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,	2018

# The	Goldman	Sachs	Group,	Inc.

(Exact	name	of	registrant	as	specified	in	its	charter)

Delaware

(State	or	other	jurisdiction	of incorporation	or	organization)

(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

Depositary	Shares,	Each	Representing	1/1,000th	Interest	in	a	Share	of	Floating	Rate Non-Cumulative	Preferred	Stock,	Series	D

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

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

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

Depository	Shares,	Each	Representing	1/1,000th	Interest	in	a	Share	of	6.30%

Non-Cumulative	Preferred	Stock,	Series	N

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

(Zip	Code)

# Name	of	each	exchange	on	which	registered:

New	York	Stock	Exchange

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

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

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.	☒	Yes	☐	No

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	15(d)	of	the	Act.	☐	Yes	☒	No

Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during	the preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past 90	days.	☒	Yes	☐	No

Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	every	Interactive	Data	File	required	to	be	submitted	pursuant	to	Rule	405	of	Regulation	S-T (§	232.405	of	this	chapter)	during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	submit	such	files).	☒	Yes	☐	No

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	(§	229.405	of	this	chapter)	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	this	Form	10-K	or	any	amendment to	this	Form	10-K.	☒

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

Large	accelerated	filer	☒

Smaller	reporting	company	☐

Accelerated	filer	☐

Non-accelerated	filer	☐

Emerging	growth	company	☐

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

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

As	of	June	30,	2018,	the	aggregate	market	value	of	the	common	stock	of	the	registrant	held	by	non-affiliates	of	the	registrant	was	approximately	$82.2	billion.

As	of	February	8,	2019,	there	were	368,272,261	shares	of	the	registrant's	common	stock	outstanding.

Documents	incorporated	by	reference:	Portions	of	The	Goldman	Sachs	Group,	Inc.'s	Proxy	Statement	for	its	2019	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.

# THE	GOLDMAN	SACHS	GROUP,	INC.	AND	SUBSIDIARIES

ANNUAL	REPORT	ON	FORM	10-K	FOR	THE	FISCAL	YEAR	ENDED	DECEMBER	31,	2018

# INDEX

# Item	1A

# Item	5

|  | Page	No. |
| :--- | :--- |
| Item\t7 |  |
| Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\nand\tResults\tof\tOperations | 45 |
| Introduction | 45 |
| Executive\tOverview | 46 |
| Business\tEnvironment | 47 |
| Critical\tAccounting\tPolicies | 48 |
| Recent\tAccounting\tDevelopments | 50 |
| Use\tof\tEstimates | 50 |
| Results\tof\tOperations | 50 |
| Balance\tSheet\tand\tFunding\tSources | 63 |
| Equity\tCapital\tManagement\tand\tRegulatory\tCapital | 68 |
| Regulatory\tMatters\tand\tOther\tDevelopments | 72 |
| Off-Balance-Sheet\tArrangements\tand\tContractual\tObligations | 74 |
| Risk\tManagement | 76 |
| Overview\tand\tStructure\tof\tRisk\tManagement | 76 |
| Liquidity\tRisk\tManagement | 81 |
| Market\tRisk\tManagement | 88 |
| Credit\tRisk\tManagement | 93 |
| Operational\tRisk\tManagement | 99 |
| Model\tRisk\tManagement | 101 |
| Item\t7A |  |
| Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk | 102 |

# Changes	in	and	Disagreements	with	Accountants	on	Accounting and	Financial	Disclosure 196 Item	9A Controls	and	Procedures 196 Item	9B Other	Information 196 PART	III 196

# 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	individuals.

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

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

As	of	December	2018,	we	had	offices	in	over	30	countries	and	46%	of	our headcount	 was	 based	 outside	 the	 Americas.	 Our	 clients	 are	 located worldwide	and	we	are	an	active	participant	in	financial	markets	around	the world.

# Our	Business	Segments

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.

# 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	corporates,	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.	 We	 are	 a leader in	 providing financial	 advisory services,	including	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 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.

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	and	acquisition	financing,	of	a	wide	range	of	securities	and other	financial	 instruments,	 including	 loans.	 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,	including	in	connection	with	acquisition	financing,	and emerging-	 and	 growth-market	 debt,	 which	 may	 be	 issued	 by,	 among others,	corporate,	sovereign,	municipal	and	agency	issuers.	In	addition,	we underwrite	 and	 originate	 structured	 securities,	 which	 include	 mortgage- related	securities	and	other	asset-backed	securities.

# Institutional	Client	Services

Institutional	Client	Services	serves	our	clients	who	come	to	us	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.

As	a	market	maker,	we	provide	prices	to	clients	globally	across	thousands of	products	in	all	major	asset	classes	and	markets.	At	times	we	take	the other	 side	 of	 transactions	 ourselves	 if	 a	 buyer	 or	 seller	 is	 not	 readily available	and	at	other	times	we	connect	our	clients	to	other	parties	who want	to	transact.	Our	willingness	to	make	markets,	commit	capital	and	take risk	 in	 a	 broad	 range	 of	 products	 is	 crucial	 to	 our	 client	 relationships. Market	makers	provide	liquidity	and	play	a	critical	role	in	price	discovery, which	contributes	to	the	overall	efficiency	of	the	capital	markets.

Our	 clients	 are	 primarily	 institutions	 that	 are	 professional	 market participants,	 including	 investment	 entities	 whose	 ultimate	 clients	 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.	 Much	 of	 this	 connectivity	 between	 us	 and	 our 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	2018,	provided fundamental	 research	 on	 approximately	 3,000	 companies	 worldwide	 and more	than	40	national	economies,	as	well	as	on	industries,	currencies	and commodities.

Institutional Client Services generates revenues from the following activities:

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

•	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	than	those	charged	in	more	liquid	markets;

•	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);

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

•	In	connection	with	our	market-making	activities,	we	maintain	inventory, typically	for	a	short	period	of	time,	in	response	to,	or	in	anticipation	of, client	 demand.	 We	 also	 hold	 inventory	 to	 actively	 manage	 our	 risk exposures	that	arise	from	these	market-making	activities.	We	carry	our inventory	at	fair	value	with	changes	in	valuation	reflected	in	net	revenues.

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,	stock	or	other	asset	on	a	specified	date	in	the	future	at	a certain	price,	or	an	interest	rate	swap,	which	is	the	agreement	to	convert	a fixed	rate	of	interest	into	a	floating	rate	or	vice	versa).

# Fixed Income,	 Currency	 and	 Commodities	 Client	 Execution.

Includes	client	execution	activities	related	to	making	markets	in	both	cash and	 derivative	 instruments	 for	 interest	 rate	 products,	 credit	 products, mortgages,	currencies	and	commodities.

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

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

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

•	Currencies.	Currency	options,	spot/forwards	and	other	derivatives	on G-10	currencies	and	emerging-market	products.

•	Commodities.	Commodity	derivatives	and,	to	a	lesser	extent,	physical commodities,	involving	crude	oil	and	petroleum	products,	natural	gas, base,	precious	and	other	metals,	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	 exchange-traded	 funds,	 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,	including	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	complex	"high- touch"	execution	through	both	traditional	and	electronic	platforms.

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

•	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.

•	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.

•	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	activities	across	various	asset	classes,	primarily	debt	securities	and loans,	public	and	private	equity	securities,	infrastructure	and	real	estate. These	 activities	 include	 making	 investments,	 some	 of	 which	 are consolidated,	 through	 our	 Merchant	 Banking	 business	 and	 our	 Special Situations	Group.	Some	of	these	investments	are	made	indirectly	through funds	that	we	manage.	We	also	provide	financing	to	corporate	clients	and individuals,	including	bank	loans,	personal	loans	and	mortgages.

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

Debt Securities and Loans.	 We make	 corporate,	 real	 estate, infrastructure	 and	 other	 debt	 investments.	 In	 addition,	 we	 provide financing	 to	 clients	 through	 loan	 facilities	 and	 through	 secured	 loans, including	 secured	 loans	 through	 our	 digital platform,	Goldman	 Sachs Private	Bank	Select.	We	also	make	unsecured	loans	and	accept	deposits through	our	digital	platform,	Marcus:	by	Goldman	Sachs.

# Investment	Management

Investment	Management	provides	investment	and	wealth	advisory	services to	help	clients	preserve	and	grow	their	financial	assets.	We	provide	these services	to	our	institutional	and	high-net-worth	individual	clients,	as	well as	investors	who	primarily	access	our	products	through	a	network	of	third- party	distributors	around	the	world.

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

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

We	 supplement	 our	 investment	 advisory	 solutions	 for	high-net-worth individuals	with	wealth	advisory	services	that	include	income	and	liability management,	 trust	 and	 estate	 planning,	 philanthropic	 giving	 and	 tax planning.	We	also	use	our	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	consists	of	asset-based	fees	on	client	assets.	The	fees	that	we charge	 vary	 by	 asset	 class,	 distribution	 channel	 and	 the	 type	 of	 services provided,	 and	 are	 affected	 by	 investment	 performance,	 as	 well	 as	 asset inflows	and	redemptions.	Other	fees	we	receive	primarily	include	financial planning	and	counseling	fees	generated	 through	wealth	advisory	services provided	by	our	subsidiary,	The	Ayco	Company,	L.P.

Assets	 under	 supervision	 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.	 Assets	 under	 supervision	 also	 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	market	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	and	credit	funds	when	the	return	on	a	fund's	investments	over	the	life of	the	fund	exceeds	certain	threshold	returns.

Transaction	Revenues.	We	 receive	 commissions	 and	 net	 spreads	 for facilitating	 transactional	 activity	 in	high-net-worth	 individual	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	numerous	highly	publicized	events	in	recent	years,	including	(i)	cyber attacks	 against	 financial	 institutions,	 governmental	 agencies,	 large consumer-based	 companies	 and	 other	 organizations	 that	 resulted	 in	 the unauthorized	disclosure	of	personal	information	of	clients	and	customers and	other	sensitive	or	confidential	information,	the	theft	and	destruction	of corporate	information	and	requests	for	ransom	payments,	and	(ii)	extreme weather	events.

Our	 Business	 Continuity	 &	 Technology	 Resilience	 Program	 has	 been developed	to	provide	reasonable	assurance	of	business	continuity	in	the event	of	disruptions	at	our	critical	facilities	or	systems	and	to	comply	with regulatory	 requirements,	 including	 those	 of	 FINRA.	 Because	 we	 are	 a BHC,	our	Business	Continuity	&	Technology	Resilience	Program	is	also subject	to	review	by	the	FRB.	The	key	elements	of	the	program	are	crisis management,	 business	 continuity,	 technology	 resilience,	 business recovery,	assurance	and	verification,	and	process	improvement.	In	the	area of	information	security,	we	have	developed	and	implemented	a	framework of	principles,	policies	and	technology	designed	to	protect	the	information provided	to	us	by	our	clients	and	our	own	information	from	cyber	attacks and	other	misappropriation,	corruption	or	loss.	Safeguards	are	designed	to maintain	the	confidentiality,	integrity	and	availability	of	information.

# 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	which	includes	an	evaluation	of	an	employee's performance	with	respect	to	risk	management,	compliance	and	diversity. As	of	December	2018,	we	had	headcount	of	36,600.

# 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,	 market-making	 and	 investment management	 services,	 and	 commercial	 and/or	 consumer	 lending	 and deposit-taking	products,	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,	 merchant	 banks,	 consumer	 finance companies	 and	 financial	 technology	 and	 other	 internet-based	 companies. We	 compete	 with	 some	 entities	 globally	 and	 with	 others	 on	 a	 regional, product	or	niche	basis.	We	compete	based	on	a	number	of	factors,	including transaction	 execution,	 products	 and	 services,	 innovation,	 reputation	 and price.

We	have	faced,	and	expect	to	continue	to	face,	pressure	to	retain	market share	by	committing	capital	to	businesses	or	transactions	on	terms	that	offer returns	 that	 may	 not	 be	 commensurate	 with	 their	 risks.	 In	 particular, corporate	clients	seek	such	commitments	(such	as	agreements	to	participate in	 their	 loan	 facilities)	 from	 financial	 services	 firms	 in	 connection	 with investment	banking	and	other	assignments.

Consolidation	and	convergence	have	significantly	increased	the	capital	base and	geographic	reach	of	some	of	our	competitors,	and	have	also	hastened the	globalization	of	the	securities	and	other	financial	services	markets.	As	a result,	we	have	had	to	commit	capital	to	support	our	international	operations and	to	execute	large	global	transactions.	To	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	U.S.

We	also	compete	with	smaller	institutions	that	offer	more	targeted	services, such	as	independent	advisory	firms.	Some	clients	may	perceive	these	firms to	be	less	susceptible	to	potential	conflicts	of	interest	than	we	are,	and,	as described	 below,	 our	 ability	 to	 effectively	 compete	 with	 them	 could	 be affected	by	regulations	and	limitations	on	activities	that	apply	to	us	but	may not	apply	to	them.

A	 number	 of	 our	 businesses	 are	 subject	 to	 intense	 price	 competition. Efforts	by	our	competitors	to	gain	market	share	have	resulted	in	pricing pressure	 in	our	 investment	banking	and	market-making	businesses,	and could	result	in	pricing	pressure	in	other	of	our	businesses.	For	example,	the increasing	volume	of	trades	executed	electronically,	through	the	internet and	 through	 alternative	 trading	 systems,	 has	 increased	 the	 pressure	 on trading	 commissions,	 in	 that	 commissions	 for	 electronic	 trading	 are generally	lower	than	for	non-electronic	trading.	It	appears	that	this	trend toward	low-commission	trading	will	continue.	Price	competition	has	also led	to	compression	in	the	difference	between	the	price	at	which	a	market participant	is	willing	to	sell	an	instrument	and	the	price	at	which	another market	participant	is	willing	to	buy	it	(i.e.,	bid/offer	spread),	which	has affected	our	market-making	businesses.	In	addition,	we	believe	 that	we will	continue	to	experience	competitive	pressures	in	these	and	other	areas in	the	future	as	some	of	our	competitors	seek	to	obtain	market	share	by further	reducing	prices,	and	as	we	enter	into	or	expand	our	presence	in markets	that	may	rely	more	heavily	on	electronic	trading	and	execution.

We	also	compete	on	the	basis	of	the	types	of	financial	products	that	we	and our	competitors	offer.	In	some	circumstances,	our	competitors	may	offer financial	products	that	we	do	not	offer	and	that	our	clients	may	prefer.

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	U.S.	and	to	form	and	invest	in funds	outside	the	U.S.

Likewise,	the	obligations	with	respect	to	derivative	transactions	under	Title VII	 of	 the	 Dodd-Frank	 Act	 depend,	 in	 part,	 on	 the	 location	 of	 the counterparties	to	the	transaction.	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	described	further	in	"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	FRB	and other	 regulators	 inside	 and	 outside	 the	 U.S.,	 including	 the	 Prudential Regulation	Authority	(PRA)	and	the	Financial	Conduct	Authority	(FCA)	in the	 U.K.	 We	 also	 compete	 for	 employees	 with	 institutions	 whose	 pay practices	 are	 not	 subject	 to	 regulatory	 oversight.	 See	 "Regulation	 — Compensation	 Practices"	 and	 "Risk	 Factors	 —	 Our	 businesses	 may	 be adversely	affected	if	we	are	unable	to	hire	and	retain	qualified	employees"	in Part	 I,	 Item 1A of	 this	Form	 10-K	 for	 further	 information	 about	 such regulation.

# Regulation

As	a	participant	in	the	global	financial	services	industry,	we	are	subject	to extensive	regulation	and	supervision	worldwide.	The	Dodd-Frank	Act,	and the	 rules	 thereunder,	 significantly	 altered	 the	 U.S.	 financial	 regulatory regime	within	which	we	operate	and	the	Markets	in	Financial	Instruments Regulation	 and	 Markets	 in	 Financial	 Instruments	 Directive	 (collectively, MiFID	II)	have	significantly	revised	the	regulatory	regime	for	our	European operations.	 The	 Basel	 Committee's	 framework	 for	 strengthening	 the regulation,	 supervision	 and	 risk	 management	 of	 banks	 (Basel	 III),	 is implemented	by	the	FRB,	the	PRA	and	other	national	regulators.	The	Basel Committee	 is	 the	 primary	 global	 standard	 setter	 for	 prudential	 bank regulation.	However,	its	standards	are	not	effective	in	any	jurisdiction	until rules	implementing	such	standards	have	been	implemented	by	the	relevant regulators.	The	implications	of	such	regulations	for	our	businesses	depend	to a	large	extent	on	their	implementation	by	the	relevant	regulators	globally, and	the	market	practices	and	structures	that	develop.

In	2017	and	2018,	the	U.S.	Department	of	the	Treasury,	in	response	to	an executive	 order	 issued	 by	 the	 President	 of	 the	 U.S.,	 issued	 four	 reports recommending	 a	 number	 of	 comprehensive	 changes	 to	 the	 regulatory systems	applicable	in	the	U.S.	to	banks	and	other	financial	institutions.

Other	reforms	have	been	adopted	or	are	being	considered	by	regulators	and policy	makers	worldwide,	as	described	below.	Recent	developments	have added	 additional	 uncertainty	 to	 the	 implementation,	 scope	 and	 timing	 of regulatory	reforms	and	potential	for	deregulation	in	some	areas.	The	effects of	any	changes	to	the	regulations	affecting	our	businesses,	including	as	a result	of	the	proposals	described	below,	are	uncertain	and	will	not	be	known until	the	changes	are	finalized	and	market	practices	and	structures	develop under	the	revised	regulations.

Goldman	Sachs	International	(GSI),	 Goldman	 Sachs	 International	 Bank (GSIB)	and	Goldman	Sachs	Asset	Management	International	(GSAMI), our	 principal	 E.U.	 operating	 subsidiaries,	 are	 incorporated	 and headquartered	in	the	U.K.	and,	as	such,	are	currently	subject	to	E.U.	legal and	regulatory	requirements,	based	on	directly	binding	regulations	of	the E.U.	 and	 the	 implementation	 of	 E.U.	 directives	 by	 the	 U.K.	 They	 all currently	 benefit	 from	non-discriminatory	 access	 to	 E.U.	 clients	 and infrastructure	based	on	E.U.	treaties	and	E.U.	legislation,	including	cross- border	 "passporting"	 arrangements	 and	 specific	 arrangements	 for	 the establishment	of	E.U.	branches.	As	a	result	of	the	U.K.'s	notification	to	the European	 Council	 of	 its	 decision	 to	 leave	 the	 E.U.	 (Brexit),	 there	 is considerable	uncertainty	as	to	the	regulatory	regime	that	will	be	applicable in	the	U.K.	and	the	regulatory	framework	that	will	govern	transactions	and business	 undertaken	 by	 our	 U.K.	 subsidiaries	 in	 the	 remaining	 E.U. countries.	The	 U.K.'s	 European	 Union	 (Withdrawal)	Act	 2018	 aims	 to preserve	the	direct	and	operative	E.U.	law	governing	the	requirements	on U.K.	financial	service	providers	as	English	law	beginning	March	29,	2019. References	 to	 E.U.	 regulations	 that	 are	 in	 effect	 in	 the	 U.K.	 as	 of March	29,	2019	may	apply	to	our	U.K.	subsidiaries	following	Brexit.	In addition,	 proposals	 by	 the	 Basel	 Committee	 or	 the	 E.U.	 may	 be implemented	in	the	U.K.	and	apply	to	our	U.K.	subsidiaries.

Pursuant	 to	 an	 agreement	 endorsed	 by	 the	 E.U.	 and	 U.K.	 leaders	 in November	(Withdrawal	Agreement),	the	existing	access	arrangements	for financial	services	would	continue	unchanged	until	the	end	of	2020,	with potential	for	one	further	extension	of	up	to	two	years,	subsequent	to	which a	new	trade	relationship	may	be	established	between	the	E.U.	and	the	U.K. While	the	parties	have	issued	a	political	declaration	on	the	outline	of	such co-operation,	 the	 exact	 terms	 of	 that	 future	 relationship,	 including	 the exact	terms	of	access	to	each	other's	financial	markets	remain	subject	to future	negotiation.	If	the	Withdrawal	Agreement	is	not	ratified,	beginning March	29,	2019,	the	date	on	which	the	U.K.	is	scheduled	to	leave	the	E.U., firms	established	in	the	U.K.,	including	our	U.K.	subsidiaries,	would	lose their	pan-E.U.	 "passports"	 and	 generally	 be	 treated	 like	 entities	 in countries	outside	the	E.U.	They	may,	however,	benefit	from	emergency measures,	including	those	that	several	E.U.	member	states	have	introduced so	 that	 existing	 contractual	 arrangements	 are	 not	 disrupted,	 in	 order	 to minimize	any	impact	on	existing	transactions.	The	E.U.	has	also	provided interim	 recognition	 to	 U.K.	 clearing	 houses	 so	 that	 E.U.	 clients	 can continue	to	access	them.

# Banking	Supervision	and	Regulation

Group	Inc.	is	a	BHC	under	the	U.S.	Bank	Holding	Company	Act	of	1956 (BHC	Act)	and	an	FHC	under	amendments	to	the	BHC	Act	effected	by	the U.S.	 Gramm-Leach-Bliley	 Act	 of	 1999	 (GLB	 Act),	 and	 is	 subject	 to supervision	and	examination	by	the	FRB,	which	is	our	primary	regulator.

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

In	November	2018,	the	FRB	issued	a	final	rule	establishing	a	new	rating system	for	large	financial	institutions,	such	as	us.	The	new	rating	system	is intended	 to	 align	 with	 the	 FRB's	 existing	 supervisory	 program	 for	 large financial	institutions	and	includes	component	ratings	for	capital	planning, liquidity	risk	management,	and	governance	and	controls.	The	FRB	has	also proposed	related	guidance	for	the	governance	and	controls	component.

Our	 principal	 U.S.	 bank	 subsidiary,	 GS	 Bank	 USA,	 is	 supervised	 and regulated	 by	 the	 FRB,	 the	 FDIC,	 the	 New	 York	 State	 Department	 of Financial	 Services	 (NYDFS)	 and	 the	 Bureau	 of	 Consumer	 Financial Protection.	A	number	of	our	activities	are	conducted	partially	or	entirely through	GS	Bank	USA	and	its	subsidiaries,	including:	origination	of	bank loans;	personal	loans	and	mortgages;	interest	rate,	credit,	currency	and	other derivatives;	 leveraged	 finance;	 deposit-taking;	 and	 agency	 lending.	 Our consumer-oriented	 activities	 are	 subject	 to	 extensive	 regulation	 and supervision	 by	 federal	 and	 state	 regulators	 with	 regard	 to	 consumer protection	laws,	including	laws	relating	to	fair	lending	and	other	practices	in connection	with	marketing	and	providing	consumer	financial	products.

Certain	 of	 our	 subsidiaries	 are	 regulated	 by	 the	 banking	 and	 securities regulatory	authorities	of	the	countries	in	which	they	operate.	As	described below,	our	E.U.	subsidiaries,	including	our	U.K.	subsidiaries,	are	subject to	various	European	regulations,	as	well	as	national	laws,	which	to	some extent	implement	European	directives.

GSI,	our	U.K.	broker-dealer	subsidiary	and	a	designated	investment	firm, and	GSIB,	our	U.K.	bank	subsidiary,	are	regulated	by	the	PRA	and	the FCA.	GSI	provides	broker-dealer	services	in	and	from	the	U.K.,	and	GSIB acts	as	a	primary	dealer	for	European	government	bonds	and	is	involved	in market	 making	 in	 European	 government	 bonds,	 lending	 (including securities	lending)	and	deposit-taking	activities.	GSIB's	consumer-oriented deposit-taking	 activities	 are	 subject	 to	 U.K.	 consumer	 protection regulations.	 Goldman	 Sachs	 Bank	 Europe	 SE	 ("GSBE,"	 formerly Goldman	 Sachs	AG),	 our	 German	 bank	 subsidiary,	 is	 regulated	 by	 the BaFin	 and	 Deutsche	 Bundesbank	 within	 the	 context	 of	 the	 European Single	 Supervisory	 Mechanism.	 In	 addition,	 in	 December	 2018,	 our German	subsidiary,	Goldman	Sachs	Europe	SE,	was	approved	by	BaFin	as an	 authorized	 investment	 firm,	 which	 will	 allow	 it	 to	 conduct	 certain activities	(such	as	activities	related	to	physical	commodities)	which	GSBE may	be	prevented	from	undertaking.

Capital	 and	 Liquidity	 Requirements.	 We	 and	 GS	 Bank	 USA	 are subject	to	regulatory	risk-based	capital	and	leverage	requirements	that	are calculated	 in	 accordance	 with	 the	 regulations	 of	 the	 FRB	 (Capital Framework).	The	Capital	Framework	is	largely	based	on	Basel	III	and	also implements	certain	provisions	of	the	Dodd-Frank	Act.	Under	the	Capital Framework,	 we	 and	 GS	 Bank	 USA	 are	 "Advanced	 approach"	 banking organizations.	 We	 have	 also	 been	 designated	 as	 a	 global	 systemically important	bank	(G-SIB).	Under	the	FRB's	capital	adequacy	requirements, we	and	GS	Bank	USA	must	meet	specific	regulatory	capital	requirements that	 involve	 quantitative	 measures	 of	 assets,	 liabilities	 and	 certain off-balance-sheet	 items.	 The	 sufficiency	 of	 our	 capital	 levels	 is	 also subject	to	qualitative	judgments	by	regulators.	We	and	GS	Bank	USA	are also	subject	to	liquidity	requirements	established	by	the	U.S.	federal	bank regulatory	agencies.

In	 October	 2018,	 the	 FRB	 released	 two	 proposals	 that	 would	 generally make	 the	 applicable	 capital	 and	 liquidity	 requirements	 less	 stringent	 for large	U.S.	banking	organizations	other	than	those	that	are	U.S.	G-SIBs,	such as	us.

GSI	and	GSIB	are	subject	to	capital	requirements	prescribed	in	the	E.U. Capital	 Requirements	 Regulation	 (CRR)	 and	 the	 E.U.	 Fourth	 Capital Requirements	Directive	(CRD	IV).	GSI	and	GSIB	are	subject	to	liquidity requirements	established	by	U.K.	regulatory	authorities	that	are	similar	to those	applicable	to	GS	Bank	USA	and	us.

Risk-Based	 Capital	 Ratios.	 The	 Capital	 Framework	 provides	 for	 an additional	capital	ratio	requirement	that	consists	of	three	components:	(i)	for capital	conservation	(capital	conservation	buffer),	(ii)	for	countercyclicality (countercyclical	capital	buffer)	and	(iii)	as	a	consequence	of	our	designation as	a	G-SIB	(G-SIB	buffer).	The	additional	capital	ratio	requirement	must	be satisfied	 entirely	 with	 capital	 that	 qualifies	 as	 Common	 Equity	 Tier	 1 (CET1).	 GS	 Bank	 USA	 is	 subject	 to	 the	 first	 two	 components	 of	 the additional	capital	ratio	requirement	discussed	above.

The	 capital	 conservation	 buffer	 and	G-SIB	 buffer	 began	 to	 phase	 in	 on January	 1,	 2016	 and	 continued	 to	 do	 so	 through	 January	 1,	 2019.	 In April	 2018,	 the	 FRB	 proposed	 a	 rule	 that	 would,	 among	 other	 things, replace	the	capital	conservation	buffer	with	a	stress	capital	buffer	(SCB) requirement	for	large	BHCs	subject	to	the	FRB's	Comprehensive	Capital Analysis	and	Review	(CCAR).	See	"Regulation	—	Banking	Supervision	and Regulation	—	Stress	Tests"	for	further	information	about	this	proposed	rule.

The	 countercyclical	 capital	 buffer	 is	 designed	 to	 counteract	 systemic vulnerabilities	and	currently	applies	only	to	"Advanced	approach"	banking organizations.	Several	other	national	supervisors	also	require	countercyclical capital	buffers.	The	G-SIB	and	countercyclical	capital	buffers	applicable	to us	could	change	in	the	future	and,	as	a	result,	the	minimum	capital	ratios	to which	we	are	subject	could	change.

In	December	2018,	the	U.S.	federal	bank	regulatory	agencies	issued	a	final rule	 that	 would	 provide	 an	 optional	 three-year	phase-in	 period	 for	 the day-one	regulatory	capital	effects	of	the	adoption	of	the	Current	Expected Credit	 Losses	 (CECL)	 accounting	 standard.	 The	 FRB	 also	 released	 a statement	indicating	that	it	will	not	incorporate	CECL	into	the	calculation	of the	allowance	for	credit	losses	in	supervisory	stress	tests	through	the	2021 stress	 test	 cycle.	 See	 Note	 3	 to	 the	 consolidated	 financial	 statements	 in Part	II,	Item	8	of	this	Form	10-K	for	further	information	about	CECL.

In	 October	 2018,	 the	 U.S.	 federal	 bank	 regulatory	 agencies	 issued	 a proposed	rule	that	would	implement	the	Basel	Committee's	standardized approach	for	measuring	counterparty	credit	risk	exposures	in	connection with	 derivative	 contracts	(SA-CCR).	 Under	 the	 proposal,	 "Advanced approach"	banking	organizations	would	be	required	to	use	SA-CCR	 for purposes	 of	 calculating	 their	 standardized	 risk-weighted	 assets	 (RWAs) and,	 with	 some	 adjustments,	 for	 purposes	 of	 determining	 their supplementary	leverage	ratios	(SLRs)	discussed	below.

The	 Basel	 Committee	 has	 published	 final	 guidelines	 for	 calculating incremental	 capital	 ratio	 requirements	 for	 banking	 institutions	 that	 are systemically	 significant	 from	 a	 domestic	 but	 not	 global	 perspective (D-SIBs).	If	these	guidelines	are	implemented	by	national	regulators,	they will	 apply,	 among	 others,	 to	 certain	 subsidiaries	 of	G-SIBs.	 These guidelines	 are	 in	 addition	 to	 the	 framework	 for	G-SIBs,	 but	 are	 more principles-based.	CRD	IV	and	the	CRR	provide	that	institutions	that	are systemically	important	at	the	E.U.	or	member	state	level,	known	as	other systemically	important	institutions	(O-SIIs),	may	be	subject	to	additional capital	ratio	requirements	of	up	to	2%	of	CET1,	according	to	their	degree of	 systemic	 importance	(O-SII	 buffers).	O-SIIs	 are	 identified	 annually, along	 with	 their	 applicable	 buffers.	 The	 PRA	 has	 identified	 Goldman Sachs	 Group	 UK	 Limited	 (GSG	 UK),	 the	 parent	 company	 of	 GSI	 and GSIB,	as	an	O-SII.	GSG	UK's	O-SII	buffer	is	currently	set	at	zero	percent.

In	January	2019,	the	Basel	Committee	finalized	revisions	to	the	framework for	calculating	capital	requirements	for	market	risk,	which	is	expected	to increase	market	risk	capital	requirements	for	most	banking	organizations, although	to	a	lesser	degree	than	the	version	of	the	framework	issued	in January	 2016.	The	 revised	 framework,	 among	 other	 things,	 revises	 the standardized	 approach	 and	 internal	 models	 to	 calculate	 market	 risk requirements	and	clarifies	 the	scope	of	positions	subject	 to	market	risk capital	 requirements.	 The	 Basel	 Committee	 has	 proposed	 that	 national regulators	implement	the	revised	framework	beginning	January	1,	2022. The	U.S.	federal	bank	regulatory	agencies	and	the	European	Commission have	not	yet	proposed	rules	implementing	the	2019	version	of	the	revised market	 risk	 framework	 for	 the	 U.S.	 and	 E.U.	 financial	 institutions, respectively.

In	 December	 2017,	 the	 Basel	 Committee	 published	 standards	 that	 it described	as	the	finalization	of	the	Basel	III	post-crisis	regulatory	reforms. These	standards	set	a	floor	on	internally	modeled	capital	requirements	at	a percentage	 of	 the	 capital	 requirements	 under	 the	 standardized	 approach. They	 also	 revise	 the	 Basel	 Committee's	 standardized	 and	 model-based approaches	 for	 credit	 risk,	 provide	 a	 new	 standardized	 approach	 for operational	 risk	 capital	 and	 revise	 the	 frameworks	 for	 credit	 valuation adjustment	risk.	The	Basel	Committee	has	proposed	that	national	regulators implement	 these	 standards	 beginning	 January	 1,	 2022,	 and	 that	 the	 new floor	be	phased	in	through	January	1,	2027.

The	Basel	Committee	has	also	published	updated	frameworks	relating	 to Pillar	 3	 disclosure	 requirements	 and	 the	 regulatory	 capital	 treatment	 of securitization	exposures	and	a	revised	G-SIB	assessment	methodology.	The U.S.	 federal	 bank	 regulatory	 agencies	 have	 not	 yet	 proposed	 rules implementing	 the	 December	 2017	 standards	 for	 purposes	 of	 risk-based capital	ratios	or	the	Basel	Committee	frameworks.

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

As	described	in	"Other	Restrictions"	below,	in	September	2016,	the	FRB issued	a	proposed	rule	that	would,	among	other	things,	require	FHCs	to	hold additional	capital	in	connection	with	covered	physical	commodity	activities.

Leverage	Ratios.	Under	the	Capital	Framework,	we	and	GS	Bank	USA are	subject	to	Tier	1	leverage	ratios	and	SLRs	established	by	the	FRB.	In April	2018,	 the	FRB	and	 the	Office	of	 the	Comptroller	of	 the	Currency (OCC)	 issued	a	proposed	rule	which	would	replace	 the	current	2%	SLR buffer	for	G-SIBs,	including	us,	with	a	buffer	equal	to	50%	of	their	G-SIB buffer.	 This	 proposal	 and	 the	 proposal	 to	 use	SA-CCR	 for	 purposes	 of calculating	the	SLR	would	implement	certain	of	the	revisions	to	the	leverage ratio	framework	published	by	the	Basel	Committee	in	December	2017.

The	Basel	Committee	has	also	issued	consultation	papers	on,	among	other matters,	changes	to	leverage	ratio	treatment	of	client	cleared	derivatives	and the	public	disclosure	of	daily	average	balances	for	certain	components	of leverage	ratio	calculations.

The	European	Commission's	November	2016	proposal	to	amend	the	CRR would	implement	the	Basel	III	leverage	ratio	framework	by	establishing	a 3% minimum	 leverage	 ratio	 requirement	 for	 certain	 E.U.	 financial institutions,	including	GSI	and	GSIB,	but	it	has	not	been	enacted.

See	"Management's	Discussion	and	Analysis	of	Financial	Condition	and Results	 of	 Operations	 —	 Equity	 Capital	 Management	 and	 Regulatory Capital"	 in	 Part	 II,	 Item 7 of	 this	Form	 10-K	 and	 Note 20 to	 the consolidated	financial	statements	in	Part	II,	Item	8	of	this	Form	10-K	for information	 about	 our	 and	 GS	 Bank	 USA's	Tier	 1	 leverage	 ratios	 and SLRs,	and	GSI's	leverage	ratio.

Liquidity	Ratios.	The	Basel	Committee's	framework	for	liquidity	risk measurement,	standards	and	monitoring	requires	banking	organizations	to measure	their	liquidity	against	two	specific	liquidity	tests:	the	Liquidity Coverage	Ratio	(LCR)	and	the	Net	Stable	Funding	Ratio	(NSFR).

The	LCR	rule	 issued	by	 the	U.S.	federal	bank	regulatory	agencies	and applicable	to	both	us	and	GS	Bank	USA	is	generally	consistent	with	the Basel	Committee's	framework	and	is	designed	to	ensure	that	a	banking organization	maintains	an	adequate	level	of	unencumbered,	high-quality liquid	assets	equal	to	or	greater	than	the	expected	net	cash	outflows	under an	acute	short-term	liquidity	stress	scenario.	The	LCR	rule	issued	by	the European	Commission	and	applicable	to	GSI	and	GSIB	is	also	generally consistent	 with	 the	 Basel	 Committee's	 framework.	 We	 are	 required	 to maintain	a	minimum	LCR	of	100%.	We	disclose,	on	a	quarterly	basis,	our average	daily	LCR	over	the	quarter.	See	"Available	Information."

The	NSFR	is	designed	to	promote	medium-	and	long-term	stable	funding of	the	assets	and	off-balance-sheet	activities	of	banking	organizations	over a	 one-year	 time	 horizon.	 The	 Basel	 Committee's	 NSFR	 framework requires	banking	organizations	to	maintain	a	minimum	NSFR	of	100%.

In	May	2016,	the	U.S.	federal	bank	regulatory	agencies	issued	a	proposed rule	that	would	implement	the	NSFR	for	large	U.S.	banking	organizations, including	 us	 and	 GS	 Bank	 USA.	 The	 European	 Commission's November	2016	proposal	to	amend	the	CRR	would	implement	the	NSFR for	 certain	 E.U.	 financial	 institutions.	 Neither	 the	 U.S.	 federal	 bank regulatory	agencies	nor	the	European	Commission	have	released	a	final rule.

The	FRB's	enhanced	prudential	standards	require	BHCs,	including	Group Inc.,	with	$100	billion	or	more	in	total	consolidated	assets,	to	comply	with enhanced	liquidity	and	overall	risk	management	standards,	which	include maintaining	 a	 level	 of	 highly	 liquid	 assets	 based	 on	 projected	 funding needs	for	30	days,	and	increased	involvement	by	boards	of	directors	in liquidity	and	overall	risk	management.	Although	the	liquidity	requirement under	 these	 rules	 has	 some	 similarities	 to	 the	 LCR,	 it	 is	 a	 separate requirement.

See	"Management's	Discussion	and	Analysis	of	Financial	Condition	and Results	of	Operations	—	Risk	Management	—	Overview	and	Structure	of Risk	Management"	and	"—	Liquidity	Risk	Management"	in	Part	II,	Item	7 of	this	Form	10-K	for	information	about	the	LCR	and	NSFR,	as	well	as	our risk	management	practices	and	liquidity.

Stress	Tests.	As	required	by	the	FRB's	annual	CCAR	rules,	we	submit	a capital	plan	for	review	by	the	FRB.	In	addition,	we	are	required	to	perform company-run	 stress	 tests	 on	 a	 semi-annual	 basis,	 although	 the	 FRB	 has recently	proposed	to	reduce	the	required	frequency	of	these	tests	to	annually. We	publish	summaries	of	our	stress	tests	results	on	our	website	as	described in	"Available	Information"	below.

Our	 annual	 stress	 test	 submission	 is	 incorporated	 into	 the	 annual	 capital plans	that	we	submit	to	the	FRB	as	part	of	the	CCAR	process	for	large BHCs,	 which	 is	 designed	 to	 ensure	 that	 capital	 planning	 processes	 will permit	continued	operations	by	such	institutions	during	times	of	economic and	financial	stress.	As	part	of	CCAR,	the	FRB	evaluates	an	institution's plan	to	make	capital	distributions,	such	as	by	repurchasing	or	redeeming stock	or	making	dividend	payments,	across	a	range	of	macroeconomic	and firm-specific	assumptions	based	on	the	institution's	and	the	FRB's	stress tests.	If	the	FRB	objects	to	an	institution's	capital	plan,	the	institution	is generally	prohibited	from	making	capital	distributions	other	than	those	to which	the	FRB	has	not	objected.	In	addition,	an	institution	faces	limitations on	capital	distributions	to	the	extent	that	actual	capital	issuances	are	less than	the	amounts	indicated	in	its	capital	plan.

In	April	2018,	 the	FRB	 issued	a	proposed	rule	 to	establish	stress	buffer requirements.	Under	the	proposal,	the	SCB	would	replace	the	component	of the	 capital	 conservation	 buffer.	The	 SCB,	 subject	 to	 a	 minimum,	 would reflect	stressed	losses	in	the	supervisory	severely	adverse	scenario	of	the FRB's	CCAR	stress	tests	and	would	also	include	four	quarters	of	planned common	 stock	 dividends.	 The	 proposal	 would	 also	 introduce	 a	 stress leverage	buffer	requirement,	similar	to	the	SCB,	which	would	apply	to	the Tier	 1	 leverage	 ratio.	 In	 addition,	 the	 proposal	 would	 require	 BHCs	 to reduce	their	planned	capital	distributions	if	those	distributions	would	not	be consistent	with	the	applicable	capital	buffer	constraints	based	on	the	BHCs' own	baseline	scenario	projections.

Under	recent	amendments	to	the	Dodd-Frank	Act,	effective	November	2019, depository	institutions	with	total	consolidated	assets	between	$100	billion and	$250	billion,	such	as	GS	Bank	USA,	will	not	be	required	to	conduct annual	company-run	 stress	 tests.	 GS	 Bank	 USA	 will	 not	 be	 required	 to conduct	 the	 annual	company-run	stress	 test	 in	2019.	GSI	and	GSIB	also have	 their	 own	 capital	 planning	 and	 stress	 testing	 process,	 which incorporates	 internally	designed	stress	 tests	and	 those	required	under	 the PRA's	Internal	Capital	Adequacy	Assessment	Process.

# 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	FRB.

U.S.	federal	and	state	laws	impose	limitations	on	the	payment	of	dividends by	U.S.	depository	 institutions,	such	as	GS	Bank	USA.	In	general,	 the amount	of	dividends	that	may	be	paid	by	GS	Bank	USA	is	limited	to	the lesser	 of	 the	 amounts	 calculated	 under	 a	 "recent	 earnings"	 test	 and	 an "undivided	profits"	test.	Under	the	recent	earnings	test,	a	dividend	may not	 be	 paid	 if	 the	 total	 of	 all	 dividends	 declared	 by	 the	 entity	 in	 any calendar	year	is	in	excess	of	the	current	year's	net	income	combined	with the	 retained	 net	 income	 of	 the	 two	 preceding	 years,	 unless	 the	 entity obtains	 prior	 regulatory	 approval.	 Under	 the	 undivided	 profits	 test,	 a dividend	 may	 not	 be	 paid	 in	 excess	 of	 the	 entity's	 "undivided	 profits" (generally,	 accumulated	 net	 profits	 that	 have	 not	 been	 paid	 out	 as dividends	or	transferred	to	surplus).

The	applicable	U.S.	banking	regulators	have	authority	to	prohibit	or	limit the	payment	of	dividends	if,	in	the	banking	regulator's	opinion,	payment	of a	dividend	would	constitute	an	unsafe	or	unsound	practice	in	light	of	the financial	condition	of	the	banking	organization.

Source	of	Strength.	The	Dodd-Frank	Act	requires	BHCs	to	act	as	a source	of	strength	 to	 their	bank	subsidiaries	and	 to	commit	capital	and financial	 resources	 to	 support	 those	 subsidiaries.	 This	 support	 may	 be required	by	the	FRB	at	times	when	we	might	otherwise	determine	not	to provide	it.	Capital	loans	by	a	BHC	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	BHC	commits	to	a	U.S.	federal	banking agency	that	it	will	maintain	the	capital	of	its	bank	subsidiary,	whether	in response	 to	 the	 FRB's	 invoking	 its	source-of-strength	 authority	 or	 in response	to	other	regulatory	measures,	that	commitment	will	be	assumed by	the	bankruptcy	trustee	for	the	BHC	and	the	bank	will	be	entitled	to priority	payment	in	respect	of	that	commitment,	ahead	of	other	creditors	of the	BHC.

Transactions	between	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	 FRB.	 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	or	its subsidiaries.	 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.

The	 BHC	Act	 prohibits	 the	 FRB	 from	 requiring	 a	 payment	 by	 a	 BHC subsidiary	 to	 a	 depository	 institution	 if	 the	 functional	 regulator	 of	 that subsidiary	objects	to	such	payment.	In	such	a	case,	the	FRB	could	instead require	 the	divestiture	of	 the	depository	 institution	and	 impose	operating restrictions	pending	the	divestiture.

Resolution	and	Recovery.	Group	Inc.	is	required	by	the	FRB	and	the FDIC	to	submit	a	periodic	plan	for	its	rapid	and	orderly	resolution	in	the event	 of	 material	 financial	 distress	 or	 failure	 (resolution	 plan).	 If	 the regulators	 jointly	 determine	 that	 an	 institution	 has	 failed	 to	 remediate identified	shortcomings	in	its	resolution	plan	and	that	its	resolution	plan, after	any	permitted	resubmission,	is	not	credible	or	would	not	facilitate	an orderly	 resolution	 under	 the	 U.S.	 Bankruptcy	 Code,	 the	 regulators	 may jointly	impose	more	stringent	capital,	leverage	or	liquidity	requirements	or restrictions	 on	 growth,	 activities	 or	 operations	 or	 may	 jointly	 order	 the institutions	 to	 divest	 assets	 or	 operations	 in	 order	 to	 facilitate	 orderly resolution	in	the	event	of	failure.	In	December	2018,	the	FRB	and	FDIC finalized	guidance	for	resolution	plan	submissions	which	consolidated	or superseded	 all	 prior	 guidance.	 See	 "Risk	 Factors	 —	 The	 application	 of Group	Inc.'s	proposed	resolution	strategy	could	result	in	greater	losses	for Group	Inc.'s	security	holders"	in	Part	I,	Item	1A	of	 this	Form	10-K	 and "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results of	 Operations	 —	 Regulatory	 Matters	 and	 Other	 Developments	 — Regulatory	Matters	—	Resolution	and	Recovery	Plans"	in	Part	II,	Item	7	of this	Form	10-K	for	further	information	about	our	resolution	plan.

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

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

The	federal	bank	regulatory	agencies	have	adopted	final	rules	imposing restrictions	on	qualified	financial	contracts	(QFCs)	entered	into	by	G-SIBs. The	rules	began	to	phase	in	on	January	1,	2019	and	will	be	fully	effective on	 January 1, 2020.	 The	 rules	 are	 intended	 to	 facilitate	 the	 orderly resolution	of	a	failed	G-SIB	by	limiting	the	ability	of	the	G-SIB	to	enter into	a	QFC	unless	(i)	the	counterparty	waives	certain	default	rights	in	such contract	arising	upon	the	entry	of	the	G-SIB	or	one	of	its	affiliates	into resolution,	(ii)	the	contract	does	not	contain	enumerated	prohibitions	on the	transfer	of	such	contract	and/or	any	related	credit	enhancement,	and (iii)	the	counterparty	agrees	that	the	contract	will	be	subject	to	the	special resolution	 regimes	 set	 forth	 in	 the	 Dodd-Frank	Act	 orderly	 liquidation authority	(OLA)	and	the	Federal	Deposit	Insurance	Act	of	1950	(FDIA), described	below.	Compliance	can	be	achieved	by	adhering	to	the	ISDA Universal	Protocol	or	U.S.	ISDA	Protocol	described	below.

Certain	Group	Inc.	subsidiaries,	along	with	 those	of	a	number	of	other major	global	banking	organizations,	adhere	to	the	International	Swaps	and Derivatives	 Association	 Universal	 Resolution	 Stay	 Protocol	 (ISDA Universal	 Protocol),	 which	 was	 developed	 and	 updated	 in	 coordination with	the	Financial	Stability	Board	(FSB),	an	international	body	that	sets standards	and	coordinates	the	work	of	national	financial	authorities	and international	 standard-setting	 bodies.	 The	 ISDA	 Universal	 Protocol imposes	a	stay	on	certain	cross-default	and	early	termination	rights	within standard	ISDA	derivative	contracts	and	securities	financing	transactions between	 adhering	 parties	 in	 the	 event	 that	 one	 of	 them	 is	 subject	 to resolution	in	its	home	jurisdiction,	including	a	resolution	under	the	OLA	or the	FDIA	in	the	U.S.	In	addition,	certain	Group	Inc.	subsidiaries	adhere	to the	International	Swaps	and	Derivatives	Association	2018	U.S.	Resolution Stay	 Protocol	 (U.S.	 ISDA	 Protocol),	 which	 was	 based	 on	 the	 ISDA Universal	Protocol	and	was	created	to	allow	market	participants	to	comply with	the	final	QFC	rules	adopted	by	the	federal	bank	regulatory	agencies.

The	E.U.	Bank	Recovery	and	Resolution	Directive	(BRRD)	establishes	a framework	for	the	recovery	and	resolution	of	financial	institutions	in	the E.U.,	 such	 as	 GSI	 and	 GSIB.	 The	 BRRD	 provides	 national	 supervisory authorities	 with	 tools	 and	 powers	 to	pre-emptively	 address	 potential financial	 crises	 in	 order	 to	 promote	 financial	 stability	 and	 minimize taxpayers'	exposure	to	losses.	The	BRRD	requires	E.U.	member	states	to grant	"bail-in"	powers	to	E.U.	resolution	authorities	to	recapitalize	a	failing entity	by	writing	down	its	unsecured	debt	or	converting	its	unsecured	debt into	equity.	Financial	institutions	in	the	E.U.	must	provide	 that	contracts enable	such	actions.

Total	Loss-Absorbing	Capacity.	In	December	2016,	the	FRB	adopted	a final	rule	establishing	loss-absorbency	and	related	requirements	for	BHCs that	 have	 been	 designated	 as	 U.S.	G-SIBs,	such	as	Group	Inc.	The	rule became	 effective	 in	 January	 2019	 with	 no	phase-in	 period.	 The	 rule addresses	U.S.	implementation	of	the	FSB's	total	loss-absorbing	capacity (TLAC)	 principles	 and	 term	 sheet	 on	 minimum	 TLAC	 requirements	 for G-SIBs	(issued	in	November	2015).	The	rule	(i)	establishes	minimum	TLAC requirements,	(ii)	establishes	minimum	"eligible	long-term	debt"	(i.e.,	debt that	 is	unsecured,	has	a	maturity	of	at	 least	one	year	from	 issuance	and satisfies	 certain	 additional	 criteria)	 requirements,	 (iii)	 prohibits	 certain parent	company	transactions	and	(iv)	caps	the	amount	of	parent	company liabilities	that	are	not	eligible	long-term	debt.

The	rule	also	prohibits	a	BHC	 that	has	been	designated	as	a	U.S.	G-SIB from	 (i)	 guaranteeing	 liabilities	 of	 subsidiaries	 that	 are	 subject	 to	 early termination	provisions	if	the	BHC	enters	into	an	insolvency	or	receivership proceeding,	subject	to	an	exception	for	guarantees	permitted	by	rules	of	the U.S.	federal	banking	agencies	imposing	restrictions	on	QFCs;	(ii)	incurring liabilities	 guaranteed	 by	 subsidiaries;	 (iii)	 issuing	 short-term	 debt;	 or (iv)	 entering	 into	 derivatives	 and	 certain	 other	 financial	 contracts	 with external	counterparties.

Additionally,	 the	 rule	 caps,	 at	 5%	 of	 the	 value	 of	 the	 parent	 company's eligible	 TLAC,	 the	 amount	 of	 unsecured	non-contingent	 third-party liabilities	that	are	not	eligible	long-term	debt	that	could	rank	equally	with	or junior	to	eligible	long-term	debt.

The	FSB's	final	TLAC	standard	requires	certain	material	subsidiaries	of	a G-SIB	organized	outside	of	 the	G-SIB's	home	country,	such	as	GSI	and GSIB,	to	maintain	amounts	of	TLAC	directly	or	indirectly	from	the	parent company.	In	July	2017,	the	FSB	issued	a	final	set	of	guiding	principles	on the	 implementation	 of	 the	 TLAC	 requirements	 applicable	 to	 material subsidiaries.

The	BRRD	subjects	institutions	to	a	minimum	requirement	for	own	funds and	 eligible	 liabilities	 (MREL),	 which	 is	 generally	 consistent	 with	 the FSB's	TLAC	standard.	In	June	2018,	the	Bank	of	England	published	a statement	 of	 policy	 on	 internal	 MREL,	 which	 requires	 a	 material	 U.K. subsidiary	of	an	overseas	banking	group,	such	as	GSI,	to	meet	a	minimum internal	 MREL	 requirement	 to	 facilitate	 the	 transfer	 of	 losses	 to	 its resolution	entity,	which	for	GSI	is	Group	Inc.	The	transitional	minimum internal	MREL	requirement	began	to	phase	in	from	January	1,	2019	and will	become	fully	effective	on	January	1,	2022.	In	order	to	comply	with	the MREL	statement	of	policy,	bail-in	triggers	have	been	provided	to	the	Bank of	England	over	certain	intercompany	regulatory	capital	and	senior	debt instruments	issued	by	GSI.	These	triggers	enable	the	Bank	of	England	to write	down	such	instruments	or	convert	such	instruments	to	equity.	The triggers	can	be	exercised	by	the	Bank	of	England	if	it	determines	that	GSI has	reached	the	point	of	non-viability	and	the	FRB	and	the	FDIC	have	not objected	 to	 the	bail-in	 or	 if	 Group	 Inc.	 enters	 bankruptcy	 or	 similar proceedings.

The	European	Commission's	November	2016	proposed	amendments	to	the CRR	and	the	BRRD	include	provisions	that	are	designed	to	implement	the FSB's	 minimum	 TLAC	 requirement	 for	G-SIBs.	 The	 proposal	 would require	subsidiaries	of	a	non-E.U.	G-SIB	that	account	for	more	than	5%	of its	RWAs,	operating	income	or	leverage	exposure,	such	as	GSI,	to	meet 90%	of	the	requirement	applicable	to	E.U.	G-SIBs.

In	November	2016,	 the	European	Commission	also	proposed	 to	amend CRD	 IV	 to	 require	 a	non-E.U.	G-SIB,	such	as	us,	 to	establish	an	E.U. intermediate	holding	company	(E.U.	IHC)	if	a	firm	has	two	or	more	of certain	types	of	E.U.	financial	institution	subsidiaries,	including	broker- dealers	and	banks.	The	European	Commission	also	proposed	amendments to	the	CRR	that	would	require	E.U.	IHCs	to	satisfy	MREL	requirements and	certain	other	prudential	requirements.	These	proposals	are	subject	to adoption	 at	 the	 E.U.	 level	 and,	 for	 the	 directives,	 implementing rulemakings	by	E.U.	member	states,	which	have	not	yet	occurred.

# Insolvency of an Insured	 Depository Institution or a	 Bank Holding	 Company.	 Under the	 FDIA,	 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:

•	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;

•	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

•	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,	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	debtholders	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	debtholders	(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	OLA)	for BHCs	 and	 their	 affiliates	 that	 are	 systemically	 important	 and	 certain non-bank	financial	companies.	Under	OLA,	the	FDIC	may	be	appointed	as receiver	for	 the	systemically	 important	 institution	and	 its	failed	non-bank subsidiaries	if,	upon	the	recommendation	of	applicable	regulators,	the	U.S. Secretary	 of	 the	 Treasury	 determines,	 among	 other	 things,	 that	 the institution	is	in	default	or	in	danger	of	default,	that	the	institution's	failure would	have	serious	adverse	effects	on	the	U.S.	financial	system	and	that resolution	under	OLA	would	avoid	or	mitigate	those	effects.

If	the	FDIC	is	appointed	as	receiver	under	OLA,	then	the	powers	of	the receiver,	and	the	rights	and	obligations	of	creditors	and	other	parties	who have	dealt	with	the	institution,	would	be	determined	under	OLA,	and	not under	the	bankruptcy	or	insolvency	law	that	would	otherwise	apply.	The powers	of	the	receiver	under	OLA	were	generally	based	on	the	powers	of the	FDIC	as	receiver	for	depository	institutions	under	the	FDIA.

Substantial	differences	in	the	rights	of	creditors	exist	between	OLA	and the	U.S.	Bankruptcy	Code,	including	the	right	of	the	FDIC	under	OLA	to disregard	the	strict	priority	of	creditor	claims	in	some	circumstances,	the use	of	an	administrative	claims	procedure	to	determine	creditors'	claims (as	opposed	to	the	judicial	procedure	utilized	in	bankruptcy	proceedings), and	 the	 right	 of	 the	 FDIC	 to	 transfer	 claims	 to	 a	 "bridge"	 entity.	 In addition,	OLA	limits	the	ability	of	creditors	to	enforce	certain	contractual cross-defaults	against	affiliates	of	the	institution	in	receivership.	The	FDIC has	issued	a	notice	that	it	would	likely	resolve	a	failed	FHC	by	transferring its	assets	to	a	"bridge"	holding	company	under	its	"single	point	of	entry" or	"SPOE"	strategy	pursuant	to	OLA.

Deposit Insurance.	Deposits	 at	 GS	 Bank	 USA	 have	 the	 benefit	 of FDIC	insurance	up	to	the	applicable	limits.	The	FDIC's	Deposit	Insurance Fund	is	funded	by	assessments	on	insured	depository	institutions.	GS	Bank USA's	assessment	(subject	to	adjustment	by	the	FDIC)	is	currently	based on	 its	 average	 total	 consolidated	 assets	 less	 its	 average	 tangible	 equity during	 the	 assessment	 period,	 its	 supervisory	 ratings	 and	 specified forward-looking	financial	measures	used	to	calculate	the	assessment	rate. In	 addition,	 deposits	 at	 GSIB	 are	 covered	 by	 the	 Financial	 Services Compensation	Scheme	up	to	the	applicable	limits.

Prompt	 Corrective	 Action. The	 U.S.	 Federal	 Deposit	 Insurance Corporation	Improvement	Act	of	1991	(FDICIA)	requires	the	U.S.	federal bank	regulatory	agencies	to	take	"prompt	corrective	action"	in	respect	of depository	 institutions	 that	 do	 not	 meet	 specified	 capital	 requirements. FDICIA	establishes	five	capital	categories	for	FDIC-insured	banks,	such	as GS	Bank	USA:	well-capitalized,	adequately	capitalized,	undercapitalized, significantly	undercapitalized	and	critically	undercapitalized.

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

The	prompt	corrective	action	regulations	do	not	apply	to	BHCs.	However, the	FRB	is	authorized	to	take	appropriate	action	at	the	BHC	level,	based upon	 the	 undercapitalized	 status	 of	 the	 BHC's	 depository	 institution subsidiaries.	In	certain	instances	relating	to	an	undercapitalized	depository institution	 subsidiary,	 the	 BHC	 would	 be	 required	 to	 guarantee	 the 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	 BHC,	 the	 guarantee	 would	 take	 priority	 over	 the	 BHC's	 general unsecured	creditors,	as	described	in	"Source	of	Strength"	above.

Volcker	Rule	and	Other	Restrictions	on	Activities. 	As	a	BHC,	we are	subject	to	limitations	on	the	types	of	business	activities	we	may	engage in.

Volcker	Rule.	The	provisions	of	the	Dodd-Frank	Act	referred	to	as	the "Volcker	Rule"	became	effective	in	July	2015.	The	Volcker	Rule	prohibits "proprietary	 trading,"	but	permits	activities	such	as	underwriting,	market making	 and	 risk-mitigation	 hedging,	 requires	 an	 extensive	 compliance program	and	includes	additional	reporting	and	record-keeping	requirements.

In	addition,	the	Volcker	Rule	limits	the	sponsorship	of,	and	investment	in, "covered	funds"	(as	defined	in	the	rule)	by	banking	entities,	including	us.	It also	limits	certain	types	of	transactions	between	us	and	our	sponsored	funds, similar	to	the	limitations	on	transactions	between	depository	institutions	and their	affiliates.	Covered	funds	include	our	private	equity	funds,	certain	of our	 credit	 and	 real	 estate	 funds,	 our	 hedge	 funds	 and	 certain	 other investment	 structures.	 The	 limitation	 on	 investments	 in	 covered	 funds requires	us	to	limit	our	investment	in	each	such	fund	to	3%	or	less	of	the fund's	net	asset	value,	and	 to	 limit	our	aggregate	 investment	 in	all	such funds	to	3%	or	less	of	our	Tier	1	capital.

The	 FRB	 has	 extended	 the	 conformance	 period	 to	 July	 2022	 for	 our investments	in,	and	relationships	with,	certain	legacy	"illiquid	funds"	(as defined	in	the	Volcker	Rule)	that	were	in	place	prior	to	December	2013.	See Note	6	to	the	consolidated	financial	statements	 in	Part	II,	Item	8	of	 this Form	10-K	for	further	information	about	our	investments	in	such	funds.

In	July	2018,	the	FRB,	OCC,	FDIC,	CFTC	and	SEC	issued	a	notice	of proposed	rulemaking	 intended	 to	amend	 the	application	of	 the	Volcker Rule	based	on	the	size	and	scope	of	a	banking	entity's	trading	activities and	to	clarify	and	amend	certain	definitions,	requirements	and	exemptions. The	ultimate	impact	of	any	amendments	to	the	Volcker	Rule	will	depend on,	among	other	things,	further	rulemaking	and	implementation	guidance from	the	relevant	U.S.	federal	regulatory	agencies	and	the	development	of market	practices	and	standards.

Other	Restrictions.	FHCs	generally	can	engage	in	a	broader	range	of financial	and	related	activities	than	are	otherwise	permissible	for	BHCs	as long	as	they	continue	to	meet	the	eligibility	requirements	for	FHCs.	The broader	range	of	permissible	activities	for	FHCs	 includes	underwriting, dealing	 and	 making	 markets	 in	 securities	 and	 making	 investments	 in non-FHCs	 (merchant	 banking	 activities).	 In	 addition,	 certain	 FHCs	 are permitted	to	engage	in	certain	commodities	activities	in	the	U.S.	that	may otherwise	be	impermissible	for	BHCs,	so	long	as	the	assets	held	pursuant to	these	activities	do	not	equal	5%	or	more	of	their	consolidated	assets.

The	FRB,	however,	has	the	authority	to	limit	an	FHC's	ability	to	conduct activities	that	would	otherwise	be	permissible,	and	will	likely	do	so	if	the FHC	does	not	satisfactorily	meet	certain	requirements	of	 the	FRB.	For example,	if	an	FHC	or	any	of	its	U.S.	depository	institution	subsidiaries ceases	to	maintain	its	status	as	well-capitalized	or	well-managed,	the	FRB may	impose	corrective	capital	and/or	managerial	requirements,	as	well	as additional	 limitations	or	conditions.	If	 the	deficiencies	persist,	 the	FHC may	be	required	to	divest	its	U.S.	depository	institution	subsidiaries	or	to cease	engaging	in	activities	other	than	the	business	of	banking	and	certain closely	related	activities.

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

In	addition,	we	are	required	to	obtain	prior	FRB	approval	before	engaging in	certain	banking	and	other	financial	activities	both	within	and	outside	the U.S.

In	 September	 2016,	 the	 FRB	 issued	 a	 proposed	 rule	 which,	 if	 adopted, would	impose	new	requirements	on	the	physical	commodity	activities	and certain	 merchant	 banking	 activities	 of	 FHCs.	 The	 proposed	 rule	 would, among	other	things,	(i)	require	FHCs	to	hold	additional	capital	in	connection with	 covered	 physical	 commodity	 activities,	 including	 merchant	 banking investments	 in	 companies	 engaged	 in	 physical	 commodity	 activities; (ii)	tighten	the	quantitative	limits	on	permissible	physical	trading	activity; and	 (iii)	 establish	 new	 public	 reporting	 requirements	 on	 the	 nature	 and extent	of	an	FHC's	physical	commodity	holdings	and	activities.	In	addition, in	a	September	2016	report,	the	FRB	recommended	that	Congress	repeal (i)	 the	 authority	 of	 FHCs	 to	 engage	 in	 merchant	 banking	 activities;	 and (ii)	 the	 authority	 described	 above	 for	 certain	 FHCs	 to	 engage	 in	 certain otherwise	permissible	commodities	activities.

In	 June	 2018,	 the	 FRB	 issued	 a	 final	 rule	 regarding	 single	 counterparty credit	 limits,	 which	 imposes	 more	 stringent	 requirements	 for	 credit exposures	among	major	financial	institutions.	The	final	rule	requires	U.S. G-SIBs,	such	as	us,	to	comply	by	January	1,	2020.	In	addition,	the	FRB	has proposed	early	remediation	requirements,	which	are	modeled	on	the	prompt corrective	action	regime,	described	in	"Prompt	Corrective	Action"	above, but	are	designed	to	require	action	to	begin	in	earlier	stages	of	a	company's financial	 distress,	 based	 on	 a	 range	 of	 triggers,	 including	 capital	 and leverage,	stress	test	results,	liquidity	and	risk	management.

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.

The	U.S.	federal	bank	regulatory	agencies	have	issued	guidance	that	focuses on	transaction	structures	and	risk	management	frameworks	and	that	outlines high-level	 principles	 for	safe-and-sound	 leveraged	 lending,	 including underwriting	 standards,	 valuation	 and	 stress	 testing.	 This	 guidance	 has, among	 other	 things,	 limited	 the	 percentage	 amount	 of	 debt	 that	 can	 be included	in	certain	transactions.	The	status	of	this	guidance	is	uncertain	as the	U.S.	Government	Accountability	Office	has	determined	that	it	is	a	rule subject	to	review	under	the	Congressional	Review	Act.

# Broker-Dealer	and	Securities	Regulation

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

U.S.	 state	 securities	 and	 other	 U.S.	 regulators	 also	 have	 regulatory	 or oversight	authority	over	GS&Co.	Similarly,	our	businesses	are	also	subject to	regulation	by	various	non-U.S.	governmental	and	regulatory	bodies	and self-regulatory	authorities	in	virtually	all	countries	where	we	have	offices, as	 described	 further	 below,	 as	 well	 as	 in	 "Other	 Regulation."	 For	 a description	 of	 net	 capital	 requirements	 applicable	 to	 GS&Co.,	 see "Management's	 Discussion	 and	 Analysis	 of	 Financial	 Condition	 and Results	 of	 Operations	 —	 Equity	 Capital	 Management	 and	 Regulatory Capital	—	U.S.	Regulated	Broker-Dealer	Subsidiaries"	in	Part	II,	Item	7	of this	Form	10-K.

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

Goldman	Sachs	Japan	Co.,	Ltd.	(GSJCL),	our	regulated	Japanese	broker- dealer,	 is	 subject	 to	 capital	 requirements	 imposed	 by	 Japan's	 Financial Services	Agency.	GSJCL	is	also	regulated	by	the	Tokyo	Stock	Exchange, the	Osaka	Exchange,	the	Tokyo	Financial	Exchange,	the	Japan	Securities Dealers	 Association,	 the	 Tokyo	 Commodity	 Exchange,	 Securities	 and Exchange	Surveillance	Commission,	Bank	of	Japan	and	the	Ministry	of Finance,	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.

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

In	April	2018,	the	SEC	issued	a	proposed	rule	that	would	require	broker- dealers	to	act	in	the	best	interest	of	their	customers,	and	also	proposed	an interpretation	clarifying	the	SEC's	views	of	the	existing	fiduciary	duty	owed by	 investment	 advisers	 to	 their	 clients.	 Additionally,	 the	 SEC	 issued	 a proposed	rule	that	would	require	broker-dealers	and	investment	advisers	to provide	a	standardized,	short-form	disclosure	highlighting	services	offered, applicable	 standards	 of	 conduct,	 fees	 and	 costs,	 the	 differences	 between brokerage	and	advisory	services,	and	any	conflicts	of	interest.

In	November	2018,	the	SEC	adopted	a	final	rule	requiring	broker-dealers	to provide	to	specified	customers	at	their	request	individualized	information about	the	execution	of	certain	stock	orders,	including	how	such	orders	were routed	and	the	average	rebates	received	or	fees	paid.

GS&Co.,	GS	Bank	USA	and	other	U.S.	subsidiaries	are	also	subject	to	rules adopted	 by	 U.S.	 federal	 agencies	 pursuant	 to	 the	 Dodd-Frank	 Act	 that require	any	person	who	organizes	or	initiates	certain	asset-backed	securities transactions	to	retain	a	portion	(generally,	at	least	five	percent)	of	any	credit risk	 that	 the	 person	 conveys	 to	 a	 third	 party.	 For	 certain	 securitization transactions,	 retention	 by	 third-party	 purchasers	 may satisfy this requirement.

Securitizations	 would	 also	 be	 affected	 by	 rules	 proposed	 by	 the	 SEC	 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	U.S. is	subject	to	regulation	under	the	U.S.	Commodity	Exchange	Act	(CEA). The	CFTC	is	the	U.S.	federal	agency	charged	with	the	administration	of the	CEA.	In	addition,	the	SEC	is	the	U.S.	federal	agency	charged	with	the regulation	of	security-based	swaps.	The	rules	and	regulations	of	various self-regulatory	organizations,	such	as	the	Chicago	Mercantile	Exchange, other	futures	exchanges	and	the	National	Futures	Association,	also	govern commodity	futures,	commodity	options	and	swaps	activities.

The	terms	"swaps"	and	"security-based	swaps"	include	a	wide	variety	of derivative	instruments	in	addition	to	those	conventionally	referred	to	as swaps	(including	certain	forward	contracts	and	options),	and	relate	to	a wide	 variety	 of	 underlying	 assets	 or	 obligations,	 including	 currencies, commodities,	interest	or	other	monetary	rates,	yields,	indices,	securities, credit	events,	loans	and	other	financial	obligations.

CFTC	rules	require	registration	of	swap	dealers,	mandatory	clearing	and execution	of	 interest	rate	and	credit	default	swaps	and	real-time	public reporting	 and	 adherence	 to	 business	 conduct	 standards	 for	 all	in-scope swaps.	In	December	2016,	the	CFTC	proposed	revised	capital	regulations for	swap	dealers	that	are	not	subject	to	the	capital	rules	of	a	prudential regulator,	such	as	the	FRB,	as	well	as	a	liquidity	requirement	for	those swap	dealers.

SEC	rules	govern	the	registration	and	regulation	of	security-based	swap dealers	 but	 compliance	 with	 such	 rules	 is	 not	 currently	 required.	 In October	2018,	the	SEC	re-proposed,	and	requested	comment	on,	a	number of	its	rules	for	security-based	swap	dealers,	including	capital,	margin	and segregation	requirements.

GS&Co.	is	registered	with	the	CFTC	as	a	futures	commission	merchant, and	several	of	our	subsidiaries,	including	GS&Co.,	are	registered	with	the CFTC	 and	 act	 as	 commodity	 pool	 operators	 and	 commodity	 trading advisors.	GS&Co.	and	other	subsidiaries,	including	GS	Bank	USA,	GSI and	J.	Aron	&	Company	LLC	(J.	Aron),	are	registered	with	the	CFTC	as swap	dealers.	In	addition,	GS&Co.	and	Goldman	Sachs	Financial	Markets, L.P.	are	registered	with	the	SEC	as	OTC	derivatives	dealers.

Our	 affiliates	 registered	 as	 swap	 dealers	 are	 subject	 to	 the	 margin	 rules issued	by	the	CFTC	(in	the	case	of	our	non-bank	swap	dealers)	and	the	FRB (in	the	case	of	GS	Bank	USA).	The	rules	for	variation	margin	have	become effective,	and	those	for	initial	margin	will	phase	in	through	September	2020 depending	 on	 certain	 activity	 levels	 of	 the	 swap	 dealer	 and	 the	 relevant counterparty.	In	contrast	to	the	FRB	margin	rules,	inter-affiliate	transactions under	 the	 CFTC	 margin	 rules	 are	 generally	 exempt	 from	 initial	 margin requirements.

The	 CFTC	 has	 proposed	 position	 limit	 rules	 that	 will	 limit	 the	 size	 of positions	in	physical	commodity	derivatives	that	can	be	held	by	any	entity, or	any	group	of	affiliates	or	other	parties	trading	under	common	control, subject	to	certain	exemptions,	such	as	for	bona	fide	hedging	positions.	These proposed	rules	would	apply	to	positions	in	swaps,	as	well	as	futures	and options	on	futures.

Similar	 types	 of	 swap	 regulation	 have	 been	 proposed	 or	 adopted	 in jurisdictions	outside	the	U.S.,	including	in	the	E.U.	and	Japan.	For	example, the	 E.U.	 has	 established	 regulatory	 requirements	 relating	 to	 portfolio reconciliation	and	reporting,	clearing	certain	OTC	derivatives	and	margining for	uncleared	derivatives	activities	under	the	European	Market	Infrastructure Regulation.

The	CFTC	has	adopted	rules	relating	to	cross-border	regulation	of	swaps, and	has	proposed	cross-border	business	conduct	and	registration	rules.	The CFTC	 has	 entered	 into	 agreements	 with	 certain	non-U.S.	 regulators, including	in	the	E.U.,	regarding	the	cross-border	regulation	of	derivatives and	 the	 mutual	 recognition	 of	 cross-border	 clearing	 houses,	 and	 has approved	 substituted	 compliance	 with	 certain	non-U.S.	 regulations, including	E.U.	regulations,	related	to	certain	business	conduct	requirements and	 margin	 rules.	 The	 U.S.	 prudential	 regulators	 have	 not	 yet	 made	 a determination	with	respect	to	substituted	compliance	for	transactions	subject to	non-U.S.	margin	rules.

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

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	described	in	"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	this	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.

The	 SEC	 has	 adopted	 rules	 relating	 to	 liquidity	 risk	 management	 that require	 registered	open-end	funds	to	classify	and	review	the	liquidity	of their	 portfolio	 assets.	 In	 addition,	 the	 rules	 require	 funds	 to	 make disclosures	relating	to	their	liquidity	risk	management	program	and	report to	 the	 SEC	 instances	 when	 a	 fund's	 percentage	 of	 illiquid	 investments exceeds	certain	thresholds	or	when	certain	funds	experience	shortfalls	in their	 highly	 liquid	 investments.	 While	 some	 rules	 became	 effective	 in December	 2018,	 certain	 portfolio	 asset	 classification	 and	 disclosure requirements	will	become	effective	in	June	2019	and	December	2019.

Certain	of	our	European	subsidiaries,	including	GSAMI,	are	subject	to	the Alternative	Investment	Fund	Managers	Directive	and	related	regulations, which	 govern	 the	 approval,	 organizational,	 marketing	 and	 reporting requirements	of	E.U.-based	alternative	investment	managers	and	the	ability of	alternative	investment	fund	managers	located	outside	the	E.U.	to	access the	E.U.	market.

An	E.U.	regulation	relating	to	money	market	funds,	including	provisions prescribing	minimum	levels	of	daily	and	weekly	liquidity,	clear	labeling	of money	market	funds	and	internal	credit	risk	assessments,	became	effective in	July	2018.

# Compensation	Practices

Our	compensation	practices	are	subject	to	oversight	by	the	FRB	and,	with respect	 to	some	of	our	subsidiaries	and	employees,	by	other	regulatory bodies	worldwide.	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	FSB	has	released	standards	for	local	regulators	to	implement	certain compensation	principles	for	banks	and	other	financial	companies	designed to	 encourage	 sound	 compensation	 practices.	 The	 U.S.	 federal	 bank regulatory	 agencies	 have	 provided	 guidance	 designed	 to	 ensure	 that incentive	 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	Dodd-Frank	Act	requires	 the	U.S.	financial	regulators,	 including	 the FRB	and	SEC,	to	adopt	rules	on	incentive-based	payment	arrangements	at specified	 regulated	 entities	 having	 at	 least $1 billion	 in	 total	 assets (including	Group	Inc.	and	some	of	its	depository	institution,	broker-dealer and	investment	adviser	subsidiaries).	The	U.S.	financial	regulators	proposed revised	rules	in	2016,	which	have	not	been	finalized.

In	 October	 2016,	 the	 NYDFS	 issued	 guidance	 emphasizing	 that	 its regulated	banking	institutions,	including	GS	Bank	USA,	must	ensure	that any	 incentive	 compensation	 arrangements	 tied	 to	 employee	 performance indicators	are	subject	to	effective	risk	management,	oversight	and	control.

In	 the	 E.U.,	 the	 CRR	 and	 CRD	 IV	 include	 compensation	 provisions designed	to	implement	the	FSB's	compensation	standards.	These	rules	have been	implemented	by	E.U.	member	states	and,	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	E.U.-regulated entities,	including	GSI.

The	 E.U.	 has	 also	 introduced	 rules	 regulating	 compensation	 for	 certain persons	providing	services	to	certain	investment	funds.	These	requirements are	in	addition	to	the	guidance	issued	by	U.S.	financial	regulators	described above	and	the	Dodd-Frank	Act	provision	described	above.

# Anti-Money Laundering and Anti-Bribery Rules and Regulations

The	U.S.	Bank	Secrecy	Act	(BSA),	as	amended	by	the	USA	PATRIOT	Act of	2001	(PATRIOT	Act),	contains	anti-money	 laundering	and	financial transparency	laws	and	mandates	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	U.S.	contain	some	similar	provisions.

In	addition,	we	are	subject	to	laws	and	regulations	worldwide,	including the	U.S.	Foreign	Corrupt	Practices	Act	(FCPA)	and	the	U.K.	Bribery	Act, relating	to	corrupt	and	illegal	payments	to,	and	hiring	practices	with	regard to,	government	officials	and	others.	The	scope	of	the	types	of	payments	or other	 benefits	 covered	 by	 these	 laws	 is	 very	 broad	 and	 regulators	 are frequently	 using	 enforcement	 proceedings	 to	 define	 the	 scope	 of	 these laws.	The	obligation	of	financial	institutions,	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.

# Privacy	and	Cyber	Security	Regulation

Certain	of	our	businesses	are	subject	to	laws	and	regulations	enacted	by U.S.	 federal	 and	 state	 governments,	 the	 E.U.	 or	 other	non-U.S. jurisdictions	 and/or	 enacted	 by	 various	 regulatory	 organizations	 or exchanges	relating	to	the	privacy	of	the	information	of	clients,	employees or	 others,	 including	 the	 GLB	Act,	 the	 E.U.'s	 General	 Data	 Protection Regulation	 (GDPR)	 which	 took	 effect	 on	 May	 25,	 2018,	 the	 Japanese Personal	 Information	 Protection	 Act,	 the	 Hong	 Kong	 Personal	 Data (Privacy)	Ordinance,	the	Australian	Privacy	Act	and	the	Brazilian	Bank Secrecy	 Law.	 The	 GDPR	 has	 heightened	 our	 privacy	 compliance obligations,	impacted	our	businesses'	collection,	processing	and	retention of	personal	data	and	imposed	strict	standards	for	reporting	data	breaches. The	GDPR	also	provides	for	significant	penalties	for	non-compliance.	In addition,	 the	California	Consumer	Privacy	Act	(CCPA)	was	enacted	 in June	2018	and	is	scheduled	 to	 take	effect	on	January	1,	2020	and	will impose	 privacy	 compliance	 obligations	 with	 regard	 to	 the	 personal information	of	California	residents.

The	NYDFS	also	requires	financial	institutions	regulated	by	the	NYDFS, including	GS	Bank	USA,	to,	among	other	things,	(i)	establish	and	maintain a	cyber	security	program	designed	to	ensure	the	confidentiality,	integrity	and availability	 of	 their	 information	 systems;	 (ii)	 implement	 and	 maintain	 a written	cyber	security	policy	setting	forth	policies	and	procedures	for	the protection	 of	 their	 information	 systems	 and	 nonpublic	 information;	 and (iii)	 designate	 a	 Chief	 Information	 Security	 Officer.	 In	 addition,	 in October	2016,	the	U.S.	federal	bank	regulatory	agencies	issued	an	advance notice	 of	 proposed	 rulemaking	 on	 potential	 enhanced	 cyber	 risk management	standards	for	large	financial	institutions.

# Other	Regulation

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	 U.S.,	 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	particular,	state	attorneys	general	have	become much	more	active	in	seeking	fines	and	penalties	in	enforcement	led	by	the federal	regulators.	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.

MiFID	 II	 includes	 extensive	 market	 structure	 reforms,	 such	 as	 the establishment	 of	 new	 trading	 venue	 categories	 for	 the	 purposes	 of discharging	the	obligation	to	trade	OTC	derivatives	on	a	trading	platform and	 enhanced	pre-	and	post-trade	transparency	covering	a	wider	range	of financial	 instruments.	 In	 equities,	 MiFID	 II	 introduced	 volume	 caps	 on non-transparent	 liquidity	 trading	 for	 trading	 venues,	 limited	 the	 use	 of broker-dealer	crossing	networks	and	created	a	new	regime	for	systematic internalizers,	 which	 are	 investment	 firms	 that	 execute	 client	 transactions outside	a	trading	venue.

Additional	 control	 requirements	 were	 introduced	 for	 algorithmic	 trading, high	frequency	trading	and	direct	electronic	access.	Commodities	trading firms	are	required	to	calculate	their	positions	and	adhere	to	specific	limits. Other	reforms	introduced	enhanced	transaction	reporting,	the	publication	of best	execution	data	by	investment	firms	and	trading	venues,	transparency	on costs	and	charges	of	service	to	investors,	changes	to	the	way	investment managers	 can	 pay	 for	 the	 receipt	 of	 investment	 research	 and	 mandatory unbundling	for	broker-dealers	between	execution	and	other	major	services.

The	E.U.	and	national	financial	legislators	and	regulators	in	the	E.U.	have proposed	or	adopted	numerous	further	market	reforms	 that	may	 impact our	businesses,	including	heightened	corporate	governance	standards	for financial	 institutions,	rules	on	key	 information	documents	for	packaged retail	and	insurance-based	investment	products	and	rules	on	indices	that are	used	as	benchmarks	for	financial	instruments	or	funds.	In	addition,	the European	 Commission,	 the	 European	 Securities	 and	 Markets	Authority and	the	European	Banking	Authority	have	announced	or	are	formulating regulatory	standards	and	other	measures	which	will	impact	our	European operations.	Certain	of	our	European	subsidiaries	are	also	regulated	by	the securities,	 derivatives	 and	 commodities	 exchanges	 of	 which	 they	 are members.

As	described	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.

# 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.	Our	executive officers	have	been	appointed	by	and	serve	at	the	pleasure	of	our	Board	of Directors.

Mr.	Holmes	has	been	an	Executive	Vice	President	and	Global	Head	of Human	Capital	Management	since	January	2018	and	Global	Head	of	Pine Street,	 our	 leadership	 development	 program,	 since	 2016.	 He	 had previously	 served	 as	 Global	 Head	 of	 Investor	 Relations	 since October	2007.

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

# Stephen	M.	Scherr,	54

Mr.	 Scherr	 has	 been	 an	 Executive	 Vice	 President	 and	 Chief	 Financial Officer	 since	 November	 2018.	 He	 had	 previously	 served	 as	 Chief Executive	 Officer	 of	 Goldman	 Sachs	 Bank	 USA	 since	 May	 2016,	 and head	 of	 the	 Consumer	 &	 Commercial	 Banking	 Division	 from	 2016	 to 2018.	From	June	2014	to	2017,	he	was	Chief	Strategy	Officer,	and	from 2011	to	2016	he	was	Head	of	the	Latin	America	business.	He	was	also Global	Head	of	the	Financing	Group	from	2008	to	2014.

# Karen	P.	Seymour,	57

Ms.	Seymour	has	been	an	Executive	Vice	President,	General	Counsel	and Secretary,	 and	 Head	 or	Co-Head	 of	 the	 Legal	 Department	 since January	2018.	From	2000	through	January	2002	and	2005	through	2017,	she was	a	partner	at	Sullivan	&	Cromwell	LLP,	a	global	law	firm,	including serving	 as	 a	 member	 of	 its	 management	 committee	 from	April	 2015	 to December	2017,	and	as	the	co-managing	partner	of	its	litigation	group	from December	2012	to	April	2015.

Ms.	 Smith	 has	 been	 an	 Executive	 Vice	 President	 and	 Global	 Head	 of Compliance	since	March	2017.	She	had	previously	served	as	Controller	and Chief	Accounting	Officer	since	2002.

# David	M.	Solomon,	57

Mr.	 Solomon	 has	 been	 Chairman	 of	 the	 Board	 since	 January	 2019,	 and Chief	 Executive	 Officer	 and	 a	 director	 since	 October	 2018.	 He	 had previously	 served	 as	 President	 and	 Chief	 or	 Co-Chief	 Operating	 Officer since	January	2017	and	Co-Head	of	the	Investment	Banking	Division	from July	2006	to	December	2016.

Mr.	 Waldron	 has	 been	 President	 and	 Chief	 Operating	 Officer	 since October	 2018.	 He	 had	 previously	 served	 as	Co-Head	 of	 the	 Investment Banking	Division	since	December	2014.	Prior	to	that	he	was	Global	Head	of Investment	Banking	Services/Client	Coverage	for	the	Investment	Banking Division	and	had	oversight	of	the	Investment	Banking	Services	Leadership Group,	 and	 from	 2007	 to	 2009	 was	 Global	Co-Head	 of	 the	 Financial Sponsors	Group.

# Available	Information

Our	 internet	address	 is	www.goldmansachs.com	and	the	investor	relations section	 of	 our	 website	 is	 located at	www.goldmansachs.com/investor- relations.	We	make	available	free	of	charge	through	the	investor	relations section	of	our	website,	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	website,	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,	 Corporate	 Governance	 and Nominating	Committee,	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	website	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	website	includes	information	concerning:

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

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

•	Dodd-Frank	Act	stress	test	results;

•	The	public	portion	of	our	resolution	plan	submission;

•	Our	risk	management	practices	and	regulatory	capital	ratios,	as	required under	the	disclosure-related	provisions	of	the	Capital	Framework,	which are	based	on	the	third	pillar	of	Basel	III;	and

•	Our	quarterly	average	LCR.

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.

From	 time	 to	 time,	 we use our website, our	 Twitter	 account (twitter.com/GoldmanSachs), our Instagram account (instagram.com/GoldmanSachs)	 and	 other	 social	 media	 channels	 as additional	means	of	disclosing	public	information	to	investors,	the	media and	others	interested	in	Goldman	Sachs.	In	addition,	our	officers	may	use similar	social	media	channels	to	disclose	public	information.	It	is	possible that	certain	 information	we	or	our	officers	post	on	our	website	and	on social	 media	 could	 be	 deemed	 to	 be	 material	 information,	 and	 we encourage	investors,	the	media	and	others	interested	in	Goldman	Sachs	to review	the	business	and	financial	information	we	or	our	officers	post	on our	 website	 and	 on	 the	 social	 media	 channels	 identified	 above.	 The information	 on	 our	 website	 and	 those	 social	 media	 channels	 is	 not incorporated	by	reference	into	this	Form	10-K.

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

We	have	included	or	incorporated	by	reference	in	this	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	 conditions	 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,	leverage,	liquidity,	long-term	debt and	TLAC	rules	applicable	to	banks	and	BHCs,	the	impact	of	the	Dodd- Frank	Act	on	our	businesses	and	operations,	and	various	legal	proceedings, governmental	investigations	or	mortgage-related	contingencies	as	set	forth in	both	Notes	27	and	18	to	the	consolidated	financial	statements	in	Part	II, Item	 8	 of	 this	Form	10-K,	as	well	as	statements	about	the	results	of	our Dodd-Frank	Act	and	our	stress	tests,	statements	about	the	objectives	and effectiveness	of	our	business	continuity	plan,	information	security	program, risk	management	and	liquidity	policies,	statements	about	our	resolution	plan and	resolution	strategy	and	their	implications	for	our	debtholders	and	other stakeholders,	statements	about	the	design	and	effectiveness	of	our	resolution capital	 and	 liquidity	 models	 and	 our	 triggers	 and	 alerts	 framework, 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,	statements	about	our	investment banking	 transaction	 backlog,	 statements	 about	 our	 expected	 tax	 rate, statements	 about	 the	 estimated	 impact	 of	 new	 accounting	 standards, statements	about	the	level	of	capital	actions,	statements	about	our	expected interest	income,	statements	about	our	credit	exposures,	statements	about	our preparations	for	Brexit,	including	our	plan	to	manage	a	hard	Brexit	scenario, statements	 about	 the	 replacement	 of	 LIBOR	 and	 other	 IBORs	 and	 the objectives	of	our	program	related	to	the	transition	from	IBORs	to	alternative risk-free	 reference	 rates,	 and	 statements	 about	 the	 adequacy	 of	 our allowance	for	credit	losses.

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

Statements	about	our	investment	banking	transaction	backlog	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	 information	 about	 other	 important	 factors	 that could	 adversely	 affect	 our	 investment	 banking	 transactions,	 see	 "Risk Factors"	in	Part	I,	Item	1A	of	this	Form	10-K.

Statements	about	our	expected	2019	effective	income	tax	rate	are	subject to	the	risk	that	our	tax	rate	may	differ	from	the	anticipated	rate	indicated	in such	statements,	possibly	materially,	due	to,	among	other	things,	changes in	our	earnings	mix,	our	profitability	and	entities	in	which	we	generate profits,	the	assumptions	we	have	made	in	forecasting	our	expected	tax	rate, as	 well	 as	 guidance	 that	 may	 be	 issued	 by	 the	 U.S.	 Internal	 Revenue Service.

We	 provided	 in	 this	 filing	 information	 regarding	 our	 NSFR.	 The statements	 with	 respect	 to	 our	 NSFR	 are	 forward-looking	 statements, based	on	our	current	interpretation,	expectations	and	understandings	of	the relevant	proposal,	and	reflect	significant	assumptions	about	the	treatment of	 various	 assets	 and	 liabilities	 and	 the	 manner	 in	 which	 our	 NSFR	 is calculated.	As	a	result,	the	methods	used	to	calculate	our	NSFR	may	differ, possibly	 materially,	 from	 those	 used	 in	 calculating	 our	 NSFR	 for	 any future	 disclosures.	The	 ultimate	 methods	 of	 calculating	 our	 NSFR	 will depend	on,	among	other	things,	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	negatively.

Our	financial	performance	is	highly	dependent	on	the	environment	in	which our	 businesses	 operate.	 A	 favorable	 business	 environment	 is	 generally characterized	by,	among	other	factors,	high	global	gross	domestic	product growth,	regulatory	and	market	conditions	which	result	in	transparent,	liquid and	 efficient	 capital	 markets,	 low	 inflation,	 high	 business	 and	 investor confidence,	 stable	 geopolitical	 conditions,	 clear	 regulations	 and	 strong business	 earnings.	 Unfavorable	 or	 uncertain	 economic	 and	 market conditions	can	be	caused	by:	concerns	about	sovereign	defaults;	uncertainty concerning	fiscal	or	monetary	policy,	government	shutdowns,	debt	ceilings or	 funding;	 the	 extent	 of	 and	 uncertainty	 about	 tax	 and	 other	 regulatory changes;	 declines	 in	 economic	 growth,	 business	 activity	 or	 investor	 or business	confidence;	limitations	on	the	availability	or	increases	in	the	cost	of credit	 and	 capital;	 illiquid	 markets;	 increases	 in	 inflation,	 interest	 rates, exchange	 rate	 or	 basic	 commodity	 price	 volatility	 or	 default	 rates;	 the imposition	of	tariffs	or	other	limitations	on	international	trade	and	travel; outbreaks	 of	 domestic	 or	 international	 tensions	 or	 hostilities,	 terrorism, nuclear	 proliferation,	 cybersecurity	 threats	 or	 attacks	 and	 other	 forms	 of disruption	to	or	curtailment	of	global	communication,	energy	transmission or	 transportation	networks	or	other	geopolitical	 instability	or	uncertainty, such	as	Brexit;	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.

The	 financial	 services	 industry	 and	 the	 securities	 markets	 have	 been materially	and	adversely	affected	in	the	past	by	significant	declines	in	the values	of	nearly	all	asset	classes	and	by	a	serious	 lack	of	 liquidity.	In addition,	concerns	about	European	sovereign	debt	risk	and	its	impact	on the	 European	 banking	 system,	 the	 impact	 of	 Brexit,	 the	 imposition	 of tariffs	by	the	U.S.	and	by	other	countries	in	response	thereto,	and	changes in	interest	rates	and	other	market	conditions	or	actual	changes	in	interest rates	and	other	market	conditions,	have	resulted,	at	times,	in	significant volatility	while	negatively	impacting	the	levels	of	client	activity.

General	uncertainty	about	economic,	political	and	market	activities,	and the	 scope,	 timing	 and	 impact	 of	 regulatory	 reform,	 as	 well	 as	 weak consumer,	investor	and	CEO	confidence	resulting	in	large	part	from	such uncertainty,	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.

Financial	institution	returns	in	many	countries	may	be	negatively	impacted by	increased	funding	costs	due	in	part	to	the	lack	of	perceived	government support	of	such	institutions	in	the	event	of	future	financial	crises	relative	to financial	 institutions	 in	 countries	 in	 which	 governmental	 support	 is maintained.	In	addition,	liquidity	in	the	financial	markets	has	also	been negatively	 impacted	 as	 market	 participants	 and	 market	 practices	 and structures	continue	to	adjust	to	new	regulations.

Our	revenues	and	profitability	and	those	of	our	competitors	have	been	and will	continue	to	be	impacted	by	requirements	relating	to	capital,	additional loss-absorbing	 capacity,	 leverage,	 minimum	 liquidity	 and	 long-term funding	levels,	requirements	related	to	resolution	and	recovery	planning, derivatives	clearing	and	margin	rules	and	levels	of	regulatory	oversight,	as well	 as	 limitations	 on	 which	 and,	 if	 permitted,	 how	 certain	 business activities	may	be	carried	out	by	financial	institutions.

The	 degree	 to	 which	 these	 and	 other	 changes	 since	 the	 financial	 crisis continue	to	have	an	impact	on	the	profitability	of	financial	institutions	will depend	on	the	effect	of	regulations	adopted	after	2008	and	new	regulations, the	manner	in	which	markets,	market	participants	and	financial	institutions have	continued	to	adapt	to	these	regulations,	and	the	prevailing	economic and	financial	market	conditions.	However,	 there	 is	a	significant	risk	 that such	 changes	 will	 negatively	 impact	 the	 absolute	 level	 of	 revenues, profitability	and	return	on	equity	for	us	and	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	 law	enforcement,	regulatory	and	 taxing	authorities,	as	well	as	private litigation,	in	all	jurisdictions	in	which	we	conduct	our	businesses.	In	many cases,	our	activities	may	be	subject	to	overlapping	and	divergent	regulation in	different	jurisdictions.	Among	other	things,	as	a	result	of	law	enforcement authorities,	regulators	or	private	parties	challenging	our	compliance	with existing	 laws	 and	 regulations,	 we	 or	 our	 employees	 could	 be	 fined	 or criminally	sanctioned,	prohibited	from	engaging	 in	some	of	our	business activities,	 subject	 to	 limitations	 or	 conditions	 on	 our	 business	 activities, including	higher	capital	requirements,	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.	 Such	 limitations	 or conditions	 may	 limit	 our	 business	 activities	 and	 negatively	 impact	 our profitability.

In	 addition	 to	 the	 impact	 on	 the	 scope	 and	 profitability	 of	 our	 business activities,	day-to-day	 compliance	 with	 existing	 laws	 and	 regulations,	 in particular	those	adopted	since	2008,	has	involved	and	will,	except	to	the extent	 that	some	of	such	regulations	are	modified	or	otherwise	repealed, continue	to	involve	significant	amounts	of	time,	including	that	of	our	senior leaders	 and	 that	 of	 a	 large	 number	 of	 dedicated	 compliance	 and	 other reporting	and	operational	personnel,	all	of	which	may	negatively	impact	our profitability.

If	 there	 are	 new	 laws	 or	 regulations	 or	 changes	 in	 the	 enforcement	 of existing	laws	or	regulations	applicable	to	our	businesses	or	those	of	our clients,	 including	 capital,	 liquidity,	 leverage,	 long-term	 debt,	 total	 loss- absorbing	 capacity	 and	 margin	 requirements,	 restrictions	 on	 leveraged lending	or	other	business	practices,	reporting	requirements,	requirements relating	to	recovery	and	resolution	planning,	tax	burdens	and	compensation restrictions,	that	are	imposed	on	a	limited	subset	of	financial	institutions (either	based	on	size,	method	of	funding,	activities,	geography	or	other criteria),	compliance	with	these	new	laws	or	regulations,	or	changes	in	the enforcement	 of	 existing	 laws	 or	 regulations,	 could	 adversely	 affect	 our ability	to	compete	effectively	with	other	institutions	that	are	not	affected	in the	same	way.	In	addition,	regulation	imposed	on	financial	institutions	or market	 participants	 generally,	 such	 as	 taxes	 on	 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	 reducing	 dividends	 or	 share	 repurchases, 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	have	adversely	affected	and	may	in	the	future affect	our	profitability.

Among	the	aspects	of	the	Dodd-Frank	Act	that	have	affected	or	may	in	the future	affect	our	businesses	are:	increased	capital,	liquidity	and	reporting requirements;	limitations	on	activities	in	which	we	may	engage;	increased regulation	of	and	restrictions	on	OTC	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	and	investment	advisers	in dealing	with	clients.	The	implementation	of	higher	capital	requirements, the	LCR,	the	NSFR,	requirements	relating	to	long-term	debt	and	total	loss- absorbing	 capacity	 and	 the	 prohibition	 on	 proprietary	 trading	 and	 the sponsorship	of,	or	investment	in,	covered	funds	by	the	Volcker	Rule	may continue	 to	 adversely	 affect	 our	 profitability	 and	 competitive	 position, particularly	if	these	requirements	do	not	apply	equally	to	our	competitors or	are	not	implemented	uniformly	across	jurisdictions.

As	 described	 in	 "Business	 —	 Regulation	 —	 Banking	 Supervision	 and Regulation"	 in	 Part	 I,	 Item	 1	 of	 this	Form	10-K,	 Group	 Inc.'s	 proposed capital	 actions	 and	 capital	 plan	 are	 reviewed	 by	 the	 FRB	 as	 part	 of	 the CCAR	process.	If	the	FRB	objects	to	our	proposed	capital	actions	in	our capital	plan,	Group	Inc.	could	be	prohibited	from	taking	some	or	all	of	the proposed	 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.	Additionally,	 as	 a	 consequence	 of	 our designation	 as	 a	G-SIB,	 we	 are	 subject	 to	 the	G-SIB	 buffer.	 Our	G-SIB buffer	 is	 updated	 annually	 based	 on	 financial	 data	 from	 the	 prior	 year. Expansion	of	our	businesses	or	growth	in	our	balance	sheet	may	result	in	an increase	 in	 our	G-SIB	buffer	and	a	corresponding	increase	in	our	capital requirements.

We	are	also	subject	to	laws	and	regulations,	such	as	the	GDPR,	relating	to the	 privacy	 of	 the	 information	 of	 clients,	 employees	 or	 others,	 and	 any failure	to	comply	with	these	laws	and	regulations	could	expose	us	to	liability and/or	reputational	damage.	As	new	privacy-related	laws	and	regulations	are implemented,	the	time	and	resources	needed	for	us	to	comply	with	such	laws and	regulations,	as	well	as	our	potential	 liability	for	non-compliance	 and reporting	 obligations	 in	 the	 case	 of	 data	 breaches,	 may	 significantly increase.

In	addition,	our	businesses	are	increasingly	subject	to	laws	and	regulations relating	to	surveillance,	encryption	and	data	on-shoring	in	the	jurisdictions	in which	we	operate.	Compliance	with	these	laws	and	regulations	may	require us	 to	 change	 our	 policies,	 procedures	 and	 technology	 for	 information security,	 which	 could,	 among	 other	 things,	 make	 us	 more	 vulnerable	 to cyber	 attacks	 and	 misappropriation,	 corruption	 or	 loss	 of	 information	 or technology.

We	 have	 entered	 into	 new	 consumer-oriented	 deposit-taking	 and	 lending businesses,	and	we	currently	expect	to	expand	the	product	and	geographic scope	of	our	offerings.	Entering	into	such	new	businesses,	as	with	any	new business,	subjects	us	to	numerous	additional	regulations	in	the	jurisdictions in	which	these	businesses	operate.	Not	only	are	these	regulations	extensive, but	they	involve	types	of	regulations	and	supervision,	as	well	as	regulatory compliance	risks,	 that	we	have	not	previously	encountered.	The	 level	of regulatory	 scrutiny	 and	 the	 scope	 of	 regulations	 affecting	 financial interactions	with	consumers	is	often	much	greater	than	that	associated	with doing	business	with	institutions	and	high-net-worth	individuals.	Complying with	such	new	regulations	is	time-consuming,	costly	and	presents	new	and increased	risks.

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.	To	the	extent	that	we	have fiduciary	 obligations	 in	 connection	 with	 acting	 as	 a	 financial	 adviser, investment	adviser	or	in	other	roles	for	individual,	institutional,	sovereign or	investment	fund	clients,	any	breach,	or	even	an	alleged	breach,	of	such obligations	 could	 have	 materially	 negative	 legal,	 regulatory	 and reputational	consequences.

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

# 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.	In addition,	 we	 invest	 in	 similar	 asset	 classes.	 Substantially	 all	 of	 our investing	 and	 market-making	 positions	 and	 a	 portion	 of	 our	 loans	 are marked-to-market	on	a	daily	basis	and	declines	in	asset	values	directly	and immediately	impact	our	earnings,	unless	we	have	effectively	"hedged"	our exposures	to	such	declines.

In	 certain	 circumstances	 (particularly	 in	 the	 case	 of	 credit	 products, including	leveraged	loans,	and	private	equities	or	other	securities	that	are not	freely	tradable	or	lack	established	and	liquid	trading	markets),	it	may not	be	possible	or	economic	to	hedge	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	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	or	 the	credit	ratings	of	 the	party	posting	collateral	decline,	 the party	posting	the	collateral	may	need	to	provide	additional	collateral	or,	if possible,	reduce	its	trading	position.	An	example	of	such	a	situation	is	a "margin	call"	in	connection	with	a	brokerage	account.	Therefore,	declines	in the	value	of	asset	classes	used	as	collateral	mean	 that	either	 the	cost	of funding	positions	is	increased	or	the	size	of	positions	is	decreased.

If	 we	 are	 the	 party	 providing	 collateral,	 this	 can	 increase	 our	 costs	 and reduce	our	profitability	and	if	we	are	the	party	receiving	collateral,	this	can also	reduce	our	profitability	by	reducing	the	level	of	business	done	with	our clients	 and	 counterparties.	 In	 addition,	 volatile	 or	 less	 liquid	 markets increase	the	difficulty	of	valuing	assets,	which	can	lead	to	costly	and	time- consuming	disputes	over	asset	values	and	the	level	of	required	collateral,	as well	as	increased	credit	risk	to	the	recipient	of	the	collateral	due	to	delays	in receiving	adequate	collateral.

In	cases	where	we	foreclose	on	collateral,	sudden	declines	in	the	value	or liquidity	 of	 such	 collateral	 may,	 despite	 credit	 monitoring,	 over- collateralization,	the	ability	to	call	for	additional	collateral	or	the	ability	to force	repayment	of	the	underlying	obligation,	result	in	significant	losses	to us,	 especially	 where	 there	 is	 a	 single	 type	 of	 collateral	 supporting	 the obligation.	In	addition,	we	have	been,	and	may	in	the	future	be,	subject	to claims	that	the	foreclosure	was	not	permitted	under	the	legal	documents, was	conducted	in	an	improper	manner	or	caused	a	client	or	counterparty	to go	out	of	business.

