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,	2017

# 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

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	and	posted	on	its	corporate	Web	site,	if	any,	every	Interactive	Data	File	required	to	be submitted	and	posted	pursuant	to	Rule	405	of	Regulation	S-T	during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	submit	and post	such	files).	☒	Yes	☐	No

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	the	Annual	Report	on	Form	10-K	or	any	amendment	to	the Annual	Report	on	Form	10-K.	☒

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	☒

Accelerated	filer	☐

Smaller	reporting	company	☐

Non-accelerated	filer	(Do	not	check	if	a	smaller	reporting	company)		☐

Emerging	growth	company	☐

If	an	emerging	growth	company,	indicate	by	check	mark	if	the	registrant	has	elected	not	to	use	the	extended	transition	period	for	complying	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,	2017,	the	aggregate	market	value	of	the	common	stock	of	the	registrant	held	by	non-affiliates	of	the	registrant	was	approximately	$84.9	billion.

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

Documents	incorporated	by	reference:	Portions	of	The	Goldman	Sachs	Group,	Inc.'s	Proxy	Statement	for	its	2018	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,	2017

# INDEX

# Item	5

|  | Page	No. |
| :--- | :--- |
| Item\t8 |  |
| Financial\tStatements\tand\tSupplementary\tData | 102 |
| Management's\tReport\ton\tInternal\tControl\tover\tFinancial\tReporting | 102 |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm | 103 |
| Consolidated\tFinancial\tStatements | 104 |
| Consolidated\tStatements\tof\tEarnings | 104 |
| Consolidated\tStatements\tof\tComprehensive\tIncome | 105 |
| Consolidated\tStatements\tof\tFinancial\tCondition | 106 |
| Consolidated\tStatements\tof\tChanges\tin\tShareholders'\tEquity | 107 |
| Consolidated\tStatements\tof\tCash\tFlows | 108 |
| Notes\tto\tConsolidated\tFinancial\tStatements | 109 |
| Note\t1.\t\t\tDescription\tof\tBusiness | 109 |
| Note\t2.\t\t\tBasis\tof\tPresentation | 109 |
| Note\t3.\t\t\tSignificant\tAccounting\tPolicies | 110 |
| Note\t4.\t\t\t\tFinancial\tInstruments\tOwned\tand\tFinancial\tInstruments\tSold,\tBut\nNot\tYet\tPurchased | 117 |
| Note\t5.\t\t\tFair\tValue\tMeasurements | 118 |
| Note\t6.\t\t\tCash\tInstruments | 119 |
| Note\t7.\t\t\tDerivatives\tand\tHedging\tActivities | 125 |
| Note\t8.\t\t\tFair\tValue\tOption | 136 |
| Note\t9.\t\t\tLoans\tReceivable | 142 |
| Note\t10.\tCollateralized\tAgreements\tand\tFinancings | 146 |
| Note\t11.\tSecuritization\tActivities | 150 |
| Note\t12.\tVariable\tInterest\tEntities | 152 |
| Note\t13.\tOther\tAssets | 155 |
| Note\t14.\tDeposits | 158 |
| Note\t15.\tShort-Term\tBorrowings | 159 |
| Note\t16.\tLong-Term\tBorrowings | 159 |
| Note\t17.\tOther\tLiabilities\tand\tAccrued\tExpenses | 162 |
| Note\t18.\tCommitments,\tContingencies\tand\tGuarantees | 162 |
| Note\t19.\tShareholders'\tEquity | 166 |
| Note\t20.\tRegulation\tand\tCapital\tAdequacy | 169 |
| Note\t21.\tEarnings\tPer\tCommon\tShare | 178 |
| Note\t22.\tTransactions\twith\tAffiliated\tFunds | 178 |
| Note\t23.\tInterest\tIncome\tand\tInterest\tExpense | 179 |

# Item	9A

# Controls	and	Procedures 203 Item	9B

# 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	 (Federal	 Reserve	 Board	 or	 FRB).	 Our	 U.S.	 depository institution	subsidiary,	Goldman	Sachs	Bank	USA	(GS	Bank	USA),	is	a New	York	State-chartered	bank.

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

# Our	 Business	 Segments	 and	 Segment	 Operating Results

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

The	chart	below	presents	our	four	business	segments.

The	table	below	presents	our	segment	operating	results.

| $	in	millions | 2017 | 2016 | 2015 | Revenues |
| :--- | :--- | :--- | :--- | :--- |
| Investment\tBanking |  |  |  |  |
| Net\trevenues | \t$\t\t7,371 | \t$\t\t6,273 | \t$\t\t7,027 | 23% |
| Operating\texpenses | 3,526 | 3,437 | 3,713 |  |
| Pre-tax\tearnings | \t$\t\t3,845 | \t$\t\t2,836 | \t$\t\t3,314 |  |
| Institutional\tClient\tServices |  |  |  |  |
| Net\trevenues | \t$11,902 | \t$14,467 | \t$15,151 | 37% |
| Operating\texpenses | 9,692 | 9,713 | 13,938 |  |
| Pre-tax\tearnings | \t$\t\t2,210 | \t$\t\t4,754 | \t$\t\t1,213 |  |
| Investing\t&\tLending |  |  |  |  |
| Net\trevenues | \t$\t\t6,581 | \t$\t\t4,080 | \t$\t\t5,436 | 21% |
| Operating\texpenses | 2,796 | 2,386 | 2,402 |  |
| Pre-tax\tearnings | \t$\t\t3,785 | \t$\t\t1,694 | \t$\t\t3,034 |  |
| Investment\tManagement |  |  |  |  |
| Net\trevenues | \t$\t\t6,219 | \t$\t\t5,788 | \t$\t\t6,206 | 19% |
| Operating\texpenses | 4,800 | 4,654 | 4,841 |  |
| Pre-tax\tearnings | \t$\t\t1,419 | \t$\t\t1,134 | \t$\t\t1,365 |  |
| Total\tnet\trevenues | \t$32,073 | \t$30,608 | \t$33,820 |  |
| Total\toperating\texpenses | 20,941 | 20,304 | 25,042 |  |
| Total\tpre-tax\tearnings | \t$11,132 | \t$10,304 | \t$\t\t8,778 |  |
|  | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | 1 |

# In	the	table	above:

•	Financial	information	related	to	our	business	segments	for	2017,	2016 and	 2015	 is	 included	 in	 "Management's	 Discussion	 and	Analysis	 of Financial	 Condition	 and	 Results	 of	 Operations"	 and	 "Financial Statements	and	Supplementary	Data,"	which	are	in	Part	II,	Items	7	and 8, respectively,	 of	 this	Form	10-K.	 See	 Note	 25	 to	 the	 consolidated financial	statements	in	Part	II,	Item	8	of	this	Form	10-K	for	a	summary of	 our	 total	 net	 revenues,	pre-tax	 earnings	 and	 net	 earnings	 by geographic	region.

•	Operating	 expenses	 included $3.37 billion	 recorded	 in	 Institutional Client	 Services	 in	 2015	 related	 to	 the	 settlement	 agreement	 with	 the Residential	 Mortgage-Backed	 Securities	 Working	 Group	 of	 the	 U.S. Financial	 Fraud	 Enforcement	 Task	 Force.	 See	 Note 27 to	 the consolidated	financial	statements	in	Part	II,	Item	8	of	our	Annual	Report o n	Form	 10-K	 for	 the	 year	 ended	 December	 31,	 2015	 for	 further information.

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

# Investment	Banking

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

Financial	 Advisory.	 Financial	 Advisory	 includes	 strategic	 advisory assignments	 with	 respect	 to	 mergers	 and	 acquisitions,	 divestitures, corporate	defense	activities,	restructurings,	spin-offs	and	risk	management. In	particular,	we	help	clients	execute	large,	complex	transactions	for	which we	provide	multiple	services,	including	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	 2017, 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	in	the	following	ways:

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

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

# Fixed Income,	 Currency and	 Commodities	 Client	 Execution.

Includes	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, 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	our	investing	and	relationship	lending	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	credit	to clients	through	loan	facilities	and	through	secured	loans,	including	secured loans	to	retail	clients	through	our	digital	platform,	Goldman	Sachs	Private Bank	 Select (GS	 Select).	 We	 also	 make	 unsecured	 loans	 to	 and	 accept deposits from retail	 clients	 through	 our	 digital	 platform,	Marcus: by Goldman	Sachs	(Marcus).

# Investment	Management

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

We	 manage	 client	 assets	 across	 a	 broad	 range	 of	 asset	 classes	 and investment	 strategies,	 including	 equity,	 fixed	 income	 and	 alternative investments.	Alternative	investments	primarily	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 clients	 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	 is	 comprised	 of	 asset-based	 fees	 on	 client assets.	The	fees	that	we	charge	vary	by	asset	class	and	distribution	channel 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	 our	 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	 client	 accounts.	 In addition,	 we	 earn	 net	 interest	 income	 primarily	 associated	 with	 client deposits	and	margin	lending	activity	undertaken	by	such	clients.

# Business	Continuity	and	Information	Security

Business	continuity	and	information	security,	including	cyber	security,	are high	priorities	for	Goldman	Sachs.	Their	importance	has	been	highlighted by	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	 includes	 an	 evaluation	 of	 an	 employee's performance	with	respect	to	risk	management,	compliance	and	diversity. As	of	December	2017,	we	had	36,600	total	staff.

# Competition

The	 financial	 services	 industry	 and	 all	 of	 our	 businesses	 are	 intensely competitive,	and	we	expect	them	to	remain	so.	Our	competitors	are	other entities	 that	 provide	 investment	 banking,	 securities	 and	 investment management	services	and	retail	 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. Our	competition	 is	based	on	a	number	of	factors,	 including	 transaction execution,	products	and	services,	innovation,	reputation	and	price.

There	 has	 been	 substantial	 consolidation	 and	 convergence	 among companies	 in	 the	financial	services	 industry.	Moreover,	we	have	faced, and	 expect	 to	 continue	 to	 face,	 pressure	 to	 retain	 market	 share	 by committing	capital	to	businesses	or	transactions	on	terms	that	offer	returns that	may	not	be	commensurate	with	 their	risks.	In	particular,	corporate clients	seek	such	commitments	(such	as	agreements	to	participate	in	their 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	client	execution	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	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"	below	and	"Risk	Factors	—	Our	businesses	may be	 adversely	 affected	 if	 we	 are	 unable	 to	 hire	 and	 retain	 qualified employees"	in	Part	I,	Item	1A	of	this	Form	10-K	for	further	information about	the	regulation	of	our	compensation	practices.

# 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	 new	 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	 capital,	 liquidity	 and	 leverage	 ratios based	on	the	Basel	Committee's	final	capital	framework	for	strengthening international	capital	standards	(Basel	III),	as	implemented	by	the	FRB,	the PRA	and	FCA	and	other	national	regulators,	have	also	had	a	significant impact	 on	 our	 businesses.	 The	 Basel	 Committee	 is	 the	 primary	 global standard	setter	for	prudential	bank	regulation,	and	its	member	jurisdictions implement	regulations	based	on	its	standards	and	guidelines.

The	Basel	Committee's	standards	are	not	effective	in	any	jurisdiction	until rules	implementing	such	standards	have	been	implemented	by	the	relevant regulators	in	such	jurisdiction.

The	implications	of	such	regulations	for	our	businesses	continue	to	depend to	a	large	extent	on	their	implementation	by	the	relevant	regulators	globally, as	well	as	 the	development	of	market	practices	and	structures	under	 the regime	established	by	such	regulations.

Other	reforms	have	been	adopted	or	are	being	considered	by	regulators	and policy	 makers	 worldwide,	 as	 described	 further	 throughout	 this	 section. Recent	 developments	 have	 added additional uncertainty to the implementation,	scope	and	timing	of	regulatory	reforms.	Such	developments also	 include	 potential	 deregulation	 in	 some	 areas.	 In	 February	 2017,	 the President	of	the	U.S.	issued	an	executive	order	identifying	"core	principles" for	the	administration's	financial	services	regulatory	policy	and	directing	the Secretary	of	the	Treasury,	in	consultation	with	the	heads	of	other	financial regulatory	 agencies,	 to	 evaluate	 how	 the	 current	 regulatory	 framework promotes	 or	 inhibits	 the	 principles	 and	 what	 actions	 have	 been,	 and	 are being,	taken	to	promote	the	principles.	In	response	to	the	executive	order, the	U.S.	Department	of	the	Treasury	issued	during	2017	the	first	three	of four	 reports	 recommending	 a	 number	 of	 comprehensive	 changes	 in	 the current	regulatory	system	for	U.S.	depository	institutions,	the	U.S.	capital markets	 and	 the	 U.S.	 asset	 management	 and	 insurance	 industries.	 In addition,	in	February	2018,	the	U.S.	Department	of	the	Treasury	issued	a report	that	recommends	reforming	the	orderly	liquidation	authority	(OLA) under	the	Dodd-Frank	Act	and	amending	the	U.S.	Bankruptcy	Code	to	make a	 bankruptcy	 proceeding	 a	 more	 effective	 resolution	 method	 for	 large financial	institutions.

