	 the	 firm's	 consolidated investments.	 During	 the	 fourth	 quarter	 of	 2014,	 the	 firm	 de-designated	 these swaps	and	forward	contracts	as	cash	flow	hedges	as	it	became	probable	that	the hedged	forecasted	sales	would	not	occur.

Prior	 to	 de-designation,	 the	 firm	 applied	 a	 statistical	 method	 that	 utilized regression	analysis	when	assessing	hedge	effectiveness.	A	cash	flow	hedge	was considered	 highly	 effective	 in	 offsetting	 changes	 in	 forecasted	 cash	 flows attributable	 to	 the	 hedged	 risk	 when	 the	 regression	 analysis	 resulted	 in	 a coefficient	of	determination	of	80%	or	greater	and	a	slope	between	80%	and 125%.

For	qualifying	cash	flow	hedges,	the	gains	or	losses	on	derivatives,	to	the	extent effective,	 were	 included	 in	 "Cash	 flow	 hedges"	 within	 the	 consolidated statements	of	comprehensive	income.	Such	gains	or	losses	were	reclassified	to "Other	 principal	 transactions"	 within	 the	 consolidated	 statements	 of	 earnings when	 it	 became	 probable	 that	 the	 hedged	 forecasted	 sales	 would	 not	 occur. Gains	or	losses	resulting	from	hedge	ineffectiveness	were	included	in	"Other principal	transactions."

The	effective	portion	of	the	gains	recognized	on	these	cash	flow	hedges,	gains reclassified	 to	 earnings	 from	 accumulated	 other	 comprehensive	 income	 and gains	 related	 to	 hedge	 ineffectiveness	 were	 not	 material	 for	 2014	 and	 2013. There	 were	 no	 gains/(losses)	 excluded	 from	 the	 assessment	 of	 hedge effectiveness	for	2014	and	2013.

# Fair	Value	Option

# Other	Financial	Assets	and	Financial	Liabilities	at	Fair	Value

In	 addition	 to	 all	 cash	 and	 derivative	 instruments	 included	 in	 "Financial instruments	owned,	at	fair	value"	and	"Financial	instruments	sold,	but	not	yet purchased,	 at	 fair	 value,"	 the	 firm	 accounts	 for	 certain	 of	 its	 other	 financial assets	and	financial	liabilities	at	fair	value	primarily	under	the	fair	value	option.

The	primary	reasons	for	electing	the	fair	value	option	are	to:

Ÿ	Reflect	economic	events	in	earnings	on	a	timely	basis;

Ÿ	Mitigate	 volatility	 in	 earnings	 from	 using	 different	 measurement	 attributes (e.g.,	transfers	of	financial	instruments	owned	accounted	for	as	financings	are recorded	at	fair	value	whereas	the	related	secured	financing	would	be	recorded on	an	accrual	basis	absent	electing	the	fair	value	option);	and

Ÿ	Address	 simplification	 and	 cost-benefit	 considerations	 (e.g.,	 accounting	 for hybrid	financial	instruments	at	fair	value	in	their	entirety	versus	bifurcation	of embedded	derivatives	and	hedge	accounting	for	debt	hosts).

Hybrid	financial	instruments	are	instruments	that	contain	bifurcatable	embedded derivatives	and	do	not	require	settlement	by	physical	delivery	of	non-financial assets	(e.g.,	physical	commodities).	If	the	firm	elects	to	bifurcate	the	embedded derivative	from	the	associated	debt,	the	derivative	is	accounted	for	at	fair	value and	the	host	contract	is	accounted	for	at	amortized	cost,	adjusted	for	the	effective portion	of	any	fair	value	hedges.	If	the	firm	does	not	elect	to	bifurcate,	the	entire hybrid	financial	instrument	is	accounted	for	at	fair	value	under	the	fair	value option.

Other	financial	assets	and	financial	liabilities	accounted	for	at	fair	value	under the	fair	value	option	include:

Ÿ	Repurchase	agreements	and	substantially	all	resale	agreements;

Ÿ	Securities	 borrowed	 and	 loaned within Fixed Income, Currency and Commodities	Client	Execution;

Ÿ	Substantially	 all	 other	 secured	 financings, including transfers of assets accounted	for	as	financings	rather	than	sales;

Ÿ	Certain	unsecured	short-term	borrowings,	consisting	of	all	promissory	notes and	commercial	paper	and	certain	hybrid	financial	instruments;

Ÿ	Certain	unsecured	long-term	borrowings,	including	certain	prepaid	commodity transactions	and	certain	hybrid	financial	instruments;

Ÿ	Certain	receivables	from	customers	and	counterparties,	including	transfers	of assets	accounted	for	as	secured	loans	rather	than	purchases	and	certain	margin loans;

Ÿ	Certain	time	deposits	issued	by	the	firm's	bank	subsidiaries	(deposits	with	no stated	 maturity	 are	 not	 eligible	 for	 a	 fair	 value	 option	 election),	 including structured	certificates	of	deposit,	which	are	hybrid	financial	instruments;	and Ÿ	Certain	subordinated	liabilities	issued	by	consolidated	VIEs.

These	financial	assets	and	financial	liabilities	at	fair	value	are	generally	valued based	 on	 discounted	 cash	 flow	 techniques,	 which	 incorporate	 inputs	 with reasonable	levels	of	price	transparency,	and	are	generally	classified	as	level	2 because	 the	 inputs	 are	 observable.	 Valuation	 adjustments	 may	 be	 made	 for liquidity	and	for	counterparty	and	the	firm's	credit	quality.

See	 below	 for	 information	 about	 the	 significant	 inputs	 used	 to	 value	 other financial	 assets	 and	 financial	 liabilities	 at	 fair	 value,	 including	 the	 ranges	 of significant	unobservable	inputs	used	to	value	the	level	3	instruments	within	these categories.	These	ranges	represent	the	significant	unobservable	inputs	that	were used	 in	 the	 valuation	 of	 each	 type	 of	 other	 financial	 assets	 and	 financial liabilities	at	fair	value.	The	ranges	and	weighted	averages	of	these	inputs	are	not representative	of	the	appropriate	inputs	to	use	when	calculating	the	fair	value	of any	one	instrument.	For	example,	the	highest	yield	presented	below	for	resale and	repurchase	agreements	is	appropriate	for	valuing	a	specific	agreement	in	that category	but	may	not	be	appropriate	for	valuing	any	other	agreements	in	that category.	Accordingly,	the	ranges	of	inputs	presented	below	do	not	represent uncertainty	 in,	 or	 possible	 ranges	 of,	 fair	 value	 measurements	 of	 the	 firm's level	3	other	financial	assets	and	financial	liabilities.

Resale	and	Repurchase	Agreements	and	Securities	Borrowed	and Loaned.	 The significant	 inputs	 to	 the	 valuation	 of	 resale	 and	 repurchase agreements	and	securities	borrowed	and	loaned	are	funding	spreads,	the	amount and	 timing	 of	 expected	 future	 cash	 flows	 and	 interest	 rates.	 As	 of	 both December	2014	and	December	2013,	there	were	no	level	3	securities	borrowed or	 securities	 loaned.	 As	 of	 December	 2014,	 the	 firm's	 level	 3	 resale	 and repurchase	agreements	were	not	material.	The	range	of	significant	unobservable inputs	 used	 to	 value	 level 3 resale	 and	 repurchase	 agreements	 as	 of December	 2013	 was	 1.3%	 to	 3.9%	 (weighted	 average:	 1.4%)	 for	 yield,	 and 0.2	 years to	 2.7	 years	 (weighted	 average:	 2.5	 years)	 for	 duration.	 Generally, increases	in	yield	or	duration,	in	isolation,	would	result	in	a	lower	fair	value measurement.	Due	to	the	distinctive	nature	of	each	of	the	firm's	level	3	resale and	 repurchase	 agreements,	 the	 interrelationship	 of	 inputs	 is	 not	 necessarily uniform	 across	 such	 agreements.	 See	 Note	 10	 for	 further	 information	 about collateralized	agreements	and	financings.

Other	Secured	Financings.	The	significant	inputs	to	the	valuation	of	other secured	financings	at	fair	value	are	the	amount	and	timing	of	expected	future cash	 flows,	 interest	 rates,	 funding	 spreads,	 the	 fair	 value	 of	 the	 collateral delivered	 by	 the	 firm	 (which	 is	 determined	 using	 the	 amount	 and	 timing	 of expected	 future	 cash	 flows,	 market	 prices,	 market	 yields	 and	 recovery assumptions)	 and	 the	 frequency	 of	 additional	 collateral	 calls.	 The	 ranges	 of significant	unobservable	inputs	used	to	value	level	3	other	secured	financings	are as	follows:

Generally,	increases	in	funding	spreads,	yield	or	duration,	in	isolation,	would result	in	a	lower	fair	value	measurement.	Due	to	the	distinctive	nature	of	each	of the	firm's	level	3	other	secured	financings,	the	interrelationship	of	inputs	is	not necessarily	uniform	across	such	financings.	See	Note	10	for	further	information about	collateralized	agreements	and	financings.

Unsecured	 Short-term	 and	 Long-term	 Borrowings.	 The significant inputs	to	the	valuation	of	unsecured	short-term	and	long-term	borrowings	at	fair value	are	the	amount	and	timing	of	expected	future	cash	flows,	interest	rates,	the credit	spreads	of	the	firm,	as	well	as	commodity	prices	in	the	case	of	prepaid commodity	 transactions.	 The	 inputs	 used	 to	 value	 the	 embedded	 derivative component	of	hybrid	financial	instruments	are	consistent	with	the	inputs	used	to value	the	firm's	other	derivative	instruments.	See	Note	7	for	further	information about	derivatives.	See	Notes	15	and	16	for	further	information	about	unsecured short-term	and	long-term	borrowings,	respectively.

Certain	 of	 the	 firm's	 unsecured	 short-term	 and	 long-term	 instruments	 are included	in	level	3,	substantially	all	of	which	are	hybrid	financial	instruments. As	the	significant	unobservable	inputs	used	to	value	hybrid	financial	instruments primarily	 relate	 to	 the	 embedded	 derivative	 component	 of	 these	 borrowings, these	 inputs	 are	 incorporated	 in	 the	 firm's	 derivative	 disclosures	 related	 to unobservable	inputs	in	Note	7.

Receivables from	 Customers	 and	 Counterparties.	 Receivables from customers	and	counterparties	at	fair	value	are	primarily	comprised	of	transfers	of assets	 accounted	 for	 as	 secured	 loans	 rather	 than	 purchases.	 The	 significant inputs	to	the	valuation	of	such	receivables	are	commodity	prices,	interest	rates, the	amount	and	timing	of	expected	future	cash	flows	and	funding	spreads.	As	of December	 2014,	 the	 firm's	 level 3 receivables	 from	 customers	 and counterparties	were	not	material.	The	range	of	significant	unobservable	inputs used	to	value	level	3	secured	loans	as	of	December	2013	was	40	bps	to	477	bps (weighted	 average:	 142	 bps)	 for	 funding	 spreads.	 Generally,	 an	 increase	 in funding	spreads	would	result	in	a	lower	fair	value	measurement.

Deposits.	The	significant	inputs	to	the	valuation	of	time	deposits	are	interest rates	and	the	amount	and	timing	of	future	cash	flows.	The	inputs	used	to	value the	 embedded	 derivative	 component	 of	 hybrid	 financial	 instruments	 are consistent	with	the	inputs	used	to	value	the	firm's	other	derivative	instruments. See	Note	7	for	further	information	about	derivatives.	See	Note	14	for	further information	about	deposits.

The	firm's	deposits	that	are	included	in	level	3	are	hybrid	financial	instruments. As	the	significant	unobservable	inputs	used	to	value	hybrid	financial	instruments primarily	relate	to	the	embedded	derivative	component	of	these	deposits,	these inputs	 are	 incorporated	 in	 the	 firm's	 derivative	 disclosures	 related	 to unobservable	inputs	in	Note	7.

# Fair	Value	of	Other	Financial	Assets	and	Financial	Liabilities	by

# Level

The	tables	below	present,	by	level	within	the	fair	value	hierarchy,	other	financial assets	and	financial	liabilities accounted	for	at	fair	value	primarily	under	the	fair	value	option.

|  | Other	Financial	Assets	at	Fair	Value	as	of	December	2014 | Other	Financial	Assets	at	Fair	Value	as	of	December	2014 | Other	Financial	Assets	at	Fair	Value	as	of	December	2014 | Other	Financial	Assets	at	Fair	Value	as	of	December	2014 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Total |
| Securities\tsegregated\tfor\tregulatory\tand\tother\tpurposes\t^1 | $21,168 | $\t\t13,123 | $\t\t\t\t\t— | $\t\t34,291 |
| Securities\tpurchased\tunder\tagreements\tto\tresell | — | 126,036 | — | 126,036 |
| Securities\tborrowed | — | 66,769 | — | 66,769 |
| Receivables\tfrom\tcustomers\tand\tcounterparties | — | 6,888 | 56 | 6,944 |
| Total | $21,168 | $212,816 | $\t\t\t\t\t56 | $234,040 |

|  | Other	Financial	Liabilities	at	Fair	Value	as	of	December | 2014 |  |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Total |
| Deposits | $\t\t\t\t\t\t\t— | $\t\t12,458 | $1,065 | $\t\t13,523 |
| Securities\tsold\tunder\tagreements\tto\trepurchase | — | 88,091 | 124 | 88,215 |
| Securities\tloaned | — | 765 | — | 765 |
| Other\tsecured\tfinancings | — | 20,359 | 1,091 | 21,450 |
| Unsecured\tshort-term\tborrowings | — | 15,114 | 3,712 | 18,826 |
| Unsecured\tlong-term\tborrowings | — | 13,420 | 2,585 | 16,005 |
| Other\tliabilities\tand\taccrued\texpenses | — | 116 | 715 | 831 |
| Total | $\t\t\t\t\t\t\t— | $150,323 | $9,292 | $159,615 |

|  | Other	Financial	Assets	at	Fair	Value	as	of	December	2013 | Other	Financial	Assets	at	Fair	Value	as	of	December	2013 | Other	Financial	Assets	at	Fair	Value	as	of	December	2013 | Other	Financial	Assets	at	Fair	Value	as	of	December	2013 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Total |
| Securities\tsegregated\tfor\tregulatory\tand\tother\tpurposes\t^1 | $19,502 | $\t\t12,435 | $\t\t\t\t\t— | $\t\t31,937 |
| Securities\tpurchased\tunder\tagreements\tto\tresell | — | 161,234 | 63 | 161,297 |
| Securities\tborrowed | — | 60,384 | — | 60,384 |
| Receivables\tfrom\tcustomers\tand\tcounterparties | — | 7,181 | 235 | 7,416 |
| Other\tassets | — | 18 | — | 18 |
| Total | $19,502 | $241,252 | $\t\t\t298 | $261,052 |

|  | Other	Financial	Liabilities	at	Fair	Value	as	of	December	2013 | Other	Financial	Liabilities	at	Fair	Value	as	of	December	2013 | Other	Financial	Liabilities	at	Fair	Value	as	of	December	2013 | Other	Financial	Liabilities	at	Fair	Value	as	of	December	2013 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Total |
| Deposits | $\t\t\t\t\t\t\t— | $\t\t\t\t6,870 | $\t\t\t385 | $\t\t\t\t7,255 |
| Securities\tsold\tunder\tagreements\tto\trepurchase | — | 163,772 | 1,010 | 164,782 |
| Securities\tloaned | — | 973 | — | 973 |
| Other\tsecured\tfinancings | — | 22,572 | 1,019 | 23,591 |
| Unsecured\tshort-term\tborrowings | — | 15,680 | 3,387 | 19,067 |
| Unsecured\tlong-term\tborrowings | — | 9,854 | 1,837 | 11,691 |
| Other\tliabilities\tand\taccrued\texpenses | — | 362 | 26 | 388 |
| Total | $\t\t\t\t\t\t\t— | $220,083 | $7,664 | $227,747 |

1.Includes	securities	segregated	for	regulatory	and	other	purposes	accounted	for	at	fair	value	under	the	fair	value	option,	which	consists	of	securities	borrowed	and	resale	agreements.	In	addition, level	1	consists	of	securities	segregated	for	regulatory	and	other	purposes	accounted	for	at	fair	value	under	other	U.S.	GAAP,	consisting	of	U.S.	Treasury	securities	and	money	market	instruments.

Transfers	between	levels	of	the	fair	value	hierarchy	are	reported	at	the	beginning of	the	reporting	period	in	which	they	occur.	There	were	no	transfers	of	other financial	assets	and	financial	liabilities	between	level	1	and	level	2	during	2014 or	2013.	The	tables	below	present	information	about	transfers	between	level	2 and	level	3.

If	 a financial	 asset	 or financial liability	 was transferred to level	 3	 during	 a reporting	year,	its	entire	gain	or	loss	for	the	year	is	included	in	level	3.

The tables	below	present	changes in	fair	value	for	other	financial	assets	and financial	liabilities	accounted	for	at	fair	value	categorized	as	level	3	as	of	the	end of the year. Level 3 other financial assets and liabilities are frequently economically	hedged	with	cash	instruments	and	derivatives.	Accordingly,	gains or	losses	that	are	reported	in	level	3	can

be	 partially	 offset	 by	 gains	 or	 losses	 attributable	 to	 level	 1,	 2	 or	 3	 cash instruments	or	derivatives.	As	a	result,	gains	or	losses	included	in	the	level	3 rollforward	below	do	not	necessarily	represent	the	overall	impact	on	the	firm's results	of	operations,	liquidity	or	capital	resources.

# Level	3	Other	Financial	Assets	at	Fair	Value	for	the	Year	Ended	December	2014

1.The	aggregate	amounts	include	(gains)/losses	of	approximately	$(150)	million,	$833	million	and	$33	million	reported	in	"Market	making,"	"Other	principal	transactions"	and	"Interest	expense," respectively.

The	 net	 unrealized loss	 on level	 3	 other financial assets and liabilities	 of $621	 million (reflecting $2	 million of gains on other financial assets and $623	million	of	losses	on	other	financial	liabilities)	for	2014	primarily	reflected losses	on	certain	subordinated	liabilities	included	in	other	liabilities	and	accrued expenses, principally due to changes in the	 market value of the related underlying investments,	 and	 certain	 hybrid financial instruments included in unsecured	short-term	borrowings,	principally	due	to	an	increase	in	global	equity prices.

Transfers	out	of	level	3	of	other	financial	assets	during	2014	primarily	reflected transfers	of	certain	secured	loans	included	in	receivables	from	customers	and counterparties to level	 2,	 principally	 due to	 unobservable inputs	 not	 being significant	to	the	net	risk	of	the	portfolio.

Transfers	into	level	3	of	other	financial	liabilities	during	2014	primarily	reflected transfers	of	certain	hybrid	financial	instruments	included	in	unsecured	long-term and	short-term	borrowings	from	level	2,	principally	due	to	unobservable	inputs being	significant	to	the	valuation	of	these	instruments,	and	transfers	from	level	3 unsecured	long-term	borrowings	to	level	3	unsecured	short-term	borrowings,	as these	borrowings	neared	maturity.

Transfers	 out	 of	 level	 3	 of	 other	 financial	 liabilities	 during	 2014	 primarily reflected	transfers	of	certain	hybrid	financial	instruments	included	in	unsecured long-term	 and	 short-term	 borrowings	 to	 level	 2,	 principally	 due	 to	 increased transparency	 of	 certain	 correlation	 and	 volatility	 inputs	 used	 to	 value	 these instruments,	transfers	of	certain	other	hybrid	financial	instruments	included	in unsecured	 short-term	 borrowings	 to	 level 2, principally	 due	 to	 certain unobservable	 inputs	 not	 being	 significant	 to	 the	 valuation	 of	 these	 hybrid financial	instruments,	and	transfers	to	level	3	unsecured	short-term	borrowings from	 level 3 unsecured	 long-term	 borrowings,	 as	 these	 borrowings	 neared maturity.

1.The	aggregate	amounts	include	losses	of	approximately	$184	million,	$88	million	and	$8	million	reported	in	"Market	making,"	"Other	principal	transactions"	and	"Interest	expense,"	respectively.

The	 net	 unrealized loss	 on level	 3	 other financial assets and liabilities	 of $262	 million (reflecting	 $14	 million	 of	 gains	 on	 other financial	 assets	 and $276	million	of	losses	on	other	financial	liabilities)	for	2013	primarily	reflected losses	on	certain	hybrid	financial	instruments	included	in	unsecured	short-term borrowings,	principally	due	to	an	increase	in	global	equity	prices.

Sales	of	other	liabilities	and	accrued	expenses	during	2013	primarily	reflected the	sale	of	a	majority	stake	in	the	firm's	European	insurance	business.

Transfers	out	of	level	3	of	other	financial	assets	during	2013	primarily	reflected transfers	of	certain	resale	agreements to level	2,	principally	due to increased price	transparency	as	a	result	of	market	transactions	in	similar	instruments.

Transfers	into	level	3	of	other	financial	liabilities	during	2013	primarily	reflected transfers	 of	 certain	 hybrid	 financial	 instruments	 included	 in	 unsecured	 short- term	 and	 long-term	 borrowings	 from	 level	 2,	 principally	 due	 to	 decreased transparency	 of	 certain	 correlation	 and	 volatility	 inputs	 used	 to	 value	 these instruments.

Transfers	 out	 of	 level	 3	 of	 other	 financial	 liabilities	 during	 2013	 primarily reflected	transfers	of	certain	hybrid	financial	instruments	included	in	unsecured short-term	 and	 long-term	 borrowings	 to	 level	 2,	 principally	 due	 to	 increased transparency	 of	 certain	 correlation	 and	 volatility	 inputs	 used	 to	 value	 these instruments,	and	transfers	of	subordinated	liabilities	included	in	other	liabilities and	accrued	expenses	to	level	2,	principally	due	to	increased	price	transparency as	a	result	of	market	transactions	in	the	related	underlying	investments.

# Gains	 and	 Losses	 on	 Financial	 Assets	 and	 Financial	 Liabilities Accounted	for	at	Fair	Value	Under	the	Fair	Value	Option

The	table	below	presents	the	gains	and	losses	recognized	as	a	result	of	the	firm electing	to	apply	the	fair	value	option	to	certain	financial	assets	and	financial liabilities.	These	gains	and	losses	are	included	in	"Market	making"	and	"Other principal	transactions."	The	table	below	also	includes	gains	and	losses	on	the embedded	 derivative	 component	 of	 hybrid	 financial	 instruments	 included	 in unsecured	short-term	borrowings,	unsecured	long-term	borrowings	and	deposits. These	gains	and	losses	would	have	been	recognized	under	other	U.S.	GAAP even	 if	 the	 firm	 had	 not	 elected	 to	 account	 for	 the	 entire	 hybrid	 financial instrument	at	fair	value.

The	 amounts	 in	 the	 table	 exclude	 contractual	 interest,	 which	 is	 included	 in "Interest	income"	and	"Interest	expense,"	for	all	instruments	other	than	hybrid financial	instruments.	See	Note	23	for	further	information	about	interest	income and	interest	expense.

| $	in	millions | 2014 | 2013 | 2012 |
| :--- | :--- | :--- | :--- |
| Unsecured\tshort-term\nborrowings^\t1 | \t $(1,180) | \t $(1,145) | $\t\t\t(973) |
| Unsecured\tlong-term\nborrowings^\t2 | (592) | 683 | (1,523) |
| Other\tliabilities\tand\naccrued\texpenses^\t3 | (441) | (167) | (1,486) |
| Other^\t4 | (366) | (443) | (81) |
| Total | \t $(2,579) | \t $(1,072) | $(4,063) |

1.Includes losses	on	 the	embedded	derivative	component	of	hybrid	 financial	 instruments	of $1.22	billion	for	2014,	$1.04	billion	for	2013	and	$814	million	for	2012,	respectively.

3.Includes gains/(losses)	 on	 certain	 subordinated	 liabilities	 issued	 by	 consolidated	 VIEs. Gains/(losses)	for	2013	and	2012	also	includes	gains	on	certain	insurance	contracts.

4.Primarily	 consists	 of	 gains/(losses)	 on	 securities	 purchased	 under	 agreements	 to	 resell, securities	 borrowed,	 receivables	 from	 customers	 and	 counterparties,	 deposits	 and	 other secured	financings.

Excluding	the	gains	and	losses	on	the	instruments	accounted	for	under	the	fair value	 option	 described	 above,	 "Market	 making"	 and	 "Other	 principal transactions"	 primarily	 represent	 gains	 and	 losses	 on	 "Financial	 instruments owned,	at	fair	value"	and	"Financial	instruments	sold,	but	not	yet	purchased,	at fair	value."

# Loans	and	Lending	Commitments

The	table	below	presents	the	difference	between	the	aggregate	fair	value	and	the aggregate	contractual	principal	amount	for	loans	and	long-term	receivables	for which	the	fair	value	option	was	elected.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Performing\tloans\tand\tlong-term\treceivables |  |  |
| Aggregate\tcontractual\tprincipal\tin\texcess\tof\tthe\trelated\tfair\tvalue | \t\t$1,699 | \t$3,106 |
| Loans\ton\tnonaccrual\tstatus\tand/or\tmore\tthan\t90\tdays\tpast\tdue^\t1 |  |  |
| Aggregate\tcontractual\tprincipal\tin\texcess\tof\tthe\trelated\tfair\tvalue |  |  |
| (excluding\tloans\tcarried\tat\tzero\tfair\tvalue\tand\tconsidered |  |  |
| uncollectible) | \t\t13,106 | \t11,041 |
| Aggregate\tfair\tvalue\tof\tloans\ton\tnonaccrual\tstatus\tand/or\tmore\tthan\n90\tdays\tpast\tdue | 3,333 | 2,781 |

1.The	aggregate	contractual	principal	amount	of	 these	 loans	exceeds	 the	related	 fair	value primarily	because	the	firm	regularly	purchases	loans,	such	as	distressed	loans,	at	values significantly	below	contractual	principal	amounts.

As	of	December	2014	and	December	2013,	the	fair	value	of	unfunded	lending commitments	 for	 which	 the	 fair	 value	 option	 was	 elected	 was	 a	 liability	 of $402	million	and	$1.22	billion,	respectively,	and	 the	related	 total	contractual amount	of	these	lending	commitments	was	$26.19	billion	and	$51.54	billion, respectively.	See	Note	18	for	further	information	about	lending	commitments.

# Long-Term	Debt	Instruments

The	 aggregate	 contractual	 principal	 amount	 of	 long-term	 other	 secured financings	for	which	the	fair	value	option	was	elected	exceeded	the	related	fair value	 by $203 million	 and $154 million	 as	 of	 December	 2014	 and December	 2013,	 respectively.	 The	 aggregate	 contractual	 principal	 amount	 of unsecured	 long-term	 borrowings	 for	 which	 the	 fair	 value	 option	 was	 elected exceeded	 the	 related	 fair	 value	 by $163	 million and $92	 million as	 of December	2014	and	December	2013,	respectively.	The	amounts	above	include both	principal	and	non-principal-protected	long-term	borrowings.

# Impact	of	Credit	Spreads	on	Loans	and	Lending	Commitments

The	 estimated	 net	 gain	 attributable	 to	 changes	 in	 instrument-specific	 credit spreads	on	loans	and	lending	commitments	for	which	the	fair	value	option	was elected	was	$1.83	billion	for	2014,	$2.69	billion	for	2013	and	$3.07	billion	for 2012,	respectively.	Changes	in	the	fair	value	of	loans	and	lending	commitments are	 primarily	 attributable	 to	 changes	 in	 instrument-specific	 credit	 spreads. Substantially	all	of	the	firm's	performing	loans	and	lending	commitments	are floating-rate.

# Impact	of	Credit	Spreads	on	Borrowings

The	 table	 below	 presents	 the	 net	 gains/(losses)	 attributable	 to	 the	 impact	 of changes	in	the	firm's	own	credit	spreads	on	borrowings	for	which	the	fair	value option	 was	 elected.	 The	 firm	 calculates	 the	 fair	 value	 of	 borrowings	 by discounting	 future	 cash	 flows	 at	 a	 rate	 which	 incorporates	 the	 firm's	 credit spreads.

|  | Year	Ended	December | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | \t\t2014 | 2013 | 2012 |
| Net\tgains/(losses)\tincluding\thedges | \t\t$144 | \t$(296) | \t$(714) |
| Net\tgains/(losses)\texcluding\thedges | 142 | (317) | (800) |

# Loans	Receivable

Loans	receivable	is	comprised	of	loans	held	for	investment	that	are	accounted for	at	amortized	cost	net	of	allowance	for	loan	losses.	Interest	on	such	loans	is recognized	over	the	life	of	the	loan	and	is	recorded	on	an	accrual	basis.	The	table below	presents	details	about	loans	receivable.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Corporate\tloans | \t $15,044 | \t $\t\t7,667 |
| Loans\tto\tprivate\twealth\tmanagement\tclients | 11,289 | 6,558 |
| Loans\tbacked\tby\tcommercial\treal\testate | 1,705 | 809 |
| Other\tloans | 1,128 | — |
| Subtotal | 29,166 | 15,034 |
| Allowance\tfor\tloan\tlosses | (228) | (139) |
| Total\tloans\treceivable | \t $28,938 | \t $14,895 |

As	of	December	2014	and	December	2013,	the	fair	value	of	"Loans	receivable" was	$28.90	billion	and	$14.91	billion,	respectively.	As	of	December	2014,	had these	loans	been	carried	at	fair	value	and	included	in	the	fair	value	hierarchy, $13.75	 billion	 and	 $15.15	 billion	 would	 have	 been	 classified	 in	 level	 2	 and level	3,	respectively.	As	of	December	2013,	had	these	loans	been	carried	at	fair value	and	included	in	the	fair	value	hierarchy,	$6.16	billion	and	$8.75	billion would	have	been	classified	in	level	2	and	level	3,	respectively.

The	firm	also	extends	lending	commitments	that	are	held	for	investment	and accounted	for	on	an	accrual	basis.	As	of	December	2014	and	December	2013, such	lending	commitments	were	$66.22	billion	and	$35.66	billion,	respectively, substantially	all	of	which	were	extended	to	corporate	borrowers.	The	carrying value	and	the	estimated	fair	value	of	such	lending	commitments	were	liabilities of	 $199	 million	 and	 $1.86	 billion,	 respectively,	 as	 of	 December	 2014,	 and $132	million	and	$1.02	billion,	respectively,	as	of	December	2013.	Had	these commitments	been	included	in	the	firm's	fair	value	hierarchy,	they	would	have primarily	 been	 classified	 in	 level 3 as	 of	 both	 December	 2014	 and December	2013.

Ÿ	Corporate	Loans.	Corporate	loans	include	term	loans,	revolving	lines	of credit,	letter	of	credit	facilities	and	bridge	loans,	and	are	principally	used	for operating	 liquidity	 and	 general	 corporate	 purposes,	 or	 in	 connection	 with acquisitions.	Corporate	loans	may	be	secured	or	unsecured,	depending	on	the loan	purpose,	the	risk	profile	of	the	borrower	and	other	factors.	The	majority of	these	loans	have	maturities	between	one	year	and	five	years	and	carry	a floating	interest	rate.

Ÿ	Loans to	 Private	 Wealth	 Management	 Clients.	 Loans to	 the	 firm's private	wealth	management	clients	include	loans	used	by	clients	to	finance private	asset	purchases,	employ	leverage	for	strategic	investments	in	real	or financial	assets,	bridge	cash	flow	timing	gaps	or	provide	liquidity	for	other needs.	 Such	 loans	 are	 primarily	 secured	 by	 securities	 or	 other	 assets.	 The majority	of	these	loans	are	demand	or	short-term	loans	and	carry	a	floating interest	rate.

Ÿ	Loans Backed by Commercial Real Estate. Loans	 backed	 by commercial	 real	 estate	 include	 loans	 collateralized	 by	 hotels,	 retail	 stores, multifamily	housing	complexes	and	commercial	and	industrial	properties.	The majority	of	these	loans	have	maturities	between	one	year	and	five	years	and carry	a	floating	interest	rate.

Ÿ	Other	 Loans.	 Other loans	 primarily	 include	 loans	 secured	 by	 consumer loans,	residential	real	estate	and	other	assets.	The	majority	of	these	loans	have maturities	between	one	year	and	five	years	and	carry	a	floating	interest	rate.

# Credit	Quality

The	firm's	risk	assessment	process	includes	evaluating	the	credit	quality	of	its loans	 receivable.	The	 firm	 performs	 credit	 reviews	 which	 include	 initial	 and ongoing	analyses	of	its	borrowers.	A	credit	review	is	an	independent	analysis	of the	 capacity	 and	 willingness	 of	 a	 borrower	 to	 meet	 its	 financial	 obligations, resulting	in	an	internal	credit	rating.	The	determination	of	internal	credit	ratings also	incorporates	assumptions	with	respect	to	the	nature	of	and	outlook	for	the borrower's	 industry,	 and	 the	 economic	 environment.	The	 firm	 also	 assigns	 a regulatory	risk	rating	to	such	loans	based	on	the	definitions	provided	by	the	U.S. federal	bank	regulatory	agencies.

As	 of	 December	 2014	 and	 December	 2013,	 loans	 receivable	 were	 primarily extended	to	non-investment-grade	borrowers	and	lending	commitments	held	for investment	and	accounted	for	on	an	accrual	basis	were	primarily	extended	to investment-grade	 borrowers.	 Substantially	 all	 of	 these	 loans	 and	 lending commitments	align	with	the	U.S.	federal	bank	regulatory	agencies'	definition	of Pass.	Loans	and	lending	commitments	meet	the	definition	of	Pass	when	they	are performing	and/or	do	not	demonstrate	adverse	characteristics	that	are	likely	to result	in	a	credit	loss.

# Impaired	Loans	and	Loans	on	Non-Accrual	Status

A	loan	is	determined	to	be	impaired	when	it	is	probable	that	the	firm	will	not	be able	to	collect	all	principal	and	interest	due	under	the	contractual	terms	of	the loan.	At	that	time,	loans	are	placed	on	non-accrual	status	and	all	accrued	but uncollected	interest	is	reversed	against	interest	income	and	interest	subsequently collected	is	recognized	on	a	cash	basis	to	the	extent	the	loan	balance	is	deemed collectible.	Otherwise	all	cash	received	is	used	to	reduce	the	outstanding	loan balance.	As	of	December	2014	and	December	2013,	impaired	loans	receivable	in non-accrual	status	were	not	material.

# Allowance	for	Losses	on	Loans	and	Lending	Commitments

The	firm's	allowance	for	loan	losses	is	comprised	of	two	components:	specific loan	level	reserves	and	a	collective,	portfolio	level	reserve.	Specific	loan	level reserves	are	determined	on	loans	that	exhibit	credit	quality	weakness	and	are therefore	 individually	 evaluated	 for	 impairment.	 Portfolio	 level	 reserves	 are determined	on	the	remaining	loans,	not	deemed	impaired,	by	aggregating	groups of	 loans	 with	 similar	 risk	 characteristics	 and	 estimating	 the	 probable	 loss inherent	 in	 the	 portfolio.	 As	 of	 December	 2014	 and	 December	 2013, substantially	all	of	the	firm's	loans	receivable	were	evaluated	for	impairment	at the	portfolio	level.

The	 allowance	 for	 loan	 losses	 is	 determined	 using	 various	 inputs,	 including industry	 default	 and	 loss	 data,	 current	 macroeconomic	 indicators,	 borrower's capacity	 to	 meet	 its	 financial	 obligations,	 borrower's	 country	 of	 risk,	 loan seniority,	 and	 collateral	 type.	 Management's	 estimate	 of	 loan	 losses	 entails judgment	 about	 loan	 collectability	 based	 on	 available	 information	 at	 the reporting	dates,	and	there	are	uncertainties	inherent	in	those	judgments.	While management	 uses	 the	 best	 information	 available	 to	 determine	 this	 estimate, future	adjustments	to	the	allowance	may	be	necessary	based	on,	among	other things,	changes	in	the	economic	environment	or	variances	between	actual	results and	the	original	assumptions	used.	Loans	are	charged	off	against	the	allowance for	loan	losses	when	they	are	deemed	to	be	uncollectible.

The	firm	also	records	an	allowance	for	losses	on	lending	commitments	that	are held	for	investment	and	accounted	for	on	an	accrual	basis.	Such	allowance	is determined	using	the	same	methodology	as	the	allowance	for	loan	losses,	while also	taking	into	consideration	the	probability	of	drawdowns	or	funding	and	is included	 in	 "Other	 liabilities	 and	 accrued	 expenses"	 in	 the	 consolidated statements	of	financial	condition.	As	of	December	2014	and	December	2013, substantially	all	of	such	lending	commitments	were	evaluated	for	impairment	at the	portfolio	level.

The	 tables	 below	 present	 the	 changes	 in	 allowance	 for	 loan	 losses,	 and allowance	 for	 losses	 on	 lending	 commitments	 for	 the	 years	 ended December	2014	and	December	2013.

| $	in	millions | Year	Ended	December |  |
| :--- | :--- | :--- |
| Allowance\tfor\tlosses\ton\tlending\tcommitments | 2014 | 2013 |
| Balance,\tbeginning\tof\tyear | $\t\t57 | $\t\t28 |
| Provision\tfor\tlosses\ton\tlending\tcommitments | 29 | 29 |
| Balance,\tend\tof\tyear | $\t\t86 | $\t\t57 |

The	provision	for	losses	on	loans	and	lending	commitments	is	included	in	"Other principal	 transactions"	 in	 the	 consolidated	 statements	 of	 earnings.	 As	 of December	2014	and	December	2013,	substantially	all	of	the	allowance	for	loan losses	 and	 allowance	 for	 losses	 on	 lending	 commitments	 were	 related	 to corporate	loans	and	corporate	lending	commitments.	Substantially	all	of	these allowances	were	determined	at	the	portfolio	level.

# Collateralized	Agreements	and	Financings

Collateralized	agreements	are	securities	purchased	under	agreements	 to	resell (resale	 agreements)	 and	 securities	 borrowed.	 Collateralized	 financings	 are securities	 sold	 under	 agreements	 to	 repurchase	 (repurchase	 agreements), securities	 loaned	 and	 other	 secured	 financings.	 The	 firm	 enters	 into	 these transactions	 in	order	 to,	among	other	 things,	facilitate	client	activities,	 invest excess	cash,	acquire	securities	to	cover	short	positions	and	finance	certain	firm activities.

Collateralized	agreements	and	financings	are	presented	on	a	net-by-counterparty basis	when	a	legal	right	of	setoff	exists.	Interest	on	collateralized	agreements	and collateralized	 financings	 is	 recognized	 over	 the	 life	 of	 the	 transaction	 and included	in	"Interest	income"	and	"Interest	expense,"	respectively.	See	Note	23 for	further	information	about	interest	income	and	interest	expense.

The	table	below	presents	the	carrying	value	of	resale	and	repurchase	agreements and	securities	borrowed	and	loaned	transactions.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Securities\tpurchased\tunder\tagreements\tto\tresell^\t1 | \t\t$127,938 | \t$161,732 |
| Securities\tborrowed^\t2 | 160,722 | 164,566 |
| Securities\tsold\tunder\tagreements\tto\trepurchase^\t1 | 88,215 | 164,782 |
| Securities\tloaned^\t2 | 5,570 | 18,745 |

1.Substantially	all	resale	agreements	and	all	repurchase	agreements	are	carried	at	fair	value under	the	fair	value	option.	See	Note	8	for	further	information	about	the	valuation	techniques and	significant	inputs	used	to	determine	fair	value.

Resale	and	Repurchase	Agreements A resale agreement is a transaction in	 which the firm	 purchases financial instruments	from	a	seller,	typically	in	exchange	for	cash,	and	simultaneously enters	into	an	agreement	to	resell	the	same	or	substantially	the	same	financial instruments	to	the	seller	at	a	stated	price	plus	accrued	interest	at	a	future	date. A repurchase agreement is a transaction in	 which the firm sells financial instruments	to	a	buyer,	typically	in	exchange	for	cash,	and	simultaneously	enters into	an	agreement to	repurchase the	same	or	substantially the	same	financial instruments	from	the	buyer	at	a	stated	price	plus	accrued	interest	at	a	future	date.

The	financial	instruments	purchased	or	sold	in	resale	and	repurchase	agreements typically include	 U.S.	 government	 and federal	 agency,	 and investment-grade sovereign	obligations.

The firm receives financial instruments	 purchased	 under resale agreements, makes	 delivery	 of financial instruments sold	 under repurchase agreements, monitors	the	market	value	of	these	financial	instruments	on	a	daily	basis,	and delivers	or	obtains	additional	collateral	due	to	changes	in	the	market	value	of	the financial	instruments,	as	appropriate.	For	resale	agreements,	the	firm	typically requires	collateral	with	a	fair	value	approximately	equal	to	the	carrying	value	of the	relevant	assets	in	the	consolidated	statements	of	financial	condition.

Even though repurchase	 and resale	 agreements involve the legal transfer	 of ownership of financial instruments, they are accounted for as financing arrangements	because	they	require	the	financial	instruments	to	be	repurchased	or resold at the	 maturity of the agreement.	 However, "repos-to-maturity" are accounted	for	as	sales.	A	repo-to-maturity is	a transaction in	which the	firm transfers	a	security	under	an	agreement to	repurchase the	security	where the maturity	 date	 of the repurchase	 agreement	 matches the	 maturity	 date	 of the underlying	security.	Therefore,	the	firm	effectively	no	longer	has	a	repurchase obligation and has relinquished control over the underlying security and, accordingly,	accounts	for	the	transaction	as	a	sale.	See	Note	3	for	information about	changes	to	the	accounting	for	repos-to-maturity	which	became	effective	in January 2015. The firm had no repos-to-maturity outstanding as of December	2014	and	December	2013.

# Securities	Borrowed	and	Loaned	Transactions

In	 a	 securities	 borrowed	 transaction,	 the	 firm	 borrows	 securities	 from	 a counterparty	 in	 exchange	 for	 cash	 or	 securities.	 When	 the	 firm	 returns	 the securities,	the	counterparty	returns	the	cash	or	securities.	Interest	is	generally paid	periodically	over	the	life	of	the	transaction.

In	a	securities	loaned	transaction,	the	firm	lends	securities	to	a	counterparty	in exchange	for	cash	or	securities.	When	the	counterparty	returns	the	securities,	the firm	returns	the	cash	or	securities	posted	as	collateral.	Interest	is	generally	paid periodically	over	the	life	of	the	transaction.