# 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	loans	or	lines	of	credit	from	commercial	or	other	banking entities.	We	seek	to	finance	many	of	our	assets	on	a	secured	basis.	Any disruptions	in	the	credit	markets	may	make	it	harder	and	more	expensive	to obtain	funding	for	our	businesses.	If	our	available	funding	is	limited	or	we are	forced	to	fund	our	operations	at	a	higher	cost,	these	conditions	may require	 us	 to	 curtail	 our	 business	 activities	 and	 increase	 our	 cost	 of funding,	both	of	which	could	reduce	our	profitability,	particularly	in	our businesses	that	involve	investing,	lending	and	market	making.

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

Our	 credit	 businesses	 have	 been	 and	 may	 in	 the	 future	 be	 negatively affected	by	a	lack	of	liquidity	in	credit	markets.	A	lack	of	liquidity	reduces price	 transparency,	 increases	 price	 volatility	 and	 decreases	 transaction volumes	and	size,	all	of	which	can	increase	transaction	risk	or	decrease	the profitability	of	such	businesses.

# 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	have	reduced	and	may	in	the	future	reduce	these	opportunities	and the	 level	of	client	activity	associated	with	 them	and	adversely	affect	 the results	of	these	activities.	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 inventory	in	order	to	avoid	increasing	our	VaR.	Limiting	the	size	of	our market-making	positions	can	adversely	affect	our	profitability.	In	periods when	volatility	is	increasing,	but	asset	values	are	declining	significantly,	it may	not	be	possible	to	sell	assets	at	all	or	it	may	only	be	possible	to	do	so	at steep	discounts.	In	such	circumstances	we	may	be	forced	to	either	take	on additional	risk	or	to	realize	losses	in	order	to	decrease	our	VaR.	In	addition, increases	in	volatility	increase	the	level	of	our	RWAs,	which	increases	our capital	requirements.

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

Our	 investment	 banking	 business	 has	 been,	 and	 may	 in	 the	 future	 be, adversely	 affected	 by	 market	 conditions.	 Poor	 economic	 conditions	 and other	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. Even	 if	 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	or	a client	preference	for	products	other	than	those	which	we	offer or	for	products	that	generate	lower	fees.

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.	To	the	extent	that	our	clients	choose	to	invest	in	products	that we	 do	 not	 currently	 offer,	 we	 will	 suffer	 outflows	 and	 a	 loss	 of management	fees.	Further,	if,	due	to	changes	in	investor	sentiment	or	the relative	performance	of	certain	asset	classes	or	otherwise,	clients	invest	in products	that	generate	lower	fees,	our	investment	management	business could	be	adversely	affected.

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

We	 seek	 to	 monitor	 and	 control	 our	 risk	 exposure	 through	 a	 risk	 and control	framework	encompassing	a	variety	of	separate	but	complementary financial,	 credit,	 operational,	 compliance	 and	 legal	 reporting	 systems, internal	 controls,	 management	 review	 processes	 and	 other	 mechanisms. Our	risk	management	process	seeks	to	balance	our	ability	to	profit	from market-making,	investing	or	lending	positions,	and	underwriting	activities, with	 our	 exposure	 to	 potential	 losses.	 While	 we	 employ	 a	 broad	 and diversified	 set	 of	 risk	 monitoring	 and	 risk	 mitigation	 techniques,	 those techniques	 and	 the	 judgments	 that	 accompany	 their	 application	 cannot anticipate	 every	 economic	 and	 financial	 outcome	 or	 the	 specifics	 and timing	of	such	outcomes.	Thus,	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	those	that	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.

In	 addition,	 the	 use	 of	 models	 in	 connection	 with	 risk	 management	 and numerous	other	critical	activities	presents	risks	that	such	models	may	be ineffective,	either	because	of	poor	design	or	ineffective	testing,	improper	or flawed	 inputs,	as	well	as	unpermitted	access	 to	such	models	resulting	 in unapproved	or	malicious	changes	to	the	model	or	its	inputs.

To	 the	 extent	 that	 we	 have	 positions	 through	 our	 market-making	 or origination	activities	or	we	make	investments	directly	through	our	investing activities,	including	private	equity,	that	do	not	have	an	established	liquid trading	market	or	are	otherwise	subject	to	restrictions	on	sale	or	hedging,	we may	 not	 be	 able	 to	 reduce	 our	 positions	 and	 therefore	 reduce	 our	 risk associated	 with	 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.

As	we	have	expanded	and	intend	to	continue	to	expand	the	product	and geographic	scope	of	our	offerings	of	credit	products	to	consumers,	we	are presented	with	different	credit	risks	and	must	expand	and	adapt	our	credit risk	monitoring	and	mitigation	activities	to	account	for	these	new	business activities.	A	failure	to	adequately	assess	and	control	such	risk	exposures could	result	in	losses	to	us.

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

# 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.	It	is	of	critical	importance	to	us,	as most	of	the	failures	of	financial	institutions	have	occurred	in	large	part	due to	insufficient	liquidity.	Our	liquidity	may	be	impaired	by	an	inability	to access	secured	and/or	unsecured	debt	markets,	an	inability	to	access	funds from	our	subsidiaries	or	otherwise	allocate	liquidity	optimally,	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.

We	employ	structured	products	to	benefit	our	clients	and	hedge	our	own risks.	The	financial	instruments	that	we	hold	and	the	contracts	to	which	we are	a	party	are	often	complex,	and	these	complex	structured	products	often do	not	have	readily	available	markets	to	access	in	times	of	liquidity	stress. Our	 investing	 and	 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	there	is	not	generally	a liquid	 market	 for	 such	 assets,	 as	 well	 as	 in	 circumstances	 where	 other market	participants	are	seeking	to	sell	similar	otherwise	generally	liquid assets	at	the	same	time,	as	is	likely	to	occur	in	a	liquidity	or	other	market crisis	 or	 in	 response	 to	 changes	 to	 rules	 or	 regulations.	 In	 addition, financial	institutions	with	which	we	interact	may	exercise	set-off	rights	or the	 right	 to	 require	 additional	 collateral,	 including	 in	 difficult	 market conditions,	which	could	further	impair	our	liquidity.

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	 us	 or	 require	 us	 to	 post additional	collateral.	Termination	of	our	trading	and	collateralized	financing contracts	 could	 cause	 us	 to	 sustain	 losses	 and	 impair	 our	 liquidity	 by requiring	us	to	find	other	sources	of	financing	or	to	make	significant	cash payments	or	securities	movements.

As	of	December	2018,	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	$262	million	in	the event	of	a	one-notch	downgrade	of	our	credit	ratings	and	$959	million	in	the event	of	a	two-notch	downgrade	of	our	credit	ratings.	A	downgrade	by	any one	rating	agency,	depending	on	the	agency's	relative	ratings	of	us	at	the time	of	 the	downgrade,	may	have	an	 impact	which	 is	comparable	 to	 the impact	of	a	downgrade	by	all	rating	agencies.	For	further	information	about our	credit	ratings,	see	"Management's	Discussion	and	Analysis	of	Financial Condition	and	Results	of	Operations	—	Risk	Management	—	Liquidity	Risk Management	—	Credit	Ratings"	in	Part	II,	Item	7	of	this	Form	10-K.

Our	cost	of	obtaining	long-term	unsecured	funding	is	directly	related	to	our credit	spreads	(the	amount	in	excess	of	the	interest	rate	of	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	has proven	to	be	extremely	volatile	and	at	times	has	lacked	a	high	degree	of transparency	or	liquidity.

Regulatory	changes	relating	to	liquidity	may	also	negatively	impact	our results	 of	 operations	 and	 competitive	 position.	 Recently,	 numerous regulations	 have	 been	 adopted	 or	 proposed	 to	 introduce	 more	 stringent liquidity	 requirements	 for	 large	 financial	 institutions.	 These	 regulations address,	among	other	matters,	liquidity	stress	testing,	minimum	liquidity requirements,	wholesale	funding,	limitations	on	the	issuance	of	short-term debt	and	structured	notes	and	prohibitions	on	parent	guarantees	that	are subject	 to	 certain	 cross-defaults.	 New	 and	 prospective	 liquidity-related regulations	 may	 overlap	 with,	 and	 be	 impacted	 by,	 other	 regulatory changes,	including	rules	relating	to	minimum	long-term	debt	requirements and	TLAC,	guidance	on	the	treatment	of	brokered	deposits	and	the	capital, leverage	 and	 resolution	 and	 recovery	 frameworks	 applicable	 to	 large financial	institutions.	Given	the	overlap	and	complex	interactions	among these	 new	 and	 prospective	 regulations,	 they	 may	 have	 unintended cumulative	 effects,	 and	 their	 full	 impact	 will	 remain	 uncertain,	 while regulatory	 reforms	 are	 being	 adopted	 and	 market	 practices	 develop	 in response	to	such	reforms.

# 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	 our	 other businesses	and	situations	where	we	may	be	a	creditor	of	an	entity	with which	we	also	have	an	advisory	or	other	relationship.

In	addition,	our	status	as	a	BHC	subjects	us	to	heightened	regulation	and increased	 regulatory	 scrutiny	 by	 the	 FRB	 with	 respect	 to	 transactions between	 GS	 Bank	 USA	 and	 entities	 that	 are	 or	 could	 be	 viewed	 as affiliates	 of	 ours	 and,	 under	 the	 Volcker	 Rule,	 transactions	 between Goldman	Sachs	and	certain	covered	funds.

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.

# A	failure	in	our	operational	systems	or	infrastructure,	or	those of	third	parties,	as	well	as	human	error	or	malfeasance,	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	 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.

Many	rules	and	regulations	worldwide	govern	our	obligations	 to	execute transactions	and	report	such	transactions	and	other	information	to	regulators, exchanges	 and	 investors.	 Compliance	 with	 these	 legal	 and	 reporting requirements	can	be	challenging,	and	we	have	been,	and	may	in	the	future be,	subject	to	regulatory	fines	and	penalties	for	failing	to	follow	these	rules or	to	report	timely,	accurate	and	complete	information	in	accordance	with such	rules.	As	such	requirements	expand,	compliance	with	these	rules	and regulations	has	become	more	challenging.

As	 our	 client	 base,	 including	 through	 our	 consumer	 businesses,	 and	 our geographical	 reach	 expand	 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)	 increase,	 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	us.

Enhancements	and	updates	to	systems,	as	well	as	the	requisite	training, including	 in	 connection	 with	 the	 integration	 of	 new	 businesses,	 entail significant	 costs	 and	 create	 risks	 associated	 with	 implementing	 new systems	and	integrating	them	with	existing	ones.

The	use	of	computing	devices	and	phones	is	critical	to	the	work	done	by our	employees	and	the	operation	of	our	systems	and	businesses	and	those of	 our	 clients	 and	 our	 third-party	 service	 providers	 and	 vendors. Fundamental	 security	 flaws	 in	 computer	 chips	 found	 in	 many	 types	 of these	computing	devices	and	phones	have	been	reported	in	the	past	and may	be	discovered	in	the	future.	Addressing	this	and	similar	issues	could be	costly	and	affect	the	performance	of	these	businesses	and	systems,	and operational	risks	may	be	incurred	in	applying	fixes	and	there	may	still	be residual	security	risks.

Additionally,	 although	 the	 prevalence	 and	 scope	 of	 applications	 of distributed	 ledger	 technology	 and	 similar	 technologies	 is	 growing,	 the technology	is	also	nascent	and	may	be	vulnerable	to	cyber	attacks	or	have other	inherent	weaknesses.	We	may	be,	or	may	become,	exposed	to	risks related	to	distributed	ledger	technology	through	our	facilitation	of	clients' activities	 involving	 financial	 products	 linked	 to	 distributed	 ledger technology,	 such	 as	 blockchain	 or	 cryptocurrencies,	 our	 investments	 in companies	 that	 seek	 to	 develop	 platforms	 based	 on	 distributed	 ledger technology,	 and	 the	 use	 of	 distributed	 ledger	 technology	 by	 third-party vendors,	 clients,	 counterparties,	 clearing	 houses	 and	 other	 financial intermediaries.

Notwithstanding	the	proliferation	of	technology	and	technology-based	risk and	 control	 systems,	 our	 businesses	 ultimately	 rely	 on	 people	 as	 our greatest	resource,	and,	from	time-to-time,	they	make	mistakes	or	engage	in violations	 of	 applicable	 policies,	 laws,	 rules	 or	 procedures	 that	 are	 not always	 caught	 immediately	 by	 our	 technological	 processes	 or	 by	 our controls	and	other	procedures,	which	are	intended	to	prevent	and	detect such	errors	or	violations.	These	can	include	calculation	errors,	mistakes	in addressing	 emails,	 errors	 in	 software	 or	 model	 development	 or implementation,	or	simple	errors	in	judgment,	as	well	as	intentional	efforts to	 ignore	 or	 circumvent	 applicable	 policies,	 laws,	 rules	 or	 procedures. Human	 errors	 and	 malfeasance,	 even	 if	 promptly	 discovered	 and remediated,	can	result	in	material	losses	and	liabilities	for	us.

In	 addition,	 we	 face	 the	 risk	 of	 operational	 failure	 or	 significant operational	delay,	termination	or	capacity	constraints	of	any	of	the	clearing agents,	exchanges,	clearing	houses	or	other	financial	intermediaries	we	use to	 facilitate	 our	 securities	 and	 derivatives	 transactions,	 and	 as	 our interconnectivity	with	our	clients	grows,	we	increasingly	face	the	risk	of operational	 failure	 or	 significant	 operational	 delay	 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	 or significant	 operational	 delay,	 termination	 or	 capacity	 constraints	 of	 the particular	financial	intermediaries	that	we	use	and	could	affect	our	ability	to find	adequate	and	cost-effective	alternatives	in	the	event	of	any	such	failure, delay,	 termination	 or	 constraint.	 Industry	 consolidation,	 whether	 among market	 participants	 or	 financial	 intermediaries,	 increases	 the	 risk	 of operational	 failure	 or	 significant	 operational	 delay	 as	 disparate	 complex systems	need	to	be	integrated,	often	on	an	accelerated	basis.

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,	our	employees	or	third	parties	with	which	we conduct	business,	including	cloud	service	providers.	These	disruptions	may occur	as	a	result	of	events	that	affect	only	our	buildings	or	systems	or	those of	such	third	parties,	or	as	a	result	of	events	with	a	broader	impact	globally, regionally	 or	 in	 the	 cities	 where	 those	 buildings	 or	 systems	 are	 located, including,	but	not	limited	to,	natural	disasters,	war,	civil	unrest,	terrorism, economic	or	political	developments,	pandemics	and	weather	events.

In	addition,	although	we	seek	to	diversify	our	third-party	vendors	to	increase our	resiliency,	we	are	also	exposed	 to	 the	risk	 that	a	disruption	or	other information	technology	event	at	a	common	service	provider	to	our	vendors could	impede	their	ability	to	provide	products	or	services	to	us.	We	may	not be	able	to	effectively	monitor	or	mitigate	operational	risks	relating	to	our vendors'	use	of	common	service	providers.

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	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.

# A failure to protect our computer systems, networks and information,	and	our	clients'	information,	against	cyber	attacks and	 similar threats	 could impair	 our	 ability to	 conduct	 our businesses, result in the	 disclosure, theft	 or	 destruction	 of confidential information,	 damage	 our reputation and cause losses.

Our	operations	rely	on	the	secure	processing,	storage	and	transmission	of confidential	and	other	information	in	our	computer	systems	and	networks. There	have	been	a	number	of	highly	publicized	cases	involving	financial services	 companies,	 consumer-based	 companies,	 governmental	 agencies and	 other	 organizations	 reporting	 the	 unauthorized	 disclosure	 of	 client, customer	or	other	confidential	information	in	recent	years,	as	well	as	cyber attacks	 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.	 There	 have	 also	 been	 several	 highly publicized	 cases	 where	 hackers	 have	 requested	 "ransom"	 payments	 in exchange	for	not	disclosing	customer	information	or	for	restoring	access	to information	or	systems.

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.	 We	 may	 face	 an	 increasing	 number	 of attempted	cyber	attacks	as	we	expand	our	mobile-	and	other	internet-based products	and	services,	as	well	as	our	usage	of	mobile	and	cloud	technologies and	as	we	provide	more	of	these	services	to	a	greater	number	of	individual consumers.	 The	 increasing	 migration	 of	 firm	 communication	 and	 other platforms	from	firm-provided	devices	to	employee-owned	devices	presents additional	risks	of	cyber	attacks.	In	addition,	due	to	our	interconnectivity with	 third-party	 vendors	 (and	 their	 respective	 service	 providers),	 central agents,	exchanges,	clearing	houses	and	other	financial	institutions,	we	could be	adversely	impacted	if	any	of	them	is	subject	to	a	successful	cyber	attack or	other	information	security	event.	These	effects	could	include	the	loss	of access	to	information	or	services	from	the	third	party	subject	to	the	cyber attack	or	other	information	security	event,	which	could,	in	turn,	interrupt certain	of	our	businesses.

Despite	our	efforts	to	ensure	the	integrity	of	our	systems	and	information, we	may	not	be	able	to	anticipate,	detect	or	implement	effective	preventive measures	against	all	cyber	threats,	especially	because	the	techniques	used are	 increasingly	 sophisticated,	 change	 frequently	 and	 are	 often	 not recognized	 until	 launched.	 Cyber	 attacks	 can	 originate	 from	 a	 variety	 of sources,	 including	 third	 parties	 who	 are	 affiliated	 with	 or	 sponsored	 by foreign	 governments	 or	 are	 involved	 with	 organized	 crime	 or	 terrorist organizations.	Third	parties	may	also	attempt	to	place	individuals	within	the firm	or	induce	employees,	clients	or	other	users	of	our	systems	to	disclose sensitive	information	or	provide	access	to	our	data	or	that	of	our	clients,	and these	types	of	risks	may	be	difficult	to	detect	or	prevent.

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,	cyber	attacks	on	our	vendors	and	other	events	that	could have	a	security	impact.	Due	to	the	complexity	and	interconnectedness	of	our systems,	the	process	of	enhancing	our	protective	measures	can	itself	create	a risk	of	systems	disruptions	and	security	issues.

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	 legal	 or regulatory	action,	significant	losses	or	reputational	damage.	In	addition, such	an	event	could	persist	for	an	extended	period	of	time	before	being detected,	and,	following	detection,	it	could	take	considerable	time	for	us	to obtain	full	and	reliable	information	about	the	extent,	amount	and	type	of information	compromised.	During	the	course	of	an	investigation,	we	may not	know	the	full	impact	of	the	event	and	how	to	remediate	it,	and	actions, decisions	and	mistakes	that	are	taken	or	made	may	further	increase	the negative	effects	of	 the	event	on	our	business,	results	of	operations	and reputation.

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,	 but	 these measures	may	be	ineffective	and	we	may	be	subject	to	legal	or	regulatory action,	and	financial	losses	that	are	either	not	insured	against	or	not	fully covered	through	any	insurance	maintained	by	us.	Certain	aspects	of	the security	of	such	technologies	are	unpredictable	or	beyond	our	control,	and the	failure	by	mobile	technology	and	cloud	service	providers	to	adequately safeguard	 their	 systems	 and	 prevent	 cyber	 attacks	 could	 disrupt	 our operations	and	result	in	misappropriation,	corruption	or	loss	of	confidential and	other	information.	In	addition,	there	is	a	risk	that	encryption	and	other protective	 measures,	 despite	 their	 sophistication,	 may	 be	 defeated, particularly	to	the	extent	that	new	computing	technologies	vastly	increase the	speed	and	computing	power	available.

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.

# 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	FRB's	source	of	strength	requirement,	and even	require	Group	Inc.	to	provide	additional	funding	to	such	subsidiaries. Restrictions	or	regulatory	action	of	that	kind	could	impede	access	to	funds that	Group	Inc.	needs	to	make	payments	on	its	obligations,	including	debt obligations,	 or	 dividend	 payments.	 In	 addition,	 Group	 Inc.'s	 right	 to participate	 in	 a	 distribution	 of	 assets	 upon	 a	 subsidiary's	 liquidation	 or reorganization	is	subject	to	the	prior	claims	of	the	subsidiary's	creditors.

There	has	been	a	trend	towards	increased	regulation	and	supervision	of	our subsidiaries	by	the	governments	and	regulators	in	the	countries	 in	which those	 subsidiaries	 are	 located	 or	 do	 business.	 Concerns	 about	 protecting clients	and	creditors	of	financial	institutions	that	are	controlled	by	persons or	entities	located	outside	of	the	country	in	which	such	entities	are	located or	do	business	have	caused	or	may	cause	a	number	of	governments	and regulators	to	take	additional	steps	to	"ring	fence"	or	require	internal	total loss-absorbing	 capacity	 at	 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	us	on	a	consolidated	basis.

Furthermore,	Group	Inc.	has	guaranteed	the	payment	obligations	of	certain of	 its	 subsidiaries,	 including	 GS&Co.	 and	 GS	 Bank	 USA,	 subject	 to certain	 exceptions.	 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	increase	capital	or liquidity	 levels	 or	 issue	 additional	 long-term	 debt	 at	 Group	 Inc.	 or particular	 subsidiaries	 or	 otherwise	 incur	 additional	 or	 duplicative operational	or	other	costs	at	multiple	entities,	and	may	reduce	our	ability	to provide	Group	Inc.	guarantees	of	 the	obligations	of	our	subsidiaries	or raise	debt	at	Group	Inc.	Resolution	planning	may	also	impair	our	ability	to structure	our	intercompany	and	external	activities	in	a	manner	that	we	may otherwise	deem	most	operationally	efficient.	Furthermore,	arrangements	to facilitate	our	resolution	planning	may	cause	us	to	be	subject	to	additional taxes.	Any	such	limitations	or	requirements	would	be	in	addition	to	the legal	and	regulatory	restrictions	described	above	on	our	ability	to	engage	in capital	actions	or	make	intercompany	dividends	or	payments.

See	 "Business	 —	 Regulation"	 in	 Part	 I,	 Item	 1	 of this	Form	 10-K for further	information	about	regulatory	restrictions.

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

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

The	FDIC	has	announced	 that	a	single	point	of	entry	strategy	may	be	a desirable	strategy	under	OLA	to	resolve	a	large	financial	institution	such	as Group	Inc.	in	a	manner	that	would,	among	other	things,	impose	losses	on shareholders,	 debtholders	 and	 other	 creditors	 of	 the	top-tier	BHC	(in	our case,	Group	Inc.),	while	the	BHC's	subsidiaries	may	continue	to	operate.	It is	possible	that	the	application	of	the	single	point	of	entry	strategy	under OLA,	 in	 which	 Group	 Inc.	 would	 be	 the	 only	 entity	 to	 enter	 resolution proceedings	 (and	 its	 material	 broker-dealer,	 bank	 and	 other	 operating entities	 would	 not	 enter	 resolution	 proceedings),	 would	 result	 in	 greater losses	to	Group	Inc.'s	security	holders	(including	holders	of	our	fixed	rate, floating	rate	and	indexed	debt	securities),	than	the	losses	that	would	result from	the	application	of	a	bankruptcy	proceeding	or	a	different	resolution strategy,	such	as	a	multiple	point	of	entry	resolution	strategy	for	Group	Inc. and	certain	of	its	material	subsidiaries.

Assuming	Group	Inc.	entered	resolution	proceedings	and	that	support	from Group	Inc.	 to	 its	subsidiaries	was	sufficient	 to	enable	 the	subsidiaries	 to remain	solvent,	losses	at	the	subsidiary	level	would	be	transferred	to	Group Inc.	 and	 ultimately	 borne	 by	 Group	 Inc.'s	 security	 holders,	 third-party creditors	of	Group	Inc.'s	subsidiaries	would	receive	full	recoveries	on	their claims,	 and	 Group	 Inc.'s	 security	 holders	 (including	 our	 shareholders, debtholders	 and	 other	 unsecured	 creditors)	 could	 face	 significant	 and possibly	complete	losses.	In	that	case,	Group	Inc.'s	security	holders	would face	losses	while	the	third-party	creditors	of	Group	Inc.'s	subsidiaries	would incur	 no	 losses	 because	 the	 subsidiaries	 would	 continue	 to	 operate	 and would	not	enter	resolution	or	bankruptcy	proceedings.	In	addition,	holders of	Group	Inc.'s	eligible	long-term	debt	and	holders	of	Group	Inc.'s	other debt	 securities	 could	 face	 losses	 ahead	 of	 its	 other	 similarly	 situated creditors	 in	 a	 resolution	 under	 OLA	 if	 the	 FDIC	 exercised	 its	 right, described	above,	to	disregard	the	priority	of	creditor	claims.

OLA	 also	 provides	 the	 FDIC	 with	 authority	 to	 cause	 creditors	 and shareholders	of	the	financial	company	(such	as	Group	Inc.)	in	receivership to	bear	 losses	before	 taxpayers	are	exposed	 to	such	 losses,	and	amounts owed	to	the	U.S.	government	would	generally	receive	a	statutory	payment priority	over	the	claims	of	private	creditors,	including	senior	creditors.

In	addition,	under	OLA,	claims	of	creditors	(including	debtholders)	could be	satisfied	through	the	issuance	of	equity	or	other	securities	in	a	bridge entity	 to	 which	 Group	 Inc.'s	 assets	 are	 transferred.	 If	 such	 a securities-for-claims	 exchange	 were	 implemented,	 there	 can	 be	 no assurance	 that	 the	value	of	 the	securities	of	 the	bridge	entity	would	be sufficient	to	repay	or	satisfy	all	or	any	part	of	the	creditor	claims	for	which the	securities	were	exchanged.	While	the	FDIC	has	issued	regulations	to implement	 OLA,	 not	 all	 aspects	 of	 how	 the	 FDIC	 might	 exercise	 this authority	are	known	and	additional	rulemaking	is	possible.

In	addition,	certain	jurisdictions,	including	the	U.K.	and	the	E.U.,	have implemented,	or	are	considering,	changes	to	resolution	regimes	to	provide resolution	 authorities	 with	 the	 ability	 to	 recapitalize	 a	 failing	 entity	 by writing	 down	 its	 unsecured	 debt	 or	 converting	 its	 unsecured	 debt	 into equity.	Such	"bail-in"	powers	are	intended	to	enable	the	recapitalization	of a	failing	institution	by	allocating	losses	to	its	shareholders	and	unsecured debtholders.	If	the	intercompany	funding	we	provide	to	our	subsidiaries	is "bailed	in,"	Group	Inc.'s	claims	on	its	subsidiaries	would	be	subordinated to	the	claims	of	the	subsidiaries'	third-party	creditors	or	written	down.	U.S. regulators	 are	 considering	 and	non-U.S.	 authorities	 have	 adopted requirements	 that	 certain	 subsidiaries	 of	 large	 financial	 institutions maintain	minimum	amounts	of	 total	 loss-absorbing	capacity	 that	would pass	losses	up	from	the	subsidiaries	to	the	top-tier	BHC	and,	ultimately,	to security	holders	of	the	top-tier	BHC	in	the	event	of	failure.

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

In	 our	 resolution	 plan,	 Group	 Inc.	 would	 be	 resolved	 under	 the	 U.S. Bankruptcy	Code.	The	strategy	described	in	our	resolution	plan	is	a	variant of	 the	 single	 point	 of	 entry	 strategy:	 Group	 Inc.	 and	 Goldman	 Sachs Funding	LLC	(Funding	IHC),	a	wholly-owned,	direct	subsidiary	of	Group Inc.,	would	recapitalize	and	provide	liquidity	to	certain	major	subsidiaries, including	 through	 the	 forgiveness	 of	 intercompany	 indebtedness,	 the extension	of	the	maturities	of	intercompany	indebtedness	and	the	extension of	additional	intercompany	loans.	If	this	strategy	were	successful,	creditors of	 some	 or	 all	 of	 Group	 Inc.'s	 major	 subsidiaries	 would	 receive	 full recoveries	on	their	claims,	while	Group	Inc.'s	security	holders	could	face significant	and	possibly	complete	losses.

To	facilitate	the	execution	of	our	resolution	plan,	we	formed	Funding	IHC. In	 exchange	 for	 an	 unsecured	 subordinated	 funding	 note	 and	 equity interest,	 Group	 Inc.	 transferred	 certain	 intercompany	 receivables	 and substantially	all	of	its	global	core	liquid	assets	(GCLA)	to	Funding	IHC, and	agreed	to	transfer	additional	GCLA	above	prescribed	thresholds.

We	also	put	in	place	a	Capital	and	Liquidity	Support	Agreement	(CLSA) among	 Group	 Inc.,	 Funding	 IHC	 and	 our	 major	 subsidiaries.	 Under	 the CLSA,	 Funding	 IHC	 has	 provided	 Group	 Inc.	 with	 a	 committed	 line	 of credit	that	allows	Group	Inc.	to	draw	sufficient	funds	to	meet	its	cash	needs during	the	ordinary	course	of	business.	In	addition,	if	our	financial	resources deteriorate	so	severely	that	resolution	may	be	imminent,	(i)	the	committed line	of	credit	will	automatically	terminate	and	the	unsecured	subordinated funding	 note	 will	 automatically	 be	 forgiven,	 (ii)	 all	 intercompany receivables	owed	by	the	major	subsidiaries	to	Group	Inc.	will	be	transferred to	Funding	IHC	or	their	maturities	will	be	extended	to	five	years,	(iii)	Group Inc.	 will	 be	 obligated	 to	 transfer	 substantially	 all	 of	 its	 remaining intercompany	 receivables	 and	 GCLA	 (other	 than	 an	 amount	 to	 fund anticipated	bankruptcy	expenses)	 to	Funding	IHC,	and	(iv)	Funding	IHC will	 be	 obligated	 to	 provide	 capital	 and	 liquidity	 support	 to	 the	 major subsidiaries.	Group	Inc.'s	and	Funding	IHC's	obligations	under	the	CLSA are	secured	pursuant	to	a	related	security	agreement.	Such	actions	would materially	and	adversely	affect	Group	Inc.'s	liquidity.	As	a	result,	during	a period	of	severe	stress,	Group	Inc.	might	commence	bankruptcy	proceedings at	an	earlier	time	than	it	otherwise	would	if	the	CLSA	and	related	security agreement	had	not	been	implemented.

If	Group	Inc.'s	proposed	resolution	strategy	were	successful,	Group	Inc.'s security	holders	could	face	losses	while	the	third-party	creditors	of	Group Inc.'s	major	subsidiaries	would	incur	no	losses	because	those	subsidiaries would	 continue	 to	 operate	 and	 not	 enter	 resolution	 or	 bankruptcy proceedings.	As	part	of	the	strategy,	Group	Inc.	could	also	seek	to	elevate the	priority	of	its	guarantee	obligations	relating	to	its	major	subsidiaries' derivative	contracts	or	transfer	them	to	another	entity	so	that	cross-default and	 early	 termination	 rights	 would	 be	 stayed	 under	 the	 ISDA	 Universal Protocol	 or	 U.S.	 ISDA	 Protocol	 (ISDA	 Protocols),	 as	 applicable,	 which would	result	in	holders	of	Group	Inc.'s	eligible	long-term	debt	and	holders of	 Group	 Inc.'s	 other	 debt	 securities	 incurring	 losses	 ahead	 of	 the beneficiaries	of	those	guarantee	obligations.	It	is	also	possible	that	holders of	Group	Inc.'s	eligible	long-term	debt	and	other	debt	securities	could	incur losses	ahead	of	other	similarly	situated	creditors.

If	Group	Inc.'s	proposed	resolution	strategy	were	not	successful,	Group Inc.'s	financial	condition	would	be	adversely	impacted	and	Group	Inc.'s security	 holders,	 including	 debtholders,	 may	 as	 a	 consequence	 be	 in	 a worse	position	than	if	the	strategy	had	not	been	implemented.	In	all	cases, any	payments	to	debtholders	are	dependent	on	our	ability	to	make	such payments	and	are	therefore	subject	to	our	credit	risk.

As	a	result	of	our	recovery	and	resolution	planning	processes,	including incorporating	 feedback	 from	 our	 regulators,	 we	 may	 incur	 increased operational,	funding	or	other	costs	and	face	limitations	on	our	ability	to structure	 our	 internal	 organization	 or	 engage	 in	 internal	 or	 external activities	 in	 a	 manner	 that	 we	 may	 otherwise	 deem	 most	 operationally efficient.

# Our	 businesses,	 profitability	 and liquidity	 may	 be	 adversely affected	by	Brexit.

In	March	2017,	the	U.K.	notified	the	European	Council	of	its	decision	to leave	the	E.U.	(Brexit).	As	discussed	in	"Business	—	Regulation"	in	Part	I, Item 1 of	 this	Form	 10-K	 there	 is	 considerable	 uncertainty	 as	 to	 the regulatory	 framework	 that	 will	 govern	 transactions	 and	 business undertaken	by	our	U.K.	subsidiaries	in	the	E.U.,	both	in	the	near	term	and the	long	term.	As	a	result,	we	face	numerous	risks	that	could	adversely affect	how	we	conduct	our	businesses	or	our	profitability	and	liquidity.

Our	 principal	 E.U.	 operating	 subsidiaries,	 GSI,	 GSIB	 and	 GSAMI,	 are incorporated	and	headquartered	in	the	U.K.	They	all	currently	benefit	from non-discriminatory	access	to	E.U.	clients	and	infrastructure	based	on	E.U. treaties	 and	 E.U.	 legislation,	 including	 arrangements	 for	 cross-border "passporting"	 and	 the	 establishment	 of	 E.U.	 branches.	 Because	 the Withdrawal	 Agreement	 has	 not	 been	 ratified	 by	 the	 U.K.	 and	 E.U. Parliaments,	it	is	uncertain	whether	GSI,	GSIB	and	GSAMI	will	continue to	 benefit	 from	 the	 existing	 access	 arrangements	 for	 financial	 services following	March	29,	2019,	 the	date	on	which	 the	U.K.	 is	scheduled	 to leave	the	E.U.	Further,	even	if	the	Withdrawal	Agreement	is	ratified,	there is	 uncertainty	 regarding	 the	 terms	 of	 the	 long-term	 trading	 relationship between	 the	 E.U.	 and	 the	 U.K.,	 including	 the	 terms	 of	 access	 to	 each other's	financial	markets.

In	 a	 hard	 Brexit	 scenario	 or	 as	 otherwise	 necessary,	 our	 German	 bank subsidiary,	GSBE,	will	act	as	our	main	operating	subsidiary	in	the	E.U.	and will	 assume	 certain	 functions	 that	 can	 no	 longer	 be	 efficiently	 and effectively	 performed	 by	 our	 U.K.	 operating	 subsidiaries,	 including	 GSI, GSIB	and	GSAMI.	Implementing	this	strategy	could	materially	adversely affect	the	manner	in	which	we	operate	certain	businesses	in	Europe,	require us	 to	 restructure	 certain	 of	 our	 operations	 and	 expose	 us	 to	 higher operational,	 regulatory	 and	 compliance	 costs,	 higher	 taxes,	 higher subsidiary-level	capital	and	liquidity	requirements,	additional	restrictions	on intercompany	 transactions,	 and	 new	 restrictions	 on	 the	 ability	 of	 our subsidiaries	to	share	personal	data,	including	client	data,	all	of	which	could adversely	affect	our	liquidity	and	profitability.

GSBE	 has	 not	 been	 one	 of	 our	 main	 operating	 subsidiaries	 in	 the	 E.U. Depending	on	the	outcome,	Brexit	could	necessitate	a	rapid	and	significant expansion	 in	 the	 scope	 of	 GSBE's	 activities,	 as	 well	 as	 its	 headcount, balance	sheet,	and	capital	and	funding	needs.	Although	we	have	invested significant	 resources	 to	 plan	 for	 and	 address	 Brexit,	 there	 can	 be	 no assurance	 that	 we	 will	 be	 able	 to	 successfully	 execute	 our	 strategy.	 In addition,	even	if	we	are	able	to	successfully	execute	our	strategy,	we	face the	risk	that	Brexit	could	have	a	disproportionately	adverse	effect	on	our E.U	 operations	 compared	 to	 some	 of	 our	 competitors	 who	 have	 more extensive	pre-existing	operations	in	the	E.U.	outside	of	the	U.K.

In	 addition,	 Brexit	 has	 created	 an	 uncertain	 political	 and	 economic environment	in	the	U.K.,	and	may	create	such	environments	in	other	E.U. member	states.	Political	and	economic	uncertainty	has	in	the	past	led	to,	and the	outcome	of	Brexit	could	lead	to,	declines	in	market	liquidity	and	activity levels,	volatile	market	conditions,	a	contraction	of	available	credit,	changes in	interest	rates	or	exchange	rates,	weaker	economic	growth	and	reduced business	confidence	all	of	which	could	adversely	impact	our	business.

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	derivative	contracts	and	 loan	agreements,	could result	 in	 losses	 and/or	 adversely	 affect	 our	 ability	 to	 rehypothecate	 or otherwise	use	those	securities	or	obligations	for	liquidity	purposes.

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

As	 part	 of	 our	 clearing	 and	 prime	 brokerage	 activities,	 we	 finance	 our clients'	positions,	and	we	could	be	held	responsible	for	 the	defaults	or misconduct	of	our	clients.	Although	we	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,	and	similar	rules	adopted	in	other jurisdictions,	 require	 issuers	 of	 certain	 asset-backed	 securities	 and	 any person	 who	 organizes	 and	 initiates	 certain	 asset-backed	 securities transactions	to	retain	economic	exposure	to	the	asset,	which	has	affected	the cost	of	and	structures	used	in	connection	with	these	securitization	activities. Our	inability	to	reduce	our	credit	risk	by	selling,	syndicating	or	securitizing these	positions,	including	during	periods	of	market	stress,	could	negatively affect	our	results	of	operations	due	to	a	decrease	in	the	fair	value	of	the positions,	including	due	to	the	insolvency	or	bankruptcy	of	the	borrower,	as well	as	the	loss	of	revenues	associated	with	selling	such	securities	or	loans.

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

# 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.	There	has	been substantial	consolidation	and	convergence	among	companies	in	the	financial services	 industry.	 This	 consolidation	 and	 convergence	 has	 hastened	 the globalization	 of	 the	 securities	 and	 other	 financial	 services	 markets.	As	 a result,	we	have	had	to	commit	capital	to	support	our	international	operations and	to	execute	large	global	transactions.	To	the	extent	we	expand	into	new business	areas	and	new	geographic	regions,	we	will	face	competitors	with more	experience	and	more	established	relationships	with	clients,	regulators and	 industry	 participants	 in	 the	 relevant	 market,	 which	 could	 adversely affect	our	ability	to	expand.

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,	in	response	to competitive	pressure	we	have	experienced,	we	have	extended	and	priced credit	at	levels	that	may	not	always	fully	compensate	us	for	the	risks	we take.

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

# 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	and commodities	infrastructure	components,	both	within	and	outside	the	U.S.

We	 have	 increased	 and	 intend	 to	 further	 increase	 our	 consumer-oriented deposit-taking	 and	 lending	 activities.	 To	 the	 extent	 we	 engage	 in	 such activities	or	similar	consumer-oriented	activities,	we	could	face	additional compliance,	 legal	 and	 regulatory	 risk,	 increased	 reputational	 risk	 and increased	operational	risk	due	 to,	among	other	 things,	higher	 transaction volumes	and	significantly	increased	retention	and	transmission	of	customer and	client	information.	As	a	result	of	a	recent	information	security	event involving	 a	 credit	 reporting	 agency,	 identity	 fraud	 may	 increase	 and industry	practices	may	change	in	a	manner	that	makes	it	more	difficult	for financial	 institutions,	 such	 as	 us,	 to	 evaluate	 the	 creditworthiness	 of consumers.

New	business	initiatives	expose	us	to	new	and	enhanced	risks,	 including risks	 associated	 with	 dealing	 with	 governmental	 entities,	 reputational concerns	arising	from	dealing	with	less	sophisticated	clients,	counterparties and	investors,	greater	regulatory	scrutiny	of	these	activities,	increased	credit- related,	market,	sovereign	and	operational	risks,	risks	arising	from	accidents or	acts	of	terrorism,	and	reputational	concerns	with	the	manner	in	which certain	assets	are	being	operated	or	held	or	in	which	we	interact	with	these counterparties.	Legal,	regulatory	and	reputational	risks	may	also	exist	 in connection	 with	 activities	 and	 transactions	 involving	 new	 products	 or markets	where	there	is	regulatory	uncertainty	or	where	there	are	different	or conflicting	 regulations	 depending	 on	 the	 regulator	 or	 the	 jurisdiction involved,	 particularly	 where	 transactions	 in	 such	 products	 may	 involve multiple	jurisdictions.

In	 recent	 years,	 we	 have	 invested,	 and	 may	 continue	 to	 invest,	 more	 in businesses	that	we	expect	will	generate	a	higher	level	of	more	consistent revenues.	Such	investments	may	not	be	successful	or	have	returns	similar	to our	other	businesses.

# Our	results	may	be	adversely	affected	by	the	composition	of	our client	base.

Our	 client	 base	 is	 not	 the	 same	 as	 that	 of	 our	 major	 competitors.	 Our businesses	 may	 have	 a	 higher	 or	 lower	 percentage	 of	 clients	 in	 certain industries	 or	 markets	 than	 some	 or	 all	 of	 our	 competitors.	 Therefore, unfavorable	 industry	developments	or	market	conditions	affecting	certain industries	or	markets	may	result	in	our	businesses	underperforming	relative to	 similar	 businesses	 of	 a	 competitor	 if	 our	 businesses	 have	 a	 higher concentration	 of	 clients	 in	 such	 industries	 or	 markets.	 For	 example,	 our market-making	businesses	have	a	higher	percentage	of	clients	with	actively managed	 assets	 than	 our	 competitors	 and	 such	 clients	 have	 been disproportionately	affected	during	recent	periods	of	low	volatility.

Correspondingly,	favorable	or	simply	less	adverse	developments	or	market conditions	involving	industries	or	markets	in	a	business	where	we	have	a lower	concentration	of	clients	in	such	industry	or	market	may	also	result	in our	underperforming	relative	to	a	similar	business	of	a	competitor	that	has a	higher	concentration	of	clients	in	such	industry	or	market.	For	example, we	have	a	smaller	corporate	client	base	in	our	market-making	businesses than	many	of	our	peers	and	therefore	such	competitors	may	benefit	more from	increased	activity	by	corporate	clients.

# 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	us.

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	Protocols	and	being	subject	to	the	FRB's	and FDIC's	rules	on	QFCs	and	similar	rules	in	other	jurisdictions,	we	may	not be	able	to	exercise	remedies	against	counterparties	and,	as	this	new	regime has	not	yet	been	tested,	we	may	suffer	risks	or	losses	that	we	would	not have	expected	 to	suffer	 if	we	could	 immediately	close	out	 transactions upon	a	termination	event.	Various	non-U.S.	regulators	have	also	proposed regulations	 contemplated	 by	 the	 ISDA	 Universal	 Protocol,	 and	 those implementing	regulations	may	result	in	additional	limitations	on	our	ability to	 exercise	 remedies	 against	 counterparties.	 The	 impact	 of	 the	 ISDA Protocols	and	these	rules	and	regulations	will	depend	on	the	development of	 market	 practices	 and	 structures,	 and	 they	 extend	 to	 repurchase agreements	and	other	instruments	that	are	not	derivative	contracts.

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	central	clearing	platforms.

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

The	FCA,	which	regulates	LIBOR,	has	announced	that	it	will	not	compel panel	banks	to	contribute	to	LIBOR	after	2021.	It	is	likely	that	banks	will not	continue	to	provide	submissions	for	the	calculation	of	LIBOR	after	2021 and	possibly	prior	 to	 then.	Similarly,	 it	 is	not	possible	 to	know	whether LIBOR	 will	 continue	 to	 be	 viewed	 as	 an	 acceptable	 market	 benchmark, what	rate	or	rates	may	become	accepted	alternatives	to	LIBOR,	or	what	the effect	 of	 any	 such	 changes	 in	 views	 or	 alternatives	 may	 have	 on	 the financial	 markets	 for	 LIBOR-linked	 financial	 instruments.	 Similar statements	have	been	made	with	respect	to	other	IBORs.

Uncertainty	regarding	IBORs	and	 the	 taking	of	discretionary	actions	or negotiation	of	fallback	provisions	could	result	in	pricing	volatility,	loss	of market	 share	 in	 certain	 products,	 adverse	 tax	 or	 accounting	 impacts, compliance,	 legal	and	operational	costs	and	risks	associated	with	client disclosures,	 as	 well	 as	 systems	 disruption,	 model	 disruption	 and	 other business	continuity	issues.	In	addition,	uncertainty	relating	to	IBORs	could result	in	increased	capital	requirements	for	the	firm	given	potential	low transaction	 volumes,	 a	 lack	 of	 liquidity	 or	 limited	 observability	 for exposures	 linked	 to	 IBORs	 or	 any	 emerging	 successor	 rates	 and operational	incidents	associated	with	changes	in	and	the	discontinuance	of IBORs.

The	language	in	our	contracts	and	financial	instruments	that	define	IBORs, in	 particular	 LIBOR,	 have	 developed	 over	 time	 and	 may	 have	 various events	that	trigger	when	a	successor	rate	to	the	designated	rate	would	be selected.	If	a	trigger	is	satisfied,	contracts	and	financial	instruments	may give	the	calculation	agent	(which	may	be	us)	discretion	over	the	successor rate	 or	 benchmark	 to	 be	 selected.	 As	 a	 result,	 there	 is	 considerable uncertainty	 as	 to	 how	 the	 financial	 services	 industry	 will	 address	 the discontinuance	of	designated	rates	in	contracts	and	financial	instruments	or such	 designated	 rates	 ceasing	 to	 be	 acceptable	 reference	 rates.	 This uncertainty	 could	 ultimately	 result	 in	 client	 disputes	 and	 litigation surrounding	 the	 proper	 interpretation	 of	 our	 IBOR-based	 contracts	 and financial	instruments.

Further,	the	discontinuation	of	an	IBOR,	changes	in	an	IBOR	or	changes in	market	acceptance	of	any	IBOR	as	a	reference	rate	may	also	adversely affect	 the	 yield	 on	 loans	 or	 securities	 held	 by	 us,	 amounts	 paid	 on securities	 we	 have	 issued,	 amounts	 received	 and	 paid	 on	 derivative instruments	we	have	entered	into,	the	value	of	such	loans,	securities	or derivative	instruments,	the	trading	market	for	securities,	the	terms	of	new loans	being	made	using	different	or	modified	reference	rates,	our	ability	to effectively	use	derivative	instruments	to	manage	risk,	or	the	availability	or cost	 of	 our	 floating-rate	 funding	 and	 our	 exposure	 to	 fluctuations	 in interest	rates.

# Certain	 of	 our	 businesses	 and	 our funding	 may	 be	 adversely affected by changes in other reference rates, currencies, indexes,	baskets	or	ETFs	to	which	products	we	offer	or	funding that	we	raise	are	linked.

All	of	our	floating	rate	funding	pays	interest	by	reference	to	rates,	such	as LIBOR	or	Federal	Funds.	In	addition,	many	of	the	products	that	we	own	or that	we	offer,	such	as	structured	notes,	warrants,	swaps	or	security-based swaps,	pay	interest	or	determine	the	principal	amount	to	be	paid	at	maturity or	in	the	event	of	default	by	reference	to	rates	or	by	reference	to	an	index, currency,	basket,	ETF	or	other	financial	metric	(the	underlier).	In	the	event that	the	composition	of	the	underlier	is	significantly	changed,	by	reference to	rules	governing	such	underlier	or	otherwise,	the	underlier	ceases	to	exist (for	example,	in	the	event	that	a	country	withdraws	from	the	Euro	or	links its	currency	to	or	delinks	its	currency	from	another	currency	or	benchmark, or	an	index	or	ETF	sponsor	materially	alters	the	composition	of	an	index	or ETF)	 or	 the	 underlier	 ceases	 to	 be	 recognized	 as	 an	 acceptable	 market benchmark,	 we	 may	 experience	 adverse	 effects	 consistent	 with	 those described	above	for	IBORs.

# 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	people;	therefore,	our	continued	ability	to	compete	effectively	in	our businesses,	to	manage	our	businesses	effectively	and	to	expand	into	new businesses	 and	 geographic	 areas	 depends	 on	 our	 ability	 to	 attract	 new talented	 and	 diverse	 employees	 and	 to	 retain	 and	 motivate	 our	 existing employees.	 Factors	 that	 affect	 our	 ability	 to	 attract	 and	 retain	 such employees	 include	 the	 level	 and	 composition	 of	 our	 compensation	 and benefits,	and	our	reputation	as	a	successful	business	with	a	culture	of	fairly hiring,	training	and	promoting	qualified	employees.	As	a	significant	portion of	the	compensation	that	we	pay	to	our	employees	is	in	the	form	of	year-end discretionary	compensation,	a	significant	portion	of	which	is	in	the	form	of deferred	equity-related	awards,	declines	in	our	profitability,	or	in	the	outlook for	 our	 future	 profitability,	 as	 well	 as	 regulatory	 limitations	 on compensation	levels	and	terms,	can	negatively	impact	our	ability	to	hire	and retain	highly	qualified	employees.

Competition	from	within	the	financial	services	industry	and	from	businesses outside	the	financial	services	industry,	including	the	technology	industry,	for qualified	employees	has	often	been	intense.	Recently,	we	have	experienced increased	 competition	 in	 hiring	 and	 retaining	 employees	 to	 address	 the demands	 of	 new	 regulatory	 requirements,	 expanding	 consumer-oriented businesses	and	our	technology	initiatives.	This	is	also	the	case	in	emerging and	growth	markets,	where	we	are	often	competing	for	qualified	employees with	entities	that	have	a	significantly	greater	presence	or	more	extensive experience	in	the	region.

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

# 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 (including,	in	some	cases,	press	coverage	and	public	statements	that	do	not directly	involve	us)	often	result	in	some	type	of	investigation	by	regulators, legislators	and	law	enforcement	officials	or	in	lawsuits.

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.

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

We	face	significant	legal	risks	in	our	businesses,	and	the	volume	of	claims and	amount	of	damages	and	penalties	claimed	in	litigation	and	regulatory proceedings	against	financial	institutions	remain	high.	See	Notes	18	and	27 to	the	consolidated	financial	statements	in	Part	II,	Item	8	of	this	Form	10-K for	 information	 about	 certain	 legal	 and	 regulatory	 proceedings	 and investigations	in	which	we	are	involved.	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	headcount.	Additionally,	governmental	entities	have	been	and are	plaintiffs	in	certain	of	the	legal	proceedings	in	which	we	are	involved, and	we	may	face	future	civil	or	criminal	actions	or	claims	by	the	same	or other	governmental	entities,	as	well	as	follow-on	civil	litigation	that	is	often commenced	after	regulatory	settlements.

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

Recently,	claims	of	collusion	or	anti-competitive	conduct	have	become	more common.	 Civil	 cases	 have	 been	 brought	 against	 financial	 institutions (including	us)	alleging	bid	rigging,	group	boycotts	or	other	anti-competitive practices.	Antitrust	laws	generally	provide	for	joint	and	several	liability	and treble	damages.	These	claims	have	in	the	past,	and	may	in	the	future,	result in	significant	settlements.

We	are	subject	to	laws	and	regulations	worldwide,	including	the	FCPA	and the	U.K.	Bribery	Act,	relating	to	corrupt	and	illegal	payments	to,	and	hiring practices	with	regard	to,	government	officials	and	others.	Violation	of	these or	 similar	 laws	 and	 regulations	 could	 result	 in	 significant	 monetary penalties,	severe	restrictions	on	our	activities	and	damage	to	our	reputation.

Certain	law	enforcement	authorities	have	recently	required	admissions	of wrongdoing,	and,	in	some	cases,	criminal	pleas,	as	part	of	the	resolutions of	 matters	 brought	 by	 them	 against	 financial	 institutions	 or	 their employees.	Any	such	resolution	of	a	criminal	matter	involving	us	or	our employees	 could	 lead	 to	 increased	 exposure	 to	 civil	 litigation,	 could adversely	affect	our	reputation,	could	result	in	penalties	or	limitations	on our	ability	to	conduct	our	activities	generally	or	in	certain	circumstances and	could	have	other	negative	effects.

In	addition,	the	U.S.	Department	of	Justice	(DOJ)	has	announced	a	policy of	 requiring	 companies	 to	 provide	 investigators	 with	 all	 relevant	 facts relating	to	the	individuals	substantially	involved	in	or	responsible	for	the alleged	 misconduct	 in	 order	 to	 qualify	 for	 any	 cooperation	 credit	 in criminal	investigations	of	corporate	wrongdoing,	or	maximum	cooperation credit	 in	civil	 investigations	of	corporate	wrongdoing.	This	policy	may result	in	us	incurring	increased	fines	and	penalties	if	the	DOJ	determines that	 we	 have	 not	 provided	 sufficient	 information	 about	 applicable individuals	in	connection	with	an	investigation,	as	well	as	increased	costs in	responding	to	DOJ	investigations.	It	is	possible	that	other	governmental authorities	will	adopt	similar	policies.

# 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. 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	 generally	 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,	arrange	for	their	storage	and	transport,	and	engage	in	market making	of	commodities.	The	commodities	involved	in	these	activities	may include	crude	oil,	refined	oil	products,	natural	gas,	 liquefied	natural	gas, electric	power,	agricultural	products,	metals	(base	and	precious),	minerals (including	unenriched	uranium),	emission	credits,	coal,	freight	and	related products	and	indices.

In	our	investing	and	lending	businesses,	we	make	investments	in	and	finance entities	 that	 engage	 in	 the	 production,	 storage	 and	 transportation	 of numerous	 commodities,	 including	 many	 of	 the	 commodities	 referenced above.

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	adversely	affect	the	profitability	of	certain of	our	investments.

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

Commodities	involved	in	our	intermediation	activities	and	investments	are also	subject	 to	 the	risk	of	unforeseen	or	catastrophic	events,	which	are likely	 to	 be	 outside	 of	 our	 control,	 including	 those	 arising	 from	 the breakdown	 or	 failure	 of	 transport	 vessels,	 storage	 facilities	 or	 other equipment	 or	 processes	 or	 other	 mechanical	 malfunctions,	 fires,	 leaks, spills	 or	 release	 of	 hazardous	 substances,	 performance	 below	 expected levels	of	output	or	efficiency,	terrorist	attacks,	extreme	weather	events	or other	natural	disasters	or	other	hostile	or	catastrophic	events.	In	addition, we	 rely	 on	 third-party	 suppliers	 or	 service	 providers	 to	 perform	 their contractual	obligations	and	any	failure	on	their	part,	including	the	failure	to obtain	raw	materials	at	reasonable	prices	or	 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.	 For	 example,	 the	 FRB	 has	 proposed regulations	that	could	impose	significant	additional	capital	requirements on	certain	commodity-related	activities.	If	that	occurs,	we	may	receive	a value	that	is	less	than	the	then	carrying	value,	as	we	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,	sanctions	have	been	imposed	by	the	U.S.	and	the E.U.	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.	Further,	in	some	jurisdictions	a	failure	to	comply	with	laws	and regulations	may	subject	us	and	our	personnel	not	only	to	civil	actions,	but also	 criminal	 actions.	 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	 throughout	 the world,	including	in	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	entities	are	subject	 in	 their	operations	worldwide	 to	rules	and regulations	relating	to	corrupt	and	illegal	payments,	hiring	practices	and money	laundering,	as	well	as	laws	relating	to	doing	business	with	certain individuals,	groups	and	countries,	such	as	the	FCPA,	the	USA	PATRIOT Act	and	the	U.K.	Bribery	Act.	While	we	have	invested	and	continue	to invest	significant	resources	in	training	and	in	compliance	monitoring,	the geographical	 diversity	 of	 our	 operations,	 employees,	 clients	 and 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	may	include intentional	 efforts	 to	 ignore	 or	 circumvent	 applicable	 policies,	 rules	 or procedures.	This	 misconduct	 has	 included	 and	 may	 also	 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.	 See	 for	 example, "1Malaysia Development	 Berhad	 (1MDB)-Related	 Matters"	 in	 Note 27 to	 the consolidated	financial	statements	in	Part	II,	Item	8	of	this	Form	10-K.

# 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	 the	 Ebola	 or	 Zika	 viruses,	 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	 consist	 of	 approximately 2.1	 million square	 feet.	 The building	 is	 located	 on	 a	 parcel	 leased	 from	 Battery	 Park	 City	Authority pursuant	to	a	ground	lease.	Under	the	lease,	Battery	Park	City	Authority holds	 title	 to	 all	 improvements,	 including	 the	 office	 building,	 subject	 to 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	 square	 feet	 of	 office	 space.	 We	 have	 additional	 offices	 and commercial	space	in	the	U.S.	and	elsewhere	in	the	Americas,	which	together consist	of	approximately	2.6	million	square	feet	of	leased	and	owned	space.

In	 Europe,	 the	 Middle	 East	 and	 Africa,	 we	 have	 offices	 that	 total approximately	 1.6	 million	 square	 feet	 of	 leased	 and	 owned	 space.	 Our European	 headquarters	 is	 located	 in	 London	 at	 Peterborough	 Court, pursuant	to	a	lease	that	we	can	terminate	in	2019.	In	total,	we	have	offices with	approximately	1.2	million	square	feet	in	London,	relating	to	various properties.	We	have	substantially	completed	the	construction	of	a	826,000 square	 foot	 office	 in	 London.	 We	 entered	 into	 a	 sale	 and	 leaseback agreement	for	the	property,	which	closed	in	January	2019.	We	expect	initial occupancy	during	2019.

In	Asia,	Australia	and	New	Zealand,	we	have	offices	with	approximately 3.1	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	 219,000 square	feet,	the	majority	of	which	have	leases	that	will	expire	in	2023.	In Hong	Kong,	we	currently	have	offices	with	approximately	300,000	square feet,	the	majority	of	which	will	expire	in	2026.

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

Our	occupancy	expenses	include	costs	for	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	space	capacity	in	relation	to	current	and	projected	headcount levels.	We	may	 incur	exit	costs	 in	 the	future	 if	we	(i)	reduce	our	space capacity	or	(ii)	commit	to,	or	occupy,	new	properties	in	locations	in	which we	operate	and	dispose	of	existing	space	that	had	been	held	for	potential growth.	These	 costs	 may	 be	 material	 to	 our	 operating	 results	 in	 a	 given period.

# 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	in	a given	 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	 this Form	10-K.	See	Notes	18	and	27	to	the	consolidated	financial	statements in	Part	II,	Item	8	of	this	Form	10-K	for	information	about	certain	judicial, regulatory	and	legal	proceedings.

# Item	4.				Mine	Safety	Disclosures

# Not	applicable.

# 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 under	the	symbol	"GS."	Information	relating	to	the	performance	of	our common	stock	from	December	31,	2013	through	December	31,	2018	is	set forth	 in	 "Supplemental	 Financial	 Information	 —	 Common	 Stock Performance"	in	Part	II,	Item	8	of	this	Form	10-K.	As	of	February	8,	2019, there	were	7,137	holders	of	record	of	our	common	stock.

The	declaration	of	dividends	by	Group	Inc.	is	subject	to	the	discretion	of the	Board	of	Directors	of	Group	Inc.	(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.	The	holders	of	our	common	stock	share	proportionately	on a	per	share	basis	in	all	dividends	and	other	distributions	on	common	stock declared	by	our	Board.

The	table	below	presents	purchases	made	by	or	on	behalf	of	Group	Inc.	or any	 "affiliated	 purchaser"	 (as	 defined	 in	Rule	 10b-18(a)(3)	 under	 the Exchange	Act)	of	our	common	stock	during	the	fourth	quarter	of	2018.

|  | Total<br>Shares<br>Purchased | Average<br>Price	Paid<br>Per	Share | Purchased	as<br>Part	of	a	Publicly<br>Announced<br>Program | Maximum	Shares<br>That	May	Yet	Be<br>Purchased	Under<br>the	Program |
| :--- | :--- | :--- | :--- | :--- |
| 2018 |  |  |  |  |
| October | 3,440,242 | $219.52 | 3,440,242 | 35,862,341 |
| November | 2,182,707 | $226.69 | 2,182,707 | 33,679,634 |
| December | 100 | $178.34 | 100 | 33,679,534 |
| Total | 5,623,049 |  | 5,623,049 |  |

Since	 March	 2000,	 our	 Board	 has	 approved	 a	 repurchase	 program authorizing	repurchases	of	up	to	555	million	shares	of	our	common	stock. The	repurchase	program	is	effected	primarily	through	regular	open-market purchases	(which	may	include	repurchase	plans	designed	to	comply	with Rule	10b5-1),	the	amounts	and	timing	of	which	are	determined	primarily	by our	current	and	projected	capital	position,	but	which	may	also	be	influenced by	general	market	conditions	and	the	prevailing	price	and	trading	volumes	of our	 common	 stock.	 The	 repurchase	 program	 has	 no	 set	 expiration	 or termination	 date.	 Prior	 to	 repurchasing	 common	 stock,	 we	 must	 receive confirmation	that	the	FRB	does	not	object	to	such	capital	action.

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

# Item	6.				Selected	Financial	Data

The	 Selected	 Financial	 Data table is	 set forth in	 Part II, Item	 8	 of this Form	10-K.

# Management's	Discussion	and	Analysis

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

The	 Goldman	 Sachs	 Group,	 Inc.	 (Group	 Inc.	 or	 parent	 company),	 a Delaware	 corporation,	 together	 with	 its	 consolidated	 subsidiaries,	 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	individuals.	Founded	in	1869,	we	are	headquartered	in New	York	and	maintain	offices	in	all	major	financial	centers	around	the world.

When	we	use	the	terms	"we,"	"us"	and	"our,"	we	mean	Group	Inc.	and	its consolidated	 subsidiaries.	 We	 report	 our	 activities	 in	 four	 business segments:	Investment	Banking,	Institutional	Client	Services,	Investing	& Lending	 and	 Investment	 Management.	 See	 "Results	 of	 Operations"	 for further	information	about	our	business	segments.

References	to	"this	Form	10-K"	are	to	our	Annual	Report	on	Form	10-K for	the	year	ended	December	31,	2018.	All	references	to	"the	consolidated financial	 statements"	 or	 "Supplemental	 Financial	 Information"	 are	 to Part	II,	Item	8	of	this	Form	10-K.	All	references	to	2018,	2017	and	2016 refer	 to	 our	 years	 ended,	 or	 the	 dates,	 as	 the	 context	 requires, December 31, 2018,	 December 31, 2017	 and	 December 31, 2016, 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.

These	 statements	 include	 statements	 other	 than	 historical	 information	 or statements	 of	 current	 conditions	 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,	leverage,	liquidity,	long-term	debt and	 total	 loss-absorbing	 capacity	 (TLAC)	 rules	 applicable	 to	 banks	 and bank	holding	companies	(BHCs),	the	impact	of	the	U.S.	Dodd-Frank	Wall Street	 Reform	 and	 Consumer	 Protection	 Act	 (Dodd-Frank	 Act)	 on	 our businesses	 and	 operations,	 and	 various	 legal	 proceedings,	 governmental investigations	 or	 mortgage-related	 contingencies	 as	 set	 forth	 in	 both Notes	27	and	18	to	the	consolidated	financial	statements	in	Part	II,	Item	8	of this	Form	10-K,	as	well	as	statements	about	the	results	of	our	Dodd-Frank Act	and	our	stress	tests,	statements	about	the	objectives	and	effectiveness	of our	 business	 continuity	 plan,	 information	 security	 program,	 risk management	and	liquidity	policies,	statements	about	our	resolution	plan	and resolution	 strategy	 and	 their	 implications	 for	 our	 debtholders	 and	 other stakeholders,	statements	about	the	design	and	effectiveness	of	our	resolution capital	 and	 liquidity	 models	 and	 our	 triggers	 and	 alerts	 framework, 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,	statements	about	our	investment banking	 transaction	 backlog,	 statements	 about	 our	 expected	 tax	 rate, statements	 about	 the	 estimated	 impact	 of	 new	 accounting	 standards, statements	about	the	level	of	capital	actions,	statements	about	our	expected interest	income,	statements	about	our	credit	exposures,	statements	about	our preparations	following	the	U.K.'s	notification	to	the	European	Council	of	its decision	to	leave	the	E.U.	(Brexit),	including	our	plan	to	manage	a	hard Brexit	 scenario,	 statements	 about	 the	 replacement	 of	 LIBOR	 and	 other IBORs	 and	 the	 objectives	 of	 our	 program	 related	 to	 the	 transition	 from IBORs	 to	 alternative	risk-free	 reference	 rates,	 and	 statements	 about	 the adequacy	of	our	allowance	for	credit	losses.

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

# Executive	Overview

In	2018,	we	recorded	a	$487	million	income	tax	benefit	as	we	finalized	the estimated	income	tax	expense	of	$4.40	billion	related	to	the	Tax	Cuts	and Jobs	 Act	 (Tax	 Legislation)	 recorded	 in	 the	 fourth	 quarter	 of	 2017. Excluding	these	items,	diluted	earnings	per	common	share	was	$24.02	for 2018,	 compared	 with	 $19.76	 for	 2017,	 and	 ROE	 was	 12.7%	 for	 2018, compared	with	10.8%	for	2017.	See	"Results	of	Operations	—	Financial Overview"	 for	 further	 information	 about	non-GAAP	 measures	 that exclude	 the	 impact	 of	 Tax	 Legislation.	 See	 "Results	 of	 Operations	 — Provision	for	Taxes"	for	further	information	about	Tax	Legislation.

Net	 revenues	 were $36.62 billion	 for	 2018, 12% higher	 than	 2017, reflecting	 higher	 net	 revenues	 across	 all	 segments.	 Net	 revenues	 in Institutional	Client	Services	were	higher,	due	to	higher	net	revenues	in	both Equities	and	Fixed	Income,	Currency	and	Commodities	Client	Execution (FICC	Client	Execution).	Net	revenues	in	Investing	&	Lending	increased, driven	by	significantly	higher	net	interest	income	in	debt	securities	and loans.	Net	revenues	were	also	higher	in	Investment	Management,	primarily due	 to	 significantly	 higher	 incentive	 fees,	 and	 Investment	 Banking, reflecting	 strong	 net	 revenues	 in	 both	 Financial	 Advisory	 and Underwriting	during	2018.

Provision	 for	 credit	 losses	 was	 $674	 million	 for	 2018,	 compared	 with $657	million	for	2017,	as	the	higher	provision	for	credit	losses	primarily related	 to	 consumer	 loan	 growth	 in	 2018	 was	 partially	 offset	 by	 an impairment	of	approximately	$130	million	on	a	secured	loan	in	2017.

Operating	expenses	were	$23.46	billion	for	2018,	12%	higher	than	2017, primarily	 due	 to	 higher	 compensation	 and	 benefits	 expenses,	 reflecting improved	operating	performance,	and	significantly	higher	net	provisions for	litigation	and	regulatory	proceedings.

We	returned	$4.52	billion	of	capital	to	common	shareholders	during	2018, including	$3.29	billion	of	common	share	repurchases	and	$1.23	billion	in common	 stock	 dividends.	 As	 of	 December	 2018,	 our	 Common	 Equity Tier	 1	 (CET1)	 ratio	 as	 calculated	 in	 accordance	 with	 the	 Standardized approach	was	13.3%	and	the	Basel	III	Advanced	approach	was	13.1%.	See Note	 20	 to	 the	 consolidated	 financial	 statements	 for	 further	 information about	our	capital	ratios.

Net	revenues	were	$32.73	billion	for	2017,	6%	higher	than	2016,	due	to significantly	 higher	 net	 revenues	 in	 Investing	 &	 Lending	 and	 higher	 net revenues	in	both	Investment	Banking	and	Investment	Management.	These increases	were	partially	offset	by	lower	net	revenues	in	Institutional	Client Services,	 primarily	 reflecting	 significantly	 lower	 net	 revenues	 in	 FICC Client	Execution.

Provision	 for	 credit	 losses	 was	 $657	 million	 for	 2017,	 compared	 with $182	 million for	 2016,	 reflecting	 an	 increase	 in	 impairments,	 which included	an	impairment	of	approximately	$130	million	on	a	secured	loan	in 2017,	and	higher	provision	for	credit	losses	primarily	related	to	consumer loan	growth.

Operating	 expenses	 were	 $20.94	 billion	 for	 2017,	 3%	 higher	 than	 2016, primarily	driven	by	slightly	higher	compensation	and	benefits	expenses	and our	investments	to	fund	growth.

We	returned	$7.90	billion	of	capital	to	common	shareholders	during	2017, including	$6.72	billion	of	common	share	repurchases	and	$1.18	billion	in common	 stock	 dividends.	 As	 of	 December	 2017,	 our	 CET1	 ratio	 as calculated	in	accordance	with	the	Standardized	approach	was	12.1%	and	the Basel	 III	 Advanced	 approach	 was 10.9%, in	 each	 case	 reflecting	 the applicable	transitional	provisions.	See	Note	20	to	the	consolidated	financial statements	for	further	information	about	our	capital	ratios.

# Business	Environment

# Global

During	 2018,	 real	 gross	 domestic	 product	 (GDP)	 growth	 appeared	 to increase	in	the	U.S.	but	generally	decreased	in	other	major	economies.	In advanced	economies,	growth	in	the	Euro	area,	U.K.,	and	Japan	each	was lower	 and,	 in	 emerging	 markets,	 growth	 in	 China	 decreased	 slightly. Economic	 activity	 in	 several	 major	 emerging	 market	 economies	 was impacted	 by	 concerns	 about	 the	 vulnerability	 of	 these	 economies	 to	 a stronger	U.S.	dollar	and	higher	U.S.	Treasury	rates.	Global	asset	markets experienced	significant	periods	of	volatility	in	the	first	and	fourth	quarters of	2018	driven	by	concerns	about	the	prospect	of	slowing	global	growth and	 tighter	 monetary	 policy.	 The	 U.S.	 presidential	 administration implemented	 and	 proposed	 new	 tariffs	 on	 imports	 from	 China,	 which prompted	retaliatory	measures,	and	rising	global	trade	tensions	remained	a meaningful	source	of	uncertainty	affecting	asset	prices	throughout	2018. Political	uncertainty	in	Europe	increased	as	a	new	coalition	government formed	in	Italy	in	May	2018	and	the	future	of	the	relationship	between	the U.K.	and	E.U.	remained	uncertain.	During	2018,	the	U.S.	Federal	Reserve increased	the	target	federal	funds	rate	four	times	and	the	Bank	of	England increased	its	official	target	interest	rate	in	August	2018,	while	the	Bank	of Japan	introduced	forward	guidance	and	expanded	the	permissible	range	of fluctuations	for	the	10-year	interest	rate.

In	investment	banking,	industry-wide	announced	and	completed	mergers and	acquisitions	volumes	increased	compared	with	2017,	while	industry- wide	underwriting	transactions	decreased.

# United	States

In	the	U.S.,	real	GDP	appeared	to	increase	by	2.9%	in	2018,	compared with	2.2%	in	2017,	as	growth	in	total	fixed	investment	and	government spending	increased.	Measures	of	consumer	confidence	were	stronger	on average	compared	with	the	prior	year,	and	the	unemployment	rate	declined to	3.9%	as	of	December	2018.	Housing	starts,	sales	and	prices	increased compared	with	2017.	Measures	of	headline	inflation	were	stable	compared with	2017,	while	measures	of	core	inflation	(excluding	food	and	energy) increased.	The	U.S.	Federal	Reserve	increased	the	target	federal	funds	rate by	25	basis	points	in	each	quarter	of	2018	to	a	range	of	2.25%	to	2.50%	as of	December	2018.	The	yield	on	the	10-year	U.S.	Treasury	note	ended	the year	at	2.69%,	29	basis	points	higher	compared	with	the	end	of	2017.	The price	of	crude	oil	(WTI)	ended	the	year	at	approximately	$45	per	barrel,	a decrease	of	25%	compared	with	the	end	of	2017.	In	equity	markets,	the Dow	 Jones	 Industrial	 Average	 decreased	 by	 6%,	 the	 S&P	 500	 Index decreased	by	6%	and	the	NASDAQ	Composite	Index	decreased	by	4% compared	with	the	end	of	2017.

# Europe

In	the	Euro	area,	real	GDP	increased	by	1.8%	in	2018,	compared	with	2.4% in	2017,	while	measures	of	inflation	remained	low.	The	European	Central Bank	maintained	its	main	refinancing	operations	rate	at	0%	and	its	deposit rate	 at (0.40)%,	 but reduced	 its	 monthly	 asset	 purchases	 to	 a	 pace	 of €15	billion	per	month	after	September	2018	and	through	December	2018, after	 which	 net	 asset	 purchases	 ended.	 Measures	 of	 unemployment decreased,	and	the	Euro	depreciated	by	4%	against	the	U.S.	dollar	compared with	 the	 end	 of	 2017.	 Following	 the	 formation	 of	 a	 new	 coalition government	in	May	2018,	political	uncertainty	in	Italy	remained	high	and the	 yield	 on	10-year	 government	 bonds	 in	 Italy	 increased	 significantly. Elsewhere	 in	 the	 Euro	 area,	 yields	 on	10-year	 government	 bonds	 mostly decreased.	In	equity	markets,	the	DAX	Index	decreased	by	18%,	the	Euro Stoxx	50	Index	decreased	by	14%	and	the	CAC	40	Index	decreased	by	11% compared	with	the	end	of	2017.	In	March	2018,	it	was	announced	that	terms were	agreed	upon	for	the	transitional	period	of	the	U.K.'s	withdrawal	from the	E.U.	and,	in	November	2018,	the	U.K.	and	the	E.U.	agreed	on	a	draft Brexit	withdrawal	agreement.	However,	as	of	the	end	of	the	year,	there	was significant	uncertainty	about	the	future	relationship	between	the	U.K.	and the	E.U.

In	the	U.K.,	real	GDP	increased	by	1.4%	in	2018,	compared	with	1.8%	in 2017.	The	 Bank	 of	 England	 increased	 its	 official	 bank	 rate	 by	 25	 basis points	to	0.75%	in	August	2018,	and	the	British	pound	depreciated	by	6% against	the	U.S.	dollar.	The	yield	on	10-year	government	bonds	increased	by 8	basis	points	and,	in	equity	markets,	the	FTSE	100	Index	decreased	by	12% compared	with	the	end	of	2017.

In	Japan,	real	GDP	increased	by	0.7%	in	2018,	compared	with	1.9%	in	2017. The	Bank	of	Japan	maintained	its	asset	purchase	program	and	continued	to target	 a	 yield	 on	10-year	 government	 bonds	 of	 approximately 0%. In July	2018,	the	Bank	of	Japan	introduced	forward	guidance	for	its	interest rate	policy	and	expanded	the	permissible	range	of	deviations	from	the	0% target	 yield	 for	 the	10-year	 government	 bond.	 The	 yield	 on	10-year government	bonds	decreased	by	3	basis	points,	the	U.S.	dollar	depreciated by	3%	against	the	Japanese	yen	and	the	Nikkei	225	Index	decreased	by	12% compared	with	the	end	of	2017.

In	China,	real	GDP	 increased	by	6.6%	 in	2018,	compared	with	6.8%	 in 2017.	The	U.S.	dollar	appreciated	by	6%	against	the	Chinese	yuan	compared with	 the	 end	 of	 2017,	 while	 in	 equity	 markets,	 the	 Shanghai	 Composite Index	decreased	by	25%	and	the	Hang	Seng	Index	decreased	by	14%.

In	India,	real	GDP	appeared	to	increase	by	7.5%	in	2018,	compared	with 6.3%	in	2017.	The	U.S.	dollar	appreciated	by	9%	against	the	Indian	rupee and	 the	BSE	Sensex	Index	 increased	by	6%	compared	with	 the	end	of 2017.

# Other	Markets

In	Brazil,	real	GDP	appeared	to	increase	by	1.2%	in	2018,	compared	with 1.1%	in	2017.	The	U.S.	dollar	appreciated	by	17%	against	the	Brazilian real	and	the	Bovespa	Index	increased	by	15%	compared	with	the	end	of 2017.	In	Russia,	real	GDP	appeared	to	increase	by	2.3%	in	2018,	compared with	1.5%	in	2017.	The	U.S.	dollar	appreciated	by	21%	against	the	Russian ruble	and	the	MOEX	Russia	Index	increased	by	12%	compared	with	the end	of	2017.

# Critical	Accounting	Policies

# Fair	Value

Fair	 Value	 Hierarchy. Financial	 instruments	 owned	 and	 financial instruments	sold,	but	not	yet	purchased	(i.e.,	inventory),	and	certain	other financial	assets	and	financial	liabilities,	are	included	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).	In	evaluating	the	significance	of	a	valuation	input,	we	consider, among	other	factors,	a	portfolio's	net	risk	exposure	to	that	input.	Assets and	liabilities	are	classified	in	their	entirety	based	on	the	lowest	level	of input	that	is	significant	to	their	fair	value	measurement.

The	 fair	 values	 for	 substantially	 all	 of	 our	 financial	 assets	 and	 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	our	credit	quality,	funding	risk,	 transfer restrictions,	liquidity	and	bid/offer	spreads.

Instruments	classified	in	level	3	of	the	fair	value	hierarchy	are	those	which require	 one	 or	 more	 significant	 inputs	 that	 are	 not	 observable.	 Level	 3 financial	 assets	 represented	 2.4%	 as	 of	 December	 2018	 and	 2.1%	 as	 of December	 2017,	 of	 our	 total	 assets.	 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.	Absent	evidence	to	the	contrary,	instruments	classified in	level	3	of	the	fair	value	hierarchy	are	initially	valued	at	transaction	price, which	is	considered	to	be	the	best	initial	estimate	of	fair	value.	Subsequent to	the	transaction	date,	we	use	other	methodologies	to	determine	fair	value, which	vary	based	on	the	type	of	instrument.	Estimating	the	fair	value	of level 3 financial	 instruments	 requires	 judgments	 to	 be	 made.	 These judgments	include:

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

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

•	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 independent	 risk	 oversight	 and	 control	 functions.	This	 independent	 price verification	is	critical	to	ensuring	that	our	financial	instruments	are	properly valued.

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

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

•	External	Price	Comparison.	Valuations	and	prices	are	compared	to pricing	data	obtained	from	third	parties	(e.g.,	brokers	or	dealers,	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.

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

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

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

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

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

Review	of	Valuation	Models.	Our	independent	model	risk	management group	(Model	Risk	Management),	consisting	of	quantitative	professionals who	are	separate	from	model	developers,	performs	an	independent	model review	 and	 validation	 process	 of	 our	 valuation	 models.	 New	 or	 changed models	are	reviewed	and	approved	prior	to	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.	See "Risk	Management	—	Model	 Risk	 Management"	 for	 further	 information about	the	review	and	validation	of	our	valuation	models.

# 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	for	impairment	annually	in	the	fourth	quarter	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	estimated	fair	value	of	a	reporting	unit	is	less	than	its	estimated carrying	value.	If	the	results	of	the	qualitative	assessment	are	not	conclusive, a	quantitative	goodwill	test	is	performed	by	comparing	the	estimated	fair value	of	each	reporting	unit	with	its	estimated	carrying	value.

In	the	fourth	quarter	of	2018,	we	assessed	goodwill	for	impairment	for	each of	 our	 reporting	 units	 by	 performing	 a	 qualitative	 assessment.	 The qualitative	 assessment	 required	 management	 to	 make	 judgments	 and	 to evaluate	 several	 factors,	 which	 included,	 but	 were	 not	 limited	 to, performance	indicators,	firm	and	industry	events,	macroeconomic	indicators and	 fair	 value	 indicators.	 Based	 on	 our	 evaluation	 of	 these	 factors,	 we determined	that	it	was	more	likely	than	not	that	the	estimated	fair	value	of each	of	the	reporting	units	exceeded	its	respective	estimated	carrying	value. Therefore,	 we	 determined	 that	 goodwill	 for	 each	 reporting	 unit	 was	 not impaired	and	that	a	quantitative	goodwill	test	was	not	required.

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

Estimating	 the	 fair	 value	 of	 our	 reporting	 units	 requires	 management	 to make	judgments.	Critical	inputs	to	the	fair	value	estimates	include	projected earnings	and	attributed	equity.	There	is	inherent	uncertainty	in	the	projected earnings.	The	estimated	net	book	value	of	each	reporting	unit	reflects	an allocation	of	total	shareholders'	equity	and	represents	the	estimated	amount of	 total	 shareholders'	 equity	 required	 to	 support	 the	 activities	 of	 the reporting	 unit	 under	 currently	 applicable	 regulatory	 capital	 requirements. See	 "Equity	 Capital	 Management	 and	 Regulatory	 Capital"	 for	 further information	about	our	capital	requirements.

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

Identifiable Intangible Assets. We	 amortize	 our	 identifiable intangible	 assets	 over	 their	 estimated	 useful	 lives	 generally	 using	 the straight-line	 method.	 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.

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	 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 further information	about	our	identifiable	intangible	assets.

# Recent	Accounting	Developments

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

# Use	of	Estimates

U.S.	 GAAP	 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	the	allowance	for	credit	losses	on	loans	receivable	and	lending commitments	 held	 for	 investment,	 provisions	 for	 losses	 that	 may	 arise from	 litigation	 and	 regulatory	 proceedings	 (including	 governmental investigations),	and	provisions	for	losses	that	may	arise	from	tax	audits.

We	estimate	and	record	an	allowance	for	credit	losses	related	to	our	loans receivable	 and	 lending	 commitments	 held	 for	 investment.	 Management's estimate	of	credit	losses	entails	judgment	about	collectability	at	the	reporting dates,	and	there	are	uncertainties	inherent	in	those	judgments.	See	Note	9	to the	 consolidated	 financial	 statements	 for	 further	 information	 about	 the allowance	for	credit	losses.

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

Significant	 judgment	 is	required	 in	making	 these	estimates	and	our	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,	proceeding	or investigation,	our	experience	and	the	experience	of	others	in	similar	cases, proceedings	or	investigations,	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	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	"Risk	Factors"	in	Part	I, Item	 1A	 of	 this	Form	10-K	 for	 further	 information	 about	 the	 impact	 of economic	and	market	conditions	on	our	results	of	operations.

# Financial	Overview

The	 table	 below	 presents	 an	 overview	 of	 financial	 results	 and	 selected financial	ratios.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions,\texcept\tper\tshare\tamounts | 2018 | 2017 | 2016 |
| Net\trevenues | \t\t$36,616 | \t$32,730 | \t$30,790 |
| Pre-tax\tearnings | \t\t$12,481 | \t$11,132 | \t$10,304 |
| Net\tearnings | \t\t$10,459 | \t$\t\t4,286 | \t$\t\t7,398 |
| Net\tearnings\tapplicable\tto\tcommon |  |  |  |
| shareholders | \t\t$\t\t9,860 | \t$\t\t3,685 | \t$\t\t7,087 |
| Diluted\tearnings\tper\tcommon\tshare | \t\t$\t\t25.27 | \t$\t\t\t\t9.01 | \t$\t\t16.29 |
| ROE | 13.3% | 4.9% | 9.4% |
| ROTE | 14.1% | 5.2% | 9.9% |
| Net\tearnings\tto\taverage\ttotal\tassets | 1.1% | 0.5% | 0.8% |
| Return\ton\taverage\ttotal\tshareholders' |  |  |  |
| equity | 12.3% | 5.0% | 8.5% |
| Average\ttotal\tshareholders'\tequity\tto |  |  |  |
| average\ttotal\tassets | 8.8% | 9.5% | 9.8% |
| Dividend\tpayout\tratio | 12.5% | 32.2% | 16.0% |

In	the	table	above:

•	Dividend	payout	ratio	is	calculated	by	dividing	dividends	declared	per common	share	by	diluted	earnings	per	common	share.

•	Net	earnings	applicable	 to	common	shareholders	for	2016	 included	a benefit	of	$266	million,	reflected	in	preferred	stock	dividends,	related	to the	exchange	of	APEX	for	shares	of	Series	E	and	Series	F	Preferred Stock.	See	Note	19	to	the	consolidated	financial	statements	for	further information.

•	ROE	 is	 calculated	 by	 dividing	 net	 earnings	 applicable	 to	 common shareholders	 by	 average	 monthly	 common	 shareholders'	 equity. Tangible	 common	 shareholders'	 equity	 is	 calculated as total shareholders'	 equity	 less	 preferred	 stock,	 goodwill	 and	 identifiable intangible	 assets.	 Return	 on	 average	 tangible	 common	 shareholders' equity	 (ROTE)	 is	 calculated	 by	 dividing	 net	 earnings	 applicable	 to common	 shareholders	 by	 average	 monthly	 tangible	 common shareholders'	equity.	We	believe	 that	 tangible	 common	 shareholders' equity	is	meaningful	because	it	is	a	measure	that	we	and	investors	use	to assess	 capital	 adequacy	 and	 that	 ROTE	 is	 meaningful	 because	 it measures	the	performance	of	businesses	consistently,	whether	they	were acquired	or	developed	internally.	Tangible	common	shareholders'	equity and	 ROTE	 are	non-GAAP	 measures	 and	 may	 not	 be	 comparable	 to similar	non-GAAP	 measures	 used	 by	 other	 companies.	 Return	 on average	total	shareholders'	equity	is	calculated	by	dividing	net	earnings by	average	monthly	total	shareholders'	equity.	The	table	below	presents average	 common	 and	 total	 shareholders'	 equity,	 including	 the reconciliation	of	average	total	shareholders'	equity	to	average	tangible common	shareholders'	equity.

|  | Average	for	the	Year	Ended	December | Average	for	the	Year	Ended	December | Average	for	the	Year	Ended	December |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Total\tshareholders'\tequity | \t$\t85,238 | \t$\t85,959 | \t$\t86,658 |
| Preferred\tstock | (11,253) | (11,238) | (11,304) |
| Common\tshareholders'\tequity | 73,985 | 74,721 | 75,354 |
| Goodwill\tand\tidentifiable |  |  |  |
| intangible\tassets | (4,090) | (4,065) | (4,126) |
| Tangible\tcommon\nshareholders'\tequity | \t$\t69,895 | \t$\t70,656 | \t$\t71,228 |

•	In	 2017,	 we	 recorded	 $4.40	 billion	 of	 estimated	 income	 tax	 expense related	to	Tax	Legislation.	Excluding	this	expense,	diluted	earnings	per common	share	was	$19.76,	ROE	was	10.8%	and	ROTE	was	11.4%	for 2017.	In	the	fourth	quarter	of	2018,	we	finalized	this	estimate	to	reflect the	impact	of	updated	information,	including	subsequent	guidance	issued by	the	U.S.	Internal	Revenue	Service	(IRS),	resulting	in	a	$487	million income	tax	benefit	for	2018.	Excluding	this	benefit,	diluted	earnings	per common	share	was	$24.02,	ROE	was	12.7%	and	ROTE	was	13.4%	for 2018.	We	believe	that	presenting	our	results	excluding	Tax	Legislation	is meaningful	as	excluding	the	above	items	increases	the	comparability	of period-to-period	 results.	 See	 "Results	 of	 Operations	 —	 Provision	 for Taxes"	for	further	 information	about	Tax	Legislation.	Diluted	earnings per	common	share,	ROE	and	ROTE,	excluding	the	impact	of	the	above items	related	to	Tax	Legislation,	are	non-GAAP	measures	and	may	not	be comparable	to	similar	non-GAAP	measures	used	by	other	companies.	The tables	below	present	the	calculation	of	net	earnings	applicable	to	common shareholders,	diluted	earnings	per	common	share	and	average	common shareholders'	equity,	excluding	the	impact	of	the	above	items	related	to Tax	Legislation.

|  | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- |
| in\tmillions,\texcept\tper\tshare\tamounts | 2018 | 2017 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders,\nas\treported | \t $9,860 | $3,685 |
| Impact\tof\tTax\tLegislation | (487) | 4,400 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders, |  |  |
| excluding\tthe\timpact\tof\tTax\tLegislation | \t\t $9,373 | $8,085 |
| Divided\tby\taverage\tdiluted\tcommon\tshares | 390.2 | 409.1 |
| Diluted\tearnings\tper\tcommon\tshare,\texcluding\tthe\nimpact\tof\tTax\tLegislation | \t\t $24.02 | $19.76 |

|  | Average	for	the | Average	for	the |
| :--- | :--- | :--- |
|  | Year\tEnded\nDecember | Year\tEnded\nDecember |
| $\tin\tmillions | 2018 | 2017 |
| Common\tshareholders'\tequity,\tas\treported | \t\t$73,985 | \t$74,721 |
| Impact\tof\tTax\tLegislation | (42) | 338 |
| Common\tshareholders'\tequity,\texcluding |  |  |
| the\timpact\tof\tTax\tLegislation | 73,943 | 75,059 |
| Goodwill\tand\tidentifiable\tintangible\tassets | (4,090) | (4,065) |
| Tangible\tcommon\tshareholders'\tequity,\texcluding\nthe\timpact\tof\tTax\tLegislation | \t\t$69,853 | \t$70,994 |

•	In	2017,	as	required,	we	adopted	ASU	No.	2016-09,	"Compensation	— Stock	Compensation	(Topic	718)	—	Improvements	to	Employee	Share- Based	Payment	Accounting."	The	impact	of	adoption	was	a	reduction	to our	provision	for	taxes	of	$719	million	for	2017,	which	increased	diluted earnings	per	common	share	by	approximately	$1.75	and	both	ROE	and ROTE	by	approximately	1.0	percentage	points.	The	impact	for	2018	was not	 material.	 See	 Note	 3	 to	 the	 consolidated	 financial	 statements	 for further	information	about	this	ASU.

# Net	Revenues

The	table	below	presents	net	revenues	by	line	item.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Investment\tbanking | \t\t$\t\t7,862 | \t$\t\t7,371 | \t$\t\t6,273 |
| Investment\tmanagement | 6,514 | 5,803 | 5,407 |
| Commissions\tand\tfees | 3,199 | 3,051 | 3,208 |
| Market\tmaking | 9,451 | 7,660 | 9,933 |
| Other\tprincipal\ttransactions | 5,823 | 5,913 | 3,382 |
| Total\tnon-interest\trevenues | 32,849 | 29,798 | 28,203 |
| Interest\tincome | 19,679 | 13,113 | 9,691 |
| Interest\texpense | 15,912 | 10,181 | 7,104 |
| Net\tinterest\tincome | 3,767 | 2,932 | 2,587 |
| Total\tnet\trevenues | \t\t$36,616 | \t$32,730 | \t$30,790 |

•	Investment	banking	consists	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.

•	Investment	 management	 consists	 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.

•	Commissions	and	fees	consists	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.

•	Market	making	consists	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.

•	Other	principal	transactions	consists	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.	 Provision for credit losses,	previously	reported	in	other	principal	transactions	revenues,	is now	reported	as	a	separate	line	item	in	the	consolidated	statements	of earnings.	 Previously reported amounts	 have	 been conformed to the current	presentation.

Operating	 Environment.	 During 2018,	 our	 market-making	 activities reflected	generally	higher	levels	of	volatility	and	improved	client	activity, compared	with	a	low	volatility	environment	in	2017.	In	investment	banking, industry-wide	mergers	and	acquisitions	volumes	increased	compared	with 2017,	while	industry-wide	underwriting	transactions	decreased.	Our	other principal	 transactions	 revenues	 benefited	 from	 company-specific	 events, including	 sales,	 and	 strong	 corporate	 performance,	 while	 investments	 in public	equities	reflected	losses,	as	global	equity	prices	generally	decreased in	 2018,	 particularly	 towards	 the	 end	 of	 the	 year.	 In	 investment management,	our	assets	under	supervision	increased	reflecting	net	inflows in	liquidity	products,	fixed	income	assets	and	equity	assets,	partially	offset by	depreciation	in	client	assets,	primarily	in	equity	assets.

If	market-making	or	 investment	banking	activity	 levels	decline,	or	assets under	supervision	decline,	or	asset	prices	continue	to	decline,	net	revenues would	likely	be	negatively	impacted.	See	"Segment	Operating	Results"	for further	information	about	the	operating	environment	and	material	trends	and uncertainties	that	may	impact	our	results	of	operations.

During	2017,	generally	higher	asset	prices	and	tighter	credit	spreads	were supportive	of	industry-wide	underwriting	activities,	investment	management performance	 and	 other	 principal	 transactions.	 However,	 low	 levels	 of volatility	 in	 equity,	 fixed	 income,	 currency	 and	 commodity	 markets continued	to	negatively	affect	our	market-making	activities.

Net	revenues	in	the	consolidated	statements	of	earnings	were	$36.62	billion for	 2018,	 12%	 higher	 than	 2017,	 primarily	 due	 to	 significantly	 higher market	 making	 revenues	 and	 net	 interest	 income,	 as	 well	 as	 higher investment	management	revenues	and	investment	banking	revenues.

Non-Interest Revenues. Investment	 banking revenues in the consolidated	statements	of	earnings	were	$7.86	billion	for	2018,	7%	higher than	 2017.	 Revenues	 in	 financial	 advisory	 were	 higher,	 reflecting	 an increase	 in	 industry-wide	 completed	 mergers	 and	 acquisitions	 volumes. Revenues	in	underwriting	were	slightly	higher,	due	to	significantly	higher revenues	in	equity	underwriting,	driven	by	initial	public	offerings,	partially offset	 by	 lower	 revenues	 in	 debt	 underwriting,	 reflecting	 a	 decline	 in leveraged	finance	activity.

Investment	management	revenues	in	the	consolidated	statements	of	earnings were	 $6.51	 billion	 for	 2018,	 12%	 higher	 than	 2017,	 primarily	 due	 to significantly	higher	incentive	fees,	as	a	result	of	harvesting.	Management and	 other	 fees	 were	 also	 higher,	 reflecting	 higher	 average	 assets	 under supervision	 and	 the	 impact	 of	 the	 recently	 adopted	 revenue	 recognition standard,	partially	offset	by	shifts	in	the	mix	of	client	assets	and	strategies. See	Note	3	to	the	consolidated	financial	statements	for	further	information about	 ASU	No.	 2014-09,	 "Revenue	 from	 Contracts	 with	 Customers (Topic	606)."

Commissions	 and	 fees	 in	 the	 consolidated	 statements	 of	 earnings	 were $3.20	billion	for	2018,	5%	higher	than	2017,	reflecting	an	increase	in	our listed	cash	equity	and	futures	volumes,	generally	consistent	with	market volumes.

Market	making	revenues	in	the	consolidated	statements	of	earnings	were $9.45	billion	for	2018,	23%	higher	than	2017,	due	to	significantly	higher revenues	in	equity	products,	interest	rate	products	and	commodities.	These increases	were	partially	offset	by	significantly	lower	results	in	mortgages and	lower	revenues	in	credit	products.

Other	 principal	 transactions	 revenues	 in	 the	 consolidated	 statements	 of earnings	were	$5.82	billion	for	2018,	2%	lower	than	2017,	reflecting	net losses	from	investments	in	public	equities	compared	with	net	gains	in	the prior	 year,	 partially	 offset	 by	 significantly	 higher	 net	 gains	 from investments	 in	 private	 equities,	 driven	 by	 company-specific	 events, including	sales,	and	corporate	performance.

Net	Interest	Income.	Net	interest	income	in	the	consolidated	statements of	earnings	was	$3.77	billion	for	2018,	28%	higher	than	2017,	reflecting an	increase	in	interest	income	primarily	due	to	the	impact	of	higher	interest rates	 on	 collateralized	 agreements,	 other	 interest-earning	 assets	 and deposits	 with	 banks,	 increases	 in	 total	 average	 loans	 receivable	 and financial	 instruments	owned,	and	higher	yields	on	financial	 instruments owned	and	loans	receivable.	The	increase	in	interest	income	was	partially offset	by	higher	 interest	expense	primarily	due	 to	 the	 impact	of	higher interest	rates	on	other	interest-bearing	liabilities,	collateralized	financings, deposits	and	long-term	borrowings,	and	increases	in	total	average	long- term	borrowings	and	deposits.	See	"Statistical	Disclosures	—	Distribution of	Assets,	 Liabilities	 and	 Shareholders'	 Equity"	 for	 further	 information about	our	sources	of	net	interest	income.

Net	 revenues	 in	 the	 consolidated	 statements	 of	 earnings	 were $32.73	billion	for	2017,	6%	higher	than	2016,	due	to	significantly	higher other	 principal	 transactions	 revenues,	 and	 higher	 investment	 banking revenues,	investment	management	revenues	and	net	interest	income.	These increases	 were	 partially	 offset	 by	 significantly	 lower	 market	 making revenues	and	lower	commissions	and	fees.

Non-Interest Revenues. Investment	 banking	 revenues	 in	 the consolidated	 statements	 of	 earnings	 were	 $7.37	 billion	 for	 2017,	 18% higher	than	2016.	Revenues	in	financial	advisory	were	higher	compared with	2016,	reflecting	an	increase	in	completed	mergers	and	acquisitions transactions.	Revenues	in	underwriting	were	significantly	higher	compared with	2016,	due	to	significantly	higher	revenues	in	both	debt	underwriting, primarily	reflecting	an	increase	in	industry-wide	leveraged	finance	activity, and	equity	underwriting,	reflecting	an	increase	in	industry-wide	secondary offerings.

Investment	management	revenues	in	the	consolidated	statements	of	earnings were $5.80 billion	 for	 2017, 7% higher	 than	 2016,	 due	 to	 higher management	 and	 other	 fees,	 reflecting	 higher	 average	 assets	 under supervision,	and	higher	transaction	revenues.

Commissions	 and	 fees	 in	 the	 consolidated	 statements	 of	 earnings	 were $3.05	billion	for	2017,	5%	lower	than	2016,	reflecting	a	decline	in	our	listed cash	equity	volumes	in	the	U.S.	Market	volumes	in	the	U.S.	also	declined.

Market	making	revenues	 in	 the	consolidated	statements	of	earnings	were $7.66	billion	for	2017,	23%	 lower	 than	2016,	due	 to	significantly	 lower revenues	in	commodities,	currencies,	credit	products,	interest	rate	products and	 equity	 derivative	 products.	 These	 results	 were	 partially	 offset	 by significantly	 higher	 revenues	 in	 equity	 cash	 products	 and	 significantly improved	results	in	mortgages.

Other	 principal	 transactions	 revenues	 in	 the	 consolidated	 statements	 of earnings	 were	 $5.91	 billion	 for	 2017,	 75%	 higher	 than	 2016,	 primarily reflecting	a	significant	increase	in	net	gains	from	private	equities,	which were	 positively	 impacted	 by	 company-specific	 events	 and	 corporate performance.	In	addition,	net	gains	from	public	equities	were	significantly higher,	as	global	equity	prices	increased	during	the	year.

Net	Interest	Income.	Net	interest	income	in	the	consolidated	statements of	earnings	was	$2.93	billion	for	2017,	13%	higher	than	2016,	reflecting	an increase	in	interest	income	primarily	due	to	the	impact	of	higher	interest rates	 on	 collateralized	 agreements,	 higher	 interest	 income	 from	 loans receivable	 due	 to	 higher	 yields	 and	 an	 increase	 in	 total	 average	 loans receivable,	an	increase	in	total	average	financial	instruments	owned,	and	the impact	of	higher	interest	rates	on	other	interest-earning	assets	and	deposits with	banks.	The	increase	in	interest	income	was	partially	offset	by	higher interest	expense	primarily	due	to	the	impact	of	higher	interest	rates	on	other interest-bearing	 liabilities,	 an	 increase	 in	 total	 average	 long-term borrowings,	 and	 the	 impact	 of	 higher	 interest	 rates	 on	 interest-bearing deposits,	 short-term	 borrowings	 and	 collateralized	 financings.	 See "Statistical	 Disclosures	 —	 Distribution	 of	 Assets,	 Liabilities	 and Shareholders'	 Equity"	 for	 further	 information	 about	 our	 sources	 of	 net interest	income.

# Provision	for	Credit	Losses

Provision	for	credit	losses	consists	of	provision	for	credit	losses	on	loans receivable	and	lending	commitments	held	for	investment.	See	Note	9	to	the consolidated	financial	statements	for	further	information	about	the	provision for	credit	losses.

The	table	below	presents	the	provision	for	credit	losses.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Provision\tfor\tcredit\tlosses | \t\t$674 | \t$657 | \t$182 |
| Goldman\tSachs\t2018\tForm\t10-K | Goldman\tSachs\t2018\tForm\t10-K | Goldman\tSachs\t2018\tForm\t10-K | 53 |

2018	 versus	 2017.	 Provision for	 credit	 losses	 in	 the	 consolidated statements	 of	 earnings	 was $674	 million for	 2018,	 compared	 with $657	million	for	2017,	as	the	higher	provision	for	credit	losses	primarily related	 to	 consumer	 loan	 growth	 in	 2018	 was	 partially	 offset	 by	 an impairment	of	approximately	$130	million	on	a	secured	loan	in	2017.

2017	 versus	 2016.	 Provision for	 credit	 losses	 in	 the	 consolidated statements	 of	 earnings	 was $657	 million for	 2017,	 compared	 with $182	 million for	 2016,	 reflecting	 an	 increase	 in	 impairments,	 which included	an	impairment	of	approximately	$130	million	on	a	secured	loan in	 2017,	 and	 higher	 provision	 for	 credit	 losses	 primarily	 related	 to consumer	loan	growth.

# Operating	Expenses

Our	 operating	 expenses	 are	 primarily	 influenced	 by	 compensation, headcount	 and	 levels	 of	 business	 activity.	 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.	In	addition,	see	"Use	of	Estimates"	for	further	information about	expenses	that	may	arise	from	litigation	and	regulatory	proceedings.

The	table	below	presents	operating	expenses	by	line	item	and	headcount.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Compensation\tand\tbenefits | \t\t$12,328 | \t$11,653 | \t$11,448 |
| Brokerage,\tclearing,\texchange |  |  |  |
| and\tdistribution\tfees | 3,200 | 2,876 | 2,823 |
| Market\tdevelopment | 740 | 588 | 457 |
| Communications\tand\ttechnology | 1,023 | 897 | 809 |
| Depreciation\tand\tamortization | 1,328 | 1,152 | 998 |
| Occupancy | 809 | 733 | 788 |
| Professional\tfees | 1,214 | 1,165 | 1,081 |
| Other\texpenses | 2,819 | 1,877 | 1,900 |
| Total\toperating\texpenses | \t\t$23,461 | \t$20,941 | \t$20,304 |
| Headcount\tat\tperiod-end | 36,600 | 33,600 | 32,400 |

In	 the	 table	 above,	 the	 following	 reclassifications	 have	 been	 made to previously	reported	amounts	to	conform	to	the	current	presentation:

•	Regulatory-related	fees	that	are	paid	to	exchanges	are	now	reported	in brokerage,	 clearing,	 exchange	 and	 distribution	 fees.	 Previously	 such amounts	were	reported	in	other	expenses.

•	Headcount	 consists	 of	 our	 employees,	 and	 excludes	 consultants	 and temporary	staff	previously	reported	as	part	of	total	staff.	As	a	result, expenses	 related	 to	 these	 consultants	 and	 temporary	 staff	 are	 now reported	in	professional	fees.	Previously	such	amounts	were	reported	in compensation	and	benefits	expenses.