Goldman	Sachs	International	(GSI)	and	Goldman	Sachs	International	Bank (GSIB),	 our	 principal	 E.U.	 operating	 subsidiaries,	 are	 incorporated	 and headquartered	 in	 the	 U.K.	 and,	 as	 such,	 are	 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.	 Both	 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.

# 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,	 as	 our	 primary	 regulator.	 In August	2017,	the	FRB	proposed	a	new	rating	system	for	large	financial institutions,	such	as	us,	which	is	intended	to	align	with	the	FRB's	existing supervisory	 program	 for	 large	 financial	 institutions	 and	 which	 would include	component	ratings	for	capital	planning,	liquidity	risk	management, and	governance	and	controls.	In	August	2017	and	January	2018,	the	FRB proposed	 related	 guidance	 for	 the	 governance	 and	 controls	 component. These	 proposals	 reflect	 the	 FRB's	 focus	 on	 compliance	 with	 laws	 and regulations	 related	 to	 consumer	 protection	 in	 its	 evaluations	 of	 large financial	institutions.

Certain	 of	 our	 subsidiaries	 are	 regulated	 by	 the	 banking	 and	 securities regulatory	authorities	of	the	countries	in	which	they	operate.

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"	U.S.	non-bank	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.

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	U.S.	Consumer	Financial	Protection Bureau.	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	 retail-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	retail	financial	products.

GSI,	 our	 regulated	 U.K.	 broker-dealer	 subsidiary,	 which	 is	 a	 designated investment	firm,	and	GSIB,	our	regulated	U.K.	bank	and	principal	non-U.S. 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.

# Capital,	 Leverage	 and	 Liquidity	 Requirements.	The	 firm	 and	 GS

Bank	 USA	 are	 subject	 to	 consolidated	 regulatory	 capital	 and	 leverage requirements	set	forth	by	 the	FRB.	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).

Under	the	FRB's	capital	adequacy	requirements,	the	firm	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.	 The	 firm	 and	 GS	 Bank	 USA	 are	 also	 subject	 to	 liquidity requirements	established	by	the	U.S.	federal	bank	regulatory	agencies,	and GSI	 and	 GSIB	 are	 subject	 to	 similar	 requirements	 established	 by	 U.K. regulatory	authorities.

Capital	 Ratios.	 We are	 subject	 to	 the	 FRB's	 risk-based	 capital	 and leverage	 regulations,	 subject	 to	 certain	 transitional	 provisions	 (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	are	an	"Advanced	approach"	banking	organization	and	have been	designated	as	a	global	systemically	important	bank	(G-SIB).

The	Capital	Framework	provides	for	an	additional	capital	ratio	requirement that	phases	in	over	time	and	consists	of	three	components:	(i)	for	capital conservation	 (capital	 conservation	 buffer),	 (ii)	 as	 a	 consequence	 of	 our designation	 as	 a	G-SIB	 (G-SIB	 buffer)	 and	 (iii)	 for	 countercyclicality (countercyclical	 capital	 buffer).	 The	 additional	 capital	 ratio	 requirement must	 be	 satisfied	 entirely	 with	 capital	 that	 qualifies	 as	 Common	 Equity Tier	1	(CET1).

The	capital	conservation	buffer	began	to	phase	in	on	January	1,	2016	and will	continue	to	do	so	in	increments	of	0.625%	per	year	until	it	reaches 2.5%	 of risk-weighted	 assets	 (RWAs)	 on	 January	 1,	 2019.	 The	 G-SIB buffer	also	began	to	phase	in	on	January	1,	2016	and	will	continue	to	do	so through	January	1,	2019.

The	countercyclical	capital	buffer,	of	up	to	2.5%,	is	designed	to	counteract systemic	vulnerabilities	and	applies	only	to	"Advanced	approach"	banking organizations.	The	countercyclical	capital	buffer	 is	currently	set	at	zero percent.	 Several	 other	 national	 supervisors	 have	 also	 started	 to	 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.

GS	 Bank	 USA	 also	 computes	 its	 capital	 ratios	 in	 accordance	 with the Capital	Framework	as	an	"Advanced	approach"	banking	organization.

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	 to,	 among	 others,	 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	2016,	the	Basel	Committee	finalized	a	revised	framework	for calculating	 minimum	 capital	 requirements	 for	 market	 risk,	 which	 is expected	 to	 increase	market	risk	capital	requirements	for	most	banking organizations.	 In	 December	 2017,	 the	 Basel	 Committee	 extended	 the implementation	 date	 for	 the	 revised	 market	 risk	 framework	 until January	1,	2022,	noting	that	the	extension	would	allow	for	a	review	of	the calibration	of	the	framework.

In	December	2017,	the	Basel	Committee	also	published	standards	 that	 it described	as	the	finalization	of	the	Basel	III	post-crisis	regulatory	reforms. These	 standards	 introduce	 an	 aggregate	 output	 floor	 comparing	 capital requirements	 under	 the	 Basel	 Committee's	 standardized	 and	 internally modeled	 approaches,	 and	 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	 and	 the	 leverage	 ratio.	 The	 Basel Committee	has	proposed	that	national	regulators	implement	these	standards effective	on	January	1,	2022,	with	the	output	floor	being	phased	in	through January	1,	2027.

The	 U.S.	 federal	 bank	 regulatory	 agencies	 have	 not	 proposed	 rules implementing	the	December	2017	standards	or	the	revisions	to	the	Basel Committee's	 market	 risk	 framework	 for	 U.S.	 banking	 organizations.	 In November	2016,	the	European	Commission	proposed	amendments	to	the CRR	to	implement	the	revisions	to	the	market	risk	framework	for	certain E.U.	 financial	 institutions,	 which	 would	 be	 effective	 two	 years	 after	 the amendments	are	incorporated	into	the	CRR.

# The	Basel	Committee	has	also:

•	Finalized	 a	 revised	 standard	 approach	 for	 calculating	 RWAs	 for counterparty	credit	risk	on	derivatives	exposures	(Standardized	Approach for	 measuring	 Counterparty	 Credit	 Risk	 exposures,	 known	 as "SA-CCR");

•	Published	an	updated	framework	for	the	regulatory	capital	treatment	of securitization	exposures	(Securitization	Framework);

•	Published	 guidelines	 for	 measuring	 and	 controlling	 large	 exposures (Supervisory	Framework	for	measuring	and	controlling	Large	Exposures); and

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

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,	GS	Bank	USA's	and	GSI's	capital	ratios	and	minimum	required ratios.

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,	the	firm	and	GS	Bank USA	are	subject	to	Tier	1	leverage	requirements	established	by	the	FRB. The	Capital	Framework	also	introduced	a	supplementary	leverage	ratio	for "Advanced	 approach"	 banking	 organizations	 which	 became	 effective January	1,	2018	and	implements	the	Basel	III	leverage	ratio	framework.

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,	including	GSI	and	GSIB,	which	would implement	the	Basel	III	leverage	ratio	framework.

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	firm's	and	GS	Bank	USA's	Tier	1	leverage	ratios and	supplementary	leverage	ratios,	and	GSI's	leverage	ratio.

Liquidity	Ratios.	The	Basel	Committee's	 international	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)	 issued	 by	 the	 U.S.	 federal	 bank regulatory	agencies	and	applicable	to	both	the	firm	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.	We	disclose,	on	a	quarterly	basis,	our	average	daily	LCR	over	the quarter.	See	"Available	Information"	below.

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

The	 Basel	 Committee's	 net	 stable	 funding	 ratio	 (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	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	an	NSFR	for	large	U.S.	banking	organizations, including	the	firm	and	GS	Bank	USA.	The	proposal	would	require	banking organizations	 to	 ensure	 they	 have	 stable	 funding	 over	 a	one-year	 time horizon.	 In	 November	 2016,	 the	 European	 Commission	 proposed amendments	to	the	CRR	to	implement	the	NSFR	for	certain	E.U.	financial institutions,	which	would	be	effective	two	years	after	it	is	incorporated	into the	 CRR.	 Neither	 the	 U.S.	 federal	 bank	 regulatory	 agencies	 nor	 the European	Commission	have	released	a	final	rule.

The	 enhanced	 prudential	 standards	 implemented	 by	 the	 FRB	 under	 the Dodd-Frank	Act	require	BHCs,	including	Group	Inc.,	with	$50	billion	or more	in	total	consolidated	assets	(covered	BHCs)	to	comply	with	enhanced liquidity	and	overall	risk	management	standards,	including	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	a	covered	BHC,	we	are	subject	to	the	Dodd-Frank	Act annual	 supervisory	 stress	 tests	 conducted	 by	 the	 FRB	 and	 semi-annual company-run	stress	tests.

We	publish	summaries	of	our	annual	and	mid-cycle	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	 Comprehensive	 Capital Analysis	and	Review	(CCAR)	of	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 repurchasing	or	redeeming	stock	or	increasing	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	distributions	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.

GS	Bank	USA	is	also	required	to	conduct	stress	tests	on	an	annual	basis,	to submit	the	results	to	the	FRB,	and	to	publicly	disclose	a	summary	of	those results.	 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.	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.

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.

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).	 Our resolution	plan	must,	among	other	things,	demonstrate	that	GS	Bank	USA	is adequately	 protected	 from	 risks	 arising	 from	 our	 other	 entities.	 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.	See	"Risk	Factors	—	The	application	of Group	Inc.'s	proposed	resolution	strategy	could	result	in	greater	losses	for Group	Inc.'s	security	holders,	and	failure	to	address	shortcomings	in	our resolution	plan	could	subject	us	 to	 increased	regulatory	requirements"	 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	Developments	—	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.

In	September	2017,	the	FRB	issued	a	final	rule	imposing	restrictions	on qualified	financial	contracts	(QFCs)	entered	into	by	G-SIBs.	The	rule	will begin	 to	 phase	 in	 on	 January	 1,	 2019	 and	 will	 be	 fully	 effective	 on January	1,	2020.	This	rule	is	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	 termination	 rights	 in	 such contracts	arising	upon	the	entry	of	the	G-SIB	or	one	of	its	affiliates	into resolution,	(ii)	the	contracts	do	not	prohibit	transfers	of	credit	enhancement that	 satisfy	 certain	 standards,	 and	 (iii)	 the	 counterparty	 agrees	 that	 the QFCs	 will	 be	 subject	 to	 the	 special	 resolution	 regimes	 set	 forth	 in	 the Dodd-Frank	Act	 OLA	 and	 the	 Federal	 Deposit	 Insurance	Act	 of	 1950 (FDIA),	described	below.	Compliance	can	be	achieved	by	adhering	to	the ISDA	Protocol	described	below.

We,	along	with	a	number	of	other	major	global	banking	organizations, adhere	to	the	International	Swaps	and	Derivatives	Association	Resolution Stay	 Protocol	 (ISDA	 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	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.	The	ISDA	Protocol	is	expected	to	be	adopted	more broadly	in	the	future,	following	the	phase-in	of	QFC	regulations	adopted by	 banking	 regulators	 (including	 the	 FRB's	 final	 rule	 on	 QFCs)	 that impose	additional	requirements	in	order	for	G-SIBs,	such	as	us,	to	enter into	QFCs	with	counterparties	that	do	not	adhere	to	the	ISDA	Protocol.

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	 new contracts	 enable	 such	 actions	 and	 also	 amend	pre-existing	 contracts governed	by	non-E.U.	law	to	enable	such	actions,	if	the	financial	institutions could	incur	liabilities	under	such	pre-existing	contracts.

The	BRRD	also	subjects	financial	institutions	to	a	minimum	requirement	for own	 funds	 and	 eligible	 liabilities	 (MREL)	 so	 that	 they	 can	 be	 resolved without	causing	financial	instability	and	without	recourse	to	public	funds	in the	event	of	a	failure.	The	Bank	of	England's	rules	on	MREL	are	described below	in	"Total	Loss-Absorbing	Capacity."

Total	Loss-Absorbing	Capacity.	In	December	2016,	the	FRB	adopted	a final	rule	establishing	loss-absorbency	and	related	requirements	for	parent companies	of	U.S.	G-SIBs,	such	as	Group	Inc.	The	rule	will	be	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.	The rule	(i)	establishes	minimum	TLAC	requirements,	(ii)	establishes	minimum "eligible	long-term	debt"	(i.e.,	debt	that	is	unsecured,	has	a	maturity	greater than	 one	 year	 from	 issuance	 and	 satisfies	 certain	 additional	 criteria) requirements,	 (iii)	 prohibits	 certain	 BHC	 transactions	 and	 (iv)	 caps	 the amount	of	G-SIB	liabilities	that	are	not	eligible	long-term	debt.

The	 rule	 also	 prohibits	 a	 U.S.	G-SIB	 from	 (i)	 guaranteeing	 liabilities	 of subsidiaries	 that	 are	 subject	 to	 early	 termination	 provisions	 if	 the	 parent company	 of	 a	 U.S.	G-SIB	 enters	 into	 an	 insolvency	 or	 receivership proceeding,	subject	to	an	exception	for	guarantees	permitted	by	rules	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	U.S.	G-SIB'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.