The	 firm	 receives	 securities	 borrowed,	 makes	 delivery	 of	 securities	 loaned, monitors	the	market	value	of	these	securities	on	a	daily	basis,	and	delivers	or obtains	additional	collateral	due	to	changes	in	the	market	value	of	the	securities, as	appropriate.	For	securities	borrowed	transactions,	the	firm	typically	requires collateral	 with	 a	 fair	 value	 approximately	 equal	 to	 the	 carrying	 value	 of	 the securities	borrowed	transaction.

Securities	 borrowed	 and	 loaned	 within	 Fixed	 Income,	 Currency	 and Commodities	Client	Execution	are	recorded	at	fair	value	under	the	fair	value option.	See	Note	8	for	further	information	about	securities	borrowed	and	loaned accounted	for	at	fair	value.

Securities	borrowed	and	loaned	within	Securities	Services	are	recorded	based	on the	amount	of	cash	collateral	advanced	or	received	plus	accrued	 interest.	As these	arrangements	generally	can	be	terminated	on	demand,	they	exhibit	little,	if any,	sensitivity	to	changes	in	interest	rates.	Therefore,	the	carrying	value	of	such arrangements	approximates	fair	value.	While	these	arrangements	are	carried	at amounts	that	approximate	fair	value,	they	are	not	accounted	for	at	fair	value under	the	fair	value	option	or	at	fair	value	in	accordance	with	other	U.S.	GAAP and	 therefore	 are	 not	 included	 in	 the	 firm's	 fair	 value	 hierarchy	 in	 Notes	 6 through	 8.	 Had	 these	 arrangements	 been	 included	 in	 the	 firm's	 fair	 value hierarchy,	they	would	have	been	classified	in	level	2	as	of	December	2014	and December	2013.

# Offsetting	Arrangements

The	tables	below	present	the	gross	and	net	resale	and	repurchase	agreements	and securities	borrowed	and	loaned	transactions,	and	the	related	amount	of	netting with	 the	 same	 counterparty	 under	 enforceable	 netting	 agreements	 (i.e., counterparty	 netting)	 included	 in	 the	 consolidated	 statements	 of	 financial condition.	Substantially	all	of	the	gross	carrying	values	of	these	arrangements	are subject	 to	 enforceable	 netting	 agreements.	The	 tables	 below	 also	 present	 the amounts	 not	 offset	 in	 the	 consolidated	 statements	 of	 financial	 condition including	counterparty	netting	that	does	not	meet	the	criteria	for	netting	under U.S.	GAAP	and	the	fair	value	of	cash	or	securities	collateral	received	or	posted subject	to	enforceable	credit	support	agreements.	Where	the	firm	has	received	or posted	collateral	under	credit	support	agreements,	but	has	not	yet	determined such	agreements	are	enforceable,	the	related	collateral	has	not	been	netted	in	the tables	below.

1.As	 of	 December	 2014	 and	 December	 2013, the firm	 had	 $6.04	 billion	 and	 $9.67	 billion, respectively, of securities received under resale agreements, and $7.08 billion and $2.77	billion,	respectively,	of	securities	borrowed	transactions	that	were	segregated	to	satisfy certain regulatory requirements.	 These securities	 are included in "Cash	 and securities segregated	for	regulatory	and	other	purposes."

# Other	Secured	Financings

In	addition	to	repurchase	agreements	and	securities	lending	transactions,	the	firm funds	certain	assets	 through	 the	use	of	other	secured	financings	and	pledges financial	instruments	and	other	assets	as	collateral	in	these	transactions.	These other	secured	financings	consist	of:

# Ÿ	Liabilities	of	consolidated	VIEs;

Ÿ	Transfers	of	assets	accounted	for	as	financings	rather	 than	sales	(primarily collateralized	central	bank	financings,	pledged	commodities,	bank	loans	and mortgage	whole	loans);	and

# Ÿ	Other	structured	financing	arrangements.

Other	 secured	 financings	 include	 arrangements	 that	 are	 nonrecourse.	 As	 of December	2014	and	December	2013,	nonrecourse	other	secured	financings	were $1.94	billion	and	$1.54	billion,	respectively.

The	firm	has	elected	 to	apply	 the	fair	value	option	 to	substantially	all	other secured	 financings	 because	 the	 use	 of	 fair	 value	 eliminates	 non-economic volatility	 in	 earnings	 that	 would	 arise	 from	 using	 different	 measurement attributes.	See	Note	8	for	further	information	about	other	secured	financings	that are	accounted	for	at	fair	value.

Other	secured	financings	that	are	not	recorded	at	fair	value	are	recorded	based on	 the	 amount	 of	 cash	 received	 plus	 accrued	 interest,	 which	 generally approximates	 fair	 value.	 While	 these	 financings	 are	 carried	 at	 amounts	 that approximate	fair	value,	they	are	not	accounted	for	at	fair	value	under	the	fair value	option	or	at	fair	value	in	accordance	with	other	U.S.	GAAP	and	therefore are	not	included	in	the	firm's	fair	value	hierarchy	in	Notes	6	through	8.	Had these	financings	been	included	in	the	firm's	fair	value	hierarchy,	they	would have	 primarily	 been	 classified	 in	 level 2 as	 of	 December	 2014	 and December	2013.

The	tables	below	present	information	about	other	secured	financings.

|  | As	of	December	2014 | As	of	December	2014 |  |
| :--- | :--- | :--- | :--- |
|  | U.S. | Non-U.S. |  |
| $\tin\tmillions | Dollar | Dollar | Total |
| Other\tsecured\tfinancings\t(short-term): |  |  |  |
| At\tfair\tvalue | \t\t$\t\t7,887 | $\t\t7,668\t\t\t\t\t$15,555 | $\t\t7,668\t\t\t\t\t$15,555 |
| At\tamortized\tcost | 5 | — | 5 |
| Weighted\taverage\tinterest\trates | 4.33% | —% |  |
| Other\tsecured\tfinancings\t(long-term):\nAt\tfair\tvalue | 3,290 | 2,605 | 5,895 |
| At\tamortized\tcost | 580 | 774 | 1,354 |
| Weighted\taverage\tinterest\trates | 2.69% | 2.31% |  |
| Total^\t1 | \t\t$11,762 | $11,047\t\t\t\t\t$22,809 | $11,047\t\t\t\t\t$22,809 |
| Amount\tof\tother\tsecured\tfinancings\tcollateralized\tby:\nFinancial\tinstruments^\t2 | \t\t$11,460 | $10,483\t\t\t\t\t$21,943 | $10,483\t\t\t\t\t$21,943 |
| Other\tassets | 302 | 564 | 866 |

|  | As	of	December	2013 | As	of	December	2013 |  |
| :--- | :--- | :--- | :--- |
|  | U.S. | Non-U.S. |  |
| $\tin\tmillions | Dollar | Dollar | Total |
| Other\tsecured\tfinancings\t(short-term): |  |  |  |
| At\tfair\tvalue | \t\t$\t\t9,374 | $\t\t7,828\t\t\t\t\t$17,202 | $\t\t7,828\t\t\t\t\t$17,202 |
| At\tamortized\tcost | 88 | — | 88 |
| Weighted\taverage\tinterest\trates | 2.86% | —% |  |
| Other\tsecured\tfinancings\t(long-term):\nAt\tfair\tvalue | 3,711 | 2,678 | 6,389 |
| At\tamortized\tcost | 372 | 763 | 1,135 |
| Weighted\taverage\tinterest\trates | 3.78% | 1.53% |  |
| Total^\t1 | \t\t$13,545 | $11,269\t\t\t\t\t$24,814 | $11,269\t\t\t\t\t$24,814 |
| Amount\tof\tother\tsecured\tfinancings\tcollateralized\tby:\nFinancial\tinstruments^\t2 | \t\t$13,366 | $10,880\t\t\t\t\t$24,246 | $10,880\t\t\t\t\t$24,246 |
| Other\tassets | 179 | 389 | 568 |

1.Includes	$974	million	and	$1.54	billion	related	to	transfers	of	financial	assets	accounted	for	as financings	rather	than	sales	as	of	December	2014	and	December	2013,	respectively.	Such financings	were	collateralized	by	financial	assets	included	in	"Financial	instruments	owned,	at fair	 value"	 of	 $995	 million	 and	 $1.58	 billion	 as	 of	 December	 2014	 and	 December	 2013, respectively.

2.Includes	 $10.24	 billion	 and	 $14.75	 billion	 of	 other	 secured	 financings	 collateralized	 by financial	 instruments	 owned,	 at	 fair	 value	 as	 of	 December	 2014	 and	 December	 2013, respectively,	 and	 includes	 $11.70	 billion	 and	 $9.50	 billion	 of	 other	 secured	 financings collateralized	 by	 financial	 instruments	 received	 as	 collateral	 and	 repledged	 as	 of December	2014	and	December	2013,	respectively.

# In	the	tables	above:

Ÿ	Short-term	secured	financings	include	financings	maturing	within	one	year	of the	financial	statement	date	and	financings that	are	redeemable	within	one year	of	the	financial	statement	date	at	the	option	of	the	holder.

Ÿ	Long-term	secured	financings	that	are	repayable	prior	to	maturity	at	the	option of	the	firm	are	reflected	at	their	contractual	maturity	dates.

Ÿ	Long-term	 secured financings that	 are redeemable	 prior to	 maturity	 at the option of the holders are reflected at the dates such options become exercisable.

Ÿ	Weighted	average	interest	rates	exclude	secured	financings	at	fair	value	and include	the	effect	of	hedging	activities.	See	Note	7	for	further	information about	hedging	activities.

The	table	below	presents	other	secured	financings	by	maturity.

|  | As	of |
| :--- | :--- |
| $\tin\tmillions | December\t2014 |
| Other\tsecured\tfinancings\t(short-term) | $15,560 |
| Other\tsecured\tfinancings\t(long-term):\n2016 | 3,304 |
| 2017 | 1,800 |
| 2018 | 938 |
| 2019 | 465 |
| 2020-thereafter | 742 |
| Total\tother\tsecured\tfinancings\t(long-term) | 7,249 |
| Total\tother\tsecured\tfinancings | $22,809 |

# Collateral	Received	and	Pledged

The	firm	receives	cash	and	securities	(e.g.,	U.S.	government	and	federal	agency, other	sovereign	and	corporate	obligations,	as	well	as	equities	and	convertible debentures)	 as	 collateral,	 primarily	 in	 connection	 with	 resale	 agreements, securities	borrowed,	derivative	transactions	and	customer	margin	loans.	The	firm obtains	cash	and	securities	as	collateral	on	an	upfront	or	contingent	basis	for derivative	 instruments	 and	 collateralized	 agreements	 to	 reduce	 its	 credit exposure	to	individual	counterparties.

In	many	cases,	the	firm	is	permitted	to	deliver	or	repledge	financial	instruments received	as	collateral	when	entering	into	repurchase	agreements	and	securities lending	 agreements,	 primarily	 in	 connection	 with	 secured	 client	 financing activities.	 The	 firm	 is	 also	 permitted	 to	 deliver	 or	 repledge	 these	 financial instruments	 in	 connection	 with	 other	 secured	 financings,	 collateralizing derivative	transactions	and	meeting	firm	or	customer	settlement	requirements.

The	 firm	 also	 pledges	 certain	 financial	 instruments	 owned,	 at	 fair	 value	 in connection	with	repurchase	agreements,	securities	lending	agreements	and	other secured	 financings,	 and	 other	 assets	 (primarily	 real	 estate	 and	 cash)	 in connection	with	other	secured	financings	to	counterparties	who	may	or	may	not have	the	right	to	deliver	or	repledge	them.

The	table	below	presents	financial	instruments	at	fair	value	received	as	collateral that	were	available	to	be	delivered	or	repledged	and	were	delivered	or	repledged by	the	firm.

# Securitization	Activities

The	 firm	 securitizes	 residential	 and	 commercial	 mortgages,	 corporate	 bonds, loans	and	other	types	of	financial	assets	by	selling	these	assets	to	securitization vehicles	 (e.g.,	 trusts,	 corporate	 entities	 and	 limited	 liability	 companies)	 or through	a	resecuritization.	The	firm	acts	as	underwriter	of	the	beneficial	interests that	 are	 sold	 to	 investors.	The	 firm's	 residential	 mortgage	 securitizations	 are substantially	all	in	connection	with	government	agency	securitizations.

Beneficial	interests	issued	by	securitization	entities	are	debt	or	equity	securities that	give	the	investors	rights	to	receive	all	or	portions	of	specified	cash	inflows	to a	 securitization	 vehicle	 and	 include	 senior	 and	 subordinated	 interests	 in principal,	 interest	 and/or	 other	 cash	 inflows.	 The	 proceeds	 from	 the	 sale	 of beneficial	interests	are	used	to	pay	the	transferor	for	the	financial	assets	sold	to the	securitization	vehicle	or	to	purchase	securities	which	serve	as	collateral.

The	firm	accounts	for	a	securitization	as	a	sale	when	it	has	relinquished	control over	the	transferred	assets.	Prior	to	securitization,	the	firm	accounts	for	assets pending	 transfer	 at	 fair	 value	 and	 therefore	 does	 not	 typically	 recognize significant	 gains	 or	 losses	 upon	 the	 transfer	 of	 assets.	 Net	 revenues	 from underwriting	 activities	 are	 recognized	 in	 connection	 with	 the	 sales	 of	 the underlying	beneficial	interests	to	investors.

For	transfers	of	assets	that	are	not	accounted	for	as	sales,	the	assets	remain	in "Financial	instruments	owned,	at	fair	value"	and	the	transfer	is	accounted	for	as a	collateralized	financing,	with	the	related	interest	expense	recognized	over	the life	 of	 the	 transaction.	 See	 Notes	 10	 and	 23	 for	 further	 information	 about collateralized	financings	and	interest	expense,	respectively.

The	firm	generally	receives	cash	in	exchange	for	the	transferred	assets	but	may also	have	continuing	involvement	with	transferred	assets,	including	ownership	of beneficial	interests	in	securitized	financial	assets,	primarily	in	the	form	of	senior or	subordinated	securities.	The	firm	may	also	purchase	senior	or	subordinated securities	 issued	 by	 securitization	 vehicles	 (which	 are	 typically	 VIEs)	 in connection	with	secondary	market-making	activities.

The	primary	risks	included	in	beneficial	interests	and	other	interests	from	the firm's	continuing	involvement	with	securitization	vehicles	are	the	performance of	the	underlying	collateral,	the	position	of	the	firm's	investment	in	the	capital structure	of	the	securitization	vehicle	and	the	market	yield	for	the	security.	These interests	are	accounted	for	at	fair	value,	are	included	in	"Financial	instruments owned,	at	fair	value"	and	are	substantially	all	classified	in	level	2	of	the	fair value	hierarchy.	See	Notes	5	through	8	for	further	information	about	fair	value measurements.

The	table	below	presents	the	amount	of	financial	assets	securitized	and	the	cash flows	received	on	retained	interests	in	securitization	entities	in	which	the	firm had	continuing	involvement.

| $	in	millions | 2014 | 2013 | 2012 |
| :--- | :--- | :--- | :--- |
| Residential\tmortgages | \t\t$19,099 | \t$29,772 | \t $33,755 |
| Commercial\tmortgages | 2,810 | 6,086 | 300 |
| Other\tfinancial\tassets | 1,009 | — | — |
| Total | \t\t$22,918 | \t$35,858 | \t $34,055 |
| Cash\tflows\ton\tretained\tinterests | \t\t$\t\t\t\t\t215 | \t$\t\t\t\t\t249 | \t $\t\t\t\t\t389 |

The	tables	below	present	the	firm's	continuing	involvement	in	nonconsolidated securitization	 entities	 to	 which	 the	 firm	 sold	 assets,	 as	 well	 as	 the	 total outstanding	 principal	 amount	 of	 transferred	 assets	 in	 which	 the	 firm	 has continuing	involvement.	In	these	tables:

Ÿ	The	outstanding	principal	amount	is	presented	for	the	purpose	of	providing information	about	the	size	of	the	securitization	entities	in	which	the	firm	has continuing	involvement	and	is	not	representative	of	the	firm's	risk	of	loss.

Ÿ	For	retained	or	purchased	interests,	the	firm's	risk	of	loss	is	limited	to	the	fair value	of	these	interests.

Ÿ	Purchased	interests	represent	senior	and	subordinated	interests,	purchased	in connection	with	secondary	market-making	activities,	in	securitization	entities in	which	the	firm	also	holds	retained	interests.

|  | Outstanding | Fair	Value	of | Fair	Value	of |
| :--- | :--- | :--- | :--- |
|  | Principal | Retained | Purchased |
| $\tin\tmillions | Amount | Interests | Interests |
| U.S.\tgovernment\tagency-issued |  |  |  |
| collateralized\tmortgage\tobligations | $56,792 | $2,140 | $ \t\t— |
| Other\tresidential\tmortgage-backed | 2,273 | 144 | 5 |
| Other\tcommercial\tmortgage-backed | 3,313 | 86 | 45 |
| CDOs,\tCLOs\tand\tother | 4,299 | 59 | 17 |
| Total | $66,677 | $2,429 | $\t67 |

|  |  | As	of	December	2013 |  |
| :--- | :--- | :--- | :--- |
|  | Outstanding | Fair\tValue\tof | Fair\tValue\tof |
|  | Principal | Retained | Purchased |
| $\tin\tmillions | Amount | Interests | Interests |
| U.S.\tgovernment\tagency-issued\ncollateralized\tmortgage\tobligations | $61,543 | $3,455 | $ \t\t— |
| Other\tresidential\tmortgage-backed | 2,072 | 46 | — |
| Other\tcommercial\tmortgage-backed | 7,087 | 140 | 153 |
| CDOs,\tCLOs\tand\tother | 6,861 | 86 | 8 |
| Total\t^1 | $77,563 | $3,727 | $161 |

1.Outstanding	principal	amount	includes	$418	million	related	to	securitization	entities	in	which the	firm's	only	continuing	involvement	is	retained	servicing	which	is	not	a	variable	interest.

In	addition,	the	outstanding	principal	and	fair	value	of	retained	interests	in	the tables	 above	 relate	 to	 the	 following	 types	 of	 securitizations	 and	 vintage	 as described:

Ÿ	The	outstanding	principal	amount	and	fair	value	of	retained	interests	for	U.S. government	 agency-issued	 collateralized	 mortgage	 obligations	 as	 of December	2014	primarily	relate	to	securitizations	during	2014	and	2013,	and as	of	December	2013	primarily	relate	to	securitizations	during	2013	and	2012.

Ÿ	The	outstanding	principal	amount	and	fair	value	of	retained	interests	for	other residential	mortgage-backed	obligations	as	of	December	2014	primarily	relate to	resecuritizations	during	2014,	and	prime	and	Alt-A	securitizations	during 2007,	 and	 as	 of	 December	 2013	 primarily	 relate	 to	 prime	 and	 Alt-A securitizations	during	2007	and	2006.

Ÿ	The	outstanding	principal	amount	and	fair	value	of	retained	interests	for	other commercial	 mortgage-backed	 obligations	 as	 of	 December	 2014	 primarily relate	to	securitizations	during	2014,	and	as	of	December	2013	primarily	relate to	securitizations	during	2013.

Ÿ	The	 outstanding	 principal	 amount	 and	 fair	 value	 of	 retained	 interests	 for CDOs,	 CLOs	 and	 other	 as	 of	 December	 2014	 primarily	 relate	 to securitizations	 during	 2014	 and	 2007,	 and	 as	 of	 December	 2013	 primarily relate	to	securitizations	during	2007.

In	addition	to	the	interests	in	the	tables	above,	the	firm	had	other	continuing involvement	in	the	form	of	derivative	transactions	with	certain	nonconsolidated VIEs.	The	carrying	value	of	these	derivatives	was	a	net	asset	of	$115	million	and $26	 million as	 of	 December	 2014	 and	 December	 2013,	 respectively.	 The notional	amounts	of	these	derivatives	are	included	in	maximum	exposure	to	loss in	the	nonconsolidated	VIE	tables	in	Note	12.

The	tables	below	present	the	weighted	average	key	economic	assumptions	used in	measuring	the	fair	value	of	retained	interests	and	the	sensitivity	of	this	fair value	to	immediate	adverse	changes	of	10%	and	20%	in	those	assumptions.

| $	in	millions | Mortgage-Backed | Other	^1 |
| :--- | :--- | :--- |
| Fair\tvalue\tof\tretained\tinterests | $\t2,370 | \t$\t\t\t\t59 |
| Weighted\taverage\tlife\t(years) | 7.6 | 3.6 |
| Constant\tprepayment\trate | 13.2% | N.M. |
| Impact\tof\t10%\tadverse\tchange | $\t\t\t\t\t(33) | N.M. |
| Impact\tof\t20%\tadverse\tchange | (66) | N.M. |
| Discount\trate | 4.1% | N.M. |
| Impact\tof\t10%\tadverse\tchange | $\t\t\t\t\t(50) | N.M. |
| Impact\tof\t20%\tadverse\tchange | (97) | N.M. |

| $	in	millions | Mortgage-Backed | Other	^1 |
| :--- | :--- | :--- |
| Fair\tvalue\tof\tretained\tinterests | $3,641 | \t$\t\t\t\t86 |
| Weighted\taverage\tlife\t(years) | 8.3 | 1.9 |
| Constant\tprepayment\trate | 7.5% | N.M. |
| Impact\tof\t10%\tadverse\tchange | $\t\t\t\t(36) | N.M. |
| Impact\tof\t20%\tadverse\tchange | (64) | N.M. |
| Discount\trate | 3.9% | N.M. |
| Impact\tof\t10%\tadverse\tchange | $\t\t\t\t(85) | N.M. |
| Impact\tof\t20%\tadverse\tchange | (164) | N.M. |

1.Due	to	the	nature	and	current	fair	value	of	certain	of	these	retained	interests,	the	weighted average	assumptions	for	constant	prepayment	and	discount	rates	and	the	related	sensitivity to	adverse	changes	are	not	meaningful	as	of	December	2014	and	December	2013.	The firm's	maximum	exposure	to	adverse	changes	in	the	value	of	these	interests	is	the	carrying value	of	$59	million	and	$86	million	as	of	December	2014	and	December	2013,	respectively.

Ÿ	Amounts	do	not	reflect	the	benefit	of	other	financial	instruments	that	are	held to	mitigate	risks	inherent	in	these	retained	interests.

Ÿ	Changes	in	fair	value	based	on	an	adverse	variation	in	assumptions	generally cannot	be	extrapolated	because	the	relationship	of	the	change	in	assumptions to	the	change	in	fair	value	is	not	usually	linear.

Ÿ	The	impact	of	a	change	in	a	particular	assumption	is	calculated	independently of	 changes	 in	 any	 other	 assumption.	 In	 practice,	 simultaneous	 changes	 in assumptions	might	magnify	or	counteract	the	sensitivities	disclosed	above.

Ÿ	The	constant	prepayment	rate	is	included	only	for	positions	for	which	it	is	a key	assumption	in	the	determination	of	fair	value.

Ÿ	The	discount	rate	for	retained	interests	that	relate	to	U.S.	government	agency- issued	collateralized	mortgage	obligations	does	not	include	any	credit	loss.

Ÿ	Expected	 credit	 loss	 assumptions	 are	 reflected in the	 discount	 rate	 for the remainder	of	retained	interests.

# Variable	Interest	Entities

VIEs	 generally	 finance	 the	 purchase	 of	 assets	 by	 issuing	 debt	 and	 equity securities	that	are	either	collateralized	by	or	indexed	to	the	assets	held	by	the VIE.	The	debt	and	equity	securities	issued	by	a	VIE	may	include	tranches	of varying	 levels	 of	 subordination.	 The	 firm's	 involvement	 with	 VIEs	 includes securitization	of	financial	assets,	as	described	in	Note	11,	and	investments	in	and loans	to	other	types	of	VIEs,	as	described	below.	See	Note	11	for	additional information	about	securitization	activities,	including	the	definition	of	beneficial interests.	 See	 Note 3 for	 the	 firm's	 consolidation	 policies,	 including	 the definition	of	a	VIE.

The	 firm is	 principally involved	 with	 VIEs through the following	 business activities:

Mortgage-Backed	VIEs	and	Corporate	CDO	and	CLO	VIEs. 	The	firm sells	 residential	 and	 commercial	 mortgage	 loans	 and	 securities	 to	 mortgage- backed	VIEs	and	corporate	bonds	and	loans	to	corporate	CDO	and	CLO	VIEs and	may	retain	beneficial	interests	in	the	assets	sold	to	these	VIEs.	The	firm purchases	and	sells	beneficial	interests	issued	by	mortgage-backed	and	corporate CDO	and	CLO	VIEs	in	connection	with	market-making	activities.	In	addition, the	firm	may	enter	into	derivatives	with	certain	of	these	VIEs,	primarily	interest rate	swaps,	which	are	typically	not	variable	interests.	The	firm	generally	enters into	derivatives	with	other	counterparties	to	mitigate	its	risk	from	derivatives with	these	VIEs.

Certain	mortgage-backed	and	corporate	CDO	and	CLO	VIEs,	usually	referred	to as	synthetic	CDOs	or	credit-linked	note	VIEs,	synthetically	create	the	exposure for	the	beneficial	interests	they	issue	by	entering	into	credit	derivatives,	rather than	purchasing	the	underlying	assets.	These	credit	derivatives	may	reference	a single	asset,	an	index,	or	a	portfolio/basket	of	assets	or	indices.	See	Note	7	for further	information	about	credit	derivatives.	These	VIEs	use	the	funds	from	the sale	 of	 beneficial	 interests	 and	 the	 premiums	 received	 from	 credit	 derivative counterparties	to	purchase	securities	which	serve	to	collateralize	the	beneficial interest	holders	and/or	the	credit	derivative	counterparty.	These	VIEs	may	enter into	 other	 derivatives,	 primarily	 interest	 rate	 swaps,	 which	 are	 typically	 not variable	interests.	The	firm	may	be	a	counterparty	to	derivatives	with	these	VIEs and	generally	enters	into	derivatives	with	other	counterparties	to	mitigate	its	risk.

Real	 Estate,	 Credit-Related and	 Other Investing	 VIEs. The	 firm purchases	equity	and	debt	securities	issued	by	and	makes	loans	to	VIEs	that	hold real	 estate,	 performing	 and	 nonperforming	 debt,	 distressed	 loans	 and	 equity securities.	The	firm	typically	does	not	sell	assets	to,	or	enter	into	derivatives with,	these	VIEs.

Other	Asset-Backed	 VIEs.	 The firm	 structures	 VIEs	 that	 issue	 notes	 to clients,	and	purchases	and	sells	beneficial	interests	issued	by	other	asset-backed VIEs	 in	 connection	 with	 market-making	 activities.	 In	 addition,	 the	 firm	 may enter	into	derivatives	with	certain	other	asset-backed	VIEs,	primarily	total	return swaps	on	the	collateral	assets	held	by	these	VIEs	under	which	the	firm	pays	the VIE	the	return	due	to	the	note	holders	and	receives	the	return	on	the	collateral assets	owned	by	the	VIE.	The	firm	generally	can	be	removed	as	the	total	return swap	 counterparty.	 The	 firm	 generally	 enters	 into	 derivatives	 with	 other counterparties	to	mitigate	its	risk	from	derivatives	with	these	VIEs.	The	firm typically	does	not	sell	assets	to	the	other	asset-backed	VIEs	it	structures.

Principal-Protected	 Note VIEs. The	 firm	 structures	 VIEs	 that	 issue principal-protected	 notes	 to	 clients.	 These	 VIEs	 own	 portfolios	 of	 assets, principally	 with	 exposure	 to	 hedge	 funds.	 Substantially	 all	 of	 the	 principal protection	on	the	notes	issued	by	these	VIEs	is	provided	by	the	asset	portfolio rebalancing	that	is	required	under	the	terms	of	the	notes.	The	firm	enters	into total	return	swaps	with	these	VIEs	under	which	the	firm	pays	the	VIE	the	return due	to	the	principal-protected	note	holders	and	receives	the	return	on	the	assets owned	by	the	VIE.	The	firm	may	enter	into	derivatives	with	other	counterparties to	mitigate	the	risk	it	has	from	the	derivatives	it	enters	into	with	these	VIEs.	The firm	also	obtains	funding	through	these	VIEs.

Other	 VIEs.	 Other primarily	 includes	 nonconsolidated	 power-related	 and investment	fund	VIEs.	The	firm	purchases	debt	and	equity	securities	issued	by VIEs	 that	 hold	 power-related	 assets,	 and	 may	 provide	 commitments	 to	 these VIEs.	The	firm	also	makes	equity	investments	in	certain	of	the	investment	fund VIEs	 it	 manages,	 and	 is	 entitled	 to	 receive	 fees	 from	 these	 VIEs.	 The	 firm typically	does	not	sell	assets	to,	or	enter	into	derivatives	with,	these	VIEs.

# VIE	Consolidation	Analysis

A	variable	interest	in	a	VIE	is	an	investment	(e.g.,	debt	or	equity	securities)	or other	interest	(e.g.,	derivatives	or	loans	and	lending	commitments)	in	a	VIE	that will	absorb	portions	of	the	VIE's	expected	losses	and/or	receive	portions	of	the VIE's	expected	residual	returns.

The	firm's	variable	interests	in	VIEs	include	senior	and	subordinated	debt	in residential	 and	 commercial	 mortgage-backed	 and	 other	 asset-backed securitization	 entities,	 CDOs	 and	 CLOs;	 loans	 and	 lending	 commitments; limited	 and	 general	 partnership	 interests;	 preferred	 and	 common	 equity; derivatives	 that	 may	 include	 foreign	 currency,	 equity	 and/or	 credit	 risk; guarantees;	 and	 certain	 of	 the	 fees	 the	 firm	 receives	 from	 investment	 funds. Certain	interest	rate,	foreign	currency	and	credit	derivatives	the	firm	enters	into with	VIEs	are	not	variable	interests	because	they	create	rather	than	absorb	risk.

The	enterprise	with	a	controlling	financial	 interest	 in	a	VIE	 is	known	as	 the primary	beneficiary	and	consolidates	the	VIE.	The	firm	determines	whether	it	is the	 primary	 beneficiary	 of	 a	VIE	 by	 performing	 an	 analysis	 that	 principally considers:

Ÿ	Which	variable	interest	holder	has	the	power	to	direct	the	activities	of	the	VIE that	most	significantly	impact	the	VIE's	economic	performance;

Ÿ	Which	variable	interest	holder	has	the	obligation	to	absorb	losses	or	the	right to	receive	benefits	from	the	VIE	that	could	potentially	be	significant	to	the VIE;

Ÿ	The	VIE's	purpose	and	design,	including	the	risks	the	VIE	was	designed	to create	and	pass	through	to	its	variable	interest	holders;

# Ÿ	The	VIE's	capital	structure;

Ÿ	The	terms	between	the	VIE	and	its	variable	interest	holders	and	other	parties involved	with	the	VIE;	and

# Ÿ	Related-party	relationships.

The	firm	reassesses	its	initial	evaluation	of	whether	an	entity	is	a	VIE	when certain	reconsideration	events	occur.	The	firm	reassesses	 its	determination	of whether	it	is	the	primary	beneficiary	of	a	VIE	on	an	ongoing	basis	based	on current	facts	and	circumstances.

# Nonconsolidated	VIEs

The	firm's	exposure	to	the	obligations	of	VIEs	is	generally	limited	to	its	interests in	 these	entities.	In	certain	 instances,	 the	firm	provides	guarantees,	 including derivative	guarantees,	to	VIEs	or	holders	of	variable	interests	in	VIEs.

The	tables	below	present	information	about	nonconsolidated	VIEs	in	which	the firm	 holds	 variable	 interests.	 Nonconsolidated	VIEs	 are	 aggregated	 based	 on principal	business	activity.	The	nature	of	the	firm's	variable	interests	can	take different	forms,	as	described	in	the	rows	under	maximum	exposure	to	loss.	In	the tables	below:

Ÿ	The	maximum	exposure	 to	 loss	excludes	 the	benefit	of	offsetting	financial instruments	that	are	held	to	mitigate	the	risks	associated	with	these	variable interests.

Ÿ	For	retained	and	purchased	interests,	and	loans	and	investments,	the	maximum exposure	to	loss	is	the	carrying	value	of	these	interests.

Ÿ	For	commitments	and	guarantees,	and	derivatives,	the	maximum	exposure	to loss	is	the	notional	amount,	which	does	not	represent	anticipated	losses	and also	has	not	been	reduced	by	unrealized	losses	already	recorded.	As	a	result, the	maximum	exposure	to	loss	exceeds	liabilities	recorded	for	commitments and	guarantees,	and	derivatives	provided	to	VIEs.

The	carrying	values	of	the	firm's	variable	interests	in	nonconsolidated	VIEs	are included	in	the	consolidated	statement	of	financial	condition	as	follows:

Ÿ	Substantially	all	assets	held	by	the	firm	related	to	mortgage-backed,	corporate CDO	 and	 CLO,	 and	 other	 asset-backed	 VIEs	 are	 included	 in	 "Financial instruments	owned,	at	fair	value."	Substantially	all	liabilities	held	by	the	firm related	to	corporate	CDO	and	CLO,	and	other	asset-backed	VIEs	are	included in	"Financial	instruments	sold,	but	not	yet	purchased,	at	fair	value;"

Ÿ	Substantially	all	assets	held	by	the	firm	related	to	real	estate,	credit-related	and other	 investing	VIEs	 are	 included	 in	 "Financial	 instruments	 owned,	 at	 fair value,"	 "Loans	 receivable,"	 and	 "Other	 assets."	 Substantially	 all	 liabilities held	by	the	firm	related	to	real	estate,	credit-related	and	other	investing	VIEs are	 included	 in	 "Financial	 Instruments	 sold,	 but	 not	 yet	 purchased,	 at	 fair value"	and	"Other	liabilities	and	accrued	expenses;"	and

Ÿ	Substantially	all	assets	held	by	the	firm	related	to	other	VIEs	are	included	in "Financial	instruments	owned,	at	fair	value."

# Nonconsolidated	VIEs	as	of	December	2014

|  |  | Corporate | credit-related | Other |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Mortgage- | CDOs\tand | and\tother | asset- |  |  |
| $\tin\tmillions | backed | CLOs | investing | backed | \t Other | Total |
| Assets\tin\tVIE | $78,107\t^2 | $\t\t8,317 | $8,720 | \t $8,253 | \t$5,677 | \t$109,074 |
| Carrying\tValue\tof\tthe\tFirm's\tVariable\tInterests |  |  |  |  |  |  |
| Assets | 4,348 | 463 | 3,051 | 509 | 290 | 8,661 |
| Liabilities | — | 3 | 3 | 16 | — | 22 |
| Maximum\tExposure\tto\tLoss\tin\tNonconsolidated\tVIEs |  |  |  |  |  |  |
| Retained\tinterests | 2,370 | 4 | — | 55 | — | 2,429 |
| Purchased\tinterests | 1,978 | 184 | — | 322 | — | 2,484 |
| Commitments\tand\tguarantees | — | — | 604 | 213 | 307 | 1,124 |
| Derivatives\t^1 | 392 | 2,053 | — | 3,221 | 88 | 5,754 |
| Loans\tand\tinvestments | — | — | 3,051 | — | 290 | 3,341 |
| Total | $\t\t4,740\t^2 | $\t\t2,241 | $3,655 | \t $3,811 | \t$\t\t\t685 | \t$\t\t15,132 |

|  |  | Nonconsolidated	VIEs	as	of	December	2013 | Nonconsolidated	VIEs	as	of	December	2013 | Nonconsolidated	VIEs	as	of	December	2013 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | Real\testate, |  |  |  |
|  |  | Corporate | credit-related | Other |  |  |
|  | Mortgage- | CDOs\tand | and\tother | asset- |  |  |
| $\tin\tmillions | backed | CLOs | investing | backed | Other | Total |
| Assets\tin\tVIE | $86,562\t^2 | $19,761 | $8,599 | \t $4,401 | \t$2,925 | \t$122,248 |
| Carrying\tValue\tof\tthe\tFirm's\tVariable\tInterests |  |  |  |  |  |  |
| Assets | 5,269 | 1,063 | 2,756 | 284 | 165 | 9,537 |
| Liabilities | — | 3 | 2 | 40 | — | 45 |
| Maximum\tExposure\tto\tLoss\tin\tNonconsolidated\tVIEs |  |  |  |  |  |  |
| Retained\tinterests | 3,641 | 80 | — | 6 | — | 3,727 |
| Purchased\tinterests | 1,627 | 659 | — | 142 | — | 2,428 |
| Commitments\tand\tguarantees | — | — | 485 | — | 281 | 766 |
| Derivatives\t^1 | 586 | 4,809 | — | 2,115 | — | 7,510 |
| Loans\tand\tinvestments | — | — | 2,756 | — | 165 | 2,921 |
| Total | $\t\t5,854\t^2 | $\t\t5,548 | $3,241 | \t $2,263 | \t$\t\t\t446 | \t$\t\t17,352 |

1.The	aggregate	amounts	include	$1.64	billion	and	$2.01	billion	as	of	December	2014	and	December	2013,	respectively,	related	to	derivative	transactions	with	VIEs	to	which	the	firm	transferred assets.

2.Assets	in	VIE	and	maximum	exposure	to	loss	include	$3.57	billion	and	$662	million,	respectively,	as	of	December	2014,	and	$4.55	billion	and	$900	million,	respectively,	as	of	December	2013, related	to	CDOs	backed	by	mortgage	obligations.

# Consolidated	VIEs

The	tables	below	present	the	carrying	amount	and	classification	of	assets	and liabilities	 in	 consolidated	 VIEs,	 excluding	 the	 benefit	 of	 offsetting	 financial instruments	that	are	held	to	mitigate	the	risks	associated	with	the	firm's	variable interests.	Consolidated	VIEs	are	aggregated	based	on	principal	business	activity and	their	assets	and	liabilities	are	presented	net	of	intercompany	eliminations. The	majority	of	the	assets	in	principal-protected	notes	VIEs	are	intercompany and	are	eliminated	in	consolidation.

Substantially	 all	 the	 assets in	 consolidated	 VIEs	 can	 only	 be	 used to settle obligations	of	the	VIE.

The	tables	below	exclude	VIEs	in	which	the	firm	holds	a	majority	voting	interest if	(i)	the	VIE	meets	the	definition	of	a	business	and	(ii)	the	VIE's	assets	can	be used	for	purposes	other	than	the	settlement	of	its	obligations.

The	liabilities	of	real	estate,	credit-related	and	other	investing	VIEs,	and	CDOs, mortgage-backed	 and	 other	 asset-backed	 VIEs	 do	 not	 have	 recourse	 to	 the general	credit	of	the	firm.

|  | Real	estate, | CDOs, |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | credit-related | mortgage-backed | Principal- |  |
|  | and\tother | and\tother | protected |  |
| $\tin\tmillions | investing | asset-backed | notes | Total |
| Assets |  |  |  |  |
| Cash\tand\tcash\tequivalents | $\t\t\t218 | $\t\t— | $\t\t\t\t\t\t— | \t$\t\t\t218 |
| Cash\tand\tsecurities\tsegregated\tfor\tregulatory\tand\tother\tpurposes | 19 | — | 31 | 50 |
| Loans\treceivable | 589 | — | — | 589 |
| Financial\tinstruments\towned,\tat\tfair\tvalue | 2,608 | 121 | 276 | 3,005 |
| Other\tassets | 349 | — | — | 349 |
| Total | $3,783 | $121 | $\t\t\t307 | \t$4,211 |
| Liabilities |  |  |  |  |
| Other\tsecured\tfinancings | $\t\t\t419 | $\t\t99 | $\t\t\t439 | \t$\t\t\t957 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased,\tat\tfair\tvalue | 10 | 8 | — | 18 |
| Unsecured\tshort-term\tborrowings,\tincluding\tthe\tcurrent\tportion\tof\tunsecured\tlong-term\tborrowings | — | — | 1,090 | 1,090 |
| Unsecured\tlong-term\tborrowings | 12 | — | 103 | 115 |
| Other\tliabilities\tand\taccrued\texpenses | 906 | — | — | 906 |
| Total | $1,347 | $107 | $1,632 | \t$3,086 |

|  |  | Consolidated	VIEs	as	of	December	2013 | Consolidated	VIEs	as	of	December	2013 |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Real\testate, | CDOs, |  |  |
|  | credit-related | mortgage-backed | Principal- |  |
|  | and\tother | and\tother | protected |  |
| $\tin\tmillions | investing | asset-backed | notes | Total |
| Assets |  |  |  |  |
| Cash\tand\tcash\tequivalents | $\t\t\t183 | $\t\t\t— | $\t\t\t\t\t\t— | \t$\t\t\t183 |
| Cash\tand\tsecurities\tsegregated\tfor\tregulatory\tand\tother\tpurposes | 84 | — | 63 | 147 |
| Loans\treceivable | 50 | — | — | 50 |
| Financial\tinstruments\towned,\tat\tfair\tvalue | 1,309 | 310 | 155 | 1,774 |
| Other\tassets | 921 | — | — | 921 |
| Total | $2,547 | $310 | $\t\t\t218 | \t$3,075 |
| Liabilities |  |  |  |  |
| Other\tsecured\tfinancings | $\t\t\t417 | $198 | $\t\t\t404 | \t$1,019 |
| Unsecured\tshort-term\tborrowings,\tincluding\tthe\tcurrent\tportion\tof\tunsecured\tlong-term\tborrowings | — | — | 1,258 | 1,258 |
| Unsecured\tlong-term\tborrowings | 57 | — | 193 | 250 |
| Other\tliabilities\tand\taccrued\texpenses | 556 | — | — | 556 |
| Total | $1,030 | $198 | $1,855 | \t$3,083 |
|  |  |  | Goldman\tSachs\t2014\tForm\t10-K | 175 |

# Other	Assets

Other	 assets	 are	 generally less liquid,	 non-financial	 assets.	 The table	 below presents	other	assets	by	type.

1.Excludes	investments	accounted	for	at	fair	value	under	the	fair	value	option	where	the	firm would	otherwise	apply	the	equity	method	of	accounting	of	$6.62	billion	and	$6.07	billion	as	of December	 2014	 and	 December	 2013,	 respectively,	 which	 are	 included	 in	 "Financial instruments	owned,	at	fair	value."	The	firm	has	generally	elected	the	fair	value	option	for such	investments	acquired	after	the	fair	value	option	became	available.