2018	versus	2017.	Operating	expenses	in	the	consolidated	statements	of earnings	were	$23.46	billion	for	2018,	12%	higher	than	2017.	Our	efficiency ratio	(total	operating	expenses	divided	by	total	net	revenues)	for	2018	was 64.1%,	compared	with	64.0%	for	2017.

The	increase	in	operating	expenses	compared	with	2017	was	primarily	due to	higher	compensation	and	benefits	expenses,	reflecting	improved	operating performance,	 and	 significantly	 higher	 net	 provisions	 for	 litigation	 and regulatory	proceedings.	Brokerage,	clearing,	exchange	and	distribution	fees were	also	higher,	reflecting	an	increase	in	activity	levels,	and	technology expenses	 increased,	 reflecting	 higher	 expenses	 related	 to	 computing services.	In	addition,	expenses	related	to	consolidated	investments	and	our digital	lending	and	deposit	platform	increased,	with	the	increases	primarily in	depreciation	and	amortization	expenses,	market	development	expenses and	 other	 expenses.	 The	 increase	 compared	 with	 2017	 also	 included $297	million	related	to	the	recently	adopted	revenue	recognition	standard. See	Note	3	to	the	consolidated	financial	statements	for	further	information about	 ASU	No.	 2014-09,	 "Revenue	 from	 Contracts	 with	 Customers (Topic	606)."

Net	 provisions	 for	 litigation	 and	 regulatory	 proceedings	 for	 2018	 were $844	 million compared	 with $188	 million for	 2017.	 2018	 included	 a $132	million	charitable	contribution	to	Goldman	Sachs	Gives,	our	donor- advised	fund.	Compensation	was	reduced	to	fund	this	charitable	contribution to	Goldman	Sachs	Gives.	We	ask	our	participating	managing	directors	to make	 recommendations	 regarding	 potential	 charitable	 recipients	 for	 this contribution.

As	 of	 December	 2018,	 headcount	 increased 9% compared	 with December	 2017,	 reflecting	 an	 increase	 in	 technology	 professionals	 and investments	in	new	business	initiatives.

The	 increase	 in	 operating	 expenses	 compared	 with	 2016	 was	 primarily driven	 by	 slightly	 higher	 compensation	 and	 benefits	 expenses	 and	 our investments	 to	 fund	 growth.	 Higher	 expenses	 related	 to	 consolidated investments	 and	 our	 digital	 lending	 and	 deposit	 platform	 were	 primarily included	 in	 depreciation	 and	 amortization	 expenses,	 market	 development expenses	and	other	expenses.	In	addition,	technology	expenses	increased, reflecting	 higher	 expenses	 related	 to	 cloud-based	 services	 and	 software depreciation,	and	professional	fees	increased,	primarily	related	to	consulting costs.	 These	 increases	 were	 partially	 offset	 by	 lower	 net	 provisions	 for litigation	 and	 regulatory	 proceedings,	 and	 lower	 occupancy	 expenses (primarily	related	to	exit	costs	in	2016).

As	 of	 December	 2017,	 headcount	 increased 4% compared	 with December	2016,	reflecting	an	increase	in	employees	of	our	digital	lending and	deposit	platform,	and	in	support	of	our	regulatory	efforts.

# Provision	for	Taxes

The	effective	income	tax	rate	for	2018	was	16.2%,	down	from	61.5%	for 2017,	as	2017	included	the	estimated	impact	of	Tax	Legislation,	which increased	 our	 effective	 income	 tax	 rate	 by 39.5 percentage	 points. Additionally,	the	decrease	compared	with	2017	reflected	the	impact	of	the lower	U.S.	corporate	income	tax	rate	in	2018.	The	estimated	impact	of	Tax Legislation	was	an	 increase	 in	 income	 tax	expense	of	$4.40	billion	for 2017.	 During	 2018,	 we	 finalized	 this	 estimate	 to	 reflect	 the	 impact	 of updated	 information,	 including	 subsequent	 guidance	 issued	 by	 the	 IRS, resulting	in	a	$487	million	income	tax	benefit	for	2018.

The	effective	 income	 tax	rate	for	2017	was	61.5%,	up	from	28.2%	for 2016.	The	increase	compared	with	2016	was	primarily	due	to	the	estimated impact	 of	Tax	 Legislation,	 which	 was	 enacted	 on	 December	 22,	 2017, partially	offset	by	tax	benefits	on	the	settlement	of	employee	share-based awards	in	accordance	with	ASU	No.	2016-09.

Effective	January	1,	2018,	Tax	Legislation	reduced	the	U.S.	corporate	tax rate	to	21%,	eliminated	tax	deductions	for	certain	expenses	and	enacted two	 new	 taxes,	 Base	 Erosion	 and	Anti-Abuse	Tax	 (BEAT)	 and	 Global Intangible	Low	Taxed	Income	(GILTI).	BEAT	is	an	alternative	minimum tax	 that	 applies	 to	 banks	 that	 pay	 more	 than	 2%	 of	 total	 deductible expenses	to	certain	foreign	subsidiaries.	GILTI	is	effectively	a	10.5%	tax, before	 allowable	 credits	 for	 foreign	 taxes	 paid,	 on	 the	 annual	 taxable income	of	certain	foreign	subsidiaries.	Income	tax	expense	associated	with GILTI	is	recognized	as	incurred.	During	2018,	the	IRS	issued	proposed regulations	relating	to	BEAT	and	GILTI.	Our	2018	effective	income	tax rate	includes	estimates	for	BEAT	and	GILTI	that	are	based	on	our	current interpretation	of	 these	proposed	regulations.	We	do	not	expect	 that	 the finalization	of	these	proposed	regulations	will	have	a	material	impact	on these	estimates.

Based	on	our	current	interpretations	of	the	rules	and	legislative	guidance	to date,	we	expect	our	2019	tax	rate	to	be	between	22%	and	23%,	excluding the	impact	of	equity-based	compensation.

# Segment	Operating	Results

The	 table	 below	 presents	 the	 net	 revenues,	 provision for credit losses, operating	expenses	and	pre-tax	earnings	by	segment.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Investment\tBanking |  |  |  |
| Net\trevenues | \t\t$\t\t7,862 | \t$\t\t7,371 | \t$\t\t6,273 |
| Operating\texpenses | 4,346 | 3,526 | 3,437 |
| Pre-tax\tearnings | \t\t$\t\t3,516 | \t$\t\t3,845 | \t$\t\t2,836 |
| Institutional\tClient\tServices |  |  |  |
| Net\trevenues | \t\t$13,482 | \t$11,902 | \t$14,467 |
| Operating\texpenses | 10,351 | 9,692 | 9,713 |
| Pre-tax\tearnings | \t\t$\t\t3,131 | \t$\t\t2,210 | \t$\t\t4,754 |
| Investing\t&amp;\tLending |  |  |  |
| Net\trevenues | \t\t$\t\t8,250 | \t$\t\t7,238 | \t$\t\t4,262 |
| Provision\tfor\tcredit\tlosses | 674 | 657 | 182 |
| Operating\texpenses | 3,365 | 2,796 | 2,386 |
| Pre-tax\tearnings | \t\t$\t\t4,211 | \t$\t\t3,785 | \t$\t\t1,694 |
| Investment\tManagement |  |  |  |
| Net\trevenues | \t\t$\t\t7,022 | \t$\t\t6,219 | \t$\t\t5,788 |
| Operating\texpenses | 5,267 | 4,800 | 4,654 |
| Pre-tax\tearnings | \t\t$\t\t1,755 | \t$\t\t1,419 | \t$\t\t1,134 |
| Total\tnet\trevenues | \t\t$36,616 | \t$32,730 | \t$30,790 |
| Provision\tfor\tcredit\tlosses | 674 | 657 | 182 |
| Total\toperating\texpenses | 23,461 | 20,941 | 20,304 |
| Total\tpre-tax\tearnings | \t\t$12,481 | \t$11,132 | \t$10,304 |

•	Provision	for	credit	losses,	previously	reported	in	Investing	&	Lending segment	net	revenues,	is	now	reported	as	a	separate	line	item.	Previously reported	amounts	have	been	conformed	to	the	current	presentation.

•	All	operating	expenses	have	been	allocated	to	our	segments	except	for charitable	contributions	of	$132	million	for	2018,	$127	million	for	2017 and	$114	million	for	2016.

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

Our	cost	drivers	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,	 our	 overall	 performance,	 as	 well	 as	 the	 performance	 of individual	businesses.	Consequently,	pre-tax	margins	in	one	segment	of	our business	 may	 be	 significantly	 affected	 by	 the	 performance	 of	 our	 other business	segments.	A	description	of	segment	operating	results	follows.

Our	Investment	Banking	segment	consists	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	and	acquisition	financing,	of a	wide	range	of	securities	and	other	financial	instruments,	including	loans, 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 |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Financial\tAdvisory | \t\t$3,507 | \t$3,188 | \t$2,932 |
| Equity\tunderwriting | 1,646 | 1,243 | 891 |
| Debt\tunderwriting | 2,709 | 2,940 | 2,450 |
| Total\tUnderwriting | 4,355 | 4,183 | 3,341 |
| Total\tnet\trevenues | 7,862 | 7,371 | 6,273 |
| Operating\texpenses | 4,346 | 3,526 | 3,437 |
| Pre-tax\tearnings | \t\t$3,516 | \t$3,845 | \t$2,836 |

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

•	Volumes	are	per	Dealogic.

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

•	Equity	 and	 equity-related	 offerings	 includes	 Rule	 144A	 and	 public common	stock	offerings,	convertible	offerings	and	rights	offerings.

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

Operating	 Environment.	 During	 2018, industry-wide	 announced	 and completed	 mergers	 and	 acquisitions	 activity	 was	 strong	 and	 volumes increased	compared	with	2017.

In	 underwriting,	 industry-wide	 equity	 and	 debt	 underwriting	 transactions decreased	compared	with	2017,	reflecting	a	challenging	market	environment for	financing	towards	the	end	of	2018.	However,	demand	for	initial	public offerings	increased	compared	with	2017.

In	the	future,	if	industry-wide	mergers	and	acquisitions	volumes	decline,	or if	equity	or	debt	underwriting	transactions	continue	to	decline,	net	revenues in	Investment	Banking	would	likely	be	negatively	impacted.

During	2017,	Investment	Banking	operated	in	an	environment	characterized by	 solid	 industry-wide	 mergers	 and	 acquisitions	 transactions,	 although volumes	 declined	 compared	 with	 2016.	 Industry-wide	 debt	 underwriting offerings	remained	strong	and	industry-wide	equity	underwriting	offerings increased	significantly	compared	with	2016.

Net	revenues	 in	Financial	Advisory	were	$3.51	billion,	10%	higher	 than 2017,	 reflecting	 an	 increase	 in	 industry-wide	 completed	 mergers	 and acquisitions	volumes.

Net	revenues	in	Underwriting	were	$4.36	billion,	4%	higher	than	2017,	due to	significantly	higher	net	revenues	in	equity	underwriting,	driven	by	initial public	offerings,	partially	offset	by	lower	net	revenues	in	debt	underwriting, reflecting	a	decline	in	leveraged	finance	activity.

Operating	 expenses	 were	 $4.35	 billion	 for	 2018,	 23%	 higher	 than	 2017, primarily	 due	 to	 higher	 net	 provisions	 for	 litigation	 and	 regulatory proceedings,	 increased	 compensation	 and	 benefits	 expenses,	 reflecting higher	 net	 revenues,	 and	 the	 impact	 of	 the	 recently	 adopted	 revenue recognition	standard.	Pre-tax	earnings	were	$3.52	billion	in	2018,	9%	lower than	2017.	See	Note	3	to	the	consolidated	financial	statements	for	further information	 about	 ASU	No.	 2014-09,	 "Revenue	 from	 Contracts	 with Customers	(Topic	606)."

As	of	December	2018,	our	investment	banking	transaction	backlog	increased compared	 with	 December	 2017,	 primarily	 due	 to	 significantly	 higher estimated	net	revenues	from	potential	advisory	transactions.	Estimated	net revenues	 from	 potential	 debt	 underwriting	 transactions	 were	 also	 higher, while	estimated	net	revenues	from	equity	underwriting	 transactions	were essentially	unchanged.

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.

Net	revenues	in	Financial	Advisory	were	$3.19	billion,	9%	higher	than 2016,	 reflecting	 an	 increase	 in	 completed	 mergers	 and	 acquisitions transactions.

Net	revenues	in	Underwriting	were	$4.18	billion,	25%	higher	than	2016, due	 to	 significantly	 higher	 net	 revenues	 in	 both	 debt	 underwriting, primarily	reflecting	an	increase	in	industry-wide	leveraged	finance	activity, and	equity	underwriting,	reflecting	an	increase	in	industry-wide	secondary offerings.

Operating	expenses	were	$3.53	billion	for	2017,	3%	higher	than	2016,	due to	 increased	 compensation	 and	 benefits	 expenses,	 reflecting	 higher	 net revenues.	Pre-tax	earnings	were	$3.85	billion	in	2017,	36%	higher	than 2016.

As	 of	 December	 2017,	 our	 investment	 banking	 transaction	 backlog increased	 compared	 with	 December	 2016,	 due	 to	 significantly	 higher estimated	net	revenues	from	potential	debt	underwriting	transactions	and significantly	 higher	 estimated	 net	 revenues	 from	 potential	 equity underwriting	 transactions,	 primarily	 in	 initial	 public	 offerings.	 These increases	 were	 partially	 offset	 by	 lower	 estimated	 net	 revenues	 from potential	 advisory	 transactions,	 principally	 related	 to	 mergers	 and acquisitions.

Our	Institutional	Client	Services	segment	consists	of:

FICC	 Client	 Execution.	 Includes	 client	 execution	 activities	 related	 to making	 markets	 in	 both	 cash	 and	 derivative	 instruments	 for	 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.

# Market-Making	Activities

As	a	market	maker,	we	facilitate	transactions	in	both	liquid	and	less	liquid markets,	primarily	for	institutional	clients,	such	as	corporations,	financial institutions,	investment	funds	and	governments,	to	assist	clients	in	meeting their	investment	objectives	and	in	managing	their	risks.	In	this	role,	we seek	to	earn	the	difference	between	the	price	at	which	a	market	participant is	willing	to	sell	an	instrument	to	us	and	the	price	at	which	another	market participant	 is	 willing	 to	 buy	 it	 from	 us,	 and	 vice	 versa	 (i.e.,	 bid/offer spread).	In	addition,	we	maintain	inventory,	typically	for	a	short	period	of time,	in	response	to,	or	in	anticipation	of,	client	demand.	We	also	hold inventory	 to	 actively	 manage	 our	 risk	 exposures	 that	 arise	 from	 these market-making	 activities.	 Our	 market-making	 inventory	 is	 recorded	 in financial	instruments	owned	(long	positions)	or	financial	instruments	sold, but	not	yet	purchased	(short	positions)	in	our	consolidated	statements	of financial	condition.

Our	 results	 are	 influenced	 by	 a	 combination	 of	 interconnected	 drivers, including	 (i)	 client	 activity	 levels	 and	 transactional	 bid/offer	 spreads (collectively,	 client	 activity),	 and	 (ii)	 changes	 in	 the	 fair	 value	 of	 our inventory	and	interest	income	and	interest	expense	related	to	the	holding, hedging	 and	 funding	 of	 our	 inventory	 (collectively,	 market-making inventory	changes).	Due	 to	 the	 integrated	nature	of	our	market-making activities,	disaggregation	of	net	revenues	into	client	activity	and	market- making	 inventory	 changes	 is	 judgmental	 and	 has	 inherent	 complexities and	limitations.

The	amount	and	composition	of	our	net	revenues	vary	over	time	as	these drivers	are	impacted	by	multiple	interrelated	factors	affecting	economic and	 market	 conditions,	 including	 volatility	 and	 liquidity	 in	 the	 market, changes	in	interest	rates,	currency	exchange	rates,	credit	spreads,	equity prices	 and	 commodity prices, investor confidence, and other macroeconomic	concerns	and	uncertainties.

In	general,	assuming	all	other	market-making	conditions	remain	constant, increases	 in	 client	 activity	 levels	 or	 bid/offer	 spreads	 tend	 to	 result	 in increases	in	net	revenues,	and	decreases	tend	to	have	the	opposite	effect. However,	 changes	 in	 market-making	 conditions	 can	 materially	 impact client	activity	levels	and	bid/offer	spreads,	as	well	as	the	fair	value	of	our inventory.	For	example,	a	decrease	in	liquidity	in	the	market	could	have the	impact	of	(i)	increasing	our	bid/offer	spread,	(ii)	decreasing	investor confidence	and	 thereby	decreasing	client	activity	 levels,	and	(iii)	wider credit	spreads	on	our	inventory	positions.

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

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| FICC\tClient\tExecution | \t$\t\t5,882 | \t$\t\t5,299 | \t$\t\t7,556 |
| Equities\tclient\texecution | 2,835 | 2,046 | 2,194 |
| Commissions\tand\tfees | 3,055 | 2,920 | 3,078 |
| Securities\tservices | 1,710 | 1,637 | 1,639 |
| Total\tEquities | 7,600 | 6,603 | 6,911 |
| Total\tnet\trevenues | 13,482 | 11,902 | 14,467 |
| Operating\texpenses | 10,351 | 9,692 | 9,713 |
| Pre-tax\tearnings | \t$\t\t3,131 | \t$\t\t2,210 | \t$\t\t4,754 |

The table below presents the net revenues of our Institutional	 Client Services	segment	by	line	item	in	the	consolidated	statements	of	earnings.

|  | FICC	Client | Total | Client |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | Execution | Equities | Services |
| Year\tEnded\tDecember\t2018 |  |  |  |
| Market\tmaking | $\t\t5,211 | \t$\t\t4,240 | $\t\t9,451 |
| Commissions\tand\tfees | – | 3,055 | 3,055 |
| Net\tinterest\tincome | 671 | 305 | 976 |
| Total\tnet\trevenues | $\t\t5,882 | \t$\t\t7,600 | $13,482 |
| Year\tEnded\tDecember\t2017 |  |  |  |
| Market\tmaking | $\t\t4,403 | \t$\t\t3,257 | $\t\t7,660 |
| Commissions\tand\tfees | – | 2,920 | 2,920 |
| Net\tinterest\tincome | 896 | 426 | 1,322 |
| Total\tnet\trevenues | $\t\t5,299 | \t$\t\t6,603 | $11,902 |
| Year\tEnded\tDecember\t2016 |  |  |  |
| Market\tmaking | $\t\t6,803 | \t$\t\t3,130 | $\t\t9,933 |
| Commissions\tand\tfees | – | 3,078 | 3,078 |
| Net\tinterest\tincome | 753 | 703 | 1,456 |
| Total\tnet\trevenues | $\t\t7,556 | \t$\t\t6,911 | $14,467 |

•	The difference between commissions and fees and those in the consolidated statements	 of earnings represents commissions and fees included	in	our	Investment	Management	segment.

•	See "Net Revenues" for further information about	 market	 making revenues,	commissions	and	fees,	and	net	interest	income.	See	Note	25	to the	consolidated	financial	statements	for	net	interest	income	by	business segment.

•	The	primary	driver	of	net	revenues	for	FICC	Client	Execution	was	client activity.

Operating	 Environment.	 During	 2018, Institutional	 Client	 Services operated	 in	 an	 environment	 characterized	 by	 generally	 higher	 levels	 of volatility	 and	 improved	 client	 activity,	 compared	 with	 a	 low	 volatility environment	in	2017.	The	average	daily	VIX	for	2018	increased	to	17, reflecting	periods	of	high	volatility	in	the	first	and	fourth	quarters	of	2018, compared	 with	 11	 for	 2017.	 In	 2018,	 global	 equity	 markets	 generally decreased	(with	the	MSCI	World	Index	down	11%)	and	in	credit	markets, spreads	generally	widened	(with	U.S.	high-yield	credit	spreads	wider	by 139	basis	points),	both	particularly	towards	the	end	of	the	year.	Oil	prices decreased	 to $45 per	 barrel	 (WTI),	 while	 natural	 gas	 prices	 were essentially	unchanged	at	$2.94	per	million	British	thermal	units	compared to	the	end	of	2017.	If	activity	levels	decline,	net	revenues	in	Institutional Client	 Services	 would	 likely	 be	 negatively	 impacted.	 See	 "Business Environment"	 for	 further	 information	 about	 economic	 and	 market conditions	in	the	global	operating	environment	during	the	year.

During	2017,	low	volatility	levels	in	equity,	fixed	income,	currency	and commodity	markets	impacted	the	operating	environment	for	Institutional Client	Services.	This	negatively	affected	client	activity	across	businesses, particularly	in	FICC	Client	Execution.	Although	market-making	conditions were	challenged,	global	equity	markets	increased	compared	with	2016,	and credit	spreads	generally	tightened.

Net	revenues	in	FICC	Client	Execution	were	$5.88	billion,	11%	higher than	2017,	primarily	reflecting	higher	client	activity.

The	following	provides	information	about	our	FICC	Client	Execution	net revenues	by	business,	compared	with	2017	results:

•	Net	revenues	 in	commodities	were	significantly	higher,	reflecting	 the impact	 of	 improved	 market-making	 conditions	 on	 our	 inventory, compared	with	challenging	conditions	in	2017,	and	higher	client	activity.

•	Net	revenues	in	currencies	were	significantly	higher,	primarily	reflecting higher	client	activity.

•	Net	revenues	in	interest	rate	products	and	mortgages	were	both	slightly lower,	reflecting	lower	client	activity.

•	Net	revenues	in	credit	products	were	essentially	unchanged,	reflecting the	impact	of	challenging	market-making	conditions	on	our	inventory, particularly	during	 the	fourth	quarter	of	2018,	offset	by	higher	client activity.

For	2018,	approximately	90%	of	the	net	revenues	in	FICC	Client	Execution were	generated	from	market	intermediation	and	approximately	10%	were generated	from	financing.	FICC	Client	Execution	financing	net	revenues include	 net	 revenues	 primarily	 from	 short-term	 repurchase	 agreement activities.

Net	 revenues	 in	 Equities	 were $7.60 billion, 15% higher	 than	 2017, primarily	 due	 to	 significantly	 higher	 net	 revenues	 in	 equities	 client execution,	reflecting	significantly	higher	net	revenues	in	both	cash	products and	derivatives.	In	addition,	commissions	and	fees	were	higher,	reflecting an	 increase	 in	 our	 listed	 cash	 equity	 and	 futures	 volumes,	 generally consistent	with	market	volumes.	Net	revenues	in	securities	services	were slightly	higher.

For	2018,	approximately	60%	of	the	net	revenues	in	Equities	were	generated from	market	intermediation	and	approximately	40%	were	generated	from financing.	Equities	financing	net	revenues	include	net	revenues	from	prime brokerage	and	other	financing	activities,	including	securities	lending,	margin lending	and	swaps.

Operating	 expenses	 were	 $10.35	 billion	 for	 2018,	 7%	 higher	 than	 2017, primarily	due	to	increased	compensation	and	benefits	expenses,	reflecting higher	 net	 revenues,	 higher	 net	 provisions	 for	 litigation	 and	 regulatory proceedings,	 and	 higher	 brokerage,	 clearing	 and	 exchange	 fees.	Pre-tax earnings	were	$3.13	billion	in	2018,	42%	higher	than	2017.

Net	revenues	in	FICC	Client	Execution	were	$5.30	billion,	30%	lower	than 2016,	reflecting	significantly	lower	client	activity.	Approximately	one-third of	 the	 decline	 in	 FICC	 Client	 Execution	 net	 revenues	 was	 due	 to significantly	lower	results	in	commodities.

•	Net	 revenues	 in	 commodities	 were	 significantly	 lower,	 reflecting the impact	of	challenging	market-making	conditions	on	our	inventory.

•	Net	revenues	in	interest	rate	products	were	significantly	lower,	reflecting lower	client	activity.

•	Net	 revenues	 in	 currencies	 were	 significantly	 lower,	 reflecting	 lower client	activity	and	the	impact	of	challenging	market-making	conditions	on our	inventory.

•	Net	revenues	in	credit	products	were	significantly	lower,	reflecting	lower client	activity.

•	Net	revenues	in	mortgages	were	significantly	higher,	reflecting	the	impact of	 favorable	 market-making	 conditions	 on	 our	 inventory,	 including generally	tighter	spreads,	compared	with	a	challenging	2016.

Net	 revenues	 in	 Equities	 were $6.60 billion, 4% lower	 than	 2016, primarily	due	to	lower	commissions	and	fees,	reflecting	a	decline	in	our listed	cash	equity	volumes	in	the	U.S.	Market	volumes	in	the	U.S.	also declined.	In	addition,	net	revenues	in	equities	client	execution	were	lower, reflecting	lower	net	revenues	in	derivatives,	partially	offset	by	higher	net revenues	 in	 cash	 products.	 Net	 revenues	 in	 securities	 services	 were essentially	unchanged.

Operating	 expenses	 were	 $9.69	 billion	 for	 2017,	 essentially	 unchanged compared	 with	 2016,	 due	 to	 decreased	 compensation	 and	 benefits expenses,	 reflecting	 lower	 net	 revenues,	 largely	 offset	 by	 increased technology	 expenses,	 reflecting	 higher	 expenses	 related	 to	 cloud-based services	and	software	depreciation,	and	increased	consulting	costs.	Pre-tax earnings	were	$2.21	billion	in	2017,	54%	lower	than	2016.

Investing	&	Lending	includes	our	investing	activities	and	the	origination of	loans,	including	our	relationship	lending	activities,	to	provide	financing to	clients.	These	investments	and	loans	are	typically	longer-term	in	nature. We	make	investments,	some	of	which	are	consolidated,	including	through our	Merchant	Banking	business	and	our	Special	Situations	Group,	in	debt securities	and	loans,	public	and	private	equity	securities,	infrastructure	and real	estate	entities.	Some	of	these	investments	are	made	indirectly	through funds	that	we	manage.	We	also	make	unsecured	loans	through	our	digital platform,	Marcus:	 by	 Goldman	 Sachs and	 secured	 loans	 through	 our digital	platform,	Goldman	Sachs	Private	Bank	Select.

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

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Equity\tsecurities | \t\t$4,455 | \t$4,578 | \t$2,573 |
| Debt\tsecurities\tand\tloans | 3,795 | 2,660 | 1,689 |
| Total\tnet\trevenues | 8,250 | 7,238 | 4,262 |
| Provision\tfor\tcredit\tlosses | 674 | 657 | 182 |
| Operating\texpenses | 3,365 | 2,796 | 2,386 |
| Pre-tax\tearnings | \t\t$4,211 | \t$3,785 | \t$1,694 |

Operating	 Environment.	 During 2018,	 our	 investments	 in	 private equities	 benefited	 from	 company-specific	 events,	 including	 sales,	 and strong	 corporate	 performance,	 while	 investments	 in	 public	 equities reflected	losses,	as	global	equity	prices	generally	decreased.	Results	for our	investments	in	debt	securities	and	loans	reflected	continued	growth	in loans	 receivables,	 resulting	 in	 higher	 net	 interest	 income. If macroeconomic	concerns	negatively	affect	corporate	performance	or	the origination	 of	 loans,	 or	 if	 global	 equity	 prices	 continue	 to	 decline,	 net revenues	in	Investing	&	Lending	would	likely	be	negatively	impacted.

During	2017,	generally	higher	global	equity	prices	and	tighter	credit	spreads contributed	to	a	favorable	environment	for	our	equity	and	debt	investments. Results	 also	 reflected	 net	 gains	 from	 company-specific	 events,	 including sales,	and	corporate	performance.

Net	revenues	in	equity	securities	were	$4.46	billion,	3%	lower	than	2017, reflecting	 net	 losses	 from	 investments	 in	 public	 equities	 (2018 included	$183	million	of	net	losses)	compared	with	net	gains	in	the	prior year,	partially	offset	by	significantly	higher	net	gains	from	investments	in private	 equities	 (2018	 included $4.64 billion	 of	 net	 gains),	 driven	 by company-specific	events,	including	sales,	and	corporate	performance.	For 2018,	 60%	 of	 the	 net	 revenues	 in	 equity	 securities	 were	 generated	 from corporate	investments	and	40%	were	generated	from	real	estate.

Net	revenues	in	debt	securities	and	loans	were	$3.80	billion,	43%	higher than	2017,	primarily	driven	by	significantly	higher	net	interest	income.	2018 included	net	interest	income	of	approximately	$2.70	billion	compared	with approximately	$1.80	billion	in	2017.

Operating	 expenses	 were	 $3.37	 billion	 for	 2018,	 20%	 higher	 than	 2017, primarily	due	to	increased	expenses	related	to	consolidated	investments	and our	digital	lending	and	deposit	platform,	and	increased	compensation	and benefits	 expenses,	 reflecting	 higher	 net	 revenues.	Pre-tax	 earnings	 were $4.21	billion	in	2018,	11%	higher	than	2017.

Net	revenues	in	equity	securities	were	$4.58	billion,	78%	higher	than	2016, primarily	reflecting	a	significant	increase	in	net	gains	from	private	equities (2017	included	$3.82	billion	of	net	gains),	which	were	positively	impacted by	 company-specific	 events	 and	 corporate	 performance.	 In	 addition,	 net gains	from	public	equities	(2017	included	$762	million	of	net	gains)	were significantly	higher,	as	global	equity	prices	increased	during	the	year.	For 2017,	 64%	 of	 the	 net	 revenues	 in	 equity	 securities	 were	 generated	 from corporate	investments	and	36%	were	generated	from	real	estate.

Net	revenues	in	debt	securities	and	loans	were	$2.66	billion,	57%	higher than	2016,	reflecting	significantly	higher	net	interest	income	(2017	included approximately	$1.80	billion	of	net	interest	income).

Operating	expenses	were	$2.80	billion	for	2017,	17%	higher	than	2016, due	to	increased	compensation	and	benefits	expenses,	reflecting	higher	net revenues,	 increased	 expenses	 related	 to	 consolidated	 investments,	 and increased	 expenses	 related	 to	 our	 digital	 lending	 and	 deposit	 platform. Pre-tax	earnings	were	$3.79	billion	in	2017	compared	with	$1.69	billion	in 2016.

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	provided	by	our	subsidiary,	The	Ayco	Company, L.P.,	 including	 portfolio	 management	 and	 financial	 planning	 and counseling,	and	brokerage	and	other	transaction	services	to	high-net-worth individuals	and	families.

Assets	under	supervision	(AUS)	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.	 Assets	 under	 supervision	 also 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	 market	 and	 bank	 deposit assets.

Assets	under	supervision	 typically	generate	fees	as	a	percentage	of	net asset	value,	which	vary	by	asset	class,	distribution	channel	and	the	type	of services	provided,	and	are	affected	by	investment	performance,	as	well	as asset	inflows	and	redemptions.	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	34	basis	points	for	2018	and	35	basis	points	for	both	2017	and	2016.

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

The	table	below	presents	period-end	assets	under	supervision	by	asset	class, distribution	channel,	region	and	vehicle.

|  |  | As	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tbillions | 2018 | 2017 | 2016 |
| Asset\tClass |  |  |  |
| Alternative\tinvestments | \t\t$\t\t\t167 | \t$\t\t\t168 | \t$\t\t\t154 |
| Equity | 301 | 321 | 266 |
| Fixed\tincome | 677 | 660 | 601 |
| Total\tlong-term\tAUS | 1,145 | 1,149 | 1,021 |
| Liquidity\tproducts | 397 | 345 | 358 |
| Total\tAUS | \t\t$1,542 | \t$1,494 | \t$1,379 |
| Distribution\tChannel |  |  |  |
| Institutional | \t\t$\t\t\t575 | \t$\t\t\t576 | \t$\t\t\t511 |
| High-net-worth\tindividuals | 455 | 458 | 413 |
| Third-party\tdistributed | 512 | 460 | 455 |
| Total\tAUS | \t\t$1,542 | \t$1,494 | \t$1,379 |
| Region |  |  |  |
| Americas | \t\t$1,151 | \t$1,120 | \t$1,042 |
| Europe,\tMiddle\tEast\tand\tAfrica | 239 | 229 | 211 |
| Asia | 152 | 145 | 126 |
| Total\tAUS | \t\t$1,542 | \t$1,494 | \t$1,379 |
| Vehicle |  |  |  |
| Separate\taccounts | \t\t$\t\t\t867 | \t$\t\t\t857 | \t$\t\t\t763 |
| Public\tfunds | 506 | 482 | 469 |
| Private\tfunds\tand\tother | 169 | 155 | 147 |
| Total\tAUS | \t\t$1,542 | \t$1,494 | \t$1,379 |

In	the	table	above,	alternative	investments	primarily	includes	hedge	funds, credit	funds,	private	equity,	real	estate,	currencies,	commodities	and	asset allocation	strategies.

The	table	below	presents	changes	in	assets	under	supervision.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tbillions | 2018 | 2017 | 2016 |
| Beginning\tbalance | \t$1,494 | \t$1,379 | \t$1,252 |
| Net\tinflows/(outflows): |  |  |  |
| Alternative\tinvestments | 1 | 15 | 5 |
| Equity | 13 | 2 | (3) |
| Fixed\tincome | 23 | 25 | 40 |
| Total\tlong-term\tAUS\tnet\tinflows/(outflows) | 37 | 42 | 42 |
| Liquidity\tproducts | 52 | (13) | 52 |
| Total\tAUS\tnet\tinflows/(outflows) | 89 | 29 | 94 |
| Net\tmarket\tappreciation/(depreciation) | (41) | 86 | 33 |
| Ending\tbalance | \t$1,542 | \t$1,494 | \t$1,379 |
|  | Goldman\tSachs\t2018\tForm\t10-K | Goldman\tSachs\t2018\tForm\t10-K | 61 |

In	 the	 table	above,	 total	AUS	net	 inflows/(outflows)	for	2017	 included $23	billion	of	 inflows	($20	billion	 in	 long-term	AUS	and	$3	billion	 in liquidity	products)	in	connection	with	the	acquisition	of	a	portion	of	Verus Investors'	outsourced	chief	investment	officer	business	(Verus	acquisition) and	$5	billion	of	equity	asset	outflows	in	connection	with	the	divestiture	of our	 local	Australian-focused	 investment	 capabilities	 and	 fund	 platform (Australian	divestiture).

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

|  |  | Average	for	the<br>Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tbillions | 2018 | 2017 | 2016 |
| Alternative\tinvestments | \t\t$\t\t\t171 | \t$\t\t\t162 | \t$\t\t\t149 |
| Equity | 329 | 292 | 256 |
| Fixed\tincome | 665 | 633 | 578 |
| Total\tlong-term\tAUS | 1,165 | 1,087 | 983 |
| Liquidity\tproducts | 352 | 330 | 326 |
| Total\tAUS | \t\t$1,517 | \t$1,417 | \t$1,309 |

Operating	Environment.	 During	 2018,	 our	 assets	 under	 supervision increased	reflecting	net	inflows	in	liquidity	products,	fixed	income	assets and	equity	assets.	This	increase	was	partially	offset	by	depreciation	in	our client	assets,	primarily	in	equity	assets,	as	global	equity	prices	generally decreased	in	2018,	particularly	towards	the	end	of	the	year.	The	mix	of	our average	 assets	 under	 supervision	 between	 long-term	 assets	 under supervision	and	liquidity	products	during	2018	was	essentially	unchanged compared	with	2017.	In	the	future,	if	asset	prices	continue	to	decline,	or investors	 continue	 to	 favor	 assets	 that	 typically	 generate	 lower	 fees	 or investors	withdraw	their	assets,	net	revenues	in	Investment	Management would	likely	be	negatively	impacted.

During	 2017,	 Investment	 Management	 operated	 in	 an	 environment characterized	by	generally	higher	asset	prices,	resulting	in	appreciation	in both	 equity	 and	 fixed	 income	 assets.	 Our	 long-term	 assets	 under supervision	 increased	 from	 net	 inflows	 primarily	 in	 fixed	 income	 and alternative	investment	assets.	These	increases	were	partially	offset	by	net outflows	in	liquidity	products.	As	a	result,	the	mix	of	our	average	assets under	supervision	during	2017	shifted	slightly	from	liquidity	products	to long-term	assets	under	supervision	compared	to	the	mix	at	the	end	of	2016.

2018 versus 2017.	 Net	 revenues	 in	 Investment	 Management	 were $7.02	billion	for	2018,	13%	higher	than	2017,	primarily	due	to	significantly higher	incentive	fees,	as	a	result	of	harvesting.	Management	and	other	fees were	also	higher,	reflecting	higher	average	assets	under	supervision	and	the impact	of	the	recently	adopted	revenue	recognition	standard,	partially	offset by	shifts	in	the	mix	of	client	assets	and	strategies.	In	addition,	transaction revenues	were	higher.	See	Note	3	to	the	consolidated	financial	statements for	further	information	about	ASU	No.	2014-09,	"Revenue	from	Contracts with	Customers	(Topic	606)."

During	 2018,	 total	 assets	 under	 supervision	 increased $48 billion	 to $1.54 trillion.	 Long-term	 assets	 under	 supervision	 decreased	 $4	 billion, including	net	market	depreciation	of	$41	billion	primarily	in	equity	assets, largely	offset	by	net	inflows	of	$37	billion,	primarily	in	fixed	income	and equity	assets.	Liquidity	products	increased	$52	billion.

Operating	 expenses	 were	 $5.27	 billion	 for	 2018,	 10%	 higher	 than	 2017, primarily	 due	 to	 the	 impact	 of	 the	 recently	 adopted	 revenue	 recognition standard	 and	 increased	 compensation	 and	 benefits	 expenses,	 reflecting higher	 net	 revenues.	Pre-tax	 earnings	 were	 $1.76	 billion	 in	 2018,	 24% higher	than	2017.	See	Note	3	to	the	consolidated	financial	statements	for further	information	about	ASU	No.	2014-09,	"Revenue	from	Contracts	with Customers	(Topic	606)."

2017 versus 2016.	 Net	 revenues	 in	 Investment	 Management	 were $6.22	billion	for	2017,	7%	higher	than	2016,	due	to	higher	management	and other	fees,	reflecting	higher	average	assets	under	supervision,	and	higher transaction	revenues.

During	 2017,	 total	 assets	 under	 supervision	 increased $115 billion	 to $1.49	trillion.	Long-term	assets	under	supervision	increased	$128	billion, including	net	market	appreciation	of	$86	billion,	primarily	 in	equity	and fixed	 income	 assets,	 and	 net	 inflows	 of $42 billion	 (which	 includes $20 billion	 of	 inflows	 in	 connection	 with	 the	 Verus	 acquisition	 and $5 billion	 of	 equity	 asset	 outflows	 in	 connection	 with	 the	 Australian divestiture),	 primarily	 in	 fixed	 income	 and	 alternative	 investment	 assets. Liquidity	 products	 decreased	 $13	 billion	 (which	 includes	 $3	 billion	 of inflows	in	connection	with	the	Verus	acquisition).

# 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	risk	management	disciplines	is	our	ability	to	manage	the	size and	composition	of	our	balance	sheet.	While	our	asset	base	changes	due	to client	activity,	market	fluctuations	and	business	opportunities,	the	size	and composition	 of	 our	 balance	 sheet	 also	 reflects	 factors	 including	 (i)	 our overall	risk	tolerance,	(ii)	the	amount	of	equity	capital	we	hold	and	(iii)	our funding	 profile,	 among	 other	 factors.	 See	 "Equity	 Capital	 Management and	Regulatory	Capital	—	Equity	Capital	Management"	for	information about	our	equity	capital	management	process.

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

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

Balance	 Sheet	 Planning.	 We prepare	 a	 balance	 sheet	 plan	 that combines	our	projected	 total	assets	and	composition	of	assets	with	our expected	 funding	 sources	 over	 a	 three-year	 time	 horizon.	 This	 plan	 is reviewed	quarterly	and	may	be	adjusted	in	response	to	changing	business needs	or	market	conditions.	The	objectives	of	this	planning	process	are:

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

•	To	 allow	 Treasury	 and	 our	 independent	 risk	 oversight	 and	 control functions	to	objectively	evaluate	balance	sheet	limit	requests	from	our revenue-producing	 units	 in	 the	 context	 of	 our	 overall	 balance	 sheet constraints,	including	our	liability	profile	and	equity	capital	levels,	and key	metrics;	and

•	To	inform	the	target	amount,	tenor	and	type	of	funding	to	raise,	based	on our	projected	assets	and	contractual	maturities.

Treasury	and	our	independent	risk	oversight	and	control	functions,	along with	 our	 revenue-producing	 units,	 review	 current	 and	 prior	 period information	 and	 expectations	 for	 the	 year	 to	 prepare	 our	 balance	 sheet plan.	The	specific	information	reviewed	includes	asset	and	liability	size and	 composition,	 limit	 utilization,	 risk	 and	 performance	 measures,	 and capital	usage.

Our	 consolidated	 balance	 sheet	 plan,	 including	 our	 balance	 sheets	 by business,	funding	projections	and	projected	key	metrics,	 is	reviewed	and approved	 by	 the	 Firmwide	 Asset	 Liability	 Committee	 and	 the	 Risk Governance	Committee.	See	"Risk	Management	—	Overview	and	Structure of	Risk	Management"	for	an	overview	of	our	risk	management	structure.

Balance	Sheet	Limits.	The	Firmwide	Asset	Liability	Committee	and	the Risk	 Governance	 Committee	 have	 the	 responsibility	 of	 reviewing	 and approving	balance	sheet	limits.	These	limits	are	set	at	levels	which	are	close to	actual	operating	levels,	rather	than	at	levels	which	reflect	our	maximum risk	appetite,	in	order	to	ensure	prompt	escalation	and	discussion	among	our revenue-producing	units,	Treasury	and	our	independent	risk	oversight	and control	 functions	 on	 a	 routine	 basis.	 The	 Firmwide	 Asset	 Liability Committee	 and	 the	 Risk	 Governance	 Committee	 review	 and	 approve balance	sheet	limits.	In	addition,	the	Risk	Governance	Committee	sets	aged inventory	limits	for	certain	financial	instruments	as	a	disincentive	to	hold inventory	over	longer	periods	of	time.	Requests	for	changes	in	limits	are evaluated	 after	 giving	 consideration	 to	 their	 impact	 on	 our	 key	 metrics. Compliance	with	limits	is	monitored	by	our	revenue-producing	units	and Treasury,	as	well	as	our	independent	risk	oversight	and	control	functions.

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

Scenario	Analyses.	We	conduct	various	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"	for	further	information	about	these	scenario analyses.	 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	our	assets	and	better	enables	investors	to assess	the	liquidity	of	our	assets.

The	table	below	presents	our	balance	sheet	allocation.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| GCLA,\tsegregated\tassets\tand\tother | \t\t$313,138 | \t$285,270 |
| Secured\tclient\tfinancing | 145,232 | 164,123 |
| Inventory | 204,584 | 216,883 |
| Secured\tfinancing\tagreements | 61,632 | 64,991 |
| Receivables | 42,006 | 36,750 |
| Institutional\tClient\tServices | 308,222 | 318,624 |
| Public\tequity | 1,445 | 2,072 |
| Private\tequity | 19,985 | 20,253 |
| Total\tequity | 21,430 | 22,325 |
| Loans\treceivable | 80,590 | 65,933 |
| Loans,\tat\tfair\tvalue | 13,416 | 14,877 |
| Total\tloans | 94,006 | 80,810 |
| Debt\tsecurities | 11,215 | 8,797 |
| Other | 7,913 | 8,481 |
| Investing\t&amp;\tLending | 134,564 | 120,413 |
| Total\tinventory\tand\trelated\tassets | 442,786 | 439,037 |
| Other\tassets | 30,640 | 28,346 |
| Total\tassets | \t\t$931,796 | \t$916,776 |

The	following	is	a	description	of	the	captions	in	the	table	above:

# •	Global	Core	Liquid	Assets	(GCLA),	Segregated	Assets	and

Other.	We	maintain	liquidity	to	meet	a	broad	range	of	potential	cash outflows	 and	 collateral	 needs	 in	 a	 stressed	 environment.	 See	 "Risk Management	—	Liquidity	Risk	Management"	for	information	about	the composition	 and	 sizing	 of	 our	 GCLA.	 We	 also	 segregate	 cash	 and securities	 for	 regulatory	 and	 other	 purposes	 related	 to	 client	 activity. Securities	 are	 segregated	 from	 our	 own	 inventory,	 as	 well	 as	 from collateral	obtained	through	securities	borrowed	or	securities	purchased under	agreements	to	resell	(resale	agreements).	In	addition,	we	maintain other	unrestricted	operating	cash	balances,	primarily	for	use	in	specific currencies,	 entities	 or	 jurisdictions	 where	 we	 do	 not	 have	 immediate access	to	parent	company	liquidity.

•	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.	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.

•	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	or	use	our own	inventory	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.

•	Investing	 &	 Lending.	 We invest	 in	 and	 originate	 loans	 to	 provide financing	to	clients.	These	investments	and	loans	are	typically	longer-term in	nature.	We	make	investments,	through	our	Merchant	Banking	business and	our	Special	Situations	Group,	in	debt	securities,	loans	and	public	and private	equity.	We	also	originate	secured	and	unsecured	loans	through	our digital	platforms.	Other	Investing	&	Lending	primarily	includes	customer and	other	receivables.

Equity.	We	make	equity	investments	in	corporate	and	real	estate	entities. As	of	December	2018,	30%	of	total	equity	was	in	investments	made	in 2011	or	earlier,	23%	was	in	investments	made	during	2012	through	2014, and	47%	was	in	investments	made	since	the	beginning	of	2015.

The	table	below	presents	equity	by	type	and	region.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Equity\tType |  |  |
| Corporate | \t\t$17,262 | \t$18,194 |
| Real\tEstate | 4,168 | 4,131 |
| Total | \t\t$21,430 | \t$22,325 |
| Region |  |  |
| Americas | 53% | 54% |
| Europe,\tMiddle\tEast\tand\tAfrica | 16% | 18% |
| Asia | 31% | 28% |
| Total | 100% | 100% |

Loans.	The	table	below	presents	loans	by	type	and	region.

|  | Loans | Loans,	at |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | Receivable | Fair\tValue | Total |
| As\tof\tDecember\t2018 |  |  |  |
| Loan\tType |  |  |  |
| Corporate\tloans | $37,283 | \t$\t\t2,819 | \t$40,102 |
| PWM\tloans | 17,219 | 7,250 | 24,469 |
| Commercial\treal\testate\tloans | 11,441 | 1,718 | 13,159 |
| Residential\treal\testate\tloans | 7,284 | 973 | 8,257 |
| Consumer\tloans | 4,536 | – | 4,536 |
| Other\tloans | 3,893 | 656 | 4,549 |
| Allowance\tfor\tloan\tlosses | (1,066) | – | (1,066) |
| Total | $80,590 | \t$13,416 | \t$94,006 |
| Region |  |  |  |
| Americas | 67% | 11% | 78% |
| Europe,\tMiddle\tEast\tand\tAfrica | 16% | 2% | 18% |
| Asia | 3% | 1% | 4% |
| Total | 86% | 14% | 100% |
| As\tof\tDecember\t2017 |  |  |  |
| Loan\tType |  |  |  |
| Corporate\tloans | $30,749 | \t$\t\t3,924 | \t$34,673 |
| PWM\tloans | 16,591 | 7,102 | 23,693 |
| Commercial\treal\testate\tloans | 7,987 | 1,825 | 9,812 |
| Residential\treal\testate\tloans | 6,234 | 1,043 | 7,277 |
| Consumer\tloans | 1,912 | – | 1,912 |
| Other\tloans | 3,263 | 983 | 4,246 |
| Allowance\tfor\tloan\tlosses | (803) | – | (803) |
| Total | $65,933 | \t$14,877 | \t$80,810 |
| Region |  |  |  |
| Americas | 64% | 13% | 77% |
| Europe,\tMiddle\tEast\tand\tAfrica | 14% | 4% | 18% |
| Asia | 4% | 1% | 5% |
| Total | 82% | 18% | 100% |

•	As	of	December	2018,	corporate	loans	included	$15.50	billion	of	loans relating	to	our	relationship	lending	and	investment	banking	activities, $6.99 billion	 relating	 to	 collateralized	 inventory	 financing	 and	 the remainder	 of	 the	 loans	 related	 to	 other	 corporate	 lending	 activities, including	middle	market	lending.	As	of	December	2017,	corporate	loans included	$11.96	billion	of	loans	relating	to	our	relationship	lending	and investment	 banking	 activities,	 $5.49	 billion	 relating	 to	 collateralized inventory	 financing	 and	 the	 remainder	 of	 the	 loans	 related	 to	 other corporate	lending	activities,	including	middle	market	lending.

•	Approximately 85% of	 total	 loans were secured as of both December	2018	and	December	2017.

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

•	Other	 Assets.	 Other assets	 are	 generally	 less	 liquid,	 nonfinancial assets,	 including	 property,	 leasehold	 improvements	 and	 equipment, goodwill	and	identifiable	intangible	assets,	income	tax-related	receivables and	miscellaneous	receivables.	Other	assets	included	$13.21	billion	as	of December	 2018	 and $9.42 billion	 as	 of	 December	 2017,	 held	 by consolidated	 investment	 entities	 (CIEs)	 in	 connection	 with	 our Investing	&	Lending	segment	activities.	Substantially	all	of	such	assets relate	to	CIEs	engaged	in	real	estate	investment	activities.	These	entities were	 funded	 with	 liabilities	 of	 approximately $6 billion	 as	 of December	2018	and	$4	billion	as	of	December	2017.	Substantially	all such	liabilities	were	nonrecourse,	thereby	reducing	our	equity	at	risk.

The	table	below	presents	the	reconciliation	of	our	balance	sheet	allocation	to our	U.S.	GAAP	balance	sheet.

|  | Segregated | Secured | Institutional | Investing |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Assets | Client | Client | &amp; |  |
| $\tin\tmillions | and\tOther | Financing | Services | Lending | Total |
| As\tof\tDecember\t2018 |  |  |  |  |  |
| Cash\tand\tcash |  |  |  |  |  |
| equivalents | $130,547\t\t\t $\t\t\t\t\t\t\t\t\t\t\t– | $130,547\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\t\t\t\t–\t\t\t $130,547 | $\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 $130,547 | $\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 $130,547 |
| Resale\tagreements | 87,022 | 32,389 | 19,808 | 39 | 139,258 |
| Securities\tborrowed | 10,382 | 83,079 | 41,824 | – | 135,285 |
| Loans\treceivable | – | – | – | 80,590 | 80,590 |
| Customer\tand |  |  |  |  |  |
| other\treceivables | – | 29,764 | 42,006 | 7,545 | 79,315 |
| Financial\tinstruments |  |  |  |  |  |
| owned | 85,187 | – | 204,584 | 46,390 | 336,161 |
| Subtotal | $313,138\t\t\t $145,232 | $313,138\t\t\t $145,232 | $308,222\t\t\t $134,564\t\t\t $901,156 | $308,222\t\t\t $134,564\t\t\t $901,156 | $308,222\t\t\t $134,564\t\t\t $901,156 |
| Other\tassets |  |  |  |  | 30,640 |
| Total\tassets |  |  |  | \t\t\t $931,796 | \t\t\t $931,796 |
| As\tof\tDecember\t2017 |  |  |  |  |  |
| Cash\tand\tcash |  |  |  |  |  |
| equivalents | $110,051\t\t\t $\t\t\t\t\t\t\t\t\t\t\t– | $110,051\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\t\t\t\t–\t\t\t $110,051 | $\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 $110,051 | $\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 $110,051 |
| Resale\tagreements | 73,277 | 26,202 | 20,931 | 412 | 120,822 |
| Securities\tborrowed | 49,242 | 97,546 | 44,060 | – | 190,848 |
| Loans\treceivable | – | – | – | 65,933 | 65,933 |
| Customer\tand |  |  |  |  |  |
| other\treceivables | – | 40,375 | 36,750 | 7,663 | 84,788 |
| Financial\tinstruments\nowned | 52,700 | – | 216,883 | 46,405 | 315,988 |
| Subtotal\nOther\tassets | $285,270\t\t\t $164,123 | $285,270\t\t\t $164,123 | $318,624\t\t\t $120,413\t\t\t $888,430 | $318,624\t\t\t $120,413\t\t\t $888,430 | 28,346 |
| Total\tassets |  |  |  | \t\t\t $916,776 | \t\t\t $916,776 |

•	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,	 segregated	 assets	 and	 other,	 secured	 client financing	and	other	assets.

•	See	 "Balance	 Sheet	 Analysis	 and	 Metrics"	 for	 explanations	 on the changes	in	our	balance	sheet	from	December	2017	to	December	2018.

# Balance	Sheet	Analysis	and	Metrics

As	 of	 December	 2018,	 total	 assets	 in	 our	 consolidated	 statements	 of financial	 condition	 were	 $931.80	 billion,	 an	 increase	 of	 $15.02	 billion from	December	2017,	reflecting	increases	in	cash	and	cash	equivalents	of $20.50	billion,	financial	instruments	owned	of	$20.17	billion,	and	loans receivable	 of $14.66 billion,	 partially	 offset	 by	 a	 net	 decrease	 in collateralized	agreements	of	$37.13	billion.	The	increase	in	cash	and	cash equivalents	reflected	the	impact	of	our	and	clients'	activities.	The	increase in	financial	instruments	owned	primarily	reflected	higher	client	activity	in government	and	agency	obligations,	partially	offset	by	lower	activity	in equity	securities	by	us	and	our	clients.	The	increase	in	loans	receivable primarily	 reflected	 an	 increase	 in	 corporate	 and	 commercial	 real	 estate loans.	The	net	decrease	in	collateralized	agreements	reflected	the	impact	of our	and	clients'	activities.

As	of	December	2018,	total	liabilities	in	our	consolidated	statements	of financial	condition	were	$841.61	billion,	an	increase	of	$7.08	billion	from December	2017,	primarily	reflecting	increases	in	deposits	of	$19.65	billion and	unsecured	long-term	borrowings	of	$6.46	billion,	partially	offset	by decreases	in	collateralized	financings	of	$12.34	billion	and	unsecured	short term	 borrowings	 of $6.42 billion.	 The	 increase	 in	 deposits	 primarily reflected	 an	 increase	 in	 consumer	 deposits.	 The	 increase	 in	 unsecured long-term	 borrowings	 was	 primarily	 due	 to	 net	 new	 issuances.	 The decrease	 in	 collateralized	 financings	 reflected	 the	 impact	 of	 our	 and clients'	activities.	The	decrease	in	unsecured	short	term	borrowings	was primarily	due	to	maturities	and	early	retirements.

Our	 total	 repurchase	 agreements,	 accounted	 for	 as	 collateralized financings,	were	$78.72	billion	as	of	December	2018	and	$84.72	billion	as of	December	2017,	which	were	1%	higher	as	of	December	2018	and	2% lower	as	of	December	2017	than	the	daily	average	amount	of	repurchase agreements	 over	 the	 respective	 quarters,	 and 12% lower	 as	 of December	2018	and	1%	lower	as	of	December	2017	than	the	daily	average amount	 of	 repurchase	 agreements	 over	 the	 respective	 years.	 As	 of December	2018,	the	increase	in	our	repurchase	agreements	relative	to	the daily	 average	 during	 the	 quarter,	 and	 decrease	 in	 our	 repurchase agreements	 relative	 to	 the	 daily	 average	 during	 the	 year,	 resulted	 from client	and	our	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	 liquid	 government	 and	 agency	 obligations,	 through collateralized	financing	activities.

The	 table	 below	 presents information about the	 balance sheet and the leverage	ratios.

•	The	leverage	ratio	equals	total	assets	divided	by	total	shareholders'	equity and	measures	the	proportion	of	equity	and	debt	we	use	to	finance	assets. This	ratio	is	different	from	the	leverage	ratios	included	in	Note	20	to	the consolidated	financial	statements.

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

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

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions,\texcept\tper\tshare\tamounts | 2018 | 2017 |
| Total\tshareholders'\tequity | \t$\t90,185 | \t$\t82,243 |
| Preferred\tstock | (11,203) | (11,853) |
| Common\tshareholders'\tequity | 78,982 | 70,390 |
| Goodwill\tand\tidentifiable\tintangible\tassets | (4,082) | (4,038) |
| Tangible\tcommon\tshareholders'\tequity | \t$\t74,900 | \t$\t66,352 |
| Book\tvalue\tper\tcommon\tshare | \t$\t207.36 | \t$\t181.00 |
| Tangible\tbook\tvalue\tper\tcommon\tshare | \t$\t196.64 | \t$\t170.61 |

•	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.

•	Book	value	per	common	share	and	tangible	book	value	per	common	share are	 based	 on	 common	 shares	 outstanding	 and	 restricted	 stock	 units granted	to	employees	with	no	future	service	requirements	(collectively, basic	shares)	of	380.9	million	as	of	December	2018	and	388.9	million	as of	 December	 2017.	We	 believe	 that	 tangible	 book	 value	 per	 common share	(tangible	common	shareholders'	equity	divided	by	basic	shares)	is meaningful	because	it	is	a	measure	that	we	and	investors	use	to	assess capital	adequacy.	Tangible	book	value	per	common	share	is	a	non-GAAP measure	and	may	not	be	comparable	to	similar	non-GAAP	measures	used by	other	companies.

# Funding	Sources

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

The	table	below	presents	information	about	our	funding	sources.

| $	in	millions | 2018 |  | 2017 |  |
| :--- | :--- | :--- | :--- | :--- |
| Deposits | \t\t$158,257 | 25% | \t$138,604 | 23% |
| Collateralized\tfinancings: |  |  |  |  |
| Repurchase\tagreements | 78,723 | 13% | 84,718 | 14% |
| Securities\tloaned | 11,808 | 2% | 14,793 | 2% |
| Other\tsecured\tfinancings | 21,433 | 3% | 24,788 | 4% |
| Total\tcollateralized\tfinancings | 111,964 | 18% | 124,299 | 20% |
| Unsecured\tshort-term\tborrowings | 40,502 | 7% | 46,922 | 8% |
| Unsecured\tlong-term\tborrowings | 224,149 | 36% | 217,687 | 36% |
| Total\tshareholders'\tequity | 90,185 | 14% | 82,243 | 13% |
| Total\tfunding\tsources | \t\t$625,057 | \t100% | \t$609,755 | \t100% |

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

Deposits.	Our	deposits	provide	us	with	a	diversified	source	of	funding and	reduce	our	reliance	on	wholesale	funding.	A	growing	portion	of	our deposit	base	consists	of	consumer	deposits.	Deposits	are	primarily	used	to finance	lending	activity,	other	inventory	and	a	portion	of	our	GCLA.	We raise	 deposits,	 including	 savings,	 demand	 and	 time	 deposits,	 through internal	 and	 third-party	 broker-dealers,	 and	 from	 consumers	 and institutional	clients,	and	primarily	through	Goldman	Sachs	Bank	USA	(GS Bank	 USA)	 and	 Goldman	 Sachs	 International	 Bank	 (GSIB).	 In September	2018,	we	launched	Marcus:	by	Goldman	Sachs	in	the	U.K.	to accept	deposits.	See	Note	14	to	the	consolidated	financial	statements	for further	information	about	our	deposits.

Secured	 Funding.	 We fund	 a	 significant	 amount	 of	 inventory	 on	 a secured	 basis.	 Secured	 funding	 includes	 collateralized	 financings	 in	 the consolidated	 statements	 of	 financial	 condition.	 We	 may	 also	 pledge	 our inventory	as	collateral	for	securities	borrowed	under	a	securities	 lending agreement.	We	also	use	our	own	inventory	to	cover	transactions	in	which	we or	our	clients	have	sold	securities	that	have	not	yet	been	purchased.	Secured funding	 is	 less	 sensitive	 to	 changes	 in	 our	 credit	 quality	 than	 unsecured funding,	due	 to	our	posting	of	collateral	 to	our	 lenders.	Nonetheless,	we continually	analyze	the	refinancing	risk	of	our	secured	funding	activities, taking	 into	 account	 trade	 tenors,	 maturity	 profiles,	 counterparty concentrations,	collateral	eligibility	and	counterparty	roll	over	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.	Our	secured	funding, excluding	 funding	 collateralized	 by	 liquid	 government	 and	 agency obligations,	is	primarily	executed	for	tenors	of	one	month	or	greater	and	is primarily	 executed	 through	 term	 repurchase	 agreements	 and	 securities loaned	contracts.

The	 weighted	 average	 maturity	 of	 our	 secured	 funding	 included	 in collateralized	 financings	 in	 the	 consolidated	 statements	 of	 financial condition,	 excluding	 funding	 that	 can	 only	 be	 collateralized	 by	 liquid government	 and	 agency	 obligations,	 exceeded 120 days	 as	 of December	2018.

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,	equity	securities	and	emerging	market	securities. Assets	that	are	classified	in	level	3	of	the	fair	value	hierarchy	are	generally funded	 on	 an	 unsecured	 basis.	 See	 Notes	 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.

We	 also	 raise	 financing	 through	 other	 types	 of	 collateralized	 financings, such	as	secured	loans	and	notes.	GS	Bank	USA	has	access	to	funding	from the	 Federal	 Home	 Loan	 Bank.	 Our	 outstanding	 borrowings	 against	 the Federal	 Home	 Loan	 Bank	 were	 $528	 million	 as	 of	 December	 2018	 and $3.40	billion	as	of	December	2017.

GS	Bank	USA	also	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	 Short-Term	 Borrowings.	 A significant	 portion	 of	 our unsecured	 short-term	 borrowings	 was	 originally	 long-term	 debt	 that	 is scheduled	 to	 mature	 within	 one	 year	 of	 the	 reporting	 date.	 We	 use unsecured	 short-term	 borrowings,	 including	 U.S.	 and	non-U.S.	 hybrid financial	 instruments,	 to	 finance	 liquid	 assets	 and	 for	 other	 cash management	purposes.	In	light	of	regulatory	developments,	Group	Inc.	no longer	issues	debt	with	an	original	maturity	of	less	than	one	year,	other than	 to	 its	 subsidiaries.	 See	 Note 15 to	 the	 consolidated	 financial statements	 for	 further	 information	 about	 our	 unsecured	 short-term borrowings.

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.	 Unsecured	 long-term	 borrowings, including	structured	notes,	are	raised	through	syndicated	U.S.	registered offerings,	 U.S.	 registered	 and	 Rule	 144A	 medium-term	 note	 programs, offshore	medium-term	note	offerings	and	other	debt	offerings.	We	issue	in different	tenors,	currencies	and	products	to	maximize	the	diversification	of our	investor	base.

The	 table	below	presents	 the	quarterly	unsecured long-term	borrowings maturity	profile	as	of	December	2018.

| $	in	millions | First<br>Quarter | Second<br>Quarter | Third<br>Quarter | Fourth<br>Quarter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| 2020 | \t\t$\t\t6,740 | \t$9,744 | \t$6,308 | \t$6,579 | \t$\t\t29,371 |
| 2021 | \t\t$\t\t3,288 | \t$4,162 | \t$7,790 | \t$7,724 | 22,964 |
| 2022 | \t\t$\t\t6,151 | \t$6,067 | \t$5,365 | \t$5,876 | 23,459 |
| 2023 | \t\t$10,076 | \t$4,958 | \t$8,343 | \t$4,495 | 27,872 |
| 2024\t-\tthereafter |  |  |  |  | 120,483 |
| Total |  |  |  |  | \t$224,149 |

The	weighted	average	maturity	of	our	unsecured	long-term	borrowings	as of	December	2018	was	approximately	eight	years.	To	mitigate	refinancing risk,	we	seek	to	limit	the	principal	amount	of	debt	maturing	over	the	course of	any	monthly,	quarterly	or	annual	time	horizon.	We	enter	into	interest rate	swaps	to	convert	a	portion	of	our	unsecured	long-term	borrowings	into floating-rate	 obligations	 to	 manage	 our	 exposure	 to	 interest	 rates.	 See Note	16	to	the	consolidated	financial	statements	for	further	information about	our	unsecured	long-term	borrowings.

Shareholders'	Equity.	Shareholders'	equity	is	a	stable	and	perpetual source	of	funding.	See	Note	19	to	the	consolidated	financial	statements	for further	information	about	our	shareholders'	equity.

# Equity	Capital	Management	and	Regulatory	Capital

Capital	 adequacy	 is	 of	 critical	 importance	 to	 us.	 We	 have	 in	 place	 a comprehensive	 capital	 management	 policy	 that	 provides	 a	 framework, defines	objectives	and	establishes	guidelines	to	assist	us	in	maintaining	the appropriate	level	and	composition	of	capital	in	both	business-as-usual	and stressed	conditions.

# Equity	Capital	Management

We	determine	the	appropriate	amount	and	composition	of	our	equity	capital by	considering	multiple	factors,	including	our	current	and	future	regulatory capital	requirements,	the	results	of	our	capital	planning	and	stress	testing process,	the	results	of	resolution	capital	models	and	other	factors,	such	as rating	 agency	 guidelines,	 subsidiary	 capital	 requirements,	 the	 business environment	and	conditions	in	the	financial	markets.

We	manage	our	capital	requirements	and	 the	 levels	of	our	capital	usage principally	by	setting	limits	on	balance	sheet	assets	and/or	limits	on	risk,	in each	case	at	both	the	firmwide	and	business	levels.

We	 principally	 manage	 the	 level	 and	 composition	 of	 our	 equity	 capital through	 issuances	 and	 repurchases	 of	 our	 common	 stock.	We	 may	 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	 Board	 of	 Governors	 of	 the	 Federal Reserve	System	(FRB)	does	not	object	to	such	capital	action.	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. 	As	part	of	capital planning,	we	project	sources	and	uses	of	capital	given	a	range	of	business environments,	including	stressed	conditions.	Our	stress	testing	process	is designed	 to	 identify	 and	 measure	 material	 risks	 associated	 with	 our business	activities,	including	market	risk,	credit	risk	and	operational	risk, as	well	as	our	ability	to	generate	revenues.

The	following	is	a	description	of	our	capital	planning	and	stress	testing process:

•	Capital	 Planning.	 Our capital	 planning	 process	 incorporates	 an internal	capital	adequacy	assessment	with	the	objective	of	ensuring	that we	are	appropriately	capitalized	relative	to	the	risks	in	our	businesses. We	incorporate	stress	scenarios	into	our	capital	planning	process	with	a goal	 of	 holding	 sufficient	 capital	 to	 ensure	 we	 remain	 adequately capitalized	after	experiencing	a	severe	stress	event.	Our	assessment	of capital	adequacy	is	viewed	in	tandem	with	our	assessment	of	liquidity adequacy	and	is	integrated	into	our	overall	risk	management	structure, governance	and	policy	framework.

Our	capital	planning	process	also	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 considering	internal	and	external	actual	loss	experience.	Backtesting	for market	risk	and	credit	risk	is	used	to	gauge	the	effectiveness	of	models	at capturing	and	measuring	relevant	risks.

•	Stress	Testing.	Our	stress	tests	incorporate	our	internally	designed stress	 scenarios,	 including	 our	 internally	 developed	 severely	 adverse scenario,	and	those	required	under	CCAR	and	DFAST,	and	are	designed to	 capture	 our	 specific	 vulnerabilities	 and	 risks.	 We	 provide	 further information	about	our	stress	test	processes	and	a	summary	of	the	results on	our	website	as	described	in	"Business	—	Available	Information"	in Part	I,	Item	1	of	this	Form	10-K.

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

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

In	addition,	the	DFAST	rules	currently	require	us	to	conduct	stress	tests	on	a semi-annual	basis	and	publish	a	summary	of	results.	The	FRB	also	conducts its	own	annual	stress	tests	and	publishes	a	summary	of	certain	results.

With	respect	to	our	2018	CCAR	submission,	the	FRB	informed	us	that	it	did not	object	to	our	capital	plan,	conditioned	upon	us	returning	not	more	than $6.30	billion	of	capital	from	the	third	quarter	of	2018	through	the	second quarter	 of	 2019.	 The	 capital	 plan	 provides	 for	 up	 to $5.00 billion	 in repurchases	of	outstanding	common	stock	and	$1.30	billion	in	total	common stock	dividends,	 including	an	 increase	 in	our	common	stock	dividend	of $0.05	from	$0.80	to	$0.85	per	share	in	the	second	quarter	of	2019,	subject	to the	approval	by	the	Board	of	Directors	of	Group	Inc.	(Board).	The	amount and	timing	of	our	capital	actions	will	be	based	on,	among	other	things,	our current	and	projected	capital	position,	and	capital	deployment	opportunities. We	published	a	summary	of	our	annual	DFAST	results	in	June	2018.	See "Business	—	Available	Information"	in	Part	I,	Item	1	of	this	Form	10-K.

In	October	2018,	we	submitted	our	semi-annual	DFAST	results	to	the	FRB and	published	a	summary	of	the	results	of	our	internally	developed	severely adverse	scenario.	See	"Business	—	Available	Information"	in	Part	I,	Item	1 of	this	Form	10-K.

In	addition,	GS	Bank	USA	submitted	its	2018	annual	DFAST	results	to	the FRB	in	April	2018	and	published	a	summary	of	its	annual	DFAST	results	in June	 2018.	 GS	 Bank	 USA	 will	 not	 be	 required	 to	 conduct	 the	 annual company-run	stress	test	in	2019.	See	"Business	—	Available	Information"	in Part	I,	Item	1	of	this	Form	10-K.

Goldman	Sachs	International	(GSI)	and	GSIB	also	have	their	own	capital planning	and	stress	testing	process,	which	incorporates	internally	designed stress	tests	and	those	required	under	the	Prudential	Regulation	Authority's (PRA)	Internal	Capital	Adequacy	Assessment	Process.

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

Capital	Attribution.	We	 assess	 each	 of	 our	 businesses'	 capital	 usage based	 upon	 our	 internal	 assessment	 of	 risks,	 which	 incorporates	 an attribution	 of	 all	 of	 our	 relevant	 regulatory	 capital	 requirements.	These regulatory	capital	requirements	are	allocated	using	our	attributed	equity framework,	 which	 takes	 into	 consideration	 our	 most	 binding	 capital constraints.	Our	most	binding	capital	constraint	is	based	on	the	results	of the	FRB's	annual	stress	test	scenarios	which	include	the	Standardized	risk- based	capital	and	leverage	ratios.

We	also	attribute	risk-weighted	assets	(RWAs)	to	our	business	segments. As	 of	 December	 2018,	 approximately 60% of	 RWAs	 calculated	 in accordance	with	the	Standardized	Capital	Rules	and	approximately	50%	of RWAs	calculated	in	accordance	with	the	Basel	III	Advanced	Rules,	were attributed	to	our	Institutional	Client	Services	segment	and	substantially	all of	 the	 remaining	 RWAs	 were	 attributed	 to	 our	 Investing	 &	 Lending segment.	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.

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	 and	 our	 capital	 plan submitted	to	the	FRB	as	part	of	CCAR.	The	amounts	and	timing	of	the repurchases	may	also	be	influenced	by	general	market	conditions	and	the prevailing	price	and	trading	volumes	of	our	common	stock.

As	of	December	2018,	the	remaining	share	authorization	under	our	existing repurchase	program	was	33.7	million	shares;	however,	we	are	only	permitted to	 make	 repurchases	 to	 the	 extent	 that	 such	 repurchases	 have	 not	 been objected	 to	 by	 the	 FRB.	 See	 "Market	 for	 Registrant's	 Common	 Equity, Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities"	in Part	II,	Item	5	of	this	Form	10-K	and	Note	19	to	the	consolidated	financial statements	for	further	information	about	our	share	repurchase	program,	and see	 above	 for	 information	 about	 our	 capital	 planning	 and	 stress	 testing process.

Resolution	Capital	Models.	In	connection	with	our	resolution	planning efforts,	we	have	established	a	Resolution	Capital	Adequacy	and	Positioning framework,	 which	 is	 designed	 to	 ensure	 that	 our	 major	 subsidiaries	 (GS Bank	USA,	Goldman	Sachs	&	Co.	LLC	(GS&Co.),	GSI,	GSIB,	Goldman Sachs	Japan	Co.,	Ltd.	(GSJCL),	Goldman	Sachs	Asset	Management,	L.P. and	 Goldman	 Sachs	 Asset	 Management	 International	 (GSAMI))	 have access	 to	 sufficient	 loss-absorbing	 capacity	 (in	 the	 form	 of	 equity, subordinated	debt	and	unsecured	senior	debt)	so	that	they	are	able	to	wind- down	 following	 a	 Group	 Inc.	 bankruptcy	 filing	 in	 accordance	 with	 our preferred	resolution	strategy.

In	addition,	we	have	established	a	triggers	and	alerts	framework,	which	is designed	to	provide	the	Board	with	information	needed	to	make	an	informed decision	on	whether	and	when	 to	commence	bankruptcy	proceedings	for Group	Inc.

# Rating	Agency	Guidelines

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

The	level	and	composition	of	our	equity	capital	are	among	the	many	factors considered	 in	 determining	 our	 credit	 ratings.	 Each	 agency	 has	 its	 own definition	 of	 eligible	 capital	 and	 methodology	 for	 evaluating	 capital adequacy,	and	assessments	are	generally	based	on	a	combination	of	factors rather	than	a	single	calculation.	See	"Risk	Management	—	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

We	are	subject	to	consolidated	regulatory	capital	requirements	which	are calculated	 in	 accordance	 with	 the	 regulations	 of	 the	 FRB	 (Capital Framework).	 Under	 the	 Capital	 Framework,	 we	 are	 an	 "Advanced approach"	 banking	 organization	 and	 have	 been	 designated	 as	 a	 global systemically	important	bank	(G-SIB).

The	Capital	Framework	includes	risk-based	capital	buffers	that	phased	in ratably	and	became	fully	effective	on	January	1,	2019.	The	minimum	risk- based	capital	ratios	applicable	to	us	as	of	January	2019	reflected	the	fully phased-in	 capital	 conservation	 buffer	 of	 2.5%	 and	 the	 countercyclical capital	 buffer,	 if	 any,	 determined	 by	 the	 FRB.	 In	 addition,	 the	 fully phased-in	G-SIB	buffer	applicable	to	us	as	of	January	2019	is	2.5%	based on	 2017	 financial	 data.	 The	G-SIB	 buffer	 applicable	 to	 us	 as	 of January	 2020	 is	 2.5%	 based	 on	 2018	 financial	 data.	 The	G-SIB	 and countercyclical	buffers	in	the	future	may	differ	due	to	additional	guidance from	our	regulators	and/or	positional	changes.

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

# Subsidiary	Capital	Requirements

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

Bank	 Subsidiaries.	 GS	 Bank	 USA is	 our	 primary	 U.S.	 banking subsidiary	and	GSIB	is	our	primary	non-U.S.	banking	subsidiary.	These entities	are	subject	to	regulatory	capital	requirements.

See	 Note 20 to	 the	 consolidated	 financial	 statements	 for	 further information	 about	 the	 regulatory	 capital	 requirements	 of	 our	 bank subsidiaries.

# U.S.	Regulated	Broker-Dealer	Subsidiaries.	GS&Co.	is	our	primary

U.S.	regulated	broker-dealer	subsidiary	and	is	subject	to	regulatory	capital requirements,	 including	 those	 imposed	 by	 the	 SEC	 and	 the	 Financial Industry	Regulatory	Authority,	Inc.	In	addition,	GS&Co.	is	a	registered futures	 commission	 merchant	 and	 is	 subject	 to	 regulatory	 capital requirements	imposed	by	the	CFTC,	the	Chicago	Mercantile	Exchange	and the	National	Futures	Association.	Rule	15c3-1	of	the	SEC	and	Rule	1.17	of the	CFTC	specify	uniform	minimum	net	capital	requirements,	as	defined, for	their	registrants,	and	also	effectively	require	that	a	significant	part	of the	 registrants'	 assets	 be	 kept	 in	 relatively	 liquid	 form.	 GS&Co.	 has elected	to	calculate	its	minimum	capital	requirements	in	accordance	with the	"Alternative	Net	Capital	Requirement"	as	permitted	by	Rule	15c3-1.

GS&Co.	 had	 regulatory	 net	 capital,	 as	 defined	 by	Rule	 15c3-1,	 of $17.45 billion	 as	 of	 December	 2018	 and $15.57 billion	 as	 of December	2017,	which	exceeded	the	amount	required	by	$15.00	billion	as of	December	2018	and	$13.15	billion	as	of	December	2017.	In	addition	to its	alternative	minimum	net	capital	requirements,	GS&Co.	is	also	required	to hold	tentative	net	capital	in	excess	of	$1	billion	and	net	capital	in	excess	of $500	million in	accordance	with	 the	market	and	credit	risk	standards	of Appendix	E	of	Rule	15c3-1.	GS&Co.	is	also	required	to	notify	the	SEC	in the	event	 that	 its	 tentative	net	capital	 is	 less	 than	$5	billion.	As	of	both December	2018	and	December	2017,	GS&Co.	had	tentative	net	capital	and net	capital	in	excess	of	both	the	minimum	and	the	notification	requirements.

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

GSI,	 our	 U.K.	 broker-dealer,	 is	 regulated	 by	 the	 PRA	 and	 the	 Financial Conduct	Authority	(FCA).	GSI	is	subject	to	the	capital	framework	for	E.U.- regulated	 financial	 institutions	 prescribed	 in	 the	 E.U.	 Fourth	 Capital Requirements	 Directive	 and	 the	 E.U.	 Capital	 Requirements	 Regulation (CRR).	These	capital	regulations	are	largely	based	on	Basel	III.

The	table	below	presents	information	about	GSI's	risk-based	capital	ratios and	minimum	ratios.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Risk-based\tcapital\tand\tRWAs |  |  |
| CET1 | \t\t$\t\t23,956 | \t$\t\t24,871 |
| Tier\t1\tcapital | \t\t$\t\t32,256 | \t$\t\t30,671 |
| Tier\t2\tcapital | \t\t$\t\t\t\t5,377 | \t$\t\t\t\t5,377 |
| Total\tcapital | \t\t$\t\t37,633 | \t$\t\t36,048 |
| RWAs | \t\t$200,089 | \t$225,942 |
| Risk-based\tcapital\tratios |  |  |
| CET1\tratio | 12.0% | 11.0% |
| Tier\t1\tcapital\tratio | 16.1% | 13.6% |
| Total\tcapital\tratio | 18.8% | 16.0% |
| Risk-based\tminimum\tratios |  |  |
| CET1\tratio | 8.1% | 7.2% |
| Tier\t1\tcapital\tratio | 10.1% | 9.1% |
| Total\tcapital\tratio | 12.7% | 11.8% |

•	CET1,	Tier	1	capital	and	Total	capital	as	of	December	2018	 included amounts	which	will	be	finalized	upon	the	issuance	of	GSI's	2018	annual audited	 financial	 statements	 and	 contributed	 approximately	 114	 basis points	to	the	risk-based	capital	ratios.

•	The	 minimum	 risk-based	 capital	 ratios	 incorporate	 capital	 guidance received	 from	 the	 PRA	 and	 could	 change	 in	 the	 future.	 GSI's	 future capital	requirements	may	also	be	impacted	by	developments	such	as	the introduction	of	risk-based	capital	buffers.

In	November	2016,	the	European	Commission	proposed	amendments	to the	 CRR	 to	 implement	 a	 3%	 minimum	 leverage	 ratio	 requirement	 for certain	E.U.	financial	institutions.	This	leverage	ratio	compares	the	CRR's definition	of	Tier	1	capital	to	a	measure	of	leverage	exposure,	defined	as the	sum	of	certain	assets	plus	certain	off-balance-sheet	exposures	(which include	 a	 measure	 of	 derivatives,	 securities	 financing	 transactions, commitments	and	guarantees),	less	Tier	1	capital	deductions.	Any	required minimum	leverage	ratio	is	expected	to	become	effective	for	GSI	no	earlier than	 January 1, 2021.	 GSI	 had	 a	 leverage	 ratio	 of 4.4% as	 of December	 2018	 and	 4.1%	 as	 of	 December	 2017.	 Tier	 1	 capital	 as	 of December	 2018	 included	 amounts	 which	 will	 be	 finalized	 upon	 the issuance	 of	 GSI's	 2018	 annual	 audited	 financial	 statements	 and	 these amounts	contributed	approximately	31	basis	points	to	the	leverage	ratio. This	leverage	ratio	is	based	on	our	current	interpretation	and	understanding of	this	rule	and	may	evolve	as	we	discuss	the	interpretation	and	application of	this	rule	with	GSI's	regulators.

GSJCL,	 our	 Japanese	 broker-dealer,	 is	 regulated	 by	 Japan's	 Financial Services	Agency.	GSJCL	and	certain	other	non-U.S.	subsidiaries	are	also subject	to	capital	adequacy	requirements	promulgated	by	authorities	of	the countries	 in	 which	 they	 operate.	 As	 of	 both	 December	 2018	 and December	 2017,	 these	 subsidiaries	 were	 in	 compliance	 with	 their	 local capital	adequacy	requirements.

# Regulatory	Matters	and	Other	Developments

# Regulatory	Matters

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	 regulators	 and	 policy	 makers worldwide.	Given	 that	many	of	 the	new	and	proposed	rules	are	highly complex,	the	full	impact	of	regulatory	reform	will	not	be	known	until	the rules	 are	 implemented	 and	 market	 practices	 develop	 under	 the	 final regulations.

See	 "Business	 —	 Regulation"	 in	 Part	 I,	 Item	 1	 of	 this	Form	 10-K	 for further	 information	 about	 the	 laws,	 rules	 and	 regulations	 and	 proposed laws,	rules	and	regulations	that	apply	to	us	and	our	operations.

Resolution	and	Recovery	Plans.	We	are	required	by	the	FRB	and	the FDIC	to	submit	a	periodic	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	FRB	 to	submit	a	periodic recovery	plan	that	outlines	the	steps	that	management	could	take	to	reduce risk,	maintain	sufficient	liquidity,	and	conserve	capital	in	times	of	prolonged stress.

In	December	2017,	the	FRB	and	the	FDIC	provided	feedback	on	our	2017 resolution	 plan	 and	 determined	 that	 it	 satisfactorily	 addressed	 the shortcomings	identified	in	our	prior	submissions.	The	FRB	and	the	FDIC did	not	identify	deficiencies	in	our	2017	resolution	plan,	but	the	FRB	and the	 FDIC	 did	 note	 one	 shortcoming	 that	 must	 be	 addressed	 in	 our	 next resolution	plan	submission.	Our	next	resolution	plan	is	due	on	July	1,	2019. In	December	2018,	the	FRB	and	FDIC	finalized	guidance	for	Resolution Plan	submissions	which	consolidated	or	superseded	all	prior	guidance.	See "Business	—	Available	Information"	in	Part	I,	Item	1	of	this	Form	10-K.

In	addition,	GS	Bank	USA	is	required	to	submit	periodic	resolution	plans	to the	 FDIC.	 GS	 Bank	 USA's	 2018	 resolution	 plan	 was	 submitted	 on June	28,	2018.	In	August	2018,	the	FDIC	extended	the	next	resolution	plan filing	deadline	to	no	sooner	than	July	1,	2020.

TLAC.	In	December	2016,	the	FRB	adopted	a	final	rule,	establishing	new TLAC	and	related	requirements	for	U.S.	BHCs	designated	as	G-SIBs.	The rule	became	effective	in	January	2019,	with	no	phase-in	period.	Failure	to comply	 with	 the	 TLAC	 requirements	 could	 result	 in	 restrictions	 being imposed	 by	 the	 FRB	 and	 could	 limit	 our	 ability	 to	 distribute	 capital, including	share	repurchases	and	dividend	payments,	and	 to	make	certain discretionary	compensation	payments.

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

| $	in	millions | TLAC	and	External<br>Long-Term	Debt |
| :--- | :--- |
| As\tof\tDecember\t2018 |  |
| TLAC | $\t\t\t254,836 |
| External\tlong-term\tdebt | $\t\t\t160,493 |
| RWAs | $\t\t\t558,111 |
| Leverage\texposure | $1,342,906 |
| TLAC\tto\tRWAs | 45.7% |
| TLAC\tto\tleverage\texposure | 19.0% |
| External\tlong-term\tdebt\tto\tRWAs | 28.8% |
| External\tlong-term\tdebt\tto\tleverage\texposure | 12.0% |
| As\tof\tJanuary\t2019 |  |
| Minimum\tTLAC\tto\tRWAs | 22.0% |
| Minimum\tTLAC\tto\tleverage\texposure | 9.5% |
| Minimum\texternal\tlong-term\tdebt\tto\tRWAs | 8.5% |
| Minimum\texternal\tlong-term\tdebt\tto\tleverage\texposure | 4.5% |

•	TLAC	 includes	 common	 and	 preferred	 stock,	 and	 eligible	 long-term debt	issued	by	Group	Inc.	Eligible	long-term	debt	represents	unsecured debt,	which	has	a	remaining	maturity	of	at	least	one	year	and	satisfies additional	requirements.

•	External	long-term	debt	consists	of	eligible	long-term	debt	subject	to	a haircut	if	it	is	due	to	be	paid	between	one	and	two	years.

•	RWAs	 represent	 Basel	 III	Advanced	 RWAs.	 In	 accordance	 with	 the TLAC	rules,	the	higher	of	Basel	III	Advanced	or	Standardized	RWAs are	used	in	the	calculation	of	TLAC	and	external	long-term	debt	ratios.

•	Leverage	exposure	consists	of	average	adjusted	total	assets	and	certain off-balance-sheet	exposures.

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

# Other	Developments

Brexit. In	 March	 2017,	 the	 U.K.	 government	 commenced	 the	 formal proceedings	to	end	the	U.K.'s	membership	in	the	E.U.	There	is	a	two	year window	during	which	the	terms	of	the	U.K.'s	exit	from	the	E.U.	may	be negotiated.	This	period	expires	on	March	29,	2019.

The	E.U.	and	the	U.K.	had	negotiated	a	withdrawal	agreement	which	both the	 U.K.	 and	 the	 E.U.	 Parliaments	 must	 ratify	 (the	 Withdrawal Agreement).	The	U.K.	Parliament	has	not	yet	approved	the	Withdrawal Agreement.	As	a	result,	there	is	a	possibility	that	the	U.K.	will	leave	the E.U.	on	March	29,	2019	without	any	transitional	arrangements	in	place and	firms	based	in	the	U.K.	will	lose	their	existing	access	arrangements	to the	E.U.	markets;	such	a	scenario	is	referred	to	as	a	"hard"	Brexit.

We	have	been	preparing	for	anticipated	outcomes,	including	a	hard	Brexit, with	the	goal	of	ensuring	that	we	maintain	access	to	E.U.	markets	and	are able	to	continue	to	provide	products	and	services	to	our	E.U.	clients.	In order	for	us	to	continue	to	serve	our	E.U.	clients,	clients	may	need	to	face an	entity	within	one	of	the	remaining	E.U.	member	states,	unless	national laws	 in	 the	 applicable	 member	 state	 permit	 cross-border	 services	 from non-E.U.	entities	(for	example,	based	on	specific	licenses	or	exemptions).

Our	plan	to	manage	a	hard	Brexit	scenario	involves	transition	of	certain activities	to	new	and/or	different	legal	entities;	working	with	clients	and counterparties	 to	redocument	 transactions	so	 they	face	one	of	our	E.U. legal	entities;	changes	to	our	infrastructure;	obtaining	and	developing	new real	estate;	and,	in	some	cases,	moving	our	people	to	offices	in	the	E.U.

In	a	hard	Brexit	scenario	or	as	otherwise	necessary,	our	plan	is	to	service our	E.U.	client	base	in	the	following	manner:

•	Our	German	bank	subsidiary,	Goldman	Sachs	Bank	Europe	SE	(GSBE), will	act	as	our	main	operating	subsidiary	 in	 the	E.U.	and	will	assume certain	 functions	 that	 can	 no	 longer	 be	 efficiently	 and	 effectively performed	by	our	U.K.	operating	subsidiaries,	including	GSI,	GSIB	and GSAMI.

•	Consistent	with	our	global	approach	of	being	closer	to	our	clients,	we	are also	setting	up	branches	of	GSBE	in	a	number	of	jurisdictions	in	the	E.U. to	 enable	 Investment	 Banking,	 Institutional	 Client	 Services	 and	 PWM investment	personnel	to	be	situated	in	our	offices	in	those	countries.

•	We	have	received	approval	from	the	German	financial	regulator,	BaFin, for	a	licensed	investment	firm,	Goldman	Sachs	Europe	SE,	which	will	be able	 to	conduct	certain	activities	(such	as	activities	related	 to	physical commodities	 and	 related	 products)	 that	 GSBE	 may	 be	 prevented	 from undertaking.

•	In	 order	 to	 service	 our	 Investment	 Management	 business,	 we	 have received	approval	from	the	Irish	Financial	Regulator,	the	Central	Bank	of Ireland,	 for	 a	 Collective	 Investment	 Fund	 and	 Alternative	 Investment Fund	Manager	in	Ireland,	to	replace	the	similar	existing	London-based Alternative	Investment	Fund	Manager,	which	will	lose	its	E.U.	passport post-Brexit.

•	A	 large	 portion	 of	 our	 Institutional	 Client	 Services	 and	 Investment Banking	clients	are	classified	as	professionals	or	eligible	counterparties	in specific	jurisdictions	and	may	choose	to	continue	being	serviced	by,	and to	continue	to	transact	with,	the	U.K.	service	providers	and	entities	under domestic	arrangements	provided	by	individual	member	states	(licenses	or exemptions).	We	expect	to	continue	providing	products	and	services	in this	 manner	 to	 the	 extent	 that	 clients	 prefer	 such	 coverage	 and	 it	 is available.	This	would	mean	those	clients	who	choose	to	do	so	in	certain jurisdictions	could	continue	to	face	GSI.

•	We	are	also	in	the	process	of	opening	accounts	to	enable	clients	to	transact with	GSBE	and/or	Goldman	Sachs	Europe	SE,	as	applicable.

•	The	internal	infrastructure	build-out	and	external	connectivity	to	Financial Market	 Infrastructure	 required	 for	 the	 new	 E.U.	 entities	 continues	 to progress,	with	substantial	elements	already	in	place.	GSBE	has	connected to	settlement	and	clearing	systems	and	is	testing	exchange	connectivity.

•	GSBE	has	been	assigned	a	credit	rating	of	A/F1	by	Fitch,	Inc.	(Fitch), A1/P-1	 by	 Moody's	 Investors	 Service	 (Moody's)	 and	A+/A-1	 by Standard	&	Poor's	Ratings	Services	(S&P),	which	are	consistent	with those	issued	to	GSI.

•	Headcount	in	our	E.U.	offices	has	increased	over	the	course	of	last	year, with	several	hundred	roles	expected	to	transition	into	the	E.U.	under	our current	planning	assumptions.

•	We	have	secured	and	are	developing	additional	real	estate	capacity	in Frankfurt,	Stockholm,	Milan	and	Dublin.

Replacement	 of Interbank	 Offered	 Rates (IBORs), including LIBOR.	Central	banks	and	regulators	in	a	number	of	major	jurisdictions (for	 example,	 U.S.,	 U.K.,	 E.U.,	 Switzerland	 and	 Japan)	 have	 convened working	 groups	 to	 find,	 and	 implement	 the	 transition	 to,	 suitable replacements	 for	 IBORs.	 The	 U.K.	 FCA,	 which	 regulates	 LIBOR,	 has announced	that	it	will	not	compel	panel	banks	to	contribute	to	LIBOR	after 2021.	The	E.U.	Benchmarks	Regulation	imposed	conditions	under	which only	compliant	benchmarks	may	be	used	in	new	contracts	after	2021.

Market-led	 working	 groups	 in	 major	 jurisdictions,	 noted	 above,	 have already	 selected	 their	 preferred	 alternative	 risk-free	 reference	 rates	 and have	 published	 and	 will	 continue	 to	 publish	 consultations	 on	 issues, including	methodologies	for	fallback	provisions	in	contracts	and	financial instruments	linked	to	IBORs	and	the	development	of	term	structures	for alternative	 risk-free	 reference	 rates,	 which	 will	 be	 critical	 for	 financial markets	to	transition	to	the	use	of	alternative	risk-free	reference	rates	in place	of	IBORs.

We	 have	 exposure	 to	 IBORs,	 including	 in	 financial	 instruments	 and contracts	that	mature	after	2021.	Our	exposures	arise	from	securities	and loans	 we	 hold	 for	 investment	 or	 in	 connection	 with	 market-making activities,	as	well	as	derivatives	we	enter	 into	 to	make	markets	for	our clients	 and	 hedge	 our	 risks.	 We	 also	 have	 exposure	 to	 IBORs	 in	 the floating-rate	securities	and	other	funding	products	we	issue.

The	markets	for	alternative	risk-free	reference	rates	are	developing	and	as they	develop	we	expect	to	transition	to	these	alternative	risk-free	reference rates.

We	are	seeking	to	facilitate	an	orderly	transition	from	IBORs	to	alternative risk-free	 reference	 rates	 for	 us	 and	 our	 clients.	 Accordingly,	 we	 have created	a	program	that	focuses	on:

•	Evaluating	and	monitoring	the	impacts	across	our	businesses,	including transactions	and	products;

•	Identifying	and	evaluating	the	scope	of	existing	financial	instruments	and contracts	that	may	be	affected,	and	the	extent	to	which	those	financial instruments	and	contracts	already	contain	appropriate	fallback	language	or would	require	amendment,	either	through	bilateral	negotiation	or	using industry-wide	tools,	such	as	protocols;

•	Enhancements	 to	 infrastructure	 (for	 example,	 models	 and	 systems) to prepare	for	a	smooth	transition	to	alternative	risk-free	reference	rates;

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

•	Client	education	and	communication.

As	part	of	this	program,	we	have	sought	to	systematically	identify	the	risks inherent	in	this	transition,	including	financial	risks	(for	example,	earnings volatility	under	stress	due	to	widening	swap	spreads	and	the	loss	of	funding sources	as	a	result	of	counterparties'	reluctance	to	participate	in	transitioning their	 positions)	 and	 nonfinancial	 risks	 (for	 example,	 the	 inability	 to negotiate	 fallbacks	 with	 clients	 and/or	 counterparties	 and	 operational impediments	to	the	transition).	We	are	engaged	with	a	range	of	industry	and regulatory	 working	 groups	 (for	 example,	 ISDA,	 the	 Bank	 of	 England's Working	 Group	 on	 Sterling	 Risk	 Free	 Reference	 Rates	 and	 the	 Federal Reserve's	Alternative	 Reference	 Rates	 Committee)	 and	 will	 continue	 to engage	with	our	clients	and	counterparties	to	facilitate	an	orderly	transition to	alternative	risk-free	reference	rates.

# Off-Balance-Sheet	 Arrangements and	 Contractual Obligations

# Off-Balance-Sheet	Arrangements

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

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

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

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

•	Entering	into	operating	leases;	and

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

We	 enter	 into	 these	 arrangements	 for	 a	 variety	 of	 business	 purposes, including	 securitizations.	 The	 securitization	 vehicles	 that	 purchase mortgages,	corporate	bonds,	and	other	types	of	financial	assets	are	critical to	 the	functioning	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,	distressed	loans,	power-related	assets, equity	securities,	real	estate	and	other	assets;	provide	investors	with	credit- linked	and	asset-repackaged	notes;	and	receive	or	provide	letters	of	credit to	 satisfy	 margin	 requirements	 and	 to	 facilitate	 the	 clearance	 and settlement	process.

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

# Type	of	Off-Balance-Sheet Arrangement

# Contractual	Obligations

We	have	certain	contractual	obligations	which	require	us	to	make	future cash	payments.	These	contractual	obligations	include	our	time	deposits, secured long-term financings, unsecured long-term borrowings, contractual	 interest	 payments	 and	 minimum	 rental	 payments	 under noncancelable	leases.

Our	 obligations	 to	 make	 future	 cash	 payments	 also	 include	 our commitments	 and	 guarantees	 related	 to	off-balance-sheet	 arrangements, which	are	excluded	from	the	table	below.	See	Note	18	to	the	consolidated financial	statements	for	further	information	about	such	commitments	and guarantees.

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

The	table	below	presents	contractual	obligations	by	type.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Time\tdeposits | \t\t$\t\t28,413 | \t$\t\t30,075 |
| Secured\tlong-term\tfinancings | \t\t$\t\t11,878 | \t$\t\t\t\t9,892 |
| Unsecured\tlong-term\tborrowings | \t\t$224,149 | \t$217,687 |
| Contractual\tinterest\tpayments | \t\t$\t\t54,594 | \t$\t\t54,489 |
| Minimum\trental\tpayments | \t\t$\t\t\t\t2,399 | \t$\t\t\t\t1,964 |

The	table	below	presents	contractual	obligations	by	expiration.

•	Obligations	maturing	within	one	year	of	our	financial	statement	date	or redeemable	within	one	year	of	our	financial	statement	date	at	the	option of	the	holders	are	excluded	as	they	are	treated	as	short-term	obligations. See	 Note 15 to	 the	 consolidated	 financial	 statements	 for	 further information	about	our	short-term	borrowings.

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

•	As	of	December	2018,	unsecured	 long-term	borrowings	had	maturities extending	through	2067,	consisted	principally	of	senior	borrowings,	and included	 $4.24	 billion	 of	 adjustments	 to	 the	 carrying	 value	 of	 certain unsecured	long-term	borrowings	resulting	from	the	application	of	hedge accounting.	 See	 Note	 16	 to	 the	 consolidated	 financial	 statements	 for further	information	about	our	unsecured	long-term	borrowings.

•	As	of	December	2018,	the	difference	between	the	aggregate	contractual principal	amount	and	 the	related	fair	value	of	 long-term	other	secured financings	for	which	the	fair	value	option	was	elected	was	not	material.

•	As	 of	 December	 2018,	 the	 aggregate	 contractual	 principal	 amount	 of unsecured	 long-term	 borrowings	 for	 which	 the	 fair	 value	 option	 was elected	exceeded	the	related	fair	value	by	$2.38	billion.

•	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	 2018,	 and	 includes	 stated	 coupons,	 if	 any,	 on	 structured notes.

•	Future	minimum	rental	payments	are	net	of	minimum	sublease	rentals under	noncancelable	leases.	These	lease	commitments	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.

# Risk	Management

Risks	are	inherent	in	our	businesses	and	include	liquidity,	market,	credit, operational,	model,	legal,	compliance,	conduct,	regulatory	and	reputational risks.	For	further	information	about	our	risk	management	processes,	see "Overview	and	Structure	of	Risk	Management."	Our	risks	include	the	risks across	our	risk	categories,	regions	or	global	businesses,	as	well	as	those which	have	uncertain	outcomes	and	have	the	potential	to	materially	impact our	 financial	 results,	 our	 liquidity	 and	 our	 reputation.	 For	 further information	about	our	areas	of	risk,	see	"Liquidity	Risk	Management," "Market	 Risk	 Management,"	 "Credit	 Risk	 Management,"	 "Operational Risk	Management"	and	"Model	Risk	Management"	and	"Risk	Factors"	in Part	I,	Item	1A	of	this	Form	10-K.

# Overview	and	Structure	of	Risk	Management

# Overview

We	 believe	 that	 effective	 risk	 management	 is	 critical	 to	 our	 success. Accordingly,	 we	 have	 established	 an	 enterprise	 risk	 management framework	 that	 employs	 a	 comprehensive,	 integrated	 approach	 to	 risk management,	and	is	designed	to	enable	comprehensive	risk	management processes	through	which	we	identify,	assess,	monitor	and	manage	the	risks we	 assume	 in	 conducting	 our	 activities.	 These	 risks	 include	 liquidity, market,	credit,	operational,	model,	legal,	compliance,	conduct,	regulatory and	reputational	risk	exposures.	Our	risk	management	structure	 is	built around	three	core	components:	governance,	processes	and	people.

Governance.	Risk	management	governance	starts	with	the	Board,	which both	 directly	 and	 through	 its	 committees,	 including	 its	 Risk	 Committee, oversees	our	risk	management	policies	and	practices	implemented	through the	enterprise	risk	management	framework.	The	Board	is	also	responsible for	the	annual	review	and	approval	of	our	risk	appetite	statement.	The	risk appetite	statement	describes	the	levels	and	types	of	risk	we	are	willing	to accept	or	 to	avoid,	 in	order	 to	achieve	our	strategic	business	objectives, while	remaining	in	compliance	with	regulatory	requirements.

The	Board	receives	regular	briefings	on	firmwide	risks,	including	liquidity risk,	 market	 risk,	 credit	 risk,	 operational	 risk	 and	 model	 risk	 from	 our independent	risk	oversight	and	control	functions,	 including	 the	chief	risk officer,	 and	 on	 compliance	 risk	 and	 conduct	 risk	 from	 the	 head	 of Compliance,	on	legal	and	regulatory	matters	from	the	general	counsel,	and on	other	matters	impacting	our	reputation	from	the	chair	of	our	Firmwide Client	and	Business	Standards	Committee	and	our	Firmwide	Reputational Risk	Committee.	The	chief	risk	officer	reports	to	our	chief	executive	officer and	 to	 the	 Risk	 Committee	 of	 the	 Board.	As	 part	 of	 the	 review	 of	 the firmwide	 risk	 portfolio,	 the	 chief	 risk	 officer	 regularly	 advises	 the	 Risk Committee	of	the	Board	of	relevant	risk	metrics	and	material	exposures, including	 risk	 limits	 and	 thresholds	 established	 in	 our	 risk	 appetite statement.

The	Enterprise	Risk	Management	department,	which	reports	 to	our	chief risk	officer,	oversees	the	implementation	of	our	risk	governance	structure and	core	risk	management	processes	and	is	responsible	for	ensuring	that	our enterprise	 risk	 management	 framework	 provides	 the	 Board,	 our	 risk committees	 and	 senior	 management	 with	 a	 consistent	 and	 integrated approach	to	managing	our	various	risks	in	a	manner	consistent	with	our	risk appetite.

Our	 revenue-producing	 units,	 as	 well	 as	 Treasury,	 Operations	 and Technology,	 are	 our	 first	 line	 of	 defense	 and	 are	 accountable	 for	 the outcomes	 of	 our	 risk-generating	 activities,	 as	 well	 as	 for	 assessing	 and managing	those	risks	within	our	risk	appetite.

Our	 independent	 risk	 oversight	 and	 control	 functions	 are	 considered	 our second	line	of	defense	and	provide	independent	assessment,	oversight	and challenge	of	the	risks	taken	by	our	first	line	of	defense,	as	well	as	lead	and participate	 in	 risk-oriented	 committees.	 Independent	 risk	 oversight	 and control	 functions	 include	 Compliance,	 Conflicts	 Resolution,	 Controllers, Credit	 Risk	 Management,	 Enterprise	 Risk	 Management,	 Human	 Capital Management,	 Legal,	 Liquidity	 Risk	 Management,	 Market	 Risk Management,	Model	Risk	Management,	Operational	Risk	Management	and Tax.

Internal	Audit	is	considered	our	third	line	of	defense	and	reports	to	our chief	executive	officer	and	 the	Audit	Committee	of	 the	Board.	Internal Audit	 includes	 professionals	 with	 a	 broad	 range	 of	 audit	 and	 industry experience,	 including	 risk	 management	 expertise.	 Internal	 Audit	 is responsible	for	independently	assessing	and	validating	the	effectiveness	of key	controls,	including	those	within	the	risk	management	framework,	and providing	timely	reporting	to	the	Audit	Committee	of	the	Board,	senior management	and	regulators.