In	 October	 2016,	 the	 Basel	 Committee	 issued	 a	 final	 standard	 to implement	capital	deductions	for	banking	organizations	relating	to	TLAC holdings	of	other	G-SIBs.

The	 FSB	 issued	 a	 final	 TLAC	 standard	 requiring	 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	MREL,	which	is	generally	consistent with	the	FSB's	TLAC	standard.	In	October	2017,	the	Bank	of	England published	a	consultation	paper	on	internal	MREL,	which	would	require	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	 would	 phase	 in	 from January	1,	2019,	becoming	fully	effective	from	January	1,	2022.

In	November	2016,	the	European	Commission	proposed	amendments	to the	CRR	and	BRRD	that	are	designed	to	implement	the	FSB's	minimum TLAC	requirement	for	G-SIBs	commencing	January	1,	2019.	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	 an amendment	to	CRD	IV	that	would	require	a	non-E.U.	G-SIB,	such	as	us, to	establish	an	E.U.	intermediate	holding	company	(E.U.	IHC)	if	the	firm has	two	or	more	of	certain	types	of	E.U.	financial	institution	subsidiaries, including	broker-dealers	and	banks,	such	as	GSI	and	GSIB.	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	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.

FDIC	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.

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

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:	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.

Activities.	The	Dodd-Frank	Act	and	the	BHC	Act	generally	restrict	BHCs from	engaging	in	business	activities	other	than	the	business	of	banking	and certain	closely	related	activities.

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. The	reporting	requirements	include	calculating	daily	quantitative	metrics	on covered	trading	activities	(as	defined	in	the	rule)	and	providing	these	metrics to	regulators	on	a	monthly	basis.

In	addition,	the	Volcker	Rule	limits	the	sponsorship	of,	and	investment	in, "covered	funds"	(as	defined	in	the	rule)	by	banking	entities,	including	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	reduce	our	investment	in	each	such	fund	to 3%	 or less	 of	 the	 fund's	 net	 asset	 value,	 and	 to	 reduce	 our	 aggregate investment	in	all	such	funds	to	3%	or	less	of	our	Tier	1	capital.

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.

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	under	the	GLB	Act	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	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	 March	 2016,	 the	 FRB	 issued	 a	 revised	 proposal	 regarding	 single counterparty	credit	limits,	which	would	impose	more	stringent	requirements for	 credit	 exposures	 among	 major	 financial	 institutions.	 Such	 limits (together	with	other	provisions	incorporated	into	the	Basel	III	capital	rules) may	affect	our	ability	to	transact	or	hedge	with	other	financial	institutions. 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.

In	 addition,	 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	Note	20	to	the	consolidated	financial	statements	in	Part	II, Item	8	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,	the	Ministry	of	Finance and	the	Ministry	of	Economy,	Trade	and	Industry,	among	others.

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

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

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

In	addition,	in	June	2017,	the	U.S.	Department	of	Labor's	conflict	of	interest rule	under	the	Employee	Retirement	Income	Security	Act	of	1974	(ERISA) went	into	effect.	The	rule	broadens	the	circumstances	under	which	a	firm and/or	a	financial	advisor	is	considered	a	fiduciary	when	providing	certain recommendations to retirement clients and requires that such recommendations	be	in	the	best	interest	of	clients.	As	a	result,	we	have	made changes	to	some	of	our	services	and	offerings	for	retirement	clients.

Our	U.S.	broker-dealer	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.	The	SEC has	proposed	rules	that	would	govern	the	design	of	new	trading	venues	for security-based	 swaps	 and	 establish	 the	 process	 for	 determining	 which products	must	be	traded	on	these	venues.

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	(J.	Aron),	are	registered	with	the	CFTC	as	swap	dealers. In	addition,	Goldman	Sachs	Financial	Markets,	L.P.	is	registered	with	the SEC	as	an	OTC	derivatives	dealer.

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	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.	The	full	application	of	new derivatives	 rules	 across	 different	 regulatory	 jurisdictions	 has	 not	 yet occurred	 and	 the	 full	 impact	 will	 not	 be	 known	 until	 the	 rules	 are implemented	and	market	practices	and	structures	develop	under	such	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	 currently	 anticipated	 to	 become	 effective	 in December	 2018	 relating	 to	 liquidity	 risk	 management	 that	 will	 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.

Certain	 of	 our	 European	 subsidiaries,	 including	 Goldman	 Sachs	 Asset Management	International,	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.

The	E.U.	legislative	institutions	have	reached	provisional	agreement	on	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.	The	regulation	was published	on	June	30,	2017	and	will	be	effective	on	July	21,	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	 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	FSB	has	released	standards	for	local	regulators	to	implement	certain compensation	principles	for	banks	and	other	financial	companies	designed to	 encourage	 sound	 compensation	 practices.	 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	below.

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.

# 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	mandated	the	implementation	of	various	regulations applicable	 to	 all	 financial	 institutions,	 including	 standards	 for	 verifying client	identification	at	account	opening,	and	obligations	to	monitor	client transactions	 and	 report	 suspicious	 activities.	 Through	 these	 and	 other provisions,	 the	 BSA	 and	 the	 PATRIOT	 Act	 seek	 to	 promote	 the identification	 of	 parties	 that	 may	 be	 involved	 in	 terrorism,	 money laundering	 or	 other	 suspicious	 activities.	 Anti-money	 laundering	 laws outside	the	U.S.	contain	some	similar	provisions.

In	addition,	we	are	subject	to	laws	and	regulations	worldwide,	including	the U.S.	Foreign	Corrupt	Practices	Act	and	the	U.K.	Bribery	Act,	relating	to corrupt	 and	 illegal	 payments	 to,	 and	 hiring	 practices	 with	 regard	 to, government	officials	and	others.	The	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.	Data	Protection	Directive,	the Japanese	Personal	Information	Protection	Act,	the	Hong	Kong	Personal Data	(Privacy)	Ordinance,	 the	Australian	Privacy	Act	and	 the	Brazilian Bank	 Secrecy	 Law.	 Effective	 May	 25,	 2018,	 the	 E.U.	 Data	 Protection Directive	will	be	replaced	by	a	more	extensive	General	Data	Protection Regulation	(GDPR).	Compared	to	the	current	directive,	the	GDPR	will, among	other	 things,	 increase	compliance	obligations,	have	a	significant impact	on	our	businesses'	collection,	processing	and	retention	of	personal data	and	reporting	of	data	breaches,	and	provide	for	significantly	increased penalties	for	non-compliance.

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,	which	became	effective	on	January	3,	2018,	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	controls	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.

On	October	26,	2017,	the	SEC	staff	issued	guidance	permitting	U.S.	broker- dealers	to	comply	with	MiFID	II	without	being	subject	to	conflicting	U.S. regulation	or	other	adverse	U.S.	regulatory	effects.

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,	ESMA	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.

# Available	Information

Our	internet	address	is	www.gs.com	and	the	investor	relations	section	of our	 website	 is	 located	 at	www.gs.com/shareholders.	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)	and	other	social	media	channels	as	additional means	of	disclosing	public	information	to	investors,	the	media	and	others interested	in	Goldman	Sachs.	It	is	possible	that	certain	information	we	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	post	on our	 website	 and	 on	 the	 social	 media	 channels	 identified	 above.	 The information	 on	 our	 website	 and	 our	 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	total	loss-absorbing	capacity	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	 Notes 27 and 18, respectively,	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	firm	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	 the	 estimated effects	of	the	Tax	Cuts	and	Jobs	Act	(Tax	Legislation),	statements	about our	average	LCR	and	statements	about	our	strategic	growth	initiatives.

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	the	estimated	effects	of	Tax	Legislation	are	based	on	our current	calculations,	as	well	as	our	current	interpretations,	assumptions	and expectations	 relating	 to	 Tax	 Legislation,	 which	 are	 subject	 to	 further guidance	and	change.	The	impact	of	Tax	Legislation	may	differ	from	our estimates,	possibly	materially,	due	to,	among	other	things,	(i)	refinement	of our	calculations	based	on	updated	information,	(ii)	changes	in	interpretations and	assumptions,	(iii)	guidance	that	may	be	issued	and	(iv)	actions	we	may take	as	a	result	of	Tax	Legislation.

Statements	about	our	strategic	growth	initiatives	are	subject	to	the	risk	that our	businesses	may	be	unable	to	generate	incremental	revenues	or	pre-tax earnings	or	take	advantage	of	growth	opportunities.	It	is	possible	that	our actual	results,	including	the	incremental	revenues	and	pre-tax	earnings,	if any,	 from	 such	 initiatives,	 and	 financial	 condition,	 may	 differ,	 possibly materially,	from	the	anticipated	results,	financial	condition	and	incremental revenues	and	pre-tax	earnings	indicated	in	these	forward-looking	statements.

We	have	provided	in	this	filing	information	regarding	our	capital,	liquidity and	leverage	ratios,	including	our	NSFR.	The	statements	with	respect	to these	 ratios	 are	 forward-looking	 statements,	 based	 on	 our	 current interpretation,	expectations	and	understandings	of	the	relevant	regulatory rules,	 guidance	 and	 proposals,	 and	 reflect	 significant	 assumptions concerning	the	treatment	of	various	assets	and	liabilities	and	the	manner	in which	the	ratios	are	calculated.	As	a	result,	the	methods	used	to	calculate these	ratios	may	differ,	possibly	materially,	from	those	used	in	calculating our	and,	where	applicable,	GS	Bank	USA's	capital,	liquidity	and	leverage ratios	for	any	future	disclosures.	The	ultimate	methods	of	calculating	the ratios	will	depend	on,	among	other	 things,	 implementation	guidance	or further	rulemaking	from	the	U.S.	federal	bank	regulatory	agencies	and	the development	of	market	practices	and	standards.

# Item	1A.				Risk	Factors

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

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

Our	businesses,	by	their	nature,	do	not	produce	predictable	earnings,	and all	of	our	businesses	are	materially	affected	by	conditions	in	the	global financial	 markets	 and	 economic	 conditions	 generally,	 both	 directly	 and through	their	impact	on	client	activity	levels.	These	conditions	can	change suddenly	and	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	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;	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,	about	the	impact	of	Brexit,	and	about	changes	in interest	rates	and	other	market	conditions	or	actual	changes	in	interest	rates and	other	market	conditions,	 including	market	conditions	 in	China,	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.

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.

Although	 interest	 rates	 are	 still	 near	 historically	 low	 levels,	 financial institution	returns	in	many	countries	have	also	been	negatively	impacted by	 increased	 funding	 costs	 due	 in	 part	 to	 the	 withdrawal	 of	 perceived government	support	of	such	 institutions	 in	 the	event	of	future	financial crises.	 In	 addition,	 liquidity	 in	 the	 financial	 markets	 has	 also	 been negatively	 impacted	 as	 market	 participants	 and	 market	 practices	 and structures	continue	to	adjust	to	new	regulations.

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

# 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	eventually	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,	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	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.

We	are	also	subject	to	laws	and	regulations	relating	to	the	privacy	of	the information	of	clients,	employees	or	others,	and	any	failure	to	comply	with these	laws	and	regulations	could	expose	us	to	liability	and/or	reputational damage.	As	new	privacy-related	laws	and	regulations,	such	as	the	GDPR, 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	recently	entered	new	retail-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	retail	clients	is	often	much	greater	than	that	associated with	 doing	 business	 with	 institutions	 and	high-net-worth	 clients. 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	continue	to	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 b y	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.	To	the extent	 that	clients	do	not	withdraw	 their	funds,	 they	may	 invest	 them	 in products	that	generate	less	fee	income.

# Our	investment	management	business	may	be	affected	by	the poor	investment	performance	of	our	investment	products	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	recently	expanded	and	intend	to	continue	to	expand	the	product and	geographic	scope	of	our	offerings	of	credit	products	to	retail	clients,	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.	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 across	our	firm,	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	 2017,	 in	 the	 event	 of	 a	one-notch	 and	two-notch downgrade	of	our	credit	ratings	our	counterparties	could	have	called	for additional	collateral	or	termination	payments	related	to	our	net	derivative liabilities	 under	 bilateral	 agreements	 in	 an	 aggregate	 amount	 of $358	 million	 and	 $1.86	 billion,	 respectively.	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	 new	 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	 until implementation	of	post-financial	crisis	regulatory	reform	is	complete.

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

Due	to	the	broad	scope	of	our	businesses	and	our	client	base,	we	regularly address	 potential	 conflicts	 of	 interest,	 including	 situations	 where	 our services	 to	 a	 particular	 client	 or	 our	 own	 investments	 or	 other	 interests conflict,	or	are	perceived	to	conflict,	with	the	interests	of	another	client,	as well	 as	 situations	 where	 one	 or	 more	 of	 our	 businesses	 have	 access	 to material	non-public	 information	 that	 may	 not	 be	 shared	 with	 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,	 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	report 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	 report	 timely,	 accurate	 and complete	information.	As	reporting	requirements	expand,	compliance	with these	rules	and	regulations	has	become	more	challenging.