2.Includes	$461	million	related	to	investments	in	qualified	affordable	housing	projects	as	of December	2014.

# Property,	Leasehold	Improvements	and	Equipment

Property,	leasehold	improvements	and	equipment	in	the	table	above	is	presented net	 of	 accumulated	 depreciation	 and	 amortization	 of $8.98 billion	 and $9.04	billion	as	of	December	2014	and	December	2013,	respectively.	Property, leasehold	improvements	and	equipment	included	$5.81	billion	and	$6.02	billion as	 of	 December	 2014	 and	 December	 2013,	 respectively,	 related	 to	 property, leasehold	improvements	and	equipment	that	the	firm	uses	in	connection	with	its operations.	 The	 remainder	 is	 held	 by	 investment	 entities,	 including	 VIEs, consolidated	by	the	firm.

Substantially	all	property	and	equipment	are	depreciated	on	a	straight-line	basis over	the	useful	life	of	the	asset.	Leasehold	improvements	are	amortized	on	a straight-line	basis	over	the	useful	 life	of	 the	 improvement	or	 the	 term	of	 the lease,	whichever	is	shorter.	Certain	costs	of	software	developed	or	obtained	for internal	use	are	capitalized	and	amortized	on	a	straight-line	basis	over	the	useful life	of	the	software.

The	 tables	 below present the carrying values of goodwill and identifiable intangible	assets.

1.The	decrease	from	December	2013	to	December	2014	for	goodwill	and	identifiable	intangible assets	 reflects	 the	 sale	 of	 two	 consolidated	 investments.	 The	 decrease	 in	 goodwill	 also reflects	an	impairment	of	$22	million	in	connection	with	the	sale	of	Metro	International	Trade Services	 LLC	 (Metro).	 See	 "—	 Impairments"	 below	 for	 further	 information	 about	 the impairment.

2.The	increase	from	December	2013	to	December	2014	is	primarily	related	to	the	acquisition of	commodities-related	intangible	assets.

3.The	decrease	from	December	2013	to	December	2014	reflects	an	impairment	related	to	the firm's	exchange-traded	fund	lead	market	maker	(LMM)	rights.

Goodwill.	Goodwill	is	the	cost	of	acquired	companies	in	excess	of	the	fair	value of	net	assets,	including	identifiable	intangible	assets,	at	the	acquisition	date.

Goodwill	 is	 assessed	 annually	 in	 the	 fourth	 quarter	 for	 impairment	 or	 more frequently	if	events	occur	or	circumstances	change	that	indicate	an	impairment may	exist.	When	assessing	goodwill	for	impairment,	first,	qualitative	factors	are assessed	to	determine	whether	it	is	more	likely	than	not	that	the	fair	value	of	a reporting	 unit	 is	 less	 than	 its	 carrying	 amount.	 If	 results	 of	 the	 qualitative assessment	are	not	conclusive,	a	quantitative	test	would	be	performed.

The	quantitative	goodwill	impairment	test	consists	of	two	steps:

Ÿ	The	first	step	compares	the	estimated	fair	value	of	each	reporting	unit	with	its estimated	 net	 book	 value	 (including	 goodwill	 and	 identifiable	 intangible assets).	If	the	reporting	unit's	fair	value	exceeds	its	estimated	net	book	value, goodwill	is	not	impaired.

Ÿ	If	the	estimated	fair	value	of	a	reporting	unit	is	less	than	its	estimated	net	book value,	the	second	step	of	the	goodwill	impairment	test	is	performed	to	measure the	amount	of	impairment,	if	any.	An	impairment	is	equal	to	the	excess	of	the carrying	amount	of	goodwill	over	its	fair	value.

The	firm	performed	a	quantitative	goodwill	impairment	test	during	the	fourth quarter	of	2012	(2012	quantitative	goodwill	test).	When	performing	this	test,	the firm	 estimated	 the	 fair	 value	 of	 each	 reporting	 unit	 and	 compared	 it	 to	 the respective	 reporting	 unit's	 net	 book	 value	 (estimated	 carrying	 value).	 The reporting	units	were	valued	using	relative	value	and	residual	income	valuation techniques	 because	 the	 firm	 believes	 market	 participants	 would	 use	 these techniques	 to	 value	 the	 firm's	 reporting	 units.	 The	 net	 book	 value	 of	 each reporting	 unit	 reflected	 an	 allocation	 of	 total	 shareholders'	 equity	 and represented	the	estimated	amount	of	shareholders'	equity	required	to	support	the activities	of	the	reporting	unit	under	guidelines	issued	by	the	Basel	Committee on	Banking	Supervision	(Basel	Committee)	in	December	2010.	In	performing	its 2012	 quantitative	 goodwill	 test,	 the	 firm	 determined	 that	 goodwill	 was	 not impaired,	and	the	estimated	fair	value	of	the	firm's	reporting	units,	in	which substantially	 all	 of	 the	 firm's	 goodwill	 is	 held,	 significantly	 exceeded	 their estimated	carrying	values.

During	the	fourth	quarter	of	2014,	the	firm	assessed	goodwill	for	impairment. Multiple	factors	were	assessed	with	respect	to	each	of	the	firm's	reporting	units to	determine	whether	it	was	more	likely	than	not	that	the	fair	value	of	any	of	the reporting	units	was	 less	 than	 its	carrying	amount.	The	qualitative	assessment also	considered	changes	since	the	2012	quantitative	goodwill	test.

In	accordance	with	ASC	350,	the	firm	considered	the	following	factors	in	the 2014	qualitative	assessment	performed	 in	 the	fourth	quarter	when	evaluating whether	it	was	more	likely	than	not	that	the	fair	value	of	a	reporting	unit	was	less than	its	carrying	amount:

Ÿ	Macroeconomic	conditions.	Since	the	2012	quantitative	goodwill	test	was performed,	 the	 firm's	 general	 operating	 environment	 improved	 as	 credit spreads	tightened,	global	equity	prices	increased	significantly,	and	industry- wide	 mergers	 and	 acquisitions	 activity,	 and	 industry-wide	 debt	 and	 equity underwriting	activity,	improved.

Ÿ	Industry and	 market considerations. Since	 the	 2012	 quantitative goodwill	test	was	performed,	industry-wide	metrics	have	trended	positively and	most	publicly-traded	industry	participants,	including	the	firm,	experienced increases	 in	 stock	 price,	 price-to-book	 multiples	 and	 price-to-earnings multiples.	In	addition,	clarity	was	obtained	on	a	number	of	regulations	and other	reforms	have	been	adopted	or	proposed	by	regulators.	Many	of	these rules	are	highly	complex	and	their	full	impact	will	not	be	known	until	the	rules are	 implemented	 and	 market	 practices	 develop	 under	 the	 final	 regulations. However,	the	firm	does	not	expect	compliance	to	have	a	significant	negative impact	on	reporting	unit	results.

Ÿ	Cost	factors.	Although	certain	expenses	increased,	there	were	no	significant negative	 changes	 to	 the	 firm's	 overall	 cost	 structure	 since	 the	 2012 quantitative	goodwill	test	was	performed.

Ÿ	Overall	financial	performance.	During	2014,	the	firm's	net	earnings,	pre- tax	margin,	diluted	earnings	per	common	share,	return	on	average	common shareholders'	equity	and	book	value	per	common	share	increased	as	compared with	2012.

Ÿ	Entity-specific	events.	There	were	no	entity-specific	events	since	the	2012 quantitative	goodwill	test	was	performed	that	would	have	had	a	significant negative	impact	on	the	valuation	of	the	firm's	reporting	units.

Ÿ	Events	affecting	reporting	units.	There	were	no	events	since	the	2012 quantitative	goodwill	test	was	performed	that	would	have	had	a	significant negative	impact	on	the	valuation	of	the	firm's	reporting	units.

Ÿ	Sustained	changes	in	stock	price. 	Since	the	2012	quantitative	goodwill test	 was	 performed,	 the	 firm's	 stock	 price	 has	 increased	 significantly.	 In addition,	the	stock	price	exceeded	book	value	per	common	share	throughout most	of	2013	and	2014.

The	firm	also	considered	other	factors	in	its	qualitative	assessment,	including changes	in	the	book	value	of	reporting	units,	the	estimated	excess	of	the	fair values	as	compared	with	the	carrying	values	for	the	reporting	units	in	the	2012 quantitative	goodwill	test,	projected	earnings	and	the	cost	of	equity.	The	firm considered	all	of	 the	above	factors	 in	 the	aggregate	as	part	of	 its	qualitative assessment.

As	a	result	of	the	2014	qualitative	assessment,	the	firm	determined	that	it	was more	likely	than	not	that	the	fair	value	of	each	of	the	reporting	units	exceeded	its respective	carrying	amount.	Therefore,	the	firm	determined	that	goodwill	was not	impaired	and	that	a	quantitative	goodwill	impairment	test	was	not	required.

Identifiable	Intangible	Assets.	The	table	below	presents	the	gross	carrying amount,	 accumulated	 amortization	 and	 net	 carrying	 amount	 of	 identifiable intangible	assets	and	their	weighted	average	remaining	useful	lives.

| $	in	millions | 2014 | Lives	(years) | 2013 |
| :--- | :--- | :--- | :--- |
| Customer\tlists |  |  |  |
| Gross\tcarrying\tamount | \t\t $1,036 |  | $\t1,102 |
| Accumulated\tamortization | (715) |  | (706) |
| Net\tcarrying\tamount | 321 | 6 | 396 |
| Commodities-related^\t1 |  |  |  |
| Gross\tcarrying\tamount | 216 |  | 510 |
| Accumulated\tamortization | (78) |  | (341) |
| Net\tcarrying\tamount | 138 | 8 | 169 |
| Other |  |  |  |
| Gross\tcarrying\tamount^\t2 | 200 |  | 906 |
| Accumulated\tamortization^\t2 | (144) |  | (800) |
| Net\tcarrying\tamount | 56 | 5 | 106 |
| Total |  |  |  |
| Gross\tcarrying\tamount | 1,452 |  | 2,518 |
| Accumulated\tamortization | (937) |  | (1,847) |
| Net\tcarrying\tamount | \t\t $\t\t\t515 | 7 | $\t\t\t\t671 |

1.Includes	commodities-related	transportation	rights,	customer	contracts	and	relationships,	and permits.

2.The	decrease	from	December	2013	to	December	2014	is	primarily	due	to	the	sale	of	the firm's	New	York	Stock	Exchange	Designated	Market	Maker	rights	in	August	2014.

Substantially	 all	 of	 the	 firm's	 identifiable	 intangible	 assets	 are	 considered	 to have	finite	useful	lives	and	are	amortized	over	their	estimated	useful	lives	using the	straight-line	method	or	based	on	economic	usage	for	certain	commodities- related	intangibles.

The	 tables	 below	 present	 amortization	 for	 2014,	 2013	 and	 2012,	 and the estimated	future	amortization	through	2019	for	identifiable	intangible	assets.

# Impairments

The	 firm	 tests	 property,	 leasehold	 improvements	 and	 equipment,	 identifiable intangible	assets	and	other	assets	for	impairment	whenever	events	or	changes	in circumstances	suggest	that	an	asset's	or	asset	group's	carrying	value	may	not	be fully	 recoverable.	 To	 the	 extent	 the	 carrying	 value	 of	 an	 asset	 exceeds	 the projected	undiscounted	cash	flows	expected	to	result	from	the	use	and	eventual disposal	of	the	asset	or	asset	group,	the	firm	determines	the	asset	is	impaired	and records	an	impairment	equal	to	the	difference	between	the	estimated	fair	value and	 the	carrying	value	of	 the	asset	or	asset	group.	In	addition,	 the	firm	will recognize	an	impairment	prior	to	the	sale	of	an	asset	if	the	carrying	value	of	the asset	exceeds	its	estimated	fair	value.

During	 2014	 and	 2013,	 primarily	 as	 a	 result	 of	 deterioration	 in	 market	 and operating	conditions	related	to	certain	of	the	firm's	consolidated	investments	and the	firm's	LMM	rights,	the	firm	determined	that	certain	assets	were	impaired and	recorded	impairments	of	$360	million	and	$216	million,	respectively.

Ÿ	In	 2014,	 these	 impairments	 consisted	 of	 $268	 million	 related	 to	 property, leasehold	 improvements	 and	 equipment,	 substantially	 all	 of	 which	 was attributable	to	a	consolidated	investment	in	Latin	America,	$70	million	related to	 identifiable	 intangible	 assets,	 primarily	 attributable	 to	 the	 firm's	 LMM rights,	and	$22	million	related	to	goodwill	as	a	result	of	the	sale	of	Metro.	The impairments	related	to	property,	leasehold	improvements	and	equipment	and goodwill	were	included	in	the	firm's	Investing	&	Lending	segment	and	the impairments	related	to	identifiable	intangible	assets	were	principally	included in	the	firm's	Institutional	Client	Services	segment.

Ÿ	In	 2013,	 these	 impairments	 consisted	 of	 $160	 million	 related	 to	 property, leasehold	improvements	and	equipment	and	$56	million	related	to	identifiable intangible	assets	primarily	attributable	to	a	consolidated	investment	in	Latin America.	Substantially	all	of	these	impairments	were	included	in	the	firm's Investing	&	Lending	segment.

The	impairments	in	both	2014	and	2013	were	included	in	"Depreciation	and amortization"	and	represented	the	excess	of	the	carrying	values	of	these	assets over	their	estimated	fair	values,	substantially	all	of	which	are	calculated	using level	3	measurements.	These	fair	values	were	calculated	using	a	combination	of discounted	 cash	 flow	 analyses	 and	 relative	 value	 analyses,	 including	 the estimated	cash	flows	expected	to	result	from	the	use	and	eventual	disposition	of these	assets.

The	 table	 below	 presents	 deposits	 held	 in	 U.S.	 and	 non-U.S.	 offices, substantially	all	of	which	were	interest-bearing.	Substantially	all	U.S.	deposits were	held	at	Goldman	Sachs	Bank	USA	(GS	Bank	USA)	and	substantially	all non-U.S.	deposits	were	held	at	Goldman	Sachs	International	Bank	(GSIB).

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| U.S.\toffices | \t\t$69,270 | \t $61,016 |
| Non-U.S.\toffices | 13,738 | 9,791 |
| Total | \t\t$83,008 | \t $70,807 |

The	table	below	presents	maturities	of	time	deposits	held	in	U.S.	and	non-U.S. offices.

|  | As	of	December	2014 | As	of	December	2014 | As	of	December	2014 |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | U.S. | \t\t\tNon-U.S. | Total |
| 2015 | \t\t$\t\t6,478 | $8,395 | \t\t\t$14,873 |
| 2016 | 3,755 | 8 | 3,763 |
| 2017 | 4,067 | — | 4,067 |
| 2018 | 2,410 | — | 2,410 |
| 2019 | 2,898 | — | 2,898 |
| 2020\t-\tthereafter | 5,661 | 43 | 5,704 |
| Total | \t\t$25,269^\t1 | $8,446 | \t2\t\t\t\t$33,715^\t3 |

1.Includes	 $1.57	 billion	 greater	 than	 $100,000,	 of	 which	 $198	 million	 matures	 within	 three months,	$937	million	matures	within	three	to	six	months,	$170	million	matures	within	six	to twelve	months,	and	$266	million	matures	after	twelve	months.

3.Includes	$13.52	billion	of	time	deposits	accounted	for	at	fair	value	under	the	fair	value	option. See	Note	8	for	further	information	about	deposits	accounted	for	at	fair	value.

As	of	December	2014	and	December	2013,	deposits	include	$49.29	billion	and $46.02	 billion,	 respectively,	 of	 savings	 and	 demand	 deposits,	 which	 have	 no stated	maturity,	and	were	recorded	based	on	the	amount	of	cash	received	plus accrued	interest,	which	approximates	fair	value.	In	addition,	the	firm	designates certain	derivatives	as	fair	value	hedges	to	convert	substantially	all	of	its	time deposits	not	accounted	for	at	fair	value	from	fixed-rate	obligations	into	floating- rate	obligations.	Accordingly,	the	carrying	value	of	time	deposits	approximated fair	value	as	of	December	2014	and	December	2013.	While	these	savings	and demand	deposits	and	time	deposits	are	carried	at	amounts	that	approximate	fair value,	they	are	not	accounted	for	at	fair	value	under	the	fair	value	option	or	at fair	value	in	accordance	with	other	U.S.	GAAP	and	therefore	are	not	included	in the	firm's	fair	value	hierarchy	in	Notes	6	through	8.	Had	these	deposits	been included	in	the	firm's	fair	value	hierarchy,	they	would	have	been	classified	in level	2	as	of	December	2014	and	December	2013.

# Short-Term	Borrowings

The	table	below	presents	details	about	the	firm's	short-term	borrowings.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Other\tsecured\tfinancings\t(short-term) | \t\t$15,560 | \t$17,290 |
| Unsecured\tshort-term\tborrowings | 44,540 | 44,692 |
| Total | \t\t$60,100 | \t$61,982 |

See	Note	10	for	information	about	other	secured	financings.

Unsecured	 short-term	 borrowings	 include	 the	 portion	 of	 unsecured	 long-term borrowings	 maturing	 within	 one	 year	 of	 the	 financial	 statement	 date	 and unsecured	 long-term	 borrowings	 that	 are	 redeemable	 within	 one	 year	 of	 the financial	statement	date	at	the	option	of	the	holder.

The	firm	accounts	for	promissory	notes,	commercial	paper	and	certain	hybrid financial	instruments	at	fair	value	under	the	fair	value	option.	See	Note	8	for further	information	about	unsecured	short-term	borrowings	that	are	accounted for	at	fair	value.	The	carrying	value	of	unsecured	short-term	borrowings	that	are not	recorded	at	fair	value	generally	approximates	fair	value	due	to	the	short-term nature	 of	 the	 obligations.	 While	 these	 unsecured	 short-term	 borrowings	 are carried	at	amounts	that	approximate	fair	value,	they	are	not	accounted	for	at	fair value	under	the	fair	value	option	or	at	fair	value	in	accordance	with	other	U.S. GAAP	and	therefore	are	not	included	in	the	firm's	fair	value	hierarchy	in	Notes	6 through	8.	Had	these	borrowings	been	included	in	the	firm's	fair	value	hierarchy, substantially	all	would	have	been	classified	in	level	2	as	of	December	2014	and December	2013.

The	 table below presents details about the firm's unsecured short-term borrowings.

2.The	 weighted	 average	 interest	 rates	 for	 these	 borrowings	 include	 the	 effect	 of	 hedging activities	and	exclude	financial	instruments	accounted	for	at	fair	value	under	the	fair	value option.	See	Note	7	for	further	information	about	hedging	activities.

# Long-Term	Borrowings

The	table	below	presents	details	about	the	firm's	long-term	borrowings.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Other\tsecured\tfinancings\t(long-term) | \t\t$\t\t\t\t7,249 | \t$\t\t\t\t7,524 |
| Unsecured\tlong-term\tborrowings | 167,571 | 160,965 |
| Total | \t\t$174,820 | \t$168,489 |

See	Note	10	for	information	about	other	secured	financings.	The	tables	below present	unsecured	long-term	borrowings	extending	through	2061	and	consisting principally	of	senior	borrowings.

2.Floating interest	 rates	 generally	 are	 based	 on	 LIBOR	 or	 OIS.	 Equity-linked	 and indexed instruments	are	included	in	floating-rate	obligations.

The	table	below	presents	unsecured	long-term	borrowings	by	maturity	date.

|  | As	of	December	2014 | As	of	December	2014 |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | \t\tGroup\tInc. | \tSubsidiaries | Total |
| 2016 | $\t\t22,368 | $\t\t\t789\t\t\t\t\t$\t\t23,157 | $\t\t\t789\t\t\t\t\t$\t\t23,157 |
| 2017 | 20,818 | 367 | 21,185 |
| 2018 | 22,564 | 1,272 | 23,836 |
| 2019 | 14,718 | 1,791 | 16,509 |
| 2020\t-\tthereafter | 78,098 | 4,786 | 82,884 |
| Total^\t1 | $158,566 | $9,005\t\t\t\t\t$167,571 | $9,005\t\t\t\t\t$167,571 |

1.Includes	$9.54	billion	of	adjustments	to	the	carrying	value	of	certain	unsecured	long-term borrowings	resulting	from	the	application	of	hedge	accounting	by	year	of	maturity	as	follows: $485	million	in	2016,	$738	million	in	2017,	$816	million	in	2018,	$459	million	in	2019	and $7.04	billion	in	2020	and	thereafter.

Ÿ	Unsecured	 long-term	borrowings	maturing	within	one	year	of	 the	financial statement	 date	 and	 unsecured	 long-term	 borrowings	 that	 are	 redeemable within	one	year	of	the	financial	statement	date	at	the	option	of	the	holders	are excluded	 from	 the	 table	 as	 they	 are	 included	 as	 unsecured	 short-term borrowings.

Ÿ	Unsecured	long-term	borrowings	that	are	repayable	prior	to	maturity	at	the option	of	the	firm	are	reflected	at	their	contractual	maturity	dates.

Ÿ	Unsecured	long-term	borrowings	that	are	redeemable	prior	to	maturity	at	the option	 of	 the	 holders	 are	 reflected	 at	 the	 dates	 such	 options	 become exercisable.

The	 firm	 designates	 certain	 derivatives	 as	 fair	 value	 hedges	 to	 convert	 a substantial	 portion	 of	 its	 fixed-rate	 unsecured	 long-term	 borrowings	 not accounted	for	at	fair	value	into	floating-rate	obligations.	Accordingly,	excluding the	cumulative	impact	of	changes	in	the	firm's	credit	spreads,	the	carrying	value of	 unsecured	 long-term	 borrowings	 approximated	 fair	 value	 as	 of December	2014	and	December	2013.	See	Note	7	for	further	information	about hedging	activities.	For	unsecured	long-term	borrowings	for	which	the	firm	did not	elect	the	fair	value	option,	the	cumulative	impact	due	to	changes	in	the	firm's own	credit	spreads	would	be	an	increase	of	2%	and	3%	in	the	carrying	value	of total	unsecured	long-term	borrowings	as	of	December	2014	and	December	2013, respectively.	As	these	borrowings	are	not	accounted	for	at	fair	value	under	the fair	value	option	or	at	fair	value	in	accordance	with	other	U.S.	GAAP,	their	fair value	is	not	included	in	the	firm's	fair	value	hierarchy	in	Notes	6	through	8.	Had these	borrowings	been	included	in	the	firm's	fair	value	hierarchy,	substantially all	 would	 have	 been	 classified	 in	 level 2 as	 of	 December	 2014	 and December	2013.

The	tables	below	present	unsecured	long-term	borrowings,	after	giving	effect	to hedging	activities	that	converted	a	substantial	portion	of	fixed-rate	obligations	to floating-rate	obligations.

1.The	weighted	average	interest	rates	on	the	aggregate	amounts	were	2.68%	(5.09%	related	to fixed-rate	obligations	and	2.01%	related	to	floating-rate	obligations)	and	2.73%	(5.23%	related to	fixed-rate	obligations	and	2.04%	related	to	floating-rate	obligations)	as	of	December	2014 and	December	2013,	respectively.	These	rates	exclude	financial	instruments	accounted	for	at fair	value	under	the	fair	value	option.

# Subordinated	Borrowings

Unsecured	 long-term	 borrowings	 include	 subordinated	 debt	 and	 junior subordinated	debt.	Junior	subordinated	debt	is	junior	in	right	of	payment	to	other subordinated	 borrowings,	 which	 are	 junior	 to	 senior	 borrowings.	 As	 of December	2014	and	December	2013,	subordinated	debt	had	maturities	ranging from	2017	to	2038,	and	2015	to	2038,	respectively.	The	tables	below	present subordinated	borrowings.

|  | As	of	December	2014 | As	of	December	2014 |  |
| :--- | :--- | :--- | :--- |
|  | Par | Carrying |  |
| $\tin\tmillions | Amount | Amount | Rate^\t1 |
| Subordinated\tdebt^\t2 | \t\t $14,254 | $17,241\t\t\t\t\t3.77% | $17,241\t\t\t\t\t3.77% |
| Junior\tsubordinated\tdebt | 1,582 | 2,122\t\t\t\t\t6.21% | 2,122\t\t\t\t\t6.21% |
| Total\tsubordinated\tborrowings | \t\t $15,836 | $19,363\t\t\t\t\t4.02% | $19,363\t\t\t\t\t4.02% |

|  | As	of	December	2013 | As	of	December	2013 |  |
| :--- | :--- | :--- | :--- |
|  | Par | Carrying |  |
| $\tin\tmillions | Amount | Amount | Rate^\t1 |
| Subordinated\tdebt^\t2 | \t\t $14,508 | $16,982\t\t\t\t\t4.16% | $16,982\t\t\t\t\t4.16% |
| Junior\tsubordinated\tdebt | 2,835 | 3,760\t\t\t\t\t4.79% | 3,760\t\t\t\t\t4.79% |
| Total\tsubordinated\tborrowings | \t\t $17,343 | $20,742\t\t\t\t\t4.26% | $20,742\t\t\t\t\t4.26% |

1.Weighted	average	interest	rates	after	giving	effect	to	fair	value	hedges	used	to	convert	these fixed-rate	obligations	into	floating-rate	obligations.	See	Note	7	for	further	information	about hedging	activities.	See	below	for	information	about	interest	rates	on	junior	subordinated	debt.

# Junior	Subordinated	Debt

Street	Investment	Trust	I	and	the	Murray	Street	Investment	Trust	I	(together,	the 2012	 Trusts)	 issued	 an	 aggregate	 of	 $2.25	 billion	 of	 senior	 guaranteed	 trust securities	to	third	parties.	The	proceeds	of	that	offering	were	used	to	purchase $1.75	billion	of	junior	subordinated	debt	issued	by	Group	Inc.	that	pays	interest semi-annually	at	a	fixed	annual	rate	of	4.647%	and	matures	on	March	9,	2017, and	$500	million	of	junior	subordinated	debt	issued	by	Group	Inc.	that	pays interest	 semi-annually	 at	 a	 fixed	 annual	 rate	 of 4.404% and	 matures	 on September	1,	2016.	During	2014,	the	firm	exchanged	$175	million	of	the	senior guaranteed	 trust	 securities	 held	 by	 the	 firm	 for $175	 million of	 junior subordinated	debt	held	by	the	Murray	Street	Investment	Trust	I.	Following	the exchange,	these	senior	guaranteed	trust	securities	and	junior	subordinated	debt were	extinguished.

The	2012	Trusts	purchased	the	junior	subordinated	debt	from	Goldman	Sachs Capital	II	and	Goldman	Sachs	Capital	III	(APEX	Trusts).	The	APEX	Trusts	used the	proceeds	from	such	sales	to	purchase	shares	of	Group	Inc.'s	Perpetual	Non- Cumulative	Preferred	Stock,	Series	E	(Series	E	Preferred	Stock)	and	Perpetual Non-Cumulative	 Preferred	 Stock,	 Series	 F	 (Series	 F	 Preferred	 Stock).	 See Note	19	for	more	information	about	the	Series	E	and	Series	F	Preferred	Stock.

The	2012	Trusts	are	required	to	pay	distributions	on	their	senior	guaranteed	trust securities	in	the	same	amounts	and	on	the	same	dates	that	they	are	scheduled	to receive	interest	on	the	junior	subordinated	debt	they	hold,	and	are	required	to redeem	their	respective	senior	guaranteed	trust	securities	upon	the	maturity	or earlier	redemption	of	the	junior	subordinated	debt	they	hold.

The	firm	has	the	right	to	defer	payments	on	the	junior	subordinated	debt,	subject to	limitations.	During	any	such	deferral	period,	the	firm	will	not	be	permitted	to, among	 other	 things,	 pay	 dividends	 on	 or	 make	 certain	 repurchases	 of	 its common	or	preferred	stock.	However,	as	Group	Inc.	fully	and	unconditionally guarantees	the	payment	of	the	distribution	and	redemption	amounts	when	due	on a	senior	basis	on	the	senior	guaranteed	trust	securities	issued	by	the	2012	Trusts, if	the	2012	Trusts	are	unable	to	make	scheduled	distributions	to	the	holders	of the	senior	guaranteed	trust	securities,	under	the	guarantee,	Group	Inc.	would	be obligated	 to	 make	 those	 payments.	 As	 such,	 the $2.08 billion	 of	 junior subordinated	debt	held	by	the	2012	Trusts	for	the	benefit	of	investors,	included in	"Unsecured	long-term	borrowings"	in	the	consolidated	statements	of	financial condition,	is	not	classified	as	subordinated	borrowings.

The	APEX	Trusts	and	the	2012	Trusts	are	Delaware	statutory	trusts	sponsored by	the	firm	and	wholly-owned	finance	subsidiaries	of	the	firm	for	regulatory	and legal	purposes	but	are	not	consolidated	for	accounting	purposes.

The	firm	has	covenanted	in	favor	of	the	holders	of	Group	Inc.'s	6.345%	junior subordinated	debt	due	February	15,	2034,	that,	subject	to	certain	exceptions,	the firm	will	not	redeem	or	purchase	the	capital	securities	issued	by	the	APEX	Trusts or	shares	of	Group	Inc.'s	Series	E	or	Series	F	Preferred	Stock	prior	to	specified dates	 in	 2022	 for	 a	 price	 that	 exceeds	 a	 maximum	 amount	 determined	 by reference	to	the	net	cash	proceeds	that	the	firm	has	received	from	the	sale	of qualifying	securities.

# Junior	Subordinated	Debt	Issued	in	Connection	with	Trust	Preferred

Securities.	Group	Inc.	issued	$2.84	billion	of	junior	subordinated	debt	in	2004 to	Goldman	Sachs	Capital	I	(Trust),	a	Delaware	statutory	trust.	The	Trust	issued $2.75 billion	 of	 guaranteed	 preferred	 beneficial	 interests	 (Trust	 Preferred Securities)	to	third	parties	and	$85	million	of	common	beneficial	interests	to Group	 Inc.	 and	 used	 the	 proceeds	 from	 the	 issuances	 to	 purchase	 the	 junior subordinated	debt	from	Group	Inc.	During	the	second	quarter	of	2014,	the	firm purchased	$1.22	billion	(par	amount)	of	Trust	Preferred	Securities	and	delivered these	securities,	along	with	$37.6	million	of	common	beneficial	interests,	to	the Trust	in	the	third	quarter	of	2014	in	exchange	for	a	corresponding	par	amount	of the	 junior	 subordinated	 debt.	 Following	 the	 exchange,	 these	 Trust	 Preferred Securities,	 common	 beneficial	 interests	 and	 junior	 subordinated	 debt	 were extinguished	and	the	firm	recognized	a	gain	of	$289	million	($270	million	of which	was	recorded	at	extinguishment	in	the	third	quarter	of	2014),	which	is included	 in	 "Market	 making"	 in	 the	 consolidated	 statements	 of	 earnings. Subsequent	to	this	exchange,	during	the	second	half	of	2014,	the	firm	purchased $214	 million (par	 amount)	 of	 Trust	 Preferred	 Securities	 and	 delivered	 these securities,	along	with	$6.6	million	of	common	beneficial	interests,	to	the	Trust	in February	 2015	 in	 exchange	 for	 a	 corresponding	 par	 amount	 of	 the	 junior subordinated	debt.	The	Trust	is	a	wholly-owned	finance	subsidiary	of	the	firm for	 regulatory	 and	 legal	 purposes	 but	 is	 not	 consolidated	 for	 accounting purposes.

The	 firm	 pays	 interest	 semi-annually	 on	 the	 junior	 subordinated	 debt	 at	 an annual	rate	of	6.345%	and	the	debt	matures	on	February	15,	2034.	The	coupon rate	and	the	payment	dates	applicable	to	the	beneficial	interests	are	the	same	as the	interest	rate	and	payment	dates	for	the	junior	subordinated	debt.	The	firm	has the	 right,	 from	 time	 to	 time,	 to	 defer	 payment	 of	 interest	 on	 the	 junior subordinated	 debt,	 and	 therefore	 cause	 payment	 on	 the	 Trust's	 preferred beneficial	 interests	 to	 be	 deferred,	 in	 each	 case	 up	 to	 ten	 consecutive	 semi- annual	periods.	During	any	such	deferral	period,	the	firm	will	not	be	permitted to,	 among	 other	 things,	 pay	 dividends	 on	 or	 make	 certain	 repurchases	 of	 its common	 stock.	 The	 Trust	 is	 not	 permitted	 to	 pay	 any	 distributions	 on	 the common	beneficial	interests	held	by	Group	Inc.	unless	all	dividends	payable	on the	preferred	beneficial	interests	have	been	paid	in	full.

# Other	Liabilities	and	Accrued	Expenses

The	table	below	presents	other	liabilities	and	accrued	expenses	by	type.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Compensation\tand\tbenefits | \t\t$\t\t8,368 | \t $\t\t7,874 |
| Noncontrolling\tinterests^\t1 | 404 | 326 |
| Income\ttax-related\tliabilities | 1,533 | 1,974 |
| Employee\tinterests\tin\tconsolidated\tfunds | 176 | 210 |
| Subordinated\tliabilities\tissued\tby\tconsolidated\tVIEs | 843 | 477 |
| Accrued\texpenses\tand\tother | 4,751 | 5,183 |
| Total | \t\t$16,075 | \t $16,044 |
| 1.Primarily\trelates\tto\tconsolidated\tinvestment\tfunds. |  |  |
| Goldman\tSachs\t2014\tForm\t10-K | Goldman\tSachs\t2014\tForm\t10-K | 183 |

1.Primarily	relates	to	consolidated	investment	funds.

# Commitments,	Contingencies	and	Guarantees

# Commitments

The	table	below	presents	the	firm's	commitments.

|  | Commitment	Amount	by	Period<br>of	Expiration	as	of	December	2014 | Commitment	Amount	by	Period<br>of	Expiration	as	of	December	2014 | Commitment	Amount	by	Period<br>of	Expiration	as	of	December	2014 |  | Total	Commitments<br>as	of	December | Total	Commitments<br>as	of	December |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | 2016\t- | 2018\t- | 2020\t- |  |  |
| $\tin\tmillions | 2015 | 2017 | 2019 | Thereafter | 2014 | 2013 |
| Commitments\tto\textend\tcredit |  |  |  |  |  |  |
| Commercial\tlending: |  |  |  |  |  |  |
| Investment-grade | \t$\t\t9,712 | \t$15,003 | \t$36,200 | $2,719 | \t$\t\t63,634 | \t$\t\t60,499 |
| Non-investment-grade | 4,136 | 7,080 | 14,111 | 4,278 | 29,605 | 25,412 |
| Warehouse\tfinancing | 1,306 | 1,152 | 112 | 140 | 2,710 | 1,716 |
| Total\tcommitments\tto\textend\tcredit | 15,154 | 23,235 | 50,423 | 7,137 | 95,949 | 87,627 |
| Contingent\tand\tforward\tstarting\tresale\tand\tsecurities\tborrowing\tagreements | 34,343 | 557 | 325 | — | 35,225 | 34,410 |
| Forward\tstarting\trepurchase\tand\tsecured\tlending\tagreements | 8,180 | — | — | — | 8,180 | 8,256 |
| Letters\tof\tcredit | 280 | 14 | 10 | 4 | 308 | 501 |
| Investment\tcommitments | 1,684 | 2,818 | 25 | 637 | 5,164 | 7,116 |
| Other | 6,136 | 87 | 42 | 56 | 6,321 | 3,955 |
| Total\tcommitments | \t$65,777 | \t$26,711 | \t$50,825 | $7,834 | \t$151,147 | \t$141,865 |

# Commitments	to	Extend	Credit

The	 firm's	 commitments	 to	 extend	 credit	 are	 agreements	 to	 lend	 with	 fixed termination	dates	and	depend	on	the	satisfaction	of	all	contractual	conditions	to borrowing.	These	commitments	are	presented	net	of	amounts	syndicated	to	third parties.	The	total	commitment	amount	does	not	necessarily	reflect	actual	future cash	flows	because	the	firm	may	syndicate	all	or	substantial	additional	portions of	 these	 commitments.	 In	 addition,	 commitments	 can	 expire	 unused	 or	 be reduced	or	cancelled	at	the	counterparty's	request.

As	of	December	2014	and	December	2013,	$66.22	billion	and	$35.66	billion, respectively,	of	the	firm's	lending	commitments	were	held	for	investment	and were	accounted	for	on	an	accrual	basis.	See	Note	9	for	further	information	about such	commitments.

The	firm	accounts	for	the	remaining	commitments	to	extend	credit	at	fair	value. Losses, if	 any,	 are	 generally recorded,	 net	 of	 any fees in	 "Other	 principal transactions."

Commercial	 Lending.	 The firm's commercial lending commitments are extended to investment-grade	 and	 non-investment-grade	 corporate	 borrowers. Commitments	to	investment-grade	corporate	borrowers	are	principally	used	for operating	liquidity	and	general	corporate	purposes.	The	firm	also	extends	lending commitments in	 connection	 with	 contingent	 acquisition financing	 and	 other types of corporate lending as	 well as commercial real estate financing. Commitments	that	are	extended	for	contingent	acquisition	financing	are	often intended	to	be	short-term	in	nature,	as	borrowers	often	seek	to	replace	them	with other	funding	sources.

Sumitomo	Mitsui	Financial	Group,	Inc.	(SMFG)	provides	the	firm	with	credit loss	protection	on	certain	approved	 loan	commitments	(primarily	 investment- grade	 commercial	 lending	 commitments).	 The	 notional	 amount	 of	 such	 loan commitments	was	$27.51	billion	and	$29.24	billion	as	of	December	2014	and December	2013,	respectively.	The	credit	loss	protection	on	loan	commitments provided	by	SMFG	is	generally	limited	to	95%	of	the	first	loss	the	firm	realizes on	 such	 commitments,	 up	 to	 a	 maximum	 of	 approximately	 $950	 million.	 In addition,	subject	to	the	satisfaction	of	certain	conditions,	upon	the	firm's	request, SMFG	 will	 provide	 protection	 for 70% of	 additional	 losses	 on	 such commitments,	up	to	a	maximum	of	$1.13	billion,	of	which	$768	million	and $870	 million of	 protection	 had	 been	 provided	 as	 of	 December	 2014	 and December	2013,	respectively.	The	firm	also	uses	other	financial	instruments	to mitigate	 credit	 risks	 related	 to	 certain	 commitments	 not	 covered	 by	 SMFG. These	instruments	primarily	include	credit	default	swaps	that	reference	the	same or	similar	underlying	instrument	or	entity,	or	credit	default	swaps	that	reference a	market	index.

Warehouse Financing. The	 firm	 provides	 financing	 to	 clients	 who warehouse	financial	assets.	These	arrangements	are	secured	by	the	warehoused assets,	primarily	consisting	of	corporate	loans	and	commercial	mortgage	loans.

# Contingent	and	Forward	Starting	Resale	and	Securities	Borrowing Agreements/Forward	 Starting	 Repurchase and	 Secured Lending Agreements

The	firm	enters	into	resale	and	securities	borrowing	agreements	and	repurchase and	secured	lending	agreements	that	settle	at	a	future	date,	generally	within	three business	 days.	The	 firm	 also	 enters	 into	 commitments	 to	 provide	 contingent financing	to	its	clients	and	counterparties	through	resale	agreements.	The	firm's funding	 of	 these	 commitments	 depends	 on	 the	 satisfaction	 of	 all	 contractual conditions	to	the	resale	agreement	and	these	commitments	can	expire	unused.

# Letters	of	Credit

The	firm	has	commitments	under	letters	of	credit	issued	by	various	banks	which the	firm	provides	to	counterparties	in	lieu	of	securities	or	cash	to	satisfy	various collateral	and	margin	deposit	requirements.

# Investment	Commitments

The	 firm's	 investment	 commitments	 of	 $5.16	 billion	 and	 $7.12	 billion	 as	 of December	 2014	 and	 December	 2013,	 respectively,	 include	 commitments	 to invest	in	private	equity,	real	estate	and	other	assets	directly	and	through	funds that	 the	 firm	 raises	 and	 manages.	 Of	 these	 amounts, $2.87 billion	 and $5.48	billion	as	of	December	2014	and	December	2013,	respectively,	relate	to commitments	to	invest	in	funds	managed	by	the	firm.	If	these	commitments	are called,	they	would	be	funded	at	market	value	on	the	date	of	investment.

# Leases

The	 firm	 has	 contractual	 obligations	 under	 long-term	 noncancelable	 lease agreements,	principally	for	office	space,	expiring	on	various	dates	through	2069. Certain	agreements	are	subject	to	periodic	escalation	provisions	for	increases	in real	estate	taxes	and	other	charges.	The	table	below	presents	future	minimum rental	payments,	net	of	minimum	sublease	rentals.

|  | As	of |
| :--- | :--- |
| $\tin\tmillions | December\t2014 |
| 2015 | $\t\t\t321 |
| 2016 | 292 |
| 2017 | 274 |
| 2018 | 226 |
| 2019 | 190 |
| 2020\t-\tthereafter | 870 |
| Total | $2,173 |

Operating	 leases	 include	office	space	held	 in	excess	of	current	requirements. Rent	expense	relating	to	space	held	for	growth	is	included	in	"Occupancy."	The firm	records	a	liability,	based	on	the	fair	value	of	the	remaining	lease	rentals reduced	by	any	potential	or	existing	sublease	rentals,	for	leases	where	the	firm has	ceased	using	the	space	and	management	has	concluded	that	the	firm	will	not derive	any	future	economic	benefits.	Costs	to	terminate	a	lease	before	the	end	of its	term	are	recognized	and	measured	at	fair	value	on	termination.

# Contingencies

Legal	Proceedings.	See	Note	27	for information	about	 legal	proceedings, including	certain	mortgage-related	matters,	and	agreements	the	firm	has	entered into	to	toll	the	statute	of	limitations.

Certain	 Mortgage-Related	 Contingencies.	 There	 are	 multiple	 areas	 of focus	 by	 regulators,	 governmental	 agencies	 and	 others	 within	 the	 mortgage market	 that	 may	 impact	 originators,	 issuers,	 servicers	 and	 investors.	 There remains	 significant	 uncertainty	 surrounding	 the	 nature	 and	 extent	 of	 any potential	exposure	for	participants	in	this	market.