The	three	lines	of	defense	structure	promotes	the	accountability	of	first line	risk	takers,	provides	a	framework	for	effective	challenge	by	the	second line	and	empowers	independent	review	from	the	third	line.

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	manage	and	mitigate	risks.

We	maintain	strong	communication	about	risk	and	we	have	a	culture	of collaboration	 in	 decision-making	 among	 our	 first	 and	 second	 lines	 of defense,	 committees	 and	 senior	 management.	 While	 our	 first	 line	 of defense	is	responsible	for	management	of	their	risk,	we	dedicate	extensive resources	 to	 our	 second	 line	 of	 defense	 in	 order	 to	 ensure	 a	 strong oversight	structure	and	an	appropriate	segregation	of	duties.	We	regularly reinforce	 our	 strong	 culture	 of	 escalation	 and	 accountability	 across	 all functions.

Processes.	We	maintain	various	processes	that	are	critical	components of	 our	 risk	 management	 framework,	 including	 identifying,	 assessing, monitoring	and	limiting	our	risks.

To	effectively	assess	and	monitor	our	risks,	we	maintain	a	daily	discipline of	marking	substantially	all	of	our	inventory	to	current	market	levels.	We carry	 our	 inventory	 at	 fair	 value,	 with	 changes	 in	 valuation	 reflected immediately	in	our	risk	management	systems	and	in	net	revenues.	We	do so	because	we	believe	this	discipline	is	one	of	the	most	effective	tools	for assessing	and	managing	risk	and	that	it	provides	transparent	and	realistic insight	into	our	inventory	exposures.

We	also	apply	a	rigorous	framework	of	limits	and	thresholds	to	control	and monitor	risk	across	 transactions,	products,	businesses	and	markets.	The Board,	directly	or	indirectly	through	its	Risk	Committee,	approves	limits and	 thresholds	 included	 in	 our	 risk	 appetite	 statement	 at	 firmwide, business	 and	 product	 levels.	 In	 addition,	 the	 Firmwide	 Enterprise	 Risk Committee	is	responsible	for	approving	our	risk	limits	framework,	subject to	the	overall	limits	approved	by	the	Risk	Committee	of	the	Board,	at	a variety	of	levels	and	monitoring	these	limits	on	a	daily	basis.

The	 Risk	 Governance	 Committee	 is	 responsible	 for	 approving	 limits	 at firmwide,	business	and	product	levels.	Certain	limits	may	be	set	at	levels that	will	require	periodic	adjustment,	rather	than	at	levels	that	reflect	our maximum	risk	appetite.	This	fosters	an	ongoing	dialogue	about	risk	among our	first	and	second	lines	of	defense,	committees	and	senior	management,	as well	 as	 rapid	 escalation	 of	risk-related	 matters.	 See	 "Liquidity	 Risk Management,"	"Market	Risk	Management,"	"Credit	Risk	Management"	and "Operational	Risk	Management"	for	further	information.

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.

Effective	risk	reporting	and	risk	decision-making	depends	on	our	ability	to get	the	right	information	to	the	right	people	at	the	right	time.	As	such,	we focus	on	the	rigor	and	effectiveness	of	our	risk	systems,	with	the	objective of	 ensuring	 that	 our	 risk	 management	 technology	 systems	 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.	 The experience	of	our	professionals,	and	their	understanding	of	the	nuances	and limitations	 of	 each	 risk	 measure,	 guides	 us	 in	 assessing	 exposures	 and maintaining	them	within	prudent	levels.

We	reinforce	a	culture	of	effective	risk	management,	consistent	with	our risk	appetite,	in	our	training	and	development	programs,	as	well	as	in	the way	we	evaluate	performance,	and	recognize	and	reward	our	people.	Our training	and	development	programs,	including	certain	sessions	led	by	our most	 senior	 leaders,	 are	 focused	 on	 the	 importance	 of	 risk	 management, client	 relationships	 and	 reputational	 excellence.	 As	 part	 of	 our	 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	our	highest	standards.

# Structure

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

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

The	chart	below	presents	an	overview	of	our	risk	management	governance structure,	our	three	lines	of	defense	and	our	reporting	relationships.

Management	 Committee.	 The	 Management	 Committee	 oversees	 our global	activities.	It	provides	 this	oversight	directly	and	 through	authority delegated	to	committees	it	has	established.	This	committee	consists	of	our most	 senior	 leaders,	 and	 is	 chaired	 by	 our	 chief	 executive	 officer.	 Most members	 of	 the	 Management	 Committee	 are	 also	 members	 of	 other committees.	The	following	are	the	committees	that	are	principally	involved in	firmwide	risk	management.

# Firmwide	Enterprise	Risk	Committee.	The	Firmwide	Enterprise	Risk

Committee	is	responsible	for	the	ongoing	review,	approval	and	monitoring of	the	enterprise	risk	management	framework	and	for	providing	oversight	of our	aggregate	financial	and	nonfinancial	risks.	As	a	part	of	such	oversight, the	committee	is	responsible	for	the	ongoing	approval	and	monitoring	of	our risk	 limits	framework	at	 the	firmwide,	business	and	product	 levels.	This committee	 is	co-chaired	by	our	chief	financial	officer	and	our	chief	risk officer,	 who	 are	 appointed	 as	 chairs	 by	 our	 chief	 executive	 officer,	 and reports	 to	 the	 Management	 Committee.	 The	 following	 are	 the	 primary committees	that	report	to	the	Firmwide	Enterprise	Risk	Committee:

•	Firmwide	Risk	Committee.	The	Firmwide	Risk	Committee	is	globally responsible	 for	 the	 ongoing	 monitoring	 of	 relevant	 financial	 risks	 and related	 risk	 limits	 at	 the	 firmwide,	 business	 and	 product	 levels.	 This committee	 is	co-chaired	by	the	chairs	of	the	Firmwide	Enterprise	Risk Committee.

•	Firmwide	 New	Activity	 Committee. 	 The	 Firmwide	 New	Activity Committee	is	responsible	for	reviewing	new	activities	and	for	establishing a	process	to	identify	and	review	previously	approved	activities	that	are significant	 and	 that	 have	 changed	 in	 complexity	 and/or	 structure	 or present	 different	 reputational	 and	 suitability	 concerns	 over	 time	 to consider	whether	these	activities	remain	appropriate.	This	committee	is co-chaired	 by	 the	 head	 of	 regulatory	 controllers	 and	 the	co-head	 of Europe,	Middle	East	and	Africa	FICC	sales,	who	are	appointed	as	chairs by	the	chairs	of	the	Firmwide	Enterprise	Risk	Committee.

# •	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	deputy	chief	risk	officer,	who	is	appointed	as chair	by	the	chairs	of	the	Firmwide	Enterprise	Risk	Committee.

•	Firmwide	 Conduct and	 Operational	 Risk	 Committee. The Firmwide	 Conduct	 and	 Operational	 Risk	 Committee	 is	 globally responsible	for	the	ongoing	approval	and	monitoring	of	the	frameworks, policies,	 parameters	 and	 limits	 which	 govern	 our	 conduct	 and operational	risks.	This	committee	is	co-chaired	by	a	managing	director in	 Global	 Compliance	 and	 our	 deputy	 chief	 risk	 officer,	 who	 are appointed	 as	 chairs	 by	 the	 chairs	 of	 the	 Firmwide	 Enterprise	 Risk Committee.

•	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,	who	are	appointed	as	chairs	by	the	chairs of	the	Firmwide	Enterprise	Risk	Committee.

# •	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,	 who	 is appointed	 as	 chair	 by	 the	 chairs	 of	 the	 Firmwide	 Enterprise	 Risk Committee.

•	Risk	 Governance	 Committee.	 The	 Risk	 Governance	 Committee (through	 delegated	 authority	 from	 the	 Firmwide	 Enterprise	 Risk Committee)	 is	 globally	 responsible	 for	 the	 ongoing	 approval	 and monitoring	 of	 risk	 frameworks,	 policies,	 parameters	 and	 limits,	 at firmwide,	 business	 and	 product	 levels.	 In	 addition,	 this	 committee reviews	the	results	of	stress	tests	and	scenario	analyses.	This	committee is	chaired	by	our	chief	risk	officer,	who	is	appointed	as	chair	by	the chairs	of	the	Firmwide	Enterprise	Risk	Committee.

•	Firmwide	Volcker	Oversight	Committee. 	The	Firmwide	Volcker Oversight	 Committee	 is	 responsible	 for	 the	 oversight	 and	 periodic review	of	the	implementation	of	our	Volcker	Rule	compliance	program, as	approved	by	the	Board,	and	other	Volcker	Rule-related	matters.	This committee	 is	co-chaired	by	the	head	of	Market	Risk	Management	and the	 deputy	 head	 of	 Compliance,	 who	 are	 appointed	 as	 chairs	 by	 the chairs	of	the	Firmwide	Enterprise	Risk	Committee.

Firmwide Client and Business Standards Committee. The Firmwide	 Client	 and	 Business	 Standards	 Committee	 assesses	 and	 makes determinations	regarding	relationships	with	our	clients,	client	service	and experience,	 and	 related	 business	 standards	 and	 reputational	 risk.	 This committee	is	chaired	by	our	president	and	chief	operating	officer,	who	is appointed	 as	 chair	 by	 the	 chief	 executive	 officer,	 and	 reports	 to	 the Management	Committee.	This	committee	periodically	provides	updates	to, and	receives	guidance	from,	the	Public	Responsibilities	Committee	of	the Board.

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

•	Firmwide Reputational Risk Committee. The Firmwide Reputational	 Risk	 Committee	 is	 responsible	 for	 assessing	 reputational risks	 arising	 from	 transactions	 that	 have	 been	 identified	 as	 having potential	heightened	reputational	risk	pursuant	to	the	criteria	established by	the	Firmwide	Reputational	Risk	Committee.	This	committee	is	chaired by	our	president	and	chief	operating	officer,	and	the	vice-chairs	are	the head	 of	 Compliance	 and	 the	 head	 of	 Conflicts	 Resolution,	 who	 are appointed	as	vice-chairs	by	the	chair	of	the	Firmwide	Reputational	Risk Committee.

•	Firmwide Suitability Committee. The	 Firmwide Suitability Committee	is	responsible	for	setting	standards	and	policies	for	product, transaction	and	client	suitability	and	providing	a	forum	for	consistency across	 functions,	 regions	 and	 products	 on	 suitability	 assessments.	This committee	 also	 reviews	 suitability	 matters	 escalated	 from	 other committees.	 This	 committee	 is	co-chaired	 by	 the	 deputy	 head	 of Compliance,	 and	 the	co-head	of	Europe,	Middle	East	and	Africa	FICC sales,	who	are	appointed	as	chairs	by	the	chair	of	the	Firmwide	Client	and Business	Standards	Committee.

# •	Firmwide	Investment	Policy	Committee.	The	Firmwide	Investment

Policy	Committee	reviews,	approves,	sets	policies,	and	provides	oversight for	 certain	 illiquid	 principal	 investments,	 including	 review	 of	 risk management	and	controls	for	these	types	of	investments.	This	committee is	co-chaired	by	the	head	of	our	Merchant	Banking	Division	and	the	head of	 the	 Special	 Situations	 Group,	 who	 are	 appointed	 as	 chairs	 by	 our president	and	chief	operating	officer	and	our	chief	financial	officer.

•	Firmwide	 Capital	 Committee.	 The	 Firmwide	 Capital	 Committee provides	approval	and	oversight	of	debt-related	transactions,	including principal	commitments	of	our	capital.	This	committee	aims	to	ensure that	business,	reputational	and	suitability	standards	for	underwritings	and capital	commitments	are	maintained	on	a	global	basis.	This	committee	is co-chaired	by	the	head	of	Credit	Risk	Management	and	a	co-head	of	the Financing	 Group,	 who	 are	 appointed	 as	 chairs	 by	 the	 chairs	 of	 the Firmwide	Enterprise	Risk	Committee.

# •	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	the	co-head	of	the	Industrials Group	in	our	Investment	Banking	Division,	an	advisory	director	and	a managing	director	in	Risk	Management,	who	are	appointed	as	chairs	by the	chair	of	the	Firmwide	Client	and	Business	Standards	Committee.

# Firmwide	Asset	Liability	Committee.	The	Firmwide	Asset	Liability

Committee	reviews	and	approves	the	strategic	direction	for	our	financial resources,	 including	 capital,	 liquidity,	 funding	 and	 balance	 sheet.	 This committee	 has	 oversight	 responsibility	 for	 asset	 liability	 management, including	 interest	 rate	 and	 currency	 risk,	 funds	 transfer	 pricing,	 capital allocation	 and	 incentives,	 and	 credit	 ratings.	 This	 committee	 makes recommendations	as	to	any	adjustments	to	asset	liability	management	and financial	resource	allocation	in	light	of	current	events,	risks,	exposures,	and regulatory	requirements	and	approves	related	policies.	This	committee	is co-chaired	by	our	chief	financial	officer	and	our	global	treasurer,	who	are appointed	 as	 chairs	 by	 our	 chief	 executive	 officer,	 and	 reports	 to	 the Management	Committee.

# Conflicts	Management

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

We	 have	 a	 multilayered	 approach	 to	 resolving	 conflicts	 and	 addressing reputational	 risk.	 Our	 senior	 management	 oversees	 policies	 related	 to conflicts	resolution,	and,	 in	conjunction	with	Conflicts	Resolution,	Legal and	Compliance,	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,	Conflicts	Resolution	reviews	financing	and	advisory assignments	in	Investment	Banking	and	certain	of	our	investing,	lending	and other	 activities.	 In	 addition,	 we	 have	 various	 transaction	 oversight committees,	 such	 as	 the	 Firmwide	 Capital,	 Commitments	 and	 Suitability Committees	 and	 other	 committees	 that	 also	 review	 new	 underwritings, loans,	investments	and	structured	products.	These	groups	and	committees work	with	internal	and	external	counsel	and	Compliance	to	evaluate	and address	any	actual	or	potential	conflicts.	Conflicts	Resolution	reports	to	our president	and	chief	operating	officer.

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	risk	is	the	risk	that	we	will	be	unable	to	fund	ourselves	or	meet our	liquidity	needs	in	the	event	of	firm-specific,	broader	industry	or	market liquidity	stress	events.	We	have	in	place	a	comprehensive	and	conservative set	of	liquidity	and	funding	policies.	Our	principal	objective	is	to	be	able	to fund	 ourselves	 and	 to	 enable	 our	 core	 businesses	 to	 continue	 to	 serve clients	and	generate	revenues,	even	under	adverse	circumstances.

Treasury,	 which	 reports	 to	 our	 chief	 financial	 officer,	 has	 primary responsibility	for	developing,	managing	and	executing	our	liquidity	and funding	strategy	within	our	risk	appetite.

Liquidity	 Risk	 Management,	 which	 is	 independent	 of	 our	 revenue- producing	units	and	Treasury,	and	reports	 to	our	chief	risk	officer,	has primary	 responsibility	 for	 assessing,	 monitoring	 and	 managing	 our liquidity	risk	through	firmwide	oversight	across	our	global	businesses	and the	establishment	of	stress	testing	and	limits	frameworks.

# Liquidity	Risk	Management	Principles

We	manage	liquidity	risk	according	to	three	principles:	(i)	hold	sufficient excess	liquidity	in	the	form	of	GCLA	to	cover	outflows	during	a	stressed period,	 (ii)	 maintain	 appropriate	 Asset-Liability	 Management	 and (iii)	maintain	a	viable	Contingency	Funding	Plan.

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

Our	GCLA	reflects	the	following	principles:

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

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

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

•	As	a	result	of	our	policy	 to	pre-fund	liquidity	that	we	estimate	may	be needed	in	a	crisis,	we	hold	more	unencumbered	securities	and	have	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	maintain	our	GCLA	across	Group	Inc.,	Goldman	Sachs	Funding	LLC (Funding	IHC)	and	Group	Inc.'s	major	broker-dealer	and	bank	subsidiaries, asset	 types,	 and	 clearing	 agents	 to	 provide	 us	 with	 sufficient	 operating liquidity	to	ensure	timely	settlement	in	all	major	markets,	even	in	a	difficult funding	environment.	In	addition	to	the	GCLA,	we	maintain	cash	balances and	securities	in	several	of	our	other	entities,	primarily	for	use	in	specific currencies,	entities	or	jurisdictions	where	we	do	not	have	immediate	access to	parent	company	liquidity.

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.

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	manage	the	maturities	and diversity	of	our	funding	across	markets,	products	and	counterparties,	and seek	 to	 maintain	 a	 diversified	 funding	 profile	 with	 an	 appropriate	 tenor, taking	 into	 consideration	 the	 characteristics	 and	 liquidity	 profile	 of	 our assets.

# Our	approach	to	asset-liability	management	includes:

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

•	Actively	managing	and	monitoring	our	asset	base,	with	particular	focus on	 the	 liquidity,	 holding	 period	 and	 our	 ability	 to	 fund	 assets	 on	 a secured	basis.	We	assess	our	funding	requirements	and	our	ability	 to liquidate	assets	in	a	stressed	environment	while	appropriately	managing risk.	This	enables	us	to	determine	the	most	appropriate	funding	products and	tenors.	See	"Balance	Sheet	and	Funding	Sources	—	Balance	Sheet Management"	 for	 further	 information	 about	 our	 balance	 sheet management	process	and	"—	Funding	Sources	—	Secured	Funding"	for further	information	about	asset	classes	that	may	be	harder	to	fund	on	a secured	basis;	and

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

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

# Subsidiary	Funding	Policies

The	 majority	 of	 our	 unsecured	 funding	 is	 raised	 by	 Group	 Inc.,	 which lends	the	necessary	funds	to	Funding	IHC	and	other	subsidiaries,	some	of which	are	regulated,	 to	meet	 their	asset	financing,	 liquidity	and	capital requirements.	In	addition,	Group	Inc.	provides	its	regulated	subsidiaries with	 the	 necessary	 capital	 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	deposits,	secured	funding	and	unsecured	borrowings.

Our	 intercompany	 funding	 policies	 assume	 that	 a	 subsidiary's	 funds	 or securities	 are	 not	 freely	 available	 to	 its	 parent,	 Funding	 IHC	 or	 other subsidiaries	unless	(i)	legally	provided	for	and	(ii)	there	are	no	additional regulatory,	tax	or	other	restrictions.	In	particular,	many	of	our	subsidiaries are	subject	to	laws	that	authorize	regulatory	bodies	to	block	or	reduce	the flow	 of	 funds	 from	 those	 subsidiaries	 to	 Group	 Inc.	 or	 Funding	 IHC. Regulatory	action	of	that	kind	could	impede	access	to	funds	that	Group	Inc. needs	to	make	payments	on	its	obligations.	Accordingly,	we	assume	that	the capital	provided	to	our	regulated	subsidiaries	is	not	available	to	Group	Inc. or	 other	 subsidiaries	 and	 any	 other	 financing	 provided	 to	 our	 regulated subsidiaries	is	not	available	to	Group	Inc.	or	Funding	IHC	until	the	maturity of	such	financing.

Group	 Inc.	 has	 provided	 substantial	 amounts	 of	 equity	 and	 subordinated indebtedness,	 directly	 or	 indirectly,	 to	 its	 regulated	 subsidiaries.	 For example,	as	of	December	2018,	Group	Inc.	had	$29.05	billion	of	equity	and subordinated	indebtedness	invested	in	GS&Co.,	its	principal	U.S.	registered broker-dealer;	 $39.69	 billion	 invested	 in	 GSI,	 a	 regulated	 U.K.	 broker- dealer;	$2.76	billion	invested	in	GSJCL,	a	regulated	Japanese	broker-dealer; $31.98	 billion invested	 in	 GS	 Bank	 USA,	 a	 regulated	 New	York	 State- chartered	bank;	and	$3.93	billion	invested	in	GSIB,	a	regulated	U.K.	bank. Group	 Inc.	 also	 provided,	 directly	 or	 indirectly, $114.38 billion	 of unsubordinated	 loans	 (including	 secured	 loans	 of $28.72 billion),	 and $18.09	billion	of	collateral	and	cash	deposits	to	these	entities,	substantially all	 of	 which	 was	 to	 GS&Co.,	 GSI,	 GSJCL	 and	 GS	 Bank	 USA,	 as	 of December	 2018.	 In	 addition,	 as	 of	 December	 2018,	 Group	 Inc.	 had significant	amounts	of	capital	invested	in	and	loans	to	its	other	regulated subsidiaries.

Contingency	Funding	Plan.	We	maintain	a	contingency	funding	plan	to provide	 a	 framework	 for	 analyzing	 and	 responding	 to	 a	 liquidity	 crisis situation	or	periods	of	market	stress.	Our	contingency	funding	plan	outlines a	list	of	potential	risk	factors,	key	reports	and	metrics	that	are	reviewed	on an	 ongoing	 basis	 to	 assist	 in	 assessing	 the	 severity	 of,	 and	 managing through,	 a	 liquidity	 crisis	 and/or	 market	 dislocation.	 The	 contingency funding	 plan	 also	 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	 provides	 information	 about	 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.

# Stress	Tests

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,	the	results	of	our	long-term	stress	testing models,	 our	 resolution	 liquidity	 models	 and	 other	 applicable	 regulatory requirements	and	a	qualitative	assessment	of	our	condition,	as	well	as	the financial	 markets.	 The	 results	 of	 the	 Modeled	 Liquidity	 Outflow,	 the Intraday	 Liquidity	 Model,	 the	 long-term	 stress	 testing	 models	 and	 the resolution	liquidity	models	are	reported	to	senior	management	on	a	regular basis.	 We	 also	 perform	 stress	 tests	 that	 are	 designed	 to	 ensure	 a comprehensive	 analysis	 of	 our	 vulnerabilities	 and	 idiosyncratic	 risks combining	financial	and	nonfinancial	risks,	including,	but	not	limited	to, credit,	 market,	 liquidity	 and	 funding,	 operational	 and	 compliance, strategic,	systemic	and	emerging	risks	into	a	single	combined	scenario.

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

•	Severely	challenged	market	environments,	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

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

The	 following are key	 modeling elements of the	 Modeled	 Liquidity Outflow:

•	Liquidity	needs	over	a	30-day	scenario;

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

•	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;

•	No	issuance	of	equity	or	unsecured	debt;

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

•	No	asset	liquidation,	other	than	the	GCLA.

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

# Unsecured	Funding

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

•	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

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

•	Contingent:	 Partial	 withdrawals	 of	 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

•	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.

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

# OTC	Derivatives

•	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).

•	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

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

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

# Customer	Cash	and	Securities

•	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.

# Securities

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

# Unfunded	Commitments

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

# Other

•	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:

•	Liquidity	needs	over	a	one-day	settlement	period;

•	Delays	in	receipt	of	counterparty	cash	payments;

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

•	Higher	settlement	volumes	due	to	an	increase	in	activity.

Long-Term	Stress	Testing. 	We	utilize	longer-term	stress	tests	to	take	a forward	view	on	our	liquidity	position	through	prolonged	stress	periods	in which	we	experience	a	severe	liquidity	stress	and	recover	in	an	environment that	continues	to	be	challenging.	We	are	focused	on	ensuring	conservative asset-liability	management	 to	prepare	for	a	prolonged	period	of	potential stress,	seeking	to	maintain	a	diversified	funding	profile	with	an	appropriate tenor,	taking	into	consideration	the	characteristics	and	liquidity	profile	of our	assets.

We	also	perform	stress	tests	on	a	regular	basis	as	part	of	our	routine	risk management	processes	and	conduct	 tailored	stress	 tests	on	an	ad	hoc	or product-specific	basis	in	response	to	market	developments.

Resolution Liquidity	 Models. In	 connection	 with	 our	 resolution planning	efforts,	we	have	established	our	Resolution	Liquidity	Adequacy and	Positioning	framework,	which	estimates	liquidity	needs	of	our	major subsidiaries	 in	a	stressed	environment.	The	 liquidity	needs	are	measured using	 our	 Modeled	 Liquidity	 Outflow	 assumptions	 and	 include	 certain additional	inter-affiliate	exposures.	We	have	also	established	our	Resolution Liquidity	Execution	Need	framework,	which	measures	the	liquidity	needs	of our	major	subsidiaries	to	stabilize	and	wind-down	following	a	Group	Inc. bankruptcy	filing	in	accordance	with	our	preferred	resolution	strategy.

# Model	Review	and	Validation

We	 regularly	 refine	 our	 Modeled	 Liquidity	 Outflow,	 Intraday	 Liquidity Model	and	our	other	stress	testing	models	to	reflect	changes	in	market	or economic	conditions	and	our	business	mix.	Any	changes,	including	model assumptions,	 are	 approved	 by	 Liquidity	 Risk	 Management.	 Significant changes	 to	 these	 models	 are	 also	 approved	 by	 the	 Risk	 Governance Committee.

These	 models	 are	 independently	 reviewed,	 validated	 and	 approved	 by Model	 Risk	 Management.	 See	 "Model	 Risk	 Management"	 for	 further information.

# Limits

We	use	liquidity	limits	at	various	levels	and	across	liquidity	risk	types	to manage	the	size	of	our	liquidity	exposures.	Limits	are	measured	relative	to acceptable	levels	of	risk	given	our	liquidity	risk	tolerance.	The	purpose	of the	 firmwide	 limits	 is	 to	 assist	 senior	 management	 in	 monitoring	 and controlling	our	overall	liquidity	profile.

The	Risk	Committee	of	the	Board	and	the	Risk	Governance	Committee approve	liquidity	risk	limits	at	the	firmwide	level,	consistent	with	our	risk appetite	 statement.	 Limits	 are	 reviewed	 frequently	 and	 amended,	 with required	approvals,	on	a	permanent	and	temporary	basis,	as	appropriate,	to reflect	changing	market	or	business	conditions.

Our	 liquidity	 risk	 limits	 are	 monitored	 by	Treasury	 and	 Liquidity	 Risk Management.	Liquidity	Risk	Management	 is	responsible	for	 identifying and	 escalating	 to	 senior	 management	 and/or	 the	 appropriate	 risk committee,	on	a	timely	basis,	instances	where	limits	have	been	exceeded.

# GCLA	and	Unencumbered	Metrics

GCLA.	 Based	 on	 the	 results	 of	 our	 internal	 liquidity	 risk	 models, described	above,	as	well	as	our	consideration	of	other	factors,	including, but	not	limited	to,	an	assessment	of	our	potential	intraday	liquidity	needs and	 a	 qualitative	 assessment	 of	 our	 condition,	 as	 well	 as	 the	 financial markets,	we	believe	our	liquidity	position	as	of	both	December	2018	and December	 2017	 was	 appropriate.	 We	 strictly	 limit	 our	 GCLA	 to	 a narrowly	defined	list	of	securities	and	cash	because	they	are	highly	liquid, even	in	a	difficult	funding	environment.	We	do	not	include	other	potential sources	of	excess	liquidity	in	our	GCLA,	such	as	less	liquid	unencumbered securities	or	committed	credit	facilities.

The	table	below	presents	information	about	our	average	GCLA.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Denomination |  |  |
| U.S.\tdollar | \t\t$155,348 | \t$155,020 |
| Non-U.S.\tdollar | 77,995 | 63,528 |
| Total | \t\t$233,343 | \t$218,548 |
| Asset\tClass |  |  |
| Overnight\tcash\tdeposits | \t\t$\t\t98,811 | \t$\t\t93,617 |
| U.S.\tgovernment\tobligations | 79,810 | 75,108 |
| U.S.\tagency\tobligations | 12,171 | 11,813 |
| Non-U.S.\tgovernment\tobligations | 42,551 | 38,010 |
| Total | \t\t$233,343 | \t$218,548 |
| Entity\tType |  |  |
| Group\tInc.\tand\tFunding\tIHC | \t\t$\t\t40,920 | \t$\t\t37,507 |
| Major\tbroker-dealer\tsubsidiaries | 104,364 | 98,160 |
| Major\tbank\tsubsidiaries | 88,059 | 82,881 |
| Total | \t\t$233,343 | \t$218,548 |

•	The	U.S.	dollar-denominated	GCLA	consists	of	(i)	unencumbered	U.S. government	and	agency	obligations	(including	highly	liquid	U.S.	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.

•	T h e	non-U.S.	 dollar-denominated	 GCLA consists of	non-U.S. government	obligations	(only	unencumbered	German,	French,	Japanese and	U.K.	government	obligations)	and	certain	overnight	cash	deposits	in highly	liquid	currencies.

We	maintain	our	GCLA	to	enable	us	to	meet	current	and	potential	liquidity requirements	of	our	parent	company,	Group	Inc.,	and	its	subsidiaries.	Our Modeled	 Liquidity	 Outflow	 and	 Intraday	 Liquidity	 Model	 incorporate	 a consolidated	 requirement	 for	 Group	 Inc.,	 as	 well	 as	 a	 standalone requirement	 for	 each	 of	 our	 major	 broker-dealer	 and	 bank	 subsidiaries. Funding	IHC	is	required	to	provide	the	necessary	liquidity	to	Group	Inc. during	 the	 ordinary	 course	 of	 business,	 and	 is	 also	 obligated	 to	 provide capital	 and	 liquidity	 support	 to	 major	 subsidiaries	 in	 the	 event	 of	 our material	financial	distress	or	failure.	Liquidity	held	directly	in	each	of	our major	broker-dealer	and	bank	subsidiaries	is	intended	for	use	only	by	that subsidiary	 to	 meet	 its	 liquidity	 requirements	 and	 is	 assumed	 not	 to	 be available	to	Group	Inc.	or	Funding	IHC	unless	(i)	legally	provided	for	and (ii)	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. or	Funding	IHC	to	support	such	requirements.

Other	Unencumbered	Assets.	In	addition to	our	GCLA,	we	have	a significant	amount	of	other	unencumbered	cash	and	financial	instruments, including	 other	 government	 obligations,	 high-grade	 money	 market securities,	 corporate	 obligations,	 marginable	 equities,	 loans	 and	 cash deposits	not	included	in	our	GCLA.	The	fair	value	of	our	unencumbered assets	averaged	$177.08	billion	for	2018	and	$158.41	billion	for	2017.	We do	not	consider	these	assets	liquid	enough	to	be	eligible	for	our	GCLA.

# Liquidity	Regulatory	Framework

As	a	BHC,	we	are	subject	to	a	minimum	Liquidity	Coverage	Ratio	(LCR) under	the	LCR	rule	approved	by	the	U.S.	federal	bank	regulatory	agencies. The	 LCR	 rule	 requires	 organizations	 to	 maintain	 an	 adequate	 ratio	 of eligible	high-quality	 liquid	assets	(HQLA)	 to	expected	net	cash	outflows under	an	acute	short-term	liquidity	stress	scenario.	Eligible	HQLA	excludes HQLA	held	by	subsidiaries	that	is	in	excess	of	their	minimum	requirement and	 is	 subject	 to	 transfer	 restrictions.	 We	 are	 required	 to	 maintain	 a minimum	 LCR	 of	 100%.	 We	 expect	 that	 fluctuations	 in	 client	 activity, business	mix	and	the	market	environment	will	impact	our	average	LCR.

The	table	below	presents	information	about	our	average	daily	LCR.

|  | Three	Months	Ended | Three	Months	Ended |
| :--- | :--- | :--- |
| $\tin\tmillions | December\n2018 | September\n2018 |
| Total\tHQLA | \t\t$226,473 | \t$233,721 |
| Eligible\tHQLA | \t\t$160,016 | \t$170,621 |
| Net\tcash\toutflows | \t\t$126,511 | \t$133,126 |
| LCR | 127% | 128% |
| Goldman\tSachs\t2018\tForm\t10-K | Goldman\tSachs\t2018\tForm\t10-K | 85 |

In	 addition,	 the	 U.S.	 federal	 bank	 regulatory	 agencies	 have	 issued	 a proposed	rule	that	calls	for	a	net	stable	funding	ratio	(NSFR)	for	large	U.S. banking	organizations.	The	proposal	would	require	banking	organizations to	ensure	they	have	access	to	stable	funding	over	a	one-year	time	horizon. The	 proposed	 rule	 includes	 quarterly	 disclosure	 of	 the	 ratio	 and	 a description	of	the	banking	organization's	stable	funding	sources.	The	U.S. federal	 bank	 regulatory	 agencies	 have	 not	 released	 the	 final	 rule.	 We expect	that	we	will	be	compliant	with	the	NSFR	requirement	when	it	is effective.

The	 following is information	 about	 our subsidiary liquidity regulatory requirements:

•	GS	Bank	USA.	GS	Bank	USA	is	subject	to	a	minimum	LCR	of	100% under	 the	 LCR	 rule	 approved	 by	 the	 U.S.	 federal	 bank	 regulatory agencies.	As	of	December	2018,	GS	Bank	USA's	LCR	exceeded	the minimum	requirement.	The	NSFR	requirement	described	above	would also	apply	to	GS	Bank	USA.

•	GSI.	GSI	is	subject	to	a	minimum	LCR	of	100%	under	the	LCR	rule approved	 by	 the	 U.K.	 regulatory	 authorities	 and	 the	 European Commission.	GSI's	average	monthly	LCR	for	the	trailing	twelve-month period	ended	December	2018	exceeded	the	minimum	requirement.

•	Other Subsidiaries. We	 monitor	 local	 regulatory liquidity requirements	of	our	subsidiaries	to	ensure	compliance.	For	many	of	our subsidiaries,	 these	 requirements	 either	 have	 changed	 or	 are	 likely	 to change	in	the	future	due	to	the	implementation	of	the	Basel	Committee's framework	for	liquidity	risk	measurement,	standards	and	monitoring,	as well	as	other	regulatory	developments.

The	implementation	of	these	rules	and	any	amendments	adopted	by	the regulatory	authorities,	could	impact	our	liquidity	and	funding	requirements and	practices	in	the	future.

# 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	"Risk	Factors"	in	Part	I,	Item	1A	of	this	Form	10-K	for information	 about	 the	 risks	 associated	 with	 a	 reduction	 in	 our	 credit ratings.

The	table	below	presents	the	unsecured	credit	ratings	and	outlook	of	Group Inc.

•	The	 ratings	 and	 outlook	 are	 by	 DBRS,	 Inc.	 (DBRS),	 Fitch,	 Moody's, Rating	and	Investment	Information,	Inc.	(R&I),	and	S&P.

•	The	ratings	for	trust	preferred	relate	to	the	guaranteed	preferred	beneficial interests	issued	by	Goldman	Sachs	Capital	I.

•	The	DBRS,	Fitch,	Moody's	and	S&P	ratings	for	preferred	stock	include the	 APEX	 issued	 by	 Goldman	 Sachs	 Capital	 II	 and	 Goldman	 Sachs Capital	III.

The	table	below	presents	the	unsecured	credit	ratings	and	outlook	of	GS Bank	USA,	GSIB,	GS&Co.	and	GSI,	by	Fitch,	Moody's	and	S&P.

| Short-term	debt | F1 | P-1 | A-1 |
| :--- | :--- | :--- | :--- |
| Long-term\tdebt | A+ | A1 | A+ |
| Short-term\tbank\tdeposits | F1+ | P-1 | N/A |
| Long-term\tbank\tdeposits | AA- | A1 | N/A |
| Ratings\toutlook | \t\tStable | \tNegative | \tStable |
| GSIB |  |  |  |
| Short-term\tdebt | F1 | P-1 | A-1 |
| Long-term\tdebt | A | A1 | A+ |
| Short-term\tbank\tdeposits | F1 | P-1 | N/A |
| Long-term\tbank\tdeposits | A | A1 | N/A |
| Ratings\toutlook | \t\tStable | \tNegative | \tStable |
| GS&amp;Co. |  |  |  |
| Short-term\tdebt | F1 | N/A | A-1 |
| Long-term\tdebt | A+ | N/A | A+ |
| Ratings\toutlook | \t\tStable | N/A | \tStable |

We	 believe	 our	 credit ratings	 are	 primarily	 based	 on the	 credit rating agencies'	assessment	of:

•	Our	liquidity,	market,	credit	and	operational	risk	management	practices;

•	The	level	and	variability	of	our	earnings;

•	Our	capital	base;

•	Our	franchise,	reputation	and	management;

# •	Our	corporate	governance;	and

•	The	external	operating	and	economic	environment,	including,	in	some cases,	 the	 assumed	 level	 of	 government	 support	 or	 other	 systemic considerations,	such	as	potential	resolution.

Certain	of	our	derivatives	have	been	transacted	under	bilateral	agreements with	counterparties	who	may	require	us	to	post	collateral	or	terminate	the transactions	based	on	changes	in	our	credit	ratings.	We	manage	our	GCLA to	ensure	we	would,	among	other	potential	requirements,	be	able	to	make the	additional	collateral	or	termination	payments	that	may	be	required	in the	event	of	a	two-notch	reduction	in	our	long-term	credit	ratings,	as	well as	collateral	that	has	not	been	called	by	counterparties,	but	is	available	to them.

See	Note	7	to	the	consolidated	financial	statements	for	further	information about	derivatives	with	credit-related	contingent	features	and	the	additional collateral	or	termination	payments	related	to	our	net	derivative	liabilities under	bilateral	agreements	that	could	have	been	called	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	2018.	Our	cash	and	cash	equivalents	increased by	$20.50	billion	to	$130.55	billion	at	the	end	of	2018,	primarily	due	to	net cash	provided	by	financing	activities	and	operating	activities,	partially	offset by	net	cash	used	for	investing	activities.	The	net	cash	provided	by	financing activities	primarily	reflected	increases	in	consumer	deposits.	The	net	cash provided	 by	 operating	 activities	 primarily	 reflected	 net	 earnings	 and	 a decrease	 in	 collateralized	 transactions,	 partially	 offset	 by	 an	 increase	 in financial	instruments	owned.	The	net	cash	used	for	investing	activities	was primarily	to	fund	corporate	and	commercial	real	estate	loans.

Year	Ended	December	2017.	Our	cash	and	cash	equivalents	decreased by $11.66 billion	 to $110.05 billion	 at	 the	 end	 of	 2017.	 We	 used $18.23	billion	in	net	cash	for	operating	activities,	reflecting	a	decrease	in	the net	 liability	for	receivables	and	payables	due	 to	client	activity.	We	used $28.64	billion	in	net	cash	for	investing	activities,	primarily	to	fund	corporate and	 real	 estate	 loans,	 and	 investments	 in	 U.S.	 government	 and	 agency obligations	 accounted	 for	 as	available-for-sale	 securities.	 We	 generated $35.21	 billion in	 net	 cash	 from	 financing	 activities,	 primarily	 from	 net issuances	of	unsecured	long-term	borrowings	and	increases	in	institutional and	consumer	deposits,	partially	offset	by	repurchases	of	common	stock.

Year	Ended	December	2016.	Our	cash	and	cash	equivalents	increased by	 $28.27	 billion	 to	 $121.71	 billion	 at	 the	 end	 of	 2016.	 We	 generated $9.68	billion	in	net	cash	from	investing	activities,	primarily	from	net	cash acquired	in	business	acquisitions.	We	generated	$18.60	billion	in	net	cash from	financing	activities	and	operating	activities,	primarily	from	increases	in deposits	 and	 from	 net	 issuances	 of	 unsecured	 long-term	 borrowings, partially	offset	by	repurchases	of	common	stock.

# 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:

•	Interest	rate	risk:	results	from	exposures	to	changes	in	the	level,	slope and	 curvature	 of	 yield	 curves,	 the	 volatilities	 of	 interest	 rates, prepayment	speeds	and	credit	spreads;

•	Equity	 price	 risk:	 results	 from	 exposures	 to	 changes	 in	 prices	 and volatilities	of	individual	equities,	baskets	of	equities	and	equity	indices;

•	Currency	 rate	 risk:	 results	 from	 exposures	 to	 changes in	 spot	 prices, forward	prices	and	volatilities	of	currency	rates;	and

•	Commodity	price	risk:	results	from	exposures	to	changes	in	spot	prices, forward	 prices	 and	 volatilities	 of	 commodities,	 such	 as	 crude	 oil, petroleum	 products,	 natural	 gas,	 electricity,	 and	 precious	 and	 base metals.

Market	Risk	Management,	which	is	independent	of	our	revenue-producing units	and	reports	to	our	chief	risk	officer,	has	primary	responsibility	for assessing,	 monitoring	 and	 managing	 our	 market	 risk	 through	 firmwide oversight	across	our	global	businesses.

Managers	 in	 revenue-producing	 units	 and	 Market	 Risk	 Management discuss	market	information,	positions	and	estimated	loss	scenarios	on	an ongoing	basis.	Managers	in	revenue-producing	units	are	accountable	for managing	 risk	 within	 prescribed	 limits.	 These	 managers	 have	in-depth knowledge	 of	 their	 positions,	 markets	 and	 the	 instruments	 available	 to hedge	their	exposures.

# Market	Risk	Management	Process

Our	process	for	managing	market	risk	includes:

•	Collecting	complete,	accurate	and	timely	information;

•	A	dynamic	limit-setting	framework;

•	Monitoring	compliance	with	established	market	risk	limits	and	reporting our	exposures;

# •	Diversifying	exposures;

# •	Controlling	position	sizes;

•	Evaluating	mitigants,	such	as	economic	hedges in	related	securities	or derivatives;	and

•	Proactive	communication	between	our	revenue-producing	units	and	our independent	risk	oversight	and	control	functions.

Our	market	risk	management	systems	enable	us	to	perform	an	independent calculation	of	VaR	and	stress	measures,	capture	risk	measures	at	individual position	 levels,	 attribute	 risk	 measures	 to	 individual	 risk	 factors	 of	 each position,	report	many	different	views	of	the	risk	measures	(e.g.,	by	desk, business,	product	type	or	entity)	and	produce	ad	hoc	analyses	in	a	timely manner.

# Risk	Measures

Market	 Risk	 Management	 produces	 risk	 measures	 and	 monitors	 them against	established	market	risk	limits.	These	measures	reflect	an	extensive range	of	scenarios	and	the	results	are	aggregated	at	product,	business	and firmwide	levels.

We	use	a	variety	of	risk	measures	to	estimate	the	size	of	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	risk	oversight	and	control	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	 assets	 and	 liabilities	 included	 in	 VaR,	 see	 "Financial	 Statement Linkages	to	Market	Risk	Measures."	We	typically	employ	a	one-day	time horizon	with	a	95%	confidence	level.	We	use	a	single	VaR	model,	which captures	risks	 including	 interest	rates,	equity	prices,	currency	rates	and commodity	prices.	As	such,	VaR	facilitates	comparison	across	portfolios of	different	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:

•	VaR	does	not	estimate	potential	losses	over	longer	time	horizons	where moves	may	be	extreme;

•	VaR	 does	 not take	 account	 of the relative liquidity	 of	 different risk positions;	and

•	Previous	 moves	 in	 market	 risk	 factors	 may not produce accurate predictions	of	all	future	market	moves.

To	comprehensively	capture	our	exposures	and	relevant	risks	in	our	VaR calculation,	 we	 use	 historical	 simulations	 with	 full	 valuation	 of	 market factors	 at	 the	 position	 level	 by	 simultaneously	 shocking	 the	 relevant market	factors	for	that	position.	These	market	factors	include	spot	prices, credit	spreads,	funding	spreads,	yield	curves,	volatility	and	correlation,	and are	updated	periodically	based	on	changes	in	the	composition	of	positions, as	well	as	variations	in	market	conditions.	We	sample	from	five	years	of historical	 data	 to	 generate	 the	 scenarios	 for	 our	 VaR	 calculation.	 The historical	 data	 is	 weighted	 so	 that	 the	 relative	 importance	 of	 the	 data reduces	 over	 time.	 This	 gives	 greater	 importance	 to	 more	 recent observations	 and	 reflects	 current	 asset	 volatilities,	 which	 improves	 the accuracy	 of	 our	 estimates	 of	 potential	 loss.	 As	 a	 result,	 even	 if	 our positions	included	in	VaR	were	unchanged,	our	VaR	would	increase	with increasing	market	volatility	and	vice	versa.

Given	its	reliance	on	historical	data,	VaR	is	most	effective	in	estimating risk	 exposures	 in	 markets	 in	 which	 there	 are	 no	 sudden	 fundamental changes	or	shifts	in	market	conditions.

# Our	VaR	measure	does	not	include:

•	Positions	 that are best measured and monitored using sensitivity measures;	and

•	The	 impact	of	changes	 in	counterparty	and	our	own	credit	spreads	on derivatives,	as	well	as	changes	 in	our	own	credit	spreads	on	financial liabilities	for	which	the	fair	value	option	was	elected.

We	perform	daily	backtesting	of	our	VaR	model	(i.e.,	comparing	daily	net revenues	for	positions	included	in	VaR	to	the	VaR	measure	calculated	as	of the	prior	business	day)	at	the	firmwide	level	and	for	each	of	our	businesses and	major	regulated	subsidiaries.

Stress	Testing.	Stress	testing	is	a	method	of	determining	the	effect	of various	hypothetical	stress	scenarios.	We	use	stress	testing	to	examine	risks of	specific	portfolios,	as	well	as	the	potential	impact	of	our	significant	risk exposures.	We	 use	 a	 variety	 of	 stress	 testing	 techniques	 to	 calculate	 the potential	 loss	 from	 a	 wide	 range	 of	 market	 moves	 on	 our	 portfolios, including	sensitivity	analysis,	scenario	analysis	and	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	 any	 single	 entity,	 which	 captures	 the	 risk	 of	 large	 or concentrated	exposures.

Scenario	 analysis	 is	 used	 to	 quantify	 the	 impact	 of	 a	 specified	 event, including	how	the	event	impacts	multiple	risk	factors	simultaneously.	For example,	for	sovereign	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.

Stress	 testing	 is	 designed	 to	 ensure	 a	 comprehensive	 analysis	 of	 our vulnerabilities	 and	 idiosyncratic	 risks	 combining	 financial	 and nonfinancial	risks,	including,	but	not	limited	to,	market,	credit,	liquidity and	funding,	operational	and	compliance,	strategic,	systemic	and	emerging risks	into	a	single	combined	scenario.	Stress	tests	are	primarily	used	to assess	capital	adequacy	as	part	of	our	capital	planning	and	stress	testing process;	however,	stress	testing	is	also	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"	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.

We	 use	 risk	 limits	 at	 various	 levels	 (including	 firmwide,	 business	 and product)	 to	 govern	 our	 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	Risk	Committee	of	the	Board	and	the	Risk	Governance	Committee approve	 market	 risk	 limits	 and	sub-limits	 at	 firmwide,	 business	 and product	 levels,	 consistent	 with	 our	 risk	 appetite	 statement.	 In	 addition, Market	 Risk	 Management	 (through	 delegated	 authority	 from	 the	 Risk Governance	Committee)	sets	market	risk	limits	and	sub-limits	at	certain product	and	desk	levels.

The	 purpose	 of	 the	 firmwide	 limits	 is	 to	 assist	 senior	 management	 in controlling	our	overall	risk	profile.	Sub-limits	are	set	below	the	approved level	of	risk	limits.	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	 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	by	Market	Risk	Management,	which	is responsible	for	identifying	and	escalating	to	senior	management	and/or	the appropriate	risk	committee,	on	a	timely	basis,	instances	where	limits	have been	exceeded.	When	a	risk	limit	has	been	exceeded	(e.g.,	due	to	positional changes	or	changes	in	market	conditions,	such	as	increased	volatilities	or changes	 in	correlations),	 it	 is	escalated	 to	senior	management	and/or	 the appropriate	risk	committee.	Such	instances	are	remediated	by	an	inventory reduction	and/or	a	temporary	or	permanent	increase	to	the	risk	limit.

Our	VaR	and	stress	testing	models	are	regularly	reviewed	by	Market	Risk Management	 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,	Model	Risk	Management	performs	model validations.	Significant	changes	to	our	VaR	and	stress	testing	models	are reviewed	 with	 our	 chief	 risk	 officer	 and	 chief	 financial	 officer,	 and approved	by	the	Risk	Governance	Committee.

# 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	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	table	below	presents	average	daily	VaR	by	risk	category.

|  | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Interest\trates | $\t46 | $\t40 |
| Equity\tprices | 31 | 24 |
| Currency\trates | 14 | 12 |
| Commodity\tprices | 11 | 13 |
| Diversification\teffect | (42) | (35) |
| Total | $\t60 | $\t54 |

Our	average	daily	VaR	increased	to	$60	million	in	2018	from	$54	million in	2017,	primarily	due	to	increases	in	the	equity	prices	and	interest	rates categories,	partially	offset	by	an	increase	in	the	diversification	effect.	The overall	 increase	 was	 due	 to	 increased	 exposures	 and	 higher	 levels	 of volatility.

The	table	below	presents	period-end	VaR	by	risk	category.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | \t\t2018 | \t2017 |
| Interest\trates | \t\t$\t46 | \t$\t48 |
| Equity\tprices | 32 | 31 |
| Currency\trates | 12 | 7 |
| Commodity\tprices | 11 | 9 |
| Diversification\teffect | (44) | (30) |
| Total | \t\t$\t57 | \t$\t65 |

Our	 daily	 VaR	 decreased	 to	 $57	 million	 as	 of	 December	 2018	 from $65	 million	 as	 of	 December	 2017,	 primarily	 due	 to	 an	 increase	 in	 the diversification	effect,	partially	offset	by	an	increase	in	the	currency	rates category.	The	overall	decrease	was	primarily	due	to	reduced	exposures.

During	2018	and	2017,	the	firmwide	VaR	risk	limit	was	not	exceeded, raised	or	reduced.

The	table	below	presents	high	and	low	VaR	by	risk	category.

|  | Year	Ended<br>December	2018 | Year	Ended<br>December	2018 | Year	Ended<br>December	2017 | Year	Ended<br>December	2017 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | High | Low | High | Low |
| Interest\trates | $61 | $34 | $57 | $29 |
| Equity\tprices | $45 | $24 | $38 | $17 |
| Currency\trates | $27 | $\t\t7 | $28 | $\t\t6 |
| Commodity\tprices | $17 | $\t\t8 | $27 | $\t\t7 |

The	chart	below	presents	daily	VaR	for	2018.

The	chart	below	presents	the	frequency	distribution	of	daily	net	revenues	for positions	included	in	VaR	for	2018.

Daily	net	revenues	for	positions	included	in	VaR	are	compared	with	VaR calculated	as	of	the	end	of	the	prior	business	day.	Net	losses	incurred	on	a single	day	for	such	positions	exceeded	our	95%	one-day	VaR	(i.e.,	a	VaR exception)	 on	 two	 occasions	 during	 2018	 and	 did	 not	 exceed	 our	 95% one-day	VaR	during	2017.

During	periods	in	which	we	have	significantly	more	positive	net	revenue days	than	net	revenue	loss	days,	we	expect	to	have	fewer	VaR	exceptions because,	under	normal	conditions,	our	business	model	generally	produces positive	 net	 revenues.	 In	 periods	 in	 which	 our	 franchise	 revenues	 are adversely	affected,	we	generally	have	more	loss	days,	resulting	in	more VaR	exceptions.	The	daily	net	revenues	for	positions	included	in	VaR	used to	determine	VaR	exceptions	reflect	the	impact	of	any	intraday	activity, including	 bid/offer	 net	 revenues,	 which	 are	 more	 likely	 than	 not	 to	 be positive	by	their	nature.

# Sensitivity	Measures

Certain	portfolios	and	individual	positions	are	not	included	in	VaR	because VaR	is	not	the	most	appropriate	risk	measure.	Other	sensitivity	measures we	use	to	analyze	market	risk	are	described	below.

10%	Sensitivity	Measures.	The	table	below	presents	market	risk	by asset	 category	 for	 positions	 accounted	 for	 at	 fair	 value,	 that	 are	 not included	in	VaR.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Equity | \t\t$1,923 | \t$2,096 |
| Debt | 1,890 | 1,606 |
| Total | \t\t$3,813 | \t$3,702 |

•	The	 market	 risk	 of	 these	 positions	 is	 determined	 by	 estimating	 the potential	reduction	in	net	revenues	of	a	10%	decline	in	the	value	of	these positions.

•	Equity	positions	relate	to	private	and	restricted	public	equity	securities, including	 interests	 in	 funds	 that	 invest	 in	 corporate	 equities	 and	 real estate	and	interests	in	hedge	funds.

•	Debt	 positions	 include	 interests	 in	 funds	 that	 invest	 in	 corporate mezzanine	 and	 senior	 debt	 instruments,	 loans	 backed	 by	 commercial and	 residential	 real	 estate,	 corporate	 bank	 loans	 and	 other	 corporate debt,	including	acquired	portfolios	of	distressed	loans.

•	Funded	 equity	 and	 debt	 positions	 are	 included	 in	 our	 consolidated statements	of	financial	condition	 in	financial	 instruments	owned.	See Note	6	to	the	consolidated	financial	statements	for	further	information about	cash	instruments.

•	These	 measures	 do	 not	 reflect	 the	 diversification	 effect	 across	 asset categories	or	across	other	market	risk	measures.

# Credit Spread Sensitivity on Derivatives and Financial

Liabilities.	VaR	excludes	the	impact	of	changes	in	counterparty	and	our own	 credit	 spreads	 on	 derivatives,	 as	 well	 as	 changes	 in	 our	 own	 credit spreads	(debt	valuation	adjustment)	on	financial	liabilities	for	which	the	fair value	 option	 was	 elected.	The	 estimated	 sensitivity	 to	 a	 one	 basis	 point increase	in	credit	spreads	(counterparty	and	our	own)	on	derivatives	was	a gain	 of	 $3	 million	 (including	 hedges)	 as	 of	 both	 December	 2018	 and December	2017.	In	addition,	the	estimated	sensitivity	to	a	one	basis	point increase	in	our	own	credit	spreads	on	financial	liabilities	for	which	the	fair value	option	was	elected	was	a	gain	of	$41	million	as	of	December	2018	and $35	 million	 as	 of	 December	 2017.	 However,	 the	 actual	 net	 impact	 of	 a change	in	our	own	credit	spreads	is	also	affected	by	the	liquidity,	duration and	convexity	(as	the	sensitivity	is	not	linear	to	changes	in	yields)	of	those financial	liabilities	for	which	the	fair	value	option	was	elected,	as	well	as	the relative	performance	of	any	hedges	undertaken.

Interest	Rate	Sensitivity.	Loans	receivable	were	 $80.59	 billion	 as	 of December	2018	and	$65.93	billion	as	of	December	2017,	substantially	all	of which	had	floating	interest	rates.	The	estimated	sensitivity	to	a	100	basis point	 increase	 in	 interest	 rates	 on	 such	 loans	 was	 $607	 million	 as	 of December	 2018	 and	 $527	 million	 as	 of	 December	 2017,	 of	 additional interest	 income	 over	 a	 twelve-month	 period,	 which	 does	 not	 take	 into account	the	potential	impact	of	an	increase	in	costs	to	fund	such	loans.	See Note	9	to	the	consolidated	financial	statements	for	further	information	about loans	receivable.

# Other	Market	Risk	Considerations

As	of	both	December	2018	and	December	2017,	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.

In	addition,	we	make	 investments	 in	securities	 that	are	accounted	for	as available-for-sale	 and	 included	 in	 financial	 instruments	 owned	 in	 the consolidated	 statements	 of	 financial	 condition.	 See	 Note 6 to	 the consolidated	financial	statements	for	further	information.

We	also	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	further	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	 in	 the consolidated	statements	of	earnings,	and	debt	valuation	adjustment	in	the consolidated	statements	of	comprehensive	income.

The	table	below	presents	certain	categories	of	assets	and	liabilities	in	the consolidated	 statements	 of	 financial	 condition	 and	 the	 market	 risk measures	used	to	assess	those	assets	and	liabilities.

# Categories	in	the	Consolidated	Statements of	Financial	Condition

# Financial	instruments	owned

# Deposits,	at	fair	value

Collateralized	financings,	at	fair	value

# Market	Risk	Measures

Credit	Spread	Sensitivity	— Financial	Liabilities

# 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 customer	and	other	receivables.

Credit	Risk	Management,	which	is	independent	of	our	revenue-producing units	and	reports	 to	our	chief	risk	officer,	has	primary	responsibility	for assessing,	 monitoring	 and	 managing	 our	 credit	 risk	 through	 firmwide oversight	across	our	global	businesses.	The	Risk	Governance	Committee reviews	and	approves	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.

# Credit	Risk	Management	Process

Our	process	for	managing	credit	risk	includes:

•	Approving	transactions	and	setting	and	communicating	credit	exposure limits;

•	Monitoring	compliance	with	established	credit	risk	limits	and	reporting our	exposure;

•	Establishing	or	approving	underwriting	standards;

•	Assessing	the	likelihood	that	a	counterparty	will	default	on	its	payment obligations;

•	Measuring	our	current	and	potential	credit	exposure	and	losses	resulting from	counterparty	default;

•	Using	credit	risk	mitigants,	including	collateral	and	hedging;

•	Maximizing	recovery	through	active	workout	and	restructuring	of	claims; and

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	risk	assessment	process	may	also	include,	where	applicable,	reviewing certain	 key	 metrics,	 including,	 but	 not	 limited	 to,	 delinquency	 status, collateral	 values,	 Fair	 Isaac	 Corporation	 credit	 scores	 and	 other	 risk factors.

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

# Risk	Measures	and	Limits

We	measure	our	credit	risk	based	on	 the	potential	 loss	 in	 the	event	of non-payment	by	a	counterparty	using	current	and	potential	exposure.	For derivatives	 and	 securities	 financing	 transactions,	 current	 exposure represents	 the	 amount	 presently	 owed	 to	 us	 after	 taking	 into	 account applicable	netting	and	collateral	arrangements,	while	potential	exposure represents	our	estimate	of	the	future	exposure	that	could	arise	over	the	life of	a	transaction	based	on	market	movements	within	a	specified	confidence level.	 Potential	 exposure	 also	 takes	 into	 account	 netting	 and	 collateral arrangements.	For	loans	and	lending	commitments,	the	primary	measure	is a	function	of	the	notional	amount	of	the	position.

The	Risk	Committee	of	the	Board	and	the	Risk	Governance	Committee approve	 credit	 risk	 limits	 at	 firmwide,	 business	 and	 product	 levels, consistent	 with	 our	 risk	 appetite	 statement.	 Credit	 Risk	 Management (through	delegated	authority	from	the	Risk	Governance	Committee)	sets credit	limits	for	individual	counterparties,	economic	groups,	industries	and countries.	Policies	authorized	by	the	Firmwide	Enterprise	Risk	Committee and	 the	 Risk	 Governance	 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.

We	use	credit	limits	at	various	levels	(e.g.,	counterparty,	economic	group, industry	and	country),	as	well	as	underwriting	standards	to	control	the	size and	nature	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	appetite	and	are	designed	to	allow	for	regular monitoring,	 review,	 escalation	 and	 management of credit risk concentrations.

Our	credit	risk	limits	are	monitored	by	Credit	Risk	Management,	which	is responsible	for	identifying	and	escalating,	on	a	timely	basis,	instances	where limits	 have	 been	 exceeded.	 When	 a	 risk	 limit	 has	 been	 exceeded,	 it	 is escalated	to	senior	management	and/or	the	appropriate	risk	committee.

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	 perform	 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.	 We	 also	 perform	 stress	 tests	 that	 are designed	 to	 ensure	 a	 comprehensive	 analysis	 of	 our	 vulnerabilities	 and idiosyncratic	 risks	 combining	 financial	 and	 nonfinancial	 risks,	 including, but	 not	 limited	 to,	 credit,	 market,	 liquidity	 and	 funding,	 operational	 and compliance,	strategic,	systemic	and	emerging	risks	into	a	single	combined scenario.

Our	potential	credit	exposure	and	stress	testing	models,	and	any	changes	to such	 models	 or	 assumptions,	 are	 independently	 reviewed,	 validated	 and approved	by	Model	Risk	Management.	See	"Model	Risk	Management"	for further	information.

# 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	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,	 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	 2018,	 our	 aggregate	 credit	 exposure	 increased	 as compared	with	December	2017,	primarily	reflecting	an	increase	in	cash deposits	with	central	banks	and	loans	and	lending	commitments,	partially offset	by	a	decrease	in	secured	financing	transactions.	The	percentage	of our	 credit	 exposures	 arising	 from	non-investment-grade	 counterparties (based	 on	 our	 internally	 determined	 public	 rating	 agency	 equivalents) increased	 as	 compared	 with	 December	 2017,	 reflecting	 an	 increase	 in non-investment-grade	 loans	 and	 lending	 commitments.	 Our	 credit exposure	 to	 counterparties	 that	 defaulted	 during	 2018	 was	 lower	 as compared	with	our	credit	exposure	to	counterparties	that	defaulted	during the	prior	year,	and	substantially	all	of	such	exposure	was	related	to	loans and	 lending	 commitments.	 Our	 credit	 exposure	 to	 counterparties	 that defaulted	during	2018	remained	low,	representing	less	than	0.5%	of	our total	credit	exposure,	and	estimated	losses	compared	with	the	prior	year were	lower	and	not	material.	Our	credit	exposures	are	described	further below.

Cash	 and	 Cash	 Equivalents.	Our	credit	exposure	on	cash	and	cash equivalents	arises	from	our	unrestricted	cash,	and	 includes	both	 interest- bearing	and	non-interest-bearing	deposits.	To	mitigate	the	risk	of	credit	loss, we	place	substantially	all	of	our	deposits	with	highly	rated	banks	and	central banks.

The	table	below	presents	credit	exposure	from	unrestricted	cash	and	cash equivalents,	and	the	concentration	by	industry,	region	and	credit	quality.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Cash\tand\tCash\tEquivalents | \t\t$107,408 | \t$91,609 |
| Industry |  |  |
| Financial\tInstitutions | 16% | 17% |
| Sovereign | 84% | 83% |
| Total | 100% | 100% |
| Region |  |  |
| Americas | 36% | 64% |
| Europe,\tMiddle\tEast\tand\tAfrica | 41% | 22% |
| Asia | 23% | 14% |
| Total | 100% | 100% |
| Credit\tQuality\t(Credit\tRating\tEquivalent) |  |  |
| AAA | 62% | 72% |
| AA | 10% | 9% |
| A | 27% | 18% |
| BBB | 1% | 1% |
| Total | 100% | 100% |

The	table	above	excludes	cash	segregated	for	regulatory	and	other	purposes of $23.14 billion	 as	 of	 December	 2018	 and $18.44 billion	 as	 of December	2017.

OTC Derivatives.	Our credit	 exposure	 on	 OTC	 derivatives	 arises primarily	from	our	market-making	activities.	As	a	market	maker,	we	enter into	derivative	transactions	to	provide	liquidity	to	clients	and	to	facilitate	the transfer	and	hedging	of	their	risks.	We	also	enter	into	derivatives	to	manage market	risk	exposures.	We	manage	our	credit	exposure	on	OTC	derivatives using	the	credit	risk	process,	measures,	limits	and	risk	mitigants	described above.

We	 generally	 enter	 into	 OTC	 derivatives	 transactions	 under	 bilateral collateral	 arrangements	 that	 require	 the	 daily	 exchange	 of	 collateral.	As credit	 risk	 is	 an	 essential	 component	 of	 fair	 value,	 we	 include	 a	 credit valuation	 adjustment	 (CVA)	 in	 the	 fair	 value	 of	 derivatives	 to	 reflect counterparty	credit	risk,	as	described	in	Note	7	to	the	consolidated	financial statements.	CVA	is	a	function	of	the	present	value	of	expected	exposure,	the probability	of	counterparty	default	and	the	assumed	recovery	upon	default.

The	table	below	presents	net	credit	exposure	from	OTC	derivatives	and	the concentration	by	industry	and	region.

•	OTC	 derivative	 assets,	 included	 in	 the	 consolidated	 statements	 of   financial	condition,	are	reported	on	a	net-by-counterparty	basis	(i.e.,	the    net	 receivable	 for	 a	 given	 counterparty)	 when	 a	 legal	 right	 of	 setoff   exists	under	an	enforceable	netting	agreement	(counterparty	netting)	and are	 accounted	 for	 at	 fair	 value,	 net	 of	 cash	 collateral	 received	 under enforceable	credit	support	agreements	(cash	collateral	netting).

•	Collateral	 represents	 cash	 collateral	 and	 the	 fair	 value	 of	 securities collateral,	 primarily	 U.S.	 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	table	below	presents	the	distribution	of	net	credit	exposure	from	OTC derivatives	by	tenor.

| $	in	millions | Investment-<br>Grade | Non-Investment-<br>Grade	/	Unrated | Total |
| :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |  |
| Less\tthan\t1\tyear | \t$\t\t15,697 | $\t\t5,427 | \t$\t\t21,124 |
| 1\t-\t5\tyears | 21,300 | 4,091 | 25,391 |
| Greater\tthan\t5\tyears | 51,737 | 4,191 | 55,928 |
| Total | 88,734 | 13,709 | 102,443 |
| Netting | (68,736) | (7,409) | (76,145) |
| Net\tcredit\texposure | \t$\t\t19,998 | $\t\t6,300 | \t$\t\t26,298 |
| As\tof\tDecember\t2017 |  |  |  |
| Less\tthan\t1\tyear | \t$\t\t16,232 | $\t\t4,854 | \t$\t\t21,086 |
| 1\t-\t5\tyears | 23,817 | 5,465 | 29,282 |
| Greater\tthan\t5\tyears | 62,103 | 4,441 | 66,544 |
| Total | 102,152 | 14,760 | 116,912 |
| Netting | (79,786) | (7,512) | (87,298) |
| Net\tcredit\texposure | \t$\t\t22,366 | $\t\t7,248 | \t$\t\t29,614 |

•	Tenor	is	based	on	remaining	contractual	maturity.

•	Netting	includes	counterparty	netting	across	tenor	categories	and	cash	and securities	collateral	that	management	considers	when	determining	credit risk	(including	collateral	that	is	not	eligible	for	netting	under	U.S.	GAAP). Counterparty	netting	within	the	same	tenor	category	is	included	within such	tenor	category.

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

| $	in	millions | BB	or	lower | Unrated | Total |
| :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |  |
| Less\tthan\t1\tyear | \t\t $\t\t\t5,255 | \t\t$\t\t\t\t\t\t172 | \t\t$\t\t\t\t5,427 |
| 1\t-\t5\tyears | 4,053 | 38 | 4,091 |
| Greater\tthan\t5\tyears | 4,138 | 53 | 4,191 |
| Total | 13,446 | 263 | 13,709 |
| Netting | (7,339) | (70) | (7,409) |
| Net\tcredit\texposure | \t\t $\t\t\t6,107 | \t\t$\t\t\t\t\t\t193 | \t\t$\t\t\t\t6,300 |
| As\tof\tDecember\t2017 |  |  |  |
| Less\tthan\t1\tyear | $\t\t\t4,603 | \t\t$\t\t\t\t\t\t251 | \t\t$\t\t\t\t4,854 |
| 1\t-\t5\tyears | 5,458 | 7 | 5,465 |
| Greater\tthan\t5\tyears | 4,401 | 40 | 4,441 |
| Total | 14,462 | 298 | 14,760 |
| Netting | (7,418) | (94) | (7,512) |
| Net\tcredit\texposure | $\t\t\t7,044 | \t\t$\t\t\t\t\t\t204 | \t\t$\t\t\t\t7,248 |

Lending	Activities.	We	manage	our	lending	activities	using	the	credit risk	process,	measures,	limits	and	risk	mitigants	described	above.	Other lending	positions,	including	secondary	trading	positions,	are	risk-managed as	a	component	of	market	risk.

•	Commercial	 Lending.	 Our commercial	 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. Corporate	loans	may	be	secured	or	unsecured,	depending	on	the	loan purpose,	 the	 risk	 profile	 of	 the	 borrower	 and	 other	 factors.	 Our commercial	lending	activities	also	include	extending	loans	to	borrowers that	are	secured	by	commercial	and	other	real	estate.

The	 table	below	presents	credit	exposure	from	commercial	 loans	and lending	 commitments,	 and	 the	 concentration	 by	 industry,	 region	 and credit	quality.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Loans\tand\tLending\tCommitments | \t\t$200,823 | \t$198,012 |
| Industry |  |  |
| Consumer,\tRetail\t&amp;\tHealthcare | 16% | 23% |
| Diversified\tIndustrials | 16% | 13% |
| Financial\tInstitutions | 9% | 7% |
| Funds | 4% | 3% |
| Natural\tResources\t&amp;\tUtilities | 15% | 14% |
| Real\tEstate | 10% | 12% |
| Technology,\tMedia\t&amp;\tTelecommunications | 18% | 19% |
| Other\t(including\tSpecial\tPurpose\tVehicles) | 12% | 9% |
| Total | 100% | 100% |
| Region |  |  |
| Americas | 76% | 73% |
| Europe,\tMiddle\tEast\tand\tAfrica | 20% | 24% |
| Asia | 4% | 3% |
| Total | 100% | 100% |
| Credit\tQuality\t(Credit\tRating\tEquivalent) |  |  |
| AAA | 1% | 2% |
| AA | 5% | 4% |
| A | 14% | 17% |
| BBB | 29% | 32% |
| BB\tor\tlower | 51% | 45% |
| Total | 100% | 100% |

# •	PWM,	Residential	Real	Estate	and	Other	Lending.	We	extend

PWM	loans	and	lending	commitments	through	our	private	bank	that	are secured	 by	 residential	 real	 estate,	 securities	 or	 other	 assets.	 The	 fair value	 of	 the	 collateral	 received	 against	 such	 loans	 and	 lending commitments	generally	exceeds	their	carrying	value.

We	also	have	residential	real	estate	and	other	lending	exposures,	which includes	purchased	residential	real	estate	and	unsecured	consumer	loans and	commitments	to	purchase	such	loans	(including	distressed	loans)	and securities.

The table	 below	 presents	 credit	 exposure from	 PWM, residential real estate	and	other	lending,	and	the	concentration	by	region.

| $	in	millions | PWM | Estate	and	Other |
| :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |
| Credit\tExposure | \t\t $26,152 | $12,599 |
| Americas | 91% | 73% |
| Europe,\tMiddle\tEast\tand\tAfrica | 7% | 26% |
| Asia | 2% | 1% |
| Total | 100% | 100% |
| As\tof\tDecember\t2017\nCredit\tExposure | \t\t $24,855 | $10,242 |
| Americas | 90% | 74% |
| Europe,\tMiddle\tEast\tand\tAfrica | 5% | 26% |
| Asia | 5% | – |
| Total | 100% | 100% |

•	Consumer	Lending.	We	originate	unsecured	consumer	loans.

The table below presents credit exposure from originated unsecured consumer	loans	and	the	concentration	for	the	five	most	concentrated	U.S. states.

| $	in	millions | Consumer |
| :--- | :--- |
| As\tof\tDecember\t2018 |  |
| Credit\tExposure | $4,536 |
| California | 12% |
| Texas | 9% |
| New\tYork | 7% |
| Florida | 7% |
| Illinois | 4% |
| Other | 61% |
| Total | 100% |
| As\tof\tDecember\t2017\nCredit\tExposure | $1,912 |
| California | 11% |
| Texas | 10% |
| New\tYork | 7% |
| Florida | 7% |
| Illinois | 4% |
| Other | 61% |
| Total | 100% |

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

Securities Financing Transactions. We	 enter	 into	 securities financing	 transactions	 in	 order	 to,	 among	 other	 things,	 facilitate	 client activities,	invest	excess	cash,	acquire	securities	to	cover	short	positions	and finance	certain	activities.	We	bear	credit	risk	related	to	resale	agreements and	securities	borrowed	only	to	the	extent	that	cash	advanced	or	the	value of	securities	pledged	or	delivered	to	the	counterparty	exceeds	the	value	of the	 collateral	 received.	 We	 also	 have	 credit	 exposure	 on	 repurchase agreements	and	securities	loaned	to	the	extent	that	the	value	of	securities pledged	or	delivered	to	the	counterparty	for	these	transactions	exceeds	the amount	of	cash	or	collateral	received.	Securities	collateral	obtained	for securities	 financing	 transactions	 primarily	 includes	 U.S.	 and	non-U.S. government	and	agency	obligations.

The	 table	 below	 presents	 credit	 exposure	 from	 secured	 financing transactions	and	the	concentration	by	industry,	region	and	credit	quality.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Secured\tFinancing\tTransactions | \t\t$20,979 | \t$29,071 |
| Industry |  |  |
| Financial\tInstitutions | 31% | 29% |
| Funds | 33% | 28% |
| Municipalities\t&amp;\tNonprofit | 7% | 6% |
| Sovereign | 28% | 36% |
| Other\t(including\tSpecial\tPurpose\tVehicles) | 1% | 1% |
| Total | 100% | 100% |
| Region |  |  |
| Americas | 33% | 30% |
| Europe,\tMiddle\tEast\tand\tAfrica | 41% | 46% |
| Asia | 26% | 24% |
| Total | 100% | 100% |
| Credit\tQuality\t(Credit\tRating\tEquivalent) |  |  |
| AAA | 11% | 12% |
| AA | 34% | 33% |
| A | 35% | 35% |
| BBB | 10% | 10% |
| BB\tor\tlower | 10% | 10% |
| Total | 100% | 100% |

The	 table	 above	 reflects	 both	 netting	 agreements and collateral that management	considers	when	determining	credit	risk.

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	 primarily	 consist	 of	 initial	 margin	 placed	 with	 clearing organizations	 and	 receivables	 related	 to	 sales	 of	 securities	 which	 have traded,	but	not	yet	settled.	These	receivables	generally	have	minimal	credit risk	due	 to	 the	 low	probability	of	clearing	organization	default	and	 the short-term	 nature	 of	 receivables	 related	 to	 securities	 settlements. Receivables	 from	 customers	 and	 counterparties	 generally	 consist	 of collateralized	receivables	related	 to	customer	securities	 transactions	and generally	have	minimal	credit	risk	due	to	both	the	value	of	the	collateral received	and	the	short-term	nature	of	these	receivables.

The	table	below	presents	other	credit	exposures	and	the	concentration	by industry,	region	and	credit	quality.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Other\tCredit\tExposures | \t\t$41,649 | \t$34,323 |
| Industry |  |  |
| Financial\tInstitutions | 84% | 88% |
| Funds | 7% | 6% |
| Natural\tResources\t&amp;\tUtilities | 4% | 3% |
| Other\t(including\tSpecial\tPurpose\tVehicles) | 5% | 3% |
| Total | 100% | 100% |
| Region |  |  |
| Americas | 44% | 41% |
| Europe,\tMiddle\tEast\tand\tAfrica | 46% | 49% |
| Asia | 10% | 10% |
| Total | 100% | 100% |
| Credit\tQuality\t(Credit\tRating\tEquivalent) |  |  |
| AAA | 3% | 3% |
| AA | 47% | 51% |
| A | 26% | 27% |
| BBB | 8% | 7% |
| BB\tor\tlower | 16% | 12% |
| Total | 100% | 100% |

The	 table	 above	 reflects collateral that	 management considers	 when determining	credit	risk.

# Selected	Exposures

We	have	credit	and	market	exposures,	as	described	below,	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.

The	 international	 sanctions	 on	 Russia	 have	 led	 to	 concerns	 about	 its economic	 stability.	 As	 of	 December	 2018,	 our	 total	 credit	 exposure	 to Russia	 was $371 million,	 which	 was	 primarily	 with	non-sovereign counterparties	or	borrowers,	and	was	primarily	related	to	loans	and	lending commitments.	 In	 addition,	 our	 total	 market	 exposure	 to	 Russia	 as	 of December	 2018	 was $502 million,	 reflecting	 equity	 exposure	 with non-sovereign	issuers	or	underliers.

The	 potential	 restructuring	 of	 Lebanon's	 sovereign	 debt	 has	 led	 to concerns	 about	 its	 financial	 stability.	As	 of	 December	 2018,	 our	 credit exposure	to	Lebanon	was	$570	million,	substantially	all	of	which	related	to loans	 and	 lending	 commitments	 with	non-sovereign	 borrowers.	 After taking	 into	 consideration	 the	 benefit	 of	 cash	 and	 Lebanese	 securities collateral	held,	our	net	credit	exposure	was	not	material.	In	addition,	our total	market	exposure	to	Lebanon	as	of	December	2018	was	not	material.

The	debt	crisis	in	Mozambique	has	resulted	in	credit	rating	downgrades and	 political	 instability	 in	 Ukraine	 has	 led	 to	 economic	 concerns.	 In addition,	Venezuela	has	delayed	payments	on	its	sovereign	debt	and	its political	situation	remains	unclear.	As	of	December	2018,	our	total	credit and	market	exposure	to	each	of	Mozambique,	Ukraine	and	Venezuela	was not	material.

We	have	a	comprehensive	framework	to	monitor,	measure	and	assess	our country	exposures	and	to	determine	our	risk	appetite.	We	determine	the country	of	risk	by	the	location	of	the	counterparty,	issuer	or	underlier's assets,	 where	 they	 generate	 revenue,	 the	 country	 in	 which	 they	 are headquartered,	 the	 jurisdiction	 where	 a	 claim	 against	 them	 could	 be enforced,	and/or	the	government	whose	policies	affect	their	ability	to	repay their	obligations.	We	monitor	our	credit	exposure	 to	a	specific	country both	 at	 the	 individual	 counterparty	 level,	 as	 well	 as	 at	 the	 aggregate country	level.

We	 use	 regular	 stress	 tests,	 described	 above,	 to	 calculate	 the	 credit exposures,	 including	 potential	 concentrations	 that	 would	 result	 from applying	shocks	 to	counterparty	credit	ratings	or	credit	risk	factors.	To supplement	these	regular	stress	tests,	we	also	conduct	tailored	stress	tests on	an	ad	hoc	basis	in	response	to	specific	market	events	that	we	deem significant.	These	stress	tests	are	designed	to	estimate	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.	We	 also	 utilize	 these	 stress	 tests	 to	 estimate	 the	 indirect impact	of	certain	hypothetical	events	on	our	country	exposures,	such	as	the impact	 of	 credit	 market	 deterioration	 on	 corporate	 borrowers	 and counterparties	along	with	the	shocks	to	the	risk	factors	described	above. The	parameters	of	these	shocks	vary	based	on	the	scenario	reflected	in each	stress	test.	We	review	estimated	losses	produced	by	the	stress	tests	in order to understand their magnitude, highlight potential loss concentrations,	and	assess	and	mitigate	our	exposures	where	necessary.

See	"Stress	Tests"	above,	"Liquidity	Risk	Management	—	Stress	Tests" and	"Market	Risk	Management	—	Risk	Measures	—	Stress	Testing"	for further	information	about	stress	tests.

# Operational	Risk	Management

Operational	risk	is	the	risk	of	an	adverse	outcome	resulting	from	inadequate or	failed	internal	processes,	people,	systems	or	from	external	events.	Our exposure	to	operational	risk	arises	from	routine	processing	errors,	as	well	as extraordinary	 incidents,	 such	 as	 major	 systems	 failures	 or	 legal	 and regulatory	matters.

Potential	types	of	loss	events	related	to	internal	and	external	operational	risk include:

•	Clients,	products	and	business	practices;

•	Execution,	delivery	and	process	management;

•	Business	disruption	and	system	failures;

•	Employment	practices	and	workplace	safety;

•	Damage	to	physical	assets;

# •	Internal	fraud;	and

•	External	fraud.

We	 maintain	 a	 comprehensive	 control	 framework	 designed	 to	 provide	 a well-controlled	environment	to	minimize	operational	risks.	The	Firmwide Conduct	and	Operational	Risk	Committee	 is	globally	responsible	for	 the ongoing	approval	and	monitoring	of	the	frameworks,	policies,	parameters, limits	and	thresholds	which	govern	our	operational	risks.

Operational	 Risk	 Management,	 which	 is	 independent	 of	 our	 revenue- producing	 units	 and	 reports	 to	 our	 chief	 risk	 officer,	 has	 primary responsibility	for	developing	and	implementing	a	formalized	framework	for assessing,	 monitoring	 and	 managing	 operational	 risk	 with	 the	 goal	 of maintaining	our	exposure	to	operational	risk	at	levels	that	are	within	our risk	appetite.

# Operational	Risk	Management	Process

Our	process	for	managing	operational	risk	includes:

•	Training,	supervision	and	development	of	our	people;

•	Active	participation	of	senior	management	in	identifying	and	mitigating our	key	operational	risks;

•	Independent	risk	oversight	and	control	functions	that	monitor	operational risk,	 and	 implementation	 of	 policies	 and	 procedures,	 and	 controls designed	to	prevent	the	occurrence	of	operational	risk	events;	and

We	combine	top-down	and	bottom-up	approaches	to	manage	and	measure operational	 risk.	 From	 a	top-down	 perspective,	 our	 senior	 management assesses	 firmwide	 and	 business-level	 operational	 risk	 profiles.	 From	 a bottom-up	 perspective,	 our	 first	 and	 second	 lines	 of	 defense	 are responsible	for	risk	 identification	and	risk	management	on	a	day-to-day basis,	including	escalating	operational	risks	to	senior	management.

Our	operational	risk	management	framework	is	in	part	designed	to	comply with	the	operational	risk	measurement	rules	under	the	Capital	Framework and	 has	 evolved	 based	 on	 the	 changing	 needs	 of	 our	 businesses	 and regulatory	guidance.

Our	 operational risk	 management framework	 consists	 of the following practices:

•	Risk	identification	and	assessment;

•	Risk	measurement;	and

•	Risk	monitoring	and	reporting.

The	 core	 of	 our	 operational	 risk	 management	 framework	 is	 risk identification	and	assessment.	We	have	a	comprehensive	data	collection process,	including	firmwide	policies	and	procedures,	for	operational	risk events.

We	 have	 established	 policies	 that	 require	 all	 employees	 to	 report	 and escalate	 operational	 risk	 events.	 When	 operational	 risk	 events	 are identified,	our	policies	require	that	the	events	be	documented	and	analyzed to	determine	whether	changes	are	required	in	our	systems	and/or	processes to	further	mitigate	the	risk	of	future	events.

We	use	operational	risk	management	applications	to	capture	and	organize operational	 risk	 event	 data	 and	 key	 metrics.	 One	 of	 our	 key	 risk identification	and	assessment	tools	is	an	operational	risk	and	control	self- assessment	process,	which	 is	performed	by	our	managers.	This	process consists	of	the	identification	and	rating	of	operational	risks,	on	a	forward- looking	basis,	and	the	related	controls.	The	results	from	this	process	are analyzed	to	evaluate	operational	risk	exposures	and	identify	businesses, activities	or	products	with	heightened	levels	of	operational	risk.

# Risk	Measurement

We	measure	our	operational	risk	exposure	using	both	statistical	modeling and	 scenario	 analyses,	 which	 involve	 qualitative	 and	 quantitative assessments	 of	 internal	 and	 external	 operational	 risk	 event	 data	 and internal	 control	 factors	 for	 each	 of	 our	 businesses.	 Operational	 risk measurement	 also	 incorporates	 an	 assessment	 of	 business	 environment factors,	including,	but	not	limited	to:

•	Evaluations	of	the	complexity	of	our	business	activities;

•	The	degree	of	automation	in	our	processes;

# •	New	activity	information;

•	The	legal	and	regulatory	environment;	and

•	Changes	 in	 the	 markets	 for	 our	 products	 and	 services,	 including the diversity	and	sophistication	of	our	customers	and	counterparties.

The	results	from	 these	scenario	analyses	are	used	 to	monitor	changes	 in operational	risk	and	to	determine	business	lines	that	may	have	heightened exposure	to	operational	risk.	These	analyses	are	used	in	the	determination	of the	appropriate	level	of	operational	risk	capital	to	hold.

We	 perform	 stress	 tests	 on	 a	 regular	 basis	 as	 part	 of	 our	 routine	 risk management	processes.	We	also	perform	stress	tests	that	are	designed	 to ensure	 a	 comprehensive	 analysis	 of	 our	 vulnerabilities	 and	 idiosyncratic risks	combining	financial	and	nonfinancial	risks,	including,	but	not	limited to,	 credit,	 market,	 liquidity	 and	 funding,	 operational	 and	 compliance, strategic,	systemic	and	emerging	risks	into	a	single	combined	scenario.

We	 evaluate	 changes	 in	 our	 operational	 risk	 profile	 and	 our	 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 preventive	and	detective	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.

We	have	established	limits	and	thresholds	consistent	with	our	risk	appetite statement	that	are	approved	by	the	Risk	Committee	of	the	Board,	as	well	as escalation	 protocols.	 Our	 operational	 risk	 limits	 and	 thresholds	 are monitored	by	Operational	Risk	Management.	Operational	Risk	Management is	responsible	for	identifying	and	escalating	to	senior	management	and/or	the appropriate	risk	committee,	on	a	timely	basis,	instances	where	limits	and thresholds	have	been	exceeded.

The	 statistical	 models	 utilized	 by	 Operational	 Risk	 Management	 are independently	 reviewed,	 validated	 and	 approved	 by	 Model	 Risk Management.	See	"Model	Risk	Management"	for	further	information.

# Model	Risk	Management

Model	risk	is	the	potential	for	adverse	consequences	from	decisions	made based	on	model	outputs	that	may	be	incorrect	or	used	inappropriately.	We rely	 on	 quantitative	 models	 across	 our	 business	 activities	 primarily	 to value	 certain	 financial	 assets	 and	 financial	 liabilities,	 to	 monitor	 and manage	our	risk,	and	to	measure	and	monitor	our	regulatory	capital.

Our	model	risk	management	framework	is	managed	through	a	governance structure	 and	 risk	 management	 controls,	 which	 encompass	 standards designed	 to	 ensure	 we	 maintain	 a	 comprehensive	 model	 inventory, including	 risk	 assessment	 and	 classification,	 sound	 model	 development practices,	 independent	 review	 and	 model-specific	 usage	 controls.	 The Firmwide	 Model	 Risk	 Control	 Committee	 oversees	 our	 model	 risk management	framework.

Model	Risk	Management,	which	is	independent	of	our	revenue-producing units,	model	developers,	model	owners	and	model	users,	and	reports	to	our chief	risk	officer,	has	primary	responsibility	for	assessing,	monitoring	and managing	our	model	risk	 through	firmwide	oversight	across	our	global businesses,	 and	 provides	 periodic	 updates	 to	 senior	 management,	 risk committees	and	the	Risk	Committee	of	the	Board.

# Model	Review	and	Validation	Process

Model	 Risk	 Management	 consists	 of	 quantitative	 professionals	 who perform	an	independent	review,	validation	and	approval	of	our	models. This	review	includes	an	analysis	of	the	model	documentation,	independent testing,	an	assessment	of	the	appropriateness	of	the	methodology	used,	and verification	of	compliance	with	model	development	and	implementation standards.	 Model	 Risk	 Management	 reviews	 all	 existing	 models	 on	 an annual	basis,	and	approves	new	models	or	significant	changes	to	models prior	to	implementation.

The	model	validation	process	incorporates	a	review	of	models	and	trade	and risk	 parameters	 across	 a	 broad	 range	 of	 scenarios	 (including extreme conditions)	in	order	to	critically	evaluate	and	verify:

•	The	model's	conceptual	soundness,	including	the	reasonableness	of	model assumptions,	and	suitability	for	intended	use;

•	The	testing	strategy	utilized	by	the	model	developers	to	ensure	that	the models	function	as	intended;

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

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

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

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

See	"Critical	Accounting	Policies	—	Fair	Value	—	Review	of	Valuation Models,"	 "Liquidity	 Risk	 Management,"	 "Market	 Risk	 Management," "Credit	Risk	Management"	and	"Operational	Risk	Management"	for	further information	about	our	use	of	models	within	these	areas.

# Item	 7A. 	 Quantitative	 and	 Qualitative Disclosures	About	Market	Risk

Quantitative	and	qualitative	disclosures	about	market	risk	are	set	forth	in "Management's	 Discussion	 and	 Analysis	 of	 Financial	 Condition	 and Results	 of	 Operations	 —	 Risk	 Management"	 in	 Part	 II,	 Item	 7	 of	 this Form	10-K.

# Item 8. Financial Statements and Supplementary	Data

# Management's Report on Internal Control over	Financial	Reporting

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,	2018,	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,	2018 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,	2018 has	 been	 audited	 by	 PricewaterhouseCoopers	 LLP,	 an	 independent registered	public	accounting	firm,	as	stated	in	their	report	appearing	on	page 103,	 which	 expresses	 an	 unqualified	 opinion	 on	 the	 effectiveness	 of	 the firm's	internal	control	over	financial	reporting	as	of	December	31,	2018.

# Report of Independent Registered Public

# Accounting	Firm

To	the	Board	of	Directors	and	the	Shareholders	of	The	Goldman	Sachs Group,	Inc.:

# Opinions	on	the	Financial	Statements	and	Internal	Control	over Financial	Reporting

We	have	audited	the	accompanying	consolidated	statements	of	financial condition	 of	 The	 Goldman	 Sachs	 Group, Inc.	 and its	 subsidiaries (the Company) as of December 31, 2018 and 2017, and the related consolidated	statements	of	earnings,	 comprehensive income,	 changes in shareholders'	 equity	 and	 cash flows for	 each	 of the three	 years in the period	ended	December	31,	2018,	including	the	related	notes	(collectively referred to as the "consolidated financial statements").	 We also	 have audited the	 Company's internal	 control	 over financial reporting	 as	 of December	31,	2018,	based	on	criteria	established	in	Internal	Control	— Integrated	 Framework (2013) issued	 by the	 Committee	 of	 Sponsoring Organizations	of	the	Treadway	Commission	(COSO).

In	 our	 opinion, the	 consolidated financial	 statements referred to	 above present fairly, in all	 material respects, the financial position of the Company as	 of	 December	 31,	 2018 and	 2017, and the results	 of its operations	and	its	cash	flows	for	each	of	the	three	years	in	the	period	ended December	 31,	 2018 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, 2018, based on criteria established	in	Internal	Control	—	Integrated	Framework	(2013)	issued	by the	COSO.

# Basis	for	Opinions

The Company's management is responsible for these consolidated financial statements, for	 maintaining effective internal control over financial	reporting,	and	for	its	assessment	of	the	effectiveness	of	internal control	 over financial reporting, included in	 Management's	 Report	 on Internal	 Control	 over	 Financial	 Reporting	 appearing	 on	 page	 102.	 Our responsibility is to express opinions on the	 Company's consolidated financial	statements	and	on	the	Company's	internal	control	over	financial reporting	based	on	our	audits.	We	are	a	public	accounting	firm	registered with the	 Public	 Company	Accounting	 Oversight	 Board (United	 States) (PCAOB)	and	are	required	to	be	independent	with	respect	to	the	Company in	accordance	with	the	U.S.	federal	securities	laws	and	the	applicable	rules and regulations	 of the	 Securities and	 Exchange	 Commission and the PCAOB.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	PCAOB. Those	 standards require that	 we	 plan	 and	 perform the	 audits to	 obtain reasonable	assurance	about	whether	the	consolidated	financial	statements are free	 of	 material	 misstatement,	 whether	 due to	 error	 or fraud,	 and whether	effective	internal	control	over	financial	reporting	was	maintained in	all	material	respects.

Our	 audits	 of	 the	 consolidated	 financial	 statements	 included	 performing procedures	to	assess	the	risks	of	material	misstatement	of	the	consolidated financial	 statements,	 whether	 due	 to	 error	 or	 fraud,	 and	 performing procedures	that	respond	to	those	risks.	Such	procedures	included	examining, on	 a	 test	 basis,	 evidence	 regarding	 the	 amounts	 and	 disclosures	 in	 the consolidated	financial	statements.	Our	audits	also	included	evaluating	the accounting	principles	used	and	significant	estimates	made	by	management, as	well	as	evaluating	the	overall	presentation	of	the	consolidated	financial statements.	Our	audit	of	internal	control	over	financial	reporting	included obtaining	 an	 understanding	 of	 internal	 control	 over	 financial	 reporting, assessing	the	risk	that	a	material	weakness	exists,	and	testing	and	evaluating the	 design	 and	 operating	 effectiveness	 of	 internal	 control	 based	 on	 the assessed	risk.	Our	audits	also	included	performing	such	other	procedures	as we	considered	necessary	in	the	circumstances.	We	believe	that	our	audits provide	a	reasonable	basis	for	our	opinions.

# Definition	 and	 Limitations	 of Internal	 Control	 over	 Financial Reporting

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

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

# Consolidated	Statements	of	Earnings

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| in\tmillions,\texcept\tper\tshare\tamounts | 2018 | 2017 | 2016 |
| Revenues |  |  |  |
| Investment\tbanking | \t$\t\t7,862 | \t$\t\t7,371 | \t$\t\t6,273 |
| Investment\tmanagement | 6,514 | 5,803 | 5,407 |
| Commissions\tand\tfees | 3,199 | 3,051 | 3,208 |
| Market\tmaking | 9,451 | 7,660 | 9,933 |
| Other\tprincipal\ttransactions | 5,823 | 5,913 | 3,382 |
| Total\tnon-interest\trevenues | 32,849 | 29,798 | 28,203 |
| Interest\tincome | 19,679 | 13,113 | 9,691 |
| Interest\texpense | 15,912 | 10,181 | 7,104 |
| Net\tinterest\tincome | 3,767 | 2,932 | 2,587 |
| Total\tnet\trevenues | 36,616 | 32,730 | 30,790 |
| Provision\tfor\tcredit\tlosses | 674 | 657 | 182 |
| Operating\texpenses |  |  |  |
| Compensation\tand\tbenefits | 12,328 | 11,653 | 11,448 |
| Brokerage,\tclearing,\texchange\tand\tdistribution\tfees | 3,200 | 2,876 | 2,823 |
| Market\tdevelopment | 740 | 588 | 457 |
| Communications\tand\ttechnology | 1,023 | 897 | 809 |
| Depreciation\tand\tamortization | 1,328 | 1,152 | 998 |
| Occupancy | 809 | 733 | 788 |
| Professional\tfees | 1,214 | 1,165 | 1,081 |
| Other\texpenses | 2,819 | 1,877 | 1,900 |
| Total\toperating\texpenses | 23,461 | 20,941 | 20,304 |
| Pre-tax\tearnings | 12,481 | 11,132 | 10,304 |
| Provision\tfor\ttaxes | 2,022 | 6,846 | 2,906 |
| Net\tearnings | 10,459 | 4,286 | 7,398 |
| Preferred\tstock\tdividends | 599 | 601 | 311 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders | \t$\t\t9,860 | \t$\t\t3,685 | \t$\t\t7,087 |
| Earnings\tper\tcommon\tshare |  |  |  |
| Basic | \t$\t\t25.53 | \t$\t\t\t\t9.12 | \t$\t\t16.53 |
| Diluted | \t$\t\t25.27 | \t$\t\t\t\t9.01 | \t$\t\t16.29 |
| Average\tcommon\tshares |  |  |  |
| Basic | 385.4 | 401.6 | 427.4 |
| Diluted | 390.2 | 409.1 | 435.1 |

# Consolidated	Statements	of	Comprehensive	Income

|  | Year	Ended	December | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Net\tearnings | \t$10,459 | \t\t\t$\t\t4,286 | \t\t\t$\t\t7,398 |
| Other\tcomprehensive\tincome/(loss)\tadjustments,\tnet\tof\ttax: |  |  |  |
| Currency\ttranslation | 4 | 22 | (60) |
| Debt\tvaluation\tadjustment | 2,553 | (807) | (544) |
| Pension\tand\tpostretirement\tliabilities | 119 | 130 | (199) |
| Available-for-sale\tsecurities | (103) | (9) | – |
| Other\tcomprehensive\tincome/(loss) | 2,573 | (664) | (803) |
| Comprehensive\tincome | \t$13,032 | \t\t\t$\t\t3,622 | \t\t\t$\t\t6,595 |

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

# Consolidated	Statements	of	Financial	Condition

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Assets |  |  |
| Cash\tand\tcash\tequivalents | \t$130,547 | \t$110,051 |
| Collateralized\tagreements: |  |  |
| Securities\tpurchased\tunder\tagreements\tto\tresell\t(includes\t$139,220\tand\t$120,420\tat\tfair\tvalue) | 139,258 | 120,822 |
| Securities\tborrowed\t(includes\t$23,142\tand\t$78,189\tat\tfair\tvalue) | 135,285 | 190,848 |
| Receivables: |  |  |
| Loans\treceivable | 80,590 | 65,933 |
| Customer\tand\tother\treceivables\t(includes\t$3,189\tand\t$3,526\tat\tfair\tvalue) | 79,315 | 84,788 |
| Financial\tinstruments\towned\t(at\tfair\tvalue\tand\tincludes\t$55,081\tand\t$50,335\tpledged\tas\tcollateral) | 336,161 | 315,988 |
| Other\tassets | 30,640 | 28,346 |
| Total\tassets | \t$931,796 | \t$916,776 |
| Liabilities\tand\tshareholders'\tequity |  |  |
| Deposits\t(includes\t$21,060\tand\t$22,902\tat\tfair\tvalue) | \t$158,257 | \t$138,604 |
| Collateralized\tfinancings: |  |  |
| Securities\tsold\tunder\tagreements\tto\trepurchase\t(at\tfair\tvalue) | 78,723 | 84,718 |
| Securities\tloaned\t(includes\t$3,241\tand\t$5,357\tat\tfair\tvalue) | 11,808 | 14,793 |
| Other\tsecured\tfinancings\t(includes\t$20,904\tand\t$24,345\tat\tfair\tvalue) | 21,433 | 24,788 |
| Customer\tand\tother\tpayables | 180,235 | 178,169 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased\t(at\tfair\tvalue) | 108,897 | 111,930 |
| Unsecured\tshort-term\tborrowings\t(includes\t$16,963\tand\t$16,904\tat\tfair\tvalue) | 40,502 | 46,922 |
| Unsecured\tlong-term\tborrowings\t(includes\t$46,584\tand\t$38,638\tat\tfair\tvalue) | 224,149 | 217,687 |
| Other\tliabilities\t(includes\t$132\tand\t$268\tat\tfair\tvalue) | 17,607 | 16,922 |
| Total\tliabilities | 841,611 | 834,533 |
| Commitments,\tcontingencies\tand\tguarantees |  |  |
| Shareholders'\tequity |  |  |
| Preferred\tstock;\taggregate\tliquidation\tpreference\tof\t$11,203\tand\t$11,853 | 11,203 | 11,853 |
| Common\tstock;\t891,356,284\tand\t884,592,863\tshares\tissued,\tand\t367,741,973\tand\t374,808,805\tshares\toutstanding | 9 | 9 |
| Share-based\tawards | 2,845 | 2,777 |
| Nonvoting\tcommon\tstock;\tno\tshares\tissued\tand\toutstanding | – | – |
| Additional\tpaid-in\tcapital | 54,005 | 53,357 |
| Retained\tearnings | 100,100 | 91,519 |
| Accumulated\tother\tcomprehensive\tincome/(loss) | 693 | (1,880) |
| Stock\theld\tin\ttreasury,\tat\tcost;\t523,614,313\tand\t509,784,060\tshares | (78,670) | (75,392) |
| Total\tshareholders'\tequity | 90,185 | 82,243 |
| Total\tliabilities\tand\tshareholders'\tequity | \t$931,796 | \t$916,776 |
| Goldman\tSachs\t2018\tForm\t10-K | Goldman\tSachs\t2018\tForm\t10-K | 105 |

# Consolidated	Statements	of	Changes	in	Shareholders'	Equity

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Preferred\tstock |  |  |  |
| Beginning\tbalance | \t$\t\t11,853 | \t\t\t$\t11,203 | \t\t\t$\t11,200 |
| Issued | – | 1,500 | 1,325 |
| Redeemed | (650) | (850) | (1,322) |
| Ending\tbalance | 11,203 | 11,853 | 11,203 |
| Common\tstock |  |  |  |
| Beginning\tbalance | 9 | 9 | 9 |
| Issued | – | – | – |
| Ending\tbalance | 9 | 9 | 9 |
| Share-based\tawards |  |  |  |
| Beginning\tbalance,\tas\tpreviously\treported | 2,777 | 3,914 | 4,151 |
| Cumulative\teffect\tof\tchange\tin\taccounting\tprinciple\tfor\tforfeiture\tof\tshare-based\tawards | – | 35 | – |
| Beginning\tbalance,\tadjusted | 2,777 | 3,949 | 4,151 |
| Issuance\tand\tamortization\tof\tshare-based\tawards | 1,355 | 1,810 | 2,143 |
| Delivery\tof\tcommon\tstock\tunderlying\tshare-based\tawards | (1,175) | (2,704) | (2,068) |
| Forfeiture\tof\tshare-based\tawards | (80) | (89) | (102) |
| Exercise\tof\tshare-based\tawards | (32) | (189) | (210) |
| Ending\tbalance | 2,845 | 2,777 | 3,914 |
| Additional\tpaid-in\tcapital |  |  |  |
| Beginning\tbalance | 53,357 | 52,638 | 51,340 |
| Delivery\tof\tcommon\tstock\tunderlying\tshare-based\tawards | 1,751 | 2,934 | 2,282 |
| Cancellation\tof\tshare-based\tawards\tin\tsatisfaction\tof\twithholding\ttax\trequirements | (1,118) | (2,220) | (1,121) |
| Preferred\tstock\tissuance\tcosts,\tnet\tof\treversals\tupon\tredemption | 15 | 8 | (10) |
| Excess\tnet\ttax\tbenefit\trelated\tto\tshare-based\tawards | – | – | 147 |
| Cash\tsettlement\tof\tshare-based\tawards | – | (3) | – |
| Ending\tbalance | 54,005 | 53,357 | 52,638 |
| Retained\tearnings |  |  |  |
| Beginning\tbalance,\tas\tpreviously\treported | 91,519 | 89,039 | 83,386 |
| Cumulative\teffect\tof\tchange\tin\taccounting\tprinciple\tfor: |  |  |  |
| Revenue\trecognition\tfrom\tcontracts\twith\tclients,\tnet\tof\ttax | (53) | – | – |
| Forfeiture\tof\tshare-based\tawards,\tnet\tof\ttax | – | (24) | – |
| Debt\tvaluation\tadjustment,\tnet\tof\ttax | – | – | (305) |
| Beginning\tbalance,\tadjusted | 91,466 | 89,015 | 83,081 |
| Net\tearnings | 10,459 | 4,286 | 7,398 |
| Dividends\tand\tdividend\tequivalents\tdeclared\ton\tcommon\tstock\tand\tshare-based\tawards | (1,226) | (1,181) | (1,129) |
| Dividends\tdeclared\ton\tpreferred\tstock | (584) | (587) | (577) |
| Preferred\tstock\tredemption\tdiscount/(premium) | (15) | (14) | 266 |
| Ending\tbalance | 100,100 | 91,519 | 89,039 |
| Accumulated\tother\tcomprehensive\tincome/(loss) |  |  |  |
| Beginning\tbalance,\tas\tpreviously\treported | (1,880) | (1,216) | (718) |
| Cumulative\teffect\tof\tchange\tin\taccounting\tprinciple\tfor\tdebt\tvaluation\tadjustment,\tnet\tof\ttax | – | – | 305 |
| Beginning\tbalance,\tadjusted | (1,880) | (1,216) | (413) |
| Other\tcomprehensive\tincome/(loss) | 2,573 | (664) | (803) |
| Ending\tbalance | 693 | (1,880) | (1,216) |
| Stock\theld\tin\ttreasury,\tat\tcost |  |  |  |
| Beginning\tbalance | (75,392) | (68,694) | (62,640) |
| Repurchased | (3,294) | (6,721) | (6,069) |
| Reissued | 21 | 34 | 22 |
| Other | (5) | (11) | (7) |
| Ending\tbalance | (78,670) | (75,392) | (68,694) |
| Total\tshareholders'\tequity | \t$\t\t90,185 | \t\t\t$\t82,243 | \t\t\t$\t86,893 |

# Consolidated	Statements	of	Cash	Flows

# SUPPLEMENTAL	DISCLOSURES:

Cash	payments	for	interest,	net	of	capitalized	interest,	were	$16.72	billion	for	2018,	$11.17	billion	for	2017	and	$7.14	billion	for	2016,	and	cash	payments	for	income	taxes,	net	of	refunds,	were	$1.27	billion for	2018,	$1.42	billion	for	2017	and	$1.06	billion	for	2016.	Cash	flows	related	to	common	stock	repurchased	includes	common	stock	repurchased	in	the	prior	period	for	which	settlement	occurred	during	the current	period	and	excludes	common	stock	repurchased	during	the	current	period	for	which	settlement	occurred	in	the	following	period.