As	our	client	base	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.	 It	 has	 been reported	that	there	are	some	fundamental	security	flaws	in	computer	chips found	in	many	types	of	these	computing	devices	and	phones.	Addressing this	issue	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	that	are	not always	caught	immediately	by	our	technological	processes	or	by	our	other procedures	which	are	intended	to	prevent	and	detect	such	errors.	These	can include	calculation	errors,	mistakes	in	addressing	emails,	errors	in	software or	model	development	or	implementation,	or	simple	errors	in	judgment. We	strive	to	eliminate	such	human	errors	through	training,	supervision, technology	and	by	redundant	processes	and	controls.	Human	errors,	even if	promptly	discovered	and	remediated,	can	result	in	material	losses	and liabilities	for	us.

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

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

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

Despite	the	resiliency	plans	and	facilities	we	have	in	place,	our	ability	to conduct	 business	 may	 be	 adversely	 impacted	 by	 a	 disruption	 in	 the infrastructure	that	supports	our	businesses	and	the	communities	in	which	we are	 located.	 This	 may	 include	 a	 disruption	 involving	 electrical,	 satellite, undersea	cable	or	other	communications,	 internet,	 transportation	or	other services	facilities	used	by	us,	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	 retail	 customers.	 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	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	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.

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	likely.

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.	U.S.	regulators	are	considering	and	non-U.S.	authorities	have proposed	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, and	 failure	 to	 address	 shortcomings	 in	 our	 resolution	 plan could	subject	us	to	increased	regulatory	requirements.

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, a	 wholly-owned,	 direct	 subsidiary	 of	 Group	 Inc.	 In	 exchange	 for	 an unsecured	subordinated	funding	note	and	equity	interest,	Group	Inc.	has transferred	 certain	 intercompany	 receivables	 and	 substantially	 all	 of	 its global	 core	 liquid	 assets	 (GCLA)	 to	 Funding	 IHC,	 and	 has	 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	 Protocol, 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	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	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,	 we	 have experienced	 pressure	 to	 extend	 and	 price	 credit	 at	 levels	 that	 may	 not always	fully	compensate	us	for	the	risks	we	take.

The	financial	services	industry	is	highly	interrelated	in	that	a	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	recently	increased	and	intend	to	further	increase	our	retail-oriented deposit-taking	 and	 lending	 activities.	 To	 the	 extent	 we	 engage	 in	 such activities	 or	 similar	 retail-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	retail customers.

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 these	assets	are	being	operated	or	held	or	in	which	we	interact	with	these counterparties.

# 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	by	the	low	levels	of	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	Protocol	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	Protocol,	and	those	implementing regulations	may	result	in	additional	limitations	on	our	ability	to	exercise remedies	 against	 counterparties.	 The	 impact	 of	 the	 ISDA	 Protocol	 and these	 rules	 and	 regulations	 will	 depend	 on	 the	 development	 of	 market practices	and	structures.

Derivative	contracts	and	other	transactions,	including	secondary	bank	loan purchases	 and	 sales,	 entered	 into	 with	 third	 parties	 are	 not	 always confirmed	by	 the	counterparties	or	settled	on	a	 timely	basis.	While	 the transaction	remains	unconfirmed	or	during	any	delay	in	settlement,	we	are subject	 to	 heightened	 credit	 and	 operational	 risk	 and	 in	 the	 event	 of	 a default	may	find	it	more	difficult	to	enforce	our	rights.

In	 addition,	 as	 new	 complex	 derivative	 products	 are	 created,	 covering	 a wider	array	of	underlying	credit	and	other	instruments,	disputes	about	the terms	of	the	underlying	contracts	could	arise,	which	could	impair	our	ability to	effectively	manage	our	risk	exposures	from	these	products	and	subject	us to	increased	costs.	The	provisions	of	the	Dodd-Frank	Act	requiring	central clearing	of	credit	derivatives	and	other	OTC	derivatives,	or	a	market	shift toward	standardized	derivatives,	could	reduce	the	risk	associated	with	such transactions,	but	under	certain	circumstances	could	also	limit	our	ability	to develop	derivatives	that	best	suit	the	needs	of	our	clients	and	to	hedge	our own	 risks,	 and	 could	 adversely	 affect	 our	 profitability	 and	 increase	 our credit	exposure	to	such	platform.

# Certain	 of	 our	 businesses	 and	 our	 funding	 may	 be	 adversely affected	by	changes	in	the	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	a	rate,	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	similar	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,	or	the	underlier ceases	 to	exist	(for	example,	 in	 the	event	 that	LIBOR	 is	discontinued,	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),	 there	 may	 be uncertainty	as	to	the	calculation	of	the	amounts	to	be	paid	to	the	lender, investor	 or	 counterparty,	 depending	 on	 the	 terms	 of	 the	 governing instrument.

Such	changes	in	an	underlier	or	underliers	could	result	in	our	hedges	being ineffective	or	otherwise	result	in	losses	on	a	product	or	having	to	pay	more or	receive	less	on	securities	that	we	own	or	have	issued.	In	addition,	such uncertainty	could	result	in	lengthy	and	costly	litigation.

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

We	face	significant	legal	risks	in	our	businesses,	and	the	volume	of	claims and	amount	of	damages	and	penalties	claimed	in	litigation	and	regulatory proceedings	against	financial	institutions	remain	high.	See	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	staff.	Additionally,	governmental	entities	have	been	and	are plaintiffs	in	certain	of	the	legal	proceedings	in	which	we	are	involved,	and we	may	face	future	actions	or	claims	by	the	same	or	other	governmental entities,	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	 U.S. Foreign	Corrupt	Practices	Act	and	the	U.K.	Bribery	Act,	relating	to	corrupt and	illegal	payments	to,	and	hiring	practices	with	regard	to,	government officials	and	others.	Violation	of	such	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.	 Any	 such resolution	of	a	matter	involving	us	could	lead	to	increased	exposure	to	civil litigation,	could	adversely	affect	our	reputation,	could	result	in	penalties	or limitations	on	our	ability	to	do	business	in	certain	jurisdictions	and	could have	other	negative	effects.

In	 addition,	 the	 U.S.	 Department	 of	 Justice	 has	 announced	 a	 policy	 of requiring	companies	to	provide	investigators	with	all	relevant	facts	relating to	the	individuals	responsible	for	the	alleged	misconduct	in	order	to	qualify for	any	cooperation	credit	in	civil	and	criminal	investigations	of	corporate wrongdoing,	 which	 may	 result	 in	 our	 incurring	 increased	 fines	 and penalties	 if	 the	 Department	 of	 Justice	 determines	 that	 we	 have	 not provided	sufficient	information	about	applicable	individuals	in	connection with	 an	 investigation,	 as	 well	 as	 increased	 costs	 in	 responding	 to Department	of	Justice	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	profitability	of	our investments.

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

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

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

We	may	also	be	required	to	divest	or	discontinue	certain	of	these	activities for	 regulatory	 or	 legal	 reasons.	 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.

In	March	2017,	the	U.K.	notified	the	European	Council	of	its	decision	to leave	 the	 E.U.	 (Brexit).	 The	 exit	 of	 the	 U.K.	 from	 the	 E.U.	 will	 likely change	the	arrangements	by	which	U.K.	firms	are	able	to	provide	services into	the	E.U.,	which	may	materially	adversely	affect	the	manner	in	which	we operate	 certain	 of	 our	 businesses	 in	 Europe	 and	 could	 require	 us	 to restructure	 certain	 of	 our	 operations.	 The	 outcome	 of	 the	 negotiations between	the	U.K.	and	the	E.U.	in	connection	with	Brexit	is	highly	uncertain. Such	uncertainty	may	result	in	market	volatility	and	may	negatively	impact the	 confidence	 of	 investors	 and	 clients.	 Additionally,	 depending	 on	 the outcome,	Brexit	could	have	a	disproportionate	effect	on	our	operations	in the	E.U.	compared	to	some	of	our	competitors	who	have	more	extensive pre-existing	operations	in	the	E.U.	outside	of	the	U.K.

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	 U.S.	 Foreign	 Corrupt Practices	Act,	the	USA	PATRIOT	Act	and	U.K.	Bribery	Act.	While	we have	invested	and	continue	to	invest	significant	resources	in	training	and	in compliance	 monitoring,	 the	 geographical	 diversity	 of	 our	 operations, employees,	clients	and	customers,	as	well	as	the	vendors	and	other	third parties	that	we	deal	with,	greatly	increases	the	risk	that	we	may	be	found in	 violation	 of	 such	 rules	 or	 regulations	 and	 any	 such	 violation	 could subject	us	to	significant	penalties	or	adversely	affect	our	reputation.

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

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

The	 occurrence	 of	 unforeseen	 or	 catastrophic	 events,	 including	 the emergence	 of	 a	 pandemic,	 such	 as	 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	comprise	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	comprise	approximately	2.9	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	2021.	In	total,	we	have	offices with	approximately	1.2	million	square	feet	in	London,	relating	to	various properties.	We	are	currently	constructing	a	1.1	million	square	foot	office	in London.	We	expect	initial	occupancy	during	2019.

In	Asia,	Australia	and	New	Zealand,	we	have	offices	with	approximately 1.9	million	square	feet.	Our	headquarters	in	this	region	are	in	Tokyo,	at	the Roppongi	 Hills	 Mori	 Tower,	 and	 in	 Hong	 Kong,	 at	 the	 Cheung	 Kong Center.	 In	 Japan,	 we	 currently	 have	 offices	 with	 approximately	 219,000 square	feet,	the	majority	of	which	have	leases	that	will	expire	in	2023.	In Hong	Kong,	we	currently	have	offices	with	approximately	308,000	square feet,	the	majority	of	which	will	also	expire	in	2023.

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	associated	with	office	space	held	in excess	of	our	current	requirements.	This	excess	space,	the	cost	of	which	is charged	to	earnings	as	incurred,	is	being	held	for	potential	growth	or	to replace	 currently	 occupied	 space	 that	 we	 may	 exit	 in	 the	 future.	 We regularly	evaluate	our	space	capacity	in	relation	to	current	and	projected staffing	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	exit	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.

# 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.

# Lloyd	C.	Blankfein,	63

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

# R.	Martin	Chavez,	53

Mr.	 Chavez	 has	 been	 an	 Executive	Vice	 President	 and	 Chief	 Financial Officer	since	May	2017.	He	had	previously	served	as	Chief	Information Officer	since	2014.	From	2012	to	2014,	he	was	Global	co-Chief	Operating Officer	of	the	Equities	business.

# Richard	J.	Gnodde,	57

Mr.	 Gnodde	 has	 been	 a	 Vice	 Chairman	 since	 January	 2017,	 and	 Chief Executive	 Officer	 or	co-Chief	 Executive	 Officer	 of	 Goldman	 Sachs International	since	2006.	He	previously	served	as	co-head	of	the	Investment Banking	Division	from	2011	to	May	2017.

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	2007.

Mr.	 Palm	 has	 been	 General	 Counsel	 and	 Head	 or	Co-Head	 of	 the	 Legal Department	 since	 1992,	 and	 an	 Executive	 Vice	 President	 and	 Secretary since	1999.

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

Mr.	 Salame	 has	 been	 a	 Vice	 Chairman	 since January	 2017	 and	 global co-head	of	the	Securities	Division	since	2008.

# Harvey	M.	Schwartz,	53

Mr.	 Schwartz	 has	 been	 President	 and	co-Chief	 Operating	 Officer	 since January	2017.	He	also	served	as	Chief	Financial	Officer	from	January	2013 through	April	2017.	From	February	2008	to	January	2013,	he	was	global co-head	of	the	Securities	Division.

# Karen	P.	Seymour,	56

Ms.	Seymour	has	been	an	Executive	Vice	President,	General	Counsel	and Secretary,	and	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,	56

Mr.	 Solomon	 has	 been	 President	 and	co-Chief	 Operating	 Officer	 since January	 2017.	 He	 had	 previously	 served	 as	co-head	 of	 the	 Investment Banking	Division	since	July	2006.

# PART	II

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

The	principal	market	on	which	our	common	stock	is	traded	is	the	NYSE. Information	 relating	 to	 the	 high	 and	 low	 sales	 prices	 per	 share	 of	 our common	stock,	as	reported	by	the	Consolidated	Tape	Association,	for	each full	 quarterly	 period	 during	 2015,	 2016	 and	 2017	 is	 set	 forth	 in "Supplemental	Financial	Information	—	Common	Stock	Price	Range"	in Part	 II,	 Item	 8	 of	 this	Form	10-K.	As	of	February	9,	2018,	 there	were 7,652	holders	of	record	of	our	common	stock.