Ÿ	Representations	and	Warranties.	The	firm	has	 not	 been	 a	 significant originator	 of	 residential	 mortgage	 loans.	 The	 firm	 did	 purchase	 loans originated	by	others	and	generally	received	loan-level	representations	of	the type	described	below	from	the	originators.	During	the	period	2005	through 2008,	 the	 firm	 sold	 approximately $10 billion	 of	 loans	 to	 government- sponsored	enterprises	and	approximately	$11	billion	of	loans	to	other	third parties.	In	addition,	the	firm	transferred	loans	to	trusts	and	other	mortgage securitization	 vehicles.	 As	 of	 December	 2014	 and	 December	 2013,	 the outstanding	 balance	 of	 the	 loans	 transferred	 to	 trusts	 and	 other	 mortgage securitization	 vehicles	 during	 the	 period	 2005	 through	 2008	 was approximately	$25	billion	and	$29	billion,	respectively.	These	amounts	reflect paydowns	and	cumulative	losses	of	approximately	$100	billion	($23	billion	of which	 are	 cumulative	 losses)	 as	 of	 December	 2014	 and	 approximately $96	billion	($22	billion	of	which	are	cumulative	losses)	as	of	December	2013. A	 small	 number	 of	 these	 Goldman	 Sachs-issued	 securitizations	 with	 an outstanding	 principal	 balance	 of $401	 million and	 total	 paydowns	 and cumulative	 losses	 of	 $1.66	 billion	 ($550	 million	 of	 which	 are	 cumulative losses)	 as	 of	 December	 2014,	 and	 an	 outstanding	 principal	 balance	 of $463	 million and	 total	 paydowns	 and	 cumulative	 losses	 of	 $1.60	 billion ($534	million	of	which	are	cumulative	losses)	as	of	December	2013,	were structured	 with	 credit	 protection	 obtained	 from	 monoline	 insurers.	 In connection	with	both	sales	of	loans	and	securitizations,	the	firm	provided	loan level	 representations	 of	 the	 type	 described	 below	 and/or	 assigned	 the	 loan level	representations	from	the	party	from	whom	the	firm	purchased	the	loans.

The	 loan	 level	 representations	 made	 in	 connection	 with	 the	 sale	 or securitization	of	mortgage	loans	varied	among	transactions	but	were	generally detailed	representations	applicable	to	each	loan	in	the	portfolio	and	addressed matters	 relating	 to	 the	 property,	 the	 borrower	 and	 the	 note.	 These representations	 generally	 included,	 but	 were	 not	 limited	 to,	 the	 following: (i)	certain	attributes	of	the	borrower's	financial	status;	(ii)	loan-to-value	ratios, owner	 occupancy	 status	 and	 certain	 other	 characteristics	 of	 the	 property; (iii)	the	lien	position;	(iv)	the	fact	that	the	loan	was	originated	in	compliance with	law;	and	(v)	completeness	of	the	loan	documentation.

The	firm	has	received	repurchase	claims	for	residential	mortgage	loans	based on	 alleged	 breaches	 of	 representations	 from	 government-sponsored enterprises,	 other	 third	 parties,	 trusts	 and	 other	 mortgage	 securitization vehicles,	 which	 have	 not	 been	 significant.	 During	 both	 the	 years	 ended December	 2014	 and	 December	 2013,	 the	 firm	 repurchased	 loans	 with	 an unpaid	principal	balance	of	less	than	$10	million	and	related	losses	were	not material.	The	firm	has	received	a	communication	from	counsel	purporting	to represent	certain	institutional	investors	in	portions	of	Goldman	Sachs-issued securitizations	 between	 2003	 and	 2007,	 such	 securitizations	 having	 a	 total original	notional	face	amount	of	approximately	$150	billion,	offering	to	enter into	a	"settlement	dialogue"	with	respect	to	alleged	breaches	of	representations made	by	Goldman	Sachs	in	connection	with	such	offerings.

Ultimately,	 the	 firm's	 exposure	 to	 claims	 for	 repurchase	 of	 residential mortgage	loans	based	on	alleged	breaches	of	representations	will	depend	on	a number	of	factors	including	the	following:	(i)	the	extent	to	which	these	claims are	actually	made	within	the	statute	of	limitations	taking	into	consideration	the agreements	 to	 toll	 the	 statute	 of	 limitations	 the	 firm	 has	 entered	 into	 with trustees	 representing	 trusts;	 (ii)	 the	 extent	 to	 which	 there	 are	 underlying breaches	of	representations	that	give	rise	to	valid	claims	for	repurchase;	(iii)	in the	case	of	loans	originated	by	others,	the	extent	to	which	the	firm	could	be held	liable	and,	if	it	is,	the	firm's	ability	to	pursue	and	collect	on	any	claims against	the	parties	who	made	representations	to	the	firm;	(iv)	macroeconomic factors,	 including	 developments	 in	 the	 residential	 real	 estate	 market;	 and (v)	 legal	 and	 regulatory	 developments.	 Based	 upon	 the	 large	 number	 of defaults	in	residential	mortgages,	including	those	sold	or	securitized	by	 the firm,	there	is	a	potential	for	increasing	claims	for	repurchases.	However,	the firm	is	not	in	a	position	to	make	a	meaningful	estimate	of	that	exposure	at	this time.

# Ÿ	Foreclosure	 and	 Other	 Mortgage	 Loan	 Servicing	 Practices	 and

Procedures.	The	firm	had	received	a	number	of	requests	for	information from	 regulators	 and	 other	 agencies,	 including	 state	 attorneys	 general	 and banking	 regulators,	 as	 part	 of	 an	 industry-wide	 focus	 on	 the	 practices	 of lenders	and	servicers	 in	connection	with	foreclosure	proceedings	and	other aspects	 of	 mortgage	 loan	 servicing	 practices	 and	 procedures.	The	 requests sought	information	about	the	foreclosure	and	servicing	protocols	and	activities of	 Litton	 Loan	 Servicing	 LP	 (Litton),	 a	 residential	 mortgage	 servicing subsidiary	sold	by	the	firm	to	Ocwen	Financial	Corporation	(Ocwen)	in	the third	quarter	of	2011.	The	firm	 is	cooperating	with	 the	requests	and	 these inquiries	may	result	in	the	imposition	of	fines	or	other	regulatory	action.

In	 connection	 with	 the	 sale	 of	 Litton,	 the	 firm	 provided	 customary representations	 and	 warranties,	 and	 indemnities	 for	 breaches	 of	 these representations	and	warranties,	 to	Ocwen.	These	 indemnities	are	subject	 to various	limitations,	and	are	capped	at	approximately	$50	million.	The	firm	has not	yet	received	any	claims	under	these	indemnities.	The	firm	also	agreed	to provide	specific	indemnities	to	Ocwen	related	to	claims	made	by	third	parties with	respect	to	servicing	activities	during	the	period	that	Litton	was	owned	by the	 firm	 and	 which	 are	 in	 excess	 of	 the	 related	 reserves	 accrued	 for	 such matters	 by	 Litton	 at	 the	 time	 of	 the	 sale.	These	 indemnities	 are	 capped	 at approximately	$125	million.	The	firm	has	recorded	a	reserve	for	the	portion	of these	 potential	 losses	 that	 it	 believes	 is	 probable	 and	 can	 be	 reasonably estimated.	 As	 of	 December	 2014,	 claims	 received	 and	 payments	 made	 in connection	with	these	claims	were	not	material	to	the	firm.

The	firm	further	agreed	to	provide	indemnities	to	Ocwen	not	subject	to	a	cap, which	 primarily	 relate	 to	 potential	 liabilities	 constituting	 fines	 or	 civil monetary	penalties	which	could	be	imposed	in	settlements	with	U.S.	states' attorneys	general	or	in	consent	orders	with	the	U.S.	federal	bank	regulatory agencies	or	 the	New	York	State	Department	of	Financial	Services,	 in	each case	relating	to	Litton's	foreclosure	and	servicing	practices	while	it	was	owned by	the	firm.	The	firm	has	entered	into	a	settlement	with	the	Federal	Reserve Board	relating	to	foreclosure	and	servicing	matters.

Under	the	Litton	sale	agreement	the	firm	also	retained	liabilities	associated with	 claims	 related	 to	 Litton's	 failure	 to	 maintain	 lender-placed	 mortgage insurance,	obligations	to	repurchase	certain	loans	from	government-sponsored enterprises,	 subpoenas	 from	 one	 of	 Litton's	 regulators,	 and	 fines	 or	 civil penalties	 imposed	 by	 the	 Federal	 Reserve	 Board	 or	 the	 New	 York	 State Department	 of	 Financial	 Services	 in	 connection	 with	 certain	 compliance matters.	 Management	 does	 not	 believe,	 based	 on	 currently	 available information,	that	any	payments	under	these	indemnities	will	have	a	material adverse	effect	on	the	firm's	financial	condition.

Other	Contingencies.	In	connection	with	the	sale	of	Metro,	the	firm	provided customary	representations	and	warranties,	and	indemnities	for	breaches	of	these representations	and	warranties,	to	the	buyer.	The	firm	further	agreed	to	provide indemnities	to	the	buyer,	which	primarily	relate	to	potential	liabilities	for	legal or	regulatory	proceedings	arising	out	of	the	conduct	of	Metro's	business	while	it was	owned	by	the	firm.

Derivative	Guarantees.	The	firm	enters	into	various	derivatives	that	meet	the definition	 of	 a	 guarantee	 under	 U.S.	 GAAP,	 including	 written	 equity	 and commodity	put	options,	written	currency	contracts	and	interest	rate	caps,	floors and	swaptions.	These	derivatives	are	risk	managed	together	with	derivatives	that do	not	meet	the	definition	of	a	guarantee,	and	therefore	the	amounts	in	the	tables below	do	not	reflect	the	firm's	overall	risk	related	to	its	derivative	activities. Disclosures	about	derivatives	are	not	required	if	they	may	be	cash	settled	and	the firm	 has	 no	 basis	 to	 conclude	 it	 is	 probable	 that	 the	 counterparties	 held	 the underlying	instruments	at	inception	of	the	contract.	The	firm	has	concluded	that these	 conditions	 have	 been	 met	 for	 certain	 large,	 internationally	 active commercial	and	investment	bank	counterparties,	central	clearing	counterparties and	certain	other	counterparties.	Accordingly,	the	firm	has	not	 included	such contracts	in	the	tables	below.

Derivatives	are	accounted	for	at	fair	value	and	therefore	the	carrying	value	is considered	 the	 best	 indication	 of	 payment/performance	 risk	 for	 individual contracts.	However,	the	carrying	values	in	the	tables	below	exclude	the	effect	of counterparty	and	cash	collateral	netting.

Securities	 Lending Indemnifications.	 The firm,	 in	 its	 capacity	 as	 an agency	 lender,	 indemnifies	 most	 of	 its	 securities	 lending	 customers	 against losses	 incurred	 in	 the	 event	 that	 borrowers	 do	 not	 return	 securities	 and	 the collateral	 held	 is	 insufficient	 to	 cover	 the	 market	 value	 of	 the	 securities borrowed.	Collateral	held	by	the	lenders	in	connection	with	securities	lending indemnifications	was	$28.49	billion	and	$27.14	billion	as	of	December	2014	and December	 2013,	 respectively.	 Because	 the	 contractual	 nature	 of	 these arrangements	 requires	 the	 firm	 to	 obtain	 collateral	 with	 a	 market	 value	 that exceeds	 the	 value	 of	 the	 securities	 lent	 to	 the	 borrower,	 there	 is	 minimal performance	risk	associated	with	these	guarantees.

Other	Financial	Guarantees.	In	the	ordinary	course	of	business,	the	firm provides	 other	 financial	 guarantees	 of	 the	 obligations	 of	 third	 parties	 (e.g., standby	 letters	 of	 credit	 and	 other	 guarantees	 to	 enable	 clients	 to	 complete transactions	and	fund-related	guarantees).	These	guarantees	represent	obligations to	 make	 payments	 to	 beneficiaries	 if	 the	 guaranteed	 party	 fails	 to	 fulfill	 its obligation	under	a	contractual	arrangement	with	that	beneficiary.

The	 tables	 below	 present	 information	 about	 certain	 derivatives	 that	 meet	 the definition	of	a	guarantee,	securities	lending	indemnifications	and	certain	other guarantees.	The	maximum	payout	in	the	tables	below	is	based	on	the	notional amount	of	the	contract	and	therefore	does	not	represent	anticipated	losses.	See Note	 7	 for	 information	 about	 credit	 derivatives	 that	 meet	 the	 definition	 of	 a guarantee	which	are	not	included	below.	The	tables	below	also	exclude	certain commitments	 to	 issue	 standby	 letters	 of	 credit	 that	 are	 included	 in "Commitments	to	extend	credit."	See	the	table	in	"Commitments"	above	for	a summary	of	the	firm's	commitments.

|  |  | As	of	December	2014 |  |
| :--- | :--- | :--- | :--- |
|  |  | Securities | Other |
|  |  | lending | financial |
| $\tin\tmillions | \t\tDerivatives | indemnifications | guarantees |
| Carrying\tValue\tof\tNet\tLiability | $\t\t11,201 | $\t\t\t\t\t\t\t\t— | $\t\t\t119 |
| Maximum\tPayout/Notional\tAmount\tby\tPeriod\tof\tExpiration |  |  |  |
| 2015 | $351,308 | $27,567 | $\t\t\t471 |
| 2016\t-\t2017 | 150,989 | — | 935 |
| 2018\t-\t2019 | 51,927 | — | 1,390 |
| 2020\t-\tThereafter | 58,511 | — | 1,690 |
| Total | $612,735 | $27,567 | $4,486 |

|  |  | As	of	December	2013 |  |
| :--- | :--- | :--- | :--- |
|  |  | Securities | Other |
|  |  | lending | financial |
| $\tin\tmillions | \t\t Derivatives | indemnifications | guarantees |
| Carrying\tValue\tof\tNet\tLiability | $\t\t\t\t7,634 | $\t\t\t\t\t\t\t\t— | $\t\t\t213 |
| Maximum\tPayout/Notional\tAmount\tby\tPeriod\tof\tExpiration |  |  |  |
| 2014 | $517,634 | $26,384 | $1,361 |
| 2015\t-\t2016 | 180,543 | — | 620 |
| 2017\t-\t2018 | 39,367 | — | 1,140 |
| 2019\t-\tThereafter | 57,736 | — | 1,046 |
| Total | $795,280 | $26,384 | $4,167 |

Guarantees	 of	 Securities Issued	 by	 Trusts.	 The firm	 has	 established trusts,	including	Goldman	Sachs	Capital	I,	the	APEX	Trusts,	the	2012	Trusts, and	other	entities	for	the	limited	purpose	of	issuing	securities	to	third	parties, lending	the	proceeds	to	the	firm	and	entering	into	contractual	arrangements	with the	firm	and	third	parties	related	to	this	purpose.	The	firm	does	not	consolidate these	 entities.	 See	 Note 16 for	 further	 information	 about	 the	 transactions involving	Goldman	Sachs	Capital	I,	the	APEX	Trusts,	and	the	2012	Trusts.

The	firm	effectively	provides	for	 the	full	and	unconditional	guarantee	of	 the securities	issued	by	these	entities.	Timely	payment	by	the	firm	of	amounts	due	to these	 entities	 under	 the	 guarantee,	 borrowing,	 preferred	 stock	 and	 related contractual	 arrangements	 will	 be	 sufficient	 to	 cover	 payments	 due	 on	 the securities	issued	by	these	entities.

Management	believes	that	it	is	unlikely	that	any	circumstances	will	occur,	such as	nonperformance	on	the	part	of	paying	agents	or	other	service	providers,	that would	make	it	necessary	for	the	firm	to	make	payments	related	to	these	entities other	than	those	required	under	the	terms	of	the	guarantee,	borrowing,	preferred stock	 and	 related	 contractual	 arrangements	 and	 in	 connection	 with	 certain expenses	incurred	by	these	entities.

Indemnities	 and	 Guarantees	 of	 Service	 Providers. In	 the	 ordinary course	 of	 business,	 the	 firm	 indemnifies	 and	 guarantees	 certain	 service providers,	 such	 as	 clearing	 and	 custody	 agents,	 trustees	 and	 administrators, against	specified	potential	losses	in	connection	with	their	acting	as	an	agent	of, or	providing	services	to,	the	firm	or	its	affiliates.

The	firm	may	also	be	liable	to	some	clients	or	other	parties,	for	losses	arising from	 its	 custodial	 role	 or	 caused	 by	 acts	 or	 omissions	 of	 third-party	 service providers,	including	sub-custodians	and	third-party	brokers.	In	certain	cases,	the firm	 has	 the	 right	 to	 seek	 indemnification	 from	 these	 third-party	 service providers	for	certain	relevant	losses	incurred	by	the	firm.	In	addition,	the	firm	is a	member	of	payment,	clearing	and	settlement	networks	as	well	as	securities exchanges	around	the	world	that	may	require	the	firm	to	meet	the	obligations	of such	networks	and	exchanges	in	the	event	of	member	defaults	and	other	loss scenarios.

In	connection	with	its	prime	brokerage	and	clearing	businesses,	the	firm	agrees to	clear	and	settle	on	behalf	of	its	clients	the	transactions	entered	into	by	them with	other	brokerage	firms.	The	firm's	obligations	in	respect	of	such	transactions are	secured	by	the	assets	in	the	client's	account	as	well	as	any	proceeds	received from	the	transactions	cleared	and	settled	by	the	firm	on	behalf	of	the	client.	In connection	with	joint	venture	investments,	the	firm	may	issue	loan	guarantees under	 which	 it	 may	 be	 liable	 in	 the	 event	 of	 fraud,	 misappropriation, environmental	liabilities	and	certain	other	matters	involving	the	borrower.

The	firm	is	unable	to	develop	an	estimate	of	the	maximum	payout	under	these guarantees	 and	 indemnifications.	 However,	 management	 believes	 that	 it	 is unlikely	 the	 firm	 will	 have	 to	 make	 any	 material	 payments	 under	 these arrangements,	 and	 no	 material	 liabilities	 related	 to	 these	 guarantees	 and indemnifications	 have	 been	 recognized	 in	 the	 consolidated	 statements	 of financial	condition	as	of	December	2014	and	December	2013.

Other	 Representations,	 Warranties	 and Indemnifications.	The firm provides	representations	and	warranties	to	counterparties	in	connection	with	a variety	of	commercial	transactions	and	occasionally	indemnifies	them	against potential	losses	caused	by	the	breach	of	those	representations	and	warranties. The	firm	may	also	provide	 indemnifications	protecting	against	changes	 in	or adverse	application	of	certain	U.S.	tax	laws	in	connection	with	ordinary-course transactions	such	as	securities	issuances,	borrowings	or	derivatives.

In	addition,	 the	firm	may	provide	 indemnifications	 to	some	counterparties	 to protect	them	in	the	event	additional	taxes	are	owed	or	payments	are	withheld, due	either	to	a	change	in	or	an	adverse	application	of	certain	non-U.S.	tax	laws.

These	indemnifications	generally	are	standard	contractual	terms	and	are	entered into	in	the	ordinary	course	of	business.	Generally,	there	are	no	stated	or	notional amounts	included	in	these	indemnifications,	and	the	contingencies	triggering	the obligation	to	indemnify	are	not	expected	to	occur.	The	firm	is	unable	to	develop an	 estimate	 of	 the	 maximum	 payout	 under	 these	 guarantees	 and indemnifications.	However,	management	believes	that	it	is	unlikely	the	firm	will have	to	make	any	material	payments	under	these	arrangements,	and	no	material liabilities	related	to	these	arrangements	have	been	recognized	in	the	consolidated statements	of	financial	condition	as	of	December	2014	and	December	2013.

Guarantees of Subsidiaries. Group	 Inc.	 fully	 and	 unconditionally guarantees	the	securities	issued	by	GS	Finance	Corp.,	a	wholly-owned	finance subsidiary	of	the	firm.

Group	Inc.	has	guaranteed	the	payment	obligations	of	Goldman,	Sachs	&	Co. (GS&Co.),	 GS	 Bank	 USA	 and	 Goldman	 Sachs	 Execution	 &	 Clearing,	 L.P. (GSEC),	subject	to	certain	exceptions.

In	November	2008,	the	firm	contributed	subsidiaries	into	GS	Bank	USA,	and Group	Inc.	agreed	to	guarantee	the	reimbursement	of	certain	losses,	including credit-related	 losses,	 relating	 to	 assets	 held	 by	 the	 contributed	 entities.	 In connection	with	this	guarantee,	Group	Inc.	also	agreed	to	pledge	to	GS	Bank USA	 certain	 collateral,	 including	 interests	 in	 subsidiaries	 and	 other	 illiquid assets.

In	 addition,	 Group	 Inc.	 guarantees	 many	 of	 the	 obligations	 of	 its	 other consolidated	 subsidiaries	 on	 a	 transaction-by-transaction	 basis,	 as	 negotiated with	counterparties.	Group	Inc.	is	unable	to	develop	an	estimate	of	the	maximum payout	 under	 its	 subsidiary	 guarantees;	 however,	 because	 these	 guaranteed obligations	 are	 also	 obligations	 of	 consolidated	 subsidiaries,	 Group	 Inc.'s liabilities	as	guarantor	are	not	separately	disclosed.

# Shareholders'	Equity

# Common	Equity

The	firm's	share	repurchase	program	is	intended	to	help	maintain	the	appropriate level	of	common	equity.	The	share	repurchase	program	 is	effected	primarily through	 regular	 open-market	 purchases	 (which	 may	 include	 repurchase	 plans designed	to	comply	with	Rule	10b5-1),	the	amounts	and	timing	of	which	are determined	primarily	by	the	firm's	current	and	projected	capital	position,	but which	may	also	be	influenced	by	general	market	conditions	and	the	prevailing price	and	trading	volumes	of	the	firm's	common	stock.	Prior	to	repurchasing common	 stock,	 the	 firm	 must	 receive	 confirmation	 that	 the	 Federal	 Reserve Board	does	not	object	to	such	capital	actions.

The	table	below	presents	the	amount	of	common	stock	repurchased	by	the	firm under	the	share	repurchase	program	during	2014,	2013	and	2012.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| in\tmillions,\texcept\tper\tshare\tamounts | 2014 | 2013 | 2012 |
| Common\tshare\trepurchases | 31.8 | 39.3 | 42.0 |
| Average\tcost\tper\tshare | \t\t$171.79 | \t$157.11 | \t $110.31 |
| Total\tcost\tof\tcommon\tshare\trepurchases | \t\t$\t\t5,469 | \t$\t\t6,175 | \t $\t\t4,637 |

Pursuant	to	the	terms	of	certain	share-based	compensation	plans,	employees	may remit	shares	to	the	firm	or	the	firm	may	cancel	restricted	stock	units	(RSUs)	or stock	 options	 to	 satisfy	 minimum	 statutory	 employee	 tax	 withholding requirements	and	the	exercise	price	of	stock	options.	Under	these	plans,	during 2014,	2013	and	2012,	employees	remitted	174,489	shares,	161,211	shares	and 33,477	shares	with	a	total	value	of	$31	million,	$25	million	and	$3	million,	and the	firm	cancelled	5.8	million,	4.0	million	and	12.7	million	of	RSUs	with	a	total value	of	$974	million,	$599	million	and	$1.44	billion.	Under	these	plans,	the firm	also	cancelled	15.6	million	stock	options	with	a	total	value	of	$2.65	billion during	2014.

# Preferred	Equity

The	tables	below	present	details	about	the	perpetual	preferred	stock	issued	and outstanding	as	of	December	2014.

| Series | Shares<br>Authorized | Shares<br>Issued | Shares<br>Outstanding | Shares<br>Per	Share |
| :--- | :--- | :--- | :--- | :--- |
| A | 50,000 | 30,000 | 29,999 | 1,000 |
| B | 50,000 | 32,000 | 32,000 | 1,000 |
| C | 25,000 | 8,000 | 8,000 | 1,000 |
| D | 60,000 | 54,000 | 53,999 | 1,000 |
| E | 17,500 | 17,500 | 17,500 | N/A |
| F | 5,000 | 5,000 | 5,000 | N/A |
| I | 34,500 | 34,000 | 34,000 | 1,000 |
| J | 46,000 | 40,000 | 40,000 | 1,000 |
| K\t1 | 32,200 | 28,000 | 28,000 | 1,000 |
| L\t1 | 52,000 | 52,000 | 52,000 | 25 |
| Total | 372,200 | \t300,500 | 300,498 |  |

1.In	April	 2014,	 Group	 Inc.	 issued	 28,000	 shares	 of	 Series	 K	 perpetual	 6.375%	 Fixed-to- Floating	Rate	Non-Cumulative	Preferred	Stock	(Series	K	Preferred	Stock)	and	52,000	shares of	 Series	 L	 perpetual 5.70% Fixed-to-Floating	 Rate	 Non-Cumulative	 Preferred	 Stock (Series	L	Preferred	Stock).

|  | Liquidation |  | Value |  |
| :--- | :--- | :--- | :--- | :--- |
| Series | Preference | Redemption\tPrice\tPer\tShare | ($\tin\tmillions) |  |
| A | $\t\t25,000 | $25,000\tplus\tdeclared\tand\tunpaid | $\t\t\t750 |  |
|  |  | dividends |  |  |
| B | 25,000 | $25,000\tplus\tdeclared\tand\tunpaid | 800 |  |
|  |  | dividends |  |  |
| C | 25,000 | $25,000\tplus\tdeclared\tand\tunpaid | 200 |  |
|  |  | dividends |  |  |
| D | 25,000 | $25,000\tplus\tdeclared\tand\tunpaid | 1,350 |  |
|  |  | dividends |  | Series |
| E | 100,000 | $100,000\tplus\tdeclared\tand\tunpaid | 1,750 |  |
|  |  | dividends |  | A |
| F | 100,000 | $100,000\tplus\tdeclared\tand\tunpaid | 500 | B |
|  |  | dividends |  | C |
| I | 25,000 | $25,000\tplus\taccrued\tand\tunpaid | 850 | D |
|  |  | dividends |  | E |
| J | 25,000 | $25,000\tplus\taccrued\tand\tunpaid | 1,000 | F |
|  |  | dividends |  | I |
| K | 25,000 | $25,000\tplus\taccrued\tand\tunpaid | 700 | J |
|  |  | dividends |  |  |
| L | 25,000 | $25,000\tplus\taccrued\tand\tunpaid | 1,300 | K |
|  |  | dividends |  |  |
| Total |  |  | $9,200 | L |

Ÿ	Each	 share	 of	 non-cumulative	 Series	A,	 Series	 B,	 Series	 C	 and	 Series	 D Preferred	Stock	issued	and	outstanding	is	redeemable	at	the	firm's	option.

Ÿ	Each	share	of	non-cumulative	Series	E	and	Series	F	Preferred	Stock	issued and	outstanding	is	redeemable	at	the	firm's	option,	subject	to	certain	covenant restrictions	governing	the	firm's	ability	to	redeem	or	purchase	the	preferred stock	 without	 issuing	 common	 stock	 or	 other	 instruments	 with	 equity-like characteristics.	 See	 Note	 16	 for	 information	 about	 the	 replacement	 capital covenants	applicable	to	the	Series	E	and	Series	F	Preferred	Stock.

Ÿ	Each	share	of	non-cumulative	Series	I	Preferred	Stock	issued	and	outstanding is	redeemable	at	the	firm's	option	beginning	November	10,	2017.

Ÿ	Each	share	of	non-cumulative	Series	J	Preferred	Stock	issued	and	outstanding is	redeemable	at	the	firm's	option	beginning	May	10,	2023.

Ÿ	Each	 share	 of	 non-cumulative	 Series	 K	 Preferred	 Stock	 issued and outstanding	is	redeemable	at	the	firm's	option	beginning	May	10,	2024.

Ÿ	Each	share	of	non-cumulative	Series	L	Preferred	Stock	issued	and	outstanding is	redeemable	at	the	firm's	option	beginning	May	10,	2019.

Ÿ	All	shares	of	preferred	stock	have	a	par	value	of	$0.01	per	share	and,	where applicable,	 each	 share	 of	 preferred	 stock	 is	 represented	 by	 the	 specified number	of	depositary	shares.

Prior	to	redeeming	preferred	stock,	the	firm	must	receive	confirmation	that	the Federal	 Reserve	 Board	 does	 not	 object	 to	 such	 capital	 actions.	All	 series	 of preferred	stock	are	pari	passu	and	have	a	preference	over	the	firm's	common stock	 on	 liquidation.	 Dividends	 on	 each	 series	 of	 preferred	 stock,	 excluding Series	L	Preferred	Stock,	if	declared,	are	payable	quarterly	in	arrears.	Dividends on	Series	L	Preferred	Stock,	if	declared,	are	payable	semi-annually	in	arrears from	the	issuance	date	to,	but	excluding,	May	10,	2019,	and	quarterly	thereafter. The	 firm's	 ability	 to	 declare	 or	 pay	 dividends	 on,	 or	 purchase,	 redeem	 or otherwise	acquire,	its	common	stock	is	subject	to	certain	restrictions	in	the	event that	the	firm	fails	to	pay	or	set	aside	full	dividends	on	the	preferred	stock	for	the latest	completed	dividend	period.

The	 table	below	presents the	dividend	rates	of the	firm's	perpetual	preferred stock	as	of	December	2014.

The	tables	below	present	preferred	dividends	declared	on	the	firm's	preferred stock.

|  | Year	Ended	December	2014 | Year	Ended	December	2014 |
| :--- | :--- | :--- |
| Series | \t\t per\tshare | $\tin\tmillions |
| A | $\t\t\t945.32 | $\t\t28 |
| B | 1,550.00 | 50 |
| C | 1,008.34 | 8 |
| D | 1,008.34 | 54 |
| E | 4,044.44 | 71 |
| F | 4,044.44 | 20 |
| I | 1,487.52 | 51 |
| J | 1,375.00 | 55 |
| K | 850.00 | 24 |
| L | 760.00 | 39 |
| Total |  | $400 |

|  | Year	Ended	December	2013 |  |
| :--- | :--- | :--- |
| Series | per\tshare | $\tin\tmillions |
| A | $\t\t\t947.92 | $\t\t28 |
| B | 1,550.00 | 50 |
| C | 1,011.11 | 8 |
| D | 1,011.11 | 54 |
| E | 4,044.44 | 71 |
| F | 4,044.44 | 20 |
| I | 1,553.63 | 53 |
| J | 744.79 | 30 |
| Total |  | $314 |

|  | Year	Ended	December	2012 | Year	Ended	December	2012 |
| :--- | :--- | :--- |
| Series | per\tshare | $\tin\tmillions |
| A | $\t\t\t960.94 | $\t\t29 |
| B | 1,550.00 | 50 |
| C | 1,025.01 | 8 |
| D | 1,025.01 | 55 |
| E | 2,055.56 | 36 |
| F | 1,000.00 | 5 |
| Total |  | $183 |

# Accumulated	Other	Comprehensive	Loss

The	tables	below	present	accumulated	other	comprehensive	loss,	net	of	tax	by type.

|  | Balance, | income/(loss) | Balance, |
| :--- | :--- | :--- | :--- |
|  | beginning | adjustments, | end\tof |
| $\tin\tmillions | of\tyear | net\tof\ttax | year |
| Currency\ttranslation | $(364) | $(109) | $(473) |
| Pension\tand\tpostretirement\tliabilities | (168) | (102) | (270) |
| Cash\tflow\thedges | 8 | (8) | — |
| Accumulated\tother\tcomprehensive\tloss,\tnet |  |  |  |
| of\ttax | $(524) | $(219) | $(743) |

|  | Balance, | income/(loss) | Balance, |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | beginning\nof\tyear | adjustments,\nnet\tof\ttax | end\tof\nyear |
| Currency\ttranslation | $(314) | $\t\t(50) | $(364) |
| Pension\tand\tpostretirement\tliabilities | (206) | 38 | (168) |
| Available-for-sale\tsecurities | 327 | (327) | — |
| Cash\tflow\thedges | — | 8 | 8 |
| Accumulated\tother\tcomprehensive\tloss,\tnet\tof |  |  |  |
| tax | $(193) | $(331) | $(524) |

# Regulation	and	Capital	Adequacy

The	 Federal	 Reserve	 Board	 is	 the	 primary	 regulator	 of	 Group	 Inc.,	 a	 bank holding	company	under	the	Bank	Holding	Company	Act	of	1956	(BHC	Act)	and a	financial	holding	company	under	amendments	 to	 the	BHC	Act.	As	a	bank holding	 company,	 the	 firm	 is	 subject	 to	 consolidated	 risk-based	 regulatory capital	requirements	which	are	computed	in	accordance	with	the	applicable	risk- based	capital	regulations	of	the	Federal	Reserve	Board.

These	capital	requirements	are	expressed	as	capital	ratios	that	compare	measures of	regulatory	capital	to	risk-weighted	assets	(RWAs).	The	firm's	capital	levels are	 subject	 to	 qualitative	 judgments	 by	 the	 regulators	 about	 components	 of capital,	 risk	 weightings	 and	 other	 factors.	 In	 addition,	 the	 firm	 is	 subject	 to requirements	with	respect	to	leverage.

Furthermore,	certain	of	the	firm's	subsidiaries	are	subject	to	separate	regulations and	capital	requirements	as	described	below.

# Applicable	Capital	Framework

As	of	December	2013,	the	firm	was	subject	to	the	risk-based	capital	regulations of	the	Federal	Reserve	Board	that	were	based	on	the	Basel	I	Capital	Accord	of the	 Basel	 Committee	 on	 Banking	 Supervision	 (Basel	 Committee),	 and incorporated	the	revised	market	risk	regulatory	capital	requirements	(together, the	Prior	Capital	Rules).

As	of	January	1,	2014,	the	firm	became	subject	to	the	Federal	Reserve	Board's revised	risk-based	capital	and	leverage	regulations,	subject	to	certain	transitional provisions	(Revised	Capital	Framework).	These	regulations	are	largely	based	on the	Basel	Committee's	final	capital	framework	for	strengthening	international capital	standards	(Basel	III)	and	also	implement	certain	provisions	of	the	Dodd- Frank	Act.	Under	the	Revised	Capital	Framework,	the	firm	is	an	"Advanced approach"	banking	organization.

The	firm	was	notified	in	the	first	quarter	of	2014	that	it	had	completed	a	"parallel run"	 to	 the	 satisfaction	 of	 the	 Federal	 Reserve	 Board,	 as	 required	 under	 the Revised	Capital	Framework.	As	such,	additional	changes	in	the	firm's	capital requirements	became	effective	on	April	1,	2014.

Beginning	on	January	1,	2014,	regulatory	capital	was	calculated	based	on	the Revised	Capital	Framework.	Beginning	April	1,	2014,	there	were	no	changes	to the	calculation	of	regulatory	capital,	but	RWAs	were	calculated	using	(i)	the Prior	Capital	Rules,	adjusted	for	certain	items	related	to	capital	deductions	under the	previous	definition	of	regulatory	capital	and	for	the	phase-in	of	new	capital deductions	(Hybrid	Capital	Rules),	and	(ii)	the	Advanced	approach	and	market risk	 rules	 set	 out	 in	 the	 Revised	 Capital	 Framework	 (together,	 the	 Basel	 III Advanced	Rules).	The	lower	of	the	ratios	calculated	under	the	Hybrid	Capital Rules	and	those	calculated	under	the	Basel	III	Advanced	Rules	are	the	binding regulatory	 capital	 requirements	 for	 the	 firm.	 The	 ratios	 calculated	 under	 the Basel	III	Advanced	Rules	were	lower	than	those	calculated	under	the	Hybrid Capital	 Rules	 and	 therefore	 were	 the	 binding	 ratios	 for	 the	 firm	 as	 of December	2014.

As	a	result	of	the	changes	in	the	applicable	capital	framework	in	2014,	the	firm's capital	 ratios	 as	 of	 December	 2014	 and	 those	 as	 of	 December	 2013	 were calculated	on	a	different	basis	and,	accordingly,	are	not	comparable.

Effective	on	January	1,	2015,	regulatory	capital	continues	to	be	calculated	under the	Revised	Capital	Framework,	but	RWAs	are	required	to	be	calculated	under the	Basel	III	Advanced	Rules,	as	well	as	the	Standardized	approach	and	market risk	rules	set	out	in	the	Revised	Capital	Framework	(together,	the	Standardized Capital	Rules).	The	lower	of	the	ratios	calculated	under	the	Basel	III	Advanced Rules	and	those	calculated	under	the	Standardized	Capital	Rules	are	the	binding regulatory	capital	requirements	for	the	firm.

The	Basel	III	Advanced	Rules,	Hybrid	Capital	Rules	and	Standardized	Capital Rules	are	discussed	in	more	detail	below.

Regulatory	Capital	and	Capital	Ratios.	The	Revised	Capital	Framework changed	the	definition	of	regulatory	capital	to	include	a	new	capital	measure called	Common	Equity	Tier	1	(CET1)	and	the	related	regulatory	capital	ratio	of CET1	to	RWAs	(CET1	ratio),	and	changed	the	definition	of	Tier	1	capital.	The Revised	Capital	Framework	also	increased	the	level	of	certain	minimum	risk- based	capital	and	leverage	ratios	applicable	to	the	firm.

The	 table	 below	 presents	 the	 minimum	 ratios	 applicable	 to	 the	 firm	 as	 of December	 2014	 and	 January	 2015.	 Failure	 to	 comply	 with	 these	 capital requirements	could	result	in	restrictions	being	imposed	by	the	firm's	regulators.

|  | December	2014<br>Minimum	Ratio | January	2015<br>Minimum	Ratio |
| :--- | :--- | :--- |
| CET1\tratio | 4.0% | 4.5% |
| Tier\t1\tcapital\tratio | 5.5% | 6.0% |
| Total\tcapital\tratio^\t1 | 8.0% | 8.0% |
| Tier\t1\tleverage\tratio\t^2 | 4.0% | 4.0% |

Certain	aspects	of	the	Revised	Capital	Framework's	requirements	phase	in	over time	(transitional	provisions).	These	include	increases	in	the	minimum	capital ratio	 requirements	 and	 the	 introduction	 of	 new	 capital	 buffers	 and	 certain deductions	 from	 regulatory	 capital	 (such	 as	 investments	 in	 nonconsolidated financial	institutions).	In	addition,	junior	subordinated	debt	issued	to	trusts	is being	phased	out	of	regulatory	capital.	The	minimum	CET1,	Tier	1	and	Total capital	ratios	applicable	to	the	firm	will	increase	as	the	transitional	provisions phase	in	and	new	capital	buffers	are	introduced.

Definition	of	Risk-Weighted	Assets.	As	of	December	2014,	RWAs	were calculated	 under	 both	 the	 Basel	 III	Advanced	 Rules	 and	 the	 Hybrid	 Capital Rules.	Under	both	the	Basel	III	Advanced	Rules	and	the	Hybrid	Capital	Rules, certain	amounts	not	required	to	be	deducted	from	CET1	under	the	transitional provisions	are	either	deducted	from	Tier	1	capital	or	are	risk	weighted.

The	primary	difference	between	the	Basel	III	Advanced	Rules	and	the	Hybrid Capital	 Rules	 is	 that	 the	 latter	 utilizes	 prescribed	 risk-weightings	 for	 credit RWAs	and	does	not	contemplate	the	use	of	internal	models	to	compute	exposure for	credit	risk	on	derivatives	and	securities	financing	transactions,	whereas	the Basel	III	Advanced	Rules	permit	the	use	of	such	models,	subject	to	supervisory approval.	In	addition,	RWAs	under	the	Hybrid	Capital	Rules	depend	largely	on the	type	of	counterparty	(e.g.,	whether	the	counterparty	is	a	sovereign,	bank, broker-dealer	 or	 other	 entity),	 rather	 than	 on	 internal	 assessments	 of	 each counterparty's	creditworthiness.	Furthermore,	the	Hybrid	Capital	Rules	do	not include	a	capital	requirement	for	operational	risk.

As	of	December	2013,	the	firm	calculated	RWAs	under	the	Prior	Capital	Rules.

# Credit	Risk

Credit	RWAs	are	calculated	based	upon	measures	of	exposure,	which	are	then risk	weighted.	The	exposure	amount	is	generally	based	on	the	following:

Ÿ	For	on-balance-sheet	assets,	the	carrying	value;	and

Ÿ	For	 off-balance-sheet	 exposures,	 including	 commitments	 and	 guarantees,	 a credit	equivalent	exposure	amount	is	calculated	based	on	the	notional	amount of	each	exposure	multiplied	by	a	credit	conversion	factor.

Counterparty	credit	risk	is	a	component	of	total	credit	risk,	and	includes	credit exposure	arising	from	derivatives,	securities	financing	transactions	and	eligible margin	loans.

Ÿ	For	 the	 Basel	 III	 Advanced	 Rules,	 the	 firm	 uses	 the	 Internal	 Models Methodology	 for	 the	 measurement	 of	 exposure	 on	 derivatives,	 securities financing	 transactions	 and	 eligible	 margin	 loans.	 The	 Revised	 Capital Framework	 requires	 that	 a	 bank	 holding	 company	 obtain	 prior	 written agreement	from	its	regulators	before	using	the	Internal	Models	Methodology; and

Ÿ	For	the	Hybrid	and	Prior	Capital	Rules,	the	exposure	amount	for	derivatives	is based	 on	 a	 combination	 of	 positive	 net	 exposure	 and	 a	 percentage	 of	 the notional	amount	for	each	trade,	and	includes	the	effect	of	counterparty	netting and	collateral,	as	applicable;	for	securities	financing	transactions	and	eligible margin	loans,	it	is	based	on	the	carrying	value.

All	exposures	are	then	assigned	a	risk	weight	computed	as	follows:

Ÿ	For	the	Basel	III	Advanced	Rules,	the	firm	has	been	given	permission	by	its supervisors	to	compute	risk	weights	for	certain	exposures	in	accordance	with the	 Advanced	 Internal	 Ratings-Based	 approach,	 which	 utilizes	 internal assessments	of	each	counterparty's	creditworthiness.	Key	inputs	to	the	risk weight	calculation	are	the	probability	of	default,	loss	given	default	and	the effective	 maturity.	 RWAs	 for	 securitization	 and	 equity	 exposures	 are calculated	using	specific	required	formula	approaches;	and

Ÿ	For	the	Hybrid	and	Prior	Capital	Rules,	a	standard	risk	weight	is	assigned depending	on,	among	other	things,	whether	the	counterparty	is	a	sovereign, bank	or	a	qualifying	securities	firm	or	other	entity	(and	if	collateral	is	held,	the risk	weight	may	depend	on	the	nature	of	the	collateral).