Non-cash	activities	during	2018:

•The	firm	received	$773	million	of	loans	receivable	and	$109	million	of held-to-maturity	securities	in	connection	with	the	securitization	of	financial	instruments	owned	and	held	for	sale	loans	included	in customer	and	other	receivables.

•The	firm	exchanged	$35	million	of	Trust	Preferred	Securities	and	common	beneficial	interests	for	$35	million	of	certain	of	the	firm's	junior	subordinated	debt. Non-cash	activities	during	2017:

•The	firm	exchanged	$237	million	of	Trust	Preferred	Securities	and	common	beneficial	interests	for	$248	million	of	the	firm's	junior	subordinated	debt.

•The	firm	received	$389	million	of	loans	receivable	and	$112	million	of	 held-to-maturity	securities	in	connection	with	the	securitization	of	financial	instruments	owned.

•The	impact	of	adoption	of	ASU	 No.	2015-02	was	a	net	reduction	to	both	total	assets	and	total	liabilities	of	approximately	$200	million.	See	Note	3	for	further	information.

•The	firm	sold	assets	of	$1.81	billion	and	liabilities	of	$697	million,	that	were	previously	classified	as	held	for	sale,	in	exchange	for	$1.11	billion	of	financial	instruments.

•The	firm	exchanged	$1.04	billion	of	APEX	for	$1.31	billion	of	Series	E	and	Series	F	Preferred	Stock.	See	Note	19	for	further	information.

•The	firm	exchanged	$127	million	of	senior	guaranteed	trust	securities	for	$124	million	of	the	firm's	junior	subordinated	debt.

# Notes	to	Consolidated	Financial	Statements

# Description	of	Business

The	 Goldman	 Sachs	 Group,	 Inc.	 (Group	 Inc.	 or	 parent	 company),	 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	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	 and	 acquisition	 financing,	 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,	including	through	its Merchant	 Banking	 business	 and	 its	 Special	 Situations	 Group,	 in	 debt securities	and	loans,	public	and	private	equity	securities,	infrastructure	and real	estate	entities.	Some	of	these	investments	are	made	indirectly	through funds	that	the	firm	manages.	The	firm	also	makes	unsecured	loans	through its	digital	platform,	Marcus:	by	Goldman	Sachs	and	secured	loans	through its	digital	platform,	Goldman	Sachs	Private	Bank	Select.

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	provided	by	the	firm's	subsidiary, The	Ayco	 Company,	 L.P.,	 including	 portfolio	 management	 and	 financial planning	and	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	2018,	2017	and	2016	refer	to	the	firm's	years	ended,	or	the dates,	as	the	context	requires,	December	31,	2018,	December	31,	2017	and December	31,	2016,	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	described	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	controlling	majority	voting	interest in	a	voting	interest	entity,	the	entity	is	consolidated.

Variable	Interest	Entities. 	A	VIE	is	an	entity	that	lacks	one	or	more	of the	 characteristics	 of	 a	 voting	 interest	 entity.	The	 firm	 has	 a	 controlling financial	interest	in	a	VIE	when	the	firm	has	a	variable	interest	or	interests that	provide	it	with	(i)	the	power	to	direct	the	activities	of	the	VIE	that	most significantly	impact	the	VIE's	economic	performance	and	(ii)	the	obligation to	absorb	losses	of	the	VIE	or	the	right	to	receive	benefits	from	the	VIE	that could	 potentially	 be	 significant	 to	 the	 VIE.	 See	 Note 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	generally measured	 at	 net	 asset	 value	 (NAV)	 and	 are	 included	 in	 financial instruments	owned.	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,	the	allowance	for	credit	losses on	 loans	 receivable	 and	 lending	 commitments	 held	 for	 investment, provisions	 for	 losses	 that	 may	 arise	 from	 litigation	 and	 regulatory proceedings	 (including	 governmental	 investigations),	 and	 provisions	 for losses	that	may	arise	from	tax	audits.	These	estimates	and	assumptions	are based	 on	 the	 best	 available	 information	 but	 actual	 results	 could	 be materially	different.

# Revenue	Recognition

Financial	Assets	and	Financial	Liabilities	at	Fair	Value. 	Financial instruments	owned	and	financial	instruments	sold,	but	not	yet	purchased 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.

Revenue	from	Contracts	with	Clients.	Beginning	in	January	2018,	the firm	accounts	for	revenue	earned	from	contracts	with	clients	for	services such	 as	 investment	 banking,	 investment	 management,	 and	 execution	 and clearing	(contracts	with	clients)	under	ASU	No.	2014-09,	"Revenue	from Contracts	with	Customers	(Topic	606)."	As	such,	revenues	for	these	services are	recognized	when	the	performance	obligations	related	to	the	underlying transaction	 are	 completed.	 See	 "Recent	 Accounting	 Developments	 — Revenue	 from	 Contracts	 with	 Customers	 (ASC 606)" for	 further information.

The	firm's	net	revenues	from	contracts	with	clients	subject	 to	 this	ASU represent	approximately	50%	of	the	firm's	total	net	revenues	for	2018.	This includes	 approximately	 80%	 of	 the	 firm's	 investment	 banking	 revenues, substantially	all	of	the	investment	management	revenues,	and	commissions and	fees	for	2018.	See	Note	25	for	information	about	the	firm's	net	revenues by	business	segment.

Advisory.	 Fees from	 financial	 advisory	 assignments	 are	 recognized	 in revenues	 when	 the	 services	 related	 to	 the	 underlying	 transaction	 are completed	under	the	terms	of	the	assignment.	Beginning	in	January	2018, non-refundable	 deposits	 and	 milestone	 payments	 in	 connection	 with financial	advisory	assignments	are	recognized	in	revenues	upon	completion of	 the	 underlying	 transaction	 or	 when	 the	 assignment	 is	 otherwise concluded.	 Prior	 to	 January	 2018,	non-refundable	deposits	and	milestone payments	were	recognized	in	revenues	in	accordance	with	the	terms	of	the contract.

Beginning	 in	 January	 2018,	 certain	 expenses	 associated	 with	 financial advisory	assignments	are	recognized	when	incurred.	Client	reimbursements for	 such	 expenses	 are	 included	 in	 financial	 advisory	 revenues.	 Prior	 to January	2018,	such	expenses	were	deferred	until	the	related	revenue	was recognized	or	the	assignment	was	otherwise	concluded	and	were	presented net	of	client	reimbursements.

Underwriting.	 Fees from	 underwriting	 assignments	 are	 recognized	 in revenues	upon	completion	of	the	underlying	transaction	based	on	the	terms of	the	assignment.

Certain	 expenses	 associated	 with	 underwriting	 assignments	 are	 deferred until	 the	 related	 revenue	 is	 recognized	 or	 the	 assignment	 is	 otherwise concluded.	 Beginning	 in	 January	 2018,	 such	 expenses	 are	 presented	 as operating	expenses.	Prior	to	January	2018,	such	expenses	were	presented	net within	underwriting	revenues.

The	 firm	 earns	 management	 fees	 and	 incentive	 fees	 for	 investment management	 services,	 which	 are	 included	 in	 investment	 management revenues.	The	firm	makes	payments	to	brokers	and	advisors	related	to	the placement	 of	 the	 firm's	 investment	 funds	 (distribution	 fees),	 which	 are included	in	brokerage,	clearing,	exchange	and	distribution	fees.

Management	Fees.	Management	fees	for	mutual	funds	are	calculated	as a	 percentage	 of	 daily	 net	 asset	 value	 and	 are	 received	 monthly. Management	fees	for	hedge	funds	and	separately	managed	accounts	are calculated	as	a	percentage	of	month-end	net	asset	value	and	are	generally received	 quarterly.	 Management	 fees	 for	 private	 equity	 funds	 are calculated	 as	 a	 percentage	 of	 monthly	 invested	 capital	 or	 committed capital	and	are	received	quarterly,	semi-annually	or	annually,	depending	on the	 fund.	 Management	 fees	 are	 recognized	 over	 time	 in	 the	 period	 the investment	management	services	are	provided.

Distribution	 fees	 paid	 by	 the	 firm	 are	 calculated	 based	 on	 either	 a percentage	of	the	management	fee,	the	investment	fund's	net	asset	value	or the	committed	capital.	Beginning	in	January	2018,	the	firm	presents	such fees	 in	 brokerage,	 clearing,	 exchange	 and	 distribution	 fees.	 Prior	 to January	2018,	where	the	firm	was	considered	an	agent	to	the	arrangement, such	 fees	 were	 presented	 on	 a	 net	 basis	 in	 investment	 management revenues.

Incentive	Fees.	Incentive	fees	are	calculated	as	a	percentage	of	a	fund's or	separately	managed	account's	return,	or	excess	return	above	a	specified benchmark	or	other	performance	target.	Incentive	fees	are	generally	based on	investment	performance	over	a	twelve-month	period	or	over	the	life	of	a fund.	Fees	that	are	based	on	performance	over	a	twelve-month	period	are subject	to	adjustment	prior	to	the	end	of	the	measurement	period.	For	fees that	are	based	on	investment	performance	over	the	life	of	the	fund,	future investment	underperformance	may	require	fees	previously	distributed	to the	firm	to	be	returned	to	the	fund.

Beginning	in	January	2018,	incentive	fees	earned	from	a	fund	or	separately managed	 account	 are	 recognized	 when	 it	 is	 probable	 that	 a	 significant reversal	of	such	fees	will	not	occur,	which	is	generally	when	such	fees	are no	longer	subject	to	fluctuations	in	the	market	value	of	investments	held	by the	 fund	 or	 separately	 managed	 account.	 Therefore,	 incentive	 fees recognized	 during	 the	 period	 may	 relate	 to	 performance	 obligations satisfied	in	previous	periods.	Prior	to	January	2018,	incentive	fees	were recognized	only	when	all	material	contingencies	were	resolved.

# Commissions	and	Fees

The	firm	earns	commissions	and	fees	from	executing	and	clearing	client transactions	 on	 stock,	 options	 and	 futures	 markets,	 as	 well	 as over-the-counter	(OTC)	transactions.	Commissions	and	fees	are	recognized on	the	day	the	trade	is	executed.	The	firm	also	provides	third-party	research services	to	clients	in	connection	with	certain	soft-dollar	arrangements.

Beginning	in	January	2018,	third-party	research	costs	incurred	by	the	firm	in connection	 with	 soft-dollar	 arrangements	 are	 presented	 net	 within commissions	and	fees.	Prior	to	January	2018,	such	costs	were	presented	in brokerage,	clearing,	exchange	and	distribution	fees.

# Remaining	Performance	Obligations

Remaining	performance	obligations	are	services	that	the	firm	has	committed to	perform	in	the	future	in	connection	with	its	contracts	with	clients.	The firm's	 remaining	 performance	 obligations	 are	 generally	 related	 to	 its financial	 advisory	 assignments	 and	 certain	 investment	 management activities.	 Revenues	 associated	 with	 remaining	 performance	 obligations relating	 to	financial	advisory	assignments	cannot	be	determined	until	 the outcome	 of	 the	 transaction.	 For	 the	 firm's	 investment	 management activities,	where	fees	are	calculated	based	on	the	net	asset	value	of	the	fund or	separately	managed	account,	future	revenues	associated	with	remaining performance	obligations	cannot	be	determined	as	such	fees	are	subject	to fluctuations	 in	 the	 market	 value	 of	 investments	 held	 by	 the	 fund	 or separately	managed	account.

The	 firm	 is	 able	 to	 determine	 the	 future	 revenues	 associated	 with management	 fees	 calculated	 based	 on	 committed	 capital.	 As	 of December	2018,	substantially	all	of	the	firm's	future	net	revenues	associated with	remaining	performance	obligations	will	be	recognized	through	2024. Annual	revenues	associated	with	such	performance	obligations	average	less than	$250	million	through	2024.

# Transfers	of	Financial	Assets

Transfers	of	financial	assets	are	accounted	for	as	sales	when	the	firm	has relinquished	control	over	 the	assets	 transferred.	For	 transfers	of	financial assets	 accounted	 for	 as	 sales,	 any	 gains	 or	 losses	 are	 recognized	 in	 net revenues.	 Assets	 or	 liabilities	 that	 arise	 from	 the	 firm's	 continuing involvement	with	transferred	financial	assets	are	initially	recognized	at	fair value.	For	transfers	of	financial	assets	that	are	not	accounted	for	as	sales,	the assets	are	generally	included	in	financial	instruments	owned	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	financial	assets	accounted	for	as	collateralized financings	and	Note	11	for	further	information	about	transfers	of	financial 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.	Cash	and	cash	equivalents	included	cash and	 due	 from	 banks	 of $10.66 billion	 as	 of	 December	 2018	 and $10.79	 billion	 as	 of	 December	 2017.	 Cash	 and	 cash	 equivalents	 also included	 interest-bearing	 deposits	 with	 banks	 of	 $119.89	 billion	 as	 of December	2018	and	$99.26	billion	as	of	December	2017.

The	firm	segregates	cash	for	regulatory	and	other	purposes	related	to	client activity.	Cash	and	cash	equivalents	segregated	for	regulatory	and	other purposes	were	$23.14	billion	as	of	December	2018	and	$18.44	billion	as	of December	2017.	In	addition,	the	firm	segregates	securities	for	regulatory and	 other	 purposes	 related	 to	 client	 activity.	 See	 Note	 10	 for	 further information	about	segregated	securities.

# Customer	and	Other	Receivables

Customer	and	other	receivables	included	receivables	from	customers	and counterparties	of	$53.81	billion	as	of	December	2018	and	$60.11	billion	as of	 December	 2017,	 and	 receivables	 from	 brokers,	 dealers	 and	 clearing organizations	of	$25.50	billion	as	of	December	2018	and	$24.68	billion	as of	December	2017.	Such	receivables	primarily	consist	of	customer	margin loans,	receivables	resulting	from	unsettled	transactions,	collateral	posted in	connection	with	certain	derivative	transactions	and	certain	transfers	of assets	accounted	for	as	secured	loans	rather	than	purchases	at	fair	value.

Substantially	all	of	these	receivables	are	accounted	for	at	amortized	cost net	of	estimated	uncollectible	amounts.	Certain	of	the	firm's	customer	and other	receivables	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	customer	and	other	receivables accounted	for	at	fair	value	under	 the	fair	value	option.	In	addition,	 the firm's	 customer	 and	 other	 receivables	 included $3.83 billion	 as	 of December	2018	and	$4.63	billion	as	of	December	2017	of	loans	held	for sale	accounted	for	at	the	lower	of	cost	or	fair	value.	See	Note	5	for	an overview	 of	 the	 firm's	 fair	 value	 measurement	 policies.	 As	 of	 both December	2018	and	December	2017,	the	carrying	value	of	receivables	not accounted	for	at	fair	value	generally	approximated	fair	value.	As	 these receivables	are	not	accounted	for	at	fair	value,	they	are	not	included	in	the firm's	fair	value	hierarchy	in	Notes	5	through	8.	Had	these	receivables been	included	in	the	firm's	fair	value	hierarchy,	substantially	all	would have	 been	 classified	 in	 level 2 as	 of	 both	 December	 2018	 and December	2017.	Interest	on	customer	and	other	receivables	is	recognized over	the	life	of	the	transaction	and	included	in	interest	income.

Customer	 and	 other	 receivables	 includes	 receivables	 from	 contracts	 with clients	 and,	 beginning	 in	 January	 2018,	 also	 includes	 contract	 assets. Contract	 assets	 represent	 the	 firm's	 right	 to	 receive	 consideration	 for services	provided	 in	connection	with	 its	contracts	with	clients	for	which collection	is	conditional	and	not	merely	subject	to	the	passage	of	time.	As	of December	 2018,	 the	 firm's	 receivables	 from	 contracts	 with	 clients	 were $1.94	billion	and	contract	assets	were	not	material.

# Customer	and	Other	Payables

Customer	 and	 other	 payables	 included	 payables	 to	 customers	 and counterparties	of	$173.99	billion	as	of	December	2018	and	$171.50	billion as	 of	 December	 2017,	 and	 payables	 to	 brokers,	 dealers	 and	 clearing organizations	of	$6.24	billion	as	of	December	2018	and	$6.67	billion	as	of December	 2017.	 Such	 payables	 primarily	 consist	 of	 customer	 credit balances	related	to	the	firm's	prime	brokerage	activities.	Customer	and	other payables	are	accounted	for	at	cost	plus	accrued	interest,	which	generally approximates	 fair	 value.	As	 these	 payables	 are	 not	 accounted	 for	 at	 fair value,	they	are	not	included	in	the	firm's	fair	value	hierarchy	in	Notes	5 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	both December	 2018	 and	 December	 2017.	 Interest	 on	 customer	 and	 other payables	 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. Securities	purchased	under	agreements	to	resell	(resale	agreements)	and securities	sold	under	agreements	 to	 repurchase	 (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.

Revenue from Contracts with Customers (ASC 606). In May	2014,	the	FASB	issued	ASU	No.	2014-09.	This	ASU,	as	amended, provides	comprehensive	guidance	on	 the	recognition	of	revenue	earned from	 contracts	 with	 customers	 arising	 from	 the	 transfer	 of	 goods	 and services,	 guidance	 on	 accounting	 for	 certain	 contract	 costs	 and	 new disclosures.

The	firm	adopted	this	ASU	in	January	2018	under	a	modified	retrospective approach.	As	a	result	of	adopting	this	ASU,	the	firm,	among	other	things, delays	recognition	of	non-refundable	and	milestone	payments	on	financial advisory	assignments	until	the	assignments	are	completed,	and	recognizes certain	investment	management	fees	earlier	than	under	the	firm's	previous revenue	recognition	policies.

The	firm	also	prospectively	changed	the	presentation	of	certain	costs	from	a net	presentation	within	revenues	to	a	gross	basis,	and	vice	versa.	Beginning in	 2018,	 certain	 underwriting	 expenses,	 which	 were	 netted	 against investment	 banking	 revenues,	 and	 certain	 distribution	 fees,	 which	 were netted	 against	 investment	 management	 revenues,	 are	 presented	 gross	 as operating	 expenses.	 Costs	 incurred	 in	 connection	 with	 certain	 soft-dollar arrangements,	 which	 were	 presented	 gross	 as	 operating	 expenses,	 are presented	net	within	commissions	and	fees.

The	cumulative	effect	of	adopting	this	ASU	as	of	January	1,	2018	was	a decrease	to	retained	earnings	of	$53	million	(net	of	tax).	In	addition,	net revenues	 and	 operating	 expenses	 were	 both	 higher	 by	 approximately $300	million	for	2018,	due	to	the	changes	in	the	presentation	of	certain	costs from	a	net	presentation	within	revenues	to	a	gross	basis.

Recognition	and	Measurement	of	Financial	Assets	and	Financial Liabilities (ASC 825). In	 January	 2016,	 the	 FASB	 issued	 ASU No.	 2016-01,	 "Financial	 Instruments	 (Topic 825)	 —	 Recognition and Measurement	 of	 Financial	 Assets	 and	 Financial	 Liabilities."	 This	 ASU amends	 certain	 aspects	 of	 recognition,	 measurement,	 presentation	 and disclosure	 of	 financial	 instruments.	 It	 includes	 a	 requirement	 to	 present separately	in	other	comprehensive	income	changes	in	fair	value	attributable to	a	firm's	own	credit	spreads	(debt	valuation	adjustment	or	DVA),	net	of tax,	on	financial	liabilities	for	which	the	fair	value	option	was	elected.

In	 January	 2016,	 the	 firm	 early	 adopted	 this	ASU	 for	 the	 requirements related	to	DVA	and	reclassified	the	cumulative	DVA,	a	gain	of	$305	million (net	of	 tax),	from	retained	earnings	 to	accumulated	other	comprehensive loss.	The	adoption	of	the	remaining	provisions	of	the	ASU	in	January	2018 did	not	have	a	material	impact	on	the	firm's	financial	condition,	results	of operations	or	cash	flows.

Leases (ASC 842). In	 February	 2016,	 the	 FASB	 issued	 ASU No.	 2016-02,	 "Leases	 (Topic	 842)."	 This	ASU	 requires	 that,	 for	 leases longer	 than	 one	 year,	 a	 lessee	 recognize	 in	 the	 statements	 of	 financial condition	 a	right-of-use	asset,	representing	the	right	to	use	the	underlying asset	for	the	lease	term,	and	a	lease	liability,	representing	the	liability	to make	 lease	 payments.	 It	 also	 requires	 that	 for	 finance	 leases,	 a	 lessee recognize	 interest	 expense	 on	 the	 lease	 liability,	 separately	 from	 the amortization	of	the	right-of-use	asset	in	the	statements	of	earnings,	while	for operating	 leases,	 such	 amounts	 should	 be	 recognized	 as	 a	 combined expense.	It	also	requires	that	for	qualifying	sale-leaseback	transactions	the seller	recognize	any	gain	or	loss	(based	on	the	estimated	fair	value	of	the asset	at	the	time	of	sale)	when	control	of	the	asset	is	transferred	instead	of amortizing	it	over	the	lease	period.	In	addition,	this	ASU	requires	expanded disclosures	about	the	nature	and	terms	of	lease	agreements.

The	firm	adopted	this	ASU	in	January	2019	under	a	modified	retrospective approach.	The	impact	of	adopting	this	ASU	was	a	gross	up	of	$1.77	billion on	 the	 firm's	 consolidated	 statements	 of	 financial	 condition	 and	 an increase	 to	 retained	 earnings	 of $12 million	 (net	 of	 tax)	 as	 of January	1,	2019.

Improvements	to	Employee	Share-Based	Payment	Accounting (ASC 718). In	 March	 2016,	 the	 FASB	 issued	 ASU	No.	 2016-09, "Compensation	—	Stock	Compensation	(Topic	718)	—	Improvements	to Employee	 Share-Based	 Payment	 Accounting."	 This	 ASU	 includes	 a requirement	 that	 the	 tax	 effect	 related	 to	 the	 settlement	 of	 share-based awards	be	recorded	in	income	tax	benefit	or	expense	in	the	statements	of earnings	rather	than	directly	to	additional	paid-in	capital.	This	change	has no	 impact	 on	 total	 shareholders'	 equity	 and	 is	 required	 to	 be	 adopted prospectively.	The	ASU	also	allows	for	forfeitures	to	be	recorded	when they	occur	rather	than	estimated	over	the	vesting	period.	This	change	is required	to	be	applied	on	a	modified	retrospective	basis.

The	firm	adopted	the	ASU	in	January	2017	and	subsequent	to	the	adoption, the	tax	effect	related	to	the	settlement	of	share-based	awards	is	recognized in	 the	 statements	 of	 earnings	 rather	 than	 directly	 to	 additional	paid-in capital.	 The	 firm	 also	 elected	 to	 account	 for	 forfeitures	 as	 they	 occur, rather	 than	 to	 estimate	 forfeitures	 over	 the	 vesting	 period,	 and	 the cumulative	 effect	 of	 this	 election	 upon	 adoption	 was	 an	 increase	 of $35	million	to	share-based	awards	and	a	decrease	of	$24	million	(net	of	tax of	$11	million)	to	retained	earnings.

In	 addition,	 the	ASU	 modifies	 the	 classification	 of	 certain	 share-based payment	activities	within	the	statements	of	cash	flows.	Upon	adoption,	the firm	reclassified	amounts	related	to	such	activities	within	the	consolidated statements	of	cash	flows,	on	a	retrospective	basis.

Measurement of Credit Losses on Financial Instruments (ASC	326).	In	June	2016,	the	FASB	issued	ASU	No.	2016-13,	"Financial Instruments	 —	 Credit	 Losses	 (Topic	 326)	 —	 Measurement	 of	 Credit Losses	on	Financial	Instruments."	This	ASU	amends	several	aspects	of	the measurement	of	credit	losses	on	financial	instruments,	including	replacing the	existing	incurred	credit	loss	model	and	other	models	with	the	Current Expected	Credit	Losses	(CECL)	model	and	amending	certain	aspects	of accounting	 for	 purchased	 financial	 assets	 with	 deterioration	 in	 credit quality	since	origination.

Under	CECL,	the	allowance	for	losses	for	financial	assets	that	are	measured at	amortized	cost	reflects	management's	estimate	of	credit	losses	over	the remaining	expected	life	of	the	financial	assets.	Expected	credit	losses	for newly	 recognized	 financial	 assets,	 as	 well	 as	 changes	 to	 expected	 credit losses	 during	 the	 period,	 would	 be	 recognized	 in	 earnings.	 For	 certain purchased	 financial	 assets	 with	 deterioration	 in	 credit	 quality	 since origination,	 an	 initial	 allowance	 would	 be	 recorded	 for	 expected	 credit losses	and	recognized	as	an	increase	to	the	purchase	price	rather	than	as	an expense.	 The	 ASU	 eliminates	 the	 existing	 accounting	 guidance	 for Purchased	Credit	Impaired	(PCI)	loans.	The	ASU	is	effective	for	the	firm	in January	2020	under	a	modified	retrospective	approach	with	early	adoption permitted	beginning	in	January	2019.	The	firm	plans	to	adopt	this	ASU	on January	1,	2020.

Expected	credit	losses,	including	losses	on	off-balance-sheet	exposures	such as	lending	commitments,	will	be	measured	based	on	historical	experience, current	conditions	and	forecasts	that	affect	the	collectability	of	the	reported amount.

The	firm	has	substantially	completed	development	of	credit	loss	models	for its	significant	loan	portfolios	and	is	in	the	process	of	validating	data	inputs to	 these	 models,	 while	 continuing	 to	 develop	 the	 policies,	 systems	 and controls	 that	 will	 be	 required	 to	 implement	 CECL.	 The	 firm	 currently expects	to	begin	testing	of	these	models	in	the	first	half	of	2019.	The	firm currently	 expects	 that	 its	 allowance	 for	 credit	 losses	 will	 likely	 increase when	CECL	is	adopted	as	the	allowance	will	cover	expected	credit	losses over	 the	 full	 expected	 life	 of	 the	 loan	 portfolios	 and	 will	 also	 take	 into account	expected	changes	 in	future	economic	conditions.	In	addition,	an allowance	will	be	recorded	for	certain	purchased	loans	with	deterioration	in credit	quality	since	origination	with	a	corresponding	increase	to	their	gross carrying	value.	The	extent	of	the	impact	of	adoption	of	this	ASU	on	the firm's	financial	condition,	results	of	operations	and	cash	flows	will	depend on,	among	other	things,	the	economic	environment,	and	the	size	and	type	of loan	portfolios	held	by	the	firm	on	the	date	of	adoption.

Classification	 of	 Certain	 Cash	 Receipts	 and	 Cash	 Payments (ASC 230). In	 August	 2016,	 the	 FASB	 issued	 ASU	No.	 2016-15, "Statement	of	Cash	Flows	(Topic	230)	—	Classification	of	Certain	Cash Receipts	 and	 Cash	 Payments."	 This	 ASU	 provides	 guidance	 on	 the disclosure	and	classification	of	certain	items	within	the	statements	of	cash flows.

The	 firm	 adopted	 this	 ASU	 in	 January	 2018	 under	 a	 retrospective approach.	The	impact	for	2017	was	an	increase	of	$485	million	to	net	cash used	for	operating	activities,	a	decrease	of	$477	million	to	net	cash	used	for investing	activities	and	an	increase	of	$8	million	to	net	cash	provided	by financing	activities.	The	impact	for	2016	was	a	decrease	of	$406	million	to net	cash	provided	by	operating	activities,	an	increase	of	$405	million	to	net cash	provided	by	investing	activities	and	an	increase	of	$1	million	to	net cash	provided	by	financing	activities.

Clarifying the Definition of a Business (ASC 805). In January	 2017,	 the	 FASB	 issued	 ASU	No.	 2017-01,	 "Business Combinations	(Topic	805)	—	Clarifying	the	Definition	of	a	Business."	The ASU	amends	the	definition	of	a	business	and	provides	a	threshold	which must	be	considered	to	determine	whether	a	transaction	is	an	acquisition	(or disposal)	of	an	asset	or	a	business.

The	firm	adopted	this	ASU	in	January	2018	under	a	prospective	approach. Adoption	 of	 the	 ASU	 did	 not	 have	 a	 material	 impact	 on	 the	 firm's financial	condition,	results	of	operations	or	cash	flows.	The	firm	expects that	 fewer	 transactions	 will	 be	 treated	 as	 acquisitions	 (or	 disposals)	 of businesses	as	a	result	of	adopting	this	ASU.

Simplifying the	 Test for	 Goodwill Impairment (ASC	 350). In January	 2017,	 the	 FASB	 issued	 ASU	No.	 2017-04,	 "Intangibles	 — Goodwill	and	Other	(Topic	350)	—	Simplifying	 the	Test	for	Goodwill Impairment."	The	ASU	simplifies	 the	 quantitative	 goodwill	 impairment test	by	eliminating	the	second	step	of	the	test.	Under	this	ASU,	impairment will	be	measured	by	comparing	the	estimated	fair	value	of	the	reporting unit	with	its	carrying	value.

The	firm	early	adopted	this	ASU	in	the	fourth	quarter	of	2017.	Adoption	of the	 ASU	 did	 not	 have	 a	 material	 impact	 on	 the	 results	 of	 the	 firm's goodwill	impairment	test.

Clarifying the	 Scope	 of	 Asset	 Derecognition	 Guidance	 and Accounting for Partial Sales of Nonfinancial Assets (ASC	610-20).	In	February	2017,	 the	FASB	 issued	ASU	No.	 2017-05, "Other	 Income	 —	 Gains	 and	 Losses	 from	 the	 Derecognition	 of Nonfinancial	Assets	(Subtopic	610-20)	—	Clarifying	the	Scope	of	Asset Derecognition	Guidance	and	Accounting	for	Partial	Sales	of	Nonfinancial Assets."	The	ASU	clarifies	the	scope	of	guidance	applicable	to	sales	of nonfinancial	assets	and	also	provides	guidance	on	accounting	for	partial sales	of	such	assets.

The	firm	adopted	this	ASU	in	January	2018	under	a	modified	retrospective approach.	Adoption	 of	 the	ASU	 did	 not	 have	 an	 impact	 on	 the	 firm's financial	condition,	results	of	operations	or	cash	flows.

Targeted Improvements to	 Accounting for	 Hedging	 Activities (ASC 815). In	 August	 2017,	 the	 FASB	 issued	 ASU	No.	 2017-12, "Derivatives	 and	 Hedging	 (Topic 815)	 —	 Targeted Improvements	 to Accounting	 for	 Hedging	Activities."	 The	ASU	 amends	 certain	 rules	 for hedging	relationships,	expands	the	types	of	strategies	that	are	eligible	for hedge	 accounting	 treatment	 to	 more	 closely	 align	 the	 results	 of	 hedge accounting	 with	 risk	 management	 activities	 and	 amends	 disclosure requirements	related	to	fair	value	and	net	investment	hedges.

The	 firm	 early	 adopted	 this	 ASU	 in	 January	 2018	 under	 a	 modified retrospective	 approach	 for	 hedge	 accounting	 treatment,	 and	 under	 a prospective	approach	for	the	amended	disclosure	requirements.	Adoption	of this	ASU	did	not	have	a	material	impact	on	the	firm's	financial	condition, results	of	operations	or	cash	flows.	See	Note	7	for	further	information.

Reclassification	of	Certain	Tax	Effects	from	Accumulated	Other Comprehensive Income (ASC	 220). In	 February	 2018,	 the	 FASB issued	ASU	No.	2018-02,	"Income	Statement	—	Reporting	Comprehensive Income	 (Topic 220)	 —	 Reclassification of	 Certain	 Tax	 Effects	 from Accumulated	Other	Comprehensive	Income."	This	ASU	permits	a	reporting entity	to	reclassify	the	income	tax	effects	of	the	Tax	Cuts	and	Jobs	Act	(Tax Legislation)	on	items	within	accumulated	other	comprehensive	income	to retained	earnings.

The	firm	adopted	this	ASU	in	January	2019	and	did	not	elect	to	reclassify the	 income	 tax	 effects	 of	 Tax	 Legislation	 from	 accumulated	 other comprehensive	income	to	retained	earnings.	Therefore,	the	adoption	of	the ASU	did	not	have	an	impact	on	the	firm's	financial	condition,	results	of operations	or	cash	flows.

# Changes to the Disclosure Requirements for Fair Value Measurement (ASC	 820). In	 August	 2018,	 the	 FASB	 issued	 ASU No.	 2018-13,	 "Fair	 Value	 Measurement	 (Topic	 820)	 —	 Changes	 to	 the Disclosure	Requirements	for	Fair	Value	Measurement."	This	ASU,	among other	amendments,	eliminates	the	requirement	to	disclose	the	amounts	and reasons	for	transfers	between	level	1	and	level	2	of	the	fair	value	hierarchy and	modifies	the	disclosure	requirement	relating	to	investments	in	funds	at NAV.	The	firm	early	adopted	this	ASU	in	the	third	quarter	of	2018	and disclosures	were	modified	in	accordance	with	the	ASU.	See	Notes	5	through 8	for	further	information.

# Financial Instruments Owned and Financial Instruments	Sold,	But	Not	Yet	Purchased

Financial	instruments	owned	and	financial	instruments	sold,	but	not	yet purchased	are	accounted	for	at	fair	value	either	under	the	fair	value	option or	in	accordance	with	other	U.S.	GAAP.	See	Note	8	for	information	about other	financial	assets	and	financial	liabilities	at	fair	value.

The	 table	 below	 presents	 financial instruments owned and financial instruments	sold,	but	not	yet	purchased.

| $	in	millions | Financial<br>Instruments<br>Owned | Sold,	But<br>Not	Yet<br>Purchased |
| :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |
| Money\tmarket\tinstruments | \t\t$\t\t\t\t2,635 | $\t\t\t\t\t\t\t\t\t\t– |
| Government\tand\tagency\tobligations: |  |  |
| U.S. | 110,616 | 5,080 |
| Non-U.S. | 43,607 | 25,347 |
| Loans\tand\tsecurities\tbacked\tby: |  |  |
| Commercial\treal\testate | 3,369 | – |
| Residential\treal\testate | 12,949 | 1 |
| Corporate\tdebt\tinstruments | 31,207 | 10,411 |
| State\tand\tmunicipal\tobligations | 1,233 | – |
| Other\tdebt\tobligations | 1,864 | 1 |
| Equity\tsecurities | 76,170 | 25,463 |
| Commodities | 3,729 | – |
| Investments\tin\tfunds\tat\tNAV | 3,936 | – |
| Subtotal | 291,315 | 66,303 |
| Derivatives | 44,846 | 42,594 |
| Total | \t\t$336,161 | \t$108,897 |
| As\tof\tDecember\t2017 |  |  |
| Money\tmarket\tinstruments | \t\t$\t\t\t\t1,608 | $\t\t\t\t\t\t\t\t\t\t– |
| Government\tand\tagency\tobligations: |  |  |
| U.S. | 76,418 | 17,911 |
| Non-U.S. | 33,956 | 23,311 |
| Loans\tand\tsecurities\tbacked\tby: |  |  |
| Commercial\treal\testate | 3,436 | 1 |
| Residential\treal\testate | 11,993 | – |
| Corporate\tdebt\tinstruments | 33,683 | 7,153 |
| State\tand\tmunicipal\tobligations | 1,471 | – |
| Other\tdebt\tobligations | 2,164 | 1 |
| Equity\tsecurities | 96,132 | 23,882 |
| Commodities | 3,194 | 40 |
| Investments\tin\tfunds\tat\tNAV | 4,596 | – |
| Subtotal | 268,651 | 72,299 |
| Derivatives | 47,337 | 39,631 |
| Total | \t\t$315,988 | \t$111,930 |

•	Money	market	 instruments	 includes	 commercial	 paper,	 certificates	 of deposit	and	time	deposits,	substantially	all	of	which	have	a	maturity	of less	than	one	year.

•	Corporate	debt	instruments	includes	corporate	loans	and	debt	securities.

•	Equity	securities	includes	public	and	private	equities,	exchange-traded funds	 and	 convertible	 debentures.	 Such	 amounts	 include	 investments accounted	for	at	fair	value	under	the	fair	value	option	where	the	firm would	otherwise	apply	the	equity	method	of	accounting	of	$7.91	billion as	of	December	2018	and	$8.49	billion	as	of	December	2017.

# Gains and	 Losses from	 Market	 Making and	 Other	 Principal Transactions

The	table	below	presents	market	making	revenues	by	major	product	type and	other	principal	transactions	revenues.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Interest\trates | \t$\t(2,056) | \t$\t\t6,406 | \t$\t(1,979) |
| Credit | 1,276 | 701 | 1,854 |
| Currencies | 4,582 | (3,249) | 6,158 |
| Equities | 5,186 | 3,162 | 2,873 |
| Commodities | 463 | 640 | 1,027 |
| Market\tmaking | 9,451 | 7,660 | 9,933 |
| Other\tprincipal\ttransactions | 5,823 | 5,913 | 3,382 |
| Total | \t$15,274 | \t$13,573 | \t$13,315 |

•	Gains/(losses)	include	both	realized	and	unrealized	gains	and	losses,	and are	 primarily	 related	 to	 the	 firm's	 financial	 instruments	 owned	 and financial	 instruments	 sold,	 but	 not	 yet	 purchased,	 including	 both derivative	and	non-derivative	financial	instruments.

•	Gains/(losses)	exclude	related	interest	income	and	interest	expense.	See Note 23 for	 further	 information	 about	 interest	 income	 and	 interest expense.

•	Gains/(losses)	on	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.

•	Gains/(losses)	 are	 not	 representative	 of	 the	 manner	 in	 which	 the	 firm manages	its	business	activities	because	many	of	the	firm's	market-making and	 client	 facilitation	 strategies	 utilize	 financial	 instruments	 across various	product	types.	Accordingly,	gains	or	losses	in	one	product	type frequently	offset	gains	or	losses	in	other	product	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.

# 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	 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	 hierarchy	 for	 disclosure	 of	 fair	 value measurements.	This	hierarchy	prioritizes	inputs	to	the	valuation	techniques used	to	measure	fair	value,	giving	the	highest	priority	to	level	1	inputs	and the	lowest	priority	to	level	3	inputs.	A	financial	instrument's	level	in	this hierarchy	is	based	on	the	lowest	level	of	input	that	is	significant	to	its	fair value	measurement.	In	evaluating	the	significance	of	a	valuation	input,	the firm	considers,	among	other	factors,	a	portfolio's	net	risk	exposure	to	that input.	The	fair	value	hierarchy	is	as	follows:

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	at	fair	value.

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.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Total\tlevel\t1\tfinancial\tassets | \t\t$170,463 | \t$155,086 |
| Total\tlevel\t2\tfinancial\tassets | 354,515 | 395,606 |
| Total\tlevel\t3\tfinancial\tassets | 22,181 | 19,201 |
| Investments\tin\tfunds\tat\tNAV | 3,936 | 4,596 |
| Counterparty\tand\tcash\tcollateral\tnetting | (49,383) | (56,366) |
| Total\tfinancial\tassets\tat\tfair\tvalue | \t\t$501,712 | \t$518,123 |
| Total\tassets | \t\t$931,796 | \t$916,776 |
| Total\tlevel\t3\tfinancial\tassets\tdivided\tby: |  |  |
| Total\tassets | 2.4% | 2.1% |
| Total\tfinancial\tassets\tat\tfair\tvalue | 4.4% | 3.7% |
| Total\tlevel\t1\tfinancial\tliabilities | \t\t$\t\t54,151 | \t$\t\t63,589 |
| Total\tlevel\t2\tfinancial\tliabilities | 258,335 | 261,719 |
| Total\tlevel\t3\tfinancial\tliabilities | 23,804 | 19,620 |
| Counterparty\tand\tcash\tcollateral\tnetting | (39,786) | (39,866) |
| Total\tfinancial\tliabilities\tat\tfair\tvalue | \t\t$296,504 | \t$305,062 |
| Total\tlevel\t3\tfinancial\tliabilities\tdivided\tby\ntotal\tfinancial\tliabilities\tat\tfair\tvalue | 8.0% | 6.4% |

•	Counterparty	 netting among	 positions classified in the same level is included	in	that	level.

•	Counterparty	 and	 cash	 collateral	 netting	 represents	 the impact on derivatives	of	netting	across	levels	of	the	fair	value	hierarchy.

The	table	below	presents	a	summary	of	level	3	financial	assets.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Cash\tinstruments | \t\t$17,227 | \t$15,395 |
| Derivatives | 4,948 | 3,802 |
| Other\tfinancial\tassets | 6 | 4 |
| Total | \t\t$22,181 | \t$19,201 |

Level	3	financial	assets	as	of	December	2018	increased	compared	with December	 2017,	 primarily	 reflecting	 an	 increase	 in	 level 3 cash instruments.	See	Notes	6	through	8	for	further	information	about	level	3 financial	assets	(including	information	about	unrealized	gains	and	losses related	to	level	3	financial	assets	and	financial	liabilities,	and	transfers	in and	out	of	level	3).

# Cash	Instruments

Cash	 instruments	 include	 U.S.	 government	 and	 agency	 obligations, non-U.S.	government	and	agency	obligations,	mortgage-backed	loans	and securities,	 corporate	 debt	 instruments,	 equity	 securities,	 investments	 in funds	at	NAV,	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	certain	money	market	instruments,	U.S. government	 obligations,	 most	non-U.S.	 government	 obligations,	 certain government	 agency	 obligations,	 certain	 corporate	 debt	 instruments	 and actively	traded	listed	equities.	These	instruments	are	valued	using	quoted prices	for	identical	unrestricted	instruments	in	active	markets.

The	 firm	 defines	 active	 markets	 for	 equity	 instruments	 based	 on	 the average	daily	trading	volume	both	in	absolute	terms	and	relative	to	the market	capitalization	for	the	instrument.	The	firm	defines	active	markets for	debt	instruments	based	on	both	the	average	daily	trading	volume	and the	number	of	days	with	trading	activity.

Level	 2	 cash	 instruments	 include	 most	 money	 market	 instruments,	 most government	 agency	 obligations,	 certain	non-U.S.	government	obligations, most	 mortgage-backed	 loans	 and	 securities,	 most	 corporate	 debt instruments,	 most	 state	 and	 municipal	 obligations,	 most	 other	 debt obligations,	restricted	or	less	liquid	listed	equities,	commodities	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.

# Valuation	 Techniques	 and	 Significant Inputs	 of	 Level	 3	 Cash Instruments

Valuation	techniques	of	level	3	cash	instruments	vary	by	instrument,	but	are generally	 based	 on	 discounted	 cash	 flow	 techniques.	 The	 valuation techniques	and	the	nature	of	significant	inputs	used	to	determine	the	fair values	of	each	type	of	level	3	cash	instrument	are	described	below:

Loans	and	Securities	Backed	by	Commercial	Real	Estate.	Loans and	securities	backed	by	commercial	real	estate	are	directly	or	indirectly collateralized	by	a	single	commercial	real	estate	property	or	a	portfolio	of properties,	 and	 may	 include	 tranches	 of	 varying	 levels	 of	 subordination. Significant	inputs	are	generally	determined	based	on	relative	value	analyses and	include:

•	Market	yields	implied	by	transactions	of	similar	or	related	assets	and/or current	levels	and	changes	in	market	indices	such	as	the	CMBX	(an	index that	tracks	the	performance	of	commercial	mortgage	bonds);

•	Transaction	prices	in	both	the	underlying	collateral	and	instruments	with the	same	or	similar	underlying	collateral;

•	A	measure	of	expected	future	cash	flows	in	a	default	scenario	(recovery rates)	implied	by	the	value	of	the	underlying	collateral,	which	is	mainly driven	by	current	performance	of	the	underlying	collateral,	capitalization rates	 and	 multiples.	 Recovery	 rates	 are	 expressed	 as	 a	 percentage	 of notional	or	face	value	of	the	instrument	and	reflect	the	benefit	of	credit enhancements	on	certain	instruments;	and

•	Timing	of	expected	future	cash	flows	(duration)	which,	in	certain	cases, may	 incorporate	 the	 impact	 of	 other	 unobservable	 inputs	 (e.g., prepayment	speeds).

# Loans	and	Securities	Backed	by	Residential	Real	Estate.	Loans

and	securities	backed	by	residential	real	estate	are	directly	or	indirectly collateralized	 by	 portfolios	 of	 residential	 real	 estate	 and	 may	 include tranches	 of	 varying	 levels	 of	 subordination.	 Significant	 inputs	 are generally	determined	based	on	relative	value	analyses,	which	incorporate comparisons	 to	 instruments	 with	 similar	 collateral	 and	 risk	 profiles. Significant	inputs	include:

•	Market	yields	implied	by	transactions	of	similar	or	related	assets;

•	Cumulative	 loss	 expectations,	 driven	 by	 default	 rates,	 home	 price projections,	residential	property	liquidation	timelines,	related	costs	and subsequent	recoveries;	and

•	Duration,	driven	by	underlying	loan	prepayment	speeds	and	residential property	liquidation	timelines.

Corporate	 Debt Instruments.	 Corporate	 debt	 instruments	 includes corporate	loans	and	debt	securities.	Significant	inputs	for	corporate	debt instruments	 are	 generally	 determined	 based	 on	 relative	 value	 analyses, which	incorporate	comparisons	both	to	prices	of	credit	default	swaps	that reference	the	same	or	similar	underlying	instrument	or	entity	and	to	other debt	instruments	for	the	same	issuer	for	which	observable	prices	or	broker quotations	are	available.	Significant	inputs	include:

•	Market	yields	implied	by	transactions	of	similar	or	related	assets	and/or current	levels	and	trends	of	market	indices,	such	as	the	CDX	(an	index that	tracks	the	performance	of	corporate	credit);

•	Current	performance	and	recovery	assumptions	and,	where	the	firm	uses credit	default	swaps	 to	value	 the	related	cash	 instrument,	 the	cost	of borrowing	the	underlying	reference	obligation;	and •	Duration.

Equity	Securities.	Equity	securities	includes	private	equity	securities	and convertible	 debentures.	 Recent	 third-party	 completed	 or	 pending transactions	(e.g.,	merger	proposals,	tender	offers,	debt	restructurings)	are considered	to	be	the	best	evidence	for	any	change	in	fair	value.	When	these are	 not	 available,	 the	 following	 valuation	 methodologies	 are	 used,	 as appropriate:

•	Industry multiples (primarily EBITDA multiples) and public comparables;

•	Transactions	in	similar	instruments;

•	Discounted	cash	flow	techniques;	and

•	Third-party	appraisals.

The	firm	also	considers	changes	in	the	outlook	for	the	relevant	industry	and financial	performance	of	the	issuer	as	compared	to	projected	performance. Significant	inputs	include:

•	Market	and	transaction	multiples;

•	Discount	rates	and	capitalization	rates;	and

•	For	 equity	 securities	 with	 debt-like	 features,	 market	 yields	 implied	 by transactions	of	similar	or	related	assets,	current	performance	and	recovery assumptions,	and	duration.

Other Cash Instruments. Other	 cash	 instruments	 includes	 U.S. government	 and	 agency	 obligations,	non-U.S.	 government	 and	 agency obligations,	 state	 and	 municipal	 obligations,	 and	 other	 debt	 obligations. Significant	inputs	are	generally	determined	based	on	relative	value	analyses, which	incorporate	comparisons	both	to	prices	of	credit	default	swaps	that reference	the	same	or	similar	underlying	instrument	or	entity	and	to	other debt	instruments	for	the	same	issuer	for	which	observable	prices	or	broker quotations	are	available.	Significant	inputs	include:

•	Market	yields	implied	by	transactions	of	similar	or	related	assets	and/or current	levels	and	trends	of	market	indices;

•	Current	performance	and	recovery	assumptions	and,	where	the	firm	uses credit	 default	 swaps	 to	 value	 the	 related	 cash	 instrument,	 the	 cost	 of borrowing	the	underlying	reference	obligation;	and

•	Duration.

# Fair	Value	of	Cash	Instruments	by	Level

The	table	below	presents	cash	instrument	assets	and	liabilities	at	fair	value by	level	within	the	fair	value	hierarchy.

•	Cash	instrument	assets	are	included	in	financial	instruments	owned	and cash	instrument	liabilities	are	included	in	financial	instruments	sold,	but not	yet	purchased.

•	Ranges	represent	the	significant	unobservable	inputs	that	were	used	in the	valuation	of	each	type	of	cash	instrument.

•	Weighted	 averages	 are	 calculated	 by	 weighting each input by the relative	fair	value	of	the	cash	instruments.

•	The	ranges	and	weighted	averages	of	these	inputs	are	not	representative of	the	appropriate	inputs	to	use	when	calculating	the	fair	value	of	any one	cash	instrument.	For	example,	the	highest	multiple	for	private	equity securities	is	appropriate	for	valuing	a	specific	private	equity	security	but may	not	be	appropriate	for	valuing	any	other	private	equity	security. Accordingly,	 the	 ranges	 of	 inputs	 do	 not	 represent	 uncertainty	 in,	 or possible	ranges	of,	fair	value	measurements	of	level	3	cash	instruments.

•	Increases	 in	 yield,	 discount	 rate,	 capitalization	 rate,	 duration	 or cumulative	loss	rate	used	in	the	valuation	of	level	3	cash	instruments would	have	resulted	in	a	lower	fair	value	measurement,	while	increases in	recovery	rate	or	multiples	would	have	resulted	in	a	higher	fair	value measurement	as	of	both	December	2018	and	December	2017.	Due	to	the distinctive	nature	of	each	level	3	cash	instrument,	the	interrelationship	of inputs	is	not	necessarily	uniform	within	each	product	type.

•	Loans	and	securities	backed	by	commercial	and	residential	real	estate, corporate	debt	instruments	and	other	cash	instruments	are	valued	using discounted	cash	flows,	and	equity	securities	are	valued	using	market comparables	and	discounted	cash	flows.

•	The	fair	value	of	any	one	instrument	may	be	determined	using	multiple valuation	techniques.	For	example,	market	comparables	and	discounted cash	flows	may	be	used	together	to	determine	fair	value.	Therefore,	the level	3	balance	encompasses	both	of	these	techniques.

# Level	3	Rollforward

The	table	below	presents	a	summary	of	the	changes	in	fair	value	for	level	3 cash	instrument	assets	and	liabilities.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Total\tcash\tinstrument\tassets |  |  |
| Beginning\tbalance | \t$15,395 | \t$18,035 |
| Net\trealized\tgains/(losses) | 501 | 419 |
| Net\tunrealized\tgains/(losses) | 816 | 1,144 |
| Purchases | 2,286 | 1,635 |
| Sales | (2,184) | (3,315) |
| Settlements | (2,595) | (2,265) |
| Transfers\tinto\tlevel\t3 | 5,149 | 2,405 |
| Transfers\tout\tof\tlevel\t3 | (2,141) | (2,663) |
| Ending\tbalance | \t$17,227 | \t$15,395 |
| Total\tcash\tinstrument\tliabilities |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t\t(68) | \t$\t\t\t\t\t\t(62) |
| Net\trealized\tgains/(losses) | 6 | (8) |
| Net\tunrealized\tgains/(losses) | (7) | (28) |
| Purchases | 41 | 97 |
| Sales | (26) | (20) |
| Settlements | 8 | (32) |
| Transfers\tinto\tlevel\t3 | (7) | (18) |
| Transfers\tout\tof\tlevel\t3 | 4 | 3 |
| Ending\tbalance | \t$\t\t\t\t\t\t(49) | \t$\t\t\t\t\t\t(68) |

•	Changes	 in	 fair	 value	 are	 presented	 for	 all	 cash	 instrument	 assets	 and liabilities	that	are	classified	in	level	3	as	of	the	end	of	the	period.

•	Net	unrealized	gains/(losses)	relates	to	instruments	that	were	still	held	at period-end.

•	Purchases	includes	originations	and	secondary	purchases.

•	Transfers	between	levels	of	the	fair	value	hierarchy	are	reported	at	the beginning	of	the	reporting	period	in	which	they	occur.	If	a	cash	instrument asset	or	liability	was	transferred	to	level	3	during	a	reporting	period,	its entire	gain	or	loss	for	the	period	is	classified	in	level	3.

•	For	 level 3 cash	 instrument	 assets,	 increases	 are	 shown	 as	 positive amounts,	while	decreases	are	shown	as	negative	amounts.	For	level	3	cash instrument	 liabilities,	 increases	 are	 shown	 as	 negative	 amounts,	 while decreases	are	shown	as	positive	amounts.

•	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	classified	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	table	below	disaggregates,	by	product	type,	the	information	for	cash instrument	assets	included	in	the	summary	table	above.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Loans\tand\tsecurities\tbacked\tby\tcommercial\treal\testate |  |  |
| Beginning\tbalance | \t$\t\t1,126 | \t$\t\t1,645 |
| Net\trealized\tgains/(losses) | 67 | 35 |
| Net\tunrealized\tgains/(losses) | 6 | 71 |
| Purchases | 133 | 176 |
| Sales | (126) | (319) |
| Settlements | (411) | (392) |
| Transfers\tinto\tlevel\t3 | 538 | 141 |
| Transfers\tout\tof\tlevel\t3 | (314) | (231) |
| Ending\tbalance | \t$\t\t1,019 | \t$\t\t1,126 |
| Loans\tand\tsecurities\tbacked\tby\tresidential\treal\testate |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t668 | \t$\t\t\t\t\t845 |
| Net\trealized\tgains/(losses) | 53 | 37 |
| Net\tunrealized\tgains/(losses) | 16 | 96 |
| Purchases | 119 | 98 |
| Sales | (209) | (246) |
| Settlements | (163) | (104) |
| Transfers\tinto\tlevel\t3 | 242 | 21 |
| Transfers\tout\tof\tlevel\t3 | (63) | (79) |
| Ending\tbalance | \t$\t\t\t\t\t663 | \t$\t\t\t\t\t668 |
| Corporate\tdebt\tinstruments |  |  |
| Beginning\tbalance | \t$\t\t3,270 | \t$\t\t4,640 |
| Net\trealized\tgains/(losses) | 214 | 145 |
| Net\tunrealized\tgains/(losses) | (50) | (13) |
| Purchases | 941 | 666 |
| Sales | (480) | (1,003) |
| Settlements | (850) | (1,062) |
| Transfers\tinto\tlevel\t3 | 1,754 | 1,130 |
| Transfers\tout\tof\tlevel\t3 | (575) | (1,233) |
| Ending\tbalance | \t$\t\t4,224 | \t$\t\t3,270 |
| Equity\tsecurities |  |  |
| Beginning\tbalance | \t$\t\t9,904 | \t$10,263 |
| Net\trealized\tgains/(losses) | 157 | 185 |
| Net\tunrealized\tgains/(losses) | 776 | 982 |
| Purchases | 990 | 624 |
| Sales | (1,319) | (1,702) |
| Settlements | (1,013) | (559) |
| Transfers\tinto\tlevel\t3 | 2,413 | 1,113 |
| Transfers\tout\tof\tlevel\t3 | (1,183) | (1,002) |
| Ending\tbalance | \t$10,725 | \t$\t\t9,904 |
| Other\tcash\tinstruments |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t427 | \t$\t\t\t\t\t642 |
| Net\trealized\tgains/(losses) | 10 | 17 |
| Net\tunrealized\tgains/(losses) | 68 | 8 |
| Purchases | 103 | 71 |
| Sales | (50) | (45) |
| Settlements | (158) | (148) |
| Transfers\tinto\tlevel\t3 | 202 | – |
| Transfers\tout\tof\tlevel\t3 | (6) | (118) |
| Ending\tbalance | \t$\t\t\t\t\t596 | \t$\t\t\t\t\t427 |

# Level	3	Rollforward	Commentary

Year	Ended	December	2018.	The	net	realized	and	unrealized	gains	on level	3	cash	instrument	assets	of	$1.32	billion	(reflecting	$501	million	of	net realized	gains	and	$816	million	of	net	unrealized	gains)	for	2018	included gains/(losses)	 of	 $(96)	 million	 reported	 in	 market	 making,	 $908	 million reported	in	other	principal	transactions	and	$505	million	reported	in	interest income.

The	net	unrealized	gains	on	level	3	cash	instrument	assets	for	2018	primarily reflected	 gains	 on	 private	 equity	 securities,	 principally	 driven	 by	 strong corporate	performance	and	company-specific	events.

Transfers	into	level	3	during	2018	primarily	reflected	transfers	of	certain private	 equity	 securities	 and	 corporate	 debt	 instruments	 from	 level 2, principally	due	to	reduced	price	transparency	as	a	result	of	a	lack	of	market evidence,	including	fewer	market	transactions	in	these	instruments.

Transfers	out	of	level	3	during	2018	primarily	reflected	transfers	of	certain private	 equity	 securities	 and	 corporate	 debt	 instruments	 to	 level 2, principally	 due	 to	 increased	 price	 transparency	 as	 a	 result	 of	 market evidence,	including	market	transactions	in	these	instruments,	and	transfers	of certain	other	corporate	debt	instruments	to	level	2,	principally	due	to	certain unobservable	yield	and	duration	inputs	no	longer	being	significant	to	the valuation	of	these	instruments.

Year	Ended	December	2017.	The	net	realized	and	unrealized	gains	on level	3	cash	instrument	assets	of	$1.56	billion	(reflecting	$419	million	of	net realized	gains	and	$1.14	billion	of	net	unrealized	gains)	for	2017	included gains/(losses)	 of	 $(99)	 million	 reported	 in	 market	 making,	 $1.13	 billion reported	in	other	principal	transactions	and	$532	million	reported	in	interest income.

Transfers	into	level	3	during	2017	primarily	reflected	transfers	of	certain corporate	 debt	 instruments	 and	 private	 equity	 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.

Transfers	out	of	level	3	during	2017	primarily	reflected	transfers	of	certain corporate	 debt	 instruments	 and	 private	 equity	 securities	 to	 level 2, principally	 due	 to	 increased	 price	 transparency	 as	 a	 result	 of	 market evidence,	including	market	transactions	in	these	instruments,	and	transfers	of certain	 corporate	 debt	 instruments	 to	 level	 2,	 principally	 due	 to	 certain unobservable	yield	and	duration	inputs	no	longer	being	significant	to	the valuation	of	these	instruments.

# Available-for-Sale	Securities

The	 table	 below	 presents	 information	 about	 cash instruments that	 are accounted	for	as	available-for-sale.

•	U.S.	government	obligations	were	classified	in	level	1	of	the	fair	value hierarchy	as	of	both	December	2018	and	December	2017.

•	Other	available-for-sale	 securities	 included	 corporate	 debt	 securities, other	debt	obligations,	securities	backed	by	commercial	real	estate	and money	market	instruments,	substantially	all	of	which	were	classified	in level	2	of	the	fair	value	hierarchy	as	of	December	2017.

•	The	 gross	 unrealized	 losses	 included	 in	 accumulated other comprehensive	loss	were	$153	million	as	of	December	2018	and	were related	to	U.S.	government	obligations	in	a	continuous	unrealized	loss position	for	greater	 than	a	year.	Such	 losses	were	not	material	as	of December	2017.

•	Available-for-sale	 securities	 in	 an	 unrealized	 loss	 position	 are periodically	 reviewed	 for	 other-than-temporary	 impairment.	 The	 firm considers	various	factors,	including	market	conditions,	changes	in	issuer credit	ratings,	severity	and	duration	of	 the	unrealized	 losses,	and	 the intent	and	ability	to	hold	the	security	until	recovery	to	determine	if	the securities	 are	 other-than-temporarily	 impaired.	 There	 were	 no	 such impairments	during	either	2018	or	2017.

# Investments	in	Funds	at	Net	Asset	Value	Per	Share

Cash	 instruments	 at	 fair	 value	 include	 investments	 in	 funds	 that	 are measured	at	NAV	of	the	investment	fund.	The	firm	uses	NAV	to	measure the	fair	value	of	its	fund	investments	when	(i)	the	fund	investment	does	not have	a	readily	determinable	fair	value	and	(ii)	the	NAV	of	the	investment fund	is	calculated	in	a	manner	consistent	with	the	measurement	principles	of investment	company	accounting,	including	measurement	of	the	investments at	fair	value.

Substantially	 all	 of	 the	 firm's	 investments	 in	 funds	 at	 NAV	 consist	 of investments	in	firm-sponsored	private	equity,	credit,	real	estate	and	hedge funds	where	the	firm	co-invests	with	third-party	investors.

Private	 equity	 funds	 primarily	 invest	 in	 a	 broad	 range	 of	 industries worldwide, 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	 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.	 Private equity,	credit	and	real	estate	funds	are	closed-end	funds	in	which	the	firm's investments	are	generally	not	eligible	for	redemption.	Distributions	will	be received	 from	 these	 funds	 as	 the	 underlying	 assets	 are	 liquidated	 or distributed,	the	timing	of	which	is	uncertain.

The	 firm	 also	 invests	 in	 hedge	 funds,	 primarily	 multi-disciplinary	 hedge funds	 that	 employ	 a	 fundamental	bottom-up	 investment	 approach	 across various	asset	classes	and	strategies.	The	firm's	investments	in	hedge	funds primarily	include	interests	where	the	underlying	assets	are	illiquid	in	nature, and	proceeds	from	redemptions	will	not	be	received	until	 the	underlying assets	are	liquidated	or	distributed,	the	timing	of	which	is	uncertain.

Many	of	the	funds	described	above	are	"covered	funds"	as	defined	in	the Volcker	Rule	of	the	U.S.	Dodd-Frank	Wall	Street	Reform	and	Consumer Protection	Act	(Dodd-Frank	Act).	The	Board	of	Governors	of	the	Federal Reserve	System	(FRB)	extended	the	conformance	period	to	July	2022	for the	firm's	investments	in,	and	relationships	with,	certain	legacy	"illiquid funds"	 (as	 defined	 in	 the	 Volcker	 Rule)	 that	 were	 in	 place	 prior	 to December	2013.	This	extension	 is	applicable	 to	substantially	all	of	 the firm's	 remaining	 investments	 in,	 and	 relationships	 with,	 such	 covered funds.

The	table	below	presents	the	fair	value	of	investments	in	funds	at	NAV	and the	related	unfunded	commitments.

| $	in	millions | Fair	Value	of<br>Investments | Unfunded<br>Commitments |
| :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |
| Private\tequity\tfunds | $2,683 | $\t\t\t809 |
| Credit\tfunds | 548 | 1,099 |
| Hedge\tfunds | 161 | – |
| Real\testate\tfunds | 544 | 203 |
| Total | $3,936 | $2,111 |
| As\tof\tDecember\t2017 |  |  |
| Private\tequity\tfunds | $3,478 | $\t\t\t614 |
| Credit\tfunds | 266 | 985 |
| Hedge\tfunds | 223 | – |
| Real\testate\tfunds | 629 | 201 |
| Total | $4,596 | $1,800 |

# 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	role,	the	firm	typically	acts	as	principal	and	is required	to	commit	capital	to	provide	execution,	and	maintains	inventory in	response	to,	or	in	anticipation	of,	client	demand.

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,	 and	 to	 manage	 foreign currency	exposure	on	the	net	investment	in	certain	non-U.S.	operations.

The	firm	enters	into	various	types	of	derivatives,	including:

•	Futures and	 Forwards.	 Contracts that	 commit	 counterparties	 to purchase	or	sell	financial	instruments,	commodities	or	currencies	in	the future.

•	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.

•	Options.	Contracts	in	which	the	option	purchaser	has	the	right,	but	not the	 obligation,	 to	 purchase	 from	 or	 sell	 to	 the	 option	 writer	 financial instruments,	commodities	or	currencies	within	a	defined	time	period	for	a specified	price.

Derivatives	are	reported	on	a	net-by-counterparty	basis	(i.e.,	the	net	payable or	receivable	for	derivative	assets	and	liabilities	for	a	given	counterparty) when	a	legal	right	of	setoff	exists	under	an	enforceable	netting	agreement (counterparty	netting).	Derivatives	are	accounted	for	at	fair	value,	net	of cash	 collateral	 received	 or	 posted	 under	 enforceable	 credit	 support agreements	 (cash	 collateral	 netting).	 Derivative	 assets	 are	 included	 in financial	 instruments	 owned	 and	 derivative	 liabilities	 are	 included	 in financial	instruments	sold,	but	not	yet	purchased.	Realized	and	unrealized gains	and	 losses	on	derivatives	not	designated	as	hedges	are	 included	 in market	making	and	other	principal	transactions	in	Note	4.

The	tables	below	present	the	gross	fair	value	and	the	notional	amounts	of derivative	contracts	by	major	product	type,	the	amounts	of	counterparty and	 cash	 collateral	 netting in the	 consolidated 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.

|  | Notional	Amounts	as	of	December | Notional	Amounts	as	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Not\taccounted\tfor\tas\thedges |  |  |
| Exchange-traded | \t\t $\t\t5,139,159 | $10,212,510 |
| OTC-cleared | 14,290,327 | 14,739,556 |
| Bilateral\tOTC | 12,858,248 | 12,862,328 |
| Total\tinterest\trates | 32,287,734 | 37,814,394 |
| OTC-cleared | 394,494 | 386,163 |
| Bilateral\tOTC | 762,653 | 868,226 |
| Total\tcredit | 1,157,147 | 1,254,389 |
| Exchange-traded | 5,599 | 10,450 |
| OTC-cleared | 113,360 | 98,549 |
| Bilateral\tOTC | 6,596,741 | 7,331,516 |
| Total\tcurrencies | 6,715,700 | 7,440,515 |
| Exchange-traded | 259,287 | 239,749 |
| OTC-cleared | 1,516 | 3,925 |
| Bilateral\tOTC | 244,958 | 250,547 |
| Total\tcommodities | 505,761 | 494,221 |
| Exchange-traded | 635,988 | 655,485 |
| Bilateral\tOTC | 1,070,211 | 1,127,812 |
| Total\tequities | 1,706,199 | 1,783,297 |
| Subtotal | 42,372,541 | 48,786,816 |
| Accounted\tfor\tas\thedges |  |  |
| OTC-cleared | 85,681 | 52,785 |
| Bilateral\tOTC | 12,022 | 15,188 |
| Total\tinterest\trates | 97,703 | 67,973 |
| OTC-cleared | 2,911 | 2,210 |
| Bilateral\tOTC | 8,089 | 8,347 |
| Total\tcurrencies | 11,000 | 10,557 |
| Subtotal | 108,703 | 78,530 |
| Total\tnotional\tamounts | \t\t $42,481,244 | $48,865,346 |

# In	the	tables	above:

•	Gross	 fair	 values	 exclude	 the	 effects	 of	 both	 counterparty	 netting	 and collateral,	and	therefore	are	not	representative	of	the	firm's	exposure. •	Where	 the	 firm	 has	 received	 or	 posted	 collateral	 under	 credit	 support agreements,	but	has	not	yet	determined	such	agreements	are	enforceable, the	related	collateral	has	not	been	netted.

•	Notional	 amounts,	 which	 represent	 the	 sum	 of	 gross	 long	 and	 short derivative	contracts,	provide	an	 indication	of	 the	volume	of	 the	firm's derivative	activity	and	do	not	represent	anticipated	losses.

•	Total	 gross	 fair	 value	 of	 derivatives	 included	 derivative	 assets	 of $10.68 billion	 as	 of	 December	 2018	 and $11.24 billion	 as	 of December	 2017,	 and	 derivative	 liabilities	 of $11.95 billion	 as	 of December	2018	and	$13.00	billion	as	of	December	2017,	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.

•	During	the	second	quarter	of	2018,	consistent	with	the	rules	of	a	clearing organization,	 the	 firm	 elected	 to	 consider	 its	 transactions	 with	 that clearing	 organization	 as	 settled	 each	 day.	 As	 of	 December	 2017,	 the impact	of	this	change	would	have	been	a	reduction	in	gross	interest	rate derivative	assets	of	$3.6	billion	and	gross	interest	rate	derivative	liabilities of	$1.9	billion,	and	a	corresponding	decrease	in	counterparty	and	cash collateral	 netting,	 with	 no	 impact	 to	 the	 consolidated	 statements	 of financial	condition.

•	On	 November	 19,	 2018,	 a	 clearing	 organization	 revised	 its	 rules	 to calculate	 notional	 amounts	 for	 certain	 exchange-traded	 derivative contracts.	The	impact	of	this	rule	change,	as	of	the	effective	date,	was	a decrease	 in	 the	 notional	 amounts	 of	 derivative	 contracts	 of approximately	$7	trillion,	substantially	all	of	which	related	to	interest rate	derivatives,	with	no	change	to	their	fair	value.

# 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,	as	described	below.

•	Interest	Rate.	In	general,	the	key	inputs	used	to	value	 interest	rate derivatives	are	transparent,	even	for	most	long-dated	contracts.	Interest rate	 swaps	 and	 options	 denominated	 in	 the	 currencies	 of	 leading industrialized	 nations	 are	 characterized	 by	 high	 trading	 volumes	 and 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.

•	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.

•	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.

•	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.

•	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.

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.	The significant	unobservable	inputs	used	to	value	the	firm's	level	3	derivatives are	described	below.

•	For	 level 3 interest	 rate	 and	 currency	 derivatives,	 significant unobservable	 inputs	 include	 correlations	 of	 certain	 currencies	 and interest	 rates	 (e.g.,	 the	 correlation	 between	 Euro	 inflation	 and	 Euro interest	rates).	In	addition,	for	level	3	interest	rate	derivatives,	significant unobservable	inputs	include	specific	interest	rate	volatilities.

•	For	 level	3	credit	derivatives,	significant	unobservable	 inputs	 include illiquid	 credit	 spreads	 and	 upfront	 credit	 points,	 which	 are	 unique	 to specific	reference	obligations	and	reference	entities,	recovery	rates	and certain	 correlations	 required	 to	 value	 credit	 derivatives	 (e.g.,	 the likelihood	of	default	of	the	underlying	reference	obligation	relative	to one	another).

•	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.

•	For	level	3	equity	derivatives,	significant	unobservable	inputs	generally include	equity	volatility	 inputs	for	options	 that	are	 long-dated	and/or have	strike	prices	that	differ	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.

Subsequent	to	the	initial	valuation	of	a	level	3	derivative,	the	firm	updates the	level	1	and	level	2	inputs	to	reflect	observable	market	changes	and	any resulting	 gains	 and	 losses	 are	 classified	 in	 level	 3.	 Level	 3	 inputs	 are changed	when	corroborated	by	evidence	such	as	similar	market	transactions, third-party	 pricing	 services	 and/or	 broker	 or	 dealer	 quotations	 or	 other empirical	market	data.	In	circumstances	where	the	firm	cannot	verify	the model	 value	 by	 reference	 to	 market	 transactions,	 it	 is	 possible	 that	 a different	valuation	model	could	produce	a	materially	different	estimate	of fair	value.	See	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.

# Fair	Value	of	Derivatives	by	Level

The	table	below	presents	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.

•	Ranges	represent	the	significant	unobservable	inputs	that	were	used	in	the valuation	of	each	type	of	derivative.

•	Averages	 represent	 the	 arithmetic	 average	 of	 the	 inputs	 and	 are	 not weighted	by	the	relative	fair	value	or	notional	of	the	respective	financial instruments.	 An	 average	 greater	 than	 the	 median	 indicates	 that	 the majority	 of	 inputs	 are	 below	 the	 average.	 For	 example,	 the	 difference between	the	average	and	the	median	for	credit	spreads	indicates	that	the majority	of	the	inputs	fall	in	the	lower	end	of	the	range.

•	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	 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	 do	 not	 represent	 uncertainty	 in,	 or possible	ranges	of,	fair	value	measurements	of	level	3	derivatives.

•	Interest	rates,	currencies	and	equities	derivatives	are	valued	using	option pricing	 models,	 credit	 derivatives	 are	 valued	 using	 option	 pricing, correlation	 and	 discounted	 cash	 flow	 models,	 and	 commodities derivatives	are	valued	using	option	pricing	and	discounted	cash	flow models.

•	The	fair	value	of	any	one	instrument	may	be	determined	using	multiple valuation	 techniques.	 For	 example,	 option	 pricing	 models	 and discounted	cash	flows	models	are	typically	used	together	to	determine fair	 value.	Therefore,	 the	 level	 3	 balance	 encompasses	 both	 of	 these techniques.

•	Correlation	 was	 not	 significant to the valuation of level 3 credit derivatives	as	of	December	2018.

•	Correlation	within	currencies	and	equities	includes	cross-product	type correlation.

•	Natural	 gas	 spread represents the	 spread	 per	 million	 British thermal units	of	natural	gas.

•	Oil	spread	represents	the	spread	per	barrel	of	oil	and	refined	products.

# Range	of	Significant	Unobservable	Inputs

The	following	is	information	about	the	ranges	of	significant	unobservable inputs	used	to	value	the	firm's	level	3	derivative	instruments:

•	Correlation.	Ranges	for	correlation	cover	a	variety	of	underliers	both within	 one	 product	 type	 (e.g.,	 equity	 index	 and	 equity	 single	 stock names)	and	across	product	types	(e.g.,	correlation	of	an	interest	rate	and a	 currency),	 as	 well	 as	 across	 regions.	 Generally,	 cross-product	 type correlation	inputs	are	used	to	value	more	complex	instruments	and	are lower	 than	 correlation	 inputs	 on	 assets	 within	 the	 same	 derivative product	type.

•	Volatility.	 Ranges 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.

# •	Credit	spreads,	upfront	credit	points	and	recovery	rates.	The

ranges	for	credit	spreads,	upfront	credit	points	and	recovery	rates	cover	a variety	of	underliers	(index	and	single	names),	regions,	sectors,	maturities and	credit	qualities	(high-yield	and	investment-grade).	The	broad	range	of this	 population	 gives	 rise	 to	 the	 width	 of	 the	 ranges	 of	 significant unobservable	inputs.

•	Commodity	prices	and	spreads.	The	ranges	for	commodity	prices and	 spreads	 cover	 variability	 in	 products,	 maturities	 and	 delivery locations.

# Sensitivity	of	Fair	Value	Measurement	to	Changes	in	Significant Unobservable	Inputs

The	following	 is	a	description	of	 the	directional	sensitivity	of	 the	firm's level 3 fair	 value	 measurements,	 as	 of	 both	 December	 2018	 and December	2017,	to	changes	in	significant	unobservable	inputs,	in	isolation:

•	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.

•	Volatility. In	 general,	 for	 purchased	 options,	 an increase in	 volatility results	in	a	higher	fair	value	measurement.

•	Credit	 spreads,	 upfront	 credit	 points	 and	 recovery	 rates. In general,	the	fair	value	of	purchased	credit	protection	increases	as	credit spreads	or	upfront	credit	points	increase	or	recovery	rates	decrease.	Credit spreads,	upfront	credit	points	and	recovery	rates	are	strongly	related	to distinctive	 risk	 factors	 of	 the	 underlying	 reference	 obligations,	 which include	reference	entity-specific	factors	such	as	leverage,	volatility	and industry,	market-based	risk	factors,	such	as	borrowing	costs	or	liquidity	of the	underlying	reference	obligation,	and	macroeconomic	conditions.

•	Commodity	prices	and	spreads.	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.

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.

The	table	below	presents	a	summary	of	the	changes	in	fair	value	for	level	3 derivatives.

|  | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Total\tlevel\t3\tderivatives |  |  |
| Beginning\tbalance | \t$\t\t\t(288) | \t$(1,217) |
| Net\trealized\tgains/(losses) | (113) | (119) |
| Net\tunrealized\tgains/(losses) | 1,251 | (436) |
| Purchases | 612 | 301 |
| Sales | (1,510) | (611) |
| Settlements | 573 | 1,891 |
| Transfers\tinto\tlevel\t3 | 34 | (39) |
| Transfers\tout\tof\tlevel\t3 | 31 | (58) |
| Ending\tbalance | \t$\t\t\t\t590 | \t$\t\t\t(288) |

•	Changes	in	fair	value	are	presented	for	all	derivative	assets	and	liabilities that	are	classified	in	level	3	as	of	the	end	of	the	period.

•	Transfers	between	levels	of	the	fair	value	hierarchy	are	reported	at	the beginning	of	the	reporting	period	in	which	they	occur.	If	a	derivative was	transferred	into	level	3	during	a	reporting	period,	its	entire	gain	or loss	for	the	period	is	classified	in	level	3.

•	Positive	 amounts	 for	 transfers	 into	 level	 3	 and	 negative	 amounts	 for transfers	 out	 of	 level	 3	 represent	 net	 transfers	 of	 derivative	 assets. Negative	amounts	for	 transfers	 into	 level	3	and	positive	amounts	for transfers	out	of	level	3	represent	net	transfers	of	derivative	liabilities.

•	A	derivative	with	level	1	and/or	level	2	inputs	is	classified	in	level	3	in its	entirety	if	it	has	at	least	one	significant	level	3	input.

•	If	 there	 is	 one	 significant	 level	 3	 input,	 the	 entire	 gain	 or	 loss	 from adjusting	 only	 observable	 inputs	 (i.e.,	 level	 1	 and	 level	 2	 inputs)	 is classified	in	level	3.

•	Gains	 or	 losses	 that	 have	 been	 classified	 in	 level	 3	 resulting	 from changes	in	level	1	or	level	2	inputs	are	frequently	offset	by	gains	or losses	attributable	to	level	1	or	level	2	derivatives	and/or	level	1,	level	2 and	level	3	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	table	below	disaggregates,	by	major	product	type,	the	information	for level	3	derivatives	included	in	the	summary	table	above.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Interest\trates,\tnet |  |  |
| Beginning\tbalance | \t$\t\t\t(410) | \t$\t\t\t(381) |
| Net\trealized\tgains/(losses) | (51) | (62) |
| Net\tunrealized\tgains/(losses) | 122 | 20 |
| Purchases | 8 | 4 |
| Sales | (2) | (14) |
| Settlements | 171 | 30 |
| Transfers\tinto\tlevel\t3 | (9) | (12) |
| Transfers\tout\tof\tlevel\t3 | 62 | 5 |
| Ending\tbalance | \t$\t\t\t(109) | \t$\t\t\t(410) |
| Credit,\tnet |  |  |
| Beginning\tbalance | \t$\t1,505 | \t$\t2,504 |
| Net\trealized\tgains/(losses) | (23) | 42 |
| Net\tunrealized\tgains/(losses) | 2 | (188) |
| Purchases | 53 | 20 |
| Sales | (65) | (27) |
| Settlements | 244 | (739) |
| Transfers\tinto\tlevel\t3 | (35) | 3 |
| Transfers\tout\tof\tlevel\t3 | (9) | (110) |
| Ending\tbalance | \t$\t1,672 | \t$\t1,505 |
| Currencies,\tnet |  |  |
| Beginning\tbalance | \t$\t\t\t(181) | \t$\t\t\t\t\t\t\t\t3 |
| Net\trealized\tgains/(losses) | (51) | (39) |
| Net\tunrealized\tgains/(losses) | 372 | (192) |
| Purchases | 36 | 4 |
| Sales | (25) | (3) |
| Settlements | 212 | 62 |
| Transfers\tinto\tlevel\t3 | 101 | (9) |
| Transfers\tout\tof\tlevel\t3 | (3) | (7) |
| Ending\tbalance | \t$\t\t\t\t461 | \t$\t\t\t(181) |
| Commodities,\tnet |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t\t47 | \t$\t\t\t\t\t\t73 |
| Net\trealized\tgains/(losses) | 18 | (4) |
| Net\tunrealized\tgains/(losses) | 61 | 216 |
| Purchases | 42 | 102 |
| Sales | (64) | (301) |
| Settlements | 12 | (27) |
| Transfers\tinto\tlevel\t3 | 21 | (25) |
| Transfers\tout\tof\tlevel\t3 | (25) | 13 |
| Ending\tbalance | \t$\t\t\t\t112 | \t$\t\t\t\t\t\t47 |
| Equities,\tnet |  |  |
| Beginning\tbalance | \t$(1,249) | \t$(3,416) |
| Net\trealized\tgains/(losses) | (6) | (56) |
| Net\tunrealized\tgains/(losses) | 694 | (292) |
| Purchases | 473 | 171 |
| Sales | (1,354) | (266) |
| Settlements | (66) | 2,565 |
| Transfers\tinto\tlevel\t3 | (44) | 4 |
| Transfers\tout\tof\tlevel\t3 | 6 | 41 |
| Ending\tbalance | \t$(1,546) | \t$(1,249) |

Year	Ended	December	2018.	The	net	realized	and	unrealized	gains	on level	3	derivatives	of	$1.14	billion	(reflecting	$113	million	of	net	realized losses	and	$1.25	billion	of	net	unrealized	gains)	for	2018	included	gains	of $1.11	billion	reported	in	market	making	and	$28	million	reported	in	other principal	transactions.

The	net	unrealized	gains	on	level	3	derivatives	for	2018	were	primarily attributable	to	gains	on	certain	equity	derivatives,	reflecting	the	impact	of a	 decrease	 in	 certain	 equity	 prices	 and	 gains	 on	 certain	 currency derivatives,	primarily	reflecting	the	impact	of	changes	in	foreign	exchange rates.

Both	 transfers	 into	 level 3 derivatives and transfers out of level 3 derivatives	during	2018	were	not	material.

Year	Ended	December	2017.	The	net	realized	and	unrealized	losses	on level	3	derivatives	of	$555	million	(reflecting	$119	million	of	net	realized losses	and	$436	million	of	net	unrealized	losses)	for	2017	included	losses of	$90	million	reported	in	market	making	and	$465	million	reported	in other	principal	transactions.

The	net	unrealized	losses	on	level	3	derivatives	for	2017	were	primarily attributable	to	losses	on	certain	equity	derivatives,	reflecting	the	impact	of changes	in	equity	prices,	losses	on	certain	currency	derivatives,	primarily reflecting	the	impact	of	changes	in	foreign	exchanges	rates,	and	losses	on certain	credit	derivatives,	reflecting	the	impact	of	tighter	credit	spreads, partially	offset	by	gains	on	certain	commodity	derivatives,	reflecting	the impact	of	an	increase	in	commodity	prices.

Transfers	into	level	3	derivatives	during	2017	were	not	material.

Transfers	 out	 of	 level 3 derivatives	 during	 2017	 primarily	 reflected transfers	of	certain	credit	derivatives	assets	to	level	2,	principally	due	to certain	unobservable	inputs	no	longer	being	significant	to	the	valuation	of these	derivatives.

The table	 below	 presents the fair	 values	 of	 OTC	 derivative	 assets	 and liabilities	by	tenor	and	major	product	type.

| $	in	millions | Less	than<br>1	Year | 1	-	5<br>Years | Greater	than<br>5	Years | Total |
| :--- | :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |  |  |
| Assets |  |  |  |  |
| Interest\trates | \t\t $\t\t2,810 | \t\t$13,177 | $47,426 | \t\t$\t\t63,413 |
| Credit | 807 | 3,676 | 3,364 | 7,847 |
| Currencies | 10,976 | 5,076 | 6,486 | 22,538 |
| Commodities | 4,978 | 2,101 | 145 | 7,224 |
| Equities | 4,962 | 5,244 | 1,329 | 11,535 |
| Counterparty\tnetting\tin\ttenors | (3,409) | (3,883) | (2,822) | (10,114) |
| Subtotal | \t\t $21,124 | \t\t$25,391 | $55,928 | \t\t$102,443 |
| Cross-tenor\tcounterparty\tnetting |  |  |  | (13,143) |
| Cash\tcollateral\tnetting |  |  |  | (48,724) |
| Total\tOTC\tderivative\tassets |  |  |  | $40,576 |
| Liabilities |  |  |  |  |
| Interest\trates | \t\t $\t\t4,193 | \t\t$\t\t9,153 | $29,377 | \t\t$\t\t42,723 |
| Credit | 1,127 | 4,173 | 1,412 | 6,712 |
| Currencies | 13,553 | 6,871 | 4,474 | 24,898 |
| Commodities | 4,271 | 2,663 | 3,145 | 10,079 |
| Equities | 9,278 | 5,178 | 3,060 | 17,516 |
| Counterparty\tnetting\tin\ttenors | (3,409) | (3,883) | (2,822) | (10,114) |
| Subtotal | \t\t $29,013 | \t\t$24,155 | $38,646 | \t\t$\t\t91,814 |
| Cross-tenor\tcounterparty\tnetting |  |  |  | (13,143) |
| Cash\tcollateral\tnetting |  |  |  | (39,127) |
| Total\tOTC\tderivative\tliabilities |  |  |  | \t\t$\t\t39,544 |
| As\tof\tDecember\t2017 |  |  |  |  |
| Assets |  |  |  |  |
| Interest\trates | \t\t $\t\t3,717 | \t\t$15,445 | $57,200 | \t\t$\t\t76,362 |
| Credit | 760 | 4,079 | 3,338 | 8,177 |
| Currencies | 12,184 | 6,219 | 7,245 | 25,648 |
| Commodities | 3,175 | 2,526 | 181 | 5,882 |
| Equities | 4,969 | 5,607 | 1,387 | 11,963 |
| Counterparty\tnetting\tin\ttenors | (3,719) | (4,594) | (2,807) | (11,120) |
| Subtotal | \t\t $21,086 | \t\t$29,282 | $66,544 | \t\t$116,912 |
| Cross-tenor\tcounterparty\tnetting |  |  |  | (16,404) |
| Cash\tcollateral\tnetting |  |  |  | (55,472) |
| Total\tOTC\tderivative\tassets |  |  |  | \t\t$\t\t45,036 |
| Liabilities |  |  |  |  |
| Interest\trates | \t\t $\t\t4,517 | \t\t$\t\t8,471 | $33,193 | $46,181 |
| Credit | 2,078 | 3,588 | 1,088 | 6,754 |
| Currencies | 14,326 | 7,119 | 4,802 | 26,247 |
| Commodities | 3,599 | 2,167 | 2,465 | 8,231 |
| Equities | 6,453 | 6,647 | 3,381 | 16,481 |
| Counterparty\tnetting\tin\ttenors | (3,719) | (4,594) | (2,807) | (11,120) |
| Subtotal | \t\t $27,254 | \t\t$23,398 | $42,122 | \t\t$\t\t92,774 |
| Cross-tenor\tcounterparty\tnetting |  |  |  | (16,404) |
| Cash\tcollateral\tnetting |  |  |  | (38,972) |
| Total\tOTC\tderivative\tliabilities |  |  |  | \t\t$\t\t37,398 |

•	Counterparty	netting	within	the	same	product	type	and	tenor	category	is included	within	such	product	type	and	tenor	category.

•	Counterparty	netting	across	product	types	within	the	same	tenor	category is included in	 counterparty	 netting in tenors.	 Where the	 counterparty netting	is	across	tenor	categories,	the	netting	is	included	in	cross-tenor counterparty	netting.

# 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	generally	individually	negotiated	contracts	and	can have	various	settlement	and	payment	conventions.	Credit	events	include failure	 to	 pay,	 bankruptcy,	 acceleration	 of	 indebtedness,	 restructuring, repudiation	and	dissolution	of	the	reference	entity.

The	firm	enters	into	the	following	types	of	credit	derivatives:

•	Credit	Default	Swaps.	Single-name	credit	default	swaps	protect	the buyer	 against	 the	 loss	 of	 principal	 on	 one	 or	 more	 bonds,	 loans	 or mortgages	(reference	obligations)	in	the	event	the	issuer	of	the	reference obligations	suffers	a	credit	event.	The	buyer	of	protection	pays	an	initial or	periodic	premium	to	the	seller	and	receives	protection	for	the	period of	the	contract.	If	there	is	no	credit	event,	as	defined	in	the	contract,	the seller	of	protection	makes	no	payments	to	the	buyer.	If	a	credit	event occurs,	 the	seller	of	protection	 is	required	 to	make	a	payment	 to	 the buyer,	calculated	according	to	the	terms	of	the	contract.

•	Credit	 Options. In	 a	 credit	 option,	 the	 option	 writer	 assumes	 the obligation	to	purchase	or	sell	a	reference	obligation	at	a	specified	price or	 credit	 spread.	 The	 option	 purchaser	 buys	 the	 right,	 but	 does	 not assume	the	obligation,	to	sell	the	reference	obligation	to,	or	purchase	it from,	the	option	writer.	The	payments	on	credit	options	depend	either	on a	particular	credit	spread	or	the	price	of	the	reference	obligation.

•	Credit Indices,	 Baskets	 and	 Tranches.	 Credit	 derivatives	 may reference	a	basket	of	single-name	credit	default	swaps	or	a	broad-based index.	 If	 a	 credit	 event	 occurs	 in	 one	 of	 the	 underlying	 reference obligations,	the	protection	seller	pays	the	protection	buyer.	The	payment is	typically	a	pro-rata	portion	of	the	transaction's	total	notional	amount based	 on	 the	 underlying	 defaulted	 reference	 obligation.	 In	 certain transactions,	the	credit	risk	of	a	basket	or	index	is	separated	into	various portions	(tranches),	each	having	different	levels	of	subordination.	The most	junior	tranches	cover	initial	defaults	and	once	losses	exceed	the notional	amount	of	these	junior	tranches,	any	excess	loss	is	covered	by the	next	most	senior	tranche.

•	Total	Return	Swaps.	A	total	return	swap	transfers	the	risks	relating	to economic	 performance	 of	 a	 reference	 obligation	 from	 the	 protection buyer	to	the	protection	seller.	Typically,	the	protection	buyer	receives	a floating	rate	of	interest	and	protection	against	any	reduction	in	fair	value of	 the	 reference	 obligation,	 and	 the	 protection	 seller	 receives	 the	 cash flows	associated	with	the	reference	obligation,	plus	any	increase	in	the fair	value	of	the	reference	obligation.

The	 firm	 economically	 hedges	 its	 exposure	 to	 written	 credit	 derivatives primarily	 by	 entering	 into	 offsetting	 purchased	 credit	 derivatives	 with identical	 underliers.	 Substantially	 all	 of	 the	 firm's	 purchased	 credit derivative	 transactions	 are	 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	2018,	written	credit	derivatives	had	a	total	gross	notional amount	of	$554.17	billion	and	purchased	credit	derivatives	had	a	total	gross notional	 amount	 of $603.00 billion,	 for	 total	 net	 notional	 purchased protection	 of $48.83 billion.	 As	 of	 December	 2017,	 written	 credit derivatives	 had	 a	 total	 gross	 notional	 amount	 of $611.04 billion	 and purchased	 credit	 derivatives	 had	 a	 total	 gross	 notional	 amount	 of $643.37	billion,	for	total	net	notional	purchased	protection	of	$32.33	billion. Substantially	all	of	the	firm's	written	and	purchased	credit	derivatives	are credit	default	swaps.

The	table	below	presents	information	about	credit	derivatives.

| Less	than	1	year | $182,446			 $		8,531 | $182,446			 $		8,531 | $					705 | $		4,067 | $195,749 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| 1\t–\t5\tyears | 335,872 | 10,201 | 8,747 | 7,553 | 362,373 |
| Greater\tthan\t5\tyears | 49,440 | 2,142 | 817 | 519 | 52,918 |
| Total | \t\t$567,758\t\t\t $20,874 | \t\t$567,758\t\t\t $20,874 | \t\t $10,269 | \t\t $12,139 | \t\t $611,040 |
| Maximum\tPayout/Notional\tAmount\tof\tPurchased\tCredit\tDerivatives |  |  |  |  |  |
| Offsetting | \t\t$492,325\t\t\t $13,424 | \t\t$492,325\t\t\t $13,424 | \t\t $\t\t9,395 | \t\t $10,663 | \t\t $525,807 |
| Other | 99,861 | 14,483 | 1,777 | 1,442 | 117,563 |
| Fair\tValue\tof\tWritten\tCredit\tDerivatives |  |  |  |  |  |
| Asset | \t\t$\t\t14,317\t\t\t $\t\t\t\t\t513 | \t\t$\t\t14,317\t\t\t $\t\t\t\t\t513 | \t\t $\t\t\t\t\t208 | \t\t $\t\t\t\t\t155 | \t\t $\t\t15,193 |
| Liability | 896 | 402 | 752 | 3,920 | 5,970 |
| Net\tasset/(liability) | \t\t$\t\t13,421\t\t\t $\t\t\t\t\t111 | \t\t$\t\t13,421\t\t\t $\t\t\t\t\t111 | \t\t$\t\t\t\t(544)\t\t\t $\t(3,765)\t\t\t $\t\t\t\t9,223 | \t\t$\t\t\t\t(544)\t\t\t $\t(3,765)\t\t\t $\t\t\t\t9,223 | \t\t$\t\t\t\t(544)\t\t\t $\t(3,765)\t\t\t $\t\t\t\t9,223 |

•	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.

•	The	 credit	 spread	 on	 the	 underlier,	 together	 with	 the	 tenor	 of	 the contract,	are	indicators	of	payment/performance	risk.	The	firm	is	less likely	to	pay	or	otherwise	be	required	to	perform	where	the	credit	spread and	the	tenor	are	lower.

•	Offsetting	purchased	credit	derivatives	represent	the	notional	amount	of purchased	 credit	 derivatives	 that	 economically	 hedge	 written	 credit derivatives	with	identical	underliers.

•	Other	purchased	credit	derivatives	represent	the	notional	amount	of	all other	purchased	credit	derivatives	not	included	in	offsetting.

# 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 gains/(losses), including hedges, attributable to the impact of changes	in	credit	exposure	and	credit	spreads	(counterparty	and	the	firm's) on derivatives	 was $371	 million for 2018, $66	 million for 2017 and $85	million	for	2016.

# Bifurcated	Embedded	Derivatives

The table below presents the fair value and the notional amount of derivatives	that	have	been	bifurcated	from	their	related	borrowings.

In the table	 above, 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.

# 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	information	about	net	derivative	liabilities	under such	bilateral	agreements	(excluding	application	of	collateral	posted),	the related fair value of collateral posted and the additional collateral or termination	payments	that	could	have	been	called	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 | 2018 | 2017 |
| Net\tderivative\tliabilities\tunder\tbilateral\tagreements | \t\t$29,583 | \t$29,877 |
| Collateral\tposted | \t\t$24,393 | \t$25,329 |
| Additional\tcollateral\tor\ttermination\tpayments: |  |  |
| One-notch\tdowngrade | \t\t$\t\t\t\t\t262 | \t$\t\t\t\t\t358 |
| Two-notch\tdowngrade | \t\t$\t\t\t\t\t959 | \t$\t\t1,856 |
| Goldman\tSachs\t2018\tForm\t10-K | Goldman\tSachs\t2018\tForm\t10-K | 133 |

# 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	and (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.

To	qualify	for	hedge	accounting,	the	hedging	instrument	must	be	highly effective	 at	 reducing	 the	 risk	 from	 the	 exposure	 being	 hedged. Additionally,	the	firm	must	formally	document	the	hedging	relationship	at inception	and	assess	the	hedging	relationship	at	least	on	a	quarterly	basis	to ensure	the	hedging	instrument	continues	to	be	highly	effective	over	the	life of	the	hedging	relationship.

# Fair	Value	Hedges

The	 firm	 designates	 certain	 interest	 rate	 swaps	 as	 fair	 value	 hedges	 of certain	fixed-rate	unsecured	long-term	and	short-term	debt	and	fixed-rate certificates	 of	 deposit.	These	 interest	 rate	 swaps	 hedge	 changes	 in	 fair value	attributable	to	the	designated	benchmark	interest	rate	(e.g.,	London Interbank	 Offered	 Rate	 (LIBOR)	 or	 Overnight	 Index	 Swap	 Rate), effectively	converting	a	substantial	portion	of	fixed-rate	obligations	 into floating-rate	obligations.

The	firm	applies	a	statistical	method	that	utilizes	regression	analysis	when assessing	 the	 effectiveness	 of	 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	 (hedging	 adjustment)	 and	 is	 also	 included	 in	 interest expense.	 When	 a	 derivative	 is	 no	 longer	 designated	 as	 a	 hedge,	 any remaining	 difference	 between	 the	 carrying	 value	 and	 par	 value	 of	 the hedged	item	is	amortized	to	interest	expense	over	the	remaining	life	of	the hedged	item	using	the	effective	interest	method.	See	Note	23	for	further information	about	interest	income	and	interest	expense.

The table	below	presents the	gains/(losses)	from interest	rate	derivatives accounted	for	as	hedges	and	the	related	hedged	borrowings	and	deposits, and	total	interest	expense.

| $	in	millions | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Interest\trate\thedges | \t$\t(1,854) | \t$\t\t(2,867) | \t$(1,480) |
| Hedged\tborrowings\tand\tdeposits | \t$\t\t1,295 | \t$\t\t2,183 | \t$\t\t\t\t834 |
| Interest\texpense | \t$15,912 | \t$10,181 | \t$\t7,104 |

•	The difference between gains/(losses) from interest rate hedges and hedged	borrowings	and	deposits	was	primarily	due	to	the	amortization	of prepaid	credit	spreads	resulting	from	the	passage	of	time.

The	table	below	presents	the	carrying	value	of	the	hedged	items	that	are currently	designated	in	a	hedging	relationship	and	the	related	cumulative hedging	 adjustment (increase/(decrease)) from	 current	 and	 prior	 hedging relationships	included	in	such	carrying	values.

| $	in	millions | Carrying<br>Value | Hedging<br>Adjustment |
| :--- | :--- | :--- |
| Deposits | \t\t$11,924 | $\t\t(156) |
| Unsecured\tshort-term\tborrowings | \t\t$\t\t4,450 | $\t\t\t\t(12) |
| Unsecured\tlong-term\tborrowings | \t\t$68,839 | $2,759 |

In	the	table	above,	cumulative	hedging	adjustment	included	$1.74	billion	of hedging adjustments from prior hedging relationships that were de-designated	 and substantially	 all	 were related to	 unsecured long-term borrowings.

In	addition,	as	of	December	2018,	cumulative	hedging	adjustments	for	items no longer	 designated in a	 hedging relationship	 were	 $1.51	 billion and substantially	all	were	related	to	unsecured	long-term	borrowings.

# Net	Investment	Hedges

The	firm	seeks	to	reduce	the	impact	of	fluctuations	in	foreign	exchange rates	on	its	net	investments	in	certain	non-U.S.	operations	through	the	use of	foreign	currency	forward	contracts	and	foreign	currency-denominated debt.	 For	 foreign	 currency	 forward	 contracts	 designated	 as	 hedges,	 the effectiveness	of	the	hedge	is	assessed	based	on	the	overall	changes	in	the fair	value	of	the	forward	contracts	(i.e.,	based	on	changes	in	forward	rates). For	 foreign	 currency-denominated	 debt	 designated	 as	 a	 hedge,	 the effectiveness	of	the	hedge	is	assessed	based	on	changes	in	spot	rates.

Beginning	 in	 January	 2018,	 in	 accordance	 with	 ASU	No.	 2017-12	 for qualifying	 net	 investment	 hedges,	 all	 gains	 or	 losses	 on	 the	 hedging instruments	are	 included	 in	currency	 translation.	Prior	 to	January	2018, gains	or	losses	on	the	hedging	instruments,	only	to	the	extent	effective, were	included	in	currency	translation.

The	table	below	presents	the	gains/(losses)	from	net	investment	hedging.

|  | Year	Ended	December | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Hedges: |  |  |  |
| Foreign\tcurrency\tforward\tcontract | \t\t$577 | \t$(805) | \t$135 |
| Foreign\tcurrency-denominated\tdebt | \t\t$\t(50) | \t$\t\t(67) | \t$\t(85) |

Gains	or	losses	on	individual	net	investments	in	non-U.S.	operations	are reclassified	 to	 earnings	 from	 accumulated	 other	 comprehensive	 income when	such	net	investments	are	sold	or	substantially	liquidated.	The	gross and	 net	 gains	 and	 losses	 on	 hedges	 and	 the	 related	 net	 investments	 in non-U.S.	 operations	 reclassified	 to	 earnings	 from	 accumulated	 other comprehensive	 income	 were	 not	 material	 for	 2018.	 The	 net	 gain reclassified	 to	 earnings	 from	 accumulated	 other	 comprehensive	 income was	$41	million	(reflecting	a	gain	of	$205	million	related	to	hedges	and	a loss	of	$164	million	on	the	related	net	investments	in	non-U.S.	operations) for	 2017	 and	 $28	 million	 (reflecting	 a	 gain	 of	 $167	 million	 related	 to hedges	 and	 a	 loss	 of	 $139	 million	 on	 the	 related	 net	 investments	 in non-U.S.	operations)	for	2016.	The	gain/(loss)	related	to	ineffectiveness was	not	material	for	2017	or	2016.

The	 firm	 had	 designated $1.99 billion	 as	 of	 December	 2018	 and $1.81	billion	as	of	December	2017	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.

# Fair	Value	Option

# Other	Financial	Assets	and	Financial	Liabilities	at	Fair	Value

In	 addition	 to	 cash	 and	 derivative	 instruments	 included	 in	 financial instruments	owned	and	financial	instruments	sold,	but	not	yet	purchased,	the firm	accounts	for	certain	of	its	other	financial	assets	and	financial	liabilities at	 fair	 value,	 substantially	 all	 under	 the	 fair	 value	 option.	 The	 primary reasons	for	electing	the	fair	value	option	are	to:

•	Reflect	economic	events	in	earnings	on	a	timely	basis;

•	Mitigate	volatility	in	earnings	from	using	different	measurement	attributes (e.g.,	transfers	of	financial	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

•	Address	simplification	and	cost-benefit	considerations	(e.g.,	accounting for	 hybrid	 financial	 instruments	 at	 fair	 value	 in	 their	 entirety	 versus bifurcation	of	embedded	derivatives	and	hedge	accounting	for	debt	hosts).