The	table	below	presents	dividends	declared	by	Group	Inc.	during	2017 and	2016.

|  | Date	of	Declaration | Dividend	Declared<br>Per	Common	Share |
| :--- | :--- | :--- |
| 2017 |  |  |
| First\tQuarter | January\t17,\t2017 | $0.65 |
| Second\tQuarter | April\t17,\t2017 | $0.75 |
| Third\tQuarter | July\t17,\t2017 | $0.75 |
| Fourth\tQuarter | October\t16,\t2017 | $0.75 |
| 2016 |  |  |
| First\tQuarter | January\t19,\t2016 | $0.65 |
| Second\tQuarter | April\t18,\t2016 | $0.65 |
| Third\tQuarter | July\t18,\t2016 | $0.65 |
| Fourth\tQuarter | October\t17,\t2016 | $0.65 |

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.	See	"Business	—	Regulation"	in	Part	I,	Item	1	of this	Form	10-K	for	information	about	potential	regulatory	limitations	on our	receipt	of	funds	from	our	regulated	subsidiaries	and	our	payment	of dividends	to	shareholders	of	Group	Inc.	Prior	to	the	payment	of	dividends, we	 must	 receive	 confirmation	 that	 the	 FRB	 does	 not	 object	 to	 such payment.

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	 2017. 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.

|  | Total<br>Shares<br>Purchased | Average<br>Price	Paid<br>Per	Share | Total	Shares<br>Purchased<br>as	Part	of<br>a	Publicly<br>Announced<br>Program | Maximum<br>Shares	That<br>May	Yet	Be<br>Purchased<br>Under	the<br>Program |
| :--- | :--- | :--- | :--- | :--- |
| October\t2017 | \t\t 3,021,930 | $241.88 | 3,021,930 | 51,180,272 |
| November\t2017 | \t\t 3,424,899 | $240.23 | 3,424,899 | 47,755,373 |
| December\t2017 | 128,943 | $247.68 | 128,943 | 47,626,430 |
| Total | \t\t 6,575,772 |  | 6,575,772 |  |

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.

# Item	6.				Selected	Financial	Data

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

# 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	"the	firm,"	"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"	below	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,	2017.	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	2017,	2016	and	2015 refer	 to	 our	 years	 ended,	 or	 the	 dates,	 as	 the	 context	 requires, December 31, 2017,	 December 31, 2016	 and	 December 31, 2015, respectively.	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	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	Notes	27	and	18,	respectively, to	 the	 consolidated	 financial	 statements,	 as	 well	 as	 statements	 about	 the results	of	our	Dodd-Frank	Act	and	firm	stress	tests,	statements	about	the objectives	 and	 effectiveness	 of	 our	 business	 continuity	 plan,	 information security	program,	risk	management	and	liquidity	policies,	statements	about 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	the	estimated effects	of	the	Tax	Cuts	and	Jobs	Act	(Tax	Legislation),	statements	about	our average	Liquidity	Coverage	Ratio	(LCR)	and	statements	about	our	strategic growth	initiatives.

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.

# Management's	Discussion	and	Analysis

# Executive	Overview

In	 the	 fourth	 quarter	 of	 2017,	 we	 recorded	 $4.40	 billion	 of	 estimated income	 tax	expense	related	 to	Tax	Legislation.	Excluding	 this	expense, diluted	earnings	per	common	share	were	$19.76	and	return	on	average common	 shareholders'	 equity	 was 10.8% for	 2017.	 See	 "Results	 of Operations	—	Financial	Overview"	below	for	further	information	about these	non-GAAP	measures,	including	the	calculation	of	diluted	earnings per	common	share	and	return	on	average	common	shareholders'	equity, excluding	 the	 estimated	 impact	 of	 Tax	 Legislation.	 See	 "Results	 of Operations	—	Provision	for	Taxes"	below	for	further	information	about Tax	Legislation.

Net	revenues	were	$32.07	billion	for	2017,	5%	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	 Fixed Income,	 Currency	 and	 Commodities	 Client	 Execution	 (FICC	 Client Execution).

Operating	expenses	were	$20.94	billion	for	2017,	3%	higher	than	2016, due	to	slightly	higher	non-compensation	expenses	and	compensation	and benefits	expenses.

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.	 Our	 Common	 Equity	Tier	 1	 (CET1)	 ratio	 as calculated	in	accordance	with	the	Standardized	approach	and	the	Basel	III Advanced	 approach,	 in	 each	 case	 reflecting	 the	 applicable	 transitional provisions,	was	12.1%	and	10.9%,	respectively,	as	of	December	2017.	See Note	20	to	the	consolidated	financial	statements	for	further	information about	our	capital	ratios.

In	2017,	we	announced	strategic	growth	initiatives	with	an	emphasis	on growing	 earnings	 and	 returns.	 To	 accomplish	 these	 initiatives,	 we	 will continue	to	make	investments	in	our	businesses,	including	in	technology and	talent,	while	exploring	new	opportunities.	We	estimate	these	initiatives could	generate	$5	billion	of	incremental	net	revenues	and	$2.5	billion	of incremental	pre-tax	earnings	in	2020.

Net	revenues	were	$30.61	billion	for	2016,	9%	 lower	 than	2015,	due	 to significantly	 lower	 net	 revenues	 in	 Investing	 &	 Lending	 and	 lower	 net revenues	 in	 Investment	 Banking,	 Institutional	 Client	 Services	 and Investment	Management.	These	results	reflected	the	impact	of	a	challenging operating	environment	during	the	first	half	of	2016,	particularly	during	the first	quarter,	although	the	environment	improved	during	the	second	half	of the	year.

Operating	expenses	were	$20.30	billion	for	2016,	19%	lower	 than	2015, primarily	due	to	significantly	lower	non-compensation	expenses,	primarily reflecting	significantly	lower	net	provisions	for	mortgage-related	litigation and	regulatory	matters,	as	2015	included	provisions	related	to	the	settlement agreement	with	the	Residential	Mortgage-Backed	Securities	Working	Group of	 the	 U.S.	 Financial	 Fraud	 Enforcement	 Task	 Force	 (RMBS	 Working Group),	as	well	as	 lower	market	development	expenses	and	professional fees,	 reflecting	 expense	 savings	 initiatives.	 Compensation	 and	 benefits expenses	 were	 also	 lower,	 reflecting	 a	 decrease	 in	 net	 revenues	 and	 the impact	of	expense	savings	initiatives.

We	returned	$7.20	billion	of	capital	to	common	shareholders	during	2016, including	$6.07	billion	of	common	share	repurchases	and	$1.13	billion	in common	stock	dividends.	Our	CET1	ratio	as	calculated	in	accordance	with the	Standardized	approach	and	the	Basel	III	Advanced	approach,	in	each case	reflecting	the	applicable	transitional	provisions,	was	14.5%	and	13.1%, respectively,	 as	 of	 December	 2016.	 See	 Note 20 to	 the	 consolidated financial	statements	for	further	information	about	our	capital	ratios.

# Business	Environment

# Global

During	 2017,	 real	 gross	 domestic	 product	 (GDP)	 growth	 appeared	 to generally	 increase	 compared	 to	 2016	 in	 both	 advanced	 and	 emerging market	economies.	In	advanced	economies,	real	GDP	growth	was	higher	in the	U.S.,	the	Euro	area	and	Japan,	but	decreased	slightly	in	the	U.K.	In emerging	 markets,	 real	 GDP	 growth	 increased	 slightly	 in	 China	 and appeared	to	decrease	in	India.	Real	GDP	appeared	to	grow	in	Russia	and Brazil	 compared with contractions in 2016. Broadly, global macroeconomic	data	remained	strong	throughout	2017,	and	volatility	in equity,	fixed	income,	currency	and	commodity	markets	was	low.	Major elections	were	held	in	France,	the	U.K.,	Germany	and	China,	but	none	of these	events	resulted	in	significant	volatility	across	markets.	Major	central banks	continued	to	gradually	tighten	their	stance	on	monetary	policy,	as the	U.S.	Federal	Reserve	increased	its	target	interest	rate	three	times	and began	the	process	of	balance	sheet	normalization.	In	investment	banking, industry-wide	 announced	 and	 completed	 mergers	 and	 acquisitions transactions	 remained	 solid	 during	 2017,	 although	 volumes	 declined compared	 with	 2016.	 Industry-wide	 offerings	 in	 equity	 underwriting increased	 significantly	 compared	 with	 2016,	 and	 industry-wide	 debt underwriting	offerings	remained	strong,	particularly	in	leveraged	finance activity.

# United	States

In	 the	 U.S.,	 real	 GDP	 increased	 by	 2.3%	 in	 2017,	 compared	 with	 an increase	 of 1.5% in	 2016,	 as	 growth	 in	 business	 fixed	 investment increased.	 Measures	 of	 consumer	 confidence	 were	 stronger	 on	 average compared	with	the	prior	year,	and	the	unemployment	rate	declined	to	4.1% as	of	December	2017.	Housing	starts,	sales	and	prices	increased	compared with	 2016,	 while	 measures	 of	 inflation	 were	 mixed.	 The	 U.S.	 Federal Reserve	 increased	 its	 target	 rate	 for	 the	 federal	 funds	 rate	 by	 25	 basis points	at	each	of	the	March,	June	and	December	meetings	to	end	the	year at	 a	 target	 range	 of	 1.25%	 to	 1.50%.	 In	 September,	 the	 U.S.	 Federal Reserve	formally	announced	the	process	of	balance	sheet	normalization. Previously,	 the	 U.S.	 Federal	 Reserve	 reinvested	 all	 proceeds	 from	 the maturity	of	bonds	on	its	balance	sheet,	but	since	October	2017,	$6	billion of	U.S.	Treasury	securities	and	$4	billion	of	agency	debt	and	mortgage- backed	 securities	 matured	 each	 month	 without	 reinvestment	 of	 the proceeds.	These	monthly	allowances	are	expected	to	rise	gradually	over time	to	peak	levels	of	$30	billion	and	$20	billion,	respectively.	The	yield on	the	10-year	U.S.	Treasury	note	decreased	by	5	basis	points	during	2017 to	2.40%.	The	price	of	natural	gas	decreased	by	21%	compared	to	the	end of	2016	to	$2.95	per	million	British	thermal	units	and	the	price	of	crude	oil (WTI)	 increased	 by	 12%	 to	 approximately	 $60	 per	 barrel.	 In	 equity markets,	 the	 NASDAQ	 Composite	 Index,	 the	 Dow	 Jones	 Industrial Average	 and	 the	 S&P	 500	 Index	 increased	 by	 28%,	 25%	 and	 19%, respectively,	during	2017.

# Europe

In	the	Euro	area,	real	GDP	increased	by	2.5%	in	2017,	compared	with	an increase	of	1.7%	in	2016.	Net	exports	improved,	while	growth	in	consumer spending	 and	 fixed	 investment	 slowed	 slightly.	 Measures	 of	 inflation remained	 subdued,	 prompting	 the	 European	 Central	 Bank	 (ECB)	 to announce	an	extension	of	its	asset	purchase	program	in	the	fourth	quarter	of 2017,	 although	 the	 pace	 of	 its	 monthly	 asset	 purchases	 decreased	 from €60	billion	to	€30	billion	beginning	in	January	2018.	The	ECB	maintained its	main	refinancing	operations	rate	at	0.00%	and	its	deposit	rate	at	(0.40%). The	 Euro	 appreciated	 by	 14%	 against	 the	 U.S.	 dollar.	Yields	 on	10-year government	bonds	in	the	Euro	area	generally	increased	during	the	year.	In equity	markets,	the	DAX	Index,	CAC	40	Index	and	Euro	Stoxx	50	Index increased	by	13%,	9%	and	6%,	respectively,	during	2017.	During	2017,	the process	of	negotiating	an	arrangement	for	the	withdrawal	of	the	U.K.	from the	E.U.	began,	resulting	in	an	agreement	on	certain	issues	in	December	as negotiations	 shifted	 to	 transitional	 arrangements.	 In	 the	 U.K.,	 real	 GDP increased	by	1.7%	in	2017,	compared	with	an	increase	of	1.9%	in	2016. Inflation	increased	materially	in	2017	prompting	the	Bank	of	England	to raise	 the	official	bank	rate	by	25	basis	points	 in	November.	The	British pound	appreciated	by	10%	against	the	U.S.	dollar	during	2017.	Yields	on 10-year	government	bonds	in	the	U.K.	decreased	slightly	during	the	year and,	in	equity	markets,	the	FTSE	100	Index	increased	by	8%	during	2017.

In	Japan,	real	GDP	increased	by	1.6%	in	2017,	compared	with	an	increase	of 0.9%	in	2016.	The	Bank	of	Japan	maintained	its	negative	interest	rate	policy and	continued	to	target	a	yield	on	10-year	Japanese	government	bonds	of approximately	0%.	The	yield	on	10-year	Japanese	government	bonds	was essentially	 unchanged,	 the	 U.S.	 dollar	 depreciated	 by 4% against	 the Japanese	yen	and	the	Nikkei	225	Index	increased	by	19%	in	2017.	In	China, real	GDP	increased	by	6.9%	in	2017,	compared	with	an	increase	of	6.7%	in 2016.	The	People's	Bank	of	China	slightly	tightened	its	stance	on	monetary policy	in	early	2017.	Measures	of	inflation	decreased	and	the	U.S.	dollar depreciated	by	6%	against	the	Chinese	yuan.	In	equity	markets,	the	Hang Seng	Index	and	the	Shanghai	Composite	Index	increased	by	36%	and	7%, respectively,	during	2017.	In	India,	real	GDP	appeared	to	increase	by	6.2% in	 2017,	 compared	 with	 an	 increase	 of	 7.9%	 in	 2016,	 and	 the	 rate	 of inflation	decreased	compared	with	2016.	The	U.S.	dollar	depreciated	by	6% against	the	Indian	rupee	and	the	BSE	Sensex	Index	increased	by	28%	during 2017.