The	 Standardized	 Capital	 Rules	 utilize	 prescribed	 risk-weightings	 for	 credit RWAs	and	do	not	contemplate	the	use	of	internal	models	to	compute	exposure for	credit	risk	on	derivatives	and	securities	financing	transactions.	The	exposure measure	for	securities	financing	transactions	is	calculated	to	reflect	adjustments for	potential	price	volatility,	the	size	of	which	depends	on	factors	such	as	the type	of	and	maturity	of	the	security,	and	whether	it	is	denominated	in	the	same currency	as	the	other	side	of	the	financing	transaction.	In	addition,	RWAs	under the	Standardized	Capital	Rules	depend	largely	on	the	type	of	counterparty	(e.g., whether	 the	counterparty	 is	a	sovereign,	bank,	broker-dealer	or	other	entity), rather	than	on	internal	assessments	of	each	counterparty's	creditworthiness.

# Market	Risk

RWAs	for	market	risk	are	determined	using	measures	for	Value-at-Risk	(VaR), stressed	VaR,	incremental	risk	and	comprehensive	risk	based	on	internal	models, and	 a	 standardized	 measurement	 method	 for	 specific	 risk.	 The	 market	 risk regulatory	capital	rules	require	that	a	bank	holding	company	obtain	prior	written agreement	from	its	regulators	before	using	any	internal	model	to	calculate	its risk-based	capital	requirement.

Ÿ	VaR	is	the	potential	loss	in	value	of	inventory	positions,	as	well	as	certain other	 financial	 assets	 and	 financial	 liabilities,	 due	 to	 adverse	 market movements	over	a	defined	time	horizon	with	a	specified	confidence	level.	For both	risk	management	purposes	and	regulatory	capital	calculations	the	firm uses	 a	 single	 VaR	 model	 which	 captures	 risks	 including	 those	 related	 to interest	rates,	equity	prices,	currency	rates	and	commodity	prices.	However, VaR	used	for	regulatory	capital	requirements	(regulatory	VaR)	differs	from risk	management	VaR	due	to	different	time	horizons	and	confidence	levels (10-day and 99% for	 regulatory	 VaR	 vs.	 one-day	 and 95% for	 risk management	VaR),	as	well	as	differences	in	the	scope	of	positions	on	which VaR	is	calculated.	In	addition,	the	daily	trading	net	revenues	used	to	determine risk	 management	 VaR	 exceptions	 (i.e.,	 comparing	 the	 daily	 trading	 net revenues	to	the	VaR	measure	calculated	as	of	the	prior	business	day)	include intraday	 activity,	 whereas	 the	 Federal	 Reserve	 Board's	 regulatory	 capital regulations	require	that	intraday	activity	be	excluded	from	daily	trading	net revenues	 when	 calculating	 regulatory	 VaR	 exceptions.	 Intraday	 activity includes	bid/offer	net	revenues,	which	are	more	likely	than	not	to	be	positive. Under	these	regulations,	the	firm's	positional	losses	observed	on	a	single	day exceeded	its	99%	one-day	regulatory	VaR	on	three	occasions	during	2014. There	was	no	change	in	the	VaR	multiplier	used	to	calculate	Market	RWAs;

Ÿ	Stressed	VaR	 is	 the	potential	 loss in	value	of inventory	positions	during	a period	of	significant	market	stress;

Ÿ	Incremental	 risk	 is	 the	 potential	 loss	 in	 value	 of	 non-securitized	 inventory positions	 due	 to	 the	 default	 or	 credit	 migration	 of	 issuers	 of	 financial instruments	over	a	one-year	time	horizon;	and

Ÿ	Comprehensive	 risk	 is	 the	 potential	 loss	 in	 value,	 due to	 price risk and defaults,	within	the	firm's	credit	correlation	positions.

The	standardized	measurement	method	is	used	to	determine	RWAs	for	specific risk	on	certain	positions	by	applying	supervisory	defined	risk-weighting	factors to	such	positions	after	applicable	netting	is	performed.

RWAs	for	market	risk	under	the	Standardized	Capital	Rules	are	calculated	in	a manner	that	is	generally	consistent	with	the	RWAs	calculated	under	the	Basel	III Advanced	Rules.

# Operational	Risk

The	Basel	III	Advanced	Rules	include	a	capital	requirement	for	operational	risk. The	firm	has	been	given	permission	by	its	supervisors	to	compute	operational RWAs	 in	 accordance	 with	 the	 "Advanced	 Measurement	 Approach"	 of	 the Revised	Capital	Framework.	Operational	RWAs	are	therefore	calculated	based on	an	internal	risk-based	operational	risk	quantification	model	that	meets	 the requirements	for	the	"Advanced	Measurement	Approach."

The	 Standardized	 Capital	 Rules do not include a capital requirement for operational	risk.

# Consolidated	Regulatory	Capital	Ratios

December	 2014	 Capital	 Ratios	 and	 RWAs.	 The firm	 was	 required	 to calculate	ratios	under	both	the	Basel	III	Advanced	Rules	and	Hybrid	Capital Rules	as	of	December	2014,	in	both	cases	subject	to	transitional	provisions.	The ratios	 calculated	 under	 the	 Basel	 III	Advanced	 Rules	 presented	 in	 the	 table below	 were	 lower	 than	 those	 calculated	 under	 the	 Hybrid	 Capital	 Rules	 and therefore	were	the	binding	ratios	for	the	firm	as	of	December	2014.

Effective	on	January	1,	2015,	the	firm	was	required	to	calculate	ratios	under	both the	Basel	III	Advanced	Rules	and	Standardized	Capital	Rules.	The	firm's	ratios calculated	under	the	Standardized	Capital	Rules	as	of	December	2014	are	also presented	 in	 the	 table	 below,	 although	 the	 ratios	 were	 not	 binding	 until January	2015.

|  | As	of |
| :--- | :--- |
| $\tin\tmillions | December\t2014 |
| Common\tshareholders'\tequity | $\t\t73,597 |
| Deductions\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets,\tnet\tof\tdeferred\ntax\tliabilities | (2,787) |
| Deductions\tfor\tinvestments\tin\tnonconsolidated\tfinancial\tinstitutions | (953) |
| Other\tadjustments | (27) |
| Common\tEquity\tTier\t1 | 69,830 |
| Perpetual\tnon-cumulative\tpreferred\tstock | 9,200 |
| Junior\tsubordinated\tdebt\tissued\tto\ttrusts | 660 |
| Other\tadjustments | (1,257) |
| Tier\t1\tcapital | 78,433 |
| Qualifying\tsubordinated\tdebt | 11,894 |
| Junior\tsubordinated\tdebt\tissued\tto\ttrusts | 660 |
| Other\tadjustments | (9) |
| Tier\t2\tcapital\t^1 | 12,545 |
| Total\tcapital | $\t\t90,978 |
| Basel\tIII\tAdvanced |  |
| RWAs | $570,313 |
| CET1\tratio | 12.2% |
| Tier\t1\tcapital\tratio | 13.8% |
| Total\tcapital\tratio | 16.0% |
| Tier\t1\tleverage\tratio | 9.0% |
| Standardized |  |
| RWAs | $619,216 |
| CET1\tratio | 11.3% |
| Tier\t1\tcapital\tratio | 12.7% |
| Total\tcapital\tratio | 14.7% |

1.Tier	2	capital	under	the	Standardized	Capital	Rules	is	approximately	$300	million	higher	due to	the	allowance	for	losses	on	loans	and	lending	commitments.

Ÿ	The	deduction	for	goodwill	and	identifiable	intangible	assets,	net	of	deferred tax	liabilities,	represents	goodwill	of	$3.65	billion	and	identifiable	intangible assets	of	$103	million	(20%	of	$515	million),	net	of	associated	deferred	tax liabilities	of	$961	million.	The	remaining	80%	of	the	deduction	of	identifiable intangible	 assets	 will	 be	 phased	 in	 ratably	 per	 year	 from	 2015	 to	 2018. Identifiable	 intangible	 assets	 that	 are	 not	 deducted	 during	 the	 transitional period	are	risk	weighted.

Ÿ	The	 deduction	 for	 investments	 in	 nonconsolidated	 financial	 institutions represents	 the	 amount	 by	 which	 the	 firm's	 investments	 in	 the	 capital	 of nonconsolidated	financial	institutions	exceed	certain	prescribed	thresholds.	As of	December	2014,	20%	of	the	deduction	was	reflected	(calculated	based	on transitional	thresholds).	The	remaining	80%	will	be	phased	in	ratably	per	year from	2015	to	2018.	The	balance	that	is	not	deducted	during	the	transitional period	is	risk	weighted.

Ÿ	Other	 adjustments	 within	 CET1	 and	 Tier 1 capital	 primarily	 include accumulated	 other	 comprehensive	 loss,	 credit	 valuation	 adjustments	 on derivative	 liabilities,	 the	 overfunded	 portion	 of	 the	 firm's	 defined	 benefit pension	plan	obligation,	net	of	associated	deferred	tax	liabilities,	disallowed deferred	 tax	 assets	 and	 other	 required	 credit	 risk-based	 deductions.	As	 of December	2014,	20%	of	the	deductions	related	to	credit	valuation	adjustments on	derivative	liabilities,	the	overfunded	portion	of	the	firm's	defined	benefit pension	plan	obligation,	net	of	associated	deferred	tax	liabilities,	disallowed deferred	 tax	 assets	 and	 other	 required	 credit	 risk-based	 deductions	 were included	in	other	adjustments	within	CET1	and	80%	of	the	deductions	were included	in	other	adjustments	within	Tier	1	capital.	Most	of	the	deductions that	were	included	in	other	adjustments	within	Tier	1	capital	will	be	phased into	 CET1	 ratably	 per	 year	 from	 2015	 to	 2018.	 Other	 adjustments	 within Tier	1	capital	also	include	a	deduction	for	investments	in	the	preferred	equity of	nonconsolidated	financial	institutions.

Ÿ	Junior	subordinated	debt	 issued	 to	 trusts	 is	reflected	 in	both	Tier	1	capital (50%)	and	Tier	2	capital	(50%)	and	is	reduced	by	the	amount	of	trust	preferred securities	purchased	by	the	firm.	Junior	subordinated	debt	issued	to	trusts	will be	fully	phased	out	of	Tier	1	capital	by	2016,	and	then	also	from	Tier	2	capital by	 2022.	 See	 Note	 16	 for	 additional	 information	 about	 the	 firm's	 junior subordinated	debt	issued	to	trusts	and	trust	preferred	securities	purchased	by the	firm.

Ÿ	Qualifying	subordinated	debt	represents	subordinated	debt	issued	by	Group Inc.	with	an	original	term	to	maturity	of	five	years	or	greater.	The	outstanding amount	 of	 subordinated	 debt	 qualifying	 for	 Tier	 2	 capital	 is	 reduced,	 or discounted,	upon	reaching	a	remaining	maturity	of	five	years.	See	Note	16	for additional	information	about	the	firm's	subordinated	debt.

The	table	below	presents	the	changes	in	CET1,	Tier	1	capital	and	Tier	2	capital for	the	period	December	31,	2013	to	December	31,	2014.

|  |  |  |  |  |  |  |  |  | Period	Ended | Period	Ended |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions |  |  |  |  |  |  |  |  | December\t2014 | December\t2014 |
| Common\tEquity\tTier\t1 |  |  |  |  |  |  |  |  |  |  |
| Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 |  |  |  |  |  | $63,248 | $63,248 |
| Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital |  |  |
| Framework\t^1 | Framework\t^1 |  |  |  |  |  |  |  | 3,177 | 3,177 |
| Increase\tin\tcommon\tshareholders'\tequity | Increase\tin\tcommon\tshareholders'\tequity | Increase\tin\tcommon\tshareholders'\tequity | Increase\tin\tcommon\tshareholders'\tequity | Increase\tin\tcommon\tshareholders'\tequity | Increase\tin\tcommon\tshareholders'\tequity | Increase\tin\tcommon\tshareholders'\tequity | Increase\tin\tcommon\tshareholders'\tequity | Increase\tin\tcommon\tshareholders'\tequity | 2,330 | 2,330 |
| Change\tin\tdeduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets,\tnet\tof\ndeferred\ttax\tliabilities | Change\tin\tdeduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets,\tnet\tof\ndeferred\ttax\tliabilities | Change\tin\tdeduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets,\tnet\tof\ndeferred\ttax\tliabilities | Change\tin\tdeduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets,\tnet\tof\ndeferred\ttax\tliabilities | Change\tin\tdeduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets,\tnet\tof\ndeferred\ttax\tliabilities | Change\tin\tdeduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets,\tnet\tof\ndeferred\ttax\tliabilities | Change\tin\tdeduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets,\tnet\tof\ndeferred\ttax\tliabilities | Change\tin\tdeduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets,\tnet\tof\ndeferred\ttax\tliabilities | Change\tin\tdeduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets,\tnet\tof\ndeferred\ttax\tliabilities | 144 | 144 |
| Change\tin\tdeduction\tfor\tinvestments\tin\tnonconsolidated\tfinancial | Change\tin\tdeduction\tfor\tinvestments\tin\tnonconsolidated\tfinancial | Change\tin\tdeduction\tfor\tinvestments\tin\tnonconsolidated\tfinancial | Change\tin\tdeduction\tfor\tinvestments\tin\tnonconsolidated\tfinancial | Change\tin\tdeduction\tfor\tinvestments\tin\tnonconsolidated\tfinancial | Change\tin\tdeduction\tfor\tinvestments\tin\tnonconsolidated\tfinancial | Change\tin\tdeduction\tfor\tinvestments\tin\tnonconsolidated\tfinancial | Change\tin\tdeduction\tfor\tinvestments\tin\tnonconsolidated\tfinancial | Change\tin\tdeduction\tfor\tinvestments\tin\tnonconsolidated\tfinancial |  |  |
| institutions | institutions | institutions | institutions | institutions | institutions | institutions | institutions | institutions | 839 | 839 |
| Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments |  | 92 |
| Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 |  |  |  |  |  | $69,830 | $69,830 |
| Tier\t1\tcapital |  |  |  |  |  |  |  |  |  |  |
| Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 |  |  |  |  |  | $72,471 | $72,471 |
| Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\nFramework\t^1 | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\nFramework\t^1 | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\nFramework\t^1 | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\nFramework\t^1 | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\nFramework\t^1 | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\nFramework\t^1 | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\nFramework\t^1 | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\nFramework\t^1 | Change\tin\tCET1\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\nFramework\t^1 | 3,177 | 3,177 |
| Change\tin\tTier\t1\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t1\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t1\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t1\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t1\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t1\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t1\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t1\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t1\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital |  |  |
| Framework\t^2 | Framework\t^2 | Framework\t^2 | Framework\t^2 | Framework\t^2 | Framework\t^2 | Framework\t^2 | Framework\t^2 | Framework\t^2 | (443) | (443) |
| Other\tnet\tincrease\tin\tCET1 | Other\tnet\tincrease\tin\tCET1 | Other\tnet\tincrease\tin\tCET1 | Other\tnet\tincrease\tin\tCET1 | Other\tnet\tincrease\tin\tCET1 | Other\tnet\tincrease\tin\tCET1 | Other\tnet\tincrease\tin\tCET1 | Other\tnet\tincrease\tin\tCET1 | Other\tnet\tincrease\tin\tCET1 | 3,405 | 3,405 |
| Increase\tin\tperpetual\tnon-cumulative\tpreferred\tstock | Increase\tin\tperpetual\tnon-cumulative\tpreferred\tstock | Increase\tin\tperpetual\tnon-cumulative\tpreferred\tstock | Increase\tin\tperpetual\tnon-cumulative\tpreferred\tstock | Increase\tin\tperpetual\tnon-cumulative\tpreferred\tstock | Increase\tin\tperpetual\tnon-cumulative\tpreferred\tstock | Increase\tin\tperpetual\tnon-cumulative\tpreferred\tstock | Increase\tin\tperpetual\tnon-cumulative\tpreferred\tstock |  | 2,000 | 2,000 |
| Redesignation\tof\tjunior\tsubordinated\tdebt\tissued\tto\ttrusts\tand\tdecrease | Redesignation\tof\tjunior\tsubordinated\tdebt\tissued\tto\ttrusts\tand\tdecrease | Redesignation\tof\tjunior\tsubordinated\tdebt\tissued\tto\ttrusts\tand\tdecrease | Redesignation\tof\tjunior\tsubordinated\tdebt\tissued\tto\ttrusts\tand\tdecrease | Redesignation\tof\tjunior\tsubordinated\tdebt\tissued\tto\ttrusts\tand\tdecrease | Redesignation\tof\tjunior\tsubordinated\tdebt\tissued\tto\ttrusts\tand\tdecrease | Redesignation\tof\tjunior\tsubordinated\tdebt\tissued\tto\ttrusts\tand\tdecrease | Redesignation\tof\tjunior\tsubordinated\tdebt\tissued\tto\ttrusts\tand\tdecrease | Redesignation\tof\tjunior\tsubordinated\tdebt\tissued\tto\ttrusts\tand\tdecrease |  |  |
| related\tto\ttrust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm | related\tto\ttrust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm | related\tto\ttrust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm | related\tto\ttrust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm | related\tto\ttrust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm | related\tto\ttrust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm | related\tto\ttrust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm | related\tto\ttrust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm |  | (1,403) | (1,403) |
| Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | (774) | (774) |
| Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | 78,433 | 78,433 |
| Tier\t2\tcapital |  |  |  |  |  |  |  |  |  |  |
| Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | Balance,\tDecember\t31,\t2013 | 13,632 | 13,632 |
| Change\tin\tTier\t2\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t2\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t2\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t2\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t2\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t2\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t2\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t2\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital | Change\tin\tTier\t2\tcapital\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital |  |  |
| Framework\t^3 | Framework\t^3 | Framework\t^3 | Framework\t^3 | Framework\t^3 | Framework\t^3 | Framework\t^3 | Framework\t^3 | Framework\t^3 | (197) | (197) |
| Decrease\tin\tqualifying\tsubordinated\tdebt | Decrease\tin\tqualifying\tsubordinated\tdebt | Decrease\tin\tqualifying\tsubordinated\tdebt | Decrease\tin\tqualifying\tsubordinated\tdebt | Decrease\tin\tqualifying\tsubordinated\tdebt | Decrease\tin\tqualifying\tsubordinated\tdebt | Decrease\tin\tqualifying\tsubordinated\tdebt | Decrease\tin\tqualifying\tsubordinated\tdebt | Decrease\tin\tqualifying\tsubordinated\tdebt | (879) | (879) |
| Trust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm,\tnet\tof\tredesignation\tof | Trust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm,\tnet\tof\tredesignation\tof | Trust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm,\tnet\tof\tredesignation\tof | Trust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm,\tnet\tof\tredesignation\tof | Trust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm,\tnet\tof\tredesignation\tof | Trust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm,\tnet\tof\tredesignation\tof | Trust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm,\tnet\tof\tredesignation\tof | Trust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm,\tnet\tof\tredesignation\tof | Trust\tpreferred\tsecurities\tpurchased\tby\tthe\tfirm,\tnet\tof\tredesignation\tof |  |  |
| junior\tsubordinated\tdebt\tissued\tto\ttrusts | junior\tsubordinated\tdebt\tissued\tto\ttrusts | junior\tsubordinated\tdebt\tissued\tto\ttrusts | junior\tsubordinated\tdebt\tissued\tto\ttrusts | junior\tsubordinated\tdebt\tissued\tto\ttrusts | junior\tsubordinated\tdebt\tissued\tto\ttrusts | junior\tsubordinated\tdebt\tissued\tto\ttrusts | junior\tsubordinated\tdebt\tissued\tto\ttrusts | junior\tsubordinated\tdebt\tissued\tto\ttrusts | (27) | (27) |
| Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments | Change\tin\tother\tadjustments |  | 16 |
| Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 | Balance,\tDecember\t31,\t2014 |  |  |  |  |  | 12,545 | 12,545 |
| Total\tcapital | Total\tcapital | Total\tcapital | Total\tcapital | Total\tcapital | Total\tcapital | Total\tcapital | Total\tcapital | Total\tcapital | $90,978 | $90,978 |
| 1.Includes | $3.66 | billion | related | to | the | transition | to | the\t Revised\t Capital | Framework | on |

1.Includes $3.66 billion related to the transition to the	 Revised	 Capital Framework on January	1,	2014	as	well	as	$(479)	million	related	to	the	firm's	application	of	the	Basel	III Advanced	Rules	on	April	1,	2014.

2.Includes	 $(219)	 million related to the transition to the	 Revised	 Capital	 Framework	 on January	1,	2014	as	well	as	$(224)	million	related	to	the	firm's	application	of	the	Basel	III Advanced	Rules	on	April	1,	2014.

The	change	in	CET1	related	to	the	transition	to	the	Revised	Capital	Framework is	principally	related	to	the	change	in	treatment	of	equity	investments	in	certain nonconsolidated	entities.	Under	the	Prior	Capital	Rules,	such	investments	were treated	 as	 deductions.	 However,	 during the transition to the	 Revised	 Capital Framework,	only	a	portion	of	such	investments	that	exceed	certain	prescribed thresholds	 are treated	 as	 deductions from	 CET1	 and the remainder	 are risk weighted.

The table below presents the components of	 RWAs under the	 Basel III Advanced	Rules	and	Standardized	Capital	Rules	as	of	December	2014.

|  | As	of	December	2014 | As	of	December	2014 |
| :--- | :--- | :--- |
| $\tin\tmillions | Basel\tIII\nAdvanced | \tStandardized |
| Credit\tRWAs |  |  |
| Derivatives | $122,501 | $180,771 |
| Commitments,\tguarantees\tand\tloans | 95,209 | 89,783 |
| Securities\tfinancing\ttransactions\t^1 | 15,618 | 92,116 |
| Equity\tinvestments | 40,146 | 38,526 |
| Other\t^2 | 54,470 | 71,499 |
| Total\tCredit\tRWAs | 327,944 | 472,695 |
| Market\tRWAs |  |  |
| Regulatory\tVaR | 10,238 | 10,238 |
| Stressed\tVaR | 29,625 | 29,625 |
| Incremental\trisk | 16,950 | 16,950 |
| Comprehensive\trisk | 8,150 | 9,855 |
| Specific\trisk | 79,918 | 79,853 |
| Total\tMarket\tRWAs | 144,881 | 146,521 |
| Total\tOperational\tRWAs | 97,488 | — |
| Total\tRWAs | $570,313 | $619,216 |

1.Represents resale and repurchase agreements and securities borrowed and loaned transactions.

2.Includes	receivables,	other	assets,	and	cash	and	cash	equivalents.

The	table	below	presents	the	changes	in	RWAs	under	the	Basel	III	Advanced Rules	for	the	period	December	31,	2013	to	December	31,	2014,	and	reflects	the transition	to	the	Revised	Capital	Framework	from	the	Prior	Capital	Rules	on January	1,	2014.

|  | Period	Ended |
| :--- | :--- |
| $\tin\tmillions | December\t2014 |
| Risk-weighted\tassets |  |
| Total\tRWAs,\tDecember\t31,\t2013 | $433,226 |
| Credit\tRWAs |  |
| Change\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\tFramework\t^1 | 69,101 |
| Other\tchanges:\nDecrease\tin\tderivatives | (24,109) |
| Increase\tin\tcommitments,\tguarantees\tand\tloans | 18,208 |
| Decrease\tin\tsecurities\tfinancing\ttransactions | (2,782) |
| Decrease\tin\tequity\tinvestments | (2,728) |
| Increase\tin\tother | 2,007 |
| Change\tin\tCredit\tRWAs | 59,697 |
| Market\tRWAs |  |
| Change\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\tFramework | 1,626 |
| Decrease\tin\tregulatory\tVaR | (5,175) |
| Decrease\tin\tstressed\tVaR | (11,512) |
| Increase\tin\tincremental\trisk | 7,487 |
| Decrease\tin\tcomprehensive\trisk | (6,617) |
| Decrease\tin\tspecific\trisk | (5,907) |
| Change\tin\tMarket\tRWAs | (20,098) |
| Operational\tRWAs |  |
| Change\trelated\tto\tthe\ttransition\tto\tthe\tRevised\tCapital\tFramework | 88,938 |
| Increase\tin\toperational\trisk | 8,550 |
| Change\tin\tOperational\tRWAs | 97,488 |
| Total\tRWAs,\tDecember\t31,\t2014 | $570,313 |

1.Includes	 $26.67	 billion	 of	 RWA	 changes related to the transition to the	 Revised	 Capital Framework	on	January	1,	2014	and	$42.43	billion	of	changes	to	the	calculation	of	Credit RWAs	under	the	Basel	III	Advanced	Rules	related	to	the	firm's	application	of	the	Basel	III Advanced	Rules	on	April	1,	2014.

Credit	RWAs	as	of	December	2014	increased	by	$59.70	billion	compared	with December	 2013,	 primarily	 due	 to	 increased	 risk	 weightings	 related	 to counterparty	credit	risk	for	derivative	exposures	and	the	inclusion	of	RWAs	for equity	investments	in	certain	nonconsolidated	entities,	both	resulting	from	the transition	 to	 the	 Revised	 Capital	 Framework.	 Market	 RWAs	 as	 of December	2014	decreased	by	$20.10	billion	compared	with	December	2013, primarily	due	to	a	decrease	in	stressed	VaR,	reflecting	reduced	fixed	income	and equities	 exposures.	 Operational	 RWAs	 as	 of	 December	 2014	 increased	 by $97.49	billion	compared	with	December	2013,	substantially	all	of	which	was	due to	the	transition	to	the	Revised	Capital	Framework.

December	 2013	 Capital	 Ratios	 and	 RWAs. 	 The	 table	 below	 presents information	about	the	firm's	regulatory	ratios	as	of	December	2013	under	the Prior	Capital	Rules.

| $	in	millions | As	of<br>December	2013 |
| :--- | :--- |
| Common\tshareholders'\tequity | $\t\t71,267 |
| Perpetual\tnon-cumulative\tpreferred\tstock | 7,200 |
| Junior\tsubordinated\tdebt\tissued\tto\ttrusts | 2,063 |
| Deduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets | (4,376) |
| Deduction\tfor\tequity\tinvestments\tin\tcertain\tentities | (3,314) |
| Other\tadjustments | (369) |
| Tier\t1\tcapital | 72,471 |
| Qualifying\tsubordinated\tdebt | 12,773 |
| Junior\tsubordinated\tdebt\tissued\tto\ttrusts | 687 |
| Other\tadjustments | 172 |
| Tier\t2\tcapital | 13,632 |
| Total\tcapital | $\t\t86,103 |
| Credit\tRWAs | $268,247 |
| Market\tRWAs | 164,979 |
| Total\tRWAs | $433,226 |
| Tier\t1\tcapital\tratio | 16.7% |
| Total\tcapital\tratio | 19.9% |
| Tier\t1\tleverage\tratio | 8.1% |

Ÿ	Junior	subordinated	debt	 issued	 to	 trusts	 is	reflected	 in	both	Tier	1	capital (75%)	and	Tier	2	capital	(25%).	See	Note	16	for	additional	information	about the	firm's	junior	subordinated	debt	issued	to	trusts.

Ÿ	The	 deduction	 for	 goodwill	 and	 identifiable	 intangible	 assets	 includes goodwill	of	$3.71	billion	and	identifiable	intangible	assets	of	$671	million.

Ÿ	Other	adjustments	within	Tier	1	capital	primarily	include	disallowed	deferred tax	assets	and	the	overfunded	portion	of	the	firm's	defined	benefit	pension plan	obligation,	net	of	associated	deferred	tax	liabilities.

The	table	below	presents	the	changes	in	Tier	1	capital	and	Tier	2	capital	for	the period	ended	December	2013	under	the	Prior	Capital	Rules.

| $	in	millions | Period	Ended<br>December	2013 |
| :--- | :--- |
| Tier\t1\tcapital |  |
| Balance,\tDecember\t31,\t2012 | $66,977 |
| Increase\tin\tcommon\tshareholders'\tequity | 1,751 |
| Increase\tin\tperpetual\tnon-cumulative\tpreferred\tstock | 1,000 |
| Redesignation\tof\tjunior\tsubordinated\tdebt\tissued\tto\ttrusts | (687) |
| Change\tin\tgoodwill\tand\tidentifiable\tintangible\tassets | 723 |
| Change\tin\tequity\tinvestments\tin\tcertain\tentities | 1,491 |
| Change\tin\tother\tadjustments | 1,216 |
| Balance,\tDecember\t31,\t2013 | 72,471 |
| Tier\t2\tcapital |  |
| Balance,\tDecember\t31,\t2012 | 13,429 |
| Decrease\tin\tqualifying\tsubordinated\tdebt | (569) |
| Redesignation\tof\tjunior\tsubordinated\tdebt\tissued\tto\ttrusts | 687 |
| Change\tin\tother\tadjustments | 85 |
| Balance,\tDecember\t31,\t2013 | 13,632 |
| Total\tcapital | $86,103 |

The	table	below	presents	the	components	of	RWAs	as	of	December	2013	under the	Prior	Capital	Rules.

|  | As	of |
| :--- | :--- |
| $\tin\tmillions | December\t2013 |
| Credit\tRWAs |  |
| Derivatives | $\t\t94,753 |
| Commitments,\tguarantees\tand\tloans | 78,997 |
| Securities\tfinancing\ttransactions\t^1 | 30,010 |
| Equity\tinvestments | 3,673 |
| Other\t^2 | 60,814 |
| Total\tCredit\tRWAs | 268,247 |
| Market\tRWAs |  |
| Regulatory\tVaR | 13,425 |
| Stressed\tVaR | 38,250 |
| Incremental\trisk | 9,463 |
| Comprehensive\trisk | 18,150 |
| Specific\trisk | 85,691 |
| Total\tMarket\tRWAs | 164,979 |
| Total\tRWAs | $433,226 |

1.Represents resale and repurchase agreements and securities borrowed and loaned transactions. 2.Includes	receivables,	other	assets,	and	cash	and	cash	equivalents.

The	 table	 below	 presents	 the	 changes	 in RWAs for the period ended December	31,	2013	under	the	Prior	Capital	Rules.

Credit	RWAs	as	of	December	2013	decreased	$19.28	billion	compared	with December	2012,	primarily	due	to	a	decrease	in	securities	financing	exposure. Market	RWAs	as	of	December	2013	increased	by	$52.58	billion	compared	with December	 2012,	 reflecting	 the	 impact	 of	 the	 revised	 market	 risk	 regulatory capital	requirements,	which	became	effective	on	January	1,	2013,	partially	offset by,	among	other	things,	a	decrease	in	specific	risk	due	to	a	decrease	in	inventory.

# Bank	Subsidiaries

Regulatory	Capital	Ratios.	 GS	 Bank	 USA,	 an	 FDIC-insured,	 New	York State-chartered	bank	and	a	member	of	the	Federal	Reserve	System,	is	supervised and	regulated	by	 the	Federal	Reserve	Board,	 the	FDIC,	 the	New	York	State Department	 of	 Financial	 Services	 and	 the	 Consumer	 Financial	 Protection Bureau,	and	is	subject	to	minimum	capital	requirements	(described	below)	that are	 calculated	 in	 a	 manner	 similar	 to	 those	 applicable	 to	 bank	 holding companies.	For	purposes	of	assessing	the	adequacy	of	its	capital,	GS	Bank	USA computes	its	capital	ratios	in	accordance	with	the	regulatory	capital	requirements applicable	to	state	member	banks.	Those	requirements	are	based	on	the	Revised Capital	Framework	described	above,	with	changes	to	the	definition	of	regulatory capital	and	capital	ratios	effective	from	January	1,	2014.	GS	Bank	USA	was notified	in	the	first	quarter	of	2014	that	it	had	completed	a	"parallel	run"	to	the satisfaction	of	the	Federal	Reserve	Board,	as	required	under	the	Revised	Capital Framework.	 As	 such,	 additional	 changes	 in	 GS	 Bank	 USA's	 capital requirements,	including	changes	to	RWAs,	became	effective	on	April	1,	2014. GS	Bank	USA	is	an	Advanced	approach	banking	organization	under	the	Revised Capital	 Framework.	 Under	 the	 Revised	 Capital	 Framework,	 as	 of January	1,	2014,	GS	Bank	USA	became	subject	to	a	new	minimum	CET1	ratio requirement	of	4.0%.	As	of	January	2015,	the	minimum	CET1	ratio	for	GS	Bank USA	increased	from	4.0%	to	4.5%.

Under	the	regulatory	framework	for	prompt	corrective	action	applicable	to	GS Bank	USA	as	of	December	2014,	in	order	to	meet	the	quantitative	requirements for	being	a	"well-capitalized"	depository	institution,	GS	Bank	USA	was	required to	maintain	a	Tier	1	capital	ratio	of	at	least	6.0%,	a	Total	capital	ratio	of	at	least 10.0%	and	a	Tier	1	leverage	ratio	of	at	least	5.0%.	As	of	January	1,	2015,	the Revised	Capital	Framework	changed	the	standards	for	"well-capitalized"	status under	prompt	corrective	action	regulations	by,	among	other	things,	introducing	a CET1	 ratio	 requirement	 of 6.5% and	 increasing	 the	 Tier 1 capital	 ratio requirement	from	6.0%	to	8.0%.	The	Total	capital	ratio	and	Tier	1	leverage	ratio requirements	remain	at	10.0%	and	5.0%,	respectively.

As	 noted	 in	 the	 tables	 below,	 GS	 Bank	 USA	 was	 in	 compliance	 with	 these minimum	capital	requirements	as	of	December	2014	and	December	2013.	GS Bank	USA's	capital	levels	and	prompt	corrective	action	classification	are	also subject	to	qualitative	judgments	by	the	regulators	about	components	of	capital, risk	 weightings	 and	 other	 factors.	 Failure	 to	 comply	 with	 these	 capital requirements	 could	 result	 in	 restrictions	 being	 imposed	 by	 GS	 Bank	 USA's regulators.

Similar	to	the	firm,	GS	Bank	USA	is	required	to	calculate	ratios	under	both	the Basel	III	Advanced	Rules	and	Hybrid	Capital	Rules	as	of	December	2014,	in both	 cases	 subject	 to	 transitional	 provisions.	 The	 ratios	 calculated	 under	 the Hybrid	 Capital	 Rules	 presented	 in	 the	 table	 below	 were	 lower	 than	 those calculated	under	the	Basel	III	Advanced	Rules,	and	therefore	were	the	binding ratios	for	GS	Bank	USA	as	of	December	2014.

As	a	result	of	the	changes	in	the	applicable	capital	framework	in	2014,	GS	Bank USA's	capital	ratios	as	of	December	2014	and	December	2013	were	calculated on	a	different	basis	and,	accordingly,	are	not	comparable.

Effective	on	January	1,	2015,	GS	Bank	USA	was	required	to	calculate	ratios under	both	the	Basel	III	Advanced	Rules	and	Standardized	Capital	Rules.	GS Bank	 USA's	 ratios	 calculated	 under	 the	 Standardized	 Capital	 Rules	 as	 of December	2014	are	also	presented	in	the	table	below,	although	the	ratios	were not	binding	until	January	2015.

|  | As	of |
| :--- | :--- |
| $\tin\tmillions | December\t2014 |
| Common\tEquity\tTier\t1 | $\t\t21,293 |
| Tier\t1\tcapital | $\t\t21,293 |
| Tier\t2\tcapital | $\t\t\t\t2,182 |
| Total\tcapital | $\t\t23,475 |
| Hybrid\tRWAs | $149,963 |
| CET1\tratio | 14.2% |
| Tier\t1\tcapital\tratio | 14.2% |
| Total\tcapital\tratio | 15.7% |
| Tier\t1\tleverage\tratio | 17.3% |
| Standardized\tRWAs | $200,605 |
| CET1\tratio | 10.6% |
| Tier\t1\tcapital\tratio | 10.6% |
| Total\tcapital\tratio | 11.7% |

The	table	below	presents	information	as	of	December	2013	regarding	GS	Bank USA's	regulatory	ratios	under	the	Prior	Capital	Rules.

|  | As	of |
| :--- | :--- |
| $\tin\tmillions | December\t2013 |
| Tier\t1\tcapital | $\t\t20,086 |
| Tier\t2\tcapital | $\t\t\t\t\t\t\t116 |
| Total\tcapital | $\t\t20,202 |
| Risk-weighted\tassets | $134,935 |
| Tier\t1\tcapital\tratio | 14.9% |
| Total\tcapital\tratio | 15.0% |
| Tier\t1\tleverage\tratio | 16.9% |

The	firm's	principal	non-U.S.	bank	subsidiary,	GSIB,	is	a	wholly-owned	credit institution,	 regulated	 by	 the	 Prudential	 Regulation	 Authority	 (PRA)	 and	 the Financial	 Conduct	 Authority	 (FCA)	 and	 is	 subject	 to	 minimum	 capital requirements.	 As	 of	 December	 2014	 and	 December	 2013,	 GSIB	 was	 in compliance	with	all	regulatory	capital	requirements.

Other.	The	deposits	of	GS	Bank	USA	are	insured	by	the	FDIC	to	the	extent provided	 by	 law.	 The	 Federal	 Reserve	 Board	 requires	 that	 GS	 Bank	 USA maintain	cash	reserves	with	the	Federal	Reserve	Bank	of	New	York.	The	amount deposited	by	GS	Bank	USA	held	at	the	Federal	Reserve	Bank	of	New	York	was $38.68	billion	and	$50.39	billion	as	of	December	2014	and	December	2013, respectively,	which	exceeded	required	reserve	amounts	by	$38.57	billion	and $50.29	billion	as	of	December	2014	and	December	2013,	respectively.

# Broker-Dealer	Subsidiaries

# U.S.	 Regulated	 Broker-Dealer	 Subsidiaries.	The	 firm's	 U.S.	 regulated

broker-dealer	subsidiaries	include	GS&Co.	and	GSEC.	GS&Co.	and	GSEC	are registered	 U.S.	 broker-dealers	 and	 futures	 commission	 merchants,	 and	 are subject	to	regulatory	capital	requirements,	including	those	imposed	by	the	SEC, the	 U.S.	 Commodity	 Futures	 Trading	 Commission	 (CFTC),	 the	 Chicago Mercantile	 Exchange,	 the	 Financial	 Industry	 Regulatory	 Authority,	 Inc. (FINRA)	and	 the	National	Futures	Association.	Rule	15c3-1	of	 the	SEC	and Rule	1.17	of	the	CFTC	specify	uniform	minimum	net	capital	requirements,	as defined,	for	their	registrants,	and	also	effectively	require	that	a	significant	part	of the	registrants'	assets	be	kept	in	relatively	liquid	form.	GS&Co.	and	GSEC	have elected	to	compute	their	minimum	capital	requirements	in	accordance	with	the "Alternative	Net	Capital	Requirement"	as	permitted	by	Rule	15c3-1.

In	addition	to	its	alternative	minimum	net	capital	requirements,	GS&Co.	is	also required	to	hold	tentative	net	capital	in	excess	of	$1	billion	and	net	capital	in excess	of	$500	million	in	accordance	with	the	market	and	credit	risk	standards	of Appendix	E	of	Rule	15c3-1.	GS&Co.	is	also	required	to	notify	the	SEC	in	the event	that	its	tentative	net	capital	is	less	than	$5	billion.	As	of	December	2014 and	December	2013,	GS&Co.	had	tentative	net	capital	and	net	capital	in	excess of	both	the	minimum	and	the	notification	requirements.

Non-U.S.	 Regulated	 Broker-Dealer	 Subsidiaries.	The firm's	 principal non-U.S.	 regulated	 broker-dealer	 subsidiaries	 include	 Goldman	 Sachs International	 (GSI)	 and	 Goldman	 Sachs	 Japan	 Co.,	 Ltd.	 (GSJCL).	 GSI,	 the firm's	 regulated	 U.K.	 broker-dealer,	 is	 regulated	 by	 the	 PRA	 and	 the	 FCA. GSJCL,	 the	 firm's	 Japanese	 broker-dealer,	 is	 regulated	 by	 Japan's	 Financial Services	Agency.	These	and	certain	other	non-U.S.	subsidiaries	of	the	firm	are also	subject	to	capital	adequacy	requirements	promulgated	by	authorities	of	the countries	 in	which	 they	operate.	As	of	December	2014	and	December	2013, these	 subsidiaries	 were	 in	 compliance	 with	 their	 local	 capital	 adequacy requirements.

# Restrictions	on	Payments

Group	Inc.'s	ability	to	withdraw	capital	from	its	regulated	subsidiaries	is	limited by	minimum	equity	capital	requirements	applicable	to	those	subsidiaries,	as	well as	by	provisions	of	applicable	law	and	regulations	that	limit	the	ability	of	those subsidiaries	to	declare	and	pay	dividends	without	prior	regulatory	approval	even if	 the	 relevant	 subsidiary	 would	 satisfy	 the	 equity	 capital	 requirements applicable	to	it	after	giving	effect	to	the	dividend.	As	of	December	2014	and December	 2013,	 Group	 Inc.	 was	 required	 to	 maintain $33.62 billion	 and $31.20 billion,	 respectively,	 of	 minimum	 equity	 capital	 in	 its	 regulated subsidiaries	in	order	to	satisfy	the	regulatory	requirements	of	such	subsidiaries. In	 addition	 to	 statutory	 limitations	 on	 the	 payment	 of	 dividends,	 the	 Federal Reserve	 Board,	 the	 FDIC	 and	 the	 New	York	 State	 Department	 of	 Financial Services	have	authority	to	prohibit	or	to	limit	the	payment	of	dividends	by	the banking	 organizations	 they	 supervise	 (including	 GS	 Bank	 USA)	 if,	 in	 the relevant	regulator's	opinion,	payment	of	a	dividend	would	constitute	an	unsafe or	 unsound	 practice	 in	 the	 light	 of	 the	 financial	 condition	 of	 the	 banking organization.	 Similar	 restrictions	 are	 imposed	 by	 regulators	 in	 jurisdictions outside	of	the	U.S.