Hybrid	 financial	 instruments	 are	 instruments	 that	 contain	 bifurcatable embedded	derivatives	and	do	not	require	settlement	by	physical	delivery	of nonfinancial	 assets	 (e.g.,	 physical	 commodities).	 If	 the	 firm	 elects	 to bifurcate	the	embedded	derivative	from	the	associated	debt,	the	derivative	is accounted	 for	 at	 fair	 value	 and	 the	 host	 contract	 is	 accounted	 for	 at amortized	cost,	adjusted	for	the	effective	portion	of	any	fair	value	hedges.	If the	firm	does	not	elect	to	bifurcate,	the	entire	hybrid	financial	instrument	is accounted	for	at	fair	value	under	the	fair	value	option.

Other	financial	assets	and	financial liabilities	accounted	for	at	fair	value under	the	fair	value	option	include:

•	Repurchase	agreements	and	substantially	all	resale	agreements;

•	Securities	 borrowed	 and	 loaned	 in	 Fixed	 Income, Currency and Commodities	Client	Execution	(FICC	Client	Execution);

•	Substantially	 all	 other	 secured	 financings, including transfers	 of	 assets accounted	for	as	financings;

•	Certain	unsecured	short-term	and	long-term	borrowings,	substantially	all of	which	are	hybrid	financial	instruments;

•	Certain	 customer	 and	 other	 receivables,	 including	 transfers	 of assets accounted	for	as	secured	loans	and	certain	margin	loans;	and

•	Certain	time	deposits	(deposits	with	no	stated	maturity	are	not	eligible	for a	fair	value	option	election),	including	structured	certificates	of	deposit, which	are	hybrid	financial	instruments.

# Fair	Value	of	Other	Financial	Assets	and	Financial	Liabilities by	Level

The	table	below	presents,	by	level	within	the	fair	value	hierarchy,	other financial	assets	and	financial	liabilities	at	fair	value,	substantially	all	of which	are	accounted	for	at	fair	value	under	the	fair	value	option.

In	the	table	above,	other	financial	assets	are	shown	as	positive	amounts and	other	financial	liabilities	are	shown	as	negative	amounts.

# Valuation	Techniques	and	Significant	Inputs

Other	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	in 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	other	secured	financings	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	 2018	 and	 December	 2017,	 the	 firm	 had	 no level	3	resale	agreements,	securities	borrowed	or	securities	loaned.	As	of both	 December	 2018	 and	 December	 2017,	 the	 firm's	 level	 3	 repurchase agreements	were	not	material.	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.	As	of December	 2018,	 the	 firm's	 level 3 other	 secured	 financings	 were	 not material.	The	ranges	of	significant	unobservable	inputs	used	to	value	level	3 other	secured	financings	as	of	December	2017	are	as	follows:

Generally,	increases	in	yield	or	duration,	in	isolation,	would	have	resulted	in a	lower	fair	value	measurement	as	of	December	2017.	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,	Note	15 for	 further	 information	 about	 unsecured	 short-term	 borrowings,	 and Note	16	for	further	information	about	long-term	borrowings.

Certain	of	the	firm's	unsecured	short-term	and	long-term	borrowings	are classified	 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.

Customer	and	Other	Receivables.	Customer	and	other	receivables	at fair	 value	 primarily	 consist	 of	 prepaid	 commodity	 transactions	 and 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	both	December	2018	and	December	2017,	the firm's	level	3	customer	and	other	receivables	were	not	material.

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	and	Note	14	for	further	information	about	deposits.

The	 firm's	 deposits	 that	 are	 classified	 in	 level	 3	 are	 hybrid	 financial instruments.	As	the	significant	unobservable	inputs	used	to	value	hybrid financial	 instruments	 primarily	 relate	 to	 the	 embedded	 derivative component	of	these	deposits,	these	inputs	are	incorporated	in	the	firm's derivative	disclosures	related	to	unobservable	inputs	in	Note	7.

The	table	below	presents	a	summary	of	the	changes	in	fair	value	for	level	3 other	financial	assets	and	financial	liabilities	accounted	for	at	fair	value.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Total\tother\tfinancial\tassets |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t\t\t\t\t\t4 | \t$\t\t\t\t\t\t\t\t55 |
| Net\tunrealized\tgains/(losses) | 2 | – |
| Purchases | – | 1 |
| Settlements | – | (52) |
| Ending\tbalance | \t$\t\t\t\t\t\t\t\t\t\t6 | \t$\t\t\t\t\t\t\t\t\t\t4 |
| Total\tother\tfinancial\tliabilities |  |  |
| Beginning\tbalance | \t$(15,462) | \t$(14,979) |
| Net\trealized\tgains/(losses) | (491) | (362) |
| Net\tunrealized\tgains/(losses) | 2,013 | (1,047) |
| Purchases | – | (3) |
| Sales | – | 1 |
| Issuances | (11,935) | (8,382) |
| Settlements | 7,010 | 6,859 |
| Transfers\tinto\tlevel\t3 | (1,416) | (611) |
| Transfers\tout\tof\tlevel\t3 | 884 | 3,062 |
| Ending\tbalance | \t$(19,397) | \t$(15,462) |

•	Changes	 in	 fair	 value	 are	 presented	 for	 all	 other	 financial	 assets	 and financial	liabilities	that	are	classified	in	level	3	as	of	the	end	of	the	period.

•	Transfers	between	levels	of	the	fair	value	hierarchy	are	reported	at	the beginning	of	the	reporting	period	in	which	they	occur.	If	a	financial	asset or	financial	liability	was	transferred	to	level	3	during	a	reporting	period, its	entire	gain	or	loss	for	the	period	is	classified	in	level	3.

•	For	 level 3 other	 financial	 assets,	 increases	 are	 shown	 as	 positive amounts,	 while	 decreases	 are	 shown	 as	 negative	 amounts.	 For	 level	 3 other	financial	liabilities,	increases	are	shown	as	negative	amounts,	while decreases	are	shown	as	positive	amounts.

•	Level	 3	 other	 financial	 assets	 and	 financial	 liabilities	 are	 frequently economically	hedged	with	cash	instruments	and	derivatives.	Accordingly, gains	or	losses	that	are	classified	in	level	3	can	be	partially	offset	by	gains or	losses	attributable	to	level	1,	2	or	3	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.

The	table	below	disaggregates,	by	the	consolidated	statements	of	financial condition	line	items,	the	information	for	other	financial	liabilities	included in	the	summary	table	above.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Deposits |  |  |
| Beginning\tbalance | \t$\t\t(2,968) | \t$(3,173) |
| Net\trealized\tgains/(losses) | (25) | (6) |
| Net\tunrealized\tgains/(losses) | 272 | (239) |
| Issuances | (796) | (661) |
| Settlements | 298 | 232 |
| Transfers\tinto\tlevel\t3 | (8) | – |
| Transfers\tout\tof\tlevel\t3 | 59 | 879 |
| Ending\tbalance | \t$\t\t(3,168) | \t$(2,968) |
| Repurchase\tagreements |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t\t\t(37) | \t$\t\t\t\t\t(66) |
| Net\tunrealized\tgains/(losses) | 2 | (1) |
| Settlements | 6 | 30 |
| Ending\tbalance | \t$\t\t\t\t\t\t\t(29) | \t$\t\t\t\t\t(37) |
| Other\tsecured\tfinancings |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t(389) | \t$\t\t\t(557) |
| Net\trealized\tgains/(losses) | (15) | 17 |
| Net\tunrealized\tgains/(losses) | 11 | (40) |
| Purchases | – | (3) |
| Sales | – | 1 |
| Issuances | (8) | (32) |
| Settlements | 157 | 171 |
| Transfers\tinto\tlevel\t3 | (10) | (12) |
| Transfers\tout\tof\tlevel\t3 | 84 | 66 |
| Ending\tbalance | \t$\t\t\t\t\t(170) | \t$\t\t\t(389) |
| Unsecured\tshort-term\tborrowings |  |  |
| Beginning\tbalance | \t$\t\t(4,594) | \t$(3,896) |
| Net\trealized\tgains/(losses) | (125) | (332) |
| Net\tunrealized\tgains/(losses) | 558 | (230) |
| Issuances | (4,564) | (4,599) |
| Settlements | 4,481 | 3,675 |
| Transfers\tinto\tlevel\t3 | (72) | (131) |
| Transfers\tout\tof\tlevel\t3 | 240 | 919 |
| Ending\tbalance | \t$\t\t(4,076) | \t$(4,594) |
| Unsecured\tlong-term\tborrowings |  |  |
| Beginning\tbalance | \t$\t\t(7,434) | \t$(7,225) |
| Net\trealized\tgains/(losses) | (349) | (60) |
| Net\tunrealized\tgains/(losses) | 1,262 | (559) |
| Issuances | (6,545) | (3,071) |
| Settlements | 2,068 | 2,751 |
| Transfers\tinto\tlevel\t3 | (1,326) | (468) |
| Transfers\tout\tof\tlevel\t3 | 501 | 1,198 |
| Ending\tbalance | \t$(11,823) | \t$(7,434) |
| Other\tliabilities |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t\t\t(40) | \t$\t\t\t\t\t(62) |
| Net\trealized\tgains/(losses) | 23 | 19 |
| Net\tunrealized\tgains/(losses) | (92) | 22 |
| Issuances | (22) | (19) |
| Ending\tbalance | \t$\t\t\t\t\t(131) | \t$\t\t\t\t\t(40) |

Year	Ended	December	2018.	The	net	realized	and	unrealized	gains	on level	3	other	financial	liabilities	of	$1.52	billion	(reflecting	$491	million	of net	 realized	 losses	 and	 $2.01	 billion	 of	 net	 unrealized	 gains)	 for	 2018 included	 gains/(losses)	 of $883	 million reported	 in	 market	 making, $(1)	 million reported	 in	 other	 principal	 transactions	 and $(1)	 million reported	in	interest	expense	in	the	consolidated	statements	of	earnings,	and gains	 of $641	 million reported	 in	 debt	 valuation	 adjustment	 in	 the consolidated	statements	of	comprehensive	income.

The	 net	 unrealized	 gains	 on	 level	 3	 other	 financial	 liabilities	 for	 2018 primarily	reflected	gains	on	certain	hybrid	financial	instruments	included	in unsecured	 long-term	 borrowings,	 principally	 due	 to	 the	 impact	 of	 wider credit	spreads	and	increases	in	interest	rates,	and	gains	on	certain	hybrid financial	 instruments	 included	 in	 unsecured	 short-term	 borrowings, principally	due	to	a	decrease	in	global	equity	prices.

Transfers	 into	 level 3 other	 financial	 liabilities	 during	 2018	 primarily reflected	 transfers	 of	 certain	 hybrid	 financial	 instruments	 included	 in unsecured	long-term	borrowings	from	level	2,	principally	due	to	reduced transparency	of	certain	inputs	used	to	value	these	instruments	as	a	result	of	a lack	of	market	transactions	in	similar	instruments.

Transfers	 out	 of	 level	 3	 other	 financial	 liabilities	 during	 2018	 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	volatility	and	correlation	inputs	used	to value	these	instruments.

Year	Ended	December	2017.	The	net	realized	and	unrealized	losses	on level	3	other	financial	liabilities	of	$1.41	billion	(reflecting	$362	million	of net	 realized	 losses	 and	 $1.05	 billion	 of	 net	 unrealized	 losses)	 for	 2017 included	 losses	 of	 $1.20	 billion	 reported	 in	 market	 making,	 $45	 million reported	in	other	principal	transactions	and	$10	million	reported	in	interest expense	 in	 the	 consolidated	 statements	 of	 earnings,	 and	 losses	 of $149	 million reported	 in	 debt	 valuation	 adjustment	 in	 the	 consolidated statements	of	comprehensive	income.

The	net	unrealized	 losses	on	 level	3	other	financial	 liabilities	for	2017 primarily	reflected	losses	on	certain	hybrid	financial	instruments	included in	unsecured	long-term	and	short-term	borrowings,	principally	due	to	an increase	in	global	equity	prices	and	the	impact	of	tighter	credit	spreads, and	 losses	on	certain	hybrid	financial	 instruments	 included	 in	deposits, principally	due	to	the	impact	of	an	 increase	 in	 the	market	value	of	 the underlying	assets.

Transfers	 into	 level	 3	 other	 financial	 liabilities	 during	 2017	 primarily reflected	 transfers	 of	 certain	 hybrid	 financial	 instruments	 included	 in unsecured	long-term	borrowings	from	level	2,	principally	due	to	reduced transparency	of	volatility	inputs	used	to	value	these	instruments.

Transfers	out	of	level	3	other	financial	liabilities	during	2017	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	inputs	used	to	value	these	instruments as	a	result	of	market	transactions	in	similar	instruments,	and	transfers	of certain	 hybrid	 financial	 instruments	 included	 in	 deposits	 to	 level 2, principally	 due	 to	 increased	 transparency	 of	 correlation	 and	 volatility inputs	used	to	value	these	instruments.

# 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	in	earnings	as	a result	of	the	firm	electing	to	apply	the	fair	value	option	to	certain	financial assets	and	financial	liabilities.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Unsecured\tshort-term\tborrowings | \t$1,443 | \t$(2,585) | \t$(1,028) |
| Unsecured\tlong-term\tborrowings | 926 | (1,357) | 584 |
| Other\tliabilities | (68) | 222 | (55) |
| Other | 349 | (620) | (630) |
| Total | \t$2,650 | \t$(4,340) | \t$(1,129) |

•	Gains/(losses) are included in	 market	 making and other principal transactions.

•	Gains/(losses)	exclude	contractual	interest,	which	is	included	in	interest income	 and	 interest	 expense,	 for	 all	 instruments	 other	 than	 hybrid financial	instruments.	See	Note	23	for	further	information	about	interest income	and	interest	expense.

•	Gains/(losses)	 included	 in	 unsecured	 short-term	 and	 long-term borrowings	 were	 substantially	 all	 related	 to	 the	 embedded	 derivative component	 of	 hybrid	 financial	 instruments	 for	 2018,	 2017	 and	 2016. These	 gains	 and	 losses	 would	 have	 been	 recognized	 under	 other	 U.S. GAAP	even	if	the	firm	had	not	elected	to	account	for	the	entire	hybrid financial	instrument	at	fair	value.

•	Other	 primarily	 consists	 of	 gains/(losses)	 on customer and other receivables,	deposits	and	other	secured	financings.

Excluding	the	gains	and	losses	on	the	instruments	accounted	for	at	fair	value under	 the	 fair	 value	 option	 described	 above,	 market	 making	 and	 other principal	 transactions	 primarily	 represent	 gains	 and	 losses	 on	 financial instruments	owned	and	financial	instruments	sold,	but	not	yet	purchased.

# 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.

In	the	table	above,	the	aggregate	contractual	principal	amount	of	loans	on nonaccrual	status	and/or	more	than	90	days	past	due	(which	excludes	loans carried	at	zero	fair	value	and	considered	uncollectible)	exceeds	the	related fair	 value	 primarily	 because	 the	 firm	 regularly	 purchases	 loans,	 such	 as distressed	 loans,	 at	 values	 significantly	 below	 the	 contractual	 principal amounts.

The	fair	value	of	unfunded	lending	commitments	for	which	the	fair	value option	was	elected	was	a	liability	of	$45	million	as	of	December	2018	and $31	million	as	of	December	2017,	and	the	related	total	contractual	amount of	these	lending	commitments	was	$7.72	billion	as	of	December	2018	and $9.94	billion	as	of	December	2017.	See	Note	18	for	further	 information about	lending	commitments.

# Long-Term	Debt	Instruments

The	difference	between	the	aggregate	contractual	principal	amount	and	the related	fair	value	of	long-term	other	secured	financings	for	which	the	fair value	option	was	elected	was	not	material	as	of	both	December	2018	and December	2017.	The	aggregate	contractual	principal	amount	of	unsecured long-term	borrowings	for	which	the	fair	value	option	was	elected	exceeded the related fair value by $2.38 billion as of	 December 2018 and $1.69	 billion	 as	 of	 December	 2017.	 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 $211	 million for 2018, $268	 million for 2017 and $281	million	for	2016.	The	firm	generally	calculates	the	fair	value	of	loans and lending	commitments	for	which the	fair	value	option is	elected	by discounting	future	cash	flows	at	a	rate	which	incorporates	the	instrument- specific	credit	spreads.	For	floating-rate	loans	and	lending	commitments, substantially all changes in fair value are attributable to changes in instrument-specific	credit	spreads,	whereas	for	fixed-rate	loans	and	lending commitments,	 changes in fair	 value	 are	 also	 attributable to	 changes in interest	rates.

# Debt	Valuation	Adjustment

The	firm	calculates	the	fair	value	of	financial	liabilities	for	which	the	fair value	option	is	elected	by	discounting	future	cash	flows	at	a	rate	which incorporates	the	firm's	credit	spreads.

The	table	below	presents	information	about	the	net	DVA	gains/(losses)	on financial	liabilities	for	which	the	fair	value	option	was	elected.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| DVA\t(pre-tax) | \t\t$3,389 | \t$(1,232) | \t$(844) |
| DVA\t(net\tof\ttax) | \t\t$2,553 | \t$\t\t\t(807) | \t$(544) |

•	DVA (net of tax) is included in debt valuation adjustment in the consolidated	statements	of	comprehensive	income.

•	The gains/(losses) reclassified to earnings from accumulated other comprehensive loss	 upon	 extinguishment	 of such financial liabilities were	not	material	for	2018,	2017	and	2016.

# Loans	Receivable

Loans	receivable	consists	of	loans	held	for	investment	that	are	accounted	for at	 amortized	 cost	 net	 of	 allowance	 for	 loan	 losses.	 Interest	 on	 loans receivable	 is	 recognized	 over	 the	 life	 of	 the	 loan	 and	 is	 recorded	 on	 an accrual	basis.

The	table	below	presents	information	about	loans	receivable.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Corporate\tloans | \t$37,283 | \t$30,749 |
| PWM\tloans | 17,219 | 16,591 |
| Commercial\treal\testate\tloans | 11,441 | 7,987 |
| Residential\treal\testate\tloans | 7,284 | 6,234 |
| Consumer\tloans | 4,536 | 1,912 |
| Other\tloans | 3,893 | 3,263 |
| Total\tloans\treceivable,\tgross | 81,656 | 66,736 |
| Allowance\tfor\tloan\tlosses | (1,066) | (803) |
| Total\tloans\treceivable | \t$80,590 | \t$65,933 |

•	Corporate	Loans.	Corporate	loans	includes	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.	 Loans	 receivable	 related	 to	 the	 firm's	 relationship lending	activities	are	reported	within	corporate	loans.

•	Private	Wealth	Management	(PWM)	Loans.	PWM	loans	includes loans	 extended	 by	 the	 private	 bank.	 These	 loans	 are	 used	 to	 finance investments	in	both	financial	and	nonfinancial	assets,	bridge	cash	flow timing	gaps	or	provide	liquidity	for	other	needs.	Substantially	all	of	such loans	are	secured	by	securities	or	other	assets.

•	Commercial	 Real	 Estate Loans. Commercial	 real	 estate	 loans includes	loans	extended	by	the	firm	that	are	directly	or	indirectly	secured by	hotels,	retail	stores,	multifamily	housing	complexes	and	commercial and	industrial	properties.	Commercial	real	estate	loans	also	includes	loans purchased	by	the	firm.

•	Residential	 Real Estate Loans. Residential	 real	 estate	 loans includes	loans	extended	by	the	firm	to	clients	who	warehouse	assets	that are	directly	or	indirectly	secured	by	residential	real	estate.	Residential real	estate	loans	also	includes	loans	purchased	by	the	firm.

•	Consumer	Loans.	 Consumer loans represents	 unsecured	 consumer loans	originated	by	the	firm.

•	Other	Loans.	Other	loans	primarily	includes	loans	extended	to	clients who	 warehouse	 assets	 that	 are	 directly	 or	 indirectly	 secured	 by consumer	loans,	including	auto	loans	and	private	student	loans.	Other loans	also	includes	unsecured	consumer	loans	purchased	by	the	firm.

# Lending	Commitments

The	table	below	presents	information	about	lending	commitments	that	are held	for	investment	and	accounted	for	on	an	accrual	basis.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Corporate | \t\t$113,484 | \t$118,553 |
| Other | 7,513 | 5,951 |
| Total | \t\t$120,997 | \t$124,504 |

•	Corporate	 lending	 commitments primarily relates to the firm's relationship	lending	activities.

•	Other	lending	commitments	primarily	relates	to	lending	commitments extended	 to	 clients	 who	 warehouse	 assets	 backed	 by	 real	 estate	 and other	assets	and	in	connection	with	commercial	real	estate	financing.

•	The	estimated	fair	value	of	such	lending	commitments	were	liabilities	of $3.78 billion	 as	 of	 December	 2018	 and $2.27 billion	 as	 of December	2017.	Had	 these	 lending	commitments	been	carried	at	fair value	 and	 included	 in	 the	 fair	 value	 hierarchy,	 $1.12	 billion	 as	 of December	 2018	 and	 $772	 million	 as	 of	 December	 2017	 would	 have been	classified	in	level	2,	and	$2.66	billion	as	of	December	2018	and $1.50	billion	as	of	December	2017	would	have	been	classified	in	level	3.

# PCI	Loans

Loans	 receivable	 includes	 PCI	 loans,	 which	 represent	 acquired	 loans	 or pools	 of	 loans	 with	 evidence	 of	 credit	 deterioration	 subsequent	 to	 their origination	and	where	it	is	probable,	at	acquisition,	that	the	firm	will	not	be able	to	collect	all	contractually	required	payments.	Loans	acquired	within the	 same	 reporting	 period,	 which	 have	 at	 least	 two	 common	 risk characteristics,	one	of	which	relates	to	their	credit	risk,	are	eligible	to	be pooled	 together	 and	 considered	 a	 single	 unit	 of	 account.	 PCI	 loans	 are initially	 recorded	 at	 the	 acquisition	 price	 and	 the	 difference	 between	 the acquisition	 price	 and	 the	 expected	 cash	 flows	 (accretable	 yield)	 is recognized	as	interest	income	over	the	life	of	such	loans	or	pools	of	loans	on an	effective	yield	method.	Expected	cash	flows	on	PCI	loans	are	determined using	various	inputs	and	assumptions,	including	default	rates,	loss	severities, recoveries,	amount	and	 timing	of	prepayments	and	other	macroeconomic indicators.

The	tables	below	present	information	about	PCI	loans.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Commercial\treal\testate\tloans | \t\t$\t\t\t581 | \t$1,116 |
| Residential\treal\testate\tloans | 2,457 | 3,327 |
| Other\tloans | 4 | 10 |
| Total\tgross\tcarrying\tvalue | \t\t$3,042 | \t$4,453 |
| Total\toutstanding\tprincipal\tbalance | \t\t$5,576 | \t$9,512 |
| Total\taccretable\tyield | \t\t$\t\t\t459 | \t$\t\t\t662 |

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Acquired\tduring\tthe\tperiod |  |  |  |
| Fair\tvalue | \t\t$\t\t\t839 | \t$1,769 | \t$2,514 |
| Expected\tcash\tflows | \t\t$\t\t\t937 | \t$1,961 | \t$2,818 |
| Contractually\trequired\tcash\tflows | \t\t$1,881 | \t$4,092 | \t$6,389 |

•	Fair	 value,	 expected	 cash flows	 and	 contractually required	 cash flows were	as	of	the	acquisition	date.

•	Expected	cash	flows	represents	the	cash	flows	expected	to	be	received over	the	life	of	the	loan	or	as	a	result	of	liquidation	of	the	underlying collateral.

•	Contractually	required	cash	flows	represents	cash	flows	required to	be repaid	by	the	borrower	over	the	life	of	the	loan.

# Credit	Quality

Risk Assessment. The	 firm's	 risk	 assessment	 process	 includes evaluating	the	credit	quality	of	its	loans	receivable.	For	loans	receivable (excluding	PCI	and	consumer	loans)	and	lending	commitments,	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.

The	firm	enters	into	economic	hedges	to	mitigate	credit	risk	on	certain loans	receivable	and	corporate	lending	commitments	(both	of	which	are held	for	investment)	related	to	the	firm's	relationship	lending	activities. Such	 hedges	 are	 accounted	 for	 at	 fair	 value.	 See	 Note	 18	 for	 further information	about	these	lending	commitments	and	associated	hedges.

The	 table	 below	 presents	 gross	 loans	 receivable	 (excluding	 PCI	 and consumer	loans	of	$7.58	billion	as	of	December	2018	and	$6.37	billion	as of	December	2017)	and	lending	commitments	by	an	internally	determined public	rating	agency	equivalent	and	by	regulatory	risk	rating.

| $	in	millions | Loans | Commitments | Total |
| :--- | :--- | :--- | :--- |
| Credit\tRating\tEquivalent |  |  |  |
| As\tof\tDecember\t2018 |  |  |  |
| Investment-grade | \t\t$28,290 | $\t\t81,959 | \t$110,249 |
| Non-investment-grade | 45,788 | 39,038 | 84,826 |
| Total | \t\t$74,078 | $120,997 | \t$195,075 |
| As\tof\tDecember\t2017 |  |  |  |
| Investment-grade | \t\t$24,192 | $\t\t89,409 | \t$113,601 |
| Non-investment-grade | 36,179 | 35,095 | 71,274 |
| Total | \t\t$60,371 | $124,504 | \t$184,875 |
| Regulatory\tRisk\tRating |  |  |  |
| As\tof\tDecember\t2018 |  |  |  |
| Non-criticized/pass | \t\t$70,153 | $117,923 | \t$188,076 |
| Criticized | 3,925 | 3,074 | 6,999 |
| Total | \t\t$74,078 | $120,997 | \t$195,075 |
| As\tof\tDecember\t2017 |  |  |  |
| Non-criticized/pass | \t\t$56,720 | $119,427 | \t$176,147 |
| Criticized | 3,651 | 5,077 | 8,728 |
| Total | \t\t$60,371 | $124,504 | \t$184,875 |

In	 the	 table	 above,	non-criticized/pass	 loans	 and	 lending	 commitments represent	loans	and	lending	commitments	that	are	performing	and/or	do not	demonstrate	adverse	characteristics	that	are	likely	to	result	in	a	credit loss.

For	consumer	loans,	an	important	credit-quality	indicator	is	the	Fair	Isaac Corporation	 (FICO)	 credit	 score,	 which	 measures	 a	 borrower's creditworthiness	by	considering	factors	such	as	payment	and	credit	history. FICO	 credit	 scores	 are	 refreshed	 periodically	 by	 the	 firm	 to	 assess	 the updated	creditworthiness	of	the	borrower.

The	 table	 below	 presents	 gross	 consumer loans receivable and the concentration	by	refreshed	FICO	credit	score.

For	PCI	loans,	the	firm's	risk	assessment	process	includes	reviewing	certain key	 metrics,	 such	 as	 delinquency	 status,	 collateral	 values,	 expected	 cash flows	and	other	risk	factors.

Impaired	Loans.	Loans	receivable	(excluding	PCI	loans)	are	determined to	be	impaired	when	it	is	probable	that	the	firm	will	not	collect	all	principal and	 interest	 due	 under	 the	 contractual	 terms.	 At	 that	 time,	 loans	 are generally	 placed	 on	 nonaccrual	 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.	A	loan	is	considered	past	due	when	a	principal	or interest	payment	has	not	been	made	according	to	its	contractual	terms.

In	certain	circumstances,	the	firm	may	also	modify	the	original	terms	of	a loan	 agreement	 by	 granting	 a	 concession	 to	 a	 borrower	 experiencing financial	 difficulty.	 Such	 modifications	 are	 considered	 troubled	 debt restructurings	 and	 typically	 include	 interest	 rate	 reductions,	 payment extensions,	 and	 modification	 of	 loan	 covenants.	 Loans	 modified	 in	 a troubled	 debt	 restructuring	 are	 considered	 impaired	 and	 are	 subject	 to specific	loan-level	reserves.

The	gross	carrying	value	of	impaired	loans	receivable	(excluding	PCI	loans) on	 nonaccrual	 status	 was $838	 million as	 of	 December	 2018	 and $845	million	as	of	December	2017.	Such	loans	included	$27	million	as	of December	2018	and	$61	million	as	of	December	2017	of	corporate	loans that	were	modified	in	a	troubled	debt	restructuring.	The	firm	did	not	have any	lending	commitments	related	to	these	loans	as	of	both	December	2018 and	December	2017.	The	amount	of	loans	30	days	or	more	past	due	was $208	million	as	of	December	2018	and	$567	million	as	of	December	2017.

When	it	is	determined	that	the	firm	cannot	reasonably	estimate	expected cash	 flows	 on	 PCI	 loans	 or	 pools	 of	 loans,	 such	 loans	 are	 placed	 on nonaccrual	status.

# Allowance	for	Credit	Losses

The	firm's	allowance	for	credit	losses	consists	of	the	allowance	for	losses on	loans	and	lending	commitments.

The	 firm's	 allowance	 for	 loan	 losses	 consists	 of	 specific	 loan-level reserves,	portfolio	level	reserves	and	reserves	on	PCI	loans,	as	described below:

•	Specific	 loan-level	 reserves	 are	 determined	 on	 loans	 (excluding	 PCI loans)	that	exhibit	credit	quality	weakness	and	are	therefore	individually evaluated	for	impairment.

•	Portfolio	level	reserves	are	determined	on	loans	(excluding	PCI	loans) not	evaluated	for	specific	loan-level	reserves	by	aggregating	groups	of loans	with	similar	risk	characteristics	and	estimating	the	probable	loss inherent	in	the	portfolio.

•	Reserves	 on	 PCI	 loans	 are	 recorded	 when	 it	 is	 determined	 that	 the expected	cash	flows,	which	are	reassessed	on	a	quarterly	basis,	will	be lower	than	those	used	to	establish	the	current	effective	yield	for	such loans	or	pools	of	loans.	If	the	expected	cash	flows	are	determined	to	be significantly	 higher	 than	 those	 used	 to	 establish	 the	 current	 effective yield,	 such	 increases	 are	 initially	 recognized	 as	 a	 reduction	 to	 any previously	 recorded	 allowances	 for	 loan	 losses	 and	 any	 remaining increases	are	recognized	as	interest	income	prospectively	over	the	life	of the	loan	or	pools	of	loans	as	an	increase	to	the	effective	yield.

The	allowance	for	 loan	 losses	 is	determined	using	various	risk	factors, 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.	In	addition,	for	loans	backed	by real	estate,	risk	factors	include	loan	to	value	ratio,	debt	service	ratio	and home	price	index.	Risk	factors	for	consumer	loans	include	FICO	credit scores	and	delinquency	status.

Management's	 estimate	 of	 loan	 losses	 entails	 judgment	 about	 loan collectability	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	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.

The	table	below	presents	gross	loans	receivable	and	lending	commitments by	impairment	methodology.

| $	in	millions | Specific | Portfolio | PCI | Total |
| :--- | :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |  |  |
| Loans\tReceivable |  |  |  |  |
| Corporate\tloans | $358 | \t$\t\t36,925 | \t$\t\t\t\t\t\t\t– | \t$\t\t37,283 |
| PWM\tloans | 46 | 17,173 | – | 17,219 |
| Commercial\treal\testate\tloans | 9 | 10,851 | 581 | 11,441 |
| Residential\treal\testate\tloans | 425 | 4,402 | 2,457 | 7,284 |
| Consumer\tloans | – | 4,536 | – | 4,536 |
| Other\tloans | – | 3,889 | 4 | 3,893 |
| Total | $838 | \t$\t\t77,776 | \t$3,042 | \t$\t\t81,656 |
| Lending\tCommitments |  |  |  |  |
| Corporate | $\t\t31 | \t$113,453 | \t$\t\t\t\t\t\t\t– | \t$113,484 |
| Other | – | 7,513 | – | 7,513 |
| Total | $\t\t31 | \t$120,966 | \t$\t\t\t\t\t\t\t– | \t$120,997 |
| As\tof\tDecember\t2017 |  |  |  |  |
| Loans\tReceivable |  |  |  |  |
| Corporate\tloans | $377 | \t$\t\t30,372 | \t$\t\t\t\t\t\t\t– | \t$\t\t30,749 |
| PWM\tloans | 163 | 16,428 | – | 16,591 |
| Commercial\treal\testate\tloans | – | 6,871 | 1,116 | 7,987 |
| Residential\treal\testate\tloans | 231 | 2,676 | 3,327 | 6,234 |
| Consumer\tloans | – | 1,912 | – | 1,912 |
| Other\tloans | 74 | 3,179 | 10 | 3,263 |
| Total | $845 | \t$\t\t61,438 | \t$4,453 | \t$\t\t66,736 |
| Lending\tCommitments |  |  |  |  |
| Corporate | $\t\t53 | \t$118,500 | \t$\t\t\t\t\t\t\t– | \t$118,553 |
| Other | – | 5,951 | – | 5,951 |
| Total | $\t\t53 | \t$124,451 | \t$\t\t\t\t\t\t\t– | \t$124,504 |

•	Gross	loans	receivable	and	lending	commitments,	subject	to	specific	loan- level	 reserves,	 included $484 million	 as	 of	 December	 2018	 and $492	 million as	 of	 December	 2017	 of	 impaired	 loans	 and	 lending commitments,	which	did	not	require	a	reserve	as	the	loan	was	deemed	to be	recoverable.

•	Gross	loans	receivable	deemed	impaired	and	subject	to	specific	loan-level reserves	as	a	percentage	of	total	gross	loans	receivable	was	1.0%	as	of December	2018	and	1.3%	as	of	December	2017.

The	table	below	presents	information	about	the	allowance	for	credit	losses.

|  | Year	Ended<br>December	2018 | Year	Ended<br>December	2018 | Year	Ended<br>December	2017 | Year	Ended<br>December	2017 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Loans\nReceivable | Lending\nCommitments | Loans\nReceivable | Lending\nCommitments |
| Changes\tin\tthe\tallowance\tfor\tcredit\tlosses |  |  |  |  |
| Beginning\tbalance | $\t\t\t803 | $274 | $\t509 | $212 |
| Net\tcharge-offs | (337) | – | (203) | – |
| Provision | 654 | 20 | 574 | 83 |
| Other | (54) | (8) | (77) | (21) |
| Ending\tbalance | $1,066 | $286 | $\t803 | $274 |
| Allowance\tfor\tlosses\tby\timpairment\tmethodology |  |  |  |  |
| Specific | $\t\t\t102 | $\t\t\t\t3 | $\t119 | $\t\t14 |
| Portfolio | 848 | 283 | 518 | 260 |
| PCI | 116 | – | 166 | – |
| Total | $1,066 | $286 | $\t803 | $274 |

•	Net	 charge-offs	 were	 primarily	 related	 to	 consumer	 loans	 and commercial	 real	 estate	 PCI	 loans	 for	 2018	 and	 primarily	 related	 to corporate	loans	for	2017.

•	The	provision	for	credit	losses	was	primarily	related	to	consumer	loans and	corporate	loans	for	2018	and	primarily	related	to	corporate	loans and	lending	commitments,	and	commercial	real	estate	loans	for	2017.

•	Other	 represents	 the	 reduction	 to	 the	 allowance related to loans	 and lending	commitments	transferred	to	held	for	sale.

•	Portfolio	 level	reserves	were	primarily	related	 to	corporate	 loans	and lending	commitments,	specific	loan-level	reserves	were	substantially	all related	to	corporate	loans	and	reserves	on	PCI	loans	were	related	to	real estate	loans.

•	Substantially	all	of	 the	allowance	for	 losses	on lending	commitments was	related	to	corporate	lending	commitments.

•	Allowance	for	loan	losses	as	a	percentage	of	total	gross	loans	receivable was	1.3%	as	of	December	2018	and	1.2%	as	of	December	2017.

•	Net	charge-offs	as	a	percentage	of	average	total	gross	loans	receivable were	0.5%	for	2018	and	0.4%	for	2017.

# Collateralized	Agreements	and	Financings

Collateralized	agreements	are	resale	agreements	and	securities	borrowed. Collateralized	financings	are	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,	 which	 is	 included	 in	 interest	 income,	 and collateralized	 financings,	 which	 is	 included	 in	 interest	 expense,	 is recognized	 over	 the	 life	 of	 the	 transaction.	 See	 Note 23 for	 further information	about	interest	income	and	interest	expense.

The	 table	 below	 presents	 the	 carrying	 value	 of	 resale and repurchase agreements	and	securities	borrowed	and	loaned	transactions.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Resale\tagreements | \t\t$139,258 | \t$120,822 |
| Securities\tborrowed | \t\t$135,285 | \t$190,848 |
| Repurchase\tagreements | \t\t$\t\t78,723 | \t$\t\t84,718 |
| Securities\tloaned | \t\t$\t\t11,808 | \t$\t\t14,793 |

•	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.

Even	 though	 repurchase	 and	 resale	 agreements	 (including	 "repos-	 and reverses-to-maturity")	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	before	or	at	the maturity	of	the	agreement.	The	financial	instruments	purchased	or	sold	in resale	 and	 repurchase	 agreements	 typically	 include	 U.S.	 government	 and agency,	and	investment-grade	sovereign	obligations.

The	firm	receives	financial	instruments	purchased	under	resale	agreements and	 makes	 delivery	 of	 financial	 instruments	 sold	 under	 repurchase agreements.	 To	 mitigate	 credit	 exposure,	 the	 firm	 monitors	 the	 market value	 of	 these	 financial	 instruments	 on	 a	 daily	 basis,	 and	 delivers	 or obtains	 additional	 collateral	 due	 to	 changes	 in	 the	 market	 value	 of	 the financial	 instruments,	 as	 appropriate.	 For	 resale	 agreements,	 the	 firm typically	requires	collateral	with	a	fair	value	approximately	equal	to	the carrying	 value	 of	 the	 relevant	 assets	 in	 the	 consolidated	 statements	 of financial	condition.

# Securities	Borrowed	and	Loaned	Transactions

In	a	securities	borrowed	transaction,	the	firm	borrows	securities	from	a counterparty	in	exchange	for	cash	or	securities.	When	the	firm	returns	the securities,	 the	 counterparty	 returns	 the	 cash	 or	 securities.	 Interest	 is generally	paid	periodically	over	the	life	of	the	transaction.

In	 a	 securities	 loaned	 transaction,	 the	 firm	 lends	 securities	 to	 a counterparty	 in	exchange	for	cash	or	securities.	When	 the	counterparty returns	 the	 securities,	 the	 firm	 returns	 the	 cash	 or	 securities	 posted	 as collateral.	 Interest	 is	 generally	 paid	 periodically	 over	 the	 life	 of	 the transaction.

The	firm	receives	securities	borrowed	and	makes	delivery	of	securities loaned.	To	mitigate	credit	exposure,	the	firm	monitors	the	market	value	of these	 securities	 on	 a	 daily	 basis,	 and	 delivers	 or	 obtains	 additional collateral	 due	 to	 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	FICC	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	agreements	generally	can	be	terminated	on	demand,	they exhibit	little,	if	any,	sensitivity	to	changes	in	interest	rates.	Therefore,	the carrying	 value	 of	 such	 agreements	 approximates	 fair	 value.	 As	 these agreements	are	not	accounted	for	at	fair	value,	they	are	not	included	in	the firm's	fair	value	hierarchy	in	Notes	5	through	8.	Had	these	agreements been	 included	 in	 the	firm's	fair	value	hierarchy,	 they	would	have	been classified	in	level	2	as	of	both	December	2018	and	December	2017.

# Offsetting	Arrangements

The	table	below	presents	the	gross	and	net	resale	and	repurchase	agreements and	securities	borrowed	and	loaned	transactions,	and	the	related	amount	of counterparty	 netting	 included	 in	 the	 consolidated	 statements	 of	 financial condition,	 as	 well	 as	 the	 amounts	 of	 counterparty	 netting	 and	 cash	 and securities	collateral	not	offset	 in	 the	consolidated	statements	of	financial condition.

•	Substantially	all	of	the	gross	carrying	values	of	these	arrangements	are subject	to	enforceable	netting	agreements.

•	Where	 the	 firm	 has	 received	 or	 posted	 collateral	 under	 credit	 support agreements,	but	has	not	yet	determined	such	agreements	are	enforceable, the	related	collateral	has	not	been	netted.

•	Amounts	not	offset	includes	counterparty	netting	that	does	not	meet	the criteria	 for	 netting	 under	 U.S.	 GAAP	 and	 the	 fair	 value	 of	 collateral received	or	posted	subject	to	enforceable	credit	support	agreements.

# Gross Carrying Value of Repurchase Agreements and Securities	Loaned

The table below presents the gross carrying value of repurchase agreements	and	securities	loaned	by	class	of	collateral	pledged.

| $	in	millions | Repurchase<br>agreements | Securities<br>loaned |
| :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |
| Money\tmarket\tinstruments | \t\t$\t\t\t\t\t\t\t100 | \t$\t\t\t\t\t\t\t\t\t– |
| U.S.\tgovernment\tand\tagency\tobligations | 88,060 | – |
| Non-U.S.\tgovernment\tand\tagency\tobligations | 84,443 | 2,438 |
| Securities\tbacked\tby\tcommercial\treal\testate | 3 | – |
| Securities\tbacked\tby\tresidential\treal\testate | 221 | – |
| Corporate\tdebt\tsecurities | 5,495 | 195 |
| State\tand\tmunicipal\tobligations | 25 | – |
| Equity\tsecurities | 7,402 | 13,446 |
| Total | \t\t$185,749 | \t$16,079 |
| As\tof\tDecember\t2017 |  |  |
| Money\tmarket\tinstruments | \t\t$\t\t\t\t\t\t\t\t\t97 | \t$\t\t\t\t\t\t\t\t\t– |
| U.S.\tgovernment\tand\tagency\tobligations | 80,591 | – |
| Non-U.S.\tgovernment\tand\tagency\tobligations | 73,031 | 2,245 |
| Securities\tbacked\tby\tcommercial\treal\testate | 43 | – |
| Securities\tbacked\tby\tresidential\treal\testate | 338 | – |
| Corporate\tdebt\tsecurities | 7,140 | 1,145 |
| Other\tdebt\tobligations | 55 | – |
| Equity\tsecurities | 12,573 | 16,338 |
| Total | \t\t$173,868 | \t$19,728 |

The table below presents the gross carrying value of repurchase agreements	and	securities	loaned	by	maturity	date.

# Other	Secured	Financings

In	addition	to	repurchase	agreements	and	securities	loaned	transactions,	the firm	funds	certain	assets	through	the	use	of	other	secured	financings	and pledges	 financial	 instruments	 and	 other	 assets	 as	 collateral	 in	 these transactions.	These	other	secured	financings	consist	of:

•	Liabilities	of	consolidated	VIEs;

•	Transfers	 of	 assets	 accounted	 for	 as	 financings	 rather	 than	 sales	 (e.g., collateralized	central	bank	financings,	pledged	commodities,	bank	loans and	mortgage	whole	loans);	and

•	Other	structured	financing	arrangements.

Other	secured	financings	includes	nonrecourse	arrangements.	Nonrecourse other	 secured	 financings	 were	 $8.47	 billion	 as	 of	 December	 2018	 and $5.31	billion	as	of	December	2017.

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.	As	these	financings	are	not	accounted	for	at	fair value,	they	are	not	included	in	the	firm's	fair	value	hierarchy	in	Notes	5 through	 8.	 Had	 these	 financings	 been	 included	 in	 the	 firm's	 fair	 value hierarchy,	they	would	have	been	primarily	classified	in	level	2	as	of	both December	2018	and	December	2017.

The	table	below	presents	information	about	other	secured	financings.

•	Short-term	other	secured	financings	includes	financings	maturing	within one	 year	 of	 the	 financial	 statement	 date	 and	 financings	 that	 are redeemable	within	one	year	of	the	financial	statement	date	at	the	option of	the	holder.

•	U.S.	 dollar-denominated	 long-term	 other	 secured	 financings	 at amortized	 cost	 had	 a	 weighted	 average	 interest	 rate	 of	 4.02%	 as	 of December	2018	and	3.89%	as	of	December	2017.	These	rates	include the	effect	of	hedging	activities.

•	Non-U.S.	 dollar-denominated	 short-term	 other	 secured	 financings	 at amortized	 cost	 had	 a	 weighted	 average	 interest	 rate	 of	 2.61%	 as	 of December	2017.	This	rate	includes	the	effect	of	hedging	activities.

•	Total	 other	 secured	 financings	 included $2.40 billion	 as	 of December	 2018	 and	 $1.55	 billion	 as	 of	 December	 2017	 related	 to transfers	of	financial	assets	accounted	for	as	financings	rather	than	sales. Such	financings	were	collateralized	by	financial	assets	of	$2.41	billion as	 of	 December	 2018	 and	 $1.57	 billion	 as	 of	 December	 2017,	 both primarily	included	in	financial	instruments	owned.

•	Other	 secured	 financings	 collateralized	 by	 financial	 instruments included	$12.41	billion	as	of	December	2018	and	$16.61	billion	as	of December	2017	of	other	secured	financings	collateralized	by	financial instruments	owned,	and	included	$4.10	billion	as	of	December	2018	and $5.71 billion	 as	 of	 December	 2017	 of	 other	 secured	 financings collateralized	 by	 financial	 instruments	 received	 as	 collateral	 and repledged.

The	table	below	presents	other	secured	financings	by	maturity.

| $	in	millions | As	of<br>December	2018 |
| :--- | :--- |
| Other\tsecured\tfinancings\t(short-term) | $\t\t9,555 |
| Other\tsecured\tfinancings\t(long-term): |  |
| 2020 | 4,435 |
| 2021 | 1,276 |
| 2022 | 2,387 |
| 2023 | 776 |
| 2024\t-\tthereafter | 3,004 |
| Total\tother\tsecured\tfinancings\t(long-term) | 11,878 |
| Total\tother\tsecured\tfinancings | $21,433 |

•	Long-term	other	secured	financings	that	are	repayable	prior	to	maturity at	the	option	of	the	firm	are	reflected	at	their	contractual	maturity	dates.

•	Long-term	 other	 secured	 financings	 that	 are	 redeemable	 prior	 to maturity	at	the	option	of	the	holder	are	reflected	at	the	earliest	dates	such options	become	exercisable.

# Collateral	Received	and	Pledged

The	firm	receives	cash	and	securities	(e.g.,	U.S.	government	and	agency obligations,	 other	 sovereign	 and	 corporate	 obligations,	 as	 well	 as	 equity securities)	 as	 collateral,	 primarily	 in	 connection	 with	 resale	 agreements, securities	borrowed,	derivative	transactions	and	customer	margin	loans.	The firm	obtains	cash	and	securities	as	collateral	on	an	upfront	or	contingent basis	for	derivative	instruments	and	collateralized	agreements	to	reduce	its credit	exposure	to	individual	counterparties.

In	 many	 cases,	 the	 firm	 is	 permitted	 to	 deliver	 or	 repledge	 financial instruments	received	as	collateral	when	entering	into	repurchase	agreements and	 securities	 loaned	 transactions,	 primarily	 in	 connection	 with	 secured client	financing	activities.	The	firm	is	also	permitted	to	deliver	or	repledge these	 financial	 instruments	 in	 connection	 with	 other	 secured	 financings, collateralized	 derivative	 transactions	 and	 firm	 or	 customer	 settlement requirements.

The	firm	also	pledges	certain	financial	 instruments	owned	 in	connection with	repurchase	agreements,	securities	loaned	transactions	and	other	secured financings,	 and	 other	 assets	 (substantially	 all	 real	 estate	 and	 cash)	 in connection	with	other	secured	financings	to	counterparties	who	may	or	may not	have	the	right	to	deliver	or	repledge	them.

The	 table	 below	 presents	 financial	 instruments	 at	 fair	 value	 received	 as collateral	 that	 were	 available	 to	 be	 delivered	 or	 repledged	 and	 were delivered	or	repledged.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Collateral\tavailable\tto\tbe\tdelivered\tor\trepledged | \t\t$681,516 | \t$763,984 |
| Collateral\tthat\twas\tdelivered\tor\trepledged | \t\t$565,625 | \t$599,565 |

In	the	table	above,	collateral	available	to	be	delivered	or	repledged	excludes $14.10	billion	as	of	December	2018	and	$1.52	billion	as	of	December	2017 of	 securities	 received	 under	 resale	 agreements	 and	 securities	 borrowed transactions	that	contractually	had	the	right	to	be	delivered	or	repledged,	but were	segregated	for	regulatory	and	other	purposes.

The	table	below	presents	information	about	assets	pledged.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Financial\tinstruments\towned\tpledged\tto\tcounterparties\tthat: |  |  |
| Had\tthe\tright\tto\tdeliver\tor\trepledge | \t\t$\t\t55,081 | \t$\t\t50,335 |
| Did\tnot\thave\tthe\tright\tto\tdeliver\tor\trepledge | \t\t$\t\t73,540 | \t$\t\t78,656 |
| Other\tassets\tpledged\tto\tcounterparties\tthat |  |  |
| did\tnot\thave\tthe\tright\tto\tdeliver\tor\trepledge | \t\t$\t\t\t\t8,037 | \t$\t\t\t\t4,838 |

The	firm	also	segregated	securities	included	in	financial	instruments	owned of $23.03 billion	 as	 of	 December	 2018	 and $10.42 billion	 as	 of December	 2017	 for	 regulatory	 and	 other	 purposes.	 See	 Note 3 for information	about	segregated	cash.

# Securitization	Activities

The	 firm	 securitizes	 residential	 and	 commercial	 mortgages,	 corporate bonds,	loans	and	other	types	of	financial	assets	by	selling	these	assets	to securitization	vehicles	(e.g.,	trusts,	corporate	entities	and	limited	liability companies)	or	through	a	resecuritization.	The	firm	acts	as	underwriter	of the	beneficial	 interests	 that	are	sold	 to	 investors.	The	firm's	residential mortgage	 securitizations	 are	 primarily	 in	 connection	 with	 government agency	securitizations.

Beneficial	 interests	 issued	 by	 securitization	 entities	 are	 debt	 or	 equity instruments	 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	financial	assets.	Prior	to	securitization,	the	firm generally	accounts	for	assets	pending	transfer	at	fair	value	and	therefore does	not	typically	recognize	significant	gains	or	losses	upon	the	transfer	of assets.	 Net	 revenues	 from	 underwriting	 activities	 are	 recognized	 in connection	with	the	sales	of	the	underlying	beneficial	interests	to	investors.

For	 transfers	of	financial	assets	 that	are	not	accounted	for	as	sales,	 the assets	remain	in	financial	instruments	owned	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	 collateralized	 financings	 and	 Note 23 for	 further information	about	interest	expense.

The	firm	generally	receives	cash	in	exchange	for	the	transferred	assets	but may	 also	 have	 continuing	 involvement	 with	 the	 transferred	 financial assets,	including	ownership	of	beneficial	interests	in	securitized	financial assets,	 primarily	 in	 the	 form	 of	 debt	 instruments.	 The	 firm	 may	 also purchase	senior	or	subordinated	securities	issued	by	securitization	vehicles (which	are	typically	VIEs)	in	connection	with	secondary	market-making activities.

The	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	primarily	are	accounted	for	at fair	value	and	classified	in	level	2	of	the	fair	value	hierarchy.	Beneficial interests	and	other	interests	not	accounted	for	at	fair	value	are	carried	at amounts	 that	 approximate	 fair	 value.	 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	as	of	the	end	of	the	period.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Residential\tmortgages | \t\t$21,229 | \t$18,142 | \t$12,164 |
| Commercial\tmortgages | 8,745 | 7,872 | 233 |
| Other\tfinancial\tassets | 1,914 | 481 | 181 |
| Total\tfinancial\tassets\tsecuritized | \t\t$31,888 | \t$26,495 | \t$12,578 |
| Retained\tinterests\tcash\tflows | \t\t$\t\t\t\t\t296 | \t$\t\t\t\t\t264 | \t$\t\t\t\t\t189 |

The	table	below	presents	information	about	nonconsolidated	securitization entities	to	which	the	firm	sold	assets	and	has	continuing	involvement.

| $	in	millions | Outstanding<br>Principal<br>Amount | Retained<br>Interests | Purchased<br>Interests |
| :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |  |
| U.S.\tgovernment\tagency-issued |  |  |  |
| collateralized\tmortgage\tobligations | $24,506 | $1,758 | $29 |
| Other\tresidential\tmortgage-backed | 19,560 | 941 | 15 |
| Other\tcommercial\tmortgage-backed | 15,088 | 448 | 10 |
| Corporate\tdebt\tand\tother\tasset-backed | 3,311 | 133 | 3 |
| Total | $62,465 | $3,280 | $57 |
| As\tof\tDecember\t2017 |  |  |  |
| U.S.\tgovernment\tagency-issued |  |  |  |
| collateralized\tmortgage\tobligations | $20,232 | $1,120 | $16 |
| Other\tresidential\tmortgage-backed | 10,558 | 711 | 17 |
| Other\tcommercial\tmortgage-backed | 7,916 | 228 | 7 |
| Corporate\tdebt\tand\tother\tasset-backed | 2,108 | 56 | 1 |
| Total | $40,814 | $2,115 | $41 |

•	The	 outstanding	 principal	 amount	 is	 presented	 for	 the	 purpose	 of providing	information	about	the	size	of	the	securitization	entities	and	is not	representative	of	the	firm's	risk	of	loss.

•	The	firm's	risk	of	loss	from	retained	or	purchased	interests	is	limited	to the	carrying	value	of	these	interests.

•	Purchased	 interests	 represent	 senior	 and	 subordinated	 interests, purchased	 in	 connection	 with	 secondary	 market-making	 activities,	 in securitization	entities	in	which	the	firm	also	holds	retained	interests.

•	Substantially	 all	 of	 the	 total	 outstanding	 principal	 amount	 and	 total retained	interests	relate	to	securitizations	during	2014	and	thereafter	as of	 December	 2018,	 and	 relate	 to	 securitizations	 during	 2012	 and thereafter	as	of	December	2017.

In	addition	to	the	interests	in	the	table	above,	the	firm	had	other	continuing involvement	in	the	form	of	derivative	transactions	and	commitments	with certain	nonconsolidated	VIEs.	The	carrying	value	of	these	derivatives	and commitments	was	a	net	asset	of	$75	million	as	of	December	2018	and $86	 million	 as	 of	 December	 2017,	 and	 the	 notional	 amount	 of	 these derivatives	and	commitments	was	$1.09	billion	as	of	December	2018	and $1.26 billion	 as	 of	 December	 2017.	 The	 notional	 amounts	 of	 these derivatives	and	commitments	are	included	in	maximum	exposure	to	loss	in the	nonconsolidated	VIE	table	in	Note	12.

The	 table	 below	 presents	 information	 about	 the	 weighted	 average	 key economic	 assumptions	 used	 in	 measuring	 the	 fair	 value	 of	 mortgage- backed	retained	interests.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Fair\tvalue\tof\tretained\tinterests | \t$\t3,151 | \t$2,071 |
| Weighted\taverage\tlife\t(years) | 7.2 | 6.0 |
| Constant\tprepayment\trate | 11.9% | 9.4% |
| Impact\tof\t10%\tadverse\tchange | \t$\t\t\t\t\t(27) | \t$\t\t\t\t(19) |
| Impact\tof\t20%\tadverse\tchange | \t$\t\t\t\t\t(53) | \t$\t\t\t\t(35) |
| Discount\trate | 4.7% | 4.2% |
| Impact\tof\t10%\tadverse\tchange | \t$\t\t\t\t\t(75) | \t$\t\t\t\t(35) |
| Impact\tof\t20%\tadverse\tchange | \t$\t\t\t(147) | \t$\t\t\t\t(70) |

•	Amounts	do	not	reflect	the	benefit	of	other	financial	instruments	that	are held	to	mitigate	risks	inherent	in	these	retained	interests.

•	Changes	 in	 fair	 value	 based	 on	 an	 adverse	 variation	 in	 assumptions generally	cannot	be	extrapolated	because	the	relationship	of	the	change in	assumptions	to	the	change	in	fair	value	is	not	usually	linear.

•	The	 impact	 of	 a	 change	 in	 a	 particular	 assumption	 is	 calculated independently	 of	 changes	 in	 any	 other	 assumption.	 In	 practice, simultaneous	changes	in	assumptions	might	magnify	or	counteract	the sensitivities	disclosed	above.

•	The	constant	prepayment	rate	is	included	only	for	positions	for	which	it	is a	key	assumption	in	the	determination	of	fair	value.

•	The	 discount	 rate	 for	 retained	 interests	 that	 relate	 to	 U.S.	 government agency-issued	collateralized	mortgage	obligations	does	not	include	any credit	loss.	Expected	credit	loss	assumptions	are	reflected	in	the	discount rate	for	the	remainder	of	retained	interests.

The	firm	has	other	retained	interests	not	reflected	in	the	table	above	with	a fair	value	of	$133	million	and	a	weighted	average	life	of	4.2	years	as	of December	2018,	and	a	fair	value	of	$56	million	and	a	weighted	average	life of	4.5	years	as	of	December	2017.	Due	to	the	nature	and	fair	value	of	certain of	these	retained	interests,	the	weighted	average	assumptions	for	constant prepayment	and	discount	rates	and	the	related	sensitivity	to	adverse	changes are	not	meaningful	as	of	both	December	2018	and	December	2017.	The firm's	maximum	exposure	to	adverse	changes	in	the	value	of	these	interests is	the	carrying	value	of	$133	million	as	of	December	2018	and	$56	million as	of	December	2017.

# Variable	Interest	Entities

A	variable	interest	in	a	VIE	is	an	investment	(e.g.,	debt	or	equity)	or	other interest	(e.g.,	derivatives	or	loans	and	lending	commitments)	that	will	absorb portions	of	the	VIE's	expected	losses	and/or	receive	portions	of	the	VIE's expected	residual	returns.

The	firm's	variable	interests	in	VIEs	include	senior	and	subordinated	debt; loans	and	lending	commitments;	limited	and	general	partnership	interests; preferred	 and	 common	 equity;	 derivatives	 that	 may	 include	 foreign currency,	equity	and/or	credit	risk;	guarantees;	and	certain	of	the	fees	the firm	receives	from	investment	funds.	Certain	interest	rate,	foreign	currency and	 credit	 derivatives	 the	 firm	 enters	 into	 with	 VIEs	 are	 not	 variable interests	because	they	create,	rather	than	absorb,	risk.

VIEs	generally	finance	the	purchase	of	assets	by	issuing	debt	and	equity securities	that	are	either	collateralized	by	or	indexed	to	the	assets	held	by	the VIE.	The	debt	and	equity	securities	issued	by	a	VIE	may	include	tranches	of varying	levels	of	subordination.	The	firm's	involvement	with	VIEs	includes securitization	of	financial	assets,	as	described	in	Note	11,	and	investments	in and	 loans	 to	 other	 types	 of	 VIEs,	 as	 described	 below.	 See	 Note	 11	 for further	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.

# VIE	Consolidation	Analysis

The	enterprise	with	a	controlling	financial	interest	in	a	VIE	is	known	as	the primary	 beneficiary	 and	 consolidates	 the	 VIE.	 The	 firm	 determines whether	it	is	the	primary	beneficiary	of	a	VIE	by	performing	an	analysis that	principally	considers:

•	Which	variable	interest	holder	has	the	power	to	direct	the	activities	of the	 VIE	 that	 most	 significantly	 impact	 the	 VIE's	 economic performance;

•	Which	variable	interest	holder	has	the	obligation	to	absorb	losses	or	the right	 to	 receive	 benefits	 from	 the	 VIE	 that	 could	 potentially	 be significant	to	the	VIE;

•	The	VIE's	purpose	and	design,	including	the	risks	the	VIE	was	designed to	create	and	pass	through	to	its	variable	interest	holders;

•	The	VIE's	capital	structure;

•	The	terms	between	the	VIE	and	its	variable	interest	holders	and	other parties	involved	with	the	VIE;	and

•	Related-party	relationships.

The	 firm	 reassesses	 its	 evaluation	 of	 whether	 an	 entity	 is	 a	VIE	 when certain	reconsideration	events	occur.	The	firm	reassesses	its	determination of	whether	it	is	the	primary	beneficiary	of	a	VIE	on	an	ongoing	basis	based on	current	facts	and	circumstances.

# VIE	Activities

The	firm	is	principally	involved	with	VIEs	through	the	following	business activities:

Mortgage-Backed	 VIEs.	 The firm	 sells	 residential	 and	 commercial mortgage	loans	and	securities	to	mortgage-backed	VIEs	and	may	retain beneficial	interests	in	the	assets	sold	to	these	VIEs.	The	firm	purchases	and sells	beneficial	interests	issued	by	mortgage-backed	VIEs	in	connection with	 market-making	 activities.	 In	 addition,	 the	 firm	 may	 enter	 into derivatives	with	certain	of	these	VIEs,	primarily	interest	rate	swaps,	which are	 typically	 not	 variable	 interests.	 The	 firm	 generally	 enters	 into derivatives	with	other	counterparties	to	mitigate	its	risk.

Real	 Estate,	 Credit-	 and	 Power-Related	 and	 Other Investing VIEs.	The	firm	purchases	equity	and	debt	securities	issued	by	and	makes loans	to	VIEs	that	hold	real	estate,	performing	and	nonperforming	debt, distressed	 loans,	 power-related	 assets	 and	 equity	 securities.	 The	 firm generally	does	not	sell	assets	to,	or	enter	into	derivatives	with,	these	VIEs.

Corporate	Debt	and	Other	Asset-Backed	VIEs. 	The	firm	structures VIEs	 that	 issue	 notes	 to	 clients,	 purchases	 and	 sells	 beneficial	 interests issued	by	corporate	debt	and	other	asset-backed	VIEs	in	connection	with market-making	activities,	and	makes	loans	to	VIEs	that	warehouse	corporate debt.	 Certain	 of	 these	 VIEs	 synthetically	 create	 the	 exposure	 for	 the beneficial	interests	they	issue	by	entering	into	credit	derivatives	with	the firm,	rather	than	purchasing	the	underlying	assets.	In	addition,	the	firm	may enter	into	derivatives,	such	as	total	return	swaps,	with	certain	corporate	debt and	other	asset-backed	VIEs,	under	which	the	firm	pays	the	VIE	a	return due	to	the	beneficial	interest	holders	and	receives	the	return	on	the	collateral owned	by	the	VIE.	The	collateral	owned	by	these	VIEs	is	primarily	other asset-backed	loans	and	securities.	The	firm	generally	can	be	removed	as	the total	 return	 swap	 counterparty	 and	 enters	 into	 derivatives	 with	 other counterparties	to	mitigate	its	risk	related	to	these	swaps.	The	firm	may	sell assets	to	the	corporate	debt	and	other	asset-backed	VIEs	it	structures.

Principal-Protected	 Note	 VIEs.	 The firm	 structures	 VIEs	 that	 issue principal-protected	notes	 to	clients.	These	VIEs	own	portfolios	of	assets, principally	with	exposure	to	hedge	funds.	Substantially	all	of	the	principal protection	 on	 the	 notes	 issued	 by	 these	 VIEs	 is	 provided	 by	 the	 asset portfolio	rebalancing	that	is	required	under	the	terms	of	the	notes.	The	firm enters	into	total	return	swaps	with	these	VIEs	under	which	the	firm	pays	the VIE	the	return	due	to	the	principal-protected	note	holders	and	receives	the return	on	the	assets	owned	by	the	VIE.	The	firm	may	enter	into	derivatives with	other	counterparties	to	mitigate	its	risk.	The	firm	also	obtains	funding through	these	VIEs.

Investments	in	Funds.	The	firm	makes	equity	 investments	 in	certain investment	fund	VIEs	it	manages	and	is	entitled	to	receive	fees	from	these VIEs.	The	firm	generally	does	not	sell	assets	to,	or	enter	into	derivatives with,	these	VIEs.

# Nonconsolidated	VIEs

The	table	below	presents	a	summary	of	the	nonconsolidated	VIEs	in	which the	firm	holds	variable	interests.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Total\tnonconsolidated\tVIEs |  |  |
| Assets\tin\tVIEs | \t\t$118,186 | \t$97,962 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tassets | 9,543 | 8,425 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tliabilities | 478 | 214 |
| Maximum\texposure\tto\tloss: |  |  |
| Retained\tinterests | 3,280 | 2,115 |
| Purchased\tinterests | 983 | 1,172 |
| Commitments\tand\tguarantees | 2,745 | 3,462 |
| Derivatives | 8,975 | 8,644 |
| Loans\tand\tinvestments | 4,728 | 4,216 |
| Total\tmaximum\texposure\tto\tloss | \t\t$\t\t20,711 | \t$19,609 |

•	The	nature	of	the	firm's	variable	interests	can	take	different	forms,	as described	in	the	rows	under	maximum	exposure	to	loss.

•	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	 maximum	 exposure	 to	 loss	 excludes	 the	 benefit	 of	 offsetting financial	instruments	that	are	held	to	mitigate	the	risks	associated	with these	variable	interests.

•	The	 maximum	 exposure	 to	 loss	 from	 retained	 interests,	 purchased interests,	 and	 loans	 and	 investments	 is	 the	 carrying	 value	 of	 these interests.

•	The	maximum	exposure	to	loss	from	commitments	and	guarantees,	and derivatives	is	the	notional	amount,	which	does	not	represent	anticipated losses	and	has	not	been	reduced	by	unrealized	losses.	As	a	result,	the maximum	exposure	to	loss	exceeds	liabilities	recorded	for	commitments and	guarantees,	and	derivatives.

The	 table	 below	 disaggregates,	 by	 principal	 business	 activity,	 the information	 for	 nonconsolidated	 VIEs	 included	 in	 the	 summary	 table above.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Mortgage-backed |  |  |
| Assets\tin\tVIEs | \t\t$73,262 | \t$55,153 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tassets | 4,090 | 3,128 |
| Maximum\texposure\tto\tloss: |  |  |
| Retained\tinterests | 3,147 | 2,059 |
| Purchased\tinterests | 941 | 1,067 |
| Commitments\tand\tguarantees | 35 | 11 |
| Derivatives | 77 | 99 |
| Total\tmaximum\texposure\tto\tloss | \t\t$\t\t4,200 | \t$\t\t3,236 |
| Real\testate,\tcredit-\tand\tpower-related\tand\tother\tinvesting |  |  |
| Assets\tin\tVIEs | \t\t$18,851 | \t$15,539 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tassets | 3,601 | 3,289 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tliabilities | 20 | 2 |
| Maximum\texposure\tto\tloss: |  |  |
| Commitments\tand\tguarantees | 1,543 | 1,617 |
| Derivatives | 113 | 238 |
| Loans\tand\tinvestments | 3,572 | 3,051 |
| Total\tmaximum\texposure\tto\tloss | \t\t$\t\t5,228 | \t$\t\t4,906 |
| Corporate\tdebt\tand\tother\tasset-backed |  |  |
| Assets\tin\tVIEs | \t\t$15,842 | \t$16,251 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tassets | 1,563 | 1,660 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tliabilities | 458 | 212 |
| Maximum\texposure\tto\tloss: |  |  |
| Retained\tinterests | 133 | 56 |
| Purchased\tinterests | 42 | 105 |
| Commitments\tand\tguarantees | 1,113 | 1,779 |
| Derivatives | 8,782 | 8,303 |
| Loans\tand\tinvestments | 867 | 817 |
| Total\tmaximum\texposure\tto\tloss | \t\t$10,937 | \t$11,060 |
| Investments\tin\tfunds |  |  |
| Assets\tin\tVIEs | \t\t$10,231 | \t$11,019 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tassets | 289 | 348 |
| Maximum\texposure\tto\tloss: |  |  |
| Commitments\tand\tguarantees | 54 | 55 |
| Derivatives | 3 | 4 |
| Loans\tand\tinvestments | 289 | 348 |
| Total\tmaximum\texposure\tto\tloss | \t\t$\t\t\t\t\t346 | \t$\t\t\t\t\t407 |

As	of	both	December	2018	and	December	2017,	the	carrying	values	of	the firm's	 variable	 interests	 in	 nonconsolidated	 VIEs	 are	 included	 in	 the consolidated	statements	of	financial	condition	as	follows:

•	Mortgage-backed:	Assets	were	primarily	included	in	financial	instruments owned.

•	Real	estate,	credit-	and	power-related	and	other	investing:	Assets	were primarily	 included	 in	 financial	 instruments	 owned	 and	 liabilities	 were included	in	financial	instruments	sold,	but	not	yet	purchased	and	other liabilities.

•	Corporate	debt	and	other	asset-backed:	Assets	were	primarily	included	in loans	 receivable	 and	 liabilities	 were	 included	 in	 financial	 instruments sold,	but	not	yet	purchased.

•	Investments in funds:	 Assets	 were included in financial instruments owned.

# Consolidated	VIEs

The	table	below	presents	a	summary	of	the	carrying	value	and	classification of	assets	and	liabilities	in	consolidated	VIEs.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Total\tconsolidated\tVIEs |  |  |
| Assets |  |  |
| Cash\tand\tcash\tequivalents | \t\t$\t\t\t\t\t84 | \t$\t\t\t275 |
| Customer\tand\tother\treceivables | 2 | 2 |
| Loans\treceivable | 319 | 427 |
| Financial\tinstruments\towned | 2,034 | 1,194 |
| Other\tassets | 1,261 | 1,273 |
| Total | \t\t$3,700 | \t$3,171 |
| Liabilities |  |  |
| Other\tsecured\tfinancings | \t\t$1,204 | \t$1,023 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased | 20 | 15 |
| Unsecured\tshort-term\tborrowings | 45 | 79 |
| Unsecured\tlong-term\tborrowings | 207 | 225 |
| Other\tliabilities | 1,100 | 577 |
| Total | \t\t$2,576 | \t$1,919 |

•	Assets	and	liabilities	are	presented	net	of	intercompany	eliminations	and exclude	 the	 benefit	 of	 offsetting	 financial	 instruments	 that	 are	 held to mitigate	the	risks	associated	with	the	firm's	variable	interests.

•	VIEs	in	which	the	firm	holds	a	majority	voting	interest	are	excluded	if (i)	the	VIE	meets	the	definition	of	a	business	and	(ii)	the	VIE's	assets	can be	used	for	purposes	other	than	the	settlement	of	its	obligations.

•	Substantially	all	assets	can	only	be	used	to	settle	obligations	of	the	VIE.

The	 table	 below	 disaggregates,	 by	 principal	 business	 activity, the information	for	consolidated	VIEs	included	in	the	summary	table	above.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Real\testate,\tcredit-related\tand\tother\tinvesting |  |  |
| Assets |  |  |
| Cash\tand\tcash\tequivalents | \t\t$\t\t\t\t\t\t\t84 | \t$\t\t\t\t\t275 |
| Loans\treceivable | 269 | 375 |
| Financial\tinstruments\towned | 1,815 | 896 |
| Other\tassets | 1,258 | 1,267 |
| Total | \t\t$\t\t3,426 | \t$\t\t2,813 |
| Liabilities |  |  |
| Other\tsecured\tfinancings | \t\t$\t\t\t\t\t596 | \t$\t\t\t\t\t327 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased | 20 | 15 |
| Other\tliabilities | 1,100 | 577 |
| Total | \t\t$\t\t1,716 | \t$\t\t\t\t\t919 |
| Mortgage-backed\tand\tother\tasset-backed |  |  |
| Assets |  |  |
| Customer\tand\tother\treceivables | \t\t$\t\t\t\t\t\t\t\t\t2 | \t$\t\t\t\t\t\t\t\t\t2 |
| Loans\treceivable | 50 | 52 |
| Financial\tinstruments\towned | 210 | 242 |
| Other\tassets | 3 | 6 |
| Total | \t\t$\t\t\t\t\t265 | \t$\t\t\t\t\t302 |
| Liabilities |  |  |
| Other\tsecured\tfinancings | \t\t$\t\t\t\t\t140 | \t$\t\t\t\t\t207 |
| Total | \t\t$\t\t\t\t\t140 | \t$\t\t\t\t\t207 |
| Principal-protected\tnotes |  |  |
| Assets |  |  |
| Financial\tinstruments\towned | \t\t$\t\t\t\t\t\t\t\t\t9 | \t$\t\t\t\t\t\t\t56 |
| Total | \t\t$\t\t\t\t\t\t\t\t\t9 | \t$\t\t\t\t\t\t\t56 |
| Liabilities |  |  |
| Other\tsecured\tfinancings | \t\t$\t\t\t\t\t468 | \t$\t\t\t\t\t489 |
| Unsecured\tshort-term\tborrowings | 45 | 79 |
| Unsecured\tlong-term\tborrowings | 207 | 225 |
| Total | \t\t$\t\t\t\t\t720 | \t$\t\t\t\t\t793 |

•	The	 majority	 of	 the	 assets	 in	 principal-protected notes	 VIEs are intercompany	and	are	eliminated	in	consolidation.

•	Creditors	and	beneficial	interest	holders	of	real	estate,	credit-related	and other	investing	VIEs,	and	mortgage-backed	and	other	asset-backed	VIEs do	not	have	recourse	to	the	general	credit	of	the	firm.

# Other	Assets

The	table	below	presents	other	assets	by	type.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Property,\tleasehold\timprovements\tand\tequipment | \t\t$18,317 | \t$15,094 |
| Goodwill\tand\tidentifiable\tintangible\tassets | 4,082 | 4,038 |
| Income\ttax-related\tassets | 1,529 | 3,728 |
| Miscellaneous\treceivables\tand\tother | 6,712 | 5,486 |
| Total | \t\t$30,640 | \t$28,346 |

•	Property,	leasehold	improvements	and	equipment	is	net	of	accumulated depreciation	and	amortization	of	$9.08	billion	as	of	December	2018	and $8.28	billion	as	of	December	2017.	Property,	leasehold	improvements	and equipment	included	$5.57	billion	as	of	December	2018	and	$5.97	billion as	of	December	2017	that	the	firm	uses	in	connection	with	its	operations, and $896	 million as	 of	 December	 2018	 and $982	 million as	 of December	2017	of	foreclosed	real	estate	primarily	related	to	PCI	loans. The	 remainder	 is	 held	 by	 investment	 entities,	 including	 VIEs, consolidated	 by	 the	 firm.	 Substantially	 all	 property	 and	 equipment	 is depreciated	 on	 a	 straight-line	 basis	 over	 the	 useful	 life	 of	 the	 asset. Leasehold	improvements	are	amortized	on	a	straight-line	basis	over	the shorter	of	the	useful	life	of	 the	 improvement	or	 the	 term	of	 the	 lease. Capitalized	costs	of	software	developed	or	obtained	for	internal	use	are amortized	on	a	straight-line	basis	over	three	years.

•	The	 decrease	 in	 income	tax-related	 assets	 from	 December	 2017	 to December	2018	reflected	a	decrease	in	net	current	tax	receivables,	as	the net	deferred	tax	liability	related	to	the	Tax	Legislation	repatriation	 tax became	 current	 and	 was	 netted	 against	 current	 tax	 receivables.	 See Note	24	for	further	information	about	Tax	Legislation.

•	Miscellaneous	receivables	and	other	included	debt	securities	accounted for	 as	held-to-maturity	 of $1.29 billion	 as	 of	 December	 2018	 and $800	million	as	of	December	2017.	As	of	December	2018,	these	securities were	 primarily	 backed	 by	 residential	 real	 estate	 and	 had	 maturities	 of greater	than	ten	years.	As	of	December	2017	these	securities	were	backed by	 residential	 real	 estate	 and	 had	 maturities	 of	 greater	 than	 ten	 years. Held-to-maturity	securities	are	carried	at	amortized	cost	and	the	carrying value	 of	 these	 securities	 approximated	 fair	 value	 as	 of	 both December	 2018	 and	 December	 2017.	 As	 these	 securities	 are	 not accounted	for	at	fair	value,	they	are	not	included	in	the	firm's	fair	value hierarchy	in	Notes	5	through	8.	Had	these	securities	been	included	in	the firm's	fair	value	hierarchy,	they	would	have	been	primarily	classified	in level	 2	 as	 of	 December	 2018	 and	 substantially	 all	 would	 have	 been classified	in	level	2	as	of	December	2017.

•	Miscellaneous	 receivables	 and	 other	 included	 investments	 in	 qualified affordable	housing	projects	of	$653	million	as	of	December	2018	and $679	million	as	of	December	2017.

•	Miscellaneous	receivables	and	other	included	assets	classified	as	held for	sale	of	$1.01	billion	as	of	December	2018	related	to	the	firm's	new European	headquarters	in	London.	During	the	third	quarter	of	2018,	the firm	 entered	 into	 a	 sale	 and	 leaseback	 agreement,	 which	 closed	 in January	2019,	to	sell	this	property	for	$1.53	billion.	The	assets	were classified	as	held	for	sale	during	the	fourth	quarter	of	2018	when	the construction	of	the	property	was	substantially	completed.	Substantially all	of	the	sale	proceeds	in	excess	of	the	carrying	value	of	the	property will	be	recognized	over	the	life	of	the	lease	as	a	reduction	to	occupancy expense.	 In	 accordance	 with	 ASU	No.	2016-02,	 the	 firm	 recorded	 a right-of-use	asset	upon	the	closing	of	the	sale	and	lease	back	agreement in	January	2019.	See	Note	3	for	information	about	ASU	No.	2016-02.

•	Miscellaneous	receivables	and	other	included	other	assets	classified	as held	for	sale	of	$365	million	as	of	December	2018	and	$634	million	as of	December	2017	related	to	the	firm's	consolidated	investments	within its	Investing	&	Lending	segment,	substantially	all	of	which	consisted	of property	and	equipment.

•	Miscellaneous receivables and other included equity-method investments	of	$357	million	as	of	December	2018	and	$275	million	as of	December	2017.

Goodwill.	The	table	below	presents	the	carrying	value	of	goodwill.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Investment\tBanking: |  |  |
| Financial\tAdvisory | \t\t$\t\t\t\t\t98 | \t$\t\t\t\t\t98 |
| Underwriting | 183 | 183 |
| Institutional\tClient\tServices: |  |  |
| FICC\tClient\tExecution | 269 | 269 |
| Equities\tclient\texecution | 2,403 | 2,403 |
| Securities\tservices | 105 | 105 |
| Investing\t&amp;\tLending | 91 | 2 |
| Investment\tManagement | 609 | 605 |
| Total | \t\t$3,758 | \t$3,665 |

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	for	impairment	annually	in	the	fourth	quarter	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	estimated	fair	value	of	a	reporting	unit	is	less	than	its	estimated carrying	 value.	 If	 the	 results	 of	 the	 qualitative	 assessment	 are	 not conclusive,	a	quantitative	goodwill	test	is	performed.

The	quantitative	goodwill	 test	compares	 the	estimated	fair	value	of	each reporting	unit	with	 its	estimated	net	book	value	(including	goodwill	and identifiable	 intangible	assets).	If	 the	reporting	unit's	estimated	fair	value exceeds	 its	 estimated	 net	 book	 value,	 goodwill	 is	 not	 impaired.	 An impairment	is	recognized	if	the	estimated	fair	value	of	a	reporting	unit	is	less than	 its	 estimated	 net	 book	 value.	 To	 estimate	 the	 fair	 value	 of	 each reporting	unit,	a	relative	value	technique	is	used	because	the	firm	believes market	participants	would	use	this	technique	to	value	the	firm's	reporting units.	 The	 relative	 value	 technique	 applies	 observable	price-to-earnings multiples	 or	price-to-book	 multiples	 and	 projected	 return	 on	 equity	 of comparable	competitors	to	reporting	units'	net	earnings	or	net	book	value. The	estimated	net	book	value	of	each	reporting	unit	reflects	an	allocation	of total	 shareholders'	 equity	 and	 represents	 the	 estimated	 amount	 of	 total shareholders'	equity	required	to	support	the	activities	of	the	reporting	unit under	currently	applicable	regulatory	capital	requirements.

In	the	fourth	quarter	of	2018,	the	firm	assessed	goodwill	for	impairment	for each	of	its	reporting	units	by	performing	a	qualitative	assessment.	Multiple factors	were	assessed	with	respect	to	each	of	the	firm's	reporting	units	to determine	whether	it	was	more	likely	than	not	that	the	estimated	fair	value of	any	of	these	reporting	units	was	less	than	its	estimated	carrying	value. The	 qualitative	 assessment	 also	 considered	 changes	 since	 the	 prior quantitative	tests.

The	 firm	 considered	 the	 following	 factors	 in	 the	 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 value:

•	Performance	Indicators.	During	2018,	the	firm's	net	revenues,	diluted earnings	 per	 common	 share,	 return	 on	 average	 common	 shareholders' equity	(ROE)	and	book	value	per	common	share	all	increased	compared with	 2017.	 The	 firm's	 operating	 expenses	 increased,	 reflecting investments	in	growth	and	higher	client	activity.	Despite	the	increase	in expenses,	the	efficiency	ratio	(total	operating	expenses	divided	by	total	net revenues)	 and	pre-tax	margin	for	2018	remained	stable	compared	with 2017	and	there	were	no	significant	negative	changes	to	the	firm's	overall cost	structure	since	the	prior	quantitative	goodwill	tests	were	performed.

•	Firm	and	Industry	Events.	There	were	no	events,	entity-specific	or otherwise,	 that	 would	 have	 had	 a	 significant	 negative	 impact	 on	 the valuation	of	the	firm's	reporting	units.

•	Macroeconomic Indicators.	 Since the	 prior	 quantitative	 goodwill tests,	the	firm's	general	operating	environment	improved	amid	stronger global	economic	growth.

•	Fair	Value	Indicators.	Since	the	prior	quantitative	goodwill	tests,	fair value	indicators	in	the	market	improved	as	global	equity	prices	generally increased	and	credit	spreads	generally	tightened.	For	the	firm	and	most publicly	traded	participants	in	its	industry,	stock	prices	increased	since the	prior	tests.	In	addition,	price-to-book	multiples	generally	remained greater	than	1.0x	and	price-to-earnings	multiples,	while	generally	lower, remained	relatively	solid.

As	a	result	of	the	qualitative	assessment,	the	firm	determined	that	it	was more	likely	than	not	that	the	estimated	fair	value	of	each	of	the	reporting units	 exceeded	 its	 respective	 carrying	 value.	 Therefore,	 the	 firm determined	that	goodwill	for	each	reporting	unit	was	not	impaired	and	that a	quantitative	goodwill	test	was	not	required.

Subsequent	to	the	qualitative	assessment,	the	firm's	stock	price	declined towards	the	end	of	the	year.	Due	to	the	short	period	of	time	of	this	decline and	 continued	 favorable	 outlook	 for	 the	 firm's	 performance,	 the	 firm determined	that	this	was	not	a	triggering	event	for	further	assessment.

Identifiable	Intangible	Assets.	The	table	below	presents	identifiable intangible	assets	by	segment	and	type.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| By\tSegment |  |  |
| Institutional\tClient\tServices: |  |  |
| FICC\tClient\tExecution | \t$\t\t\t\t\t\t10 | \t$\t\t\t\t\t\t37 |
| Equities\tclient\texecution | 37 | 88 |
| Investing\t&amp;\tLending | 178 | 140 |
| Investment\tManagement | 99 | 108 |
| Total | \t$\t\t\t\t324 | \t$\t\t\t\t373 |
| By\tType |  |  |
| Customer\tlists |  |  |
| Gross\tcarrying\tvalue | \t$\t1,117 | \t$\t1,091 |
| Accumulated\tamortization | (970) | (903) |
| Net\tcarrying\tvalue | 147 | 188 |
| Acquired\tleases\tand\tother |  |  |
| Gross\tcarrying\tvalue | 636 | 584 |
| Accumulated\tamortization | (459) | (399) |
| Net\tcarrying\tvalue | 177 | 185 |
| Total\tgross\tcarrying\tvalue | 1,753 | 1,675 |
| Total\taccumulated\tamortization | (1,429) | (1,302) |
| Total\tnet\tcarrying\tvalue | \t$\t\t\t\t324 | \t$\t\t\t\t373 |

The	firm	acquired	$137	million	of	intangible	assets	during	2018,	primarily related	to	acquired	leases,	with	a	weighted	average	amortization	period	of four	 years.	The	 firm	 acquired	 $113	 million	 of	 intangible	 assets	 during 2017,	 primarily	 related	 to	 acquired	 leases,	 with	 a	 weighted	 average amortization	period	of	five	years.

Substantially	all	of	the	firm's	identifiable	intangible	assets	are	considered	to have	finite	useful	lives	and	are	amortized	over	their	estimated	useful	lives generally	using	the	straight-line	method.

The	 tables	 below	 present information	 about	 amortization	 of identifiable intangible	assets.

|  | As	of |
| :--- | :--- |
| $\tin\tmillions | December\t2018 |
| Estimated\tfuture\tamortization |  |
| 2019 | $113 |
| 2020 | $\t\t56 |
| 2021 | $\t\t42 |
| 2022 | $\t\t32 |
| 2023 | $\t\t27 |

# 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	2018,	2017	and	2016,	impairments	were	not	material	to	the	firm's results	of	operations	or	financial	condition.

The	table	below	presents	the	types	and	sources	of	deposits.

| $	in	millions | Demand | Time | Total |
| :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |  |
| Private\tbank\tdeposits | $52,028 | \t$\t\t2,311 | \t$\t\t54,339 |
| Consumer\tdeposits | 27,987 | 7,641 | 35,628 |
| Brokered\tcertificates\tof\tdeposit | – | 35,876 | 35,876 |
| Deposit\tsweep\tprograms | 15,903 | – | 15,903 |
| Institutional\tdeposits | 1 | 16,510 | 16,511 |
| Total | $95,919 | \t$62,338 | \t$158,257 |
| As\tof\tDecember\t2017 |  |  |  |
| Private\tbank\tdeposits | $50,579 | \t$\t\t1,623 | \t$\t\t52,202 |
| Consumer\tdeposits | 13,787 | 3,330 | 17,117 |
| Brokered\tcertificates\tof\tdeposit | – | 35,704 | 35,704 |
| Deposit\tsweep\tprograms | 16,019 | – | 16,019 |
| Institutional\tdeposits | 1 | 17,561 | 17,562 |
| Total | $80,386 | \t$58,218 | \t$138,604 |

•	Substantially	all	deposits	are	interest-bearing.

•	Savings	 and	 demand	 accounts	 consist	 of	 money	 market	 deposit accounts,	negotiable	order	of	withdrawal	accounts	and	demand	deposit accounts	that	have	no	stated	maturity	or	expiration	date.

•	Time	 deposits	 included $21.06 billion	 as	 of	 December	 2018	 and $22.90	billion	as	of	December	2017	of	deposits	accounted	for	at	fair value	under	the	fair	value	option.	See	Note	8	for	further	information about	deposits	accounted	for	at	fair	value.

•	Time	 deposits	 had	 a	 weighted	 average	 maturity	 of	 approximately 1.8	years	as	of	December	2018	and	2.0	years	as	of	December	2017.

•	Deposit	 sweep	 programs	 represent	 long-term	 contractual	 agreements with	several	U.S.	broker-dealers	who	sweep	client	cash	to	FDIC-insured deposits.	As	of	both	December	2018	and	December	2017,	the	firm	had eight	deposit	sweep	program	contractual	arrangements.

•	Deposits	 insured	 by	 the	 U.K.'s	 Financial	 Services	 Compensation Scheme	were	$6.05	billion	as	of	December	2018	and	$227	million	as	of December	2017.

The	table	below	presents	deposits	held	in	U.S.	and	non-U.S.	offices.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| U.S.\toffices | \t$126,444 | \t$111,002 |
| Non-U.S.\toffices | 31,813 | 27,602 |
| Total | \t$158,257 | \t$138,604 |

In	the	table	above,	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).

The	 table	 below	 presents	 maturities	 of time	 deposits	 held in	 U.S.	 and non-U.S.	offices.

| $	in	millions | U.S. | Non-U.S. | Total |
| :--- | :--- | :--- | :--- |
| 2019 | \t\t$18,787 | \t$\t\t15,138 | \t$\t\t33,925 |
| 2020 | 7,328 | 941 | 8,269 |
| 2021 | 5,512 | 41 | 5,553 |
| 2022 | 5,142 | 83 | 5,225 |
| 2023 | 4,546 | 57 | 4,603 |
| 2024\t-\tthereafter | 3,901 | 862 | 4,763 |
| Total | \t\t$45,216 | \t$\t\t17,122 | \t$\t\t62,338 |

As	of	December	2018,	deposits	in	U.S.	offices	included	$3.78	billion	and non-U.S.	offices	included	$17.12	billion	of	time	deposits	in	denominations that	met	or	exceeded	the	applicable	insurance	limits,	or	were	otherwise	not covered	by	insurance.

The	firm's	savings	and	demand	deposits	are	recorded	based	on	the	amount of	cash	received	plus	accrued	interest,	which	approximates	fair	value.	In addition,	 the	 firm	 designates	 certain	 derivatives	 as	 fair	 value	 hedges	 to convert	a	portion	of	its	time	deposits	not	accounted	for	at	fair	value	from fixed-rate	obligations	into	floating-rate	obligations.	The	carrying	value	of time	deposits	not	accounted	for	at	fair	value	approximated	fair	value	as	of both	December	2018	and	December	2017.	As	these	savings	and	demand deposits	and	time	deposits	are	not	accounted	for	at	fair	value,	they	are	not included	in	the	firm's	fair	value	hierarchy	in	Notes	5	through	8.	Had	these deposits	been	included	in	the	firm's	fair	value	hierarchy,	they	would	have been	classified	in	level	2	as	of	both	December	2018	and	December	2017.

# Short-Term	Borrowings

The	table	below	presents	information	about	short-term	borrowings.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Other\tsecured\tfinancings\t(short-term) | \t\t$\t\t9,555 | \t$14,896 |
| Unsecured\tshort-term\tborrowings | 40,502 | 46,922 |
| Total | \t\t$50,057 | \t$61,818 |

See	Note	10	for	information	about	other	secured	financings.

Unsecured	short-term	borrowings	includes	the	portion	of	unsecured	long- term	borrowings	maturing	within	one	year	of	the	financial	statement	date and	unsecured	long-term	borrowings	that	are	redeemable	within	one	year	of the	financial	statement	date	at	the	option	of	the	holder.

The	 firm	 accounts	 for	 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.	 In addition,	 the	 firm	 designates	 certain	 derivatives	 as	 fair	 value	 hedges	 to convert	a	portion	of	its	unsecured	short-term	borrowings	not	accounted	for at	fair	value	from	fixed-rate	obligations	into	floating-rate	obligations.	The carrying	value	of	unsecured	short-term	borrowings	that	are	not	recorded	at fair	value	generally	approximates	fair	value	due	to	the	short-term	nature	of the	obligations.	As	these	unsecured	short-term	borrowings	are	not	accounted for	at	fair	value,	they	are	not	included	in	the	firm's	fair	value	hierarchy	in Notes	5	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 both	December	2018	and	December	2017.

The	 table below presents information about unsecured short-term borrowings.

•	The	 weighted	 average	 interest	 rates	 for	 these	 borrowings	 include	 the effect	 of	 hedging	 activities	 and	 exclude	 unsecured	 short-term borrowings	accounted	for	at	fair	value	under	the	fair	value	option.	See Note	7	for	further	information	about	hedging	activities.

# Long-Term	Borrowings

The	table	below	presents	information	about	long-term	borrowings.

The	 table below presents information about unsecured long-term borrowings.

•	Unsecured	 long-term	 borrowings consists principally of senior borrowings,	which	have	maturities	extending	through	2067.

•	Floating-rate	obligations	includes	equity-linked	and	indexed	instruments. Floating	interest	rates	are	generally	based	on	LIBOR	or	Euro	Interbank Offered	Rate.

The	table	below	presents	unsecured	long-term	borrowings	by	maturity.

| $	in	millions | Group	Inc. | Subsidiaries | Total |
| :--- | :--- | :--- | :--- |
| 2020 | \t\t$\t\t22,343 | $\t\t7,028 | \t $\t\t29,371 |
| 2021 | 20,128 | 2,836 | 22,964 |
| 2022 | 21,191 | 2,268 | 23,459 |
| 2023 | 21,566 | 6,306 | 27,872 |
| 2024\t-\tthereafter | 97,878 | 22,605 | 120,483 |
| Total | \t\t$183,106 | $41,043 | \t $224,149 |

•	Unsecured	 long-term	 borrowings	 maturing	 within	 one	 year	 of	 the financial	 statement	 date	 and	 unsecured	 long-term	 borrowings	 that	 are redeemable	within	one	year	of	the	financial	statement	date	at	the	option	of the	 holder	 are	 excluded	 as	 they	 are	 included	 in	 unsecured	 short-term borrowings.

•	Unsecured	long-term	borrowings	that	are	repayable	prior	to	maturity	at the	option	of	the	firm	are	reflected	at	their	contractual	maturity	dates.

•	Unsecured	long-term	borrowings	that	are	redeemable	prior	to	maturity	at the	option	of	the	holder	are	reflected	at	the	earliest	dates	such	options become	exercisable.

•	Unsecured	long-term	borrowings	included	$4.24	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: $94	 million in	 2020, $259	 million in	 2021, $(69)	 million in	 2022, $(36)	million	in	2023,	and	$3.99	billion	in	2024	and	thereafter.

During	 2018,	 the	 firm	 repurchased	 unsecured	 short-term	 and	 long-term borrowings	with	a	principal	amount	of	$4.10	billion	(carrying	value	of $4.53	billion)	for	$4.37	billion	and	recognized	a	net	gain	of	$160	million, of	which	$112	million	was	included	in	the	Institutional	Client	Services segment	 and	 $48	 million	 was	 included	 in	 the	 Investing	 &	 Lending segment.

The	firm	designates	certain	derivatives	as	fair	value	hedges	to	convert	a portion	of	fixed-rate	unsecured	long-term	borrowings	not	accounted	for	at fair	value	into	floating-rate	obligations.	See	Note	7	for	further	information about	hedging	activities.

The	 table	 below	 presents	 unsecured long-term	 borrowings,	 after	 giving effect	to	such	hedging	activities.

| $	in	millions | Group	Inc. | Subsidiaries | Total |
| :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |  |
| Fixed-rate\tobligations: |  |  |  |
| At\tfair\tvalue | \t\t$\t\t\t\t\t\t\t\t\t\t\t– | $\t\t\t\t\t\t\t28 | \t$\t\t\t\t\t\t\t\t\t28 |
| At\tamortized\tcost | 71,221 | 3,331 | 74,552 |
| Floating-rate\tobligations: |  |  |  |
| At\tfair\tvalue | 16,387 | 30,169 | 46,556 |
| At\tamortized\tcost | 95,498 | 7,515 | 103,013 |
| Total | \t\t$183,106 | $41,043 | \t$224,149 |
| As\tof\tDecember\t2017 |  |  |  |
| Fixed-rate\tobligations: |  |  |  |
| At\tfair\tvalue | \t\t$\t\t\t\t\t\t\t\t\t\t\t– | $\t\t\t\t\t147 | \t$\t\t\t\t\t\t\t147 |
| At\tamortized\tcost | 86,951 | 3,852 | 90,803 |
| Floating-rate\tobligations: |  |  |  |
| At\tfair\tvalue | 18,207 | 20,284 | 38,491 |
| At\tamortized\tcost | 85,324 | 2,922 | 88,246 |
| Total | \t\t$190,482 | $27,205 | \t$217,687 |

In	 the	 table	 above,	 the	 aggregate	 amounts	 of	 unsecured	 long-term borrowings	had	weighted	average	interest	rates	of	3.21%	(3.79%	related	to fixed-rate	obligations	and	2.79%	related	to	floating-rate	obligations)	as	of December	2018	and	2.86%	(3.67%	related	to	fixed-rate	obligations	and 2.02%	related to	floating-rate	obligations)	as	of	December	2017.	These rates	exclude	unsecured	long-term	borrowings	accounted	for	at	fair	value under	the	fair	value	option.

As	 of	 December	 2018	 and	 December	 2017,	 the	 carrying	 value	 of unsecured	long-term	borrowings	for	which	the	firm	did	not	elect	the	fair value	 option	 approximated	 fair	 value.	 As	 these	 borrowings	 are	 not accounted	for	at	fair	value,	they	are	not	included	in	the	firm's	fair	value hierarchy	in	Notes	5	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	both	December	2018	and	December	2017.

# Subordinated	Borrowings

Unsecured	 long-term	 borrowings	 includes	 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. Subordinated	 debt	 had	 maturities	 ranging	 from	 2021	 to	 2045	 as	 of December	2018	and	2020	 to	2045	as	of	December	2017.	Subordinated debt	 that	 matures	 within	 one	 year	 is	 included	 in	 unsecured	 short-term borrowings.

# The	table	below	presents	information	about	subordinated	borrowings.

| $	in	millions | Par<br>Amount | Carrying<br>Value | Rate |
| :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |  |
| Subordinated\tdebt | \t\t$14,023 | \t$15,703 | \t4.09% |
| Junior\tsubordinated\tdebt | 1,140 | 1,425 | \t3.19% |
| Total | \t\t$15,163 | \t$17,128 | \t4.02% |
| As\tof\tDecember\t2017 |  |  |  |
| Subordinated\tdebt | \t\t$14,117 | \t$16,235 | \t3.31% |
| Junior\tsubordinated\tdebt | 1,168 | 1,539 | \t2.37% |
| Total | \t\t$15,285 | \t$17,774 | \t3.24% |

•	The	 rate	 is	 the	 weighted	 average	 interest	 rate	 for	 these	 borrowings (excluding	borrowings	accounted	for	at	fair	value	under	 the	fair	value option),	including	the	effect	of	fair	value	hedges	used	to	convert	fixed-rate obligations	 into	 floating-rate	 obligations.	 See	 Note 7 for	 further information	about	hedging	activities.

# Junior	Subordinated	Debt

In	 2004,	 Group	 Inc.	 issued	 $2.84	 billion	 of	 junior	 subordinated	 debt	 to Goldman	 Sachs	 Capital	 I	 (Trust),	 a	 Delaware	 statutory	 trust.	 The	 Trust issued $2.75 billion	 of	 guaranteed	 preferred	 beneficial	 interests	 (Trust Preferred	Securities)	to	third	parties	and	$85	million	of	common	beneficial interests	to	Group	Inc.	and	used	the	proceeds	from	the	issuances	to	purchase the	junior	subordinated	debt	from	Group	Inc.	As	of	December	2018,	the outstanding	par	amount	of	junior	subordinated	debt	held	by	the	Trust	was $1.14	billion	and	the	outstanding	par	amount	of	Trust	Preferred	Securities and	common	beneficial	interests	issued	by	the	Trust	was	$1.11	billion	and $34.1	million,	respectively.	During	2018,	the	firm	purchased	$27.8	million (par	amount)	of	Trust	Preferred	Securities	and	delivered	 these	securities, along	 with	 $1.0	 million	 of	 common	 beneficial	 interests,	 to	 the	 Trust	 in exchange	for	a	corresponding	par	amount	of	the	junior	subordinated	debt. Following	 the	 exchanges,	 these	 Trust	 Preferred	 Securities,	 common beneficial	interests	and	junior	subordinated	debt	were	extinguished.	As	of December	 2017,	 the	 outstanding	 par	 amount	 of	 junior	 subordinated	 debt held	by	the	Trust	was	$1.17	billion	and	the	outstanding	par	amount	of	Trust Preferred	Securities	and	common	beneficial	interests	issued	by	the	Trust	was $1.13	billion	and	$35.1	million,	respectively.	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.

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	 Goldman	 Sachs	 Capital	 II	 and	 Goldman	 Sachs	 Capital	 III (APEX	 Trusts)	 or	 shares	 of	 Group	 Inc.'s	 Perpetual	Non-Cumulative Preferred	 Stock,	 Series	 E	 (Series	 E	 Preferred	 Stock),	 Perpetual Non-Cumulative	Preferred	Stock,	Series	F	(Series	F	Preferred	Stock)	or Perpetual	Non-Cumulative	Preferred	Stock,	Series	O,	if	the	redemption	or purchase	results	in	less	than	$253	million	aggregate	liquidation	preference of	that	series	outstanding,	prior	to	specified	dates	in	2022	for	a	price	that exceeds	 a	 maximum	 amount	 determined	 by	 reference	 to	 the	 net	 cash proceeds	that	the	firm	has	received	from	the	sale	of	qualifying	securities.

The	APEX	Trusts	hold	Group	Inc.'s	Series	E	Preferred	Stock	and	Series	F Preferred	Stock.	These	trusts	are	Delaware	statutory	trusts	sponsored	by the	firm	and	wholly-owned	finance	subsidiaries	of	the	firm	for	regulatory and	legal	purposes	but	are	not	consolidated	for	accounting	purposes.

# Other	Liabilities

The	table	below	presents	other	liabilities	by	type.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Compensation\tand\tbenefits | \t\t$\t\t6,834 | \t$\t\t6,710 |
| Income\ttax-related\tliabilities | 2,864 | 4,051 |
| Noncontrolling\tinterests | 1,568 | 553 |
| Employee\tinterests\tin\tconsolidated\tfunds | 122 | 156 |
| Accrued\texpenses\tand\tother | 6,219 | 5,452 |
| Total | \t\t$17,607 | \t$16,922 |

•	The	 decrease	 in	 income	tax-related	 liabilities	 from	 December	 2017	 to December	 2018	 reflected	 a	 decrease	 in	 the	 net	 deferred	 tax	 liability related	to	the	Tax	Legislation	repatriation	tax,	which	became	current	and was	 netted	 against	 current	 tax	 receivables.	 See	 Note 24 for	 further information	about	Tax	Legislation.

•	The	 increase	 in	 noncontrolling	 interests	 from	 December	 2017	 to December	 2018	 primarily	 reflected	 a	 noncontrolling	 interest	 in	 a consolidated	special	purpose	acquisition	company,	which	completed	its initial	public	offering	during	the	second	quarter	of	2018.

•	Beginning	in	January	2018,	accrued	expenses	and	other	includes	contract liabilities,	 which	 represent	 consideration	 received	 by	 the	 firm,	 in connection	with	its	contracts	with	clients,	prior	to	providing	the	service. As	of	December	2018,	the	firm's	contract	liabilities	were	not	material.