# Other	Markets

In	Brazil,	real	GDP	appeared	to	increase	by	1.1%	in	2017,	compared	with	a contraction	of	3.5%	in	2016.	The	U.S.	dollar	appreciated	by	2%	against	the Brazilian	real	and	the	Bovespa	Index	increased	by	27%.	In	Russia,	real GDP	appeared	to	increase	by	1.5%	in	2017,	compared	with	a	contraction of	0.2%	in	2016.	The	U.S.	dollar	depreciated	by	6%	against	the	Russian ruble	and	the	MICEX	Index	decreased	by	6%	during	2017.

# Critical	Accounting	Policies

# Fair	Value

Fair	 Value	 Hierarchy. Financial	 instruments	 owned	 and	 financial instruments	sold,	but	not	yet	purchased	(i.e.,	inventory),	as	well	as	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.	 As	 of December	2017	and	December	2016,	 level	3	financial	assets	represented 2.1%	and	2.7%,	respectively,	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	control and	 support	 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	control	and	support	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	control	and	support	functions ensure	 adherence	 to	 our	 pricing	 policy	 through	 a	 combination	 of	 daily procedures,	including	the	explanation	and	attribution	of	net	revenues	based on	the	underlying	factors.	Through	this	process,	we	independently	validate net	revenues,	 identify	and	resolve	potential	fair	value	or	 trade	booking issues	on	a	timely	basis	and	seek	to	ensure	that	risks	are	being	properly categorized	and	quantified.

Review	of	Valuation	Models.	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	2017,	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	or	our	performance,	or	additional	increases in	capital	requirements,	our	goodwill	could	be	impaired	in	the	future.	In addition,	significant	changes	to	other	inputs	of	the	quantitative	goodwill test	could	cause	the	estimated	fair	value	of	our	reporting	units	to	decline, which	could	result	in	an	impairment	of	goodwill	in	the	future.

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	income	tax	expense	related	to	Tax	Legislation,	provisions	for losses	that	may	arise	from	litigation	and	regulatory	proceedings	(including governmental	investigations),	the	allowance	for	losses	on	loans	receivable and	lending	commitments	held	for	investment,	and	provisions	for	losses	that may	arise	from	tax	audits.

We	estimate	and	provide	for	potential	losses	that	may	arise	out	of	litigation and	regulatory	proceedings	to	the	extent	that	such	losses	are	probable	and can	be	reasonably	estimated.	In	addition,	we	estimate	the	upper	end	of	the range	of	reasonably	possible	aggregate	loss	in	excess	of	the	related	reserves for	litigation	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	recorded	an	estimated	impact	of	Tax Legislation.	 We	 have	 made	 assumptions	 and	 judgments	 regarding interpretations	 of	Tax	 Legislation.	 In	 addition,	 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.

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

# 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	our	financial	results	and	selected financial	ratios.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions,\texcept\tper\tshare\tamounts | 2017 | 2016 | 2015 |
| Net\trevenues | \t\t$32,073\t\t\t$30,608\t\t\t$33,820 | \t\t$32,073\t\t\t$30,608\t\t\t$33,820 | \t\t$32,073\t\t\t$30,608\t\t\t$33,820 |
| Pre-tax\tearnings | \t\t$11,132\t\t\t$10,304\t\t\t$\t\t8,778 | \t\t$11,132\t\t\t$10,304\t\t\t$\t\t8,778 | \t\t$11,132\t\t\t$10,304\t\t\t$\t\t8,778 |
| Net\tearnings | \t\t$\t\t4,286\t\t\t$\t\t7,398\t\t\t$\t\t6,083 | \t\t$\t\t4,286\t\t\t$\t\t7,398\t\t\t$\t\t6,083 | \t\t$\t\t4,286\t\t\t$\t\t7,398\t\t\t$\t\t6,083 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders | \t\t$\t\t3,685\t\t\t$\t\t7,087\t\t\t$\t\t5,568 | \t\t$\t\t3,685\t\t\t$\t\t7,087\t\t\t$\t\t5,568 | \t\t$\t\t3,685\t\t\t$\t\t7,087\t\t\t$\t\t5,568 |
| Diluted\tearnings\tper\tcommon\tshare | \t\t$\t\t\t\t9.01\t\t\t$\t\t16.29\t\t\t$\t\t12.14 | \t\t$\t\t\t\t9.01\t\t\t$\t\t16.29\t\t\t$\t\t12.14 | \t\t$\t\t\t\t9.01\t\t\t$\t\t16.29\t\t\t$\t\t12.14 |
| Return\ton\taverage\tcommon\tshareholders'\tequity | 4.9% | 9.4% | 7.4% |
| Net\tearnings\tto\taverage\ttotal\tassets | 0.5% | 0.8% | 0.7% |
| Return\ton\taverage\ttotal\tshareholders'\tequity | 5.0% | 8.5% | 7.0% |
| Total\taverage\tshareholders'\tequity\tto\taverage |  |  |  |
| total\tassets | 9.5% | 9.8% | 9.9% |
| Dividend\tpayout\tratio | 32.2% | 16.0% | 21.0% |

•	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.

•	Return	 on	 average	 common	 shareholders'	 equity	 is	 calculated	 by dividing	 net	 earnings	 applicable	 to	 common	 shareholders	 by	 average monthly	 common	 shareholders'	 equity.	 Return	 on	 average	 total shareholders'	equity	is	calculated	by	dividing	net	earnings	by	average monthly	total	shareholders'	equity.	The	table	below	presents	our	average common	and	total	shareholders'	equity.

|  | Average	for	the	Year	Ended	December | Average	for	the	Year	Ended	December | Average	for	the	Year	Ended	December |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Total\tshareholders'\tequity | \t$\t85,959 | \t$\t86,658 | \t$\t86,314 |
| Preferred\tstock | (11,238) | (11,304) | (10,585) |
| Common\tshareholders'\tequity | \t$\t74,721 | \t$\t75,354 | \t$\t75,729 |

•	In	 2017,	 we	 recorded	 $4.40	 billion	 of	 estimated	 income	 tax	 expense related	to	Tax	Legislation.	Excluding	this	expense,	diluted	earnings	per common	share	were	$19.76	and	return	on	average	common	shareholders' equity	 was 10.8% for	 2017.	 We	 believe	 that	 presenting	 our	 results excluding	Tax	Legislation	is	meaningful	as	excluding	this	item	increases the comparability of	period-to-period	 results.	 See	 "Results	 of Operations	—	Provision	for	Taxes"	below	for	further	information	about Tax	 Legislation.	 Diluted	 earnings	 per	 common	 share	 and	 return	 on average	common	shareholders'	equity,	excluding	the	estimated	impact	of 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	estimated	impact	of	Tax	Legislation.

| in	millions,	except	per	share	amounts | Year	Ended<br>December	2017 |
| :--- | :--- |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders,\tas\treported | $\t\t3,685 |
| Estimated\timpact\tof\tTax\tLegislation | 4,400 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders,\texcluding\tthe |  |
| estimated\timpact\tof\tTax\tLegislation | $\t\t8,085 |
| Divided\tby\taverage\tdiluted\tcommon\tshares | 409.1 |
| Diluted\tearnings\tper\tcommon\tshare,\texcluding\tthe |  |
| estimated\timpact\tof\tTax\tLegislation | $\t\t19.76 |

| $	in	millions | Average	for	the<br>Year	Ended	December	2017 |
| :--- | :--- |
| Common\tshareholders'\tequity,\tas\treported | $74,721 |
| Estimated\timpact\tof\tTax\tLegislation | 338 |
| Common\tshareholders'\tequity,\texcluding\tthe |  |
| estimated\timpact\tof\tTax\tLegislation | $75,059 |

•	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	return	on	average common	 shareholders'	 equity	 by	 approximately	 1.0	 percentage	 points. See	Note	3	to	the	consolidated	financial	statements	for	further	information about	this	ASU.

•	In	2015,	we	recorded	provisions	of	$3.37	billion	related	to	the	settlement agreement	 with	 the	 RMBS	 Working	 Group,	 which	 reduced	 diluted earnings	 per	 common	 share	 by	 $6.53	 and	 return	 on	 average	 common shareholders'	equity	by	3.8	percentage	points	for	2015.	See	Note	27	to	the consolidated	financial	statements	in	Part	II,	Item	8	of	our	Annual	Report o n	Form	 10-K	 for	 the	 year	 ended	 December 31, 2015	 for	 further information.

# Net	Revenues

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

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Investment\tbanking | \t\t$\t\t7,371 | \t$\t\t6,273 | \t$\t\t7,027 |
| Investment\tmanagement | 5,803 | 5,407 | 5,868 |
| Commissions\tand\tfees | 3,051 | 3,208 | 3,320 |
| Market\tmaking | 7,660 | 9,933 | 9,523 |
| Other\tprincipal\ttransactions | 5,256 | 3,200 | 5,018 |
| Total\tnon-interest\trevenues | 29,141 | 28,021 | 30,756 |
| Interest\tincome | 13,113 | 9,691 | 8,452 |
| Interest\texpense | 10,181 | 7,104 | 5,388 |
| Net\tinterest\tincome | 2,932 | 2,587 | 3,064 |
| Total\tnet\trevenues | \t\t$32,073 | \t$30,608 | \t$33,820 |

•	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.

Operating	Environment.	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,	 particularly	 in	 fixed	 income,	 currency	 and	 commodity products.	The	price	of	natural	gas	decreased	significantly	during	2017,	while the	price	of	oil	increased	compared	with	the	end	of	2016.

If	 the	 trend	 of	 low	 volatility	 continues	 over	 the	 long	 term	 and	 market- making	activity	levels	remain	low,	or	if	investment	banking	activity	levels, asset	prices	or	assets	under	supervision	decline,	net	revenues	would	likely be	negatively	impacted.	See	"Segment	Operating	Results"	below	for	further information	 about	 the	 operating	 environment	 and	 material	 trends	 and uncertainties	that	may	impact	our	results	of	operations.

The	 first	 half	 of	 2016	 included	 challenging	 trends	 in	 the	 operating environment	for	our	business	activities	including	concerns	and	uncertainties about	 global	 economic	 growth,	 central	 bank	 activity	 and	 the	 political uncertainty	and	economic	implications	surrounding	the	potential	exit	of	the U.K.	 from	 the	 E.U.	 During	 the	 second	 half	 of	 2016,	 the	 operating environment	 improved,	 as	 global	 equity	 markets	 steadily	 increased	 and investment	 grade	 and	 high-yield	 credit	 spreads	 tightened.	 These	 trends provided	a	more	favorable	backdrop	for	our	business	activities.

Net	revenues	in	the	consolidated	statements	of	earnings	were	$32.07	billion for	2017,	5%	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	$5.26	billion	for	2017,	64%	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.

Net	revenues	in	the	consolidated	statements	of	earnings	were	$30.61	billion for	 2016,	 9%	 lower	 than	 2015,	 reflecting	 the	 impact	 of	 a	 challenging operating	environment	during	the	first	half	of	2016,	particularly	during	the first	quarter,	although	the	environment	improved	during	the	second	half	of the	year.	The	decrease	in	net	revenues	was	primarily	due	to	significantly lower	other	principal	transactions	revenues	and	lower	investment	banking revenues,	 net	 interest	 income	 and	 investment	 management	 revenues.	 In addition,	 commissions	 and	 fees	 were	 slightly	 lower.	 These	 results	 were partially	offset	by	slightly	higher	market	making	revenues.

Non-Interest Revenues. Investment	 banking revenues in the consolidated	statements	of	earnings	were	$6.27	billion	for	2016,	11%	lower compared	with	a	strong	2015.	Revenues	in	financial	advisory	were	lower compared	 with	 a	 strong	 2015,	 reflecting	 a	 decrease	 in	 industry-wide transactions.	Revenues	in	underwriting	were	lower	compared	with	a	strong 2015,	due	to	significantly	lower	revenues	in	equity	underwriting,	reflecting	a decrease	 in	 industry-wide	 volumes.	 Revenues	 in	 debt	 underwriting	 were significantly	 higher,	 reflecting	 significantly	 higher	 revenues	 from	 asset- backed	activity	and	higher	revenues	from	leveraged	finance	activity.

Investment	management	revenues	in	the	consolidated	statements	of	earnings were	 $5.41	 billion	 for	 2016,	 8%	 lower	 than	 2015,	 primarily	 reflecting significantly	lower	incentive	fees	compared	with	a	strong	2015.	In	addition, management	and	other	fees	were	slightly	lower,	reflecting	shifts	in	the	mix of	 client	 assets	 and	 strategies,	 partially	 offset	 by	 the	 impact	 of	 higher average	assets	under	supervision.