# Earnings	Per	Common	Share

Basic	earnings	per	common	share	(EPS)	is	calculated	by	dividing	net	earnings applicable	to	common	shareholders	by	the	weighted	average	number	of	common shares	 outstanding.	 Common	 shares	 outstanding	 includes	 common	 stock	 and RSUs	for	which	no	future	service	is	required	as	a	condition	to	the	delivery	of	the underlying	common	stock.	Diluted	EPS	includes	the	determinants	of	basic	EPS and,	in	addition,	reflects	the	dilutive	effect	of	the	common	stock	deliverable	for stock	warrants	and	options	and	for	RSUs	for	which	future	service	is	required	as	a condition	to	the	delivery	of	the	underlying	common	stock.

The	table	below	presents	the	computations	of	basic	and	diluted	EPS.

| in	millions,	except	per	share	amounts<br>Numerator	for	basic	and	diluted	EPS	—	net	earnings<br>applicable	to	common	shareholders | 2014<br>		$8,077 | Year	Ended	December<br>2013<br>	$7,726 | 2012<br>	$7,292 |
| :--- | :--- | :--- | :--- |
| Denominator\tfor\tbasic\tEPS\t—\tweighted\taverage\tnumber\nof\tcommon\tshares | 458.9 | 471.3 | 496.2 |
| Effect\tof\tdilutive\tsecurities: |  |  |  |
| RSUs | 6.1 | 7.2 | 11.3 |
| Stock\toptions\tand\twarrants | 8.2 | 21.1 | 8.6 |
| Dilutive\tpotential\tcommon\tshares | 14.3 | 28.3 | 19.9 |
| Denominator\tfor\tdiluted\tEPS\t—\tweighted\taverage |  |  |  |
| number\tof\tcommon\tshares\tand\tdilutive\tpotential |  |  |  |
| common\tshares | 473.2 | 499.6 | 516.1 |
| Basic\tEPS | \t\t$17.55 | \t$16.34 | \t$14.63 |
| Diluted\tEPS | 17.07 | 15.46 | 14.13 |

In	the	table	above,	unvested	share-based	awards	that	have	non-forfeitable	rights to	dividends	or	dividend	equivalents	are	treated	as	a	separate	class	of	securities in	calculating	EPS.	The	impact	of	applying	this	methodology	was	a	reduction	in basic	EPS	of	$0.05	for	both	2014	and	2013,	and	$0.07	for	2012.

The	diluted	EPS	computations	 in	 the	 table	above	do	not	 include	antidilutive RSUs	and	common	shares	underlying	antidilutive	stock	options	and	warrants	of 6.0	million	for	both	2014	and	2013,	and	52.4	million	for	2012.

# Transactions	with	Affiliated	Funds

The	firm	has	formed	numerous	nonconsolidated	 investment	funds	with	 third- party	investors.	As	the	firm	generally	acts	as	the	investment	manager	for	these funds,	it	is	entitled	to	receive	management	fees	and,	in	certain	cases,	advisory fees	or	incentive	fees	from	these	funds.	Additionally,	the	firm	invests	alongside the	third-party	investors	in	certain	funds.

The	tables	below	present	fees	earned	from	affiliated	funds,	fees	receivable	from affiliated	 funds	 and	 the	 aggregate	 carrying	 value	 of	 the	 firm's	 interests	 in affiliated	funds.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Fees\treceivable\tfrom\tfunds | \t\t$\t\t\t724 | \t$\t\t\t\t\t817 |
| Aggregate\tcarrying\tvalue\tof\tinterests\tin\tfunds\t^1 | 9,099 | 13,124 |

1.The	decrease	from	December	2013	to	December	2014	primarily	reflects	both	cash	and	in- kind	distributions	received	by	the	firm.

As	of	December	2014	and	December	2013,	the	firm	had	outstanding	guarantees on	 behalf	 of	 its	 funds	 of	 $304	 million	 and	 $147	 million,	 respectively.	 The amounts	 as	 of	 December	 2014	 and	 December	 2013	 primarily	 relate	 to	 a guarantee	that	the	firm	has	voluntarily	provided	in	connection	with	a	financing agreement	with	a	third-party	lender	executed	by	one	of	the	firm's	real	estate funds	 that	 is	 not	 covered	 by	 the	 Volcker	 Rule.	 As	 of	 December	 2014	 and December	2013,	the	firm	had	no	outstanding	loans	or	commitments	to	extend credit	to	affiliated	funds.

The	 Volcker	 Rule	 will	 restrict	 the	 firm	 from	 providing	 financial	 support	 to covered	funds	(as	defined	in	the	rule)	after	the	expiration	of	the	transition	period. As	a	general	matter,	in	the	ordinary	course	of	business,	the	firm	does	not	expect to	provide	additional	voluntary	financial	support	to	any	covered	funds	but	may choose	to	do	so	with	respect	to	funds	that	are	not	subject	to	the	Volcker	Rule; however,	in	the	event	that	such	support	is	provided,	the	amount	is	not	expected to	be	material.

In	addition,	in	the	ordinary	course	of	business,	the	firm	may	also	engage	in	other activities	with	 its	affiliated	funds	 including,	among	others,	securities	 lending, trade	execution,	market	making,	custody,	and	acquisition	and	bridge	financing. See	Note	18	for	the	firm's	investment	commitments	related	to	these	funds.

# Interest	Income	and	Interest	Expense

Interest	is	recorded	over	the	life	of	the	instrument	on	an	accrual	basis	based	on contractual	interest	rates.	The	table	below	presents	the	firm's	sources	of	interest income	and	interest	expense.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Interest\tincome |  |  |  |
| Deposits\twith\tbanks | \t$\t\t\t164 | \t$\t\t\t\t\t186 | \t$\t\t\t\t\t156 |
| Securities\tborrowed,\tsecurities\tpurchased\tunder\nagreements\tto\tresell\tand\tfederal\tfunds\tsold\t^1 | (81) | 43 | (77) |
| Financial\tinstruments\towned,\tat\tfair\tvalue | 7,452 | 8,159 | 9,817 |
| Loans\treceivable | 708 | 296 | 150 |
| Other\tinterest\t^2 | 1,361 | 1,376 | 1,335 |
| Total\tinterest\tincome | 9,604 | 10,060 | 11,381 |
| Interest\texpense |  |  |  |
| Deposits | 333 | 387 | 399 |
| Securities\tloaned\tand\tsecurities\tsold\tunder |  |  |  |
| agreements\tto\trepurchase | 431 | 576 | 822 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased,\tat\nfair\tvalue | 1,741 | 2,054 | 2,438 |
| Short-term\tborrowings\t^3 | 447 | 394 | 581 |
| Long-term\tborrowings\t^3 | 3,460 | 3,752 | 3,736 |
| Other\tinterest\t^4 | (855) | (495) | (475) |
| Total\tinterest\texpense | 5,557 | 6,668 | 7,501 |
| Net\tinterest\tincome | \t$4,047 | \t$\t\t3,392 | \t$\t\t3,880 |

1.Includes	rebates	paid	and	interest	income	on	securities	borrowed.

2.Includes	interest	income	on	customer	debit	balances	and	other	interest-earning	assets.

3.Includes	interest	on	unsecured	borrowings	and	other	secured	financings.

4.Includes rebates	 received	 on	 other	 interest-bearing	 liabilities	 and interest expense on customer	credit	balances.

# Income	Taxes

# Provision	for	Income	Taxes

Income	taxes	are	provided	for	using	the	asset	and	liability	method	under	which deferred tax assets and liabilities are recognized for temporary	 differences between	the	financial	reporting	and	tax	bases	of	assets	and	liabilities.	The	firm reports	interest	expense	related	to	income	tax	matters	in	"Provision	for	taxes" and	income	tax	penalties	in	"Other	expenses."

The	tables	below	present	the	components	of	the	provision/(benefit)	for	taxes	and a reconciliation	 of the	 U.S. federal statutory income tax rate to the firm's effective	income	tax	rate.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
|  | 2014 | 2013 | 2012 |
| U.S.\tfederal\tstatutory\tincome\ttax\trate | \t\t 35.0% | \t 35.0% | \t 35.0% |
|  | 3.2% | 4.1% | 3.8% |
| Tax\tcredits | (1.1)% | (1.0)% | (1.0)% |
| Non-U.S.\toperations\t^1 | (5.8)% | (5.6)% | (4.8)% |
| Tax-exempt\tincome,\tincluding\tdividends | (0.3)% | (0.5)% | (0.5)% |
| Other | 0.4% | (0.5)% | 0.8% |
| Effective\tincome\ttax\trate | \t\t 31.4% | \t 31.5% | \t 33.3% |

1.Includes	the	impact	of	permanently	reinvested	earnings.

# Deferred	Income	Taxes

Deferred	 income	 taxes	 reflect	 the	 net	 tax	 effects	 of	 temporary	 differences between	 the	 financial	 reporting	 and	 tax	 bases	 of	 assets	 and	 liabilities.	These temporary	differences	result	in	taxable	or	deductible	amounts	in	future	years	and are	 measured	 using	 the	 tax	 rates	 and	 laws	 that	 will	 be	 in	 effect	 when	 such differences	 are	 expected	 to	 reverse.	 Valuation	 allowances	 are	 established	 to reduce	 deferred	 tax	 assets	 to	 the	 amount	 that	 more	 likely	 than	 not	 will	 be realized	 and	 primarily	 relate	 to	 the	 ability	 to	 utilize	 losses	 in	 various	 tax jurisdictions.	Tax	assets	and	liabilities	are	presented	as	a	component	of	"Other assets"	and	"Other	liabilities	and	accrued	expenses,"	respectively.

The	table	below	presents	the	significant	components	of	deferred	tax	assets	and liabilities,	excluding	the	impact	of	netting	within	tax	jurisdictions.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| Deferred\ttax\tassets |  |  |
| Compensation\tand\tbenefits | \t$3,032 | \t$2,740 |
| Unrealized\tlosses | — | 309 |
| ASC\t740\tasset\trelated\tto\tunrecognized\ttax\tbenefits | 172 | 475 |
| Non-U.S.\toperations | 1,418 | 1,318 |
| Net\toperating\tlosses | 336 | 232 |
| Occupancy-related | 78 | 108 |
| Other\tcomprehensive\tincome-related | 277 | 69 |
| Other,\tnet | 545 | 729 |
| Subtotal | 5,858 | 5,980 |
| Valuation\tallowance | (64) | (183) |
| Total\tdeferred\ttax\tassets | \t$5,794 | \t$5,797 |
| Depreciation\tand\tamortization | 1,176 | 1,269 |
| Unrealized\tgains | 406 | — |
| Other\tcomprehensive\tincome-related | — | 68 |
| Total\tdeferred\ttax\tliabilities | \t$1,582 | \t$1,337 |

The	firm	has	recorded	deferred	tax	assets	of	$336	million	and	$232	million	as	of December	 2014	 and	 December	 2013,	 respectively,	 in	 connection	 with	 U.S. federal,	state	and	local	and	foreign	net	operating	loss	carryforwards.	The	firm also	 recorded	 a	 valuation	 allowance	 of	 $26	 million	 and	 $45	 million	 as	 of December	2014	and	December	2013,	respectively,	related	to	these	net	operating loss	carryforwards.

As	 of	 December	 2014,	 the	 U.S.	 federal	 and	 foreign	 net	 operating	 loss carryforwards	were	$108	million	and	$1.2	billion,	respectively.	If	not	utilized, the	U.S.	federal	net	operating	loss	carryforward	will	begin	to	expire	in	2015.	The foreign	 net	 operating	 loss	 carryforwards	 can	 be	 carried	 forward	 indefinitely. State	and	local	net	operating	loss	carryforwards	of	$790	million	will	begin	to expire	 in	 2015.	 If	 these	 carryforwards	 expire,	 they	 will	 not	 have	 a	 material impact	on	the	firm's	results	of	operations.	The	firm	had	no	foreign	tax	credit carryforwards	 and	 no	 related	 net	 deferred	 income	 tax	 assets	 as	 of December	2014	and	December	2013.

The	firm	had	no	capital	loss	carryforwards	and	no	related	net	deferred	income tax	assets	as	of	December	2014	and	December	2013.

The	valuation	allowance	decreased	by	$119	million	during	2014	and	increased by	 $15	 million	 during	 2013.	 The	 decrease	 in	 2014	 was	 primarily	 due	 to	 a decrease	in	deferred	tax	assets	from	which	the	firm	does	not	expect	to	realize any	benefit.	The	increase	in	2013	was	primarily	due	to	an	increase	in	deferred tax	assets	from	which	the	firm	does	not	expect	to	realize	any	benefit.

The	firm	permanently	reinvests	eligible	earnings	of	certain	foreign	subsidiaries and,	accordingly,	does	not	accrue	any	U.S.	income	taxes	that	would	arise	if	such earnings	were	repatriated.	As	of	December	2014	and	December	2013,	this	policy resulted	 in	 an	 unrecognized	 net	 deferred	 tax	 liability	 of	 $4.66	 billion	 and $4.06	billion,	respectively,	attributable	to	reinvested	earnings	of	$24.88	billion and	$22.54	billion,	respectively.

# Unrecognized	Tax	Benefits

The	firm	recognizes	tax	positions	in	the	financial	statements	only	when	it	is	more likely	than	not	that	the	position	will	be	sustained	on	examination	by	the	relevant taxing	authority	based	on	the	technical	merits	of	the	position.	A	position	that meets	this	standard	is	measured	at	the	largest	amount	of	benefit	that	will	more likely	than	not	be	realized	on	settlement.	A	liability	is	established	for	differences between	positions	taken	in	a	tax	return	and	amounts	recognized	in	the	financial statements.

As	 of	 December	 2014	 and	 December	 2013,	 the	 accrued	 liability	 for	 interest expense	related	to	income	tax	matters	and	income	tax	penalties	was	$101	million and	$410	million,	respectively.	The	firm	recognized	interest	expense	and	income tax	penalties	of	$45	million,	$53	million	and	$95	million	for	2014,	2013	and 2012,	respectively.	It	is	reasonably	possible	that	unrecognized	tax	benefits	could change	significantly	during	 the	 twelve	months	subsequent	 to	December	2014 due	to	potential	audit	settlements.	However,	at	 this	 time	 it	 is	not	possible	 to estimate	any	potential	change.

The	 table	 below	 presents	 the	 changes	 in	 the	 liability	 for	 unrecognized	 tax benefits.	This	liability	is	included	in	"Other	liabilities	and	accrued	expenses." See	Note	17	for	further	information.

|  |  | As	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Balance,\tbeginning\tof\tyear | \t$\t1,765 | \t$2,237 | \t$1,887 |
| Increases\tbased\ton\ttax\tpositions\trelated\tto\tthe\tcurrent\nyear | 204 | 144 | 190 |
| Increases\tbased\ton\ttax\tpositions\trelated\tto\tprior\tyears | 263 | 149 | 336 |
| Decreases\tbased\ton\ttax\tpositions\trelated\tto\tprior\tyears | (241) | (471) | (109) |
| Decreases\trelated\tto\tsettlements | (1,112) | (299) | (35) |
| Acquisitions/(dispositions) | — | — | (47) |
| Exchange\trate\tfluctuations | (8) | 5 | 15 |
| Balance,\tend\tof\tyear | \t$\t\t\t\t871 | \t$1,765 | \t$2,237 |
| Related\tdeferred\tincome\ttax\tasset\t^1 | 172 | 475 | 685 |
| Net\tunrecognized\ttax\tbenefit\t^2 | \t$\t\t\t\t699 | \t$1,290 | \t$1,552 |

1.Included	in	"Other	assets."	See	Note	13.

2.If	recognized,	the	net	tax	benefit	would	reduce	the	firm's	effective	income	tax	rate.

# Regulatory	Tax	Examinations

The	firm	is	subject	to	examination	by	the	U.S.	Internal	Revenue	Service	(IRS) and	 other	 taxing	 authorities	 in	 jurisdictions	 where	 the	 firm	 has	 significant business	operations,	such	as	the	United	Kingdom,	Japan,	Hong	Kong,	Korea	and various	states,	such	as	New	York.	The	 tax	years	under	examination	vary	by jurisdiction.	 The	 firm	 does	 not	 expect	 completion	 of	 these	 audits	 to	 have	 a material	 impact	 on	 the	 firm's	 financial	 condition	 but	 it	 may	 be	 material	 to operating	results	for	a	particular	period,	depending,	 in	part,	on	 the	operating results	for	that	period.

The	table	below	presents	the	earliest	tax	years	that	remain	subject	to	examination by	major	jurisdiction.

The	 U.S.	 Federal	 examinations	 of	 fiscal	 2008	 through	 calendar	 2010	 were finalized,	 but	 the	 settlement	 is	 subject	 to	 review	 by	 the	 Joint	 Committee	 of Taxation.	The	examinations	of	2011	and	2012	began	in	2013.

The	United	Kingdom	examinations	of	fiscal	2008	through	2011	were	finalized during	2014.

All	years	including	and	subsequent	to	the	years	in	the	table	above	remain	open	to examination	by	 the	 taxing	authorities.	The	firm	believes	 that	 the	 liability	for unrecognized	 tax	 benefits	 it	 has	 established	 is	 adequate	 in	 relation	 to	 the potential	for	additional	assessments.

In	January	2013,	the	firm	was	accepted	into	the	Compliance	Assurance	Process program	by	 the	IRS.	This	program	allows	 the	firm	 to	work	with	 the	IRS	 to identify	 and	 resolve	 potential	 U.S.	 federal	 tax	 issues	 before	 the	 filing	 of	 tax returns.	The	2013	tax	year	is	the	first	year	that	was	examined	under	the	program, and	remains	subject	to	post-filing	review.	The	firm	was	also	accepted	into	the program	for	the	2014	and	2015	tax	years.

# Business	Segments

The firm reports its activities in the following four business segments: Investment	 Banking, Institutional	 Client	 Services, Investing	 &	 Lending	 and Investment	Management.

In	reporting	segments,	certain	of	the	firm's	business	lines	have	been	aggregated where	they	have	similar	economic	characteristics	and	are	similar	in	each	of	the following	areas:	(i)	the	nature	of	the	services	they	provide,	(ii)	their	methods	of distribution, (iii) the types of clients they serve and (iv) the regulatory environments	in	which	they	operate.

The	cost	drivers	of	the	firm	taken	as	a	whole	—	compensation,	headcount	and levels	of	business	activity	—	are	broadly	similar	in	each	of	the	firm's	business segments.	Compensation	and	benefits	expenses	in	the	firm's	segments	reflect, among other factors, the overall performance of the firm as	 well as the performance	 of individual	 businesses.	 Consequently,	 pre-tax	 margins in	 one segment	of	the	firm's	business	may	be	significantly	affected	by	the	performance of	the	firm's	other	business	segments.

The	firm	allocates	assets	(including	allocations	of	global	core	liquid	assets	and cash,	secured	client	financing	and	other	assets),	revenues	and	expenses	among the four	 business	 segments.	 Due to the integrated	 nature	 of these	 segments, estimates	 and judgments	 are	 made in	 allocating	 certain	 assets, revenues	 and expenses.	The	allocation	process	is	based	on	the	manner	in	which	management currently views the performance of the segments. Transactions between segments	are	based	on	specific	criteria	or	approximate	third-party	rates.	Total operating	expenses	include	charitable	contributions	that	have	not	been	allocated to	individual	business	segments.

Management believes that the information in the table below provides a reasonable	representation	of	each	segment's	contribution	to	consolidated	pre-tax earnings	and	total	assets.

|  | Year	Ended	or	as	of	December | Year	Ended	or	as	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Investment\tBanking |  |  |  |
| Financial\tAdvisory | \t\t $\t\t\t\t2,474 | \t $\t\t\t\t1,978 | $\t\t\t\t1,975 |
| Equity\tunderwriting | 1,750 | 1,659 | 987 |
| Debt\tunderwriting | 2,240 | 2,367 | 1,964 |
| Total\tUnderwriting | 3,990 | 4,026 | 2,951 |
| Total\tnet\trevenues | 6,464 | 6,004 | 4,926 |
| Operating\texpenses | 3,688 | 3,479 | 3,333 |
| Pre-tax\tearnings | \t\t $\t\t\t\t2,776 | \t $\t\t\t\t2,525 | $\t\t\t\t1,593 |
| Segment\tassets | \t\t $\t\t\t\t1,845 | \t $\t\t\t\t1,901 | $\t\t\t\t1,712 |
| Institutional\tClient\tServices |  |  |  |
| Fixed\tIncome,\tCurrency\tand\tCommodities |  |  |  |
| Client\tExecution | \t\t $\t\t\t\t8,461 | \t $\t\t\t\t8,651 | $\t\t\t\t9,914 |
| Equities\tclient\texecution | 2,079 | 2,594 | 3,171 |
| Commissions\tand\tfees | 3,153 | 3,103 | 3,053 |
| Securities\tservices | 1,504 | 1,373 | 1,986 |
| Total\tEquities | 6,736 | 7,070 | 8,210 |
| Total\tnet\trevenues\t^1 | 15,197 | 15,721 | 18,124 |
| Operating\texpenses | 10,880 | 11,792 | 12,490 |
| Pre-tax\tearnings | \t\t $\t\t\t\t4,317 | \t $\t\t\t\t3,929 | $\t\t\t\t5,634 |
| Segment\tassets | \t\t $696,013 | \t $788,238 | $825,496 |
| Investing\t&amp;\tLending |  |  |  |
| Equity\tsecurities | \t\t $\t\t\t\t3,813 | \t $\t\t\t\t3,930 | $\t\t\t\t2,800 |
| Debt\tsecurities\tand\tloans | 2,165 | 1,947 | 1,850 |
| Other | 847 | 1,141 | 1,241 |
| Total\tnet\trevenues | 6,825 | 7,018 | 5,891 |
| Operating\texpenses | 2,819 | 2,686 | 2,668 |
| Pre-tax\tearnings | \t\t $\t\t\t\t4,006 | \t $\t\t\t\t4,332 | $\t\t\t\t3,223 |
| Segment\tassets | \t\t $143,842 | \t $109,285 | $\t\t98,600 |
| Investment\tManagement |  |  |  |
| Management\tand\tother\tfees | \t\t $\t\t\t\t4,800 | \t $\t\t\t\t4,386 | $\t\t\t\t4,105 |
| Incentive\tfees | 776 | 662 | 701 |
| Transaction\trevenues | 466 | 415 | 416 |
| Total\tnet\trevenues | 6,042 | 5,463 | 5,222 |
| Operating\texpenses | 4,647 | 4,357 | 4,296 |
| Pre-tax\tearnings | \t\t $\t\t\t\t1,395 | \t $\t\t\t\t1,106 | $\t\t\t\t\t\t\t926 |
| Segment\tassets | \t\t $\t\t14,540 | \t $\t\t12,083 | $\t\t12,747 |
| Total\tnet\trevenues | \t\t $\t\t34,528 | \t $\t\t34,206 | $\t\t34,163 |
| Total\toperating\texpenses\t^2 | 22,171 | 22,469 | 22,956 |
| Total\tpre-tax\tearnings | \t\t $\t\t12,357 | \t $\t\t11,737 | $\t\t11,207 |
| Total\tassets | \t\t $856,240 | \t $911,507 | $938,555 |

1.Includes	$37	million	for	2013	and	$121	million	for	2012	of	realized	gains	on	available-for-sale securities.

2.Includes	 charitable	 contributions	 that	 have	 not	 been	 allocated	 to	 the	 firm's	 segments	 of $137	million	for	2014,	$155	million	for	2013	and	$169	million	for	2012.	Operating	expenses related	to	real	estate-related	exit	costs,	previously	not	allocated	to	the	firm's	segments,	have now	been	allocated.	This	allocation	reflects	the	change	in	the	manner	in	which	management views	 the	 performance	 of	 the	 firm's	 segments.	 Reclassifications	 have	 been	 made	 to previously	reported	segment	amounts	to	conform	to	the	current	presentation.

The	segment	information	presented	in	the	table	above	is	prepared	according	to the	following	methodologies:

Ÿ	Revenues	and	expenses	directly	associated	with	each	segment	are	included	in determining	pre-tax	earnings.

Ÿ	Net	revenues	in	the	firm's	segments	include	allocations	of	interest	income	and interest	 expense	 to	 specific	 securities,	 commodities	 and	 other	 positions	 in relation	to	the	cash	generated	by,	or	funding	requirements	of,	such	underlying positions.	Net	interest	is	included	in	segment	net	revenues	as	it	is	consistent with	the	way	in	which	management	assesses	segment	performance.

Ÿ	Overhead	expenses	not	directly	allocable	to	specific	segments	are	allocated ratably	based	on	direct	segment	expenses.

The	tables	below	present	the	amounts	of	net	interest	income	or	interest	expense included	 in	 net	 revenues,	 and	 the	 amounts	 of	 depreciation	 and	 amortization expense	included	in	pre-tax	earnings.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Investment\tBanking | \t\t$\t\t\t\t\t\t— | \t$\t\t\t\t\t\t— | \t$\t\t\t\t(15) |
| Institutional\tClient\tServices | 3,679 | 3,250 | 3,723 |
| Investing\t&amp;\tLending | 237 | 25 | 26 |
| Investment\tManagement | 131 | 117 | 146 |
| Total\tnet\tinterest\tincome | \t\t$4,047 | \t$3,392 | \t$3,880 |

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Investment\tBanking | \t\t $\t\t\t135 | \t $\t\t\t144 | \t$\t\t\t166 |
| Institutional\tClient\tServices | 525 | 571 | 802 |
| Investing\t&amp;\tLending | 530 | 441 | 565 |
| Investment\tManagement | 147 | 166 | 205 |
| Total\tdepreciation\tand\tamortization\t^1 | \t\t$1,337 | \t$1,322 | \t$1,738 |

1.Depreciation and	 amortization	 related	 to	 real	 estate-related	 exit	 costs,	 previously	 not allocated	 to	 the	 firm's	 segments,	 have	 now	 been	 allocated.	 This	 allocation	 reflects	 the change	in	the	manner	in	which	management	views	the	performance	of	the	firm's	segments. Reclassifications	have	been	made	to	previously	reported	segment	amounts	to	conform	to	the current	presentation.

# Geographic	Information

Due	to	the	highly	integrated	nature	of	international	financial	markets,	the	firm manages	its	businesses	based	on	the	profitability	of	the	enterprise	as	a	whole. The	methodology	for	allocating	profitability	to	geographic	regions	is	dependent on	 estimates	 and	 management	 judgment	 because	 a	 significant	 portion	 of	 the firm's	activities	require	cross-border	coordination	in	order	to	facilitate	the	needs of	the	firm's	clients.

# Geographic	results	are	generally	allocated	as	follows:

Ÿ	Investment	Banking:	location	of	the	client	and	investment	banking	team.

Ÿ	Institutional	Client	Services:	Fixed	Income,	Currency	and	Commodities	Client Execution,	 and	 Equities	 (excluding	 Securities	 Services):	 location	 of	 the market-making	desk;	Securities	Services:	location	of	the	primary	market	for the	underlying	security.

Ÿ	Investing	&	Lending:	Investing:	location	of	the	investment;	Lending:	location of	the	client.

Ÿ	Investment	Management:	location	of	the	sales	team.

The	table	below	presents	the	total	net	revenues,	pre-tax	earnings	and	net	earnings of	the	firm	by	geographic	region	allocated	based	on	the	methodology	referred	to above,	as	well	as	the	percentage	of	total	net	revenues,	pre-tax	earnings	and	net earnings	(excluding	Corporate)	for	each	geographic	region.	In	the	table	below, Asia	includes	Australia	and	New	Zealand.

1.Includes	 charitable	 contributions	 that	 have	 not	 been	 allocated	 to	 the	 firm's	 geographic regions.	Operating	expenses	related	to	real	estate-related	exit	costs,	previously	not	allocated to	the	firm's	geographic	regions,	have	now	been	allocated.	This	allocation	reflects	the	change in	 the	 manner	 in	 which	 management	 views	 the	 performance	 of	 the	 geographic	 regions. Reclassifications	 have	 been	 made	 to	 previously	 reported	 geographic	 region	 amounts	 to conform	to	the	current	presentation.

# Credit	Concentrations

Credit	 concentrations	 may	 arise	 from	 market	 making,	 client	 facilitation, investing,	 underwriting,	 lending	 and	 collateralized	 transactions	 and	 may	 be impacted	by	changes	in	economic,	industry	or	political	factors.	The	firm	seeks	to mitigate	credit	risk	by	actively	monitoring	exposures	and	obtaining	collateral from	counterparties	as	deemed	appropriate.

While	 the	 firm's	 activities	 expose	 it	 to	 many	 different	 industries	 and counterparties,	the	firm	routinely	executes	a	high	volume	of	transactions	with asset	 managers,	 investment	 funds,	 commercial	 banks,	 brokers	 and	 dealers, clearing	houses	and	exchanges,	which	results	in	significant	credit	concentrations.

In	 the	 ordinary	 course	 of	 business,	 the	 firm	 may	 also	 be	 subject	 to	 a concentration	 of	 credit	 risk	 to	 a	 particular	 counterparty,	 borrower	 or	 issuer, including	sovereign	issuers,	or	to	a	particular	clearing	house	or	exchange.

The	table	below	presents	the	credit	concentrations	in	cash	instruments	held	by the	firm.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 |
| U.S.\tgovernment\tand\tfederal\nagency\tobligations\t^1 | \t\t$69,170 | \t $90,118 |
| %\tof\ttotal\tassets | 8.1% | 9.9% |
| Non-U.S.\tgovernment\tand\nagency\tobligations\t^1 | \t\t$37,059 | \t $40,944 |
| %\tof\ttotal\tassets | 4.3% | 4.5% |

1.Included	in	"Financial	instruments	owned,	at	fair	value"	and	"Cash	and	securities	segregated for	regulatory	and	other	purposes."

As	of	December	2014	and	December	2013,	the	firm	did	not	have	credit	exposure to	any	other	counterparty	that	exceeded	2%	of	total	assets.

To	 reduce	 credit	 exposures,	 the	 firm	 may	 enter	 into	 agreements	 with counterparties	that	permit	the	firm	to	offset	receivables	and	payables	with	such counterparties	 and/or	 enable	 the	 firm	 to	 obtain	 collateral	 on	 an	 upfront	 or contingent	basis.	Collateral	obtained	by	the	firm	related	to	derivative	assets	is principally	cash	and	is	held	by	the	firm	or	a	third-party	custodian.	Collateral obtained	 by	 the	 firm	 related	 to	 resale	 agreements	 and	 securities	 borrowed transactions	is	primarily	U.S.	government	and	federal	agency	obligations	and non-U.S.	 government	 and	 agency	 obligations.	 See	 Note 10 for	 further information	about	collateralized	agreements	and	financings.

The	table	below	presents	U.S.	government	and	federal	agency	obligations,	and non-U.S.	 government	 and	 agency	 obligations,	 that	 collateralize	 resale agreements	and	securities	borrowed	transactions	(including	those	in	"Cash	and securities	 segregated	 for	 regulatory	 and	 other	 purposes").	 Because	 the	 firm's primary	 credit	 exposure	 on	 such	 transactions	 is	 to	 the	 counterparty	 to	 the transaction,	the	firm	would	be	exposed	to	the	collateral	issuer	only	in	the	event of	counterparty	default.

1.Principally	consists	of	securities	issued	by	the	governments	of	France,	the	United	Kingdom, Japan	and	Germany.

# Legal	Proceedings

The	 firm	 is	 involved	 in	 a	 number	 of	 judicial,	 regulatory	 and	 arbitration proceedings	 (including	 those	 described	 below)	 concerning	 matters	 arising	 in connection	with	the	conduct	of	the	firm's	businesses.	Many	of	these	proceedings are	in	early	stages,	and	many	of	these	cases	seek	an	indeterminate	amount	of damages.

Under	ASC	450,	an	event	is	"reasonably	possible"	if	"the	chance	of	the	future event	or	events	occurring	is	more	than	remote	but	less	than	likely"	and	an	event is	"remote"	if	"the	chance	of	the	future	event	or	events	occurring	is	slight."	Thus, references	to	the	upper	end	of	the	range	of	reasonably	possible	loss	for	cases	in which	the	firm	is	able	to	estimate	a	range	of	reasonably	possible	loss	mean	the upper	end	of	the	range	of	loss	for	cases	for	which	the	firm	believes	the	risk	of loss	is	more	than	slight.

With	respect	to	matters	described	below	for	which	management	has	been	able	to estimate	 a	 range	 of	 reasonably	 possible	 loss	 where	 (i)	 actual	 or	 potential plaintiffs	have	claimed	an	amount	of	money	damages,	(ii)	the	firm	is	being,	or threatened	 to	 be,	 sued	 by	 purchasers	 in	 an	 underwriting	 and	 is	 not	 being indemnified	by	a	party	that	the	firm	believes	will	pay	any	judgment,	or	(iii)	the purchasers	are	demanding	that	the	firm	repurchase	securities,	management	has estimated	the	upper	end	of	the	range	of	reasonably	possible	loss	as	being	equal	to (a)	in	the	case	of	(i),	the	amount	of	money	damages	claimed,	(b)	in	the	case	of (ii),	the	difference	between	the	initial	sales	price	of	the	securities	that	the	firm sold	 in	such	underwriting	and	 the	estimated	 lowest	subsequent	price	of	such securities	 and	 (c)	 in	 the	 case	 of	 (iii),	 the	 price	 that	 purchasers	 paid	 for	 the securities	less	the	estimated	value,	if	any,	as	of	December	2014	of	the	relevant securities,	 in	 each	 of	 cases	 (i),	 (ii)	 and	 (iii),	 taking	 into	 account	 any	 factors believed	to	be	relevant	to	the	particular	matter	or	matters	of	that	type.	As	of	the date	hereof,	the	firm	has	estimated	the	upper	end	of	the	range	of	reasonably possible	aggregate	 loss	for	such	matters	and	for	any	other	matters	described below	 where	 management	 has	 been	 able	 to	 estimate	 a	 range	 of	 reasonably possible	 aggregate	 loss	 to	 be	 approximately $3.0 billion	 in	 excess	 of	 the aggregate	reserves	for	such	matters.

Management	is	generally	unable	to	estimate	a	range	of	reasonably	possible	loss for	matters	other	 than	 those	 included	 in	 the	estimate	above,	 including	where (i)	actual	or	potential	plaintiffs	have	not	claimed	an	amount	of	money	damages, except	 in	 those	 instances	 where	 management	 can	 otherwise	 determine	 an appropriate	 amount,	 (ii)	 matters	 are	 in	 early	 stages,	 (iii)	 matters	 relate	 to regulatory	 investigations	 or	 reviews,	 except	 in	 those	 instances	 where management	 can	 otherwise	 determine	 an	 appropriate	 amount,	 (iv)	 there	 is uncertainty	as	to	the	likelihood	of	a	class	being	certified	or	the	ultimate	size	of the	 class,	 (v)	 there	 is	 uncertainty	 as	 to	 the	 outcome	 of	 pending	 appeals	 or motions,	(vi)	there	are	significant	factual	issues	to	be	resolved,	and/or	(vii)	there are	novel	legal	issues	presented.	For	example,	the	firm's	potential	liabilities	with respect	to	future	mortgage-related	"put-back"	claims,	any	future	claims	arising from	 the	 ongoing	 investigations	 by	 members	 of	 the	 Residential	 Mortgage- Backed	Securities	Working	Group	of	the	U.S.	Financial	Fraud	Enforcement	Task Force	(RMBS	Working	Group)	and	the	action	filed	by	the	Libyan	Investment Authority	discussed	below	may	ultimately	result	in	a	significant	increase	in	the firm's	liabilities,	but	are	not	included	in	management's	estimate	of	reasonably possible	loss.	As	another	example,	the	firm's	potential	liabilities	with	respect	to the	investigations	and	reviews	discussed	below	under	"Regulatory	Investigations and	 Reviews	 and	 Related	 Litigation"	 also	 generally	 are	 not	 included	 in management's	estimate	of	reasonably	possible	loss.	However,	management	does not	believe,	based	on	currently	available	information,	that	the	outcomes	of	such other	 matters	 will	 have	 a	 material	 adverse	 effect	 on	 the	 firm's	 financial condition,	though	the	outcomes	could	be	material	to	the	firm's	operating	results for	any	particular	period,	depending,	in	part,	upon	the	operating	results	for	such period.	 See	 Note 18 for	 further	 information	 about	 mortgage-related contingencies.

Mortgage-Related	Matters.	Beginning	in	April	2010,	a	number	of	purported securities	law	class	actions	were	filed	in	the	U.S.	District	Court	for	the	Southern District	of	New	York	challenging	the	adequacy	of	Group	Inc.'s	public	disclosure of,	 among	 other	 things,	 the	 firm's	 activities	 in	 the	 CDO	 market,	 the	 firm's conflict	of	interest	management,	and	the	SEC	investigation	that	led	to	GS&Co. entering	into	a	consent	agreement	with	the	SEC,	settling	all	claims	made	against GS&Co.	by	the	SEC	in	connection	with	the	ABACUS	2007-AC1	CDO	offering (ABACUS	 2007-AC1	 transaction),	 pursuant	 to	 which	 GS&Co.	 paid $550	 million	 of	 disgorgement	 and	 civil	 penalties.	The	 consolidated	 amended complaint	filed	on	July	25,	2011,	which	names	as	defendants	Group	Inc.	and certain	officers	and	employees	of	Group	Inc.	and	its	affiliates,	generally	alleges violations	of	Sections	10(b)	and	20(a)	of	the	Exchange	Act	and	seeks	unspecified damages.	On	June	21,	2012,	the	district	court	dismissed	the	claims	based	on Group	Inc.'s	not	disclosing	that	it	had	received	a	"Wells"	notice	from	the	staff	of the	 SEC	 related	 to	 the	 ABACUS	 2007-AC1	 transaction,	 but	 permitted	 the plaintiffs'	other	claims	to	proceed.

In	June	2012,	the	Board	of	Directors	of	Group	Inc.	(Board)	received	a	demand from	a	shareholder	 that	 the	Board	 investigate	and	 take	action	relating	 to	 the firm's	 mortgage-related	 activities	 and	 to	 stock	 sales	 by	 certain	 directors	 and executives	of	the	firm.	On	February	15,	2013,	this	shareholder	filed	a	putative shareholder	derivative	action	in	New	York	Supreme	Court,	New	York	County, against	Group	Inc.	and	certain	current	or	former	directors	and	employees,	based on	these	activities	and	stock	sales.	The	derivative	complaint	includes	allegations of	 breach	 of	 fiduciary	 duty,	 unjust	 enrichment,	 abuse	 of	 control,	 gross mismanagement	and	corporate	waste,	and	seeks,	among	other	things,	unspecified monetary	damages,	disgorgement	of	profits	and	certain	corporate	governance and	disclosure	reforms.	On	May	28,	2013,	Group	Inc.	informed	the	shareholder that	the	Board	completed	its	investigation	and	determined	to	refuse	the	demand. On	June	20,	2013,	the	shareholder	made	a	books	and	records	demand	requesting materials	relating	to	the	Board's	determination.	The	parties	have	agreed	to	stay proceedings	in	the	putative	derivative	action	pending	resolution	of	the	books	and records	demand.

In	addition,	the	Board	has	received	books	and	records	demands	from	several shareholders	for	materials	relating	to,	among	other	subjects,	the	firm's	mortgage servicing	and	foreclosure	activities,	participation	in	federal	programs	providing assistance	to	financial	institutions	and	homeowners,	loan	sales	to	Fannie	Mae and	Freddie	Mac,	mortgage-related	activities	and	conflicts	management.

GS&Co.,	 Goldman	 Sachs	 Mortgage	 Company	 and	 GS	 Mortgage	 Securities Corp.	and	three	current	or	former	Goldman	Sachs	employees	are	defendants	in	a putative	class	action	commenced	on	December	11,	2008	 in	 the	U.S.	District Court	for	the	Southern	District	of	New	York	brought	on	behalf	of	purchasers	of various	mortgage	pass-through	certificates	and	asset-backed	certificates	issued by	 various	 securitization	 trusts	 established	 by	 the	 firm	 and	 underwritten	 by GS&Co.	in	2007.	The	complaint	generally	alleges	that	the	registration	statement and	prospectus	supplements	for	 the	certificates	violated	 the	federal	securities laws,	 and	 seeks	 unspecified	 compensatory	 damages	 and	 rescission	 or rescissionary	damages.	By	a	decision	dated	September	6,	2012,	the	U.S.	Court	of Appeals	 for	 the	 Second	 Circuit	 affirmed	 the	 district	 court's	 dismissal	 of plaintiff's	claims	with	respect	to	10	of	the	17	offerings	included	in	plaintiff's original	complaint	but	vacated	the	dismissal	and	remanded	the	case	to	the	district court	with	instructions	to	reinstate	the	plaintiff's	claims	with	respect	to	the	other seven	offerings.	On	October	31,	2012,	the	plaintiff	served	an	amended	complaint relating	 to	 those	 seven	 offerings,	 plus	 seven	 additional	 offerings	 (additional offerings).	On	July	10,	2014,	the	court	granted	the	defendants'	motion	to	dismiss as	to	the	additional	offerings.	On	June	3,	2010,	another	investor	filed	a	separate putative	class	action	asserting	substantively	similar	allegations	relating	to	one	of the	 additional	 offerings	 and	 thereafter	 moved	 to	 further	 amend	 its	 amended complaint	 to	 add	 claims	 with	 respect	 to	 two	 of	 the	 additional	 offerings.	 On March	27,	2014,	the	district	court	largely	denied	defendants'	motion	to	dismiss as	to	the	original	offering,	but	denied	the	separate	plaintiff's	motion	to	add	the two	additional	offerings	through	an	amendment.	The	securitization	trusts	issued, and	 GS&Co.	 underwrote,	 approximately $11 billion	 principal	 amount	 of certificates	to	all	purchasers	in	the	offerings	at	issue	in	the	complaints.

On	September	30,	2010,	a	class	action	was	filed	in	the	U.S.	District	Court	for	the Southern	District	of	New	York	against	GS&Co.,	Group	Inc.	and	 two	former GS&Co.	employees	on	behalf	of	investors	in	$823	million	of	notes	issued	in 2006	and	2007	by	two	synthetic	CDOs	(Hudson	Mezzanine	2006-1	and	2006-2). The	amended	complaint	asserts	federal	securities	law	and	common	law	claims, and	 seeks	 unspecified	 compensatory,	 punitive	 and	 other	 damages.	 The defendants'	 motion	 to	 dismiss	 was	 granted	 as	 to	 plaintiff's	 claim	 of	 market manipulation	and	denied	as	to	the	remainder	of	plaintiff's	claims	by	a	decision dated	March	21,	2012.	On	May	21,	2012,	 the	defendants	counterclaimed	for breach	 of	 contract	 and	 fraud.	 On	 June	 27,	 2014,	 the	 appellate	 court	 denied defendants'	petition	for	leave	to	appeal	from	the	district	court's	January	22,	2014 order	granting	class	certification.	On	January	30,	2015,	defendants	moved	for summary	judgment.