# Commitments,	Contingencies	and	Guarantees

# Commitments

The	table	below	presents	commitments	by	type.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Commercial\tlending: |  |  |
| Investment-grade | \t\t$\t\t81,729 | \t$\t\t93,115 |
| Non-investment-grade | 51,793 | 45,291 |
| Warehouse\tfinancing | 4,060 | 5,340 |
| Total\tlending\tcommitments | 137,582 | 143,746 |
| Contingent\tand\tforward\tstarting\tcollateralized |  |  |
| agreements | 54,480 | 41,756 |
| Forward\tstarting\tcollateralized\tfinancings | 15,429 | 16,902 |
| Letters\tof\tcredit | 445 | 437 |
| Investment\tcommitments | 7,595 | 6,840 |
| Other | 4,892 | 6,310 |
| Total\tcommitments | \t\t$220,423 | \t$215,991 |

The	table	below	presents	commitments	by	expiration.

| $	in	millions | 2019 | 2020	-<br>2021 | 2022	-<br>2023 | 2024	-<br>Thereafter |
| :--- | :--- | :--- | :--- | :--- |
| Commercial\tlending: |  |  |  |  |
| Investment-grade | \t\t$13,101\t\t\t$27,859\t\t\t$39,409 | \t\t$13,101\t\t\t$27,859\t\t\t$39,409 | \t\t$13,101\t\t\t$27,859\t\t\t$39,409 | $\t\t1,360 |
| Non-investment-grade | 4,884 | 11,851 | 26,803 | 8,255 |
| Warehouse\tfinancing | 699 | 2,143 | 589 | 629 |
| Total\tlending\tcommitments | 18,684 | 41,853 | 66,801 | 10,244 |
| Contingent\tand\tforward\tstarting |  |  |  |  |
| collateralized\tagreements | 54,477 | – | 3 | – |
| Forward\tstarting\tcollateralized |  |  |  |  |
| financings | 15,429 | – | – | – |
| Letters\tof\tcredit | 401 | 1 | 3 | 40 |
| Investment\tcommitments | 3,587 | 819 | 1,203 | 1,986 |
| Other | 4,815 | 77 | – | – |
| Total\tcommitments | \t\t$97,393\t\t\t$42,750\t\t\t$68,010 | \t\t$97,393\t\t\t$42,750\t\t\t$68,010 | \t\t$97,393\t\t\t$42,750\t\t\t$68,010 | $12,270 |

The	 firm's	 lending	 commitments	 are	 agreements	 to	 lend	 with	 fixed termination	 dates	 and	 depend	 on	 the	 satisfaction	 of	 all	 contractual conditions	to	borrowing.	These	commitments	are	presented	net	of	amounts syndicated	 to	 third	 parties.	 The	 total	 commitment	 amount	 does	 not necessarily	reflect	actual	future	cash	flows	because	the	firm	may	syndicate all	or	substantial	additional	portions	of	these	commitments.	In	addition, commitments	 can	 expire	 unused	 or	 be	 reduced	 or	 cancelled	 at	 the counterparty's	request.

The	table	below	presents	information	about	lending	commitments.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| Held\tfor\tinvestment | \t\t$120,997 | \t$124,504 |
| Held\tfor\tsale | 8,602 | 9,838 |
| At\tfair\tvalue | 7,983 | 9,404 |
| Total | \t\t$137,582 | \t$143,746 |

•	Held	 for	 investment	 lending	 commitments	 are	 accounted	 for	 on	 an accrual	 basis.	 See	 Note 9 for	 further	 information	 about	 such commitments.

•	Held	for	sale	lending	commitments	are	accounted	for	at	the	lower	of	cost or	fair	value.

•	Gains	or	losses	related	to	lending	commitments	at	fair	value,	if	any,	are generally	recorded,	net	of	any	fees	in	other	principal	transactions.

•	Substantially	all	lending	commitments	relates	to	the	firm's	Investing	& Lending	segment.

Commercial	 Lending.	 The firm's	 commercial	 lending	 commitments were	primarily	extended	to	investment-grade	corporate	borrowers.	Such commitments	 included $93.99 billion	 as	 of	 December	 2018	 and $85.98 billion	 as	 of	 December	 2017,	 related	 to	 relationship	 lending activities	(principally	used	for	operating	and	general	corporate	purposes) and $27.92 billion	 as	 of	 December	 2018	 and $42.41 billion	 as	 of December	2017,	related	to	other	investment	banking	activities	(generally extended	for	contingent	acquisition	financing	and	are	often	intended	to	be short-term	in	nature,	as	borrowers	often	seek	to	replace	them	with	other funding	 sources).	 The	 firm	 also	 extends	 lending	 commitments	 in connection	with	other	types	of	corporate	lending,	as	well	as	commercial real	 estate	 financing.	 See	 Note	 9	 for	 further	 information	 about	 funded loans.

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	$15.52	billion	as	of	December	2018	and $25.70	 billion	 as	 of	 December	 2017.	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	$1.0	billion,	of	which $550	million	of	protection	had	been	provided	as	of	both	December	2018	and December	2017.	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	consumer	and	corporate	loans.

# Contingent	 and	 Forward	 Starting	 Collateralized	 Agreements / Forward	Starting	Collateralized	Financings

Forward	 starting	 collateralized	 agreements	 includes	 resale	 and	 securities borrowing	 agreements,	 and	 forward	 starting	 collateralized	 financings includes	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

Investment	commitments	includes	commitments	to	invest	in	private	equity, real	estate	and	other	assets	directly	and	through	funds	that	the	firm	raises and	 manages.	 Investment	 commitments	 included $2.42 billion	 as	 of December	 2018	 and $2.09 billion	 as	 of	 December	 2017,	 related	 to commitments	to	invest	in	funds	managed	by	the	firm.	If	these	commitments are	called,	they	would	be	funded	at	market	value	on	the	date	of	investment.

# Leases

The	firm	has	contractual	obligations	under	long-term	noncancelable	lease agreements	 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.

The	amounts	in	the	table	above	do	not	include	lease	payments	arising	from the	sale	and	leaseback	of	the	firm's	new	European	headquarters	as	this agreement	closed	in	January	2019.	See	Note	13	for	further	 information about	the	sale	and	leaseback	agreement.

Operating	 leases	 include	 office	 space	 held	 in	 excess	 of	 current requirements.	Rent	expense	relating	to	space	held	for	growth	is	included	in occupancy	expenses.	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.	Total	occupancy expenses	for	space	held	in	excess	of	the	firm's	current	requirements	and exit	costs	related	to	its	office	space	were	not	material	for	both	2018	and 2017,	and	were	approximately	$68	million	for	2016.

# 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.	During	the	period	2005 through	2008	in	connection	with	both	sales	and	securitizations	of	loans,	the firm	 provided	 loan-level	 representations	 and/or	 assigned	 the	 loan-level representations	from	the	party	from	whom	the	firm	purchased	the	loans.

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	such	as	the	extent	to	which	these	claims	are	made	within	the	statute of	limitations,	taking	into	consideration	the	agreements	to	toll	the	statute	of limitations	 the	 firm	 entered	 into	 with	 trustees	 representing	 certain	 trusts. Based	upon	the	large	number	of	defaults	in	residential	mortgages,	including those	 sold	 or	 securitized	 by	 the	 firm,	 there	 is	 a	 potential	 for	 repurchase claims.	However,	the	firm	is	not	in	a	position	to	make	a	meaningful	estimate of	that	exposure	at	this	time.

Other	Contingencies.	In	connection	with	the	sale	of	Metro	International Trade	Services	(Metro),	the	firm	agreed	to	provide	indemnities	to	the	buyer, which	primarily	relate	to	fundamental	representations	and	warranties,	and potential	 liabilities	 for	 legal	 or	 regulatory	 proceedings	 arising	 out	 of	 the conduct	of	Metro's	business	while	the	firm	owned	it.

In	connection	with	the	settlement	agreement	with	the	Residential	Mortgage- Backed	Securities	Working	Group	of	the	U.S.	Financial	Fraud	Enforcement Task	Force,	the	firm	agreed	to	provide	$1.80	billion	in	consumer	relief	by January	2021.	As	of	December	2018,	approximately	$1.20	billion	of	such relief	 was	 provided.	 This	 relief	 was	 provided	 in	 the	 form	 of	 principal forgiveness	for	underwater	homeowners	and	distressed	borrowers;	financing for	construction,	rehabilitation	and	preservation	of	affordable	housing;	and support	for	debt	restructuring,	foreclosure	prevention	and	housing	quality improvement	programs,	as	well	as	land	banks.

# Guarantees

The	table	below	presents	derivatives	that	meet	the	definition	of	a	guarantee, securities	lending	indemnifications	and	certain	other	financial	guarantees.

|  |  | Securities | Other |
| :--- | :--- | :--- | :--- |
|  |  | lending | financial |
| $\tin\tmillions | Derivatives | indemnifications | guarantees |
| As\tof\tDecember\t2018 |  |  |  |
| Carrying\tValue\tof\tNet\tLiability | \t\t $\t\t\t\t4,105 | $\t\t\t\t\t\t\t\t\t– | $\t\t\t\t\t38 |
| Maximum\tPayout/Notional\tAmount\tby\tPeriod\tof\tExpiration |  |  |  |
| 2019 | \t\t $101,169 | $27,869 | $1,379 |
| 2020\t-\t2021 | 77,955 | – | 2,252 |
| 2022\t-\t2023 | 17,813 | – | 2,021 |
| 2024\t-\tthereafter | 67,613 | – | 241 |
| Total | \t\t $264,550 | $27,869 | $5,893 |
| As\tof\tDecember\t2017 |  |  |  |
| Carrying\tValue\tof\tNet\tLiability | \t\t $\t\t\t\t3,843 | $\t\t\t\t\t\t\t\t\t– | $\t\t\t\t\t37 |
| Maximum\tPayout/Notional\tAmount\tby\tPeriod\tof\tExpiration |  |  |  |
| 2018 | \t\t $113,766 | $37,959 | $\t\t\t723 |
| 2019\t-\t2020 | 59,314 | – | 1,515 |
| 2021\t-\t2022 | 24,712 | – | 1,209 |
| 2023\t-\tthereafter | 45,343 | – | 137 |
| Total | \t\t $243,135 | $37,959 | $3,584 |

•	The	maximum	payout	is	based	on	the	notional	amount	of	the	contract and	does	not	represent	anticipated	losses.

•	Amounts	exclude	certain	commitments	to	issue	standby	letters	of	credit that	 are	 included	 in	 lending	 commitments.	 See	 the	 tables	 in "Commitments"	above	for	a	summary	of	the	firm's	commitments.

Derivative	Guarantees.	The	firm	enters into	various	derivatives	 that meet	the	definition	of	a	guarantee	under	U.S.	GAAP,	 including	written equity	and	commodity	put	options,	written	currency	contracts	and	interest rate	 caps,	 floors	 and	 swaptions.	 These	 derivatives	 are	 risk	 managed together	with	derivatives	that	do	not	meet	the	definition	of	a	guarantee, and	 therefore	 the	 amounts	 in	 the	 table	 above	 do	 not	 reflect	 the	 firm's overall	risk	related	to	derivative	activities.	Disclosures	about	derivatives are	not	required	if	they	may	be	cash	settled	and	the	firm	has	no	basis	to conclude	 it	 is	 probable	 that	 the	 counterparties	 held	 the	 underlying instruments	at	inception	of	the	contract.	The	firm	has	concluded	that	these conditions	 have	 been	 met	 for	 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	table	above.	In	addition,	during	2018, the	firm	concluded	that	these	conditions	have	also	been	met	for	hedge	fund counterparties	 and,	 therefore,	 has	 not	 included	 contracts	 with	 these counterparties	in	the	table	above.	Prior	periods	have	been	conformed	to the	 current	 presentation.	 See	 Note 7 for	 information	 about	 credit derivatives	that	meet	the	definition	of	a	guarantee,	which	are	not	included in	the	table	above.

Derivatives	are	accounted	for	at	fair	value	and	therefore	the	carrying	value is	 considered	 the	 best	 indication	 of	 payment/performance	 risk	 for individual	 contracts.	 However,	 the	 carrying	 values	 in	 the	 table	 above exclude	the	effect	of	counterparty	and	cash	collateral	netting.

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	 $28.75	 billion	 as	 of	 December	 2018	 and $39.03	billion	as	of	December	2017.	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.

Guarantees	of	Securities	Issued	by	Trusts.	The	firm	has	established trusts,	 including	 Goldman	 Sachs	 Capital	 I,	 the	 APEX	 Trusts	 and	 other entities	for	the	limited	purpose	of	issuing	securities	to	third	parties,	lending the	proceeds	to	the	firm	and	entering	into	contractual	arrangements	with	the firm	and	third	parties	related	to	this	purpose.	The	firm	does	not	consolidate these	entities.	See	Note	16	for	further	information	about	 the	 transactions involving	Goldman	Sachs	Capital	I	and	the	APEX	Trusts.

The	firm	effectively	provides	for	the	full	and	unconditional	guarantee	of	the securities	issued	by	these	entities.	Timely	payment	by	the	firm	of	amounts due	to	these	entities	under	the	guarantee,	borrowing,	preferred	stock	and related	contractual	arrangements	will	be	sufficient	to	cover	payments	due	on the	securities	issued	by	these	entities.

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	the	firm's	prime	brokerage	and	clearing	businesses,	the firm	 agrees	 to	 clear	 and	 settle	 on	 behalf	 of	 its	 clients	 the	 transactions entered	into	by	them	with	other	brokerage	firms.	The	firm's	obligations	in respect	 of	 such	 transactions	 are	 secured	 by	 the	 assets	 in	 the	 client's account,	as	well	as	any	proceeds	received	from	the	transactions	cleared and	settled	by	the	firm	on	behalf	of	the	client.	In	connection	with	joint venture	investments,	the	firm	may	issue	loan	guarantees	under	which	it may	 be	 liable	 in	 the	 event	 of	 fraud,	 misappropriation,	 environmental liabilities	and	certain	other	matters	involving	the	borrower.

The	firm	is	unable	to	develop	an	estimate	of	the	maximum	payout	under these	 guarantees	 and	 indemnifications.	 However,	 management	 believes that	it	is	unlikely	the	firm	will	have	to	make	any	material	payments	under these	arrangements,	and	no	material	liabilities	related	to	these	guarantees and	indemnifications	have	been	recognized	in	the	consolidated	statements of	financial	condition	as	of	both	December	2018	and	December	2017.

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	both	December	2018	and	December	2017.

Guarantees	 of	 Subsidiaries.	 Group Inc.	 fully	 and	 unconditionally guarantees	 the	 securities	 issued	 by	 GS	 Finance	 Corp.,	 a	 wholly-owned finance	 subsidiary	 of	 the	 firm.	 Group	 Inc.	 has	 guaranteed	 the	 payment obligations	of	Goldman	Sachs	&	Co.	LLC	(GS&Co.)	and	GS	Bank	USA, subject	to	certain	exceptions.

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	obligations are	also	obligations	of	consolidated	subsidiaries,	Group	Inc.'s	liabilities	as guarantor	are	not	separately	disclosed.

# Shareholders'	Equity

# Common	Equity

As	of	both	December	2018	and	December	2017,	the	firm	had	4.00	billion authorized	shares	of	common	stock	and	200	million	authorized	shares	of nonvoting	common	stock,	each	with	a	par	value	of	$0.01	per	share.

The	 firm's	 share	 repurchase	 program	 is	 intended	 to	 help	 maintain	 the appropriate	 level	 of	 common	 equity.	 The	 share	 repurchase	 program	 is effected	 primarily	 through	 regular	 open-market	 purchases	 (which	 may include	 repurchase	 plans	 designed	 to	 comply	 with	Rule	 10b5-1),	 the amounts	and	timing	of	which	are	determined	primarily	by	the	firm's	current and	 projected	 capital	 position,	 and	 capital	 deployment	 opportunities,	 but which	 may	 also	 be	 influenced	 by	 general	 market	 conditions	 and	 the prevailing	price	and	trading	volumes	of	the	firm's	common	stock.	Prior	to repurchasing	common	stock,	 the	firm	must	receive	confirmation	 that	 the FRB	does	not	object	to	such	capital	action.

The	table	below	presents	the	amount	of	common	stock	repurchased	under the	share	repurchase	program.

The	table	below	presents	common	stock	dividends	declared.

# Preferred	Equity

The	tables	below	present	information	about	the	perpetual	preferred	stock issued	and	outstanding	as	of	December	2018.

| Series | Shares<br>Authorized | Shares<br>Issued | Shares<br>Outstanding | Depositary	Shares<br>Per	Share |
| :--- | :--- | :--- | :--- | :--- |
| A | 50,000 | 30,000 | 29,999 | 1,000 |
| B | 50,000 | 6,000 | 6,000 | 1,000 |
| C | 25,000 | 8,000 | 8,000 | 1,000 |
| D | 60,000 | 54,000 | 53,999 | 1,000 |
| E | 17,500 | 7,667 | 7,667 | N/A |
| F | 5,000 | 1,615 | 1,615 | N/A |
| J | 46,000 | 40,000 | 40,000 | 1,000 |
| K | 32,200 | 28,000 | 28,000 | 1,000 |
| L | 52,000 | 52,000 | 52,000 | 25 |
| M | 80,000 | 80,000 | 80,000 | 25 |
| N | 31,050 | 27,000 | 27,000 | 1,000 |
| O | 26,000 | 26,000 | 26,000 | 25 |
| P | 66,000 | 60,000 | 60,000 | 25 |
| Total | 540,750 | \t420,282 | 420,280 |  |

|  |  | Liquidation | Value |
| :--- | :--- | :--- | :--- |
| Series | \t\tEarliest\tRedemption\tDate | Preference | ($\tin\tmillions) |
| A | \t\t Currently\tredeemable | \t$\t\t25,000 | $\t\t\t\t\t750 |
| B | \t\t Currently\tredeemable | \t$\t\t25,000 | 150 |
| C | \t\t Currently\tredeemable | \t$\t\t25,000 | 200 |
| D | \t\t Currently\tredeemable | \t$\t\t25,000 | 1,350 |
| E | \t\t Currently\tredeemable | \t$100,000 | 767 |
| F | \t\t Currently\tredeemable | \t$100,000 | 161 |
| J | May\t10,\t2023 | \t$\t\t25,000 | 1,000 |
| K | May\t10,\t2024 | \t$\t\t25,000 | 700 |
| L | May\t10,\t2019 | \t$\t\t25,000 | 1,300 |
| M | May\t10,\t2020 | \t$\t\t25,000 | 2,000 |
| N | May\t10,\t2021 | \t$\t\t25,000 | 675 |
| O | November\t10,\t2026 | \t$\t\t25,000 | 650 |
| P | November\t10,\t2022 | \t$\t\t25,000 | 1,500 |
| Total |  |  | $11,203 |

•	All	shares	have	a	par	value	of	$0.01	per	share	and,	where	applicable,	each share	is	represented	by	the	specified	number	of	depositary	shares.

•	The	earliest	redemption	date	represents	the	date	on	which	each	share	of non-cumulative	Preferred	Stock	is	redeemable	at	the	firm's	option.

•	Prior	to	redeeming	preferred	stock,	the	firm	must	receive	confirmation that	the	FRB	does	not	object	to	such	action.

•	The	redemption	price	per	share	for	Series	A	through	F	Preferred	Stock	is the	 liquidation	 preference	 plus	 declared	 and	 unpaid	 dividends.	 The redemption	price	per	share	for	Series	J	through	P	Preferred	Stock	is	the liquidation	preference	plus	accrued	and	unpaid	dividends.	Each	share	of 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	 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.

•	All	series	of	preferred	stock	are	pari	passu	and	have	a	preference	over	the firm's	common	stock	on	liquidation.

•	The	firm's	ability	to	declare	or	pay	dividends	on,	or	purchase,	redeem	or otherwise	acquire,	its	common	stock	is	subject	to	certain	restrictions	in the	 event	 that	 the	 firm	 fails	 to	 pay	 or	 set	 aside	 full	 dividends	 on	 the preferred	stock	for	the	latest	completed	dividend	period.

In	2018,	the	firm	redeemed	26,000	shares	of	its	outstanding	Series	B	6.20% Non-Cumulative	 Preferred	 Stock	 (Series	 B	 Preferred	 Stock)	 with	 a redemption	 value	 of	 $650	 million ($25,000	 per share).	 The	 difference between	the	redemption	value	of	the	Series	B	Preferred	Stock	and	the	net carrying	 value	 at	 the	 time	 of	 redemption	 was	 $15	 million,	 which	 was recorded	as	an	addition	to	preferred	stock	dividends	in	2018.

In	 2017,	 the	 firm	 redeemed	 the 34,000 shares	 of	 Series	 I 5.95% Non-Cumulative	Preferred	Stock	(Series	I	Preferred	Stock)	for	the	stated redemption	price	of	$850	million	($25,000	per	share),	plus	accrued	and unpaid	 dividends.	 The	 difference	 between	 the	 redemption	 value	 of	 the Series	 I	 Preferred	 Stock	 and	 the	 net	 carrying	 value	 at	 the	 time	 of redemption	 was	 $14	 million,	 which	 was	 recorded	 as	 an	 addition	 to preferred	stock	dividends	in	2017.

In	2016,	the	firm	delivered	a	par	amount	of	$1.32	billion	(fair	value	of $1.04	billion)	of	APEX	to	the	APEX	Trusts	in	exchange	for	9,833	shares of	Series	E	Preferred	Stock	and	3,385	shares	of	Series	F	Preferred	Stock for	 a	 total	 redemption	 value	 of $1.32 billion	 (net	 carrying	 value	 of $1.31	 billion).	 Following	 the	 exchange,	 these	 shares	 of	 Series	 E	 and Series	F	Preferred	Stock	were	cancelled.	The	difference	between	the	fair value	of	the	APEX	and	the	net	carrying	value	of	the	preferred	stock	at	the time	of	cancellation	was	$266	million,	which	was	recorded	as	a	reduction to	preferred	stock	dividends	in	2016.

The	table	below	presents	the	dividend	rates	of	perpetual	preferred	stock	as of	December	2018.

N 6.30%,	payable	quarterly

O 5.30%,	payable	semi-annually,	from	issuance	date	to,	but	excluding, November	10,	2026;	3	month	LIBOR	+	3.834%,	payable	quarterly,	thereafter P 5.00%,	payable	semi-annually,	from	issuance	date	to,	but	excluding, November	10,	2022;	3	month	LIBOR	+	2.874%,	payable	quarterly,	thereafter

In	the	table	above,	dividends	on	each	series	of	preferred	stock	are	payable in	arrears	for	the	periods	specified.

The	table	below	presents	preferred	stock	dividends	declared.

|  | 2018 |  | 2017 |  | 2016 | 2016 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | per | $\tin | per | $\tin | per | $\tin |
| Series | share | millions | share | millions | share | millions |
| A | $\t\t\t958.33 | $\t\t29 | $\t\t\t950.51 | $\t\t29 | $\t\t\t953.12 | $\t\t29 |
| B | $1,550.00 | 19 | $1,550.00 | 50 | $1,550.00 | 50 |
| C | $1,022.23 | 8 | $1,013.90 | 8 | $1,016.68 | 8 |
| D | $1,022.23 | 55 | $1,013.90 | 55 | $1,016.68 | 55 |
| E | $4,077.78 | 31 | $4,055.55 | 31 | $4,066.66 | 50 |
| F | $4,077.78 | 7 | $4,055.55 | 6 | $4,066.66 | 13 |
| I | $\t\t\t\t\t\t\t\t\t\t\t\t– | – | $1,487.52 | 51 | $1,487.52 | 51 |
| J | $1,375.00 | 55 | $1,375.00 | 55 | $1,375.00 | 55 |
| K | $1,593.76 | 45 | $1,593.76 | 45 | $1,593.76 | 45 |
| L | $1,425.00 | 74 | $1,425.00 | 74 | $1,425.00 | 74 |
| M | $1,343.76 | 107 | $1,343.76 | 107 | $1,343.76 | 107 |
| N | $1,575.00 | 43 | $1,575.00 | 42 | $1,124.38 | 30 |
| O | $1,325.00 | 34 | $1,325.00 | 34 | $\t\t\t379.10 | 10 |
| P | $1,281.25 | 77 | $\t\t\t\t\t\t\t\t\t\t\t\t– | – | $\t\t\t\t\t\t\t\t\t\t\t\t– | – |
| Total |  | $584 |  | $587 |  | $577 |

In	the	table	above,	the	total	preferred	dividend	amounts	for	Series	E	and Series	F	Preferred	Stock	for	2016	include	prorated	dividends	of	$866.67	per share	related	to	4,861	shares	of	Series	E	Preferred	Stock	and	1,639	shares	of Series	F	Preferred	Stock,	which	were	cancelled	during	2016.

# Accumulated	Other	Comprehensive	Income/(Loss)

The	table	below	presents	changes	in	the	accumulated	other	comprehensive income/(loss),	net	of	tax,	by	type.

| $	in	millions | Beginning<br>balance | Other<br>comprehensive<br>income/(loss)<br>adjustments,<br>net	of	tax | Ending<br>balance |
| :--- | :--- | :--- | :--- |
| Year\tEnded\tDecember\t2018 |  |  |  |
| Currency\ttranslation | $\t\t\t(625) | $\t\t\t\t\t\t\t4 | \t$\t\t\t(621) |
| Debt\tvaluation\tadjustment | (1,046) | 2,553 | 1,507 |
| Pension\tand\tpostretirement\tliabilities | (200) | 119 | (81) |
| Available-for-sale\tsecurities | (9) | (103) | (112) |
| Total | $(1,880) | $2,573 | \t $\t\t\t\t693 |
| Year\tEnded\tDecember\t2017 |  |  |  |
| Currency\ttranslation | $\t\t\t(647) | $\t\t\t\t\t22 | \t$\t\t\t(625) |
| Debt\tvaluation\tadjustment | (239) | (807) | (1,046) |
| Pension\tand\tpostretirement\tliabilities | (330) | 130 | (200) |
| Available-for-sale\tsecurities | – | (9) | (9) |
| Total | $ \t(1,216) | $\t\t(664) | \t$(1,880) |
| Year\tEnded\tDecember\t2016 |  |  |  |
| Currency\ttranslation | $\t\t\t(587) | $\t\t\t\t(60) | \t$\t\t\t(647) |
| Debt\tvaluation\tadjustment | 305 | (544) | (239) |
| Pension\tand\tpostretirement\tliabilities | (131) | (199) | (330) |
| Total | $\t\t\t(413) | $\t\t(803) | \t$(1,216) |

# Regulation	and	Capital	Adequacy

The	FRB	is	the	primary	regulator	of	Group	Inc.,	a	bank	holding	company (BHC)	under	the	U.S.	Bank	Holding	Company	Act	of	1956	and	a	financial holding	company	under	amendments	to	this	Act.	As	a	BHC,	the	firm	is subject	 to	 consolidated	 regulatory	 capital	 requirements	 which	 are calculated	 in	 accordance	 with	 the	 regulations	 of	 the	 FRB	 (Capital Framework).

The	capital	requirements	are	expressed	as	risk-based	capital	and	leverage ratios	that	compare	measures	of	regulatory	capital	to	risk-weighted	assets (RWAs),	 average	 assets	 and	off-balance-sheet	 exposures.	 Failure	 to comply	with	these	capital	requirements	could	result	in	restrictions	being imposed	 by	 the	 firm's	 regulators	 and	 could	 limit	 the	 firm's	 ability	 to distribute	capital,	including	share	repurchases	and	dividend	payments,	and to	make	certain	discretionary	compensation	payments.	The	firm's	capital levels	 are	 also	 subject	 to	 qualitative	 judgments	 by	 the	 regulators	 about components	 of	 capital,	 risk	 weightings	 and	 other	 factors.	 Furthermore, certain	of	the	firm's	subsidiaries	are	subject	to	separate	regulations	and capital	requirements.

# Capital	Framework

The	 regulations	 under	 the	 Capital	 Framework	 are	 largely	 based	 on	 the Basel	 Committee	 on	 Banking	 Supervision's	 (Basel	 Committee)	 capital framework	for	strengthening	international	capital	standards	(Basel	III)	and also	 implement	 certain	 provisions	 of	 the	 Dodd-Frank	 Act.	 Under	 the Capital	 Framework,	 the	 firm	 is	 an	 "Advanced	 approach"	 banking organization	and	has	been	designated	as	a	global	systemically	important bank	(G-SIB).

The	Capital	Framework	includes	risk-based	capital	buffers	which	began	to phase	 in	 ratably	 on	 January 1, 2016,	 and	 became	 fully	 effective	 on January 1, 2019.	 The	 risk-based	 capital	 buffers	 include	 the	 capital conservation	 buffer,	G-SIB	 buffer	 and	 countercyclical	 capital	 buffer,	 if any,	all	of	which	must	consist	entirely	of	capital	that	qualifies	as	Common Equity	Tier	 1	 (CET1).	The	G-SIB	buffer	 is	an	extension	of	 the	capital conservation	buffer,	is	updated	annually	based	on	financial	data	from	the prior	 year	 and	 is	 generally	 applicable	 for	 the	 following	 year.	 The countercyclical	 capital	 buffer	 is	 also	 an	 extension	 of	 the	 capital conservation	buffer	and	is	intended	to	counteract	systemic	vulnerabilities. The	Capital	Framework	also	requires	deductions	from	regulatory	capital that	 phased	 in	 ratably	 per	 year	 from	 2014	 to	 2018.	 In	 addition,	 junior subordinated	debt	issued	to	trusts	will	be	fully	phased	out	of	regulatory capital	by	2022.

The	 firm	 calculates	 its	 CET1,	 Tier	 1	 capital	 and	 Total	 capital	 ratios	 in accordance	with	(i)	the	Standardized	approach	and	market	risk	rules	set	out in	 the	Capital	Framework	(together,	 the	Standardized	Capital	Rules)	and (ii)	 the	Advanced	 approach	 and	 market	 risk	 rules	 set	 out	 in	 the	 Capital Framework	(together,	 the	Basel	III	Advanced	Rules).	The	 lower	of	each risk-based	capital	ratio	calculated	in	(i)	and	(ii)	is	the	ratio	against	which	the firm's	 compliance	 with	 its	 minimum	 risk-based	 ratio	 requirements	 is assessed.	Under	the	Capital	Framework,	the	firm	is	also	subject	to	Tier	1 leverage	requirements	established	by	the	FRB.	The	Capital	Framework	also introduced	a	supplementary	leverage	ratio	(SLR)	which	became	effective	on January	1,	2018.

# Consolidated Regulatory Risk-Based Capital and Leverage Ratios

The table	 below	 presents the	 minimum risk-based	 capital	 and leverage ratios.

|  | 2018 | 2017 |
| :--- | :--- | :--- |
| Risk-based\tcapital\tratios |  |  |
| CET1\tratio | 8.3% | 7.0% |
| Tier\t1\tcapital\tratio | 9.8% | 8.5% |
| Total\tcapital\tratio | \t\t11.8% | \t10.5% |
| Leverage\tratios |  |  |
| Tier\t1\tleverage\tratio | 4.0% | 4.0% |
| SLR | 5.0% | N/A |

The	table	below	presents	information	about	the	risk-based	capital	ratios.

| $	in	millions | Standardized | Advanced |
| :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |
| CET1 | $\t\t73,116 | \t$\t\t73,116 |
| Tier\t1\tcapital | $\t\t83,702 | \t$\t\t83,702 |
| Tier\t2\tcapital | $\t\t14,926 | \t$\t\t13,743 |
| Total\tcapital | $\t\t98,628 | \t$\t\t97,445 |
| RWAs | $547,910 | \t$558,111 |
| CET1\tratio | 13.3% | 13.1% |
| Tier\t1\tcapital\tratio | 15.3% | 15.0% |
| Total\tcapital\tratio | 18.0% | 17.5% |
| As\tof\tDecember\t2017 |  |  |
| CET1 | $\t\t67,110 | \t$\t\t67,110 |
| Tier\t1\tcapital | $\t\t78,331 | \t$\t\t78,331 |
| Tier\t2\tcapital | $\t\t14,977 | \t$\t\t13,899 |
| Total\tcapital | $\t\t93,308 | \t$\t\t92,230 |
| RWAs | $555,611 | \t$617,646 |
| CET1\tratio | 12.1% | 10.9% |
| Tier\t1\tcapital\tratio | 14.1% | 12.7% |
| Total\tcapital\tratio | 16.8% | 14.9% |
|  | Goldman\tSachs\t2018\tForm\t10-K | 165 |

The	table	below	presents	information	about	the	leverage	ratios.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Tier\t1\tcapital | \t\t$\t\t\t\t\t83,702 | \t$\t\t\t\t\t78,331 |
| Average\ttotal\tassets | 945,961 | 937,424 |
| Deductions\tfrom\tTier\t1\tcapital | (4,754) | (4,508) |
| Average\tadjusted\ttotal\tassets | 941,207 | 932,916 |
| Off-balance-sheet\texposures | 401,699 | 408,164 |
| Total\tleverage\texposure | \t\t$1,342,906 | \t$1,341,080 |
| Tier\t1\tleverage\tratio | 8.9% | 8.4% |
| SLR | 6.2% | 5.8% |

•	Each	of	the	risk-based	capital	ratios	calculated	in	accordance	with	the Basel	III	Advanced	Rules	was	lower	than	that	calculated	in	accordance with	 the	 Standardized	 Capital	 Rules	 and	 therefore	 the	 Basel	 III Advanced	 ratios	 were	 the	 ratios	 that	 applied	 to	 the	 firm	 as	 of	 both December	2018	and	December	2017.

•	Effective	 January	 2018,	 the	 firm	 became	 subject	 to	 CET1	 ratios calculated	on	a	fully	phased-in	basis.	As	of	December	2017,	the	firm's CET1	 ratios	 calculated	 in	 accordance	 with	 the	 Standardized	 Capital Rules	and	Basel	III	Advanced	Rules	on	a	fully	phased-in	basis	were	0.2 percentage	points	lower	than	on	a	transitional	basis.

•	Beginning	in	the	fourth	quarter	of	2018,	the	firm's	default	experience was	incorporated	into	the	determination	of	probability	of	default	for	the calculation	of	Basel	III	Advanced	RWAs.	The	impact	of	this	change	was an	 increase	 in	 the	 firm's	 Basel	 III	 Advanced	 CET1	 ratio	 of approximately	0.8	percentage	points.

•	The	 minimum	 risk-based	 capital	 ratios	 as	 of	 December	 2018	 reflect (i)	the	75%	phase-in	of	the	capital	conservation	buffer	of	2.5%,	(ii)	the 75%	phase-in	of	the	G-SIB	buffer	of	2.5%,	and	(iii)	the	countercyclical capital	buffer,	which	the	FRB	has	set	to	zero.

•	The	 minimum	 risk-based	 capital	 ratios	 as	 of	 December	 2017	 reflect (i)	the	50%	phase-in	of	the	capital	conservation	buffer	of	2.5%,	(ii)	the 50%	phase-in	of	the	G-SIB	buffer	of	2.5%,	and	(iii)	the	countercyclical capital	buffer,	which	the	FRB	has	set	to	zero.

•	The	 minimum	 SLR as of	 December 2018 reflects the 2% buffer applicable	to	G-SIBs.

•	Tier	1	capital	and	deductions	from	Tier	1	capital	are	calculated	on	a transitional	basis	as	of	December	2017.

•	Average	total	assets	represents	the	daily	average	assets	for	the	quarter.

•	Off-balance-sheet	exposures	represents	the	monthly	average	and	consists of	 derivatives,	 securities	 financing	 transactions,	 commitments	 and guarantees.

•	Tier	1	leverage	ratio	is	calculated	as	Tier	1	capital	divided	by	average adjusted	total	assets.

•	SLR	is	calculated	as	Tier	1	capital	divided	by	total	leverage	exposure.

Risk-based	Capital.	The table	 below	 presents information	 about	 risk- based	capital.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Common\tshareholders'\tequity | \t$78,982 | \t$70,390 |
| Deduction\tfor\tgoodwill | (3,097) | (3,011) |
| Deduction\tfor\tidentifiable\tintangible\tassets | (297) | (258) |
| Other\tadjustments | (2,472) | (11) |
| CET1 | 73,116 | 67,110 |
| Preferred\tstock | 11,203 | 11,853 |
| Deduction\tfor\tinvestments\tin\tcovered\tfunds | (615) | (590) |
| Other\tadjustments | (2) | (42) |
| Tier\t1\tcapital | \t$83,702 | \t$78,331 |
| Standardized\tTier\t2\tand\tTotal\tcapital |  |  |
| Tier\t1\tcapital | \t$83,702 | \t$78,331 |
| Qualifying\tsubordinated\tdebt | 13,147 | 13,360 |
| Junior\tsubordinated\tdebt | 442 | 567 |
| Allowance\tfor\tcredit\tlosses | 1,353 | 1,078 |
| Other\tadjustments | (16) | (28) |
| Standardized\tTier\t2\tcapital | 14,926 | 14,977 |
| Standardized\tTotal\tcapital | \t$98,628 | \t$93,308 |
| Basel\tIII\tAdvanced\tTier\t2\tand\tTotal\tcapital |  |  |
| Tier\t1\tcapital | \t$83,702 | \t$78,331 |
| Standardized\tTier\t2\tcapital | 14,926 | 14,977 |
| Allowance\tfor\tcredit\tlosses | (1,353) | (1,078) |
| Other\tadjustments | 170 | – |
| Basel\tIII\tAdvanced\tTier\t2\tcapital | 13,743 | 13,899 |
| Basel\tIII\tAdvanced\tTotal\tcapital | \t$97,445 | \t$92,230 |

•	Deduction	for	goodwill	was	net	of	deferred	tax	liabilities	of	$661	million as	of	December	2018	and	$654	million	as	of	December	2017.

•	Deduction	 for	 identifiable	 intangible	 assets	 was	 net	 of	 deferred	 tax liabilities	 of	 $27	 million	 as	 of	 December	 2018	 and	 $40	 million	 as	 of December	2017.	The	deduction	for	identifiable	intangible	assets	was	fully phased	into	CET1	in	January	2018.	As	of	December	2017,	CET1	reflects 80%	of	the	identifiable	intangible	assets	deduction	and	the	remaining	20% was	risk	weighted.

•	Deduction	 for	 investments	 in	 covered	 funds	 represents	 the	 firm's aggregate	investments	in	applicable	covered	funds,	excluding	investments that	are	subject	to	an	extended	conformance	period.	See	Note	6	for	further information	about	the	Volcker	Rule.

•	Other	 adjustments	 within	 CET1	 and	 Tier	 1	 capital	 primarily	 include credit	 valuation	 adjustments	 on	 derivative	 liabilities,	 pension	 and postretirement	liabilities,	the	overfunded	portion	of	the	firm's	defined benefit	pension	plan	obligation	net	of	associated	deferred	tax	liabilities, disallowed	 deferred	 tax	 assets,	 debt	 valuation	 adjustments	 and	 other required	credit	risk-based	deductions.	The	deduction	for	such	items	was fully	phased	into	CET1	in	January	2018.	As	of	December	2017,	CET1 reflects	80%	of	such	deduction.	Substantially	all	of	the	balance	that	was not	 deducted	 from	 CET1	 as	 of	 December	 2017	 was	 deducted	 from Tier 1 capital	 within	 other	 adjustments.	 Other	 adjustments	 within Basel	III	Advanced	Tier	2	capital	include	eligible	credit	reserves.

•	Qualifying	subordinated	debt	is	subordinated	debt	issued	by	Group	Inc. with	 an	 original	 maturity	 of	 five	 years	 or	 greater.	 The	 outstanding amount	 of	 subordinated	 debt	 qualifying	 for	Tier	 2	 capital	 is	 reduced upon	 reaching	 a	 remaining	 maturity	 of	 five	 years.	 See	 Note	 16	 for further	information	about	the	firm's	subordinated	debt.

•	Junior	 subordinated	 debt	 represents	 debt	 issued	 to	 Trust.	 As	 of December	2018,	40%	of	this	debt	was	included	in	Tier	2	capital	and 60%	was	fully	phased	out	of	regulatory	capital.	As	of	December	2017, 50%	 of this	 debt	 was	 included	 in	Tier	 2	 capital	 and	 50%	 was	 fully phased	out	of	regulatory	capital.	Junior	subordinated	debt	is	reduced	by the	amount	of	trust	preferred	securities	purchased	by	the	firm	and	will	be fully	phased	out	of	Tier	2	capital	by	2022	at	a	rate	of	10%	per	year.	See Note	 16	 for	 further	 information	 about	 the	 firm's	 junior	 subordinated debt	and	trust	preferred	securities	purchased	by	the	firm.

The	tables	below	present	changes	in	CET1,	Tier	1	capital	and	Tier	2	capital.

| $	in	millions | Standardized | Advanced |
| :--- | :--- | :--- |
| CET1 |  |  |
| Beginning\tbalance | $67,110 | $67,110 |
| Change\tin: |  |  |
| Common\tshareholders'\tequity | 8,592 | 8,592 |
| Transitional\tprovisions | (117) | (117) |
| Deduction\tfor\tgoodwill | (86) | (86) |
| Deduction\tfor\tidentifiable\tintangible\tassets | 26 | 26 |
| Other\tadjustments | (2,409) | (2,409) |
| Ending\tbalance | $73,116 | $73,116 |
| Tier\t1\tcapital |  |  |
| Beginning\tbalance | $78,331 | $78,331 |
| Change\tin: |  |  |
| CET1 | 6,006 | 6,006 |
| Transitional\tprovisions | 13 | 13 |
| Deduction\tfor\tinvestments\tin\tcovered\tfunds | (25) | (25) |
| Preferred\tstock | (650) | (650) |
| Other\tadjustments | 27 | 27 |
| Ending\tbalance | 83,702 | 83,702 |
| Tier\t2\tcapital |  |  |
| Beginning\tbalance | 14,977 | 13,899 |
| Change\tin: |  |  |
| Qualifying\tsubordinated\tdebt | (213) | (213) |
| Junior\tsubordinated\tdebt | (125) | (125) |
| Allowance\tfor\tcredit\tlosses | 275 | – |
| Other\tadjustments | 12 | 182 |
| Ending\tbalance | 14,926 | 13,743 |
| Total\tcapital | $98,628 | $97,445 |

| $	in	millions | Standardized | Advanced |
| :--- | :--- | :--- |
| CET1 |  |  |
| Beginning\tbalance | $72,046 | $72,046 |
| Change\tin: |  |  |
| Common\tshareholders'\tequity | (5,300) | (5,300) |
| Transitional\tprovisions | (426) | (426) |
| Deduction\tfor\tgoodwill | (348) | (348) |
| Deduction\tfor\tidentifiable\tintangible\tassets | 24 | 24 |
| Deduction\tfor\tinvestments\tin\tfinancial\tinstitutions | 586 | 586 |
| Other\tadjustments | 528 | 528 |
| Ending\tbalance | $67,110 | $67,110 |
| Tier\t1\tcapital |  |  |
| Beginning\tbalance | $82,440 | $82,440 |
| Change\tin: |  |  |
| CET1 | (4,936) | (4,936) |
| Transitional\tprovisions | 152 | 152 |
| Deduction\tfor\tinvestments\tin\tcovered\tfunds | (145) | (145) |
| Preferred\tstock | 650 | 650 |
| Other\tadjustments | 170 | 170 |
| Ending\tbalance | 78,331 | 78,331 |
| Tier\t2\tcapital |  |  |
| Beginning\tbalance | 16,074 | 15,352 |
| Change\tin: |  |  |
| Qualifying\tsubordinated\tdebt | (1,206) | (1,206) |
| Junior\tsubordinated\tdebt | (225) | (225) |
| Allowance\tfor\tcredit\tlosses | 356 | – |
| Other\tadjustments | (22) | (22) |
| Ending\tbalance | 14,977 | 13,899 |
| Total\tcapital | $93,308 | $92,230 |

In the tables	 above, the	 change in transitional	 provisions represents the increased	phase-in	of	certain	deductions	and	adjustments	from	80%	to	100% (effective January	 1,	 2018) for	 2018	 and from	 60% to	 80% (effective January	1,	2017)	for	2017.

Risk-Weighted	Assets.	RWAs	are	calculated	in	accordance	with	both the	Standardized	Capital	Rules	and	the	Basel	III	Advanced	Rules.

# Credit	Risk

Credit	RWAs	are	calculated	based	upon	measures	of	exposure,	which	are then	 risk	 weighted	 under	 the	 Standardized	 Capital	 Rules	 and	 Basel	 III Advanced	Rules:

•	The	 Standardized	 Capital	 Rules	 apply	 prescribed	 risk-weights,	 which depend	largely	on	the	type	of	counterparty.	The	exposure	measure	for derivatives	and	securities	financing	transactions	are	based	on	specific formulas	which	take	certain	factors	into	consideration.

•	Under	the	Basel	III	Advanced	Rules,	the	firm	computes	risk-weights	for wholesale	and	retail	credit	exposures	in	accordance	with	the	Advanced Internal	Ratings-Based	approach.	The	exposure	measures	for	derivatives and	 securities	 financing	 transactions	 are	 computed	 utilizing	 internal models.

•	For	both	Standardized	and	Basel	III	Advanced	credit	RWAs,	the	risk- weights	for	securitizations	and	equities	are	based	on	specific	required formulaic	approaches.

# Market	Risk

RWAs	for	market	risk	in	accordance	with	the	Standardized	Capital	Rules and	the	Basel	III	Advanced	Rules	are	generally	consistent.	Market	RWAs are	calculated	based	on	measures	of	exposure	which	include	Value-at-Risk (VaR),	stressed	VaR,	incremental	risk	and	comprehensive	risk	based	on internal	models,	and	a	standardized	measurement	method	for	specific	risk.

•	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	net	revenues	used	to	determine	risk	management	VaR exceptions	(i.e.,	comparing	the	daily	net	revenues	to	the	VaR	measure calculated	 as	 of	 the	 end	 of	 the	 prior	 business	 day)	 include	 intraday activity,	whereas	the	FRB's	regulatory	capital	rules	require	that	intraday activity	be	excluded	from	daily	net	revenues	when	calculating	regulatory VaR	exceptions.	Intraday	activity	includes	bid/offer	net	revenues,	which are	more	likely	than	not	to	be	positive	by	their	nature.

As	a	result,	there	may	be	differences	in	the	number	of	VaR	exceptions	and the	amount	of	daily	net	revenues	calculated	for	regulatory	VaR	compared to	the	amounts	calculated	for	risk	management	VaR.	The	firm's	positional losses	observed	on	a	single	day	exceeded	its	99%	one-day	regulatory	VaR on	 two	 occasions	 during	 2018	 and	 did	 not	 exceed	 its	 99%	one-day regulatory	VaR	during	2017.	There	was	no	change	in	the	VaR	multiplier used	to	calculate	Market	RWAs;

•	Stressed	VaR	is	the	potential	loss	in	value	of	inventory	positions,	as	well as	certain	other	financial	assets	and	financial	liabilities,	during	a	period	of significant	market	stress;

•	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;

•	Comprehensive	risk	is	the	potential	loss	in	value,	due	to	price	risk	and defaults,	within	the	firm's	credit	correlation	positions;	and

•	Specific	risk	is	the	risk	of	loss	on	a	position	that	could	result	from	factors other	than	broad	market	movements,	including	event	risk,	default	risk	and idiosyncratic	 risk.	 The	 standardized	 measurement	 method	 is	 used	 to determine	 specific	 risk	 RWAs,	 by	 applying	 supervisory	 defined	 risk- weighting	factors	after	applicable	netting	is	performed.

# Operational	Risk

Operational	 RWAs	 are	 only	 required	 to	 be	 included	 under	 the	 Basel	 III Advanced	Rules.	The	firm	utilizes	an	internal	risk-based	model	to	quantify Operational	RWAs.

The	tables	below	present	information	about	RWAs.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Credit\tRWAs |  |  |
| Derivatives | \t\t$122,511 | \t$126,076 |
| Commitments,\tguarantees\tand\tloans | 160,305 | 145,104 |
| Securities\tfinancing\ttransactions | 66,363 | 77,962 |
| Equity\tinvestments | 53,563 | 48,155 |
| Other | 70,596 | 70,933 |
| Total\tCredit\tRWAs | 473,338 | 468,230 |
| Market\tRWAs |  |  |
| Regulatory\tVaR | 7,782 | 7,532 |
| Stressed\tVaR | 27,952 | 32,753 |
| Incremental\trisk | 10,469 | 8,441 |
| Comprehensive\trisk | 2,770 | 2,397 |
| Specific\trisk | 25,599 | 36,258 |
| Total\tMarket\tRWAs | 74,572 | 87,381 |
| Total\tRWAs | \t\t$547,910 | \t$555,611 |

The	tables	below	present	changes	in	RWAs.

| $	in	millions | Standardized | Advanced |
| :--- | :--- | :--- |
| Risk-Weighted\tAssets |  |  |
| Beginning\tbalance | $555,611 | \t$617,646 |
| Credit\tRWAs |  |  |
| Change\tin: |  |  |
| Transitional\tprovisions | 7,766 | 8,232 |
| Derivatives | (3,565) | (20,685) |
| Commitments,\tguarantees\tand\tloans | 15,201 | (20,019) |
| Securities\tfinancing\ttransactions | (11,599) | (1,103) |
| Equity\tinvestments | (2,241) | (4,580) |
| Other | (454) | (6,411) |
| Change\tin\tCredit\tRWAs | 5,108 | (44,566) |
| Market\tRWAs |  |  |
| Change\tin: |  |  |
| Regulatory\tVaR | 250 | 250 |
| Stressed\tVaR | (4,801) | (4,801) |
| Incremental\trisk | 2,028 | 2,028 |
| Comprehensive\trisk | 373 | 900 |
| Specific\trisk | (10,659) | (10,659) |
| Change\tin\tMarket\tRWAs | (12,809) | (12,282) |
| Operational\tRWAs |  |  |
| Change\tin\toperational\trisk | – | (2,687) |
| Change\tin\tOperational\tRWAs | – | (2,687) |
| Ending\tbalance | $547,910 | \t$558,111 |

# RWAs	Rollforward	Commentary

Year Ended	 December 2018. Standardized	 Credit	 RWAs	 as	 of December	2018	increased	by	$5.11	billion	compared	with	December	2017, primarily	 reflecting	 an	 increase	 in	 commitments,	 guarantees	 and	 loans, principally	due	to	an	increase	in	lending	activity.	This	increase	was	partially offset	by	a	decrease	in	securities	financing	transactions,	principally	due	to reduced	 exposures.	 Standardized	 Market	 RWAs	 as	 of	 December	 2018 decreased	 by $12.81 billion	 compared	 with	 December	 2017,	 primarily reflecting	a	decrease	in	specific	risk	on	positions	for	which	the	firm	obtained increased	transparency	into	the	underliers	and	as	a	result	utilized	a	modeled approach	to	calculate	RWAs.

Basel	 III	 Advanced	 Credit	 RWAs	 as	 of	 December	 2018	 decreased	 by $44.57	 billion	 compared	 with	 December	 2017.	 Beginning	 in	 the	 fourth quarter	 of	 2018,	 the	 firm's	 default	 experience	 was	 incorporated	 into	 the determination	 of	 probability	 of	 default,	 which	 resulted	 in	 a	 decrease	 in Credit	 RWAs,	 primarily	 in	 commitments,	 guarantees	 and	 loans	 and derivatives.	 Basel	 III	 Advanced	 Market	 RWAs	 as	 of	 December	 2018 decreased	 by $12.28 billion	 compared	 with	 December	 2017,	 primarily reflecting	a	decrease	in	specific	risk	on	positions	for	which	the	firm	obtained increased	transparency	into	the	underliers	and	as	a	result	utilized	a	modeled approach	to	calculate	RWAs.

Year	 Ended	 December 2017. Standardized	 Credit	 RWAs	 as	 of December 2017 increased by $56.82 billion	 compared with December	 2016,	 primarily	 reflecting	 an	 increase	 in	 commitments, guarantees	 and	 loans,	 principally	 due	 to	 increased	 lending	 activity. Standardized	 Market	 RWAs	 as	 of	 December	 2017	 increased	 by $2.12 billion	 compared	 with	 December	 2016,	 primarily	 reflecting	 an increase	in	stressed	VaR	as	a	result	of	increased	risk	exposures	partially offset	by	decreases	in	specific	risk,	as	a	result	of	changes	in	risk	exposures, and	comprehensive	risk,	as	a	result	of	changes	in	risk	measurements.

Basel	 III	 Advanced	 Credit	 RWAs	 as	 of	 December	 2017	 increased	 by $63.23	 billion	 compared	 with	 December	 2016,	 primarily	 reflecting	 an increase	 in	 commitments,	 guarantees	 and	 loans,	 principally	 due	 to increased	 lending	 activity.	 Basel	 III	 Advanced	 Market	 RWAs	 as	 of December	2017	increased	by	$2.38	billion	compared	with	December	2016, primarily	reflecting	an	increase	in	stressed	VaR	as	a	result	of	increased	risk exposures	 partially	 offset	 by	 decreases	 in	 specific	 risk,	 as	 a	 result	 of changes	in	risk	exposures,	and	comprehensive	risk,	as	a	result	of	changes in	risk	measurements.

# 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	FRB,	the	FDIC,	the	New	York	State Department	of	Financial	Services	and	the	Bureau	of	Consumer	Financial Protection,	 and	 is	 subject	 to	 regulatory	 capital	 requirements	 that	 are calculated	in	substantially	the	same	manner	as	those	applicable	to	BHCs. For	 purposes	 of	 assessing	 the	 adequacy	 of	 its	 capital,	 GS	 Bank	 USA calculates	 its	 capital	 ratios	 in	 accordance	 with	 the	 regulatory	 capital requirements	applicable	to	state	member	banks.	Those	requirements	are based	on	the	Capital	Framework	described	above.	GS	Bank	USA	is	an Advanced	approach	banking	organization	under	the	Capital	Framework.

Under	the	regulatory	framework	for	prompt	corrective	action	applicable	to GS	Bank	USA,	in	order	to	meet	the	quantitative	requirements	for	being	a "well-capitalized"	depository	institution,	GS	Bank	USA	must	meet	higher minimum	requirements	 than	 the	minimum	ratios	 in	 the	 table	below.	In order	to	be	considered	a	"well-capitalized"	depository	institution,	GS	Bank USA	must	meet	the	SLR	requirement	of	6.0%	or	greater,	which	became effective	on	January	1,	2018.

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,	including	a	breach	of	the	buffers	described above,	 could	 result	 in	 restrictions	 being	 imposed	 by	 GS	 Bank	 USA's regulators.

Similar	to	the	firm,	GS	Bank	USA	is	required	to	calculate	each	of	the	CET1, Tier 1 capital and Total capital ratios in accordance	 with both the Standardized	Capital	Rules	and	Basel	III	Advanced	Rules.	The lower	of each	risk-based	capital	ratio	calculated	in	accordance	with	the	Standardized Capital	Rules	and	Basel	III	Advanced	Rules	is	the	ratio	against	which	GS Bank	USA's	compliance	with	its	minimum	ratio	requirements	is	assessed.

The	table	below	presents	GS	Bank	USA's	minimum	risk-based	capital	and leverage	ratios	and	"well-capitalized"	minimum	ratios.

|  | Minimum	Ratio	as	of	December | Minimum	Ratio	as	of	December | "Well-capitalized" |
| :--- | :--- | :--- | :--- |
|  | \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t2018 | 2017 | Minimum\tRatio |
| Risk-based\tcapital\tratios |  |  |  |
| CET1\tratio | 6.4% | \t 5.8% | 6.5% |
| Tier\t1\tcapital\tratio | 7.9% | \t 7.3% | 8.0% |
| Total\tcapital\tratio | 9.9% | \t 9.3% | 10.0% |
| Leverage\tratios |  |  |  |
| Tier\t1\tleverage\tratio | 4.0% | \t 4.0% | 5.0% |
| SLR | 3.0% | N/A | 6.0% |

The table	 below	 presents information	 about	 GS	 Bank	 USA's risk-based capital	ratios.

| $	in	millions | Standardized | Advanced |
| :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |
| CET1 | $\t\t27,467 | \t$\t\t27,467 |
| Tier\t1\tcapital | $\t\t27,467 | \t$\t\t27,467 |
| Tier\t2\tcapital | $\t\t\t\t5,069 | \t$\t\t\t\t4,446 |
| Total\tcapital | $\t\t32,536 | \t$\t\t31,913 |
| RWAs | $248,356 | \t$149,019 |
| CET1\tratio | 11.1% | 18.4% |
| Tier\t1\tcapital\tratio | 11.1% | 18.4% |
| Total\tcapital\tratio | 13.1% | 21.4% |
| As\tof\tDecember\t2017 |  |  |
| CET1 | $\t\t25,343 | \t$\t\t25,343 |
| Tier\t1\tcapital | $\t\t25,343 | \t$\t\t25,343 |
| Tier\t2\tcapital | $\t\t\t\t2,547 | \t$\t\t\t\t2,000 |
| Total\tcapital | $\t\t27,890 | \t$\t\t27,343 |
| RWAs | $229,775 | \t$164,602 |
| CET1\tratio | 11.0% | 15.4% |
| Tier\t1\tcapital\tratio | 11.0% | 15.4% |
| Total\tcapital\tratio | 12.1% | 16.6% |

The	table	below	presents	information	about	GS	Bank	USA's	leverage	ratios.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Tier\t1\tcapital | \t\t$\t\t27,467 | \t$\t\t25,343 |
| Average\tadjusted\ttotal\tassets | \t\t$188,606 | \t$168,842 |
| Total\tleverage\texposure | \t\t$368,062 | \t$345,734 |
| Tier\t1\tleverage\tratio | 14.6% | 15.0% |
| SLR | 7.5% | 7.3% |

•	Each	of	the	risk-based	capital	ratios	calculated	in	accordance	with	the Standardized	Capital	Rules	was	lower	than	that	calculated	in	accordance with	 the	 Basel	 III	 Advanced	 Rules	 and	 therefore	 the	 Standardized Capital	ratios	were	the	ratios	that	applied	to	GS	Bank	USA	as	of	both December	2018	and	December	2017.

•	The	 minimum	 risk-based	 capital	 ratios	 as	 of	 December	 2018	 reflect (i)	 the	 75%	phase-in	 of	 the	 capital	 conservation	 buffer	 of	 2.5%	 and (ii)	the	countercyclical	capital	buffer	of	zero	percent.

•	The	 minimum	 risk-based	 capital	 ratios	 as	 of	 December	 2017	 reflect (i)	 the	 50%	phase-in	 of	 the	 capital	 conservation	 buffer	 of	 2.5%	 and (ii)	the	countercyclical	capital	buffer	of	zero	percent.

•	Beginning	in	the	fourth	quarter	of	2018,	the	firm's	default	experience was	incorporated	into	the	determination	of	probability	of	default	for	the calculation	of	Basel	III	Advanced	RWAs.	The	impact	of	this	change	was an	 increase	 in	 GS	 Bank	 USA's	 Basel	 III	 Advanced	 CET1	 ratio	 of approximately	1.6	percentage	points.

•	The	 Standardized	 CET1	 ratio	 and	Tier	 1	 capital	 ratio	 both	 remained essentially	unchanged	from	December	2017	to	December	2018.

•	The	Standardized	Total	capital	ratio	increased	from	December	2017	to December	2018	primarily	due	to	an	increase	in	Total	capital,	principally due	to	the	issuance	of	subordinated	debt.

•	The	Basel	III	Advanced	CET1	ratio,	Tier	1	capital	ratio	and	Total	capital ratio	increased	from	December	2017	to	December	2018.	Beginning	in the	 fourth	 quarter	 of	 2018,	 the	 firm's	 default	 experience	 was incorporated	 into	 the	 determination	 of	 probability	 of	 default,	 which resulted	 in	 a	 decrease	 in	 Credit	 RWAs,	 primarily	 in	 commitments, guarantees	and	loans	and	derivatives.

The	firm's	principal	non-U.S.	bank	subsidiary,	GSIB,	is	a	wholly-owned credit	institution,	regulated	by	the	Prudential	Regulation	Authority	and	the Financial	 Conduct	 Authority	 and	 is	 subject	 to	 minimum	 capital requirements.	As	of	both	December	2018	and	December	2017,	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	 FRB	 requires	 that	 GS	 Bank	 USA	 maintain	 cash reserves	with	the	Federal	Reserve	Bank	of	New	York.	The	amount	deposited by	 GS	 Bank	 USA	 at	 the	 Federal	 Reserve	 Bank	 of	 New	 York	 was $29.20 billion	 as	 of	 December	 2018	 and $50.86 billion	 as	 of December	 2017,	 which	 exceeded	 required	 reserve	 amounts	 by $29.03 billion	 as	 of	 December	 2018	 and $50.74 billion	 as	 of December	2017.

# Restrictions	on	Payments

Group	Inc.	may	be	 limited	 in	 its	ability	 to	access	capital	held	at	certain subsidiaries	 as	 a	 result	 of	 regulatory,	 tax	 or	 other	 constraints.	 These limitations	include	provisions	of	applicable	law	and	regulations	and	other regulatory	restrictions	that	limit	the	ability	of	those	subsidiaries	to	declare and	pay	dividends	without	prior	regulatory	approval	(e.g.,	dividends	 that may	be	paid	by	GS	Bank	USA	are	 limited	 to	 the	 lesser	of	 the	amounts calculated	under	a	recent	earnings	test	and	an	undivided	profits	test)	even	if the	 relevant	 subsidiary	 would	 satisfy	 the	 equity	 capital	 requirements applicable	to	it	after	giving	effect	to	the	dividend.	For	example,	the	FRB,	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	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.

In	 addition,	 subsidiaries	 not	 subject	 to	 separate	 regulatory	 capital requirements	 may	 hold	 capital	 to	 satisfy	 local	 tax	 and	 legal	 guidelines, rating	 agency	 requirements	 (for	 entities	 with	 assigned	 credit	 ratings)	 or internal	 policies,	 including	 policies	 concerning	 the	 minimum	 amount	 of capital	a	subsidiary	should	hold	based	on	its	underlying	level	of	risk.

Group	 Inc.'s	 equity	 investment	 in	 subsidiaries	 was	 $90.22	 billion	 as	 of December	2018	and	$93.88	billion	as	of	December	2017,	of	which	Group Inc.	 was	 required	 to	 maintain	 $52.92	 billion	 as	 of	 December	 2018	 and $53.02	 billion	 as	 of	 December	 2017,	 of	 minimum	 equity	 capital	 in	 its regulated	subsidiaries	in	order	to	satisfy	the	regulatory	requirements	of	such subsidiaries.

Group	Inc.'s	capital	invested	in	certain	non-U.S.	subsidiaries	is	exposed	to foreign	 exchange	 risk,	 substantially	 all	 of	 which	 is	 managed	 through	 a combination	of	derivatives	and	non-U.S.	denominated	debt.	See	Note	7	for information	about	the	firm's	net	investment	hedges	used	to	hedge	this	risk.

# 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	and	restricted	stock	units	(RSUs) for	which	no	future	service	is	required	as	a	condition	to	the	delivery	of	the underlying	 common	 stock	 (collectively,	 basic	 shares).	 Diluted	 EPS includes	 the	 determinants	 of	 basic	 EPS	 and,	 in	 addition,	 reflects	 the dilutive	effect	of	the	common	stock	deliverable	for	stock	options	and	for RSUs	for	which	future	service	is	required	as	a	condition	to	the	delivery	of the	underlying	common	stock.

The	table	below	presents	information	about	basic	and	diluted	EPS.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| in\tmillions,\texcept\tper\tshare\tamounts | 2018 | 2017 | 2016 |
| Net\tearnings\tapplicable\tto\tcommon |  |  |  |
| shareholders | \t\t$9,860 | \t$3,685 | \t$7,087 |
| Weighted\taverage\tbasic\tshares | 385.4 | 401.6 | 427.4 |
| Effect\tof\tdilutive\tsecurities: |  |  |  |
| RSUs | 3.9 | 5.3 | 4.7 |
| Stock\toptions | 0.9 | 2.2 | 3.0 |
| Dilutive\tsecurities | 4.8 | 7.5 | 7.7 |
| Weighted\taverage\tbasic\tshares\tand |  |  |  |
| dilutive\tsecurities | 390.2 | 409.1 | 435.1 |
| Basic\tEPS | \t\t$25.53 | \t$\t\t9.12 | \t$16.53 |
| Diluted\tEPS | \t\t$25.27 | \t$\t\t9.01 | \t$16.29 |

•	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	2018,	$0.06	for	2017	and $0.05	for	2016.

•	Diluted	EPS	does	not	include	antidilutive	securities	(RSUs	and	common shares	 underlying	 stock	 options)	 of	 less	 than	 0.1	 million	 for	 2018, 0.1	million	for	2017	and	2.8	million	for	2016.

# 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.

The	firm	may	periodically	determine	to	waive	certain	management	fees	on selected	money	market	funds.	Management	fees	waived	were	$51	million for	2018	and	$98	million	for	2017.

The	 Volcker	 Rule	 restricts	 the	 firm	 from	 providing	 financial	 support	 to covered	funds	(as	defined	in	the	rule)	after	the	expiration	of	the	conformance period.	As	a	general	matter,	in	the	ordinary	course	of	business,	the	firm	does not	expect	to	provide	additional	voluntary	financial	support	to	any	covered funds	but	may	choose	to	do	so	with	respect	to	funds	that	are	not	subject	to the	Volcker	Rule;	however,	in	the	event	that	such	support	is	provided,	the amount	is	not	expected	to	be	material.

The	 firm	 had	 an	 outstanding	 guarantee,	 as	 permitted	 under	 the	 Volcker Rule,	on	behalf	of	its	funds	of	$154	million	as	of	both	December	2018	and December	 2017.	 The	 firm	 has	 voluntarily	 provided	 this	 guarantee	 in connection	with	a	financing	agreement	with	a	third-party	lender	executed	by one	of	the	firm's	real	estate	funds	that	is	not	covered	by	the	Volcker	Rule. As	of	both	December	2018	and	December	2017,	except	as	noted	above,	the firm	has	not	provided	any	additional	financial	support	to	its	affiliated	funds.

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	sources	of	interest	income	and	interest	expense.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Interest\tincome |  |  |  |
| Deposits\twith\tbanks | \t\t$\t\t1,418 | \t$\t\t\t\t\t819 | \t$\t\t\t452 |
| Collateralized\tagreements | 3,852 | 1,661 | 691 |
| Financial\tinstruments\towned | 6,894 | 5,904 | 5,444 |
| Loans\treceivable | 4,148 | 2,678 | 1,843 |
| Other\tinterest | 3,367 | 2,051 | 1,261 |
| Total\tinterest\tincome | 19,679 | 13,113 | 9,691 |
| Interest\texpense |  |  |  |
| Deposits | 2,606 | 1,380 | 878 |
| Collateralized\tfinancings | 2,051 | 863 | 442 |
| Financial\tinstruments\tsold, |  |  |  |
| but\tnot\tyet\tpurchased | 1,554 | 1,388 | 1,251 |
| Secured\tand\tunsecured\tborrowings: |  |  |  |
| Short-term | 695 | 698 | 446 |
| Long-term | 5,555 | 4,599 | 4,242 |
| Other\tinterest | 3,451 | 1,253 | (155) |
| Total\tinterest\texpense | 15,912 | 10,181 | 7,104 |
| Net\tinterest\tincome | \t\t$\t\t3,767 | \t$\t\t2,932 | \t$2,587 |

•	Collateralized	agreements	includes	rebates	paid	and	interest	income	on securities	borrowed.

•	Other interest income includes interest income on customer debit balances	and	other	interest-earning	assets.

•	Collateralized financings consists of repurchase agreements and securities	loaned.

•	Other interest expense includes rebates received on other interest- bearing	liabilities	and	interest	expense	on	customer	credit	balances.

# Income	Taxes

# Tax	Legislation

The	 provision	 for	 taxes	 for	 2017	 reflected	 an	 estimated	 impact	 of	 Tax Legislation	of	$4.40	billion.	The	$4.40	billion	income	tax	expense	included the	 repatriation	 tax	 on	 undistributed	 earnings	 of	 foreign	 subsidiaries,	 the effects	 of	 the	 implementation	 of	 a	 territorial	 tax	 system,	 and	 the remeasurement	of	U.S.	deferred	tax	assets	at	lower	enacted	tax	rates.	During 2018,	 the	 firm	 finalized	 this	 estimate	 to	 reflect	 the	 impact	 of	 updated information,	 including	 subsequent	 guidance	 issued	 by	 the	 U.S.	 Internal Revenue	Service	(IRS),	resulting	in	a	$487	million	income	tax	benefit.

# Provision	for	Income	Taxes

Income	taxes	are	provided	for	using	the	asset	and	liability	method	under which	 deferred	 tax	 assets	 and	 liabilities	 are	 recognized	 for	 temporary differences	 between	 the	 financial	 reporting	 and	 tax	 bases	 of	 assets	 and liabilities.	The	firm	reports	interest	expense	related	to	income	tax	matters	in provision	for	taxes	and	income	tax	penalties	in	other	expenses.

The	table	below	presents	information	about	the	provision	for	taxes.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Current\ttaxes |  |  |  |
| U.S.\tfederal | \t$\t2,986 | \t$\t\t\t320 | \t$1,032 |
| State\tand\tlocal | 379 | 64 | 139 |
| Non-U.S. | 1,302 | 1,004 | 1,184 |
| Total\tcurrent\ttax\texpense | 4,667 | 1,388 | 2,355 |
| Deferred\ttaxes |  |  |  |
| U.S.\tfederal | (2,711) | 5,083 | 399 |
| State\tand\tlocal | 58 | 157 | 51 |
| Non-U.S. | 8 | 218 | 101 |
| Total\tdeferred\ttax\t(benefit)/expense | (2,645) | 5,458 | 551 |
| Provision\tfor\ttaxes | \t$\t2,022 | \t$6,846 | \t$2,906 |

•	State	and	 local	current	 taxes	 in	2017	and	2016 includes the impact	of settlements	of	state	and	local	examinations.

•	U.S.	federal	current	tax	expense	and	U.S.	federal	deferred	tax	expense	in 2018	and	2017	includes	the	impact	of	Tax	Legislation.

The	 table	 below	 presents	 a	 reconciliation	 of the	 U.S. federal	 statutory income	tax	rate	to	the	effective	income	tax	rate.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
|  | 2018 | 2017 | 2016 |
| U.S.\tfederal\tstatutory\tincome\ttax\trate | \t\t21.0%\t\t\t35.0%\t\t\t35.0% | \t\t21.0%\t\t\t35.0%\t\t\t35.0% | \t\t21.0%\t\t\t35.0%\t\t\t35.0% |
| State\tand\tlocal\ttaxes,\tnet\tof\tU.S.\tfederal |  |  |  |
| income\ttax\teffects | 2.0 | 1.5 | 0.9 |
| ASU\tNo.\t2016-09\tTax\tbenefits\ton\tsettlement |  |  |  |
| of\temployee\tshare-based\tawards | (2.2) | (6.4) | – |
| Non-U.S.\toperations | (0.7) | (6.3) | (6.7) |
| Tax\tcredits | (1.4) | (2.1) | (2.0) |
| Tax-exempt\tincome,\tincluding\tdividends | (0.6) | (0.2) | (0.3) |
| Tax\tLegislation | (3.9) | 39.5 | – |
| Non-deductible\tlegal\texpenses | 1.2 | 0.5 | 1.0 |
| Other | 0.8 | – | 0.3 |
| Effective\tincome\ttax\trate | \t\t16.2%\t\t\t61.5%\t\t\t28.2% | \t\t16.2%\t\t\t61.5%\t\t\t28.2% | \t\t16.2%\t\t\t61.5%\t\t\t28.2% |

•	Non-U.S.	operations	in	2018	includes	the	impact	of	the	Base	Erosion and	Anti-Abuse	Tax	and	Global	Intangible	Low	Taxed	Income	(GILTI).

•	Non-U.S.	 operations	 in	 2017	 and	 2016	 includes	 the	 impact	 of permanently	reinvested	earnings	and	excludes	the	estimated	impact	of Tax	Legislation.

•	State	and	local	taxes	in	2017	and	2016,	net	of	U.S.	federal	income	tax effects,	 includes	 the	 impact	 of	 settlements	 of	 state	 and	 local examinations.

# 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	are	included	in	other	assets	and	tax liabilities	are	included	in	other	liabilities.

The	 table	 below	 presents	 information	 about	 deferred	 tax assets and liabilities,	excluding	the	impact	of	netting	within	tax	jurisdictions.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Deferred\ttax\tassets |  |  |
| Compensation\tand\tbenefits | \t$1,296 | \t$1,233 |
| ASC\t740\tasset\trelated\tto\tunrecognized\ttax\tbenefits | 152 | 75 |
| Non-U.S.\toperations | 264 | – |
| Net\toperating\tlosses | 688 | 428 |
| Occupancy-related | 71 | 67 |
| Other\tcomprehensive\tincome-related | – | 408 |
| Tax\tcredits\tcarryforward | 62 | 1,006 |
| Other,\tnet | 434 | 113 |
| Subtotal | 2,967 | 3,330 |
| Valuation\tallowance | (245) | (156) |
| Total\tdeferred\ttax\tassets | \t$2,722 | \t$3,174 |
| Deferred\ttax\tliabilities |  |  |
| Depreciation\tand\tamortization | \t$\t\t\t996 | \t$\t\t\t826 |
| Tax\tLegislation\t—\trepatriation\ttax | – | 3,114 |
| Non-U.S.\toperations | – | 180 |
| Unrealized\tgains | 1,290 | 742 |
| Other\tcomprehensive\tincome-related | 84 | – |
| Total\tdeferred\ttax\tliabilities | \t$2,370 | \t$4,862 |

The	 firm	 has	 recorded	 deferred	 tax	 assets	 of $688 million	 as	 of December	2018	and	$428	million	as	of	December	2017,	in	connection	with U.S.	federal,	state	and	local	and	foreign	net	operating	loss	carryforwards. The	 firm	 also	 recorded	 a	 valuation	 allowance	 of $81	 million as	 of December	2018	and	$128	million	as	of	December	2017,	related	to	these	net operating	loss	carryforwards.

As	of	December	2018,	the	U.S.	federal	net	operating	loss	carryforward	was $259	 million,	 the	 state	 and	 local	 net	 operating	 loss	 carryforward	 was $1.35 billion,	 and	 the	 foreign	 net	 operating	 loss	 carryforward	 was $2.39	billion.	If	not	utilized,	the	U.S.	federal,	state	and	local,	and	foreign	net operating	 loss	 carryforwards	 will	 begin	 to	 expire	 in	 2019.	 If	 these carryforwards	expire,	 they	will	not	have	a	material	 impact	on	 the	firm's results	of	operations.	As	of	December	2018,	the	firm	has	recorded	deferred tax	assets	of	$24	million	in	connection	with	foreign	tax	credit	carryforwards and	a	valuation	allowance	of	$24	million	related	to	these	foreign	tax	credit carryforwards.	As	of	December	2018,	the	firm	has	recorded	deferred	tax assets	 of $38	 million in	 connection	 with	 state	 and	 local	 tax	 credit carryforwards.	If	not	utilized,	the	foreign	tax	credit	carryforward	will	expire in	2028	and	the	state	and	local	tax	credit	carryforward	will	begin	to	expire	in 2020.	As	of	December	2018,	the	firm	did	not	have	any	general	business credit	carryforwards.

As	of	both	December	2018	and	December	2017,	the	firm	had	no	U.S.	capital loss	 carryforwards	 and	 no	 related	 net	 deferred	 income	 tax	 assets.	As	 of December	 2018,	 the	 firm	 had	 deferred	 tax	 assets	 of $77	 million in connection	 with	 foreign	 capital	 loss	 carryforwards	 and	 a	 valuation allowance	of	$77	million	related	to	these	capital	loss	carryforwards.	As	of December	2017,	there	were	no	foreign	capital	loss	carryforwards.

The	 valuation	 allowance	 increased	 by $89	 million during	 2018	 and increased	by	$41	million	during	2017.	The	 increases	 in	both	2018	and 2017	were	primarily	due	to	an	increase	in	deferred	tax	assets	from	which the	firm	does	not	expect	to	realize	any	benefit.

The	 firm	 permanently	 reinvested	 eligible	 earnings	 of	 certain	 foreign subsidiaries.	As	of	December	2018,	all	U.S.	taxes	were	accrued	on	these subsidiaries'	 distributable	 earnings,	 substantially	 all	 of	 which	 resulted from	 the	 Tax	 Legislation	 repatriation	 tax	 and	 GILTI.	 As	 of December	 2017,	 substantially	 all	 U.S.	 taxes	 were	 accrued	 on	 these subsidiaries'	 earnings	 and	 profits	 as	 a	 result	 of	 the	 Tax	 Legislation repatriation	tax.

# Unrecognized	Tax	Benefits

The	firm	recognizes	tax	positions	in	the	consolidated	financial	statements only	when	it	is	more	likely	than	not	that	the	position	will	be	sustained	on examination	by	the	relevant	taxing	authority	based	on	the	technical	merits of	 the	 position.	A	 position	 that	 meets	 this	 standard	 is	 measured	 at	 the largest	amount	of	benefit	 that	will	more	 likely	 than	not	be	realized	on settlement.	 A	 liability	 is	 established	 for	 differences	 between	 positions taken	in	a	tax	return	and	amounts	recognized	in	the	consolidated	financial statements.

The	accrued	liability	for	interest	expense	related	to	income	tax	matters	and income	 tax	 penalties	 was $107	 million as	 of	 December	 2018	 and $81	million	as	of	December	2017.	The	firm	recognized	interest	expense and	income	tax	penalties	of	$18	million	for	2018,	$63	million	for	2017	and $27	 million for	 2016.	 It	 is	 reasonably	 possible	 that	 unrecognized	 tax benefits	could	change	significantly	during	the	twelve	months	subsequent	to December	2018	due	to	potential	audit	settlements.	However,	at	this	time	it is	not	possible	to	estimate	any	potential	change.

The	table	below	presents	the	changes	in	the	liability	for	unrecognized	tax benefits,	which	is	included	in	other	liabilities.

|  | Year	Ended	or	as	of	December | Year	Ended	or	as	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Beginning\tbalance | \t$\t\t\t665 | \t$\t852 | \t$\t825 |
| Increases\tbased\ton\ttax\tpositions\trelated |  |  |  |
| to\tthe\tcurrent\tyear | 197 | 94 | 113 |
| Increases\tbased\ton\ttax\tpositions\trelated |  |  |  |
| to\tprior\tyears | 232 | 101 | 188 |
| Decreases\tbased\ton\ttax\tpositions\trelated |  |  |  |
| to\tprior\tyears | (39) | (128) | (88) |
| Decreases\trelated\tto\tsettlements | (3) | (255) | (186) |
| Exchange\trate\tfluctuations | (1) | 1 | – |
| Ending\tbalance | \t$1,051 | \t$\t665 | \t$\t852 |
| Related\tdeferred\tincome\ttax\tasset | 152 | 75 | 231 |
| Net\tunrecognized\ttax\tbenefit | \t$\t\t\t899 | \t$\t590 | \t$\t621 |

# Regulatory	Tax	Examinations

The	firm	is	subject	to	examination	by	the	IRS	and	other	taxing	authorities	in jurisdictions	where	the	firm	has	significant	business	operations,	such	as	the United	Kingdom,	Japan,	Hong	Kong	and	various	states,	such	as	New	York. The	tax	years	under	examination	vary	by	jurisdiction.	The	firm	does	not expect	completion	of	these	audits	to	have	a	material	impact	on	the	firm's financial	condition	but	it	may	be	material	to	operating	results	for	a	particular period,	depending,	in	part,	on	the	operating	results	for	that	period.

The	 table	 below	 presents	 the earliest tax	 years that remain subject to examination	by	major	jurisdiction.

U.S.	Federal	examinations	of	2011	and	2012	began	in	2013.	The	firm	has been	accepted	into	the	Compliance	Assurance	Process	program	by	the	IRS for	each	of	the	tax	years	from	2013	through	2019.	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	 through	2017	 tax	years remain	subject	to	post-filing	review.

New	York	State	and	City	examinations	(excluding	GS	Bank	USA)	of	2011 through	2014	began	in	2017.	New	York	State	and	City	examinations	for	GS Bank	USA	have	been	completed	through	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.

# 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.

Management believes that this allocation provides a reasonable representation of each segment's contribution to consolidated	pre-tax earnings and total assets.	 Transactions	 between segments are	 based	 on specific	criteria	or	approximate	third-party	rates.

The	table	below	presents	net	revenues,	provision	for	credit	losses,	operating expenses	and	pre-tax	earnings	by	segment.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Investment\tBanking |  |  |  |
| Financial\tAdvisory | \t\t$\t\t3,507 | \t$\t\t3,188 | \t$\t\t2,932 |
| Equity\tunderwriting | 1,646 | 1,243 | 891 |
| Debt\tunderwriting | 2,709 | 2,940 | 2,450 |
| Total\tUnderwriting | 4,355 | 4,183 | 3,341 |
| Total\tnet\trevenues | 7,862 | 7,371 | 6,273 |
| Operating\texpenses | 4,346 | 3,526 | 3,437 |
| Pre-tax\tearnings | \t\t$\t\t3,516 | \t$\t\t3,845 | \t$\t\t2,836 |
| Institutional\tClient\tServices |  |  |  |
| FICC\tClient\tExecution | \t\t$\t\t5,882 | \t$\t\t5,299 | \t$\t\t7,556 |
| Equities\tclient\texecution | 2,835 | 2,046 | 2,194 |
| Commissions\tand\tfees | 3,055 | 2,920 | 3,078 |
| Securities\tservices | 1,710 | 1,637 | 1,639 |
| Total\tEquities | 7,600 | 6,603 | 6,911 |
| Total\tnet\trevenues | 13,482 | 11,902 | 14,467 |
| Operating\texpenses | 10,351 | 9,692 | 9,713 |
| Pre-tax\tearnings | \t\t$\t\t3,131 | \t$\t\t2,210 | \t$\t\t4,754 |
| Investing\t&amp;\tLending |  |  |  |
| Equity\tsecurities | \t\t$\t\t4,455 | \t$\t\t4,578 | \t$\t\t2,573 |
| Debt\tsecurities\tand\tloans | 3,795 | 2,660 | 1,689 |
| Total\tnet\trevenues | 8,250 | 7,238 | 4,262 |
| Provision\tfor\tcredit\tlosses | 674 | 657 | 182 |
| Operating\texpenses | 3,365 | 2,796 | 2,386 |
| Pre-tax\tearnings | \t\t$\t\t4,211 | \t$\t\t3,785 | \t$\t\t1,694 |
| Investment\tManagement |  |  |  |
| Management\tand\tother\tfees | \t\t$\t\t5,438 | \t$\t\t5,144 | \t$\t\t4,798 |
| Incentive\tfees | 830 | 417 | 421 |
| Transaction\trevenues | 754 | 658 | 569 |
| Total\tnet\trevenues | 7,022 | 6,219 | 5,788 |
| Operating\texpenses | 5,267 | 4,800 | 4,654 |
| Pre-tax\tearnings | \t\t$\t\t1,755 | \t$\t\t1,419 | \t$\t\t1,134 |
| Total\tnet\trevenues | \t\t$36,616 | \t$32,730 | \t$30,790 |
| Provision\tfor\tcredit\tlosses | 674 | 657 | 182 |
| Total\toperating\texpenses | 23,461 | 20,941 | 20,304 |
| Total\tpre-tax\tearnings | \t\t$12,481 | \t$11,132 | \t$10,304 |

•	Revenues	 and	 expenses	 directly	 associated	 with each segment are included	in	determining	pre-tax	earnings.

•	Net	 revenues	 in	 the	 firm's	 segments	 include	 allocations	 of	 interest income	 and	 expense	 to	 specific	 securities,	 commodities	 and	 other positions	in	relation	to	the	cash	generated	by,	or	funding	requirements of,	such	positions.	Net	interest	is	included	in	segment	net	revenues	as	it is	consistent	with	how	management	assesses	segment	performance.

•	Overhead	 expenses	 not	 directly	 allocable	 to	 specific segments are allocated	ratably	based	on	direct	segment	expenses.

•	Provision	for	credit	losses,	previously	reported	in	Investing	&	Lending segment	net	revenues,	 is	now	reported	as	a	separate	 line	 item	 in	 the consolidated	statements	of	earnings.	Previously	reported	amounts	have been	conformed	to	the	current	presentation.

•	Total	 operating	 expenses	 included	 net	 provisions	 for	 litigation	 and regulatory	proceedings	of	$844	million	for	2018,	$188	million	for	2017 and	$396	million	for	2016.

The	table	below	presents	assets	by	segment.

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Investment\tBanking | \t\t$\t\t\t\t1,748 | \t$\t\t\t\t2,202 |
| Institutional\tClient\tServices | 656,920 | 675,255 |
| Investing\t&amp;\tLending | 259,104 | 226,016 |
| Investment\tManagement | 14,024 | 13,303 |
| Total\tassets | \t\t$931,796 | \t$916,776 |

The	table	below	presents	net	interest	income	by	segment.

| $	in	millions | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Investment\tBanking | \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– |
| Institutional\tClient\tServices | 976 | 1,322 | 1,456 |
| Investing\t&amp;\tLending | 2,427 | 1,325 | 880 |
| Investment\tManagement | 364 | 285 | 251 |
| Total\tnet\tinterest\tincome | \t\t$3,767 | \t$2,932 | \t$2,587 |

The	table	below	presents	depreciation	and	amortization	expense	by	segment.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Investment\tBanking | \t\t$\t\t\t114 | \t$\t\t\t124 | \t$126 |
| Institutional\tClient\tServices | 567 | 514 | 489 |
| Investing\t&amp;\tLending | 426 | 314 | 215 |
| Investment\tManagement | 221 | 200 | 168 |
| Total\tdepreciation\tand\tamortization | \t\t$1,328 | \t$1,152 | \t$998 |

# 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:

•	Investment	Banking:	location	of	the	client	and	investment	banking	team.

•	Institutional Client Services: FICC Client Execution and Equities (excluding	 Securities services): location of the	 market-making desk; Securities	 services: location	 of the	 primary	 market for the	 underlying security.

•	Investing	 &	 Lending: Investing: location	 of the investment;	 Lending: location	of	the	client.

•	Investment	Management:	location	of	the	sales	team.

The table below presents total net revenues,	pre-tax earnings and net earnings	(excluding	Corporate)	by	geographic	region	allocated	based	on	the methodology	referred	to	above.

| $	in	millions | 2018 |  | 2017 |  | 2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Net\trevenues |  |  |  |  |  |  |
| Americas | \t\t$22,339 | 61%\t\t\t$19,737 | 61%\t\t\t$19,737 | 60%\t\t\t$18,301 | 60%\t\t\t$18,301 | 60% |
| Europe,\tMiddle\tEast\tand |  |  |  |  |  |  |
| Africa | 9,244 | 25% | 8,168 | 25% | 8,065 | 26% |
| Asia | 5,033 | 14% | 4,825 | 15% | 4,424 | 14% |
| Total\tnet\trevenues | \t\t$36,616 | \t\t100%\t\t\t$32,730 | \t\t100%\t\t\t$32,730 | \t\t100%\t\t\t$30,790 | \t\t100%\t\t\t$30,790 | \t\t100% |
| Pre-tax\tearnings |  |  |  |  |  |  |
| Americas | \t\t$\t\t8,235 | 65%\t\t\t$\t\t7,119 | 65%\t\t\t$\t\t7,119 | 63%\t\t\t$\t\t6,352 | 63%\t\t\t$\t\t6,352 | 61% |
| Europe,\tMiddle\tEast\tand\tAfrica | 3,266 | 26% | 2,583 | 23% | 2,883 | 28% |
| Asia | 1,112 | 9% | 1,557 | 14% | 1,183 | 11% |
| Subtotal | 12,613 | \t\t100% | 11,259 | \t\t100% | 10,418 | \t\t100% |
| Corporate | (132) |  | (127) |  | (114) |  |
| Total\tpre-tax\tearnings | \t\t$12,481 | \t\t\t$11,132 | \t\t\t$11,132 | \t\t\t$10,304 | \t\t\t$10,304 |  |
| Net\tearnings |  |  |  |  |  |  |
| Americas | \t\t$\t\t6,960 | 66%\t\t\t$\t\t\t\t\t997 | 66%\t\t\t$\t\t\t\t\t997 | 23%\t\t\t$\t\t4,337 | 23%\t\t\t$\t\t4,337 | 58% |
| Europe,\tMiddle\tEast\tand |  |  |  |  |  |  |
| Africa | 2,636 | 25% | 2,144 | 49% | 2,270 | 30% |
| Asia | 966 | 9% | 1,241 | 28% | 870 | 12% |
| Subtotal | 10,562 | \t\t100% | 4,382 | \t\t100% | 7,477 | \t\t100% |
| Corporate | (103) |  | (96) |  | (79) |  |
| Total\tnet\tearnings | \t\t$10,459 | \t\t\t$\t\t4,286 | \t\t\t$\t\t4,286 | \t\t\t$\t\t7,398 | \t\t\t$\t\t7,398 |  |
|  |  | Goldman\tSachs\t2018\tForm\t10-K | Goldman\tSachs\t2018\tForm\t10-K | Goldman\tSachs\t2018\tForm\t10-K | Goldman\tSachs\t2018\tForm\t10-K | 177 |

•	Americas	net	earnings	included	an	income	tax	benefit	of	$487	million	in 2018	and	estimated	income	tax	expense	of	$4.40	billion	in	2017	related to	Tax	Legislation.

•	Corporate	pre-tax	earnings	 includes	charitable	contributions that	have not	been	allocated	to	the	firm's	geographic	regions.

•	Substantially	all	of	the	amounts	in	Americas	were	attributable	to	the	U.S. •	Asia	includes	Australia	and	New	Zealand.

# Credit	Concentrations

The	 firm's	 concentrations	 of	 credit	 risk	 arise	 from	 its	 market	 making, client	 facilitation,	 investing,	 underwriting,	 lending	 and	 collateralized transactions,	 and	 cash	 management	 activities,	 and	 may	 be	 impacted	 by changes	in	economic,	industry	or	political	factors.	These	activities	expose the	 firm	 to	 many	 different	 industries	 and	 counterparties,	 and	 may	 also subject	 the	firm	 to	a	concentration	of	credit	risk	 to	a	particular	central bank,	counterparty,	borrower	or	issuer,	including	sovereign	issuers,	or	to	a particular	clearing	house	or	exchange.	The	firm	seeks	to	mitigate	credit risk	 by	 actively	 monitoring	 exposures	 and	 obtaining	 collateral	 from counterparties	as	deemed	appropriate.

The	 firm	 measures	 and	 monitors	 its	 credit	 exposure	 based	 on	 amounts owed	to	the	firm	after	taking	into	account	risk	mitigants	that	management considers	when	determining	credit	risk.	Such	risk	mitigants	include	netting and	 collateral	 arrangements	 and	 economic	 hedges,	 such	 as	 credit derivatives,	 futures	 and	 forward	 contracts.	 Netting	 and	 collateral agreements	permit	the	firm	to	offset	receivables	and	payables	with	such counterparties	and/or	enable	the	firm	to	obtain	collateral	on	an	upfront	or contingent	basis.

The	 table	 below	 presents	 the	 credit concentrations in cash instruments included	in	financial	instruments	owned.

As	of	both	December	2018	and	December	2017,	the	firm	did	not	have	credit exposure	to	any	other	counterparty	that	exceeded	2%	of	total	assets.

Collateral	obtained	by	the	firm	related	to	derivative	assets	is	principally	cash and	is	held	by	the	firm	or	a	third-party	custodian.	Collateral	obtained	by	the firm	 related	 to	 resale	 agreements	 and	 securities	 borrowed	 transactions	 is primarily	U.S.	government	and	agency	obligations	and	non-U.S.	government and	 agency	 obligations.	 See	 Note 10 for	 further	 information	 about collateralized	agreements	and	financings.

The	 table	 below	 presents	 U.S.	 government	 and	 agency	 obligations	 and non-U.S.	 government	 and	 agency	 obligations	 that	 collateralize	 resale agreements	and	securities	borrowed	transactions.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 |
| U.S.\tgovernment\tand\tagency\tobligations | \t\t$\t\t78,828 | \t$96,905 |
| Non-U.S.\tgovernment\tand\tagency\tobligations | \t\t$\t\t76,745 | \t$92,850 |

•	Non-U.S.	 government	 and	 agency	 obligations	 primarily	 consists	 of securities	 issued	 by	 the	 governments	 of	 Japan,	 France,	 the	 U.K.	 and Germany.

•	Given	that	the	firm's	primary	credit	exposure	on	such	transactions	is	to the	 counterparty	 to	 the	 transaction,	 the	 firm	 would	 be	 exposed	 to	 the collateral	issuer	only	in	the	event	of	counterparty	default.

# Legal	Proceedings

The	firm	is	involved	in	a	number	of	judicial,	regulatory	and	arbitration proceedings	(including	those	described	below)	concerning	matters	arising in	connection	with	the	conduct	of	the	firm's	businesses.	Many	of	these proceedings	 are	 in	 early	 stages,	 and	 many	 of	 these	 cases	 seek	 an indeterminate	amount	of	damages.

Under	ASC	450,	an	event	is	"reasonably	possible"	if	"the	chance	of	the future	event	or	events	occurring	is	more	than	remote	but	less	than	likely" and	 an	 event	 is	 "remote"	 if	 "the	 chance	 of	 the	 future	 event	 or	 events occurring	 is	 slight."	Thus,	 references	 to	 the	 upper	 end	 of	 the	 range	 of reasonably	possible	loss	for	cases	in	which	the	firm	is	able	to	estimate	a range	of	reasonably	possible	loss	mean	the	upper	end	of	the	range	of	loss for	cases	for	which	the	firm	believes	the	risk	of	loss	is	more	than	slight.

With	respect	to	matters	described	below	for	which	management	has	been able	to	estimate	a	range	of	reasonably	possible	loss	where	(i)	actual	or potential	plaintiffs	have	claimed	an	amount	of	money	damages,	(ii)	 the firm	 is	 being,	 or	 threatened	 to	 be,	 sued	 by	 purchasers	 in	 a	 securities offering	and	is	not	being	indemnified	by	a	party	that	the	firm	believes	will pay	the	full	amount	of	any	judgment,	or	(iii)	the	purchasers	are	demanding that	the	firm	repurchase	securities,	management	has	estimated	the	upper end	of	the	range	of	reasonably	possible	loss	as	being	equal	to	(a)	in	the case	of	(i),	the	amount	of	money	damages	claimed,	(b)	in	the	case	of	(ii), the	difference	between	the	initial	sales	price	of	the	securities	that	the	firm sold	in	such	offering	and	the	estimated	lowest	subsequent	price	of	such securities	prior	to	the	action	being	commenced	and	(c)	in	the	case	of	(iii), the	price	that	purchasers	paid	for	the	securities	less	the	estimated	value,	if any,	as	of	December	2018	of	the	relevant	securities,	in	each	of	cases	(i), (ii)	and	(iii),	taking	into	account	any	other	factors	believed	to	be	relevant to	the	particular	matter	or	matters	of	that	type.	As	of	the	date	hereof,	the firm	 has	 estimated	 the	 upper	 end	 of	 the	 range	 of	 reasonably	 possible aggregate	loss	for	such	matters	and	for	any	other	matters	described	below where	 management	 has	 been	 able	 to	 estimate	 a	 range	 of	 reasonably possible	aggregate	loss	to	be	approximately	$1.9	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	 the	 investigations	 and	 reviews described	 below	 in	 "Regulatory	 Investigations	 and	 Reviews	 and	 Related Litigation"	 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.

# 1Malaysia	Development	Berhad	(1MDB)-Related	Matters

The	 firm	 has	 received	 subpoenas	 and	 requests	 for	 documents	 and information	 from	 various	 governmental	 and	 regulatory	 bodies	 and	 self- regulatory	organizations	as	part	of	 investigations	and	reviews	relating	 to financing	 transactions	 and	 other	 matters	 involving	 1MDB,	 a	 sovereign wealth	 fund	 in	 Malaysia.	 Subsidiaries	 of	 the	 firm	 acted	 as	 arrangers	 or purchasers	of	approximately	$6.5	billion	of	debt	securities	of	1MDB.

On	November	1,	2018,	the	U.S.	Department	of	Justice	(DOJ)	unsealed	a criminal	 information	 and	 guilty	 plea	 by	 Tim	 Leissner,	 a	 former participating	managing	director	of	the	firm,	and	an	indictment	against	Ng Chong	Hwa,	a	former	managing	director	of	the	firm,	and	Low	Taek	Jho. Leissner	pleaded	guilty	to	a	two-count	criminal	information	charging	him with	 conspiring	 to	 launder	 money	 and	 conspiring	 to	 violate	 the	 U.S. Foreign	 Corrupt	 Practices	 Act's	 (FCPA)	 anti-bribery	 and	 internal accounting	controls	provisions.	Low	and	Ng	were	charged	in	a	three-count indictment	with	conspiring	to	launder	money	and	conspiring	to	violate	the FCPA's	 anti-bribery	 provisions.	 On	August	 28,	 2018,	 Leissner's	 guilty plea	was	accepted	by	the	U.S.	District	Court	for	the	Eastern	District	of New	York	and	Leissner	was	adjudicated	guilty	on	both	counts.	Ng	was also	 charged	 in	 this	 indictment	 with	 conspiring	 to	 violate	 the	 FCPA's internal	 accounting	 controls	 provisions.	 The	 charging	 documents	 state, among	other	things,	that	Leissner	and	Ng	participated	in	a	conspiracy	to misappropriate	proceeds	of	the	1MDB	offerings	for	themselves	and	to	pay bribes	to	various	government	officials	to	obtain	and	retain	1MDB	business for	the	firm.	The	plea	and	charging	documents	indicate	that	Leissner	and Ng	knowingly	and	willfully	circumvented	 the	firm's	system	of	 internal accounting	controls,	in	part	by	repeatedly	lying	to	control	personnel	and internal	committees	that	reviewed	these	offerings.	The	indictment	of	Ng and	 Low	 alleges	 that	 the	 firm's	 system	 of	 internal	 accounting	 controls could	 be	 easily	 circumvented	 and	 that	 the	 firm's	 business	 culture, particularly	in	Southeast	Asia,	at	times	prioritized	consummation	of	deals ahead	of	the	proper	operation	of	its	compliance	functions.	In	addition,	an unnamed	participating	managing	director	of	 the	firm	 is	alleged	 to	have been	aware	of	the	bribery	scheme	and	to	have	agreed	not	to	disclose	this information	 to	 the	 firm's	 compliance	 and	 control	 personnel.	 That employee,	 who	 was	 identified	 as	 a	co-conspirator,	 has	 been	 put	 on administrative	leave.

On	December	17,	2018,	the	Attorney	General	of	Malaysia	issued	a	press statement	 that	 (i)	 criminal	 charges	 in	 Malaysia	 had	 been	 filed	 against Goldman	Sachs	International	(GSI),	as	the	arranger	of	three	offerings	of debt	 securities	 of	 1MDB,	 aggregating	 approximately $6.5 billion	 in principal	 amount,	 for	 alleged	 disclosure	 deficiencies	 in	 the	 offering documents	relating	to,	among	other	things,	the	use	of	proceeds	for	the	debt securities,	 (ii)	 Goldman	 Sachs	 (Asia)	 LLC	 (GS	Asia),	 Goldman	 Sachs (Singapore)	 PTE	 (GS	 Singapore),	 Leissner,	 Low	 and	 Jasmine	 Loo	 Ai Swan	had	been	criminally	charged	in	Malaysia,	and	Ng	would	be	charged shortly,	and	(iii)	prosecutors	in	Malaysia	will	seek	criminal	fines	against the	accused	in	excess	of	$2.7	billion	plus	the	$600	million	of	fees	received in	connection	with	the	debt	offerings.

The	 firm	 has	 received	 multiple	 demands,	 beginning	 in	 November	 2018, from	 alleged	 shareholders	 under	 Section	 220	 of	 the	 Delaware	 General Corporation	Law	for	books	and	records	relating	to,	among	other	things,	the firm's	involvement	with	1MDB	and	the	firm's	compliance	procedures.

On	February	19,	2019,	a	purported	shareholder	derivative	action	relating	to 1MDB	was	filed	in	the	U.S.	District	Court	for	the	Southern	District	of	New York	against	Group	Inc.	and	the	current	directors	and	a	former	chairman and	 chief	 executive	 officer	 of	 the	 firm.	 The	 complaint,	 which	 seeks unspecified	damages	and	disgorgement,	alleges	breaches	of	fiduciary	duties, including	in	connection	with	alleged	insider	trading	by	certain	current	and former	directors,	unjust	enrichment,	gross	mismanagement	and	violations	of the	anti-fraud	provisions	of	the	Exchange	Act,	including	in	connection	with Group	Inc.'s	common	stock	repurchases	and	solicitation	of	proxies.

On	November	21,	2018,	a	summons	with	notice	was	filed	in	the	New	York Supreme	Court,	New	York	County,	by	International	Petroleum	Investment Company,	which	guaranteed	certain	debt	securities	issued	by	1MDB,	and	its subsidiary	 Aabar	 Investments	 PJS.	 The	 summons	 with	 notice	 makes unspecified	claims	relating	to	1MDB	and	seeks	unspecified	compensatory and	punitive	damages	and	other	relief	against	Group	Inc.,	GSI,	GS	Asia,	GS Singapore,	 Goldman	 Sachs	 (Malaysia)	 SDN	 BHD,	 Leissner,	 Ng,	 and	 an employee	of	the	firm,	as	well	as	individuals	(who	are	not	employees	of	the firm)	formerly	associated	with	the	plaintiffs.

On	December	20,	2018,	a	putative	securities	class	action	lawsuit	was	filed	in the	U.S.	District	Court	for	the	Southern	District	of	New	York	against	Group Inc.	and	certain	current	and	former	officers	of	the	firm	alleging	violations	of the	anti-fraud	provisions	of	the	Exchange	Act	with	respect	to	Group	Inc.'s disclosures	concerning	1MDB	and	seeking	unspecified	damages.

The	 firm	 is	 cooperating	 with	 the	 DOJ	 and	 all	 other	 governmental	 and regulatory	 investigations	 relating	 to	 1MDB.	 Proceedings	 by	 the	 DOJ	 or other	governmental	or	regulatory	authorities	could	result	in	the	imposition of	significant	fines,	penalties	and	other	sanctions	against	the	firm,	including restrictions	on	the	firm's	activities.

# Mortgage-Related	Matters

Beginning	 in	 April	 2010,	 a	 number	 of	 purported	 securities	 law	 class actions	were	filed	in	the	U.S.	District	Court	for	the	Southern	District	of New	York	challenging	the	adequacy	of	Group	Inc.'s	public	disclosure	of, among	 other	 things,	 the	 firm's	 activities	 in	 the	 collateralized	 debt obligation	market,	and	the	firm's	conflict	of	interest	management.

The	consolidated	amended	complaint	filed	on	July	25,	2011,	which	names as	 defendants	 Group	 Inc.	 and	 certain	 current	 and	 former	 officers	 and employees	of	Group	Inc.	and	its	affiliates,	generally	alleges	violations	of Sections	 10(b)	 and	 20(a)	 of	 the	 Exchange	 Act	 and	 seeks	 unspecified damages.	 The	 defendants	 have	 moved	 for	 summary	 judgment.	 On December	 11,	 2018,	 the	 Second	 Circuit	 Court	 of	Appeals	 granted	 the defendants'	 petition	 for	 interlocutory	 review	 of	 the	 district	 court's August	 14,	 2018	 grant	 of	 class	 certification.	 On	 January	 23,	 2019,	 the district	court	stayed	proceedings	in	the	district	court	pending	the	appellate court's	decision.

In	June	2012,	the	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.