Commissions	 and	 fees	 in	 the	 consolidated	 statements	 of	 earnings	 were $3.21	billion	for	2016,	3%	 lower	 than	2015,	reflecting	 lower	 listed	cash equity	volumes	in	Asia	and	Europe,	consistent	with	market	volumes	in	these regions.

Market	making	revenues	 in	 the	consolidated	statements	of	earnings	were $9.93	billion	for	2016,	4%	higher	 than	2015,	due	 to	significantly	higher revenues	in	interest	rate	products	and	credit	products.	These	results	were partially	offset	by	significantly	lower	revenues	in	equity	cash	products	and lower	 revenues	 in	 currencies,	 mortgages,	 equity	 derivative	 products	 and commodities.

Other	 principal	 transactions	 revenues	 in	 the	 consolidated	 statements	 of earnings	were	$3.20	billion	for	2016,	36%	lower	than	2015,	primarily	due to	 significantly	 lower	 revenues	 from	 investments	 in	 equities,	 primarily reflecting	a	significant	decrease	in	net	gains	from	private	equities,	driven by	 company-specific	 events	 and	 corporate	 performance.	 In	 addition, revenues	in	debt	securities	and	loans	were	significantly	lower	compared with	2015,	reflecting	significantly	lower	revenues	related	to	relationship lending	 activities,	 due	 to	 the	 impact	 of	 changes	 in	 credit	 spreads	 on economic	 hedges.	 Losses	 related	 to	 these	 hedges	 were	 $596	 million	 in 2016,	compared	with	gains	of	$329	million	in	2015.	This	decrease	was partially	offset	by	higher	net	gains	from	investments	in	debt	instruments. See	Note	9	to	the	consolidated	financial	statements	for	further	information about	economic	hedges	related	to	our	relationship	lending	activities.

Net	Interest	Income.	Net	interest	income	in	the	consolidated	statements of	earnings	was	$2.59	billion	for	2016,	16%	lower	than	2015,	reflecting	an increase	in	interest	expense	primarily	due	to	the	impact	of	higher	interest rates	 on	 other	 interest-bearing	 liabilities,	 interest-bearing	 deposits	 and collateralized	 financings,	 and	 increases	 in	 total	 average	 long-term borrowings	 and	 total	 average	 interest-bearing	 deposits.	 The	 increase	 in interest	expense	was	partially	offset	by	higher	interest	income	related	to collateralized	agreements,	reflecting	the	impact	of	higher	interest	rates,	and loans	receivable,	reflecting	an	increase	in	total	average	balances	and	the impact	of	higher	interest	rates.	See	"Statistical	Disclosures	—	Distribution of	Assets,	 Liabilities	 and	 Shareholders'	 Equity"	 for	 further	 information about	our	sources	of	net	interest	income.

# Operating	Expenses

Our	 operating	 expenses	 are	 primarily	 influenced	 by	 compensation, headcount	 and	 levels	 of	 business	 activity.	 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.

In	the	context	of	the	challenging	environment,	we	completed	an	initiative during	2016	that	identified	areas	where	we	can	operate	more	efficiently, resulting	in	a	reduction	of	approximately	$900	million	in	annual	run	rate compensation.	For	2016,	net	savings	from	this	initiative,	after	severance and	other	related	costs,	were	approximately	$500	million.

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

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Compensation\tand\tbenefits | \t\t$11,853 | \t$11,647 | \t$12,678 |
| Brokerage,\tclearing,\texchange\tand\tdistribution\tfees | 2,540 | 2,555 | 2,576 |
| Market\tdevelopment | 588 | 457 | 557 |
| Communications\tand\ttechnology | 897 | 809 | 806 |
| Depreciation\tand\tamortization | 1,152 | 998 | 991 |
| Occupancy | 733 | 788 | 772 |
| Professional\tfees | 965 | 882 | 963 |
| Other\texpenses | 2,213 | 2,168 | 5,699 |
| Total\tnon-compensation\texpenses | 9,088 | 8,657 | 12,364 |
| Total\toperating\texpenses | \t\t$20,941 | \t$20,304 | \t$25,042 |
| Total\tstaff\tat\tperiod-end | 36,600 | 34,400 | 36,800 |

In	the	table	above,	other	expenses	for	2015	included	$3.37	billion	recorded for	the	settlement	agreement	with	the	RMBS	Working	Group.	See	Note	27 to	 the	consolidated	financial	statements	 in	Part	II,	Item	8	of	our	Annual Report	 on	Form	10-K	for	the	year	ended	December	31,	2015	for	further information.

2017	versus	2016.	Operating	expenses	in	the	consolidated	statements	of earnings	were	$20.94	billion	for	2017,	3%	higher	than	2016.	Compensation and	 benefits	 expenses	 in	 the	 consolidated	 statements	 of	 earnings	 were $11.85	billion	for	2017,	2%	higher	than	2016.	The	ratio	of	compensation and	benefits	to	net	revenues	for	2017	was	37.0%	compared	with	38.1%	for 2016.

Non-compensation	expenses	in	the	consolidated	statements	of	earnings	were $9.09	 billion for	 2017,	 5%	 higher	 than	 2016,	 primarily	 driven	 by	 our investments	 to	 fund	 growth.	The	 increase	 compared	 with	 2016	 reflected higher	expenses	related	to	consolidated	investments	and	our	digital	lending and	deposit	platform,	Marcus:	by	Goldman	Sachs	(Marcus).	These	increases 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).

Net	 provisions	 for	 litigation	 and	 regulatory	 proceedings	 for	 2017	 were $188	 million compared	 with $396	 million for	 2016.	 2017	 included	 a $127	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	 2017,	 total	 staff	 increased 6% compared	 with December	 2016,	 reflecting	 investments	 in	 technology	 and	 Marcus,	 and support	of	our	regulatory	efforts.

2016	versus	2015.	Operating	expenses	in	the	consolidated	statements	of earnings	 were $20.30 billion	 for	 2016, 19% lower	 than	 2015. Compensation	 and	 benefits	 expenses	 in	 the	 consolidated	 statements	 of earnings	were	$11.65	billion	for	2016,	8%	lower	than	2015,	reflecting	a decrease	in	net	revenues	and	the	impact	of	expense	savings	initiatives.	The ratio	of	compensation	and	benefits	to	net	revenues	for	2016	was	38.1% compared	with	37.5%	for	2015.

Non-compensation	 expenses	 in	 the	 consolidated	 statements	 of	 earnings were	 $8.66	 billion	 for	 2016,	 30%	 lower	 than	 2015,	 primarily	 due	 to significantly	 lower	 net	 provisions	 for	 mortgage-related	 litigation	 and regulatory	 matters,	 which	 are	 included	 in	 other	 expenses.	 In	 addition, market	development	expenses	and	professional	fees	were	lower	compared with	 2015,	 reflecting	 expense	 savings	 initiatives.	 Net	 provisions	 for litigation	and	regulatory	proceedings	for	2016	were	$396	million	compared with	$4.01	billion	for	2015	(2015	primarily	related	to	net	provisions	for mortgage-related	 matters).	 2016	 included	 a $114	 million charitable contribution	to	Goldman	Sachs	Gives.	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	 2016,	 total	 staff	 decreased 7% compared with December	2015,	due	to	expense	savings	initiatives.

# Provision	for	Taxes

The	effective	 income	 tax	rate	for	2017	was	61.5%,	up	from	28.2%	for 2016.	The	increase	compared	with	2016	reflected	the	estimated	impact	of Tax	Legislation,	which	was	enacted	on	December	22,	2017	and,	among other	things,	lowers	U.S.	corporate	income	tax	rates	as	of	January	1,	2018, implements	 a	 territorial	 tax	 system	 and	 imposes	 a	 repatriation	 tax	 on deemed	repatriated	earnings	of	foreign	subsidiaries.	The	estimated	impact of	Tax	Legislation	was	an	increase	in	income	tax	expense	of	$4.40	billion, of	which	$3.32	billion	was	due	to	the	repatriation	tax	and	$1.08	billion	was due	to	the	effects	of	the	implementation	of	the	territorial	tax	system	and	the remeasurement	of	U.S.	deferred	tax	assets	at	lower	enacted	corporate	tax rates.

The	 impact	 of	Tax	 Legislation	 may	 differ	 from	 this	 estimate,	 possibly materially,	due	to,	among	other	things,	(i)	refinement	of	our	calculations based	 on	 updated	 information,	 (ii)	 changes	 in	 interpretations	 and assumptions,	(iii)	guidance	that	may	be	issued	and	(iv)	actions	we	may take	as	a	result	of	Tax	Legislation.

Excluding	the	estimated	impact	of	Tax	Legislation,	the	effective	income	tax rate	for	2017	was	22.0%,	down	from	28.2%	for	2016.	This	decrease	was primarily	 due	 to	 tax	 benefits	 on	 the	 settlement	 of	 employee	 share-based awards	 in	 accordance	 with	 ASU	No.	 2016-09.	 The	 impact	 of	 these settlements	 in	 2017	 was	 a	 reduction	 to	 our	 provision	 for	 taxes	 of $719	 million and	 a	 reduction	 in	 our	 effective	 income	 tax	 rate	 of	 6.4 percentage	points.	See	Note	3	to	the	consolidated	financial	statements	for further	information	about	this	ASU.

The	 effective	 income	 tax	 rate,	 excluding	 the	 estimated	 impact	 of	 Tax Legislation,	is	a	non-GAAP	measure	and	may	not	be	comparable	to	similar non-GAAP	measures	used	by	other	companies.	We	believe	that	presenting our	 effective	 income	 tax	 rate,	 excluding	 the	 estimated	 impact	 of	 Tax Legislation	is	meaningful,	as	excluding	this	item	increases	the	comparability of	period-to-period	results.

The	table	below	presents	the	calculation	of	the	effective	income	tax	rate, excluding	the	estimated	impact	of	Tax	Legislation.

|  | Year	Ended	December	2017 | Year	Ended	December	2017 |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | Pre-tax\nearnings | Provision\nfor\ttaxes | Effective\tincome\ntax\trate |
| As\treported | $11,132 | $6,846 | 61.5% |
| Estimated\timpact\tof\tTax\tLegislation | – | 4,400 | – |
| Excluding\tthe\testimated\timpact\tof\tTax\nLegislation | $11,132 | $2,446 | 22.0% |

The	effective	income	tax	rate	for	2016	was	28.2%,	down	from	30.7%	for 2015.	The	decline	compared	with	2015	was	primarily	due	to	the	impact	of non-deductible	 provisions	 for	 mortgage-related	 litigation	 and	 regulatory matters	 in	2015,	partially	offset	by	 the	 impact	of	changes	 in	 tax	 law	on deferred	tax	assets,	the	mix	of	earnings	and	an	increase	related	to	higher enacted	tax	rates	impacting	certain	of	our	U.K.	subsidiaries	in	2016.

Effective	January	1,	2018,	Tax	Legislation	reduced	the	U.S.	corporate	tax rate	 to	 21	 percent,	 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	percent	of	total deductible	expenses	to	certain	foreign	subsidiaries.	GILTI	is	a	10.5	percent tax,	before	allowable	credits	for	foreign	taxes	paid,	on	the	annual	earnings and	 profits	 of	 certain	 foreign	 subsidiaries.	 Based	 on	 our	 current understanding	of	these	rules,	the	impact	of	BEAT	and	GILTI	is	not	expected to	be	material	to	our	effective	income	tax	rate.

# Segment	Operating	Results

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

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Investment\tBanking |  |  |  |
| Net\trevenues | \t\t$\t\t7,371 | \t$\t\t6,273 | \t$\t\t7,027 |
| Operating\texpenses | 3,526 | 3,437 | 3,713 |
| Pre-tax\tearnings | \t\t$\t\t3,845 | \t$\t\t2,836 | \t$\t\t3,314 |
| Institutional\tClient\tServices |  |  |  |
| Net\trevenues | \t\t$11,902 | \t$14,467 | \t$15,151 |
| Operating\texpenses | 9,692 | 9,713 | 13,938 |
| Pre-tax\tearnings | \t\t$\t\t2,210 | \t$\t\t4,754 | \t$\t\t1,213 |
| Investing\t&amp;\tLending |  |  |  |
| Net\trevenues | \t\t$\t\t6,581 | \t$\t\t4,080 | \t$\t\t5,436 |
| Operating\texpenses | 2,796 | 2,386 | 2,402 |
| Pre-tax\tearnings | \t\t$\t\t3,785 | \t$\t\t1,694 | \t$\t\t3,034 |
| Investment\tManagement |  |  |  |
| Net\trevenues | \t\t$\t\t6,219 | \t$\t\t5,788 | \t$\t\t6,206 |
| Operating\texpenses | 4,800 | 4,654 | 4,841 |
| Pre-tax\tearnings | \t\t$\t\t1,419 | \t$\t\t1,134 | \t$\t\t1,365 |
| Total\tnet\trevenues | \t\t$32,073 | \t$30,608 | \t$33,820 |
| Total\toperating\texpenses | 20,941 | 20,304 | 25,042 |
| Total\tpre-tax\tearnings | \t\t$11,132 | \t$10,304 | \t$\t\t8,778 |

•	Operating	 expenses	 included $3.37 billion	 recorded	 in	 Institutional Client	 Services	 in	 2015	 related	 to	 the	 settlement	 agreement	 with	 the RMBS	 Working	 Group.	 See	 Note	 27	 to	 the	 consolidated	 financial statements	in	Part	II,	Item	8	of	our	Annual	Report	on	Form	10-K	for	the year	ended	December	31,	2015	for	further	information.