Various	 alleged	 purchasers	 of,	 and	 counterparties	 and	 providers	 of	 credit enhancement	 involved	 in	 transactions	 relating	 to,	 mortgage	 pass-through certificates,	CDOs	and	other	mortgage-related	products	(including	Aozora	Bank, Ltd.,	Basis	Yield	Alpha	Fund	(Master),	the	Charles	Schwab	Corporation,	CIFG Assurance	of	North	America,	Inc.,	CMFG	Life	Insurance	Company	and	related parties,	 Deutsche	 Zentral-Genossenschaftbank,	 the	 FDIC	 (as	 receiver	 for Guaranty	Bank),	the	Federal	Home	Loan	Banks	of	Chicago	and	Seattle,	IKB Deutsche	Industriebank	AG,	John	Hancock	and	related	parties,	Massachusetts Mutual	Life	Insurance	Company,	National	Australia	Bank,	the	National	Credit Union	Administration	 (as	 conservator	 or	 liquidating	 agent	 for	 several	 failed credit	 unions),	 Phoenix	 Light	 SF	 Limited	 and	 related	 parties,	 Royal	 Park Investments	SA/NV,	The	Union	Central	Life	Insurance	Company,	Ameritas	Life Insurance	 Corp.,	Acacia	 Life	 Insurance	 Company,	Watertown	 Savings	 Bank, Commerzbank,	 Texas	 County	 &	 District	 Retirement	 System	 and	 the Commonwealth	of	Virginia	(on	behalf	of	the	Virginia	Retirement	System))	have filed	complaints	or	summonses	with	notice	in	state	and	federal	court	or	initiated arbitration	proceedings	against	firm	affiliates,	generally	alleging	that	the	offering documents	for	the	securities	that	they	purchased	contained	untrue	statements	of material	 fact	 and	 material	 omissions	 and	 generally	 seeking	 rescission	 and/or damages.	Certain	of	these	complaints	allege	fraud	and	seek	punitive	damages. Certain	of	these	complaints	also	name	other	firms	as	defendants.

A	number	of	other	entities	(including	John	Hancock	and	related	parties,	Norges Bank	Investment	Management,	Selective	Insurance	Company	and	the	State	of Illinois	(on	behalf	of	Illinois	state	retirement	systems))	have	threatened	to	assert claims	of	various	types	against	the	firm	in	connection	with	the	sale	of	mortgage- related	securities.	The	firm	has	entered	into	agreements	with	a	number	of	these entities	to	toll	the	relevant	statute	of	limitations.

As	of	the	date	hereof,	the	aggregate	amount	of	mortgage-related	securities	sold to	 plaintiffs	 in	 active	 and	 threatened	 cases	 described	 in	 the	 preceding	 two paragraphs	where	those	plaintiffs	are	seeking	rescission	of	such	securities	was approximately	$6.6	billion	(which	does	not	reflect	adjustment	for	any	subsequent paydowns	 or	 distributions	 or	 any	 residual	 value	 of	 such	 securities,	 statutory interest	or	any	other	adjustments	that	may	be	claimed).	This	amount	does	not include	the	potential	claims	by	these	or	other	purchasers	in	the	same	or	other mortgage-related	offerings	that	have	not	been	described	above,	or	claims	that have	been	dismissed.

The	 firm	 has	 entered	 into	 agreements	 with	 Deutsche	 Bank	 National	 Trust Company	 and	 U.S.	 Bank	 National	Association	 to	 toll	 the	 relevant	 statute	 of limitations	with	respect	to	claims	for	repurchase	of	residential	mortgage	loans based	on	alleged	breaches	of	representations	related	 to	$11.4	billion	original notional	face	amount	of	securitizations	issued	by	trusts	for	which	they	act	as trustees.

Group	 Inc.,	 Litton,	 Ocwen	 and	Arrow	 Corporate	 Member	 Holdings	 LLC,	 a former	subsidiary	of	Group	Inc.,	are	defendants	in	a	putative	class	action	pending since	January	23,	2013	in	the	U.S.	District	Court	for	the	Southern	District	of New	York	generally	challenging	the	procurement	manner	and	scope	of	"force- placed"	hazard	insurance	arranged	by	Litton	when	homeowners	failed	to	arrange for	insurance	as	required	by	their	mortgages.	The	complaint	asserts	claims	for breach	 of	 contract,	 breach	 of	 fiduciary	 duty,	 misappropriation,	 conversion, unjust	 enrichment	 and	 violation	 of	 Florida	 unfair	 practices	 law,	 and	 seeks unspecified	 compensatory	 and	 punitive	 damages	 as	 well	 as	 declaratory	 and injunctive	relief.	An	amended	complaint,	filed	on	November	19,	2013,	added	an additional	plaintiff	and	RICO	claims.	On	September	29,	2014,	the	court	denied without	prejudice	and	with	leave	to	renew	at	a	later	date	Group	Inc.'s	motion	to sever	the	claims	against	it	and	certain	other	defendants.

The	firm	has	also	received,	and	continues	to	receive,	requests	for	information and/or	subpoenas	as	part	of	inquiries	or	investigations	by	the	U.S.	Department	of Justice,	other	members	of	the	RMBS	Working	Group	and	other	federal,	state	and local	regulators	and	law	enforcement	authorities	relating	to	the	mortgage-related securitization	process,	subprime	mortgages,	CDOs,	synthetic	mortgage-related products,	 sales	 communications	 and	 particular	 transactions	 involving	 these products,	and	servicing	and	foreclosure	activities,	which	may	subject	the	firm	to actions,	including	litigation,	penalties	and	fines.	In	December	2014,	as	part	of	the RMBS	Working	Group	investigation,	the	firm	received	a	letter	from	the	U.S. Attorney	 for	 the	 Eastern	 District	 of	 California	 stating	 in	 connection	 with potentially	bringing	a	civil	action	that	it	had	preliminarily	concluded	that	the firm	had	violated	federal	law	in	connection	with	its	underwriting,	securitization and	 sale	 of	 residential	 mortgage-backed	 securities	 and	 offering	 the	 firm	 an opportunity	to	respond.	The	firm	is	cooperating	with	these	regulators	and	other authorities,	including	in	some	cases	agreeing	to	the	tolling	of	the	relevant	statute of	 limitations.	 See	 also	 "Regulatory	 Investigations	 and	 Reviews	 and	 Related Litigation"	below.

The	firm	expects	to	be	the	subject	of	additional	putative	shareholder	derivative actions,	 purported	 class	 actions,	 rescission	 and	 "put	 back"	 claims	 and	 other litigation,	 additional	 investor	 and	 shareholder	 demands,	 and	 additional regulatory	and	other	investigations	and	actions	with	respect	to	mortgage-related offerings,	 loan	 sales,	 CDOs,	 and	 servicing	 and	 foreclosure	 activities.	 See Note	18	for	information	regarding	mortgage-related	contingencies	not	described in	this	Note	27.

Private	Equity-Sponsored	Acquisitions	Litigation.	Group	Inc.	is	among numerous	private	equity	firms	named	as	defendants	in	a	federal	antitrust	action filed	 in	 the	 U.S.	 District	 Court	 for	 the	 District	 of	 Massachusetts	 in December	 2007.	 As	 amended,	 the	 complaint	 generally	 alleges	 that	 the defendants	 have	 colluded	 to	 limit	 competition	 in	 bidding	 for	 private	 equity- sponsored	 acquisitions	 of	 public	 companies,	 thereby	 resulting	 in	 lower prevailing	bids	and,	by	extension,	less	consideration	for	shareholders	of	those companies	 in	 violation	 of	 Section	 1	 of	 the	 U.S.	 Sherman	Antitrust	Act	 and common	law.	The	complaint	seeks,	among	other	things,	treble	damages	in	an unspecified	 amount.	 In	 June	 2014,	 Group	 Inc.	 and	 the	 plaintiffs	 agreed	 to	 a settlement,	 which	 the	 court	 preliminarily	 approved	 on	 September	 29,	 2014. Group	Inc.,	together	with	its	affiliates,	has	paid	the	full	amount	of	its	proposed contribution	to	the	settlement.

# RALI	Pass-Through	Certificates	Litigation.	GS&Co.	is	among	numerous

underwriters	named	as	defendants	in	a	securities	class	action	initially	filed	in September	2008	in	New	York	Supreme	Court,	and	subsequently	removed	to	the U.S.	 District	 Court	 for	 the	 Southern	 District	 of	 New	 York.	 As	 to	 the underwriters,	plaintiffs	allege	 that	 the	offering	documents	 in	connection	with various	 offerings	 of	 mortgage-backed	 pass-through	 certificates	 violated	 the disclosure	 requirements	 of	 the	 federal	 securities	 laws.	 In	 addition	 to	 the underwriters,	 the	 defendants	 include	 Residential	 Capital,	 LLC	 (ResCap), Residential	 Accredit	 Loans,	 Inc.	 (RALI),	 Residential	 Funding	 Corporation (RFC),	Residential	Funding	Securities	Corporation	(RFSC),	and	certain	of	their officers	and	directors.	On	January	3,	2013,	the	district	court	certified	a	class	in connection	 with	 one	 offering	 underwritten	 by	 GS&Co.	 which	 includes	 only initial	purchasers	who	bought	the	securities	directly	from	the	underwriters	or their	 agents	 no	 later	 than	 ten	 trading	 days	 after	 the	 offering	 date.	 On April	30,	2013,	the	district	court	granted	in	part	plaintiffs'	request	to	reinstate	a number	 of	 the	 previously	 dismissed	 claims	 relating	 to	 an	 additional	 nine offerings	 underwritten	 by	 GS&Co.	 On	 May	 10,	 2013,	 the	 plaintiffs	 filed	 an amended	 complaint	 incorporating	 those	 nine	 additional	 offerings.	 On December	27,	2013,	the	court	granted	the	plaintiffs'	motion	for	class	certification as	to	the	nine	additional	offerings	but	denied	the	plaintiffs'	motion	to	expand	the time	 period	 and	 scope	 covered	 by	 the	 previous	 class	 definition.	 On October	17,	2014,	the	plaintiffs	and	defendants	moved	for	summary	judgment. On	February	11,	2015,	GS&Co.	and	the	other	underwriter	defendants	agreed	to	a settlement	with	the	plaintiffs,	subject	to	court	approval.	The	firm	has	reserved	the full	amount	of	its	proposed	contribution	to	the	settlement.

GS&Co.	underwrote	approximately	$5.57	billion	principal	amount	of	securities to	 all	 purchasers	 in	 the	 offerings	 included	 in	 the	 amended	 complaint.	 On May	14,	2012,	ResCap,	RALI	and	RFC	filed	for	Chapter	11	bankruptcy	in	the U.S.	Bankruptcy	Court	for	the	Southern	District	of	New	York.	On	June	28,	2013, the	 district	 court	 entered	 a	 final	 order	 and	 judgment	 approving	 a	 settlement between	 plaintiffs	 and	 ResCap,	 RALI,	 RFC,	 RFSC	 and	 their	 officers	 and directors	named	as	defendants	in	the	action.

MF	Global	Securities	Litigation.	GS&Co.	is	among	numerous	underwriters named	as	defendants	in	class	action	complaints	and	an	individual	action	filed	in the	 U.S.	 District	 Court	 for	 the	 Southern	 District	 of	 New	York	 commencing November 18, 2011.	 These	 complaints	 generally	 allege	 that	 the	 offering materials	for	two	offerings	of	MF	Global	Holdings	Ltd.	(MF	Global)	convertible notes	 (aggregating	 approximately $575 million	 in	 principal	 amount)	 in February	2011	and	July	2011,	among	other	things,	failed	to	describe	adequately the	nature,	scope	and	risks	of	MF	Global's	exposure	to	European	sovereign	debt, in	violation	of	 the	disclosure	requirements	of	 the	federal	securities	 laws.	On December	12,	2014,	the	court	preliminarily	approved	a	settlement	resolving	the class	action,	and	on	January	5,	2015,	the	court	entered	an	order	effectuating	the settlement	of	all	claims	against	GS&Co.	in	the	individual	action.	GS&Co.	has paid	the	full	amount	of	its	contribution	to	the	settlements.

GS&Co.	has	also	received	inquiries	from	various	governmental	and	regulatory bodies	and	self-regulatory	organizations	concerning	certain	transactions	with	MF Global	prior	to	its	bankruptcy	filing.	Goldman	Sachs	is	cooperating	with	all	such inquiries.

GT	Advanced	Technologies	Securities	Litigation.	GS&Co.	is	among	the underwriters	 named	 as	 defendants	 in	 several	 putative	 securities	 class	 actions filed	 in	 October	 2014	 in	 the	 U.S.	 District	 Court	 for	 the	 District	 of	 New Hampshire.	 In	 addition	 to	 the	 underwriters,	 the	 defendants	 include	 certain directors	 and	 officers	 of	 GT	 Advanced	 Technologies	 Inc.	 (GT	 Advanced Technologies).	 As	 to	 the	 underwriters,	 the	 complaints	 generally	 allege misstatements	and	omissions	in	connection	with	the	December	2013	offerings	by GT	Advanced	Technologies	of	approximately	$86	million	of	common	stock	and $214	million	principal	amount	of	convertible	senior	notes,	assert	claims	under the	federal	securities	laws,	and	seek	compensatory	damages	in	an	unspecified amount	and	rescission.	GS&Co.	underwrote	3,479,769	shares	of	common	stock and	$75	million	principal	amount	of	notes	for	an	aggregate	offering	price	of approximately	$105	million.	On	October	6,	2014,	GT	Advanced	Technologies filed	for	Chapter	11	bankruptcy.

FireEye	Securities	Litigation.	GS&Co.	is	among	the	underwriters	named	as defendants	 in	 several	 putative	 securities	 class	 actions,	 filed	 beginning	 in June	2014	in	the	California	Superior	Court,	County	of	Santa	Clara.	In	addition	to the	underwriters,	the	defendants	include	FireEye,	Inc.	(FireEye)	and	certain	of its	 directors	 and	 officers.	The	 complaints	 generally	 allege	 misstatements	 and omissions	in	connection	with	the	offering	materials	for	the	March	2014	offering of	approximately	$1.15	billion	of	FireEye	common	stock,	assert	claims	under	the federal	 securities	 laws,	 and	 seek	 compensatory	 damages	 in	 an	 unspecified amount	and	rescission.	GS&Co.	underwrote	2,100,000	shares	for	a	total	offering price	of	approximately	$172	million.

Millennial	Media	Securities	Litigation.	GS&Co.	is	among	the	underwriters named	 as	 defendants	 in	 a	 putative	 securities	 class	 action	 filed	 on September	30,	2014	in	the	U.S.	District	Court	for	the	Southern	District	of	New York.	In	addition	to	the	underwriters,	the	defendants	include	Millennial	Media, Inc.	(Millennial	Media)	and	certain	of	its	directors,	officers	and	shareholders.	As to	the	underwriters,	the	complaint	generally	alleges	misstatements	and	omissions in	connection	with	Millennial	Media's	$152	million	March	2012	initial	public offering	 and	 the	 October	 2012	 offering	 of	 approximately $163	 million of Millennial	Media's	common	stock,	asserts	claims	under	 the	federal	securities laws,	and	seeks	compensatory	damages	in	an	unspecified	amount	and	rescission. GS&Co.	underwrote	3,519,000	and	3,450,000	shares	of	common	stock	in	the March	and	October	2012	offerings,	respectively,	for	an	aggregate	offering	price of	approximately	$95	million.

Zynga	Securities	Litigation.	GS&Co.	was	among	the	underwriters	named	as defendants	in	a	putative	securities	class	action	filed	on	August	1,	2012	in	the California	 Superior	 Court,	 County	 of	 San	 Francisco.	 In	 addition	 to	 the underwriters,	 the	 defendants	 included	 Zynga	 Inc.	 (Zynga)	 and	 certain	 of	 its directors	 and	 officers.	 The	 consolidated	 amended	 complaint,	 filed	 on April	29,	2013,	generally	alleged	that	the	offering	materials	for	the	March	2012 $516	million	secondary	offering	of	Zynga	common	stock	by	certain	of	Zynga's shareholders	violated	the	disclosure	requirements	of	the	federal	securities	laws, and	sought	compensatory	damages	in	an	unspecified	amount	and	rescission.	On February	11,	2015,	the	court	dismissed	the	action.

# Cobalt International	Energy	Securities	Litigation.	Cobalt	International

Energy,	Inc.	(Cobalt),	certain	of	its	officers	and	directors	(including	employees of	affiliates	of	Group	Inc.	who	served	as	directors	of	Cobalt),	shareholders	of Cobalt	(including	certain	funds	affiliated	with	Group	Inc.),	affiliates	of	 these shareholders	(including	Group	Inc.)	and	underwriters	(including	GS&Co.)	for certain	offerings	of	Cobalt's	securities	are	defendants	 in	a	putative	securities class	 action	 filed	 on	 November	 30,	 2014	 in	 the	 U.S.	 District	 Court	 for	 the Southern	 District	 of	 Texas.	 The	 complaint	 asserts	 claims	 under	 the	 federal securities	 laws,	 seeks	 compensatory	 and	 rescissory	 damages	 in	 unspecified amounts	and	alleges	material	misstatements	and	omissions	concerning	Cobalt	in connection	with	a	$1.67	billion	February	2012	offering	of	Cobalt	common	stock, a $1.38 billion	 December	 2012	 offering	 of	 Cobalt's	 convertible	 notes,	 a $1.00	billion	January	2013	offering	of	Cobalt's	common	stock,	a	$1.33	billion May	2013	offering	of	Cobalt's	common	stock,	and	a	$1.30	billion	May	2014 offering	of	Cobalt's	convertible	notes.	The	complaint	alleges	that	Group	Inc., GS&Co.	and	the	affiliated	funds	are	liable	as	controlling	persons	with	respect	to all	 five	 offerings.	 The	 complaint	 also	 seeks	 damages	 (i)	 from	 GS&Co.	 in connection	with	its	acting	as	an	underwriter	of	14,430,000	shares	of	common stock	representing	an	aggregate	offering	price	of	approximately	$465	million,

$690 million	 principal	 amount	 of	 convertible	 notes,	 and	 approximately $508	 million principal	 amount	 of	 convertible	 notes	 in	 the	 February	 2012, December	2012	and	May	2014	offerings,	respectively,	for	an	aggregate	offering price	of	approximately	$1.66	billion,	and	(ii)	from	Group	Inc.	and	the	affiliated funds	in	connection	with	their	sales	of	40,042,868	shares	of	common	stock	for aggregate	gross	proceeds	of	approximately	$1.06	billion	in	the	February	2012, January	2013	and	May	2013	common	stock	offerings.

Employment-Related	 Matters.	On	 September	 15,	 2010,	 a	 putative	 class action	was	filed	in	the	U.S.	District	Court	for	the	Southern	District	of	New	York by	three	female	former	employees	alleging	that	Group	Inc.	and	GS&Co.	have systematically	 discriminated	 against	 female	 employees	 in	 respect	 of compensation,	promotion,	assignments,	mentoring	and	performance	evaluations. The	complaint	alleges	a	class	consisting	of	all	female	employees	employed	at specified	levels	in	specified	areas	by	Group	Inc.	and	GS&Co.	since	July	2002, and	asserts	claims	under	federal	and	New	York	City	discrimination	laws.	The complaint	seeks	class	action	status,	injunctive	relief	and	unspecified	amounts	of compensatory,	punitive	and	other	damages.	On	July	17,	2012,	the	district	court issued	a	decision	granting	in	part	Group	Inc.'s	and	GS&Co.'s	motion	to	strike certain	 of	 plaintiffs'	 class	 allegations	 on	 the	 ground	 that	 plaintiffs	 lacked standing	 to	 pursue	 certain	 equitable	 remedies	 and	 denying	 Group	 Inc.'s	 and GS&Co.'s	 motion	 to	 strike	 plaintiffs'	 class	 allegations	 in	 their	 entirety	 as premature.	On	March	21,	2013,	the	U.S.	Court	of	Appeals	for	the	Second	Circuit held	that	arbitration	should	be	compelled	with	one	of	the	named	plaintiffs,	who as	a	managing	director	was	a	party	to	an	arbitration	agreement	with	the	firm.	On May	19,	2014,	plaintiffs	moved	for	class	certification.

Investment	Management	Services.	Group	Inc.	and	certain	of	its	affiliates are	 parties	 to	 various	 civil	 litigation	 and	 arbitration	 proceedings	 and	 other disputes	with	clients	relating	to	losses	allegedly	sustained	as	a	result	of	the	firm's investment	 management	 services.	 These	 claims	 generally	 seek,	 among	 other things,	restitution	or	other	compensatory	damages	and,	in	some	cases,	punitive damages.

Financial	Advisory	Services.	 Group	 Inc.	 and	 certain	 of its	 affiliates	 are from	time	to	time	parties	to	various	civil	litigation	and	arbitration	proceedings and	other	disputes	with	clients	and	third	parties	relating	to	the	firm's	financial advisory	 activities.	 These	 claims	 generally	 seek,	 among	 other	 things, compensatory	damages	and,	 in	some	cases,	punitive	damages,	and	 in	certain cases	allege	that	the	firm	did	not	appropriately	disclose	or	deal	with	conflicts	of interest.

Credit Derivatives Antitrust Matters. The	 European	 Commission announced	in	April	2011	that	it	was	initiating	proceedings	to	investigate	further numerous	financial	services	companies,	including	Group	Inc.,	in	connection	with the	supply	of	data	related	to	credit	default	swaps	and	in	connection	with	profit sharing	 and	 fee	 arrangements	 for	 clearing	 of	 credit	 default	 swaps,	 including potential	anti-competitive	practices.	On	July	1,	2013,	the	European	Commission issued	to	those	financial	services	companies	a	Statement	of	Objections	alleging that	 they	 colluded	 to	 limit	 competition	 in	 the	 trading	 of	 exchange-traded unfunded	credit	derivatives	and	exchange	trading	of	credit	default	swaps	more generally,	and	setting	out	its	process	for	determining	fines	and	other	remedies. Group	 Inc.'s	 current	 understanding	 is	 that	 the	 proceedings	 related	 to	 profit sharing	 and	 fee	 arrangements	 for	 clearing	 of	 credit	 default	 swaps	 have	 been suspended	indefinitely.	The	firm	has	received	civil	investigative	demands	from the	 U.S.	 Department	 of	 Justice	 for	 information	 on	 similar	 matters.	 Goldman Sachs	is	cooperating	with	the	investigations	and	reviews.

GS&Co.	and	Group	Inc.	are	among	the	numerous	defendants	in	putative	antitrust class	 actions	 relating	 to	 credit	 derivatives,	 filed	 beginning	 in	 May	 2013	 and consolidated	in	the	U.S.	District	Court	for	the	Southern	District	of	New	York. The	complaints	generally	allege	that	defendants	violated	federal	antitrust	laws	by conspiring	to	forestall	the	development	of	alternatives	to	OTC	trading	of	credit derivatives	and	to	maintain	inflated	bid-ask	spreads	for	credit	derivatives	trading. The	complaints	seek	declaratory	and	injunctive	relief	as	well	as	treble	damages in	an	unspecified	amount.	On	September	4,	2014,	the	court	granted	in	part	and denied	in	part	the	defendants'	motion	to	dismiss,	permitting	the	claim	alleging	an antitrust	conspiracy	to	proceed	but	confining	it	to	a	period	after	the	fall	of	2008.

Libya-Related	 Litigation.	 GSI is	 the	 defendant	 in	 an	 action	 filed	 on January	 21,	 2014	 with	 the	 High	 Court	 of	 Justice	 in	 London	 by	 the	 Libyan Investment	 Authority,	 relating	 to	 nine	 derivative	 transactions	 between	 the plaintiff	and	GSI	and	seeking,	among	other	things,	rescission	of	the	transactions and	unspecified	equitable	compensation	and	damages	exceeding	$1	billion.	On August	4,	2014,	GSI	withdrew	its	April	10,	2014	motion	for	summary	judgment, and	on	December	4,	2014,	the	Libyan	Investment	Authority	filed	an	amended statement	of	claim.

Municipal	 Securities	 Matters.	GS&Co.	(along	with,	in	some	cases,	other financial	 services	 firms)	 is	 named	 as	 respondent	 in	 a	 number	 of	 FINRA arbitrations	 filed	 by	 municipalities,	 municipal-owned	 entities,	 state-owned agencies	or	instrumentalities	and	non-profit	entities,	based	on	GS&Co.'s	role	as underwriter	 of	 the	 claimants'	 issuances	 of	 an	 aggregate	 of	 approximately $2.0	billion	of	auction	rate	securities	from	2003	through	2007	and	as	a	broker- dealer	 with	 respect	 to	 auctions	 for	 these	 securities.	 The	 claimants	 generally allege	that	GS&Co.	failed	to	disclose	that	it	had	a	practice	of	placing	cover	bids in	 auctions,	 and/or	 failed	 to	 inform	 the	 claimant	 of	 the	 deterioration	 of	 the auction	 rate	 market	 beginning	 in	 the	 fall	 of	 2007,	 and	 that,	 as	 a	 result,	 the claimant	 was	 forced	 to	 engage	 in	 a	 series	 of	 expensive	 refinancing	 and conversion	transactions	after	the	failure	of	the	auction	market	in	February	2008. Certain	claimants	also	allege	that	GS&Co.	advised	them	to	enter	into	interest	rate swaps	in	connection	with	their	auction	rate	securities	issuances,	causing	them	to incur	additional	losses.	The	claims	include	breach	of	fiduciary	duty,	fraudulent concealment,	negligent	misrepresentation,	breach	of	contract,	violations	of	the Exchange	Act	and	state	securities	laws,	and	breach	of	duties	under	the	rules	of the	Municipal	Securities	Rulemaking	Board	and	the	NASD.	One	claimant	has also	filed	a	complaint	against	GS&Co.	in	federal	court	asserting	the	same	claims as	in	the	FINRA	arbitration.

GS&Co.	filed	complaints	and	motions	in	federal	court	seeking	to	enjoin	certain of	 the	 arbitrations	 to	 effectuate	 the	 exclusive	 forum	 selection	 clauses	 in	 the transaction	documents.	In	one	case,	the	district	court	denied	the	injunction	but was	reversed	by	 the	appellate	court,	and	 the	U.S.	Supreme	Court	denied	 the claimant's	petition	for	certiorari	seeking	review	of	the	appellate	court's	decision; in	 other	 cases,	 the	 district	 court	 granted	 the	 injunctions,	 which	 have	 been affirmed	by	the	appellate	court.

GS&Co.	 has	 also	 filed	 motions	 with the FINRA Panels to dismiss the arbitrations,	one	of	which	has	been	granted.

Commodities-Related	Litigation.	Group	Inc.	and	its	subsidiary,	GS	Power Holdings	 LLC	 (GS	 Power),	 as	 well	 as	 Metro,	 a	 previously	 consolidated subsidiary	of	Group	Inc.	that	was	sold	in	the	fourth	quarter	of	2014,	are	among the	 defendants	 in	 a	 number	 of	 putative	 class	 actions	 filed	 beginning	 on August	1,	2013	and	consolidated	 in	 the	U.S.	District	Court	for	 the	Southern District	 of	 New	 York.	 The	 complaints	 generally	 allege	 violation	 of	 federal antitrust	 laws	 and	 other	 federal	 and	 state	 laws	 in	 connection	 with	 the management	of	aluminum	storage	facilities.	The	complaints	seek	declaratory, injunctive	and	other	equitable	relief	as	well	as	unspecified	monetary	damages, including	treble	damages.	On	August	29,	2014,	the	court	granted	the	Goldman Sachs	 defendants'	 motion	 to	 dismiss.	 Certain	 plaintiffs	 appealed	 on September 24, 2014,	 and	 the	 remaining	 plaintiffs	 filed	 proposed	 amended complaints	on	October	9	and	10,	2014.

Group	 Inc.,	 GS	 Power,	 Metro	 and	 GSI	 are	 among	 the	 defendants	 named	 in putative	class	actions,	filed	beginning	on	May	23,	2014	in	the	U.S.	District	Court for	the	Southern	District	of	New	York,	based	on	similar	alleged	violations	of	the federal	 antitrust	 laws	 in	 connection	 with	 the	 management	 of	 zinc	 storage facilities.

GSI	is	among	the	defendants	named	in	putative	class	actions	relating	to	trading in	platinum	and	palladium,	filed	beginning	on	November	25,	2014,	in	the	U.S. District	Court	for	the	Southern	District	of	New	York.	The	complaints	generally allege	 that	 the	 defendants	 violated	 federal	 antitrust	 laws	 and	 the	 Commodity Exchange	 Act	 in	 connection	 with	 an	 alleged	 conspiracy	 to	 manipulate	 a benchmark	for	physical	platinum	and	palladium	prices	and	seek	declaratory	and injunctive	relief	as	well	as	treble	damages	in	an	unspecified	amount.

ISDAFIX-Related	 Litigation.	 GS&Co. is	 among	 the	 defendants	 named	 in several	putative	class	actions	relating	to	trading	in	interest	rate	derivatives,	filed beginning	in	September	2014	in	the	U.S.	District	Court	for	the	Southern	District of	 New	 York.	 The	 complaints	 generally	 allege	 that	 the	 defendants	 violated federal	antitrust	laws	and	the	Commodity	Exchange	Act	in	connection	with	an alleged	conspiracy	to	manipulate	the	ISDAFIX	benchmark	and	seek	declaratory and	injunctive	relief	as	well	as	treble	damages	in	an	unspecified	amount.	On December	 12,	 2014,	 defendants	 moved	 to	 dismiss	 the	 consolidated	 amended complaint,	 and	 on	 February	 12,	 2015,	 the	 plaintiffs	 filed	 a	 second	 amended consolidated	complaint.

Currencies-Related Litigation.	GS&Co.	 and	 Group	 Inc.	 are	 among	 the defendants	named	in	several	putative	antitrust	class	actions	relating	to	trading	in the	foreign	exchange	markets,	filed	beginning	in	December	2013	in	the	U.S. District	Court	for	the	Southern	District	of	New	York.	The	complaints	generally allege	 that	 defendants	 violated	 federal	 antitrust	 laws	 in	 connection	 with	 an alleged	conspiracy	 to	manipulate	 the	foreign	currency	exchange	markets	and seek	declaratory	and	injunctive	relief	as	well	as	treble	damages	in	an	unspecified amount.	On	February	13,	2014,	the	cases	were	consolidated	into	one	action.	On February	28,	2014,	Group	Inc.	was	named	in	a	separate	putative	class	action	on behalf	of	non-U.S.	plaintiffs	containing	substantially	similar	allegations,	which was	not	consolidated	but	was	coordinated	with	the	other	proceedings	for	pretrial purposes;	that	complaint	was	amended	on	April	30,	2014.	On	January	28,	2015, the	 court	 denied	 defendants'	 motion	 to	 dismiss	 the	 consolidated	 action	 and granted	defendants'	motion	to	dismiss	the	amended	complaint	on	behalf	of	the non-U.S.	plaintiffs.

# Regulatory	Investigations	and	Reviews	and	Related	Litigation.	Group

Inc.	and	certain	of	its	affiliates	are	subject	to	a	number	of	other	investigations and	reviews	by,	and	in	some	cases	have	received	subpoenas	and	requests	for documents	and	information	from,	various	governmental	and	regulatory	bodies and	 self-regulatory	 organizations	 and	 litigation	 relating	 to	 various	 matters relating	to	the	firm's	businesses	and	operations,	including:

# Ÿ	The	public	offering	process;

Ÿ	The	firm's	investment	management	and	financial	advisory	services;

# Ÿ	Conflicts	of	interest;

Ÿ	Research	practices,	including	research	independence	and	interactions	between research	 analysts	 and	 other	 firm	 personnel,	 including	 investment	 banking personnel,	as	well	as	third	parties;

Ÿ	Transactions	involving	municipal	securities,	including	wall-cross	procedures and	conflict	of	interest	disclosure	with	respect	to	state	and	municipal	clients, the	trading	and	structuring	of	municipal	derivative	instruments	in	connection with	municipal	offerings,	political	contribution	rules,	underwriting	of	Build America	Bonds,	municipal	advisory	services	and	the	possible	impact	of	credit default	swap	transactions	on	municipal	issuers;

Ÿ	The	 sales,	 trading	 and	 clearance	 of	 corporate	 and	 government	 securities, currencies,	commodities	and	other	financial	products	and	related	sales	and other	 communications	 and	 activities,	 including	 compliance	 with	 the	 SEC's short	sale	rule,	algorithmic,	high-frequency	and	quantitative	trading,	the	firm's U.S.	alternative	trading	system,	futures	trading,	options	trading,	transaction reporting,	 technology	 systems	 and	 controls,	 securities	 lending	 practices, trading	and	clearance	of	credit	derivative	instruments,	commodities	activities and	metals	storage,	private	placement	practices,	allocations	of	and	trading	in securities,	and	trading	activities	and	communications	in	connection	with	the establishment	of	benchmark	rates,	such	as	currency	rates	and	the	ISDAFIX benchmark	rates;

Ÿ	Compliance	 with	 the	 U.S.	 Foreign	 Corrupt	 Practices	 Act, including	 with respect	to	the	firm's	hiring	practices;

Ÿ	The	firm's	system	of	risk	management	and	controls;	and

Ÿ	Insider	trading,	the	potential	misuse	and	dissemination	of	material	nonpublic information	 regarding	 corporate	 and	 governmental	 developments	 and	 the effectiveness	of	the	firm's	insider	trading	controls	and	information	barriers.

Goldman	 Sachs is cooperating	 with all such regulatory investigations and reviews.

# Employee	Benefit	Plans

The	firm	sponsors	various	pension	plans	and	certain	other	postretirement	benefit plans,	primarily	healthcare	and	 life	 insurance.	The	firm	also	provides	certain benefits	to	former	or	inactive	employees	prior	to	retirement.

# Defined	Benefit	Pension	Plans	and	Postretirement	Plans

Employees	of	certain	non-U.S.	subsidiaries	participate	in	various	defined	benefit pension	plans.	These	plans	generally	provide	benefits	based	on	years	of	credited service	 and	 a	 percentage	 of	 the	 employee's	 eligible	 compensation.	The	 firm maintains	 a	 defined	 benefit	 pension	 plan	 for	 certain	 U.K.	 employees.	As	 of April	2008,	the	U.K.	defined	benefit	plan	was	closed	to	new	participants,	but allows	 existing	 participants	 to	 continue	 to	 accrue	 benefits.	 In	 2014,	 the	 firm notified	plan	participants	that	it	intends	to	close	the	U.K.	defined	benefit	plan	to future	benefit	accruals	after	March	31,	2016.	The	non-U.S.	plans	do	not	have	a material	impact	on	the	firm's	consolidated	results	of	operations.

The	firm	also	maintains	a	defined	benefit	pension	plan	for	substantially	all	U.S. employees	hired	prior	to	November	1,	2003.	As	of	November	2004,	this	plan was	closed	to	new	participants	and	frozen	such	that	existing	participants	would not	 accrue	 any	 additional	 benefits.	 In	 addition,	 the	 firm	 maintains	 unfunded postretirement	benefit	plans	that	provide	medical	and	life	insurance	for	eligible retirees	and	their	dependents	covered	under	these	programs.	These	plans	do	not have	a	material	impact	on	the	firm's	consolidated	results	of	operations.

The	 firm	 recognizes	 the	 funded	 status	 of	 its	 defined	 benefit	 pension	 and postretirement	plans,	measured	as	the	difference	between	the	fair	value	of	the plan	assets	and	the	benefit	obligation,	in	the	consolidated	statements	of	financial condition.	 As	 of	 December	 2014,	 "Other	 assets"	 and	 "Other	 liabilities	 and accrued	expenses"	included	$273	million	(related	to	overfunded	pension	plans) and	$739	million,	respectively,	related	to	these	plans.	As	of	December	2013, "Other	 assets"	 and	 "Other	 liabilities	 and	 accrued	 expenses"	 included $179 million	 (related	 to	 overfunded	 pension	 plans)	 and $482 million, respectively,	related	to	these	plans.

# Defined	Contribution	Plans

The	 firm	 contributes	 to	 employer-sponsored	 U.S.	 and	 non-U.S.	 defined contribution	plans.	The	firm's	contribution	to	these	plans	was	$223	million	for 2014,	$219	million	for	2013	and	$221	million	for	2012.

# Employee	Incentive	Plans

The	cost	of	employee	services	received	in	exchange	for	a	share-based	award	is generally	measured	based	on	the	grant-date	fair	value	of	the	award.	Share-based awards	that	do	not	require	future	service	(i.e.,	vested	awards,	including	awards granted	 to	 retirement-eligible	 employees)	 are	 expensed	 immediately.	 Share- based	awards	that	require	future	service	are	amortized	over	the	relevant	service period.	Expected	forfeitures	are	included	in	determining	share-based	employee compensation	expense.

The	 firm	 pays	 cash	 dividend	 equivalents	 on	 outstanding	 RSUs.	 Dividend equivalents	paid	on	RSUs	are	generally	charged	to	retained	earnings.	Dividend equivalents	paid	on	RSUs	expected	to	be	forfeited	are	included	in	compensation expense.	The	firm	accounts	for	the	tax	benefit	related	to	dividend	equivalents paid	on	RSUs	as	an	increase	to	additional	paid-in	capital.

The	firm	generally	issues	new	shares	of	common	stock	upon	delivery	of	share- based	awards.	In	certain	cases,	primarily	related	to	conflicted	employment	(as outlined	in	the	applicable	award	agreements),	the	firm	may	cash	settle	share- based	 compensation	 awards	 accounted	 for	 as	 equity	 instruments.	 For	 these awards,	 whose	 terms	 allow	 for	 cash	 settlement,	 additional	 paid-in	 capital	 is adjusted	to	the	extent	of	the	difference	between	the	value	of	the	award	at	the	time of	cash	settlement	and	the	grant-date	value	of	the	award.

# Stock	Incentive	Plan

The	firm	sponsors	a	stock	incentive	plan,	The	Goldman	Sachs	Amended	and Restated	Stock	Incentive	Plan	(2013)	(2013	SIP),	which	provides	for	grants	of RSUs,	 restricted	 stock,	 dividend	 equivalent	 rights,	 incentive	 stock	 options, nonqualified	 stock	 options,	 stock	 appreciation	 rights,	 and	 other	 share-based awards,	 each	 of	 which	 may	 be	 subject	 to	 performance	 conditions.	 On May	23,	2013,	shareholders	approved	the	2013	SIP.	The	2013	SIP	replaces	The Goldman	Sachs	Amended	and	Restated	Stock	Incentive	Plan	(SIP)	previously	in effect,	and	applies	to	awards	granted	on	or	after	the	date	of	approval.

The	total	number	of	shares	of	common	stock	that	may	be	delivered	pursuant	to awards	granted	under	the	2013	SIP	cannot	exceed	60	million	shares,	subject	to adjustment	for	certain	changes	in	corporate	structure	as	permitted	under	the	2013 SIP.	The	2013	SIP	is	scheduled	to	terminate	on	the	date	of	the	annual	meeting	of shareholders	 that	occurs	 in	2016.	As	of	December	2014,	45.7	million	shares were	available	for	grant	under	the	2013	SIP.

# Restricted	Stock	Units

The	firm	grants	RSUs	to	employees	under	the	2013	SIP,	which	are	valued	based on	the	closing	price	of	the	underlying	shares	on	the	date	of	grant	after	taking	into account	a	liquidity	discount	for	any	applicable	post-vesting	transfer	restrictions. RSUs	generally	vest	and	underlying	shares	of	common	stock	deliver	as	outlined in	 the	 applicable	 RSU	 agreements.	 Employee	 RSU	 agreements	 generally provide	 that	 vesting	 is	 accelerated	 in	 certain	 circumstances,	 such	 as	 on retirement,	 death,	 disability	 and	 conflicted	 employment.	 Delivery	 of	 the underlying	shares	of	common	stock	 is	conditioned	on	 the	grantees	satisfying certain	vesting	and	other	requirements	outlined	in	the	award	agreements.

The	table	below	presents	the	activity	related	to	RSUs.

|  |  |  | Weighted	Average | Weighted	Average |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Grant-Date\tFair\tValue | Grant-Date\tFair\tValue |
|  | Restricted\tStock\nUnits\tOutstanding | Restricted\tStock\nUnits\tOutstanding | of\tRestricted\tStock\nUnits\tOutstanding | of\tRestricted\tStock\nUnits\tOutstanding |
|  | Future | No\tFuture | Future | No\tFuture |
|  | Service | Service | Service | Service |
|  | Required | Required | Required | Required |
| Outstanding,\tDecember\t2013 | 8,226,869 | 4\t\t\t\t 21,002,821 | $118.91 | $117.53 |
| Granted\t^1,\t2 | 4,832,540 | 9,567,783 | 155.13 | 149.52 |
| Forfeited | (800,429) | (158,958) | 130.57 | 139.02 |
| Delivered\t^3 | — | \t\t\t(14,723,912) | — | 121.60 |
| Vested\t^2 | \t\t(5,602,111) | 5,602,111 | 119.78 | 119.78 |
| Outstanding,\tDecember\t2014 | 6,656,869 | 4\t\t\t\t 21,289,845 | 143.07 | 129.52 |

3.Includes	RSUs	that	were	cash	settled.

4.Includes	restricted	stock	subject	to	future	service	requirements	as	of	December	2014	and December	2013	of	20,651	and	4,768	shares,	respectively.

In	the	first	quarter	of	2015,	the	firm	granted	to	its	employees	14.0	million	year- end	RSUs,	of	which	3.6	million	RSUs	require	future	service	as	a	condition	of delivery.	These	awards	are	subject	to	additional	conditions	as	outlined	in	the award	agreements.	Generally,	shares	underlying	these	awards,	net	of	required withholding	tax,	deliver	over	a	three-year	period	but	are	subject	to	post-vesting transfer	restrictions	through	January	2020.	These	grants	are	not	included	in	the table	above.