Beginning	on	February	15,	2019,	two	summonses	with	notice	were	filed against	Goldman	Sachs	Mortgage	Company	and	GS	Mortgage	Securities Corp.	 in	 New	 York	 Supreme	 Court,	 New	 York	 County,	 by	 U.S.	 Bank National	 Association,	 as	 trustee	 for	 two	 residential	 mortgage-backed securitization	 trusts.	 The	 summonses	 with	 notice	 generally	 allege	 that mortgage	loans	in	the	trusts	failed	to	conform	to	applicable	representations and	 warranties	 and	 seek	 specific	 performance or, alternatively, compensatory	damages	and	other	relief.

The	firm	has	received	subpoenas	or	requests	for	information	from,	and	is engaged	 in	 discussions	 with,	 certain	 regulators	 and	 law	 enforcement agencies	with	which	it	has	not	entered	into	settlement	agreements	as	part	of inquiries	or	investigations	relating	to	mortgage-related	matters.

# Director	Compensation-Related	Litigation

On	May	9,	2017,	Group	Inc.	and	certain	of	its	current	and	former	directors were	named	as	defendants	in	a	purported	direct	and	derivative	shareholder action	in	the	Court	of	Chancery	of	the	State	of	Delaware	(a	similar	purported derivative	 action,	 filed	 in	 June	 2015,	 alleging	 excessive	 director compensation	 over	 the	 period	 2012	 to	 2014	 was	 voluntarily	 dismissed without	 prejudice	 in	 December	 2016).	 The	 new	 complaint	 alleges	 that excessive	 compensation	 has	 been	 paid	 to	 the	non-employee	 director defendants	 since	 2015,	 and	 that	 certain	 disclosures	 in	 connection	 with soliciting	shareholder	approval	of	the	stock	incentive	plans	were	deficient. The	 complaint	 asserts	 claims	 for	 breaches	 of	 fiduciary	 duties	 and	 seeks, among	 other	 things,	 rescission	 or	 in	 some	 cases	 rescissory	 damages, disgorgement, and shareholder votes on several matters.	 On October	 23,	 2018,	 the	 court	 declined	 to	 approve	 the	 parties'	 proposed settlement.	The	defendants'	July	2017	motion	to	dismiss	is	still	pending.

# Currencies-Related	Litigation

GS&Co.	and	Group	Inc.	are	among	the	defendants	named	in	putative	class actions	filed	in	the	U.S.	District	Court	for	the	Southern	District	of	New	York beginning	in	September	2016	on	behalf	of	putative	indirect	purchasers	of foreign	exchange	instruments.	The	consolidated	amended	complaint,	filed on	June	30,	2017,	generally	alleged	a	conspiracy	to	manipulate	the	foreign currency	 exchange	 markets	 and	 asserted	 claims	 under	 federal	 and	 state antitrust	laws	and	state	consumer	protection	laws.	On	March	15,	2018,	the Court	 granted	 defendants'	 motion	 to	 dismiss,	 and	 on	 October	 25,	 2018, plaintiffs'	 motion	 for	 leave	 to	 replead	 was	 denied	 as	 to	 the	 claim	 under federal	antitrust	law	and	granted	as	to	the	claims	under	state	antitrust	and consumer	 protection	 laws.	 On	 November	 28,	 2018,	 the	 plaintiffs	 filed	 a second	consolidated	amended	complaint	asserting	claims	under	various	state antitrust	 laws	 and	 state	 consumer	 protection	 laws	 and	 seeking	 treble damages	in	an	unspecified	amount.

GS&Co.	and	Group	Inc.	are	among	 the	defendants	named	 in	an	action filed	in	the	U.S.	District	Court	for	the	Southern	District	of	New	York	on November 7, 2018	 by	 certain	 direct	 purchasers	 of	 foreign	 exchange instruments	 that	 opted	 out	 of	 a	 class	 settlement	 reached	 with,	 among others,	GS&Co.	and	Group	Inc.	The	complaint	generally	alleges	that	the defendants	violated	federal	antitrust	 laws	 in	connection	with	an	alleged conspiracy	to	manipulate	the	foreign	currency	exchange	markets	and	seeks injunctive	relief,	as	well	as	treble	damages	in	an	unspecified	amount.

GS&Co.	and	Group	Inc.	are	among	the	defendants	named	in	two	putative class	actions	filed	in	the	district	court	of	the	Central	District	in	Israel	on behalf	 of	 direct	 purchasers	 of	 foreign	 exchange	 instruments.	 The complaints,	 filed	 on	 September 11, 2018	 and	 September 29, 2018, respectively,	generally	allege	a	conspiracy	to	manipulate	prices	of	foreign exchange	instruments.	The	second	putative	class	action	also	asserts	claims based	on	misuse	of	the	"last	look"	features	of	foreign	exchange	trading systems.

# 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.

# Underwriting	Litigation

Firm	affiliates	are	among	the	defendants	in	a	number	of	proceedings	in connection	with	securities	offerings.	In	these	proceedings,	including	those described	 below,	 the	 plaintiffs	 assert	 class	 action	 or	 individual	 claims under	federal	and	state	securities	laws	and	in	some	cases	other	applicable laws,	 allege	 that	 the	 offering	 documents	 for	 the	 securities	 that	 they purchased	contained	material	misstatements	and	omissions,	and	generally seek	 compensatory	 and	 rescissory	 damages	 in	 unspecified	 amounts. Certain	of	these	proceedings	involve	additional	allegations.

Cobalt	International	Energy.	Group	Inc.,	certain	former	directors	of Cobalt	 International	 Energy,	 Inc.	 (Cobalt),	 who	 were	 designated	 by affiliates	of	Group	Inc.,	and	GS&Co.	are	among	defendants	in	a	putative securities	class	action	relating	to	certain	offerings	of	Cobalt's	securities, and	 are	 among	 the	 parties	 that	 have	 reached	 a	 settlement.	 On February	13,	2019,	the	court	approved	a	settlement	of	the	claims	against the	Goldman	Sachs	defendants.	The	firm	has	paid	its	full	contribution	to the	settlement	fund.

Adeptus	Health.	GS&Co.	is	among	the	underwriters	named	as	defendants in	several	putative	securities	class	actions,	filed	beginning	in	October	2016 and	consolidated	in	the	U.S.	District	Court	for	the	Eastern	District	of	Texas. In	 addition	 to	 the	 underwriters,	 the	 defendants	 include	 certain	 former directors	and	officers	of	Adeptus	Health	Inc.	(Adeptus),	as	well	as	Adeptus' sponsor.	 As	 to	 the	 underwriters,	 the	 consolidated	 complaint,	 filed	 on November	21,	2017,	relates	 to	 the	$124	million	June	2014	 initial	public offering,	 the	 $154	 million	 May	 2015	 secondary	 equity	 offering,	 the $411	 million	 July	 2015	 secondary	 equity	 offering,	 and	 the	 $175	 million June	 2016	 secondary	 equity	 offering.	 GS&Co.	 underwrote	 1.69	 million shares	of	common	stock	in	the	June	2014	initial	public	offering	representing an	aggregate	offering	price	of	approximately	$37	million,	962,378	shares	of common	stock	in	the	May	2015	offering	representing	an	aggregate	offering price	of	approximately	$61	million,	1.76	million	shares	of	common	stock	in the	 July	 2015	 offering	 representing	 an	 aggregate	 offering	 price	 of approximately	 $184	 million,	 and	 all	 the	 shares	 of	 common	 stock	 in	 the June	 2016	 offering	 representing	 an	 aggregate	 offering	 price	 of approximately	$175	million.	On	April	19,	2017,	Adeptus	filed	for	Chapter 11	bankruptcy.	On	September	12,	2018,	the	defendants'	motions	to	dismiss were	granted	as	to	the	June	2014	and	May	2015	offerings	but	denied	as	to the	July	2015	and	June	2016	offerings.	On	September	26,	2018,	plaintiffs filed	an	amended	consolidated	complaint	to	remove	the	dismissed	claims. On	December	7,	2018,	plaintiffs	moved	for	class	certification.

SunEdison.	GS&Co.	is	among	the	underwriters	named	as	defendants	in several	 putative	 class	 actions	 and	 individual	 actions	 filed	 beginning	 in March	2016	relating	to	the	August	2015	public	offering	of	$650	million	of SunEdison,	 Inc.	 (SunEdison)	 convertible	 preferred	 stock.	The	 defendants also	 include	 certain	 of	 SunEdison's	 directors	 and	 officers.	 On April	21,	2016,	SunEdison	filed	for	Chapter	11	bankruptcy.	The	pending cases	were	transferred	to	the	U.S.	District	Court	for	the	Southern	District	of New	York	and	on	March	17,	2017,	plaintiffs	in	the	putative	class	action	filed a	consolidated	amended	complaint.	GS&Co.,	as	underwriter,	sold	138,890 shares	of	SunEdison	convertible	preferred	stock	in	the	offering,	representing an	 aggregate	 offering	 price	 of	 approximately $139 million.	 On March	6,	2018,	the	defendants'	motion	to	dismiss	in	the	class	action	was granted	in	part	and	denied	in	part.	On	February	11,	2019,	plaintiffs'	motion for	class	certification	in	the	class	action	was	granted.	On	April	10,	2018	and April	17,	2018,	certain	plaintiffs	 in	 the	 individual	actions	filed	amended complaints.	The	defendants	have	reached	a	settlement	with	certain	plaintiffs in	the	individual	actions.

Valeant Pharmaceuticals International.	 GS&Co. and	 Goldman Sachs	Canada	Inc.	(GS	Canada)	are	among	the	underwriters	and	 initial purchasers	 named	 as	 defendants	 in	 a	 putative	 class	 action	 filed	 on March	2,	2016	in	the	Superior	Court	of	Quebec,	Canada.	In	addition	to	the underwriters	 and	 initial	 purchasers,	 the	 defendants	 include	 Valeant Pharmaceuticals	International,	Inc.	(Valeant),	certain	directors	and	officers of	 Valeant	 and	 Valeant's	 auditor.	As	 to	 GS&Co.	 and	 GS	 Canada,	 the complaint	 relates	 to	 the	 June	 2013	 public	 offering	 of	 $2.3	 billion	 of common	stock,	the	June	2013	Rule	144A	offering	of	$3.2	billion	principal amount	of	senior	notes,	and	the	November	2013	Rule	144A	offering	of $900	 million	 principal	 amount	 of	 senior	 notes.	 The	 complaint	 asserts claims	under	the	Quebec	Securities	Act	and	the	Civil	Code	of	Quebec.	On August	29,	2017,	the	court	certified	a	class	that	includes	only	non-U.S. purchasers	 in	 the	offerings.	Defendants'	motion	for	 leave	 to	appeal	 the certification	was	denied	on	November	30,	2017.

GS&Co.	and	GS	Canada,	as	sole	underwriters,	sold	5,334,897	shares	of common	 stock	 in	 the	 June	 2013	 offering	 to	non-U.S.	 purchasers representing	 an	 aggregate	 offering	 price	 of	 approximately	 $453	 million and,	as	 initial	purchasers,	had	a	proportional	share	of	sales	 to	non-U.S. purchasers	 of	 approximately	 CAD14.2	 million	 in	 principal	 amount	 of senior	notes	in	the	June	2013	and	November	2013	Rule	144A	offerings.

Snap	Inc.	GS&Co.	is	among	the	underwriters	named	as	defendants	in putative	 securities	 class	 actions	 pending	 in	 California	 Superior	 Court, County	of	Los	Angeles	and	the	U.S.	District	Court	for	the	Central	District of	California	beginning	in	May	2017,	relating	to	Snap	Inc.'s	$3.91	billion March	 2017	 initial	 public	 offering.	 In	 addition	 to	 the	 underwriters,	 the defendants	 include	 Snap	 Inc.	 and	 certain	 of	 its	 officers	 and	 directors. GS&Co.	underwrote	57,040,000	shares	of	common	stock	representing	an aggregate	offering	price	of	approximately	$970	million.	The	underwriter defendants,	 including	 GS&Co.,	 were	 voluntarily	 dismissed	 from	 the federal	action	on	September	18,	2018.

Sea	Limited.	GS	Asia	is	among	the	underwriters	named	as	defendants	in a	putative	securities	class	action	filed	on	November	1,	2018	in	the	Supreme Court	 of	 New	 York,	 County	 of	 New	 York,	 relating	 to	 Sea	 Limited's $989	million	October	2017	initial	public	offering	of	American	depository shares.	In	addition	to	the	underwriters,	the	defendants	include	Sea	Limited and	certain	of	its	officers	and	directors.	GS	Asia	underwrote	28,026,721 American	 depository	 shares	 representing	 an	 aggregate	 offering	 price	 of approximately	$420	million.	On	January	25,	2019,	the	plaintiffs	filed	an amended	complaint.

# 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.

# Interest	Rate	Swap	Antitrust	Litigation

Group	Inc.,	GS&Co.,	GSI,	GS	Bank	USA	and	Goldman	Sachs	Financial Markets,	 L.P.	 (GSFM)	 are	 among	 the	 defendants	 named	 in	 a	 putative antitrust	class	action	relating	to	the	trading	of	interest	rate	swaps,	filed	in November	2015	and	consolidated	in	the	U.S.	District	Court	for	the	Southern District	of	New	York.	The	same	Goldman	Sachs	entities	also	are	among	the defendants	named	in	two	antitrust	actions	relating	to	the	trading	of	interest rate	swaps,	commenced	in	April	2016	and	June	2018,	respectively,	in	the U.S.	District	Court	for	the	Southern	District	of	New	York	by	three	operators of	swap	execution	facilities	and	certain	of	their	affiliates.	These	actions	have been	consolidated	for	pretrial	proceedings.	The	complaints	generally	assert claims	under	federal	antitrust	law	and	state	common	law	in	connection	with an	alleged	conspiracy	among	the	defendants	to	preclude	exchange	trading	of interest	 rate	 swaps.	 The	 complaints	 in	 the	 individual	 actions	 also	 assert claims	 under	 state	 antitrust	 law.	 The	 complaints	 seek	 declaratory	 and injunctive	 relief,	 as	 well	 as	 treble	 damages	 in	 an	 unspecified	 amount. Defendants	moved	 to	dismiss	 the	class	and	 the	first	 individual	action	on January	 20,	 2017.	 On	 July	 28,	 2017,	 the	 district	 court	 issued	 a	 decision dismissing	the	state	common	law	claims	asserted	by	the	plaintiffs	in	the	first individual	action	and	otherwise	limiting	the	state	common	law	claim	in	the putative	class	action	and	the	antitrust	claims	in	both	actions	to	the	period from	2013	to	2016.	On	May	30,	2018,	plaintiffs	in	the	putative	class	action filed	a	third	consolidated	amended	complaint,	adding	allegations	as	to	the surviving	claims.	On	October	26,	2018,	plaintiffs	in	the	putative	class	action filed	 a	 motion	 for	 leave	 to	 file	 a	 fourth	 amended	 complaint.	 On November	 20,	 2018,	 the	 court	 granted	 in	 part	 and	 denied	 in	 part	 the defendants'	motion	to	dismiss	the	second	individual	action,	dismissing	the state	common	law	claims	for	unjust	enrichment	and	tortious	interference	but denying	dismissal	of	the	federal	and	state	antitrust	claims.

# Securities	Lending	Antitrust	Litigation

Group	Inc.	and	GS&Co.	are	among	the	defendants	named	in	a	putative antitrust	 class	 action	 and	 two	 individual	 actions	 relating	 to	 securities lending	practices	filed	in	the	U.S.	District	Court	for	the	Southern	District	of New	York	 beginning	 in	August	 2017.	 The	 complaints	 generally	 assert claims	under	federal	antitrust	 law	and	state	common	 law	 in	connection with	 an	 alleged	 conspiracy	 among	 the	 defendants	 to	 preclude	 the development	 of	 electronic	 platforms	 for	 securities	 lending	 transactions. The	individual	complaints	also	assert	claims	for	tortious	interference	with business	relations	and	under	state	trade	practices	law	and,	in	the	second individual	 action,	 unjust	 enrichment	 under	 state	 common	 law.	 The complaints	 seek	 declaratory	 and	 injunctive	 relief,	 as	 well	 as	 treble damages	 and	 restitution	 in	 unspecified	 amounts.	 Group	 Inc.	 was voluntarily	dismissed	from	the	putative	class	action	on	January	26,	2018. Defendants	moved	to	dismiss	the	first	individual	action	on	June	1,	2018 and	moved	to	dismiss	the	second	individual	action	on	December	21,	2018. Defendants'	motion	to	dismiss	the	class	action	complaint	was	denied	on September	27,	2018.

# Credit	Default	Swap	Antitrust	Litigation

Group	 Inc.,	 GS&Co.,	 GSI,	 GS	 Bank	 USA	 and	 GSFM	 are	 among	 the defendants	named	in	an	antitrust	action	relating	to	the	trading	of	credit default	swaps	filed	in	the	U.S.	District	Court	for	the	Southern	District	of New	York	on	June	8,	2017	by	the	operator	of	a	swap	execution	facility	and certain	 of	 its	 affiliates.	 The	 complaint	 generally	 asserts	 claims	 under federal	and	state	antitrust	laws	and	state	common	law	in	connection	with an	alleged	conspiracy	among	the	defendants	to	preclude	trading	of	credit default	 swaps	 on	 the	 plaintiffs'	 swap	 execution	 facility.	The	 complaint seeks	declaratory	and	 injunctive	relief,	as	well	as	 treble	damages	 in	an unspecified	amount.	Defendants	moved	to	dismiss	on	September	11,	2017.

# Commodities-Related	Litigation

GSI	is	among	the	defendants	named	in	putative	class	actions	relating	to trading	in	platinum	and	palladium,	filed	beginning	on	November	25,	2014 and	most	recently	amended	on	May	15,	2017,	in	the	U.S.	District	Court	for the	 Southern	 District	 of	 New	York.	 The	 amended	 complaint	 generally alleges	 that	 the	 defendants	 violated	 federal	 antitrust	 laws	 and	 the Commodity	Exchange	Act	 in	connection	with	an	alleged	conspiracy	 to manipulate	a	benchmark	for	physical	platinum	and	palladium	prices	and seek	 declaratory	 and	 injunctive	 relief,	 as	 well	 as	 treble	 damages	 in	 an unspecified	amount.	Defendants	moved	to	dismiss	the	third	consolidated amended	complaint	on	July	21,	2017.

# U.S.	Treasury	Securities	Litigation

GS&Co.	 is	 among	 the	 primary	 dealers	 named	 as	 defendants	 in	 several putative	class	actions	relating	 to	 the	market	for	U.S.	Treasury	securities, filed	beginning	in	July	2015	and	consolidated	in	the	U.S.	District	Court	for the	 Southern	 District	 of	 New	York.	 GS&Co.	 is	 also	 among	 the	 primary dealers	named	as	defendants	in	a	similar	individual	action	filed	in	the	U.S. District	Court	for	the	Southern	District	of	New	York	on	August	25,	2017. The	 consolidated	 class	 action	 complaint,	 filed	 on	 December	 29,	 2017, generally	alleges	that	the	defendants	violated	antitrust	laws	in	connection with	 an	 alleged	 conspiracy	 to	 manipulate	 the	 when-issued	 market	 and auctions	for	U.S.	Treasury	securities	and	that	certain	defendants,	including GS&Co.,	 colluded	 to	 preclude	 trading	 of	 U.S.	 Treasury	 securities	 on electronic	trading	platforms	in	order	to	impede	competition	in	the	bidding process.	 The	 individual	 action	 alleges	 a	 similar	 conspiracy	 regarding manipulation	 of	 the	 when-issued	 market	 and	 auctions,	 as	 well	 as	 related futures	 and	 options	 in	 violation	 of	 the	 Commodity	 Exchange	 Act.	 The complaints	 seek	 declaratory	 and	 injunctive	 relief,	 treble	 damages	 in	 an unspecified	 amount	 and	 restitution.	 Defendants	 moved	 to	 dismiss	 on February	23,	2018.

# Employment-Related	Matters

On	September	15,	2010,	a	putative	class	action	was	filed	in	the	U.S.	District Court	 for	 the	 Southern	 District	 of	 New	 York	 by	 three	 female	 former employees.	The	complaint,	as	subsequently	amended,	alleges	that	Group	Inc. and	GS&Co.	have	systematically	discriminated	against	female	employees	in respect	 of	 compensation,	 promotion	 and	 performance	 evaluations.	 The complaint	alleges	a	class	consisting	of	all	female	employees	employed	at specified	 levels	 in	 specified	 areas	 by	 Group	 Inc.	 and	 GS&Co.	 since July	 2002,	 and	 asserts	 claims	 under	 federal	 and	 New	 York	 City discrimination	laws.	The	complaint	seeks	class	action	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	 March	 10,	 2015,	 the	 magistrate	 judge	 to	 whom	 the	 district	 judge assigned	the	remaining	plaintiffs'	May	2014	motion	for	class	certification recommended	 that	 the	 motion	 be	 denied	 in	 all	 respects.	 On August	 3,	 2015,	 the	 magistrate	 judge	 granted	 the	 plaintiffs'	 motion	 to intervene	two	female	individuals,	one	of	whom	was	employed	by	the	firm as	of	September	2010	and	the	other	of	whom	ceased	to	be	an	employee	of the	 firm	 subsequent	 to	 the	 magistrate	 judge's	 decision.	 On March	 30,	 2018,	 the	 district	 court	 certified	 a	 damages	 class	 as	 to	 the plaintiffs'	disparate	impact	and	treatment	claims.	On	September	4,	2018, the	 Second	 Circuit	 Court	 of	 Appeals	 denied	 defendants'	 petition	 for interlocutory	review	of	the	district	court's	class	certification	decision	and subsequently denied defendants' petition for rehearing.	 On September	27,	2018,	plaintiffs	advised	the	district	court	that	they	would not	seek	to	certify	a	class	for	injunctive	and	declaratory	relief.

# 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	and shareholder	 requests	 relating	 to	 various	 matters	 relating	 to	 the	 firm's businesses	and	operations,	including:

•	The	public	offering	process;

•	The	firm's	investment	management	and	financial	advisory	services;

•	Conflicts	of	interest;

•	Research	 practices,	 including	 research	 independence	 and	 interactions between	 research	 analysts	 and	 other	 firm	 personnel,	 including investment	banking	personnel,	as	well	as	third	parties;

•	Transactions	involving	government-related	financings	and	other	matters, municipal	 securities,	 including	 wall-cross	 procedures	 and	 conflict	 of interest	disclosure	with	respect	to	state	and	municipal	clients,	the	trading and	structuring	of	municipal	derivative	 instruments	 in	connection	with municipal	 offerings,	 political	 contribution	 rules,	 municipal	 advisory services	and	the	possible	impact	of	credit	default	swap	transactions	on municipal	issuers;

•	The	 offering,	 auction,	 sales,	 trading	 and	 clearance	 of	 corporate	 and government	 securities,	 currencies,	 commodities	 and	 other	 financial products	and	related	sales	and	other	communications	and	activities,	as well	 as	 the	 firm's	 supervision	 and	 controls	 relating	 to	 such	 activities, including	compliance	with	applicable	short	sale	rules,	algorithmic,	high- frequency	 and	 quantitative	 trading,	 the	 firm's	 U.S.	 alternative	 trading system	(dark	pool),	futures	trading,	options	trading,	when-issued	trading, transaction	reporting,	technology	systems	and	controls,	securities	lending practices,	 trading	 and	 clearance	 of	 credit	 derivative	 instruments	 and interest	 rate	 swaps,	 commodities	 activities	 and	 metals	 storage,	 private placement	practices,	allocations	of	and	trading	in	securities,	and	trading activities	 and	 communications	 in	 connection	 with	 the	 establishment	 of benchmark	rates,	such	as	currency	rates;

# •	Compliance	with	the	FCPA;

•	The	firm's	hiring	and	compensation	practices;

•	The	firm's	system	of	risk	management	and	controls;	and

•	Insider	 trading,	 the	 potential	 misuse	 and	 dissemination	 of	 material nonpublic information regarding corporate and governmental developments	and	the	effectiveness	of	the	firm's	insider	trading	controls and	information	barriers.

The	 firm	 is	 cooperating	 with all such governmental and regulatory investigations	and	reviews.

# 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	eligible	compensation.	The firm	maintains	a	defined	benefit	pension	plan	for	certain	U.K.	employees. As	 of	 April	 2008,	 the	 U.K.	 defined	 benefit	 plan	 was	 closed	 to	 new participants	and	frozen	for	existing	participants	as	of	March	31,	2016.	The non-U.S.	plans	do	not	have	a	material	impact	on	the	firm's	consolidated results	of	operations.

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	 for	 existing participants.	 In	 addition,	 the	 firm	 maintains	 unfunded	 postretirement benefit	plans	that	provide	medical	and	life	insurance	for	eligible	retirees and	their	dependents	covered	under	these	programs.	These	plans	do	not have	a	material	impact	on	the	firm's	consolidated	results	of	operations.

The	firm	recognizes	the	funded	status	of	its	defined	benefit	pension	and postretirement	plans,	measured	as	the	difference	between	the	fair	value	of the	plan	assets	and	the	benefit	obligation,	in	the	consolidated	statements	of financial	 condition.	 As	 of	 December	 2018,	 other	 assets	 included $462	million	(related	 to	overfunded	pension	plans)	and	other	 liabilities included	$344	million,	related	to	these	plans.	As	of	December	2017,	other assets	 included	$346	million	(related	 to	overfunded	pension	plans)	and other	liabilities	included	$606	million,	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	$240	million for	2018,	$257	million	for	2017	and	$236	million	for	2016.

# 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.	 Effective	 January	 2017,	 forfeitures	 are recorded	when	they	occur.	Prior	to	January	2017,	expected	forfeitures	were estimated	and	recorded	over	the	vesting	period.	See	Note	3	for	information about	the	adoption	of	ASU	No.	2016-09.

Cash	dividend	equivalents	paid	on	RSUs	are	charged	to	retained	earnings.	If RSUs	 that	 require	 future	 service	 are	 forfeited,	 the	 related	 dividend equivalents	 originally	 charged	 to	 retained	 earnings	 are	 reclassified	 to compensation	expense	in	the	period	in	which	forfeiture	occurs.

The	firm	generally	issues	new	shares	of	common	stock	upon	delivery	of share-based	 awards.	 In	 certain	 cases,	 primarily	 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	(2018)	(2018	SIP),	which	provides	for grants	of	RSUs,	restricted	stock,	dividend	equivalent	rights,	incentive	stock options,	 nonqualified	 stock	 options,	 stock	 appreciation	 rights,	 and	 other share-based	 awards,	 each	 of	 which	 may	 be	 subject	 to	 performance conditions.	On	May	2,	2018,	shareholders	approved	the	2018	SIP.	The	2018 SIP	replaced	The	Goldman	Sachs	Amended	and	Restated	Stock	Incentive Plan	(2015)	(2015	SIP)	previously	in	effect,	and	applies	to	awards	granted on	or	after	the	date	of	approval.	The	2015	SIP	had	previously	replaced	The Goldman	Sachs	Amended	and	Restated	Stock	Incentive	Plan	(2013)	(2013 SIP).

As	of	December	2018,	68.2	million	shares	were	available	for	grant	under	the 2018	SIP.	If	any	shares	of	common	stock	underlying	awards	granted	under the	2018	SIP,	2015	SIP	or	2013	SIP	are	not	delivered	due	 to	forfeiture, termination	or	cancellation	or	are	surrendered	or	withheld,	those	shares	will become	available	to	be	delivered	under	the	2018	SIP.	Shares	available	for grant	are	also	subject	to	adjustment	for	certain	changes	in	corporate	structure as	permitted	under	the	2018	SIP.	The	2018	SIP	is	scheduled	to	terminate	on the	date	of	the	annual	meeting	of	shareholders	that	occurs	in	2022.

# Restricted	Stock	Units

The	firm	grants	RSUs	(including	RSUs	subject	to	performance	conditions) to	employees,	which	are	generally	valued	based	on	the	closing	price	of	the underlying	shares	on	the	date	of	grant	after	taking	into	account	a	liquidity discount	for	any	applicable	post-vesting	and	delivery	transfer	restrictions. RSUs	generally	vest	and	underlying	shares	of	common	stock	deliver	(net of	 required	 withholding	 tax)	 as	 outlined	 in	 the	 applicable	 award agreements.	 Award	 agreements	 generally	 provide	 that	 vesting	 is accelerated	 in	 certain	 circumstances,	 such	 as	 on	 retirement,	 death, disability	and	conflicted	employment.	Delivery	of	the	underlying	shares	of common	 stock,	 which	 generally	 occurs	 over	 a	 three-year	 period,	 is conditioned	 on	 the	 grantees	 satisfying	 certain	 vesting	 and	 other requirements	outlined	in	the	award	agreements.

The	table	below	presents	the	2018	activity	related	to	RSUs.

|  | Restricted	Stock<br>Units	Outstanding | Restricted	Stock<br>Units	Outstanding | Restricted	Stock<br>Units	Outstanding | Restricted	Stock<br>Units	Outstanding |
| :--- | :--- | :--- | :--- | :--- |
|  | Future\nService\nRequired | No\tFuture\nService\nRequired | Future\nService\nRequired | No\tFuture\nService\nRequired |
| Beginning\tbalance | 4,123,582 | \t14,162,828 | \t\t\t\t\t\t$182.50 | \t$166.30 |
| Granted | 3,887,934 | 5,342,848 | \t\t$220.83 | \t$216.05 |
| Forfeited | (423,154) | (195,323) | \t\t$192.16 | \t$167.92 |
| Delivered | – | \t(9,807,881) | \t\t$\t\t\t\t\t\t\t\t\t– | \t$172.40 |
| Vested | \t\t(3,826,523) | 3,826,523 | \t\t$185.62 | \t$185.62 |
| Ending\tbalance | 3,761,839 | \t13,328,995 | \t\t$217.85 | \t$187.27 |

•	The	ending	balance	included	restricted	stock	subject	to	future	service requirements	of	1,649	shares	as	of	December	2018	and	3,298	shares	as of	December	2017.

•	The	ending	balance	included	RSUs	subject	to	performance	conditions and	not	subject	to	future	service	requirements	of	174,579	RSUs	as	of December	2018	and	62,023	RSUs	as	of	December	2017.

In	 relation	 to	2018	 year-end,	 during	 the	 first	 quarter	 of	 2019,	 the	 firm granted	 to	 its	employees	11.3	million	RSUs,	of	which	4.0	million	RSUs require	future	service	as	a	condition	of	delivery	for	the	related	shares	of common	stock.	These	awards	are	subject	to	additional	conditions	as	outlined in	the	award	agreements.	Generally,	shares	underlying	these	awards,	net	of required	withholding	tax,	deliver	over	a	three-year	period,	but	are	subject	to post-vesting	and	delivery	transfer	restrictions	through	January	2024.	These grants	are	not	included	in	the	table	above.

As	 of	 December	 2018,	 there	 was $448	 million of	 total	 unrecognized compensation	 cost	 related	 to	non-vested	 share-based	 compensation arrangements.	 This	 cost	 is	 expected	 to	 be	 recognized	 over	 a	 weighted average	period	of	1.85	years.

# Stock	Options

Stock	options	generally	vested	as	outlined	 in	 the	applicable	stock	option agreement.	In	general,	options	expired	on	the	tenth	anniversary	of	the	grant date,	 although	 they	 may	 have	 been	 subject	 to	 earlier	 termination	 or cancellation	under	certain	circumstances	in	accordance	with	the	terms	of	the applicable	stock	option	agreement	and	the	SIP	in	effect	at	the	time	of	grant.

There	 were	 no	 options	 outstanding	 as	 of	 December	 2018.	 There	 were 2.10	million	options	outstanding	as	of	December	2017,	all	of	which	were exercisable.	These	options	were	granted	in	2008	with	an	exercise	price	of $78.78	 and,	 as	 of	 December	 2017,	 had	 an	 aggregate	 intrinsic	 value	 of $370	million	and	a	remaining	life	of	1	year.

During	2018,	2.10	million	options	were	exercised	with	a	weighted	average exercise	price	of	$78.78.	During	2017,	5.86	million	options	were	exercised with	a	weighted	average	exercise	price	of	$139.35.	The	total	intrinsic	value of	options	exercised	was	$288	million	during	2018,	$589	million	during 2017	and	$436	million	during	2016.

The	 table	 below	 presents the share-based	 compensation	 and the related excess	tax	benefit.

In	the	table	above,	excess	net	tax	benefit	for	share-based	awards	includes the	net	tax	benefit	on	dividend	equivalents	paid	on	RSUs	and	the	delivery	of common	stock	underlying	share-based	awards,	as	well	as	the	excess	net	tax benefit	for	options	exercised.	Following	the	adoption	of	ASU	No.	2016-09 in	January	2017,	such	amounts	were	recognized	prospectively	in	income	tax expense.	In	prior	years,	such	amounts	were	recognized	in	additional	paid-in capital.	See	Note	3	for	further	information	about	this	ASU.

# Parent	Company

# Group	Inc.	—	Condensed	Statements	of	Earnings

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Revenues |  |  |  |
| Dividends\tfrom\tsubsidiaries\tand\tother\taffiliates: |  |  |  |
| Bank | \t\t$\t\t\t\t\t102 | \t\t$\t\t\t\t\t550 | \t\t$\t\t\t\t\t53 |
| Nonbank | 16,368 | 11,016 | 5,465 |
| Other\trevenues | (1,376) | (384) | 155 |
| Total\tnon-interest\trevenues | 15,094 | 11,182 | 5,673 |
| Interest\tincome | 6,617 | 4,638 | 4,140 |
| Interest\texpense | 8,114 | 5,978 | 4,543 |
| Net\tinterest\tloss | (1,497) | (1,340) | (403) |
| Total\tnet\trevenues | 13,597 | 9,842 | 5,270 |
| Operating\texpenses |  |  |  |
| Compensation\tand\tbenefits | 299 | 330 | 343 |
| Other\texpenses | 1,192 | 428 | 332 |
| Total\toperating\texpenses | 1,491 | 758 | 675 |
| Pre-tax\tearnings | 12,106 | 9,084 | 4,595 |
| Provision/(benefit)\tfor\ttaxes | (1,173) | 3,404 | (518) |
| Undistributed\tearnings/(loss)\tof\tsubsidiaries\tand\nother\taffiliates | (2,820) | (1,394) | 2,285 |
| Net\tearnings | 10,459 | 4,286 | 7,398 |
| Preferred\tstock\tdividends | 599 | 601 | 311 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders | \t\t$\t\t9,860 | \t\t$\t\t3,685 | \t\t$7,087 |

In the	 condensed	 statements	 of	 earnings	 above,	 revenues	 and	 expenses included	the	following	with	subsidiaries	and	other	affiliates:

•	Dividends from bank subsidiaries included cash dividends of $76	million	for	2018,	$525	million	for	2017	and	$32	million	for	2016. •	Dividends	from	nonbank	subsidiaries	and	other	affiliates	included	cash dividends of $10.78 billion for 2018, $7.98 billion for 2017 and $3.46	billion	for	2016.

Group	Inc.'s	provision	for	taxes	for	2017	included	substantially	all	of	the firm's $4.40 billion estimated income tax expense related to Tax Legislation.	 During	 2018, the	 firm	 finalized this	 estimate to	 reflect the impact	of	updated	information,	including	subsequent	guidance	issued	by the IRS, resulting in a $487	 million income tax benefit,	 which	 was primarily	included	in	Group	Inc.'s	benefit	for	taxes	for	2018.	See	Note	24 for	further	information	about	Tax	Legislation.

# Group	Inc.	—	Condensed	Statements	of	Financial	Condition

| $	in	millions | 2018 | 2017 |
| :--- | :--- | :--- |
| Assets |  |  |
| Cash\tand\tcash\tequivalents |  |  |
| with\tthird-party\tbanks | \t\t$\t\t\t\t\t\t\t103 | \t\t$\t\t\t\t\t\t\t\t\t38 |
| Loans\tto\tand\treceivables\tfrom\tsubsidiaries: |  |  |
| Bank | 1,019 | 721 |
| Nonbank\t(includes\t$5,461\tand\t$0\tat\tfair\tvalue) | 225,471 | 236,050 |
| Investments\tin\tsubsidiaries\tand\tother\taffiliates: |  |  |
| Bank | 28,737 | 26,599 |
| Nonbank | 61,481 | 67,279 |
| Financial\tinstruments\towned\t(at\tfair\tvalue) | 13,541 | 10,248 |
| Other\tassets | 3,653 | 5,898 |
| Total\tassets | \t\t$334,005 | \t\t$346,833 |
| Liabilities\tand\tshareholders'\tequity |  |  |
| Payables\tto\tsubsidiaries | \t\t$\t\t\t\t\t\t\t702 | \t\t$\t\t\t\t1,005 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased |  |  |
| (at\tfair\tvalue) | 281 | 254 |
| Unsecured\tshort-term\tborrowings: |  |  |
| With\tthird\tparties\t(includes\t$2,615\tand\t$2,484 |  |  |
| at\tfair\tvalue) | 25,060 | 31,871 |
| With\tsubsidiaries | 7,558 | 25,699 |
| Unsecured\tlong-term\tborrowings: |  |  |
| With\tthird\tparties\t(includes\t$16,395\tand\t$18,207 |  |  |
| at\tfair\tvalue) | 183,121 | 190,502 |
| With\tsubsidiaries | 23,343 | 11,068 |
| Other\tliabilities | 3,755 | 4,191 |
| Total\tliabilities | 243,820 | 264,590 |
| Commitments,\tcontingencies\tand\tguarantees |  |  |
| Shareholders'\tequity |  |  |
| Preferred\tstock | 11,203 | 11,853 |
| Common\tstock | 9 | 9 |
| Share-based\tawards | 2,845 | 2,777 |
| Additional\tpaid-in\tcapital | 54,005 | 53,357 |
| Retained\tearnings | 100,100 | 91,519 |
| Accumulated\tother\tcomprehensive\tincome/(loss) | 693 | (1,880) |
| Stock\theld\tin\ttreasury,\tat\tcost | (78,670) | (75,392) |
| Total\tshareholders'\tequity | 90,185 | 82,243 |
| Total\tliabilities\tand\tshareholders'\tequity | \t\t$334,005 | \t\t$346,833 |

Goldman	 Sachs	 Funding	 LLC	 (Funding	 IHC),	 a	 wholly-owned,	 direct subsidiary	of	Group	Inc.,	has	provided	Group	Inc.	with	a	committed	line	of credit	that	allows	Group	Inc.	to	draw	sufficient	funds	to	meet	its	cash	needs in	the	ordinary	course	of	business.

Financial	instruments	owned	included	derivative	contracts	with	subsidiaries of $683 million	 as	 of	 December	 2018	 and $570 million	 as	 of December	2017.

Financial	 instruments	 sold,	 but	 not	 yet	 purchased	 included	 derivative contracts	 with	 subsidiaries	 of	 $280	 million	 as	 of	 December	 2018	 and $218	million	as	of	December	2017.

# Group	Inc.	—	Condensed	Statements	of	Cash	Flows

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 |
| Cash\tflows\tfrom\toperating\tactivities |  |  |  |
| Net\tearnings\nAdjustments\tto\treconcile\tnet\tearnings\tto\tnet\tcash\nprovided\tby\toperating\tactivities: | \t\t$\t10,459 | \t\t$\t\t\t4,286 | \t\t$\t\t\t7,398 |
| Undistributed\t(earnings)/loss\tof |  |  |  |
| subsidiaries\tand\tother\taffiliates | 2,820 | 1,394 | (2,285) |
| Depreciation\tand\tamortization | 51 | 56 | 52 |
| Deferred\tincome\ttaxes | (2,817) | 4,358 | 134 |
| Share-based\tcompensation | 105 | 152 | 193 |
| Loss/(gain)\trelated\tto\textinguishment\tof |  |  |  |
| unsecured\tborrowings | (160) | (114) | 3 |
| Changes\tin\toperating\tassets\tand\tliabilities: |  |  |  |
| Financial\tinstruments\towned\t(excluding |  |  |  |
| available-for-sale\tsecurities) | (1,597) | (309) | (1,580) |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased | 27 | (521) | 332 |
| Other,\tnet | 1,804 | (757) | 337 |
| Net\tcash\tprovided\tby\toperating\tactivities | 10,692 | 8,545 | 4,584 |
| Cash\tflows\tfrom\tinvesting\tactivities |  |  |  |
| Purchase\tof\tproperty,\tleasehold |  |  |  |
| improvements\tand\tequipment | (63) | (66) | (79) |
| Repayments/(issuances)\tof\tshort-term\tloans |  |  |  |
| to\tsubsidiaries,\tnet | 10,829 | (14,415) | (3,994) |
| Issuance\tof\tterm\tloans\tto\tsubsidiaries | (30,336) | (42,234) | (28,498) |
| Repayments\tof\tterm\tloans\tby\tsubsidiaries | 25,956 | 22,039 | 32,265 |
| Purchase\tof\tinvestments | (3,140) | (6,491) | – |
| Capital\tdistributions\tfrom/(contributions\tto) |  |  |  |
| subsidiaries,\tnet | 1,807 | 388 | (3,265) |
| Net\tcash\tprovided\tby/(used\tfor)\tinvesting\tactivities | 5,053 | (40,779) | (3,571) |
| Cash\tflows\tfrom\tfinancing\tactivities |  |  |  |
| Unsecured\tshort-term\tborrowings,\tnet: |  |  |  |
| With\tthird\tparties | (1,541) | (424) | (178) |
| With\tsubsidiaries | (998) | 23,078 | 2,290 |
| Proceeds\tfrom\tissuance\tof\tlong-term |  |  |  |
| borrowings | 26,157 | 43,917 | 40,708 |
| Repayment\tof\tlong-term\tborrowings,\nincluding\tthe\tcurrent\tportion | (32,429) | (27,028) | (33,314) |
| Purchase\tof\tAPEX,\tsenior\tguaranteed |  |  |  |
| securities\tand\ttrust\tpreferred\tsecurities | (35) | (237) | (1,171) |
| Preferred\tstock\tredemption | (650) | (850) | – |
| Common\tstock\trepurchased | (3,294) | (6,772) | (6,078) |
| Settlement\tof\tshare-based\tawards\tin |  |  |  |
| satisfaction\tof\twithholding\ttax\trequirements | (1,118) | (2,223) | (1,128) |
| Dividends\tand\tdividend\tequivalents\tpaid\ton |  |  |  |
| common\tstock,\tpreferred\tstock\tand |  |  |  |
| share-based\tawards | (1,810) | (1,769) | (1,706) |
| Proceeds\tfrom\tissuance\tof\tpreferred\tstock, |  |  |  |
| net\tof\tissuance\tcosts | – | 1,495 | 1,303 |
| Proceeds\tfrom\tissuance\tof\tcommon\tstock, |  |  |  |
| including\texercise\tof\tshare-based\tawards | 38 | 7 | 6 |
| Cash\tsettlement\tof\tshare-based\tawards | – | (3) | – |
| Net\tcash\tprovided\tby/(used\tfor)\tfinancing\nactivities | (15,680) | 29,191 | 732 |

Cash	flows	related	to	common	stock	repurchased	includes	common	stock repurchased	 in	 the	prior	period	for	which	settlement	occurred	during	 the current	period	and	excludes	common	stock	repurchased	during	the	current period	for	which	settlement	occurred	in	the	following	period.

Non-cash	activities	during	the	year	ended	December	2018:

•	Group	Inc.	restructured	funding	for	Goldman	Sachs	Group	(UK)	Ltd.	and Goldman	Sachs	International,	both	wholly-owned	subsidiaries	of	Group Inc.,	 which	 resulted	 in	 a	 net	 increase	 in	 loans	 to	 subsidiaries	 of $5.71	billion	and	a	decrease	in	equity	interest	of	$5.71	billion.

•	Group	 Inc.	 exchanged	 $150	 million	 of	 liabilities	 and	 $46	 million	 of related	deferred	tax	assets	for	$104	million	of	equity	interest	in	GS&Co., a	wholly	owned	subsidiary	of	Group	Inc.

•	Group	 Inc.	 exchanged	 $35	 million	 of	 Trust	 Preferred	 Securities	 and common	beneficial	interests	for	$35	million	of	certain	of	the	Group	Inc.'s junior	subordinated	debt.

•	Group	Inc.	exchanged	$84.00	billion	of	certain	loans	to	and	receivables from	subsidiaries	for	an	$84.00	billion	unsecured	subordinated	note	from Funding	IHC	(included	in	loans	to	and	receivables	from	subsidiaries).

•	Group	 Inc.	 exchanged	 $750	 million	 of	 its	 equity	 interest	 in	 Goldman Sachs	(UK)	L.L.C.	(GS	UK),	a	wholly-owned	subsidiary	of	Group	Inc., for	a	$750	million	loan	to	GS	UK.

•	Group	 Inc.	 exchanged	 $237	 million	 of	 Trust	 Preferred	 Securities	 and common	 beneficial	 interests	 for	 $248	 million	 of	 Group	 Inc.'s	 junior subordinated	debt.

•	Group	Inc.	exchanged	$1.04	billion	of	APEX	for	$1.31	billion	of	Series	E and	Series	F	Preferred	Stock.	See	Note	19	for	further	information.

•	Group	Inc.	exchanged	$127	million	of	senior	guaranteed	trust	securities for	$124	million	of	Group	Inc.'s	junior	subordinated	debt.

# Supplemental	Financial	Information

# Quarterly	Results	(unaudited)

The	tables	below	present	the	unaudited	quarterly	results.

|  |  | Three	Months	Ended | Three	Months	Ended |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions,\texcept\tper\nshare\tamounts | December\n2018 | September\n2018 | June\n2018 | March\n2018 |
| Non-interest\trevenues | $\t7,089 | $7,964 | \t$8,634 | \t$\t\t9,162 |
| Interest\tincome | 5,468 | 5,061 | 4,920 | 4,230 |
| Interest\texpense | 4,477 | 4,205 | 3,918 | 3,312 |
| Net\tinterest\tincome | 991 | 856 | 1,002 | 918 |
| Total\tnet\trevenues | 8,080 | 8,820 | 9,636 | 10,080 |
| Provision\tfor\tcredit\tlosses | 222 | 174 | 234 | 44 |
| Operating\texpenses | 5,150 | 5,568 | 6,126 | 6,617 |
| Pre-tax\tearnings | 2,708 | 3,078 | 3,276 | 3,419 |
| Provision\tfor\ttaxes | 170 | 554 | 711 | 587 |
| Net\tearnings | 2,538 | 2,524 | 2,565 | 2,832 |
| Preferred\tstock\tdividends | 216 | 71 | 217 | 95 |
| Net\tearnings\tapplicable |  |  |  |  |
| to\tcommon\tshareholders | $\t2,322 | $2,453 | \t$2,348 | \t$\t\t2,737 |
| Earnings\tper\tcommon\tshare: |  |  |  |  |
| Basic | $\t\t\t6.11 | $\t\t6.35 | \t$\t\t6.04 | \t$\t\t\t\t7.02 |
| Diluted | $\t\t\t6.04 | $\t\t6.28 | \t$\t\t5.98 | \t$\t\t\t\t6.95 |
| Dividends\tdeclared\tper |  |  |  |  |
| common\tshare | $\t\t\t0.80 | $\t\t0.80 | \t$\t\t0.80 | \t$\t\t\t\t0.75 |

|  |  | Three	Months	Ended | Three	Months	Ended |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions,\texcept\tper\nshare\tamounts | December\n2017 | September\n2017 | June\n2017 | March\n2017 |
| Non-interest\trevenues | $\t7,226 | $7,660 | \t$7,314 | \t$\t\t7,598 |
| Interest\tincome | 3,736 | 3,411 | 3,220 | 2,746 |
| Interest\texpense | 2,838 | 2,681 | 2,432 | 2,230 |
| Net\tinterest\tincome | 898 | 730 | 788 | 516 |
| Total\tnet\trevenues | 8,124 | 8,390 | 8,102 | 8,114 |
| Provision\tfor\tcredit\tlosses | 290 | 64 | 215 | 88 |
| Operating\texpenses | 4,726 | 5,350 | 5,378 | 5,487 |
| Pre-tax\tearnings | 3,108 | 2,976 | 2,509 | 2,539 |
| Provision\tfor\ttaxes | 5,036 | 848 | 678 | 284 |
| Net\tearnings/(loss) | (1,928) | 2,128 | 1,831 | 2,255 |
| Preferred\tstock\tdividends | 215 | 93 | 200 | 93 |
| Net\tearnings/(loss)\tapplicable |  |  |  |  |
| to\tcommon\tshareholders | $(2,143) | $2,035 | \t$1,631 | \t$\t\t2,162 |
| Earnings/(loss)\tper\tcommon\tshare: |  |  |  |  |
| Basic | $\t\t(5.51) | $\t\t5.09 | \t$\t\t4.00 | \t$\t\t\t\t5.23 |
| Diluted | $\t\t(5.51) | $\t\t5.02 | \t$\t\t3.95 | \t$\t\t\t\t5.15 |
| Dividends\tdeclared\tper |  |  |  |  |
| common\tshare | $\t\t\t0.75 | $\t\t0.75 | \t$\t\t0.75 | \t$\t\t\t\t0.65 |

•	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.	The	timing	and	magnitude	of	changes	in	the firm's	 discretionary	 compensation	 accruals	 (included	 in	 operating expenses)	can	have	a	significant	effect	on	results	in	a	given	quarter.

•	Provision	for	credit	losses,	previously	reported	in	total	net	revenues,	is now	reported	as	a	separate	 line	 item	 in	 the	consolidated	statements	of earnings.	 Previously	 reported	 amounts	 have	 been	 conformed	 to	 the current	presentation.

# Common	Stock	Performance

The	graph	and	table	below	compare	the	performance	of	an	investment	in	the firm's	common	stock	from	December	31,	2013	(the	last	trading	day	before the	firm's	2014	fiscal	year)	through	December	31,	2018,	with	the	S&P	500 Index	(S&P	500)	and	the	S&P	500	Financials	Index	(S&P	500	Financials).

|  |  |  | As	of	December | As	of	December |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 |
| Group\tInc. | \t\t$100.00\t\t\t$110.78\t\t\t$104.37\t\t\t$140.80\t\t\t$151.70\t\t\t$100.85 | \t\t$100.00\t\t\t$110.78\t\t\t$104.37\t\t\t$140.80\t\t\t$151.70\t\t\t$100.85 | \t\t$100.00\t\t\t$110.78\t\t\t$104.37\t\t\t$140.80\t\t\t$151.70\t\t\t$100.85 | \t\t$100.00\t\t\t$110.78\t\t\t$104.37\t\t\t$140.80\t\t\t$151.70\t\t\t$100.85 | \t\t$100.00\t\t\t$110.78\t\t\t$104.37\t\t\t$140.80\t\t\t$151.70\t\t\t$100.85 | \t\t$100.00\t\t\t$110.78\t\t\t$104.37\t\t\t$140.80\t\t\t$151.70\t\t\t$100.85 |
| S&amp;P\t500 | \t\t$100.00\t\t\t$113.68\t\t\t$115.24\t\t\t$129.01\t\t\t$157.16\t\t\t$150.26 | \t\t$100.00\t\t\t$113.68\t\t\t$115.24\t\t\t$129.01\t\t\t$157.16\t\t\t$150.26 | \t\t$100.00\t\t\t$113.68\t\t\t$115.24\t\t\t$129.01\t\t\t$157.16\t\t\t$150.26 | \t\t$100.00\t\t\t$113.68\t\t\t$115.24\t\t\t$129.01\t\t\t$157.16\t\t\t$150.26 | \t\t$100.00\t\t\t$113.68\t\t\t$115.24\t\t\t$129.01\t\t\t$157.16\t\t\t$150.26 | \t\t$100.00\t\t\t$113.68\t\t\t$115.24\t\t\t$129.01\t\t\t$157.16\t\t\t$150.26 |
| S&amp;P\t500\tFinancials | \t\t$100.00\t\t\t$115.18\t\t\t$113.38\t\t\t$139.18\t\t\t$169.99\t\t\t$147.82 | \t\t$100.00\t\t\t$115.18\t\t\t$113.38\t\t\t$139.18\t\t\t$169.99\t\t\t$147.82 | \t\t$100.00\t\t\t$115.18\t\t\t$113.38\t\t\t$139.18\t\t\t$169.99\t\t\t$147.82 | \t\t$100.00\t\t\t$115.18\t\t\t$113.38\t\t\t$139.18\t\t\t$169.99\t\t\t$147.82 | \t\t$100.00\t\t\t$115.18\t\t\t$113.38\t\t\t$139.18\t\t\t$169.99\t\t\t$147.82 | \t\t$100.00\t\t\t$115.18\t\t\t$113.38\t\t\t$139.18\t\t\t$169.99\t\t\t$147.82 |

The	graph	and	table	above	assume	$100	was	invested	on	December	31,	2013 in	 each	 of	 the	 firm's	 common	 stock,	 the	 S&P	 500	 and	 the	 S&P	 500 Financials,	 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.

# Selected	Financial	Data

•	The	impact	of	adopting	ASU	No.	2015-03	was	a	reduction	to	both	total assets	and	liabilities	of	$398	million	as	of	December	2014.	See	Note	3	to the	 consolidated	 financial	 statements	 in	 Part	 II,	 Item	 8	 of	 the	 firm's Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2015	for further	information.

•	Basic	shares	represent	common	shares	outstanding	and	restricted	stock units	granted	to	employees	with	no	future	service	requirements.

•	Headcount	 consists	 of	 employees,	 and	 excludes consultants and temporary	staff	previously	reported	as	total	staff.

# Statistical	Disclosures

# Distribution	of	Assets,	Liabilities	and	Shareholders'	Equity

The	tables	below	present	information	about	average	balances,	interest	and average	interest	rates.

| $	in	millions | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Assets |  |  |  |
| U.S. | \t\t$\t\t65,888 | \t$\t\t66,838 | \t$\t\t72,132 |
| Non-U.S. | 52,773 | 42,353 | 33,342 |
| Total\tdeposits\twith\tbanks | 118,661 | 109,191 | 105,474 |
| U.S. | 161,783 | 159,829 | 177,930 |
| Non-U.S. | 140,411 | 133,156 | 129,150 |
| Total\tcollateralized\tagreements | 302,194 | 292,985 | 307,080 |
| U.S. | 168,253 | 163,344 | 147,862 |
| Non-U.S. | 119,602 | 112,299 | 102,387 |
| Total\tfinancial\tinstruments\towned | 287,855 | 275,643 | 250,249 |
| U.S. | 67,418 | 50,742 | 43,367 |
| Non-U.S. | 6,494 | 4,767 | 4,609 |
| Total\tloans\treceivable | 73,912 | 55,509 | 47,976 |
| U.S. | 44,201 | 40,642 | 37,525 |
| Non-U.S. | 43,261 | 40,314 | 32,732 |
| Total\tother\tinterest-earning\tassets | 87,462 | 80,956 | 70,257 |
| Total\tinterest-earning\tassets | 870,084 | 814,284 | 781,036 |
| Cash\tand\tdue\tfrom\tbanks | 11,380 | 11,056 | 13,985 |
| Other\tnon-interest-earning\tassets | 86,117 | 84,264 | 91,875 |
| Total\tassets | \t\t$967,581 | \t$909,604 | \t$886,896 |
| Liabilities |  |  |  |
| U.S. | \t\t$117,121 | \t$101,109 | \t$\t\t97,255 |
| Non-U.S. | 30,071 | 24,356 | 17,605 |
| Total\tinterest-bearing\tdeposits | 147,192 | 125,465 | 114,860 |
| U.S. | 59,129 | 56,614 | 52,388 |
| Non-U.S. | 45,747 | 39,029 | 31,936 |
| Total\tcollateralized\tfinancings | 104,876 | 95,643 | 84,324 |
| U.S. | 33,193 | 34,422 | 36,273 |
| Non-U.S. | 49,295 | 41,507 | 35,797 |
| Total\tfinancial\tinstruments\tsold, |  |  |  |
| but\tnot\tyet\tpurchased | 82,488 | 75,929 | 72,070 |
| U.S. | 40,360 | 38,615 | 43,684 |
| Non-U.S. | 16,909 | 13,318 | 13,656 |
| Total\tshort-term\tborrowings | 57,269 | 51,933 | 57,340 |
| U.S. | 212,200 | 199,569 | 182,808 |
| Non-U.S. | 24,173 | 15,000 | 10,488 |
| Total\tlong-term\tborrowings | 236,373 | 214,569 | 193,296 |
| U.S. | 124,657 | 135,804 | 147,177 |
| Non-U.S. | 63,428 | 60,986 | 59,852 |
| Total\tother\tinterest-bearing\tliabilities | 188,085 | 196,790 | 207,029 |
| Total\tinterest-bearing\tliabilities | 816,283 | 760,329 | 728,919 |
| Non-interest-bearing\tdeposits | 4,273 | 3,630 | 2,996 |
| Other\tnon-interest-bearing\tliabilities | 61,787 | 59,686 | 68,323 |
| Total\tliabilities | 882,343 | 823,645 | 800,238 |
| Shareholders'\tequity |  |  |  |
| Preferred\tstock | 11,253 | 11,238 | 11,304 |
| Common\tstock | 73,985 | 74,721 | 75,354 |
| Total\tshareholders'\tequity | 85,238 | 85,959 | 86,658 |
| Total\tliabilities\tand\tshareholders'\tequity | \t\t$967,581 | \t$909,604 | \t$886,896 |

•	Assets,	liabilities	and	interest	are	classified	as	U.S.	and	non-U.S.	based	on the	location	of	the	entity	in	which	the	assets	and	liabilities	are	held.

•	Derivative	 instruments	 and	 commodities	 are	 included in other non-interest-earning	assets	and	other	non-interest-bearing	liabilities.

•	Total	other	interest-earning	assets	primarily	consists	of	certain	receivables from	customers	and	counterparties.

•	Substantially	all	of	the	total	other	interest-bearing	liabilities	consists	of certain	payables	to	customers	and	counterparties.

•	Interest	 rates	 for	 borrowings include the	 effects	 of interest rate	 swaps accounted	for	as	hedges.

# Changes	in	Net	Interest	Income,	Volume	and	Rate	Analysis

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

| $	in	millions | Volume | Rate | Change |
| :--- | :--- | :--- | :--- |
| Interest-earning\tassets |  |  |  |
| U.S. | \t\t $\t\t\t\t(18) | \t $\t\t\t505 | \t\t $\t\t\t487 |
| Non-U.S. | 34 | 78 | 112 |
| Total\tdeposits\twith\tbanks | 16 | 583 | 599 |
| U.S. | 40 | 1,965 | 2,005 |
| Non-U.S. | 26 | 160 | 186 |
| Total\tcollateralized\tagreements | 66 | 2,125 | 2,191 |
| U.S. | 129 | 345 | 474 |
| Non-U.S. | 150 | 366 | 516 |
| Total\tfinancial\tinstruments\towned | 279 | 711 | 990 |
| U.S. | 924 | 424 | 1,348 |
| Non-U.S. | 110 | 12 | 122 |
| Total\tloans\treceivable | 1,034 | 436 | 1,470 |
| U.S. | 192 | 674 | 866 |
| Non-U.S. | 67 | 383 | 450 |
| Total\tother\tinterest-earning\tassets | 259 | 1,057 | 1,316 |
| Change\tin\tinterest\tincome | 1,654 | 4,912 | 6,566 |
| Interest-bearing\tliabilities |  |  |  |
| U.S. | 317 | 795 | 1,112 |
| Non-U.S. | 55 | 59 | 114 |
| Total\tinterest-bearing\tdeposits | 372 | 854 | 1,226 |
| U.S. | 75 | 950 | 1,025 |
| Non-U.S. | 43 | 120 | 163 |
| Total\tcollateralized\tfinancings | 118 | 1,070 | 1,188 |
| U.S. | (30) | 151 | 121 |
| Non-U.S. | 119 | (74) | 45 |
| Total\tfinancial\tinstruments\tsold,\nbut\tnot\tyet\tpurchased | 89 | 77 | 166 |
| U.S. | 29 | (17) | 12 |
| Non-U.S. | 5 | (20) | (15) |
| Total\tshort-term\tborrowings | 34 | (37) | (3) |
| U.S. | 326 | 609 | 935 |
| Non-U.S. | 31 | (10) | 21 |
| Total\tlong-term\tborrowings | 357 | 599 | 956 |
| U.S. | (290) | 2,544 | 2,254 |
| Non-U.S. | 8 | (64) | (56) |
| Total\tother\tinterest-bearing\tliabilities | (282) | 2,480 | 2,198 |
| Change\tin\tinterest\texpense | 688 | 5,043 | 5,731 |
| Change\tin\tnet\tinterest\tincome | \t\t $\t\t\t966 | \t $\t\t(131)\t\t\t $\t\t\t835 | \t $\t\t(131)\t\t\t $\t\t\t835 |

Year	Ended	December	2017 versus	December	2016 Increase	(decrease) due	to	change	in:

| $	in	millions | Volume | Rate | Change |
| :--- | :--- | :--- | :--- |
| Interest-earning\tassets |  |  |  |
| U.S. | $\t\t(60) | \t $\t\t\t438 | \t$\t\t\t378 |
| Non-U.S. | 13 | (24) | (11) |
| Total\tdeposits\twith\tbanks | (47) | 414 | 367 |
| U.S. | (151) | 1,125 | 974 |
| Non-U.S. | 10 | (14) | (4) |
| Total\tcollateralized\tagreements | (141) | 1,111 | 970 |
| U.S. | 375 | (179) | 196 |
| Non-U.S. | 172 | 92 | 264 |
| Total\tfinancial\tinstruments\towned | 547 | (87) | 460 |
| U.S. | 347 | 419 | 766 |
| Non-U.S. | 10 | 59 | 69 |
| Total\tloans\treceivable | 357 | 478 | 835 |
| U.S. | 117 | 492 | 609 |
| Non-U.S. | 99 | 82 | 181 |
| Total\tother\tinterest-earning\tassets | 216 | 574 | 790 |
| Change\tin\tinterest\tincome | 932 | 2,490 | 3,422 |
| Interest-bearing\tliabilities |  |  |  |
| U.S. | 46 | 379 | 425 |
| Non-U.S. | 49 | 28 | 77 |
| Total\tinterest-bearing\tdeposits | 95 | 407 | 502 |
| U.S. | 55 | 355 | 410 |
| Non-U.S. | 23 | (12) | 11 |
| Total\tcollateralized\tfinancings | 78 | 343 | 421 |
| U.S. | (37) | 112 | 75 |
| Non-U.S. | 97 | (35) | 62 |
| Total\tfinancial\tinstruments\tsold, |  |  |  |
| but\tnot\tyet\tpurchased | 60 | 77 | 137 |
| U.S. | (87) | 346 | 259 |
| Non-U.S. | (1) | (6) | (7) |
| Total\tshort-term\tborrowings | (88) | 340 | 252 |
| U.S. | 381 | (17) | 364 |
| Non-U.S. | 18 | (25) | (7) |
| Total\tlong-term\tborrowings | 399 | (42) | 357 |
| U.S. | (83) | 1,732 | 1,649 |
| Non-U.S. | 5 | (246) | (241) |
| Total\tother\tinterest-bearing\tliabilities | (78) | 1,486 | 1,408 |
| Change\tin\tinterest\texpense | 466 | 2,611 | 3,077 |
| Change\tin\tnet\tinterest\tincome | $\t466 | \t$\t\t(121) | \t$\t\t\t345 |

The	table	below	presents	information	about	interest-bearing	deposits.

| $	in	millions | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Average\tbalances |  |  |  |
| U.S. |  |  |  |
| Savings\tand\tdemand | \t\t$\t\t76,428 | \t$\t\t68,819 | \t$\t\t59,357 |
| Time | 40,693 | 32,290 | 37,898 |
| Total\tU.S. | \t\t117,121 | \t 101,109 | 97,255 |
| Non-U.S. |  |  |  |
| Demand | 9,579 | 8,443 | 8,041 |
| Time | 20,492 | 15,913 | 9,564 |
| Total\tnon-U.S. | 30,071 | 24,356 | 17,605 |
| Total | \t\t$147,192 | \t$125,465 | \t$114,860 |
| Average\tinterest\trates |  |  |  |
| U.S. |  |  |  |
| Savings\tand\tdemand | 1.85% | 0.98% | 0.56% |
| Time | 2.21% | 1.64% | 1.18% |
| Total\tU.S. | 1.98% | 1.19% | 0.80% |
| Non-U.S. |  |  |  |
| Demand | 1.29% | 0.68% | 0.29% |
| Time | 0.81% | 0.75% | 0.78% |
| Total\tnon-U.S. | 0.96% | 0.72% | 0.56% |
| Total | 1.77% | 1.10% | 0.76% |
|  | Goldman\tSachs\t2018\tForm\t10-K | Goldman\tSachs\t2018\tForm\t10-K | 193 |

In	the	table	above,	deposits	are	classified	as	U.S.	and	non-U.S.	based	on the	location	of	the	entity	in	which	such	deposits	are	held.

As	of	December	2018,	deposits	in	U.S.	offices	included	$6.79	billion	and non-U.S.	offices	included	$17.12	billion	of	time	deposits	that	were	greater than	$100,000.

The	table	below	presents	maturities	of	these	time	deposits	held	in	U.S. offices.

| $	in	millions | As	of<br>December	2018 |
| :--- | :--- |
| 3\tmonths\tor\tless | $1,137 |
| 3\tto\t6\tmonths | 1,306 |
| 6\tto\t12\tmonths | 3,047 |
| Greater\tthan\t12\tmonths | 1,302 |
| Total | $6,792 |

# Short-Term	and	Other	Borrowed	Funds

The	 table	 below	 presents	 information	 about securities loaned and repurchase	agreements,	and	short-term	borrowings.

| $	in	millions | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Securities\tloaned\tand\trepurchase\tagreements |  |  |  |
| Amounts\toutstanding\tat\tyear-end | \t\t$\t\t90,531 | \t$\t\t99,511 | \t$79,340 |
| Average\toutstanding\tduring\tthe\tyear | \t\t$104,876 | \t$\t\t95,643 | \t$84,324 |
| Maximum\tmonth-end\toutstanding | \t\t$123,805 | \t$103,359 | \t$89,142 |
| Weighted\taverage\tinterest\trate |  |  |  |
| During\tthe\tyear | 1.96% | 0.90% | 0.52% |
| At\tyear-end | 3.31% | 1.16% | 0.44% |
| Short-term\tborrowings |  |  |  |
| Amounts\toutstanding\tat\tyear-end | \t\t$\t\t50,057 | \t$\t\t61,818 | \t$52,383 |
| Average\toutstanding\tduring\tthe\tyear | \t\t$\t\t57,269 | \t$\t\t51,933 | \t$57,340 |
| Maximum\tmonth-end\toutstanding | \t\t$\t\t63,743 | \t$\t\t61,818 | \t$61,840 |
| Weighted\taverage\tinterest\trate |  |  |  |
| During\tthe\tyear | 1.21% | 1.34% | 0.78% |
| At\tyear-end | 1.30% | 1.22% | 0.94% |

•	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.

•	The	 weighted	 average interest	 rates	 for these	 borrowings include the effect	of	hedging	activities.

# Loan	Portfolio

| Corporate	loans | $34,256			$28,622			$23,821			$19,909			$14,020 | $34,256			$28,622			$23,821			$19,909			$14,020 | $34,256			$28,622			$23,821			$19,909			$14,020 | $34,256			$28,622			$23,821			$19,909			$14,020 | $34,256			$28,622			$23,821			$19,909			$14,020 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| PWM\tloans | 15,100 | 14,489 | 12,386 | 12,824 | 10,989 |
| Commercial\treal\testate\tloans | 9,476 | 6,150 | 2,813 | 3,186 | 1,876 |
| Residential\treal\testate\tloans | 7,244 | 6,176 | 3,777 | 2,187 | 311 |
| Consumer\tloans | 4,536 | 1,912 | 208 | – | – |
| Other\tloans | 3,616 | 3,233 | 2,664 | 3,495 | 821 |
| Total\tU.S. | 74,228 | 60,582 | 45,669 | 41,601 | 28,017 |
| Non-U.S. |  |  |  |  |  |
| Corporate\tloans | 3,027 | 2,127 | 1,016 | 831 | 290 |
| PWM\tloans | 2,119 | 2,102 | 1,442 | 1,137 | 300 |
| Commercial\treal\testate\tloans | 1,965 | 1,837 | 1,948 | 2,085 | 549 |
| Residential\treal\testate\tloans | 40 | 58 | 88 | 129 | 10 |
| Other\tloans | 277 | 30 | 18 | 38 | – |
| Total\tnon-U.S. | 7,428 | 6,154 | 4,512 | 4,220 | 1,149 |
| Total\tloans\treceivable,\ngross | 81,656 | 66,736 | 50,181 | 45,821 | 29,166 |
| Allowance\tfor\tloan\tlosses |  |  |  |  |  |
| U.S. | 848 | 604 | 476 | 381 | 205 |
| Non-U.S. | 218 | 199 | 33 | 33 | 23 |
| Total\tallowance\tfor\tloan |  |  |  |  |  |
| losses | 1,066 | 803 | 509 | 414 | 228 |
| Total\tloans\treceivable | \t\t$80,590\t\t\t$65,933\t\t\t$49,672\t\t\t$45,407\t\t\t$28,938 | \t\t$80,590\t\t\t$65,933\t\t\t$49,672\t\t\t$45,407\t\t\t$28,938 | \t\t$80,590\t\t\t$65,933\t\t\t$49,672\t\t\t$45,407\t\t\t$28,938 | \t\t$80,590\t\t\t$65,933\t\t\t$49,672\t\t\t$45,407\t\t\t$28,938 | \t\t$80,590\t\t\t$65,933\t\t\t$49,672\t\t\t$45,407\t\t\t$28,938 |

In	 the	 table	 above,	 loans	 receivable	 are	 classified	 as	 U.S.	 and	non-U.S. based	on	the	location	of	the	entity	in	which	such	loans	are	held.

# Allowance	for	Loan	Losses

The	table	below	presents	changes	in	the	allowance	for	loan	losses.

|  |  | Year	Ended	December | Year	Ended	December |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2017 | 2016 | 2015 | 2014 |
| Beginning\tbalance | \t$\t\t\t803 | \t$\t509 | \t$414 | \t$228 | \t$139 |
| Net\tcharge-offs | (337) | (203) | (8) | (1) | (3) |
| Provision | 654 | 574 | 138 | 187 | 92 |
| Other | (54) | (77) | (35) | – | – |
| Ending\tbalance | \t$1,066 | \t$\t803 | \t$509 | \t$414 | \t$228 |

•	Allowance	for	loan	losses	as	of	2018	primarily	related	to	corporate	loans and	consumer	loans	that	were	held	in	entities	located	in	the	U.S.

•	Allowance	 for	 loan	 losses	 as	 of	 2017	 and	 earlier	 primarily	 related	 to corporate	 loans	 and	 loans	 extended	 to	 PWM	 clients	 that	 were	 held	 in entities	located	in	the	U.S.

•	Net	charge-offs	for	2018	were	primarily	related	to	consumer	loans	held	in entities	located	in	the	U.S.	and	commercial	real	estate	PCI	loans	held	in entities	located	outside	of	the	U.S.

•	Net	charge-offs	for	2017	and	earlier	were	primarily	related	to	corporate loans	held	in	entities	located	in	the	U.S.

# Maturities	and	Sensitivity	to	Changes	in	Interest	Rates

The	table	below	presents	gross	loans	receivable	by	tenor	and	a	distribution of	such	loans	receivable	between	fixed	and	floating	interest	rates.

| Corporate	loans | $		4,241			$24,907			$		5,108			$34,256 | $		4,241			$24,907			$		5,108			$34,256 | $		4,241			$24,907			$		5,108			$34,256 | $		4,241			$24,907			$		5,108			$34,256 |
| :--- | :--- | :--- | :--- | :--- |
| PWM\tloans | 12,172 | 2,910 | 18 | 15,100 |
| Commercial\treal\testate\tloans | 1,458 | 7,368 | 650 | 9,476 |
| Residential\treal\testate\tloans | 2,249 | 1,972 | 3,023 | 7,244 |
| Consumer\tloans | 51 | 4,059 | 426 | 4,536 |
| Other\tloans | 435 | 2,403 | 778 | 3,616 |
| Total\tU.S. | 20,606 | 43,619 | 10,003 | 74,228 |
| Non-U.S. |  |  |  |  |
| Corporate\tloans | 263 | 2,236 | 528 | 3,027 |
| PWM\tloans | 2,082 | 37 | – | 2,119 |
| Commercial\treal\testate\tloans | 483 | 1,476 | 6 | 1,965 |
| Residential\treal\testate\tloans | 9 | 30 | 1 | 40 |
| Other\tloans | 2 | 255 | 20 | 277 |
| Total\tnon-U.S. | 2,839 | 4,034 | 555 | 7,428 |

# 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 table	below	does	not	include	all	the	effects	of	such	risk	mitigants	and	does not	represent	the	firm's	credit	exposure.

The	table	below	presents	cross-border	outstandings	and	commitments	for each country in which cross-border outstandings exceed 0.75% of consolidated	assets	in	accordance	with	the	FFIEC	guidelines.

| $	in	millions | Banks			 Governments | Other | Total | Commitments |
| :--- | :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2018 |  |  |  |  |
| Germany | \t\t$2,028 | $43,730\t\t\t$\t\t4,755\t\t\t$50,513 | $43,730\t\t\t$\t\t4,755\t\t\t$50,513 | $\t\t3,834 |
| Cayman\tIslands | \t\t$\t\t\t\t\t27 | $\t\t\t\t\t\t\t\t\t2\t\t\t$47,595\t\t\t$47,624 | $\t\t\t\t\t\t\t\t\t2\t\t\t$47,595\t\t\t$47,624 | $\t\t4,207 |
| France | \t\t$1,193 | $\t\t5,094\t\t\t$11,549\t\t\t$17,836 | $\t\t5,094\t\t\t$11,549\t\t\t$17,836 | $10,307 |
| Japan | \t\t$9,106 | $\t\t1,686\t\t\t$\t\t6,146\t\t\t$16,938 | $\t\t1,686\t\t\t$\t\t6,146\t\t\t$16,938 | $12,553 |
| Ireland | \t\t$\t\t\t146 | $\t\t\t\t\t\t\t55\t\t\t$12,390\t\t\t$12,591 | $\t\t\t\t\t\t\t55\t\t\t$12,390\t\t\t$12,591 | $\t\t\t\t\t822 |
| Canada | \t\t$2,383 | $\t\t\t\t\t470\t\t\t$\t\t7,845\t\t\t$10,698 | $\t\t\t\t\t470\t\t\t$\t\t7,845\t\t\t$10,698 | $\t\t1,513 |
| Luxembourg | \t\t$\t\t\t\t\t22 | $\t\t\t\t\t\t\t41\t\t\t$\t\t9,799\t\t\t$\t\t9,862 | $\t\t\t\t\t\t\t41\t\t\t$\t\t9,799\t\t\t$\t\t9,862 | $\t\t2,838 |
| U.K. | \t\t$1,101 | $\t\t\t\t\t\t\t77\t\t\t$\t\t8,458\t\t\t$\t\t9,636 | $\t\t\t\t\t\t\t77\t\t\t$\t\t8,458\t\t\t$\t\t9,636 | $20,336 |
| China | \t\t$1,952 | $\t\t\t\t\t\t\t66\t\t\t$\t\t6,882\t\t\t$\t\t8,900 | $\t\t\t\t\t\t\t66\t\t\t$\t\t6,882\t\t\t$\t\t8,900 | $\t\t\t\t\t271 |
| South\tKorea | \t\t$\t\t\t162 | $\t\t2,935\t\t\t$\t\t3,989\t\t\t$\t\t7,086 | $\t\t2,935\t\t\t$\t\t3,989\t\t\t$\t\t7,086 | $\t\t\t\t\t\t\t10 |
| As\tof\tDecember\t2017 |  |  |  |  |
| Cayman\tIslands | \t\t$\t\t\t\t\t\t\t6 | $\t\t\t\t\t\t\t\t\t–\t\t\t$34,624\t\t\t$34,630 | $\t\t\t\t\t\t\t\t\t–\t\t\t$34,624\t\t\t$34,630 | $\t\t4,940 |
| Germany | \t\t$4,241 | $22,765\t\t\t$\t\t6,916\t\t\t$33,922 | $22,765\t\t\t$\t\t6,916\t\t\t$33,922 | $\t\t7,015 |
| France | \t\t$3,569 | $\t\t1,574\t\t\t$19,048\t\t\t$24,191 | $\t\t1,574\t\t\t$19,048\t\t\t$24,191 | $14,549 |
| Canada | \t\t$2,562 | $\t\t\t\t\t311\t\t\t$17,358\t\t\t$20,231 | $\t\t\t\t\t311\t\t\t$17,358\t\t\t$20,231 | $\t\t2,388 |
| Japan | \t\t$8,827 | $\t\t\t\t\t\t\t69\t\t\t$\t\t7,220\t\t\t$16,116 | $\t\t\t\t\t\t\t69\t\t\t$\t\t7,220\t\t\t$16,116 | $18,079 |
| Ireland | \t\t$\t\t\t143 | $\t\t\t\t\t\t\t65\t\t\t$11,490\t\t\t$11,698 | $\t\t\t\t\t\t\t65\t\t\t$11,490\t\t\t$11,698 | $\t\t\t\t\t895 |
| China | \t\t$2,550 | $\t\t\t\t\t687\t\t\t$\t\t7,838\t\t\t$11,075 | $\t\t\t\t\t687\t\t\t$\t\t7,838\t\t\t$11,075 | $\t\t\t\t\t\t\t\t\t– |
| Italy | \t\t$2,306 | $\t\t3,986\t\t\t$\t\t2,586\t\t\t$\t\t8,878 | $\t\t3,986\t\t\t$\t\t2,586\t\t\t$\t\t8,878 | $\t\t1,649 |
| U.K. | \t\t$1,300 | $\t\t\t\t\t\t\t\t\t–\t\t\t$\t\t7,480\t\t\t$\t\t8,780 | $\t\t\t\t\t\t\t\t\t–\t\t\t$\t\t7,480\t\t\t$\t\t8,780 | $14,966 |
| Singapore | \t\t$\t\t\t372 | $\t\t5,462\t\t\t$\t\t1,873\t\t\t$\t\t7,707 | $\t\t5,462\t\t\t$\t\t1,873\t\t\t$\t\t7,707 | $\t\t\t\t\t\t\t48 |
| Luxembourg | \t\t$\t\t\t\t\t59 | $\t\t\t\t\t324\t\t\t$\t\t7,320\t\t\t$\t\t7,703 | $\t\t\t\t\t324\t\t\t$\t\t7,320\t\t\t$\t\t7,703 | $\t\t2,438 |
| As\tof\tDecember\t2016 |  |  |  |  |
| Cayman\tIslands | \t\t$\t\t\t\t\t\t\t3 | $\t\t\t\t\t\t\t\t\t–\t\t\t$34,756\t\t\t$34,759 | $\t\t\t\t\t\t\t\t\t–\t\t\t$34,756\t\t\t$34,759 | $\t\t2,519 |
| France | \t\t$6,333 | $\t\t1,858\t\t\t$18,576\t\t\t$26,767 | $\t\t1,858\t\t\t$18,576\t\t\t$26,767 | $\t\t9,598 |
| Germany | \t\t$3,183 | $14,061\t\t\t$\t\t9,250\t\t\t$26,494 | $14,061\t\t\t$\t\t9,250\t\t\t$26,494 | $\t\t7,281 |
| Japan | \t\t$9,860 | $\t\t\t\t\t721\t\t\t$\t\t6,310\t\t\t$16,891 | $\t\t\t\t\t721\t\t\t$\t\t6,310\t\t\t$16,891 | $\t\t7,476 |
| Italy | \t\t$3,220 | $\t\t3,211\t\t\t$\t\t1,608\t\t\t$\t\t8,039 | $\t\t3,211\t\t\t$\t\t1,608\t\t\t$\t\t8,039 | $\t\t1,228 |
| Canada | \t\t$\t\t\t814 | $\t\t\t\t\t333\t\t\t$\t\t6,164\t\t\t$\t\t7,311 | $\t\t\t\t\t333\t\t\t$\t\t6,164\t\t\t$\t\t7,311 | $\t\t1,279 |
| China | \t\t$1,189 | $\t\t\t\t\t158\t\t\t$\t\t5,662\t\t\t$\t\t7,009 | $\t\t\t\t\t158\t\t\t$\t\t5,662\t\t\t$\t\t7,009 | $\t\t\t\t\t\t\t\t\t– |
| Singapore | \t\t$\t\t\t190 | $\t\t6,165\t\t\t$\t\t\t\t\t505\t\t\t$\t\t6,860 | $\t\t6,165\t\t\t$\t\t\t\t\t505\t\t\t$\t\t6,860 | $\t\t\t\t\t\t\t97 |
| South\tKorea | \t\t$\t\t\t107 | $\t\t3,563\t\t\t$\t\t2,847\t\t\t$\t\t6,517 | $\t\t3,563\t\t\t$\t\t2,847\t\t\t$\t\t6,517 | $\t\t\t\t\t\t\t\t\t4 |

•	Cross-border outstandings includes cash, receivables, collateralized agreements and cash financial instruments, but exclude derivative instruments.

•	Collateralized agreements are presented gross,	 without reduction for related	securities	collateral	held.

•	Margin	loans	(included	in	receivables)	are	presented	based	on	the	amount of	collateral	advanced	by	the	counterparty.

•	Substantially	all	commitments	consists	of	commitments	to	extend	credit and	forward	starting	collateralized	agreements.

# 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,	2018	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	this	Form	10-K.

# Item	9B.				Other	Information

# PART	III

# Item	10.				Directors,	Executive	Officers	and Corporate	Governance

Information	relating	to	our	executive	officers	is	included	on	page	20	of	this 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	2019	Annual Meeting	of	Shareholders,	which	will	be	filed	within	120	days	of	the	end	of 2018	(2019	Proxy	Statement)	and	is	incorporated	in	this	Form	10-K	by reference.	 Information	 relating	 to	 our	 Code	 of	 Business	 Conduct	 and Ethics,	 which	 applies	 to	 our	 senior	 financial	 officers,	 is	 included	 in "Business	—	Available	Information"	in	Part	I,	Item	1	of	this	Form	10-K.

# Item	11.				Executive	Compensation

Information	relating	to	our	executive	officer	and	director	compensation	and the	 compensation	 committee	 of	 the	 Board	 will	 be	 in	 the	 2019	 Proxy Statement	and	is	incorporated	in	this	Form	10-K	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	2019	Proxy	Statement	and	is	incorporated	in	this Form	10-K	by	reference.

The	table	below	presents	information	as	of	December	31,	2018	regarding securities	to	be	issued	pursuant	to	outstanding	restricted	stock	units	(RSUs) and	 securities	 remaining	 available	 for	 issuance	 under	 our	 equity compensation	plans	that	were	in	effect	during	2018.

| Plan	Category | Securities<br>to	be	Issued<br>Upon<br>Exercise	of<br>Outstanding<br>Options	and<br>Rights	(a) | Weighted<br>Average<br>Exercise<br>Price	of<br>Outstanding<br>Options	(b) | Securities<br>Available<br>For	Future<br>Issuance<br>Under	Equity<br>Compensation<br>Plans	(c) |
| :--- | :--- | :--- | :--- |
| Equity\tcompensation\tplans |  |  |  |
| approved\tby\tsecurity\tholders | 17,176,475 | N/A | 68,211,649 |
| Equity\tcompensation\tplans\tnot |  |  |  |
| approved\tby\tsecurity\tholders | – | – | – |
| Total | 17,176,475 |  | 68,211,649 |

•	Securities	to	be	Issued	Upon	Exercise	of	Outstanding	Options	and	Rights includes	17,176,475	shares	 that	may	be	 issued	pursuant	 to	outstanding RSUs.	These	awards	are	subject	to	vesting	and	other	conditions	to	the extent	set	forth	in	the	respective	award	agreements,	and	the	underlying shares	 will	 be	 delivered	 net	 of	 any	 required	 tax	 withholding.	 As	 of December	31,	2018,	there	were	no	outstanding	options.

•	Shares	 underlying	 RSUs	 are	 deliverable	 without	 the	 payment	 of	 any consideration,	 and	 therefore	 these	 awards	 have	 not	 been	 taken	 into account	in	calculating	the	weighted	average	exercise	price.

•	Securities	Available	For	Future	Issuance	Under	Equity	Compensation Plans	represents	shares	remaining	to	be	issued	under	our	current	stock incentive	plan	(SIP),	excluding	shares	reflected	in	column	(a).	If	any shares	of	common	stock	underlying	awards	granted	under	our	current SIP,	 our	 SIP	 adopted	 in	 2015	 or	 our	 SIP	 adopted	 in	 2013	 are	 not delivered	 due	 to	 forfeiture,	 termination	 or	 cancellation	 or	 are surrendered	or	withheld,	those	shares	will	again	become	available	to	be delivered	 under	 our	 current	 SIP.	 Shares	 available	 for	 grant	 are	 also subject	 to	 adjustment	 for	 certain	 changes	 in	 corporate	 structure	 as permitted	under	our	current	SIP.

# Item 13. Certain Relationships and Related Transactions, and Director Independence

Information	 regarding	 certain	 relationships	 and	 related	 transactions	 and director	 independence	 will	 be	 in	 the	 2019	 Proxy	 Statement	 and	 is incorporated	in	this	Form	10-K	by	reference.

# Item	14.				Principal	Accounting	Fees	and Services

Information	regarding	principal	accounting	fees	and	services	will	be	in	the 2019	Proxy	Statement	and	is	incorporated	in	this	Form	10-K	by	reference.

# PART	IV

# Item	 15. 	 Exhibits,	 Financial	 Statement Schedules

(a)	Documents	filed	as	part	of	this	Report:

# 1.	Consolidated	Financial	Statements

				1.3 Form	 of	 Underwriting	 Agreement	 for	 preferred stock and depositary	shares	of	The	Goldman	Sachs	Group,	Inc.

				3.1 Restated	 Certificate	 of	 Incorporation	of	 The	 Goldman	 Sachs Group,	Inc.,	amended	as	of	January	24,	2018	(incorporated	by reference	to	Exhibit	3.1	to	the	Registrant's	Annual	Report	on Form	10-K	for	the	fiscal	year	ended	December	31,	2017).

				3.2 Amended	and	Restated	By-Laws	of	The	Goldman	Sachs	Group, Inc.,	 amended	 as	 of	 February 18, 2016	 (incorporated	 by reference	to	Exhibit	3.2	to	the	Registrant's	Annual	Report	on Form	10-K	for	the	fiscal	year	ended	December	31,	2015).

				4.2 Subordinated	 Debt	 Indenture,	 dated	as	of	February	20,	2004, between	The	Goldman	Sachs	Group,	Inc.	and	The	Bank	of	New York,	as	trustee	(incorporated	by	reference	to	Exhibit	4.2	to	the Registrant's	Annual	Report	on	Form	10-K	for	the	fiscal	year ended	November	28,	2003).

				4.3 Warrant	Indenture,	dated	as	of	February	14,	2006,	between	The Goldman	Sachs	Group,	Inc.	and	The	Bank	of	New	York,	as trustee	 (incorporated	 by	 reference	 to	 Exhibit 4.34 to	 the Registrant's	 Post-Effective	 Amendment	 No.	 3	 to	 Form	 S-3, filed	on	March	1,	2006).

				4.6 Fourth Supplemental Indenture, dated	as of December	31,	2016,	between	The	Goldman	Sachs	Group,	Inc. and	The	Bank	of	New	York	Mellon,	as	trustee,	with	respect	to the	 Senior	 Debt	 Indenture,	 dated	 as	 of	 July 16, 2008 (incorporated	by	reference	to	Exhibit	4.1	to	the	Registrant's Current	Report	on	Form	8-K,	filed	on	January	6,	2017).

				4.7 Senior	Debt	Indenture,	dated	as	of	October	10,	2008,	among GS	Finance	Corp.,	as	issuer,	The	Goldman	Sachs	Group,	Inc., as	guarantor,	and	The	Bank	of	New	York	Mellon,	as	trustee (incorporated	by	reference	to	Exhibit	4.70	to	the	Registrant's Registration	Statement	on	Form	S-3	(No.	333-154173),	filed on	October	10,	2008).

				4.8 First	Supplemental	Indenture,	dated	as	of	February	20,	2015, among	 GS	 Finance	 Corp.,	 as	 issuer,	 The	 Goldman	 Sachs Group,	Inc.,	as	guarantor,	and	The	Bank	of	New	York	Mellon, as	trustee,	with	respect	to	the	Senior	Debt	Indenture,	dated	as of	October	10,	2008	(incorporated	by	reference	to	Exhibit	4.7 to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	fiscal year	ended	December	31,	2014).

				4.9 Fourth	Supplemental	Indenture,	dated	as	of	August	21,	2018, among	 GS	 Finance	 Corp.,	 as	 issuer,	 The	 Goldman	 Sachs Group,	Inc.,	as	guarantor,	and	The	Bank	of	New	York	Mellon (incorporated	by	reference	to	Exhibit	4.1	to	the	Registrant's Quarterly	 Report	 on	Form 10-Q for	 the	 period	 ended September	30,	2018).

				4.10 Ninth	Supplemental	Subordinated	Debt	Indenture,	dated	as	of May	20,	2015,	between	The	Goldman	Sachs	Group,	Inc.	and The	Bank	of	New	York	Mellon,	as	trustee,	with	respect	to	the Subordinated	Debt	Indenture,	dated	as	of	February	20,	2004 (incorporated	by	reference	to	Exhibit	4.1	to	the	Registrant's Current	Report	on	Form	8-K,	filed	on	May	22,	2015).

				4.11 Tenth	Supplemental	Subordinated	Debt	Indenture,	dated	as	of July	7,	2017,	between	The	Goldman	Sachs	Group,	Inc.	and The	Bank	of	New	York	Mellon,	as	trustee,	with	respect	to	the Subordinated	Debt	Indenture,	dated	as	of	February	20,	2004 (incorporated	by	reference	to	Exhibit	4.89	to	the	Registrant's Registration	Statement	on	Form	S-3	(No.	333-219206),	filed on	July	10,	2017).

Certain	instruments	defining	the	rights	of	holders	of	long-term debt	securities	of	the	Registrant	and	its	subsidiaries	are	omitted pursuant to Item 601(b)(4)(iii) of	Regulation S-K. The Registrant hereby undertakes to furnish to the SEC, upon request,	copies	of	any	such	instruments.

The	 Goldman	 Sachs	Amended	 and	 Restated	 Stock Incentive Plan	(2018).	†

		10.2 The	Goldman	Sachs	Amended	and	Restated	Restricted	Partner Compensation	Plan	(incorporated	by	reference	to	Exhibit	10.1 to	 the	 Registrant's	 Quarterly	 Report	 on	Form	 10-Q	 for	 the period	ended	February	24,	2006).	†

		10.3 Form	 of	 Employment	 Agreement	 for	 Participating	Managing Directors	 (applicable	 to	 executive	 officers)	 (incorporated	 by reference	 to	 Exhibit 10.19 to	 the	 Registrant's	 Registration Statement	on	Form	S-1	(No.	333-75213)).	†

		10.5 Tax	Indemnification	Agreement,	dated	as	of	May	7,	1999,	by and	among	The	Goldman	Sachs	Group,	Inc.	and	various	parties (incorporated	by	reference	to	Exhibit	10.25	to	the	Registrant's Registration	Statement	on	Form	S-1	(No.	333-75213)).

		10.6 Amended	 and	 Restated	 Shareholders'	Agreement,	effective	as of	January	15,	2015,	among	The	Goldman	Sachs	Group,	Inc. and	various	parties	(incorporated	by	reference	to	Exhibit	10.6	to the	Registrant's	Annual	Report	on	Form	10-K	for	the	fiscal	year ended	December	31,	2014).

		10.7 Instrument	 of	 Indemnification	 (incorporated	 by	reference to Exhibit	 10.27	 to	 the	 Registrant's	 Registration	 Statement	 on Form	S-1	(No.	333-75213)). 		10.8 Form	of	Indemnification	Agreement	(incorporated	by	reference to	Exhibit	10.28	to	the	Registrant's	Annual	Report	on	Form	10- K	for	the	fiscal	year	ended	November	26,	1999). 		10.9 Form	of	Indemnification	Agreement	(incorporated	by	reference to	Exhibit	10.44	to	the	Registrant's	Annual	Report	on	Form	10- K	for	the	fiscal	year	ended	November	26,	1999).

		10.10 Form	of	Indemnification	Agreement,	dated	as	of	July	5,	2000 (incorporated	by	reference	to	Exhibit	10.1	to	the	Registrant's Quarterly	 Report	 on	 Form 10-Q for	 the	 period	 ended August	25,	2000).

		10.15 Form	of	Amendment,	dated	November	27,	2004,	to	Agreement Relating	 to	 Noncompetition	 and	 Other	 Covenants,	 dated May	7,	1999	(incorporated	by	reference	to	Exhibit	10.32	to the	Registrant's	Annual	Report	on	Form	10-K	for	the	fiscal year	ended	November	26,	2004).	†

		10.20 Ground	 Lease,	 dated	August	 23,	 2005,	between	Battery	Park City	 Authority	 d/b/a/	 Hugh	 L.	 Carey	 Battery	 Park	 City Authority,	as	Landlord,	and	Goldman	Sachs	Headquarters	LLC, as	 Tenant	 (incorporated	 by	 reference	 to	 Exhibit 10.1 to the	 Registrant's	 Current	 Report	 on	 Form	 8-K,	 filed	 on August	26,	2005).

		10.21 General	Guarantee	Agreement,	dated	January	30,	2006,	made	by The	Goldman	Sachs	Group,	Inc.	relating	to	certain	obligations of	Goldman	Sachs	&	Co.	LLC	(incorporated	by	reference	 to Exhibit	10.45	to	the	Registrant's	Annual	Report	on	Form	10-K for	the	fiscal	year	ended	November	25,	2005).

		10.22 Goldman	 Sachs	 &	 Co.	 LLC	 Executive	Life	Insurance	Policy and	Certificate	with	Metropolitan	Life	Insurance	Company	for Participating	Managing	Directors	(incorporated	by	reference	to Exhibit	10.1	to	the	Registrant's	Quarterly	Report	on	Form	10-Q for	the	period	ended	August	25,	2006).	†

		10.23 Form	of	Goldman	Sachs		&	Co.	LLC	Executive	Life	Insurance Policy	with	Pacific	Life		&	Annuity	Company	for	Participating Managing	Directors,	 including	policy	specifications	and	form of	 restriction	 on	 Policy	 Owner's	 Rights	 (incorporated	 by reference	to	Exhibit	10.2	to	the	Registrant's	Quarterly	Report	on Form	10-Q	for	the	period	ended	August	25,	2006).	†

		10.24 Form	 of	 Second	 Amendment,	 dated	November	 25,	 2006, to Agreement	Relating	to	Noncompetition	and	Other	Covenants, dated	May	7,	1999,	as	amended	effective	November	27,	2004 (incorporated	by	reference	to	Exhibit	10.51	to	the	Registrant's Annual	 Report	 on	 Form 10-K for	 the	 fiscal	 year	 ended November	24,	2006).	† 		10.25 Description	of	PMD	Retiree	Medical	Program.		† 		10.26 Letter,	dated	June		28,	2008,	from	The	Goldman	Sachs	Group, Inc.	 to	 Mr.	 Lakshmi	 N.	 Mittal	 (incorporated	 by	 reference	 to Exhibit	99.1	to	the	Registrant's	Current	Report	on	Form	8-K, filed	on	June	30,	2008).	† 		10.27 General	Guarantee	Agreement,	dated	December	1,	2008,	made by	 The	 Goldman	 Sachs	 Group,	 Inc.	 relating	 to	 certain obligations	 of	 Goldman	 Sachs	 Bank	 USA	 (incorporated	 by reference	 to	 Exhibit 4.80 to	 the	 Registrant's	 Post-Effective Amendment	No.	2	to	Form	S-3,	filed	on	March	19,	2009).

		10.29 Amendments	 to	 Certain	 Non-Employee	Director Equity Award Agreements (incorporated by reference to Exhibit	10.69	to	the	Registrant's	Annual	Report	on	Form	10-K for	the	fiscal	year	ended	November	28,	2008).	†

		10.30 Form	of	Year-End	RSU	Award	Agreement (not	fully	vested) (pre-2015)	 (incorporated	 by	 reference	 to	 Exhibit 10.36 to the	Registrant's	Annual	Report	on	Form	10-K	for	the	fiscal year	ended	December	31,	2014).	†

		10.31 Form	of	Year-End	RSU	Award	Agreement (fully	vested)	(pre- 2015)	 (incorporated	 by	 reference	 to	 Exhibit 10.37 to the	Registrant's	Annual	Report	on	Form	10-K	for	the	fiscal year	ended	December	31,	2014).	†

		10.33 Form	of	Year-End	Restricted	Stock	Award	Agreement	(fully vested)	(pre-2015)	(incorporated	by	reference	to	Exhibit	10.41 to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	fiscal year	ended	December	31,	2013).	†

		10.34 Form	of	Year-End	Restricted	Stock	Award	Agreement	(Base and/or	Supplemental)	(pre-2015)	(incorporated	by	reference	to Exhibit	10.41	to	the	Registrant's	Annual	Report	on	Form	10-K for	the	fiscal	year	ended	December	31,	2014).	†

Form	 of	 Performance-Based	 Restricted	Stock	 Unit	 Award Agreement (pre-2015) (incorporated by reference to Exhibit	10.2	to	the	Registrant's	Current	Report	on	Form	8-K, filed	on	December	23,	2010).	†

		10.39 Form of Performance-Based Option	Award Agreement (incorporated	by	reference	to	Exhibit	10.3	to	the	Registrant's Current	Report	on	Form	8-K,	filed	on	December	23,	2010).	† 		10.40 Form	 of	 Performance-Based	 Cash	 Compensation	 Award Agreement (pre-2015) (incorporated by reference to Exhibit	10.4	to	the	Registrant's	Current	Report	on	Form	8-K, filed	on	December	23,	2010).	†

		10.41 Amended	 and	 Restated	 General	 Guarantee	Agreement,	 dated November	21,	2011,	made	by	The	Goldman	Sachs	Group,	Inc. relating	 to	 certain	 obligations	 of	 Goldman	 Sachs	 Bank	 USA (incorporated	 by	 reference	 to	 Exhibit	 4.1	 to	 the	 Registrant's Current	Report	on	Form	8-K,	filed	on	November	21,	2011).

		10.42 Form	 of	 Aircraft	 Time	 Sharing	 Agreement	 (incorporated	 by reference	to	Exhibit	10.61	to	the	Registrant's	Annual	Report	on Form	10-K	for	the	fiscal	year	ended	December	31,	2011).	†

		10.43 Description	 of	 Compensation	 Arrangements	with	 Executive Officer	 (incorporated	 by	 reference	 to	 Exhibit 10.1 to	 the Registrant's	 Quarterly	 Report	 on	Form	 10-Q	 for	 the	 period ended	June	30,	2012).	†

		10.44 The	Goldman	Sachs	Group,	Inc.	Clawback	Policy,	effective	as of	January	1,	2015	(incorporated	by	reference	to	Exhibit	10.53 to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	fiscal year	ended	December	31,	2014).

		10.52 Form	of	Year-End	Restricted	Stock	Award	Agreement	(fully vested)	 (incorporated	 by	 reference	 to	 Exhibit	 10.53	 to	 the Registrant's	Annual	Report	on	Form	10-K	for	the	fiscal	year ended	December	31,	2017).	†

		10.53 Form	 of	 Year-End	 Short-Term	 Restricted	 Stock Award Agreement	(incorporated	by	reference	to	Exhibit	10.57	to	the Registrant's	Annual	Report	on	Form	10-K	for	the	fiscal	year ended	December	31,	2015).	†

		10.54 Form	of	Fixed	Allowance	RSU	Award	Agreement.	†

		10.55 Form of Fixed Allowance Restricted Stock Award Agreement.	†

		10.56 Form	of	Fixed	Allowance	Deferred	Cash	Award	Agreement (incorporated	by	reference	to	Exhibit	10.59	to	the	Registrant's Annual	 Report	 on	 Form 10-K for	 the	 fiscal	 year	 ended December	31,	2015).	†

		10.57 Form	 of	 Performance-Based	 Restricted	 Stock	 Unit	 Award Agreement.	†

		10.58 Form	 of	 Performance-Based	 Cash	 Compensation	Award Agreement	(incorporated	by	reference	to	Exhibit	10.61	to	the Registrant's	Annual	Report	on	Form	10-K	for	the	fiscal	year ended	December	31,	2015).	†

		10.62 Lease,	 dated	 August	 	 17,	 2018,	 between	 Farringdon	 Street Partners	Limited	and	Farringdon	Street	(Nominee)	Limited,	as Landlord,	 and	 Goldman	 Sachs	 International,	 as	 Tenant (incorporated	by	reference	to	Exhibit	10.3	to	the	Registrant's Quarterly	 Report	 on	Form 10-Q for	 the	 period	 ended September	30,	2018).

		21.1 List	of	significant	subsidiaries	of	The	Goldman	Sachs	Group, Inc.

		23.1 Consent	of	Independent	Registered	Public	Accounting	Firm.

		32.1 Section		1350	Certifications	(This	information	is	furnished	and not	filed	for	purposes	of	Sections	11	and	12	of	the	Securities Act	of	1933	and	Section	18	of	the	Securities	Exchange	Act	of 1934).

		99.1 Report	of	Independent	Registered	Public	Accounting	Firm	on Selected	Financial	Data.

		99.2 Debt	and	trust	securities	registered	under	Section	12(b)	of	the Exchange	Act.

101 Interactive	data	files	pursuant	to	Rule	405	of	Regulation	S-T: (i)	the	Consolidated	Statements	of	Earnings	for	the	years	ended December 31, 2018, December 31, 2017 and December 31, 2016,	 (ii)	 the	 Consolidated	 Statements	 of Comprehensive	Income	for	the	years	ended	December	31,	2018, December 31, 2017	 and	 December 31, 2016,	 (iii)	 the Consolidated	 Statements	 of	 Financial	 Condition	 as	 of December 31, 2018	 and	 December 31, 2017,	 (iv)	 the Consolidated	Statements	of	Changes	in	Shareholders'	Equity	for the	years	ended	December	31,	2018,	December	31,	2017	and December	31,	2016,	(v)	the	Consolidated	Statements	of	Cash Flows for the years ended December 31, 2018, December	31,	2017	and	December	31,	2016,	and	(vi)	the	notes to	the	Consolidated	Financial	Statements.

† This	exhibit	is	a	management	contract	or	a	compensatory	plan	or	arrangement.

# SIGNATURES



Question: what are the total market making revenues in the consolidated statements of earnings of 2017 , in billions?
Calculation:    a = 1 + 0.23
 b = 9.45 / a 
Answer: 7.7