# Stock	Options

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Share-based\tcompensation | \t\t$2,101 | \t$2,039 | \t$1,338 |
| Excess\tnet\ttax\tbenefit\trelated\tto\toptions\texercised | 549 | 3 | 53 |
| Excess\tnet\ttax\tbenefit/(provision)\trelated\tto\tshare-based\nawards\t^1 | 788 | 94 | (11) |

1.Represents	the	net	tax	benefit/(provision)	recognized	in	additional	paid-in	capital	on	stock options	exercised	and	the	delivery	of	common	stock	underlying	share-based	awards.

# Parent	Company

# Group	Inc.	—	Condensed	Statements	of	Earnings

| Bank	subsidiaries | $					16				$2,000				$						— | $					16				$2,000				$						— | $					16				$2,000				$						— |
| :--- | :--- | :--- | :--- |
| Nonbank\tsubsidiaries | 2,739 | 4,176 | 3,622 |
| Undistributed\tearnings\tof\tsubsidiaries | 5,330 | 1,086 | 3,682 |
| Other\trevenues | 826 | 2,209 | 1,567 |
| Total\tnon-interest\trevenues | 8,911 | 9,471 | 8,871 |
| Interest\tincome | 3,769 | 4,048 | 4,751 |
| Interest\texpense | 3,802 | 4,161 | 4,287 |
| Net\tinterest\tincome/(loss) | (33) | (113) | 464 |
| Net\trevenues,\tincluding\tnet\tinterest\tincome | 8,878 | 9,358 | 9,335 |
| Operating\texpenses |  |  |  |
| Compensation\tand\tbenefits | 411 | 403 | 452 |
| Other\texpenses | 282 | 424 | 448 |
| Total\toperating\texpenses | 693 | 827 | 900 |
| Pre-tax\tearnings | 8,185 | 8,531 | 8,435 |
| Provision/(benefit)\tfor\ttaxes | (292) | 491 | 960 |
| Net\tearnings | 8,477 | 8,040 | 7,475 |
| Preferred\tstock\tdividends | 400 | 314 | 183 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders | \t\t$8,077\t\t\t\t$7,726\t\t\t\t$7,292 | \t\t$8,077\t\t\t\t$7,726\t\t\t\t$7,292 | \t\t$8,077\t\t\t\t$7,726\t\t\t\t$7,292 |

# Group	Inc.	—	Condensed	Statements	of	Financial	Condition

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Cash\tflows\tfrom\toperating\tactivities |  |  |  |
| Net\tearnings | $\t\t\t8,477 | $\t\t\t8,040 | $\t\t\t7,475 |
| Adjustments\tto\treconcile\tnet\tearnings\tto\tnet\tcash\tprovided\nby\toperating\tactivities\nUndistributed\tearnings\tof\tsubsidiaries | (5,330) | (1,086) | (3,682) |
| Depreciation\tand\tamortization | 42 | 15 | 15 |
| Deferred\tincome\ttaxes | (4) | 1,398 | (1,258) |
| Share-based\tcompensation | 188 | 194 | 81 |
| Gain\ton\textinguishment\tof\tjunior\tsubordinated\tdebt | (289) | — | — |
| Changes\tin\toperating\tassets\tand\tliabilities\nFinancial\tinstruments\towned,\tat\tfair\tvalue | 6,766 | (3,235) | 2,197 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased,\tat\tfair\nvalue | (252) | 183 | (3) |
| Other,\tnet | (5,793) | 586 | 1,888 |
| Net\tcash\tprovided\tby\toperating\tactivities | 3,805 | 6,095 | 6,713 |
| Cash\tflows\tfrom\tinvesting\tactivities |  |  |  |
| Purchase\tof\tproperty,\tleasehold\timprovements\tand |  |  |  |
| equipment | (15) | (3) | (12) |
| Repayments/(issuances)\tof\tshort-term\tloans\tby/(to)\nsubsidiaries,\tnet | (4,099) | (5,153) | 6,584 |
| Issuance\tof\tterm\tloans\tto\tsubsidiaries | (8,803) | (2,174) | (17,414) |
| Repayments\tof\tterm\tloans\tby\tsubsidiaries | 3,979 | 7,063 | 18,715 |
| Capital\tdistributions\tfrom/(contributions\tto)\tsubsidiaries,\tnet | 865 | 655 | (298) |
| Net\tcash\tprovided\tby/(used\tfor)\tinvesting\tactivities | (8,073) | 388 | 7,575 |
| Cash\tflows\tfrom\tfinancing\tactivities |  |  |  |
| Unsecured\tshort-term\tborrowings,\tnet | 963 | 1,296 | (2,647) |
| Proceeds\tfrom\tissuance\tof\tlong-term\tborrowings | 37,101 | 28,458 | 26,160 |
| Repayment\tof\tlong-term\tborrowings,\tincluding\tthe\tcurrent\nportion | (27,931) | (29,910) | (35,608) |
| Purchase\tof\ttrust\tpreferred\tsecurities\tand\tsenior\tguaranteed\ntrust\tsecurities | (1,801) | — | — |
| Common\tstock\trepurchased | (5,469) | (6,175) | (4,640) |
| Dividends\tand\tdividend\tequivalents\tpaid\ton\tcommon\tstock,\npreferred\tstock\tand\tshare-based\tawards | (1,454) | (1,302) | (1,086) |
| Proceeds\tfrom\tissuance\tof\tpreferred\tstock,\tnet\tof\tissuance\ncosts | 1,980 | 991 | 3,087 |
| Proceeds\tfrom\tissuance\tof\tcommon\tstock,\tincluding\nexercise\tof\tshare-based\tawards | 123 | 65 | 317 |
| Excess\ttax\tbenefit\trelated\tto\tshare-based\tawards | 782 | 98 | 130 |
| Cash\tsettlement\tof\tshare-based\tawards | (1) | (1) | (1) |
| Net\tcash\tprovided\tby/(used\tfor)\tfinancing\tactivities | 4,293 | (6,480) | (14,288) |
| Net\tincrease\tin\tcash\tand\tcash\tequivalents | 25 | 3 | — |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 17 | 14 | 14 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $\t\t\t\t\t\t\t\t42 | $\t\t\t\t\t\t\t\t17 | $\t\t\t\t\t\t\t\t14 |

# Non-cash	activity:

1.Primarily	includes	overnight	loans,	the	proceeds	of	which	can	be	used	to	satisfy	the	short- term	obligations	of	Group	Inc.

4.Unsecured	long-term	borrowings	with	subsidiaries	by	maturity	date	are	$186	million	in	2016,

# Supplemental	Financial	Information

# Quarterly	Results	(unaudited)

The	 following	 represents the	 firm's	 unaudited	 quarterly	 results	 for	 2014	 and 2013.	These	quarterly	results	were	prepared	in	accordance	with	U.S.	GAAP	and reflect	all

adjustments that are, in the opinion of	 management, necessary for a fair statement	of	the	results.	These	adjustments	are	of	a	normal,	recurring	nature.

|  |  | Three	Months	Ended |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | December | September | June | March |
| in\tmillions,\texcept\tper\tshare\tdata | 2014 | 2014 | 2014 | 2014 |
| Non-interest\trevenues | $6,727 | $7,338 | \t$8,125 | \t$8,291 |
| Interest\tincome | 2,134 | 2,297 | 2,579 | 2,594 |
| Interest\texpense | 1,173 | 1,248 | 1,579 | 1,557 |
| Net\tinterest\tincome | 961 | 1,049 | 1,000 | 1,037 |
| Net\trevenues,\tincluding\tnet\tinterest\tincome | 7,688 | 8,387 | 9,125 | 9,328 |
| Operating\texpenses\t^1 | 4,478 | 5,082 | 6,304 | 6,307 |
| Pre-tax\tearnings | 3,210 | 3,305 | 2,821 | 3,021 |
| Provision\tfor\ttaxes | 1,044 | 1,064 | 784 | 988 |
| Net\tearnings | 2,166 | 2,241 | 2,037 | 2,033 |
| Preferred\tstock\tdividends | 134 | 98 | 84 | 84 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders | $2,032 | $2,143 | \t$1,953 | \t$1,949 |
| Earnings\tper\tcommon\tshare\nBasic | $\t\t4.50 | $\t\t4.69 | \t$\t\t4.21 | \t$\t\t4.15 |
| Diluted | 4.38 | 4.57 | 4.10 | 4.02 |
| Dividends\tdeclared\tper\tcommon\tshare | 0.60 | 0.55 | 0.55 | 0.55 |

|  |  | Three	Months	Ended |  |  |
| :--- | :--- | :--- | :--- | :--- |
| in\tmillions,\texcept\tper\tshare\tdata | December\n2013 | September\n2013 | June\n2013 | March\n2013 |
| Non-interest\trevenues | $7,981 | $5,882 | \t$7,786 | \t$9,165 |
| Interest\tincome | 2,391 | 2,398 | 2,663 | 2,608 |
| Interest\texpense | 1,590 | 1,558 | 1,837 | 1,683 |
| Net\tinterest\tincome | 801 | 840 | 826 | 925 |
| Net\trevenues,\tincluding\tnet\tinterest\tincome | 8,782 | 6,722 | 8,612 | \t10,090 |
| Operating\texpenses\t^1 | 5,230 | 4,555 | 5,967 | 6,717 |
| Pre-tax\tearnings | 3,552 | 2,167 | 2,645 | 3,373 |
| Provision\tfor\ttaxes | 1,220 | 650 | 714 | 1,113 |
| Net\tearnings | 2,332 | 1,517 | 1,931 | 2,260 |
| Preferred\tstock\tdividends | 84 | 88 | 70 | 72 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders | $2,248 | $1,429 | \t$1,861 | \t$2,188 |
| Earnings\tper\tcommon\tshare\nBasic | $\t\t4.80 | $\t\t3.07 | \t$\t\t3.92 | \t$\t\t4.53 |
| Diluted | 4.60 | 2.88 | 3.70 | 4.29 |
| Dividends\tdeclared\tper\tcommon\tshare | 0.55 | 0.50 | 0.50 | 0.50 |

1.The	timing	and	magnitude	of	changes	in	the	firm's	discretionary	compensation	accruals	can	have	a	significant	effect	on	results	in	a	given	quarter.

# Common	Stock	Price	Range

The	table	below	presents	the	high	and	low	sales	prices	per	share	of	the	firm's	common	stock.

|  | 2014 |  | 2013 |  | 2012 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | High | Low | High | Low | High | Low |
| First\tquarter | \t$181.13 | \t$159.77 | \t$159.00 | \t$129.62 | \t$128.72 | \t$\t\t92.42 |
| Second\tquarter | 171.08 | 151.65 | 168.20 | 137.29 | 125.54 | 90.43 |
| Third\tquarter | 188.58 | 161.53 | 170.00 | 149.28 | 122.60 | 91.15 |
| Fourth\tquarter | 198.06 | 171.26 | 177.44 | 152.83 | 129.72 | 113.84 |

On	February	6,	2015,	the	last	reported	sales	price	for	the	firm's	common	stock on	the	New	York	Stock	Exchange	was	$183.43	per	share.

# Common	Stock	Performance

The	following	graph	and	table	compare	the	performance	of	an	investment	in	the firm's	common	stock	from	December	31,	2009	(the	last	trading	day	before	the firm's	2010	fiscal	year)	through	December	31,	2014,	with	the	S&P	500	Index and	 the	 S&P	 500	 Financials	 Index.	 The	 graph	 and	 table	 assume	 $100	 was invested	on

December	31,	2009	in	each	of	the	firm's	common	stock,	the	S&P	500	Index	and the	S&P	500	Financials	Index,	and	the	dividends	were	reinvested	on	the	date	of payment	 without	 payment	 of	 any	 commissions.	 The	 performance	 shown represents	past	performance	and	should	not	be	considered	an	indication	of	future performance.

|  | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| The\tGoldman\tSachs\tGroup,\tInc. | \t$100.00 | \t$100.54 | \t$\t\t54.69 | \t$\t\t78.41 | \t$110.39 | \t$122.29 |
| S&amp;P\t500\tIndex | 100.00 | 115.06 | 117.49 | 136.27 | 180.40 | 205.08 |
| S&amp;P\t500\tFinancials\tIndex | 100.00 | 112.13 | 93.00 | 119.73 | 162.34 | 186.98 |
|  |  |  |  | Goldman\tSachs\t2014\tForm\t10-K | Goldman\tSachs\t2014\tForm\t10-K | 223 |

# Selected	Financial	Data

|  |  | Year	Ended	or	as	of	December | Year	Ended	or	as	of	December | Year	Ended	or	as	of	December |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2014 | 2013 | 2012 | 2011 | 2010 |
| Income\tstatement\tdata\t($\tin\tmillions) |  |  |  |  |  |
| Non-interest\trevenues | \t $\t\t30,481 | \t $\t\t30,814 | \t $\t\t30,283 | \t $\t\t23,619 | $\t\t33,658 |
| Interest\tincome | 9,604 | 10,060 | 11,381 | 13,174 | 12,309 |
| Interest\texpense | 5,557 | 6,668 | 7,501 | 7,982 | 6,806 |
| Net\tinterest\tincome | 4,047 | 3,392 | 3,880 | 5,192 | 5,503 |
| Net\trevenues,\tincluding\tnet\tinterest\tincome | 34,528 | 34,206 | 34,163 | 28,811 | 39,161 |
| Compensation\tand\tbenefits | 12,691 | 12,613 | 12,944 | 12,223 | 15,376 |
| U.K.\tbank\tpayroll\ttax | — | — | — | — | 465 |
| Non-compensation\texpenses | 9,480 | 9,856 | 10,012 | 10,419 | 10,428 |
| Pre-tax\tearnings | \t $\t\t12,357 | \t $\t\t11,737 | \t $\t\t11,207 | \t $\t\t\t\t6,169 | $\t\t12,892 |
| Balance\tsheet\tdata\t($\tin\tmillions) |  |  |  |  |  |
| Total\tassets | \t $856,240 | \t $911,507 | \t $938,555 | \t $923,225 | $911,332 |
| Other\tsecured\tfinancings\t(long-term) | 7,249 | 7,524 | 8,965 | 8,179 | 13,848 |
| Unsecured\tlong-term\tborrowings | 167,571 | 160,965 | 167,305 | 173,545 | 174,399 |
| Total\tliabilities | 773,443 | 833,040 | 862,839 | 852,846 | 833,976 |
| Total\tshareholders'\tequity | 82,797 | 78,467 | 75,716 | 70,379 | 77,356 |
| Common\tshare\tdata\t(in\tmillions,\texcept\tper\tshare\tamounts) |  |  |  |  |  |
| Earnings\tper\tcommon\tshare |  |  |  |  |  |
| Basic | \t $\t\t\t\t17.55 | \t $\t\t\t\t16.34 | \t $\t\t\t\t14.63 | \t $\t\t\t\t\t\t4.71 | $\t\t\t\t14.15 |
| Diluted | 17.07 | 15.46 | 14.13 | 4.51 | 13.18 |
| Dividends\tdeclared\tper\tcommon\tshare | 2.25 | 2.05 | 1.77 | 1.40 | 1.40 |
| Book\tvalue\tper\tcommon\tshare^\t1 | 163.01 | 152.48 | 144.67 | 130.31 | 128.72 |
| Average\tcommon\tshares\toutstanding |  |  |  |  |  |
| Basic | 458.9 | 471.3 | 496.2 | 524.6 | 542.0 |
| Diluted | 473.2 | 499.6 | 516.1 | 556.9 | 585.3 |
| Selected\tdata\t(unaudited) |  |  |  |  |  |
| Total\tstaff |  |  |  |  |  |
| Americas | 17,400 | 16,600 | 16,400 | 17,200 | 19,900 |
| Non-Americas | 16,600 | 16,300 | 16,000 | 16,100 | 15,800 |
| Total\tstaff | 34,000 | 32,900 | 32,400 | 33,300 | 35,700 |
| Assets\tunder\tsupervision\t($\tin\tbillions) |  |  |  |  |  |
| Asset\tclass |  |  |  |  |  |
| Alternative\tinvestments | \t $\t\t\t\t\t\t\t143 | \t $\t\t\t\t\t\t\t142 | \t $\t\t\t\t\t\t\t151 | \t $\t\t\t\t\t\t\t148 | $\t\t\t\t\t\t\t150 |
| Equity | 236 | 208 | 153 | 147 | 162 |
| Fixed\tincome | 516 | 446 | 411 | 353 | 346 |
| Long-term\tassets\tunder\tsupervision | 895 | 796 | 715 | 648 | 658 |
| Liquidity\tproducts | 283 | 246 | 250 | 247 | 259 |
| Total\tassets\tunder\tsupervision | \t $\t\t\t\t1,178 | \t $\t\t\t\t1,042 | \t $\t\t\t\t\t\t\t965 | \t $\t\t\t\t\t\t\t895 | $\t\t\t\t\t\t\t917 |

1.Book	value	per	common	share	is	based	on	common	shares	outstanding,	including	RSUs	granted	to	employees	with	no	future	service	requirements,	of	451.5	million,	467.4	million,	480.5	million, 516.3	million	and	546.9	million	as	of	December	2014,	December	2013,	December	2012,	December	2011	and	December	2010,	respectively.

# Statistical	Disclosures

# Distribution	of	Assets,	Liabilities	and	Shareholders'	Equity

The table	 below	 presents	 a summary	 of	 consolidated	 average	 balances	 and interest	rates.	Assets,	liabilities	and	interest	are

classified	as	U.S.	and	non-U.S.-based	on	the	location	of	the	legal	entity	in	which the	assets	and	liabilities	are	held.

|  |  | 2014 |  |  | 2013 |  |  | 2012 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Average\nbalance | \tInterest | Average\nrate | Average\nbalance | Interest | Average\nrate | Average\nbalance | Interest | Average\nrate |
| Assets |  |  |  |  |  |  |  |  |  |
| Deposits\twith\tbanks | \t$\t\t59,135 | \t $\t\t\t\t164 | 0.28% | \t$\t\t61,921 | \t$\t\t\t\t\t186 | 0.30% | \t$\t\t52,500 | \t$\t\t\t\t\t156 | 0.30% |
| U.S. | 53,606 | 144 | 0.27% | 56,848 | 167 | 0.29% | 49,123 | 132 | 0.27% |
| Non-U.S. | 5,529 | 20 | 0.36% | 5,073 | 19 | 0.37% | 3,377 | 24 | 0.71% |
| Securities\tborrowed,\tsecurities\tpurchased\tunder\tagreements\tto\tresell\tand\nfederal\tfunds\tsold | 302,321 | (81) | (0.03)% | 327,748 | 43 | 0.01% | 331,828 | (77) | (0.02)% |
| U.S. | 193,555 | (514) | (0.27)% | 198,677 | (289) | (0.15)% | 191,166 | (431) | (0.23)% |
| Non-U.S. | 108,766 | 433 | 0.40% | 129,071 | 332 | 0.26% | 140,662 | 354 | 0.25% |
| Financial\tinstruments\towned,\tat\tfair\tvalue^\t1 | 271,810 | 7,452 | 2.74% | 292,965 | 8,159 | 2.78% | 310,982 | 9,817 | 3.16% |
| U.S. | 170,647 | 5,045 | 2.96% | 182,158 | 5,353 | 2.94% | 190,490 | 6,548 | 3.44% |
| Non-U.S. | 101,163 | 2,407 | 2.38% | 110,807 | 2,806 | 2.53% | 120,492 | 3,269 | 2.71% |
| Loans\treceivable | 22,425 | 708 | 3.16% | 10,296 | 296 | 2.87% | 5,617 | 150 | 2.67% |
| U.S. | 21,459 | 650 | 3.03% | 9,736 | 268 | 2.75% | 5,526 | 148 | 2.68% |
| Non-U.S. | 966 | 58 | 6.00% | 560 | 28 | 5.00% | 91 | 2 | 2.20% |
| Other\tinterest-earning\tassets\t^2 | 140,733 | 1,361 | 0.97% | 138,775 | 1,376 | 0.99% | 130,810 | 1,335 | 1.02% |
| U.S. | 85,811 | 813 | 0.95% | 81,759 | 796 | 0.97% | 84,545 | 826 | 0.98% |
| Non-U.S. | 54,922 | 548 | 1.00% | 57,016 | 580 | 1.02% | 46,265 | 509 | 1.10% |
| Total\tinterest-earning\tassets | 796,424 | 9,604 | 1.21% | 831,705 | 10,060 | 1.21% | 831,737 | 11,381 | 1.37% |
| Cash\tand\tdue\tfrom\tbanks | 5,237 |  |  | 6,212 |  |  | 7,357 |  |  |
| Other\tnon-interest-earning\tassets^\t1 | 93,002 |  |  | 106,095 |  |  | 107,702 |  |  |
| Total\tassets | \t$894,663 |  |  | \t$944,012 |  |  | \t$946,796 |  |  |
| Liabilities |  |  |  |  |  |  |  |  |  |
| Interest-bearing\tdeposits | \t$\t\t73,286 | \t $\t\t\t\t333 | 0.45% | \t$\t\t69,707 | \t$\t\t\t\t\t387 | 0.56% | \t$\t\t56,399 | \t$\t\t\t\t\t399 | 0.71% |
| U.S. | 62,717 | 286 | 0.46% | 60,824 | 352 | 0.58% | 48,668 | 362 | 0.74% |
| Non-U.S. | 10,569 | 47 | 0.44% | 8,883 | 35 | 0.39% | 7,731 | 37 | 0.48% |
| Securities\tloaned\tand\tsecurities\tsold\tunder\tagreements\tto\trepurchase | 131,911 | 431 | 0.33% | 178,686 | 576 | 0.32% | 177,550 | 822 | 0.46% |
| U.S. | 79,517 | 206 | 0.26% | 114,884 | 242 | 0.21% | 121,145 | 380 | 0.31% |
| Non-U.S. | 52,394 | 225 | 0.43% | 63,802 | 334 | 0.52% | 56,405 | 442 | 0.78% |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased,\tat\tfair\tvalue\t^1 | 82,219 | 1,741 | 2.12% | 92,913 | 2,054 | 2.21% | 94,740 | 2,438 | 2.57% |
| U.S. | 39,708 | 828 | 2.09% | 37,923 | 671 | 1.77% | 41,436 | 852 | 2.06% |
| Non-U.S. | 42,511 | 913 | 2.15% | 54,990 | 1,383 | 2.52% | 53,304 | 1,586 | 2.98% |
| Short-term\tborrowings\t^3 | 64,594 | 447 | 0.69% | 60,926 | 394 | 0.65% | 70,359 | 581 | 0.83% |
| U.S. | 45,843 | 413 | 0.90% | 40,511 | 365 | 0.90% | 47,614 | 479 | 1.01% |
| Non-U.S. | 18,751 | 34 | 0.18% | 20,415 | 29 | 0.14% | 22,745 | 102 | 0.45% |
| Long-term\tborrowings\t^3 | 172,047 | 3,460 | 2.01% | 174,195 | 3,752 | 2.15% | 176,698 | 3,736 | 2.11% |
| U.S. | 164,844 | 3,327 | 2.02% | 168,106 | 3,635 | 2.16% | 170,163 | 3,582 | 2.11% |
| Non-U.S. | 7,203 | 133 | 1.85% | 6,089 | 117 | 1.92% | 6,535 | 154 | 2.36% |
| Other\tinterest-bearing\tliabilities\t^4 | 215,911 | (855) | (0.40)% | 203,482 | (495) | (0.24)% | 206,790 | (475) | (0.23)% |
| U.S. | 153,600 | (1,222) | (0.80)% | 144,888 | (904) | (0.62)% | 150,986 | (988) | (0.65)% |
| Non-U.S. | 62,311 | 367 | 0.59% | 58,594 | 409 | 0.70% | 55,804 | 513 | 0.92% |
| Total\tinterest-bearing\tliabilities | 739,968 | 5,557 | 0.75% | 779,909 | 6,668 | 0.85% | 782,536 | 7,501 | 0.96% |
| Non-interest-bearing\tdeposits | 799 |  |  | 655 |  |  | 324 |  |  |
| Other\tnon-interest-bearing\tliabilities\t^1 | 73,057 |  |  | 86,095 |  |  | 91,406 |  |  |
| Total\tliabilities | 813,824 |  |  | 866,659 |  |  | 874,266 |  |  |
| Shareholders'\tequity |  |  |  |  |  |  |  |  |  |
| Preferred\tstock | 8,585 |  |  | 6,892 |  |  | 4,392 |  |  |
| Common\tstock | 72,254 |  |  | 70,461 |  |  | 68,138 |  |  |
| Total\tshareholders'\tequity | 80,839 |  |  | 77,353 |  |  | 72,530 |  |  |
| Total\tliabilities\tand\tshareholders'\tequity | \t$894,663 |  |  | \t$944,012 |  |  | \t$946,796 |  |  |
| Interest\trate\tspread |  |  | 0.46% |  |  | 0.36% |  |  | 0.41% |
| Net\tinterest\tincome\tand\tnet\tyield\ton\tinterest-earning\tassets |  | \t $\t4,047 | 0.51% |  | \t$\t\t3,392 | 0.41% |  | \t$\t\t3,880 | 0.47% |
| U.S. |  | 2,300 | 0.44% |  | 1,934 | 0.37% |  | 2,556 | 0.49% |
| Non-U.S. |  | 1,747 | 0.64% |  | 1,458 | 0.48% |  | 1,324 | 0.43% |
| Assets |  |  | 34.07% |  |  | \t 36.37% |  |  | \t 37.38% |
| Liabilities |  |  | 26.18% |  |  | \t 27.28% |  |  | \t 25.88% |
| 4.Substantially\tall\tconsists\tof\tcertain\tpayables\tto\tcustomers\tand\tcounterparties. |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  | Goldman\tSachs\t2014\tForm\t10-K | Goldman\tSachs\t2014\tForm\t10-K | 225 |

1.Derivative	instruments	and	commodities	are	included	in	other	non-interest-earning	assets	and	other	non-interest-bearing	liabilities.

2.Primarily	consists	of	certain	receivables	from	customers	and	counterparties	and	cash	and	securities	segregated	for	regulatory	and	other	purposes.

3.Interest	rates	include	the	effects	of	interest	rate	swaps	accounted	for	as	hedges.

4.Substantially	all	consists	of	certain	payables	to	customers	and	counterparties.

# Changes	in	Net	Interest	Income,	Volume	and	Rate	Analysis

The table	below	presents	an	analysis	of the	effect	on	net interest income	of volume	and	rate	changes.	In	this	analysis,

changes	due	to	volume/rate	variance	have	been	allocated	to	volume.

Year	Ended

|  | December	2014	versus	December	2013 | December	2014	versus	December	2013 |  | December	2013	versus	December	2012 | December	2013	versus	December	2012 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Increase\t(decrease)\ndue\tto\tchange\tin: |  |  | Increase\t(decrease)\tdue\nto\tchange\tin: |  |  |
| $\tin\tmillions | Volume | Rate | Net\nChange | Volume | Rate | Net\nChange |
| Interest-earning\tassets |  |  |  |  |  |  |
| Deposits\twith\tbanks | $\t\t\t\t(7) | $\t\t(15) | $\t\t\t\t\t(22) | $\t\t\t29 | $\t\t\t\t\t\t\t\t1 | $\t\t\t\t\t\t30 |
| U.S. | (9) | (14) | (23) | 23 | 12 | 35 |
| Non-U.S. | 2 | (1) | 1 | 6 | (11) | (5) |
| Securities\tborrowed,\tsecurities\tpurchased\tunder\tagreements\tto\tresell\tand\tfederal\nfunds\tsold | (67) | (57) | (124) | (41) | 161 | 120 |
| U.S. | 14 | (239) | (225) | (11) | 153 | 142 |
| Non-U.S. | (81) | 182 | 101 | (30) | 8 | (22) |
| Financial\tinstruments\towned,\tat\tfair\tvalue | (569) | (138) | (707) | (490) | (1,168) | (1,658) |
| U.S. | (340) | 32 | (308) | (245) | (950) | (1,195) |
| Non-U.S. | (229) | (170) | (399) | (245) | (218) | (463) |
| Loans\treceivable | 379 | 33 | 412 | 139 | 7 | 146 |
| U.S. | 355 | 27 | 382 | 116 | 4 | 120 |
| Non-U.S. | 24 | 6 | 30 | 23 | 3 | 26 |
| Other\tinterest-earning\tassets | 17 | (32) | (15) | 82 | (41) | 41 |
| U.S. | 38 | (21) | 17 | (27) | (3) | (30) |
| Non-U.S. | (21) | (11) | (32) | 109 | (38) | 71 |
| Change\tin\tinterest\tincome | (247) | (209) | (456) | (281) | (1,040) | (1,321) |
| Interest-bearing\tliabilities |  |  |  |  |  |  |
| Interest-bearing\tdeposits | \t\t\t16 | \t\t(70) | \t\t\t\t\t(54) | \t\t\t75 | \t\t\t\t\t(87) | \t\t\t\t\t(12) |
| U.S. | 9 | (75) | (66) | 70 | (80) | (10) |
| Non-U.S. | 7 | 5 | 12 | 5 | (7) | (2) |
| Securities\tloaned\tand\tsecurities\tsold\tunder\tagreements\tto\trepurchase | (141) | (4) | (145) | 26 | (272) | (246) |
| U.S. | (92) | 56 | (36) | (13) | (125) | (138) |
| Non-U.S. | (49) | (60) | (109) | 39 | (147) | (108) |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased,\tat\tfair\tvalue | (231) | (82) | (313) | (20) | (364) | (384) |
| U.S. | 37 | 120 | 157 | (62) | (119) | (181) |
| Non-U.S. | (268) | (202) | (470) | 42 | (245) | (203) |
| Short-term\tborrowings | 45 | 8 | 53 | (67) | (120) | (187) |
| U.S. | 48 | — | 48 | (64) | (50) | (114) |
| Non-U.S. | (3) | 8 | 5 | (3) | (70) | (73) |
| Long-term\tborrowings | (45) | (247) | (292) | (53) | 69 | 16 |
| U.S. | (66) | (242) | (308) | (44) | 97 | 53 |
| Non-U.S. | 21 | (5) | 16 | (9) | (28) | (37) |
| Other\tinterest-bearing\tliabilities | (47) | (313) | (360) | 57 | (77) | (20) |
| U.S. | (69) | (249) | (318) | 38 | 46 | 84 |
| Non-U.S. | 22 | (64) | (42) | 19 | (123) | (104) |
| Change\tin\tinterest\texpense | (403) | (708) | (1,111) | 18 | (851) | (833) |
| Change\tin\tnet\tinterest\tincome | $\t156 | $\t499 | $\t\t\t\t655 | $(299) | $\t\t\t(189) | $\t\t\t(488) |

The	tables	below	present	a	summary	of	the	firm's	interest-bearing	deposits.

# Short-term	and	Other	Borrowed	Funds

The tables below present a summary of the firm's securities loaned and securities sold	 under agreements to repurchase, and short-term	 borrowings. These	borrowings	generally	mature	within	one	year	of	the	financial	statement date	 and include	 borrowings that	 are	 redeemable	 at the	 option	 of the	 holder within	one	year	of	the	financial	statement	date.

|  |  | Short-Term	Borrowings<br>as	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2014 | 2013 | 2012 |
| Amounts\toutstanding\tat\tyear-end^\t1 | \t\t $\t\t60,100 | $\t\t61,982 | $\t\t67,349 |
| Average\toutstanding\tduring\tthe\tyear | 64,594 | 60,926 | 70,359 |
| Maximum\tmonth-end\toutstanding | 68,572 | 66,978 | 75,280 |
| Weighted\taverage\tinterest\trate^\t2 |  |  |  |
| During\tthe\tyear | 0.69% | 0.65% | 0.83% |
| At\tyear-end | 0.68% | 0.89% | 0.79% |

2.The	 weighted	 average interest rates for these	 borrowings include the	 effect	 of	 hedging activities.

# Cross-border	Outstandings

Cross-border	 outstandings	 are	 based	 on	 the	 Federal	 Financial	 Institutions Examination	 Council's	 (FFIEC)	 guidelines	 for	 reporting	 cross-border information	and	represent	the	amounts	that	the	firm	may	not	be	able	to	obtain from	 a	 foreign	 country	 due	 to	 country-specific	 events,	 including	 unfavorable economic	and	political	conditions,	economic	and	social	instability,	and	changes in	government	policies.

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

The	tables	below	present	cross-border	outstandings	and	commitments	for	each country	in	which	cross-border	outstandings	exceed	0.75%	of	consolidated	assets in	 accordance	 with	 the	 FFIEC	 guidelines	 and	 include	 cash,	 receivables, securities	purchased	under	agreements	to	resell,	securities	borrowed	and	cash financial	instruments,	but	exclude	derivative	instruments.	Securities	purchased under	agreements	to	resell	and	securities	borrowed	are	presented	gross,	without reduction	 for	 related	 securities	 collateral	 held.	 Margin	 loans	 (included	 in receivables)	are	presented	based	on	the	amount	of	collateral	advanced	by	the counterparty.	 Substantially	 all	 commitments	 in	 the	 table	 below	 consist	 of commitments	 to	 extend	 credit	 and	 forward	 starting	 resale	 and	 securities borrowing	agreements.

1.Primarily	comprised	of	secured	lending	transactions	with	a	clearing	house.

2.Primarily	comprised	of	interests	in	and	receivables	from	funds	domiciled	in	Ireland,	but	whose	underlying	investments	are	primarily	located	outside	of	Ireland,	and	secured	lending	transactions.

# Item 9. Changes in and Disagreements with Accountants	on	Accounting	and	Financial	Disclosure

There	were	no	changes	in	or	disagreements	with	accountants	on	accounting	and financial	disclosure	during	the	last	two	years.

# Item	9A.				Controls	and	Procedures

As	of	the	end	of	the	period	covered	by	this	report,	an	evaluation	was	carried	out by	Goldman	Sachs'	management,	with	the	participation	of	our	Chief	Executive Officer	 and	 Chief	 Financial	 Officer,	 of	 the	 effectiveness	 of	 our	 disclosure controls	and	procedures	(as	defined	in	Rule	13a-15(e)	under	the	Exchange	Act). Based	upon	that	evaluation,	our	Chief	Executive	Officer	and	Chief	Financial Officer	concluded	that	these	disclosure	controls	and	procedures	were	effective	as of	the	end	of	the	period	covered	by	this	report.	In	addition,	no	change	in	our internal	control	over	financial	reporting	(as	defined	in	Rule	13a-15(f)	under	the Exchange	 Act)	 occurred	 during	 the	 fourth	 quarter	 of	 our	 year	 ended December	 31,	 2014	 that	 has	 materially	 affected,	 or	 is	 reasonably	 likely	 to materially	affect,	our	internal	control	over	financial	reporting.

Management's	 Report	 on	 Internal	 Control	 over	 Financial	 Reporting	 and	 the Report	of	Independent	Registered	Public	Accounting	Firm	are	set	forth	in	Part	II, Item	8	of	the	2014	Form	10-K.

# Item	9B.				Other	Information

Effective	 February 20, 2015,	 the	 Board	 approved	 an	 amendment	 to	 our Amended	 and	 Restated	 By-Laws	 solely	 to	 change	 three	 references	 to	 the "Corporate	Governance,	Nominating	and	Public	Responsibilities	Committee"	to the	"Corporate	Governance	and	Nominating	Committee,"	reflecting	a	change	in the	name	of	that	Board	committee.

# PART	III

# Item	10.				Directors,	Executive	Officers	and	Corporate Governance

Information	relating	to	our	executive	officers	is	included	on	page	44	of	the	2014 Form	10-K.	Information	relating	to	our	directors,	including	our	audit	committee and	audit	committee	financial	experts	and	the	procedures	by	which	shareholders can	recommend	director	nominees,	and	our	executive	officers	will	be	 in	our definitive	Proxy	Statement	for	our	2015	Annual	Meeting	of	Shareholders,	which will	be	filed	within	120	days	of	the	end	of	2014	(2015	Proxy	Statement)	and	is incorporated	herein	by	reference.	Information	relating	to	our	Code	of	Business Conduct	and	Ethics,	which	applies	to	our	senior	financial	officers,	is	included under	"Available	Information"	in	Part	I,	Item	1	of	the	2014	Form	10-K.

# Item	11.				Executive	Compensation

Information	relating	to	our	executive	officer	and	director	compensation	and	the compensation	committee	of	the	Board	will	be	in	the	2015	Proxy	Statement	and	is incorporated	herein	by	reference.

# Item	 12. 	 Security	 Ownership	 of	 Certain	 Beneficial Owners and	 Management and	 Related Stockholder Matters

Information	relating	to	security	ownership	of	certain	beneficial	owners	of	our common stock and information relating to the security ownership of our management	will	be	in	the	2015	Proxy	Statement	and	is	incorporated	herein	by reference.

The	following	table	provides	information	as	of	December	31,	2014,	the	last	day of	 2014, regarding securities to	 be issued	 on	 exercise	 of	 outstanding stock options	or	pursuant	to	outstanding	restricted	stock	units	and	securities	remaining available	for	issuance	under	our	equity	compensation	plans	that	were	in	effect during	2014.

|  |  | Number	of |  | Future |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Securities |  | Issuance |
|  |  | to\tbe | Weighted | Under\tEquity |
|  |  | Issued | Average | Compensation |
|  |  | Upon | Exercise | Plans |
|  |  | Exercise\tof | Price\tof | (Excluding |
|  |  | Outstanding | Outstanding | Securities |
|  | Plan\nCategory | Options,\nWarrants\nand\tRights | Options,\nWarrants\nand\tRights | Reflected\tin\nthe\tSecond\nColumn) |
| Equity | The |  |  |  |
| compensation | Goldman |  |  |  |
| plans | Sachs |  |  |  |
| approved\tby | Amended |  |  |  |
| security\tholders | and |  |  |  |
|  | Restated |  |  |  |
|  | Stock |  |  |  |
|  | Incentive |  |  |  |
|  | Plan |  |  |  |
|  | (2013)\t^1 | 47,970,886\t^2 | $120.40\t^3 | 45,678,241\t^4 |
| Equity |  |  |  |  |
| compensation |  |  |  |  |
| plans\tnot |  |  |  |  |
| approved\tby |  |  |  |  |
| security\tholders | \tNone | — | — | — |
| Total |  | 47,970,886\t^2 |  | 45,678,241\t^4 |

1.The	Goldman	Sachs	Amended	and	Restated	Stock	Incentive	Plan	(2013)	(2013	SIP)	was approved	by	the	shareholders	of	Group	Inc.	at	our	2013	Annual	Meeting	of	Shareholders	and is	a	successor	plan	to	The	Goldman	Sachs	Amended	and	Restated	Stock	Incentive	Plan (2003	SIP).	The	2003	SIP	was	approved	by	our	shareholders	at	our	2003	Annual	Meeting	of shareholders	and	was	a	successor	plan	to	The	Goldman	Sachs	1999	Stock	Incentive	Plan (1999	SIP),	which	was	approved	by	our	shareholders	immediately	prior	to	our	initial	public offering	in	May	1999.

2.Includes:	 (i)	 19,955,338	 shares	 of	 common	 stock	 that	 may	 be	 issued	 upon	 exercise	 of outstanding	options	and	(ii)	28,015,548	shares	that	may	be	issued	pursuant	to	outstanding restricted	stock	units.	These	awards	are	subject	to	vesting	and	other	conditions	to	the	extent set	forth	in	the	respective	award	agreements,	and	the	underlying	shares	will	be	delivered	net of	any	required	tax	withholding.

3.This	weighted	average	exercise	price	relates	only	 to	 the	options	described	 in	 footnote	2. Shares	 underlying	 restricted	 stock	 units	 are	 deliverable	 without	 the	 payment	 of	 any consideration,	and	therefore	these	awards	have	not	been	taken	into	account	in	calculating the	weighted	average	exercise	price.

4.Represents	shares	remaining	to	be	issued	under	the	2013	SIP,	excluding	shares	reflected	in the	second	column.	The	 total	number	of	shares	of	common	stock	 that	may	be	delivered pursuant	to	awards	granted	under	the	2013	SIP	cannot	exceed	60	million	shares,	subject	to adjustment	 for	 certain	 changes	 in	 corporate	 structure	 as	 permitted	 under	 the	 2013	 SIP. Shares	that	remain	authorized	but	unissued	under	the	2003	SIP	are	not	carried	over	to	the 2013	SIP.	There	are	no	shares	remaining	to	be	issued	under	the	1999	SIP	or	2003	SIP	other than	those	reflected	in	the	second	column.

# Item 13. Certain Relationships and Related Transactions,	and	Director	Independence

Information	regarding	certain	relationships	and	related	transactions	and	director independence	will	be	in	the	2015	Proxy	Statement	and	is	incorporated	herein	by reference.

# Item	14.				Principal	Accounting	Fees	and	Services

Information	regarding	principal	accounting	fees	and	services	will	be	in	the	2015 Proxy	Statement	and	is	incorporated	herein	by	reference.

# PART	IV

# Item	15.				Exhibits,	Financial	Statement	Schedules

# (a)	Documents	filed	as	part	of	this	Report:

# 1.	Consolidated	Financial	Statements

The	consolidated	financial	statements	required	to	be	filed	in	the	2014	Form	10-K	are	included	in	Part	II,	Item	8	hereof.

		10.40 Form	of	Year-End	Restricted	Stock	Award	Agreement	(fully	vested)	(incorporated	by	reference	to	Exhibit	10.41	to	the	Registrant's	Annual	Report	on Form	10-K	for	the	fiscal	year	ended	December	31,	2013).^		†

		10.44 General	Guarantee	Agreement,	dated	March	2,	2010,	made	by	The	Goldman	Sachs	Group,	Inc.	relating	to	the	obligations	of	Goldman	Sachs	Execution	& Clearing,	L.P.	(incorporated	by	reference	to	Exhibit	10.1	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	period	ended	March	31,	2010).

†						This	exhibit	is	a	management	contract	or	a	compensatory	plan	or	arrangement.

*					This	information	is	furnished	and	not	filed	for	purposes	of	Sections	11	and	12	of	the	Securities	Act	of	1933	and	Section	18	of	the	Securities	Exchange	Act	of	1934.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	Registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf	by	the undersigned,	thereunto	duly	authorized.

		Name: Harvey	M.	Schwartz

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of	the	Registrant	and	in	the capacities	and	on	the	dates	indicated.



Question: what percentage of securities borrowed were at fair value for december 31 2015?
Calculation: borrowed_at_fair_value = 172099 / 1000
borrowed_at_fair_value_2015 = 69.80 / borrowed_at_fair_value
answer = borrowed_at_fair_value_2015 * 100
Answer: 40.6%