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

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 | 2017 | 2016 | 2015 |
| Financial\tAdvisory | \t\t$3,188 | \t$2,932 | \t$3,470 |
| Equity\tunderwriting | 1,243 | 891 | 1,546 |
| Debt\tunderwriting | 2,940 | 2,450 | 2,011 |
| Total\tUnderwriting | 4,183 | 3,341 | 3,557 |
| Total\tnet\trevenues | 7,371 | 6,273 | 7,027 |
| Operating\texpenses | 3,526 | 3,437 | 3,713 |
| Pre-tax\tearnings | \t\t$3,845 | \t$2,836 | \t$3,314 |

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

•	Volumes	are	per	Dealogic.	Prior	periods	have	been	conformed	to	reflect volumes	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	2017,	industry-wide	announced	and completed mergers and acquisitions transactions remained solid, increasing slightly compared	 with 2016, although volumes declined compared	with	the	prior	year.

In	underwriting,	generally	higher	equity	prices	and	tighter	credit	spreads during	 2017	 continued to	 contribute to	 a relatively favorable financing environment.	Industry-wide	debt	underwriting	offerings	remained	strong, particularly in leveraged finance activity. Industry-wide equity underwriting	offerings	increased	significantly	during	2017	compared	with the	weak	backdrop	for	new	issuances	during	2016.

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

During 2016, Investment Banking operated in an environment characterized	by	robust	industry-wide	mergers	and	acquisitions	activity. Industry-wide equity underwriting volumes decreased significantly compared with strong levels in 2015, while industry-wide debt underwriting	volumes	increased	compared	with	2015.

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.

As	of	December	2017,	our	investment	banking	transaction	backlog	increased compared	with	the	end	of	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	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 $2.93 billion, 16% lower compared	 with	 a	 strong	 2015,	 reflecting	 a	 decrease	 in	 industry-wide transactions.	Net	revenues	 in	Underwriting	were	$3.34	billion,	6%	 lower compared	with	a	strong	2015,	due	 to	significantly	 lower	net	revenues	 in equity	 underwriting,	 reflecting	 a	 decrease	 in	 industry-wide	 volumes.	 Net revenues	 in	 debt	 underwriting	 were	 significantly	 higher,	 reflecting significantly	higher	net	revenues	from	asset-backed	activity	and	higher	net revenues	from	leveraged	finance	activity.

As	of	December	2016,	our	investment	banking	transaction	backlog	was lower	 compared	 with	 a	 strong	 level	 of	 backlog	 at	 the	 end	 of	 2015, primarily	 due	 to	 lower	 estimated	 net	 revenues	 from	 potential	 advisory transactions	and	significantly	lower	estimated	net	revenues	from	potential debt	underwriting	transactions,	principally	reflecting	decreases	in	mergers and	 acquisitions	 activity	 and	 acquisition-related	 financing,	 respectively. Estimated	 net	 revenues	 from	 potential	 equity	 underwriting	 transactions were	slightly	lower	compared	with	the	end	of	2015.

Our	Institutional	Client	Services	segment	consists	of:

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 |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| FICC\tClient\tExecution | \t$\t\t5,299 | \t$\t\t7,556 | \t$\t\t7,322 |
| Equities\tclient\texecution | 2,046 | 2,194 | 3,028 |
| Commissions\tand\tfees | 2,920 | 3,078 | 3,156 |
| Securities\tservices | 1,637 | 1,639 | 1,645 |
| Total\tEquities | 6,603 | 6,911 | 7,829 |
| Total\tnet\trevenues | 11,902 | 14,467 | 15,151 |
| Operating\texpenses | 9,692 | 9,713 | 13,938 |
| Pre-tax\tearnings | \t$\t\t2,210 | \t$\t\t4,754 | \t$\t\t1,213 |

The	table	below	presents	net	revenues	of	our	Institutional	Client	Services segment	by	line	item	in	the	consolidated	statements	of	earnings.	See	"Net Revenues"	above	for	further	information	about	market	making	revenues, commissions	and	fees,	and	net	interest	income.

| $	in	millions | FICC	Client<br>Execution | Total<br>Equities | Client<br>Services |
| :--- | :--- | :--- | :--- |
| 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 |
| Year\tEnded\tDecember\t2015 |  |  |  |
| Market\tmaking | $\t\t5,893 | \t$\t\t3,630 | $\t\t9,523 |
| Commissions\tand\tfees | – | 3,156 | 3,156 |
| Net\tinterest\tincome | 1,429 | 1,043 | 2,472 |
| Total\tnet\trevenues | $\t\t7,322 | \t$\t\t7,829 | $15,151 |

•	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	 Note	 25	 to	 the	 consolidated financial statements for	 net interest income	by	business	segment.

•	The	primary	driver	of	net	revenues	for	FICC	Client	Execution,	for	the periods	in	the	table	above,	was	client	activity.

Operating	Environment.	Low	volatility	levels	in	equity,	fixed	income, currency	 and	 commodity	 markets	 were	 a	 consistent	 theme	 during	 2017, impacting	 the	 operating	 environment	 for	 Institutional	 Client	 Services throughout	the	year.	During	2017,	average	VIX	declined	to	11.10	compared with 15.84 in	 2016,	 U.S.	 and	 European	 interest	 rates	 experienced historically	low	volatility	levels,	and	volatility	in	G-10	currencies	were	near 10-year lows.	 This	 continued	 to	 negatively	 affect	 client	 activity	 across businesses,	particularly	in	FICC	Client	Execution	for	2017.

Although	 market-making	 conditions	 remained	 challenging,	 including	 the price	of	natural	gas	decreasing	by	21%	compared	to	the	end	of	2016	to	$2.95 per	million	British	thermal	units,	there	were	some	positives	in	the	financial markets.	Global	equity	markets	continued	to	increase,	with	the	MSCI	World Index	up	22%	during	2017,	and	credit	spreads	continued	to	generally	tighten in	2017.	In	addition,	the	price	of	oil	increased	by	12%	compared	to	the	end of	2016	to	approximately	$60	per	barrel	(WTI).

If	the	trend	of	low	volatility	continues	over	the	long	term	and	activity	levels remain	 low,	 net	 revenues	 in	 Institutional	 Client	 Services	 would	 likely continue	to	be	negatively	impacted.	See	"Business	Environment"	above	for further	 information	 about	 economic	 and	 market	 conditions	 in	 the	 global operating	environment	during	the	year.

The	 first	 half	 of	 2016	 included	 challenging	 trends	 in	 the	 operating environment	 for	 Institutional	 Client	 Services	 including	 concerns	 and uncertainties	about	global	economic	growth,	central	bank	activity	and	the political	uncertainty	and	economic	 implications	 surrounding	 the	 potential exit	of	the	U.K.	from	the	E.U.	During	the	second	half	of	2016,	the	operating environment	 improved,	 as	 global	 equity	 markets	 steadily	 increased	 and investment	 grade	 and	 high-yield	 credit	 spreads	 tightened.	 These	 trends drove	improved	client	sentiment	and	market-making	conditions	during	the second	half	of	2016.

Net	revenues	in	FICC	Client	Execution	were	$5.30	billion	for	2017,	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.

The	following	provides	details	of	our	FICC	Client	Execution	net	revenues by	business,	compared	with	2016	results:

•	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.

Net	revenues	in	FICC	Client	Execution	were	$7.56	billion	for	2016,	3% higher	 than	2015.	This	 increase	was	primarily	driven	by	 the	 impact	of changes	in	market-	making	conditions	on	our	inventory.

•	Net	 revenues	 in	 credit	 products	 were	 significantly	 higher,	 reflecting improved	market-making	conditions,	including	generally	tighter	spreads, and	higher	client	activity	levels	compared	with	low	activity	in	2015.

•	Net	revenues	in	interest	rate	products	were	higher,	reflecting	higher	client activity	levels.

•	Net	 revenues	 in	 mortgages	 were	 significantly	 lower,	 reflecting	 less favorable	market-making	conditions,	including	generally	wider	spreads.

•	Net	revenues	in	currencies	were	lower,	reflecting	less	favorable	market- making	conditions	 in	emerging	markets	products	compared	with	2015, which	included	a	strong	first	quarter	of	2015.

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

Net	revenues	in	Equities	were	$6.91	billion,	12%	lower	than	2015,	primarily due	 to	 significantly	 lower	 net	 revenues	 in	 equities	 client	 execution, reflecting	 significantly	 lower	 net	 revenues	 in	 cash	 products,	 primarily	 in Asia,	as	well	as	lower	net	revenues	in	derivatives.	Commissions	and	fees were	slightly	lower,	reflecting	lower	listed	cash	equity	volumes	in	Asia	and Europe,	consistent	with	market	volumes	in	these	regions,	and	net	revenues	in securities	services	were	essentially	unchanged	compared	with	2015.

We	elect	the	fair	value	option	for	certain	unsecured	borrowings.	For	2015, the	fair	value	net	gain	attributable	to	the	impact	of	changes	in	our	credit spreads	 on	 these	 borrowings	 was $255 million ($214 million	 and $41	million	related	to	FICC	Client	Execution	and	equities	client	execution, respectively).	For	2016,	we	adopted	the	requirement	in	ASU	No.	2016-01	to present	separately	such	gains	and	 losses	 in	other	comprehensive	 income. The	amount	included	in	accumulated	other	comprehensive	loss	for	2016	was a	 loss	 of	 $844	 million	 ($544	 million,	 net	 of	 tax).	 See	 Note	 3	 to	 the consolidated	 financial	 statements	 for	 further	 information	 about	 ASU No.	2016-01.

Operating	 expenses	 were	 $9.71	 billion	 for	 2016,	 30%	 lower	 than	 2015, primarily	 due	 to	 significantly	 lower	 net	 provisions	 for	 mortgage-related litigation	and	regulatory	matters,	and	decreased	compensation	and	benefits expenses,	reflecting	lower	net	revenues.	Pre-tax	earnings	were	$4.75	billion in	2016	compared	with	$1.21	billion	in	2015.

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	and	secured	loans	to	retail clients	through	our	digital	platforms,	Marcus	and	Goldman	Sachs	Private Bank	Select	(GS	Select),	respectively.

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

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Equity\tsecurities | \t\t$4,578 | \t$2,573 | \t$3,781 |
| Debt\tsecurities\tand\tloans | 2,003 | 1,507 | 1,655 |
| Total\tnet\trevenues | 6,581 | 4,080 | 5,436 |
| Operating\texpenses | 2,796 | 2,386 | 2,402 |
| Pre-tax\tearnings | \t\t$3,785 | \t$1,694 | \t$3,034 |

Operating	Environment.	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.	This environment	 contrasts	 with	 2016,	 where,	 in	 the	 first	 quarter	 of	 2016, market	conditions	were	difficult	and	corporate	performance,	particularly	in the	 energy	 sector,	 was	 impacted	 by	 a	 challenging	 macroeconomic environment.	 However,	 market	 conditions	 improved	 during	 the	 rest	 of 2016	as	macroeconomic	concerns	moderated.	If	macroeconomic	concerns negatively	affect	company-specific	events	or	corporate	performance,	or	if global	 equity	 markets	 decline	 or	 credit	 spreads	 widen,	 net	 revenues	 in Investing	&	Lending	would	likely	be	negatively	impacted.

2017 versus 2016. Net	 revenues	 in	 Investing	 &	 Lending	 were $6.58	 billion for	 2017,	 61%	 higher	 than	 2016.	 Net	 revenues	 in	 equity securities	 were	 $4.58	 billion,	 including	 $3.82	 billion	 of	 net	 gains	 from private	 equities	 and	 $762	 million	 in	 net	 gains	 from	 public	 equities.	 Net revenues	 in	 equity	 securities	 were 78% 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.	Of	the	$4.58	billion of	net	revenues	in	equity	securities,	approximately	60%	was	driven	by	net gains	from	company-specific	events,	such	as	sales,	and	public	equities.	Net revenues	in	debt	securities	and	loans	were	$2.00	billion,	33%	higher	than 2016,	 reflecting	 significantly	 higher	 net	 interest	 income	 (2017	 included approximately	$1.80	billion	of	net	interest	income).	Net	revenues	in	debt securities	and	loans	for	2017	also	included	an	impairment	of	approximately $130	million	on	a	secured	loan.

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	Marcus.	Pre-tax	earnings	were	$3.79	billion	in 2017	compared	with	$1.69	billion	in	2016.

2016 versus 2015. Net	 revenues	 in	 Investing	 &	 Lending	 were $4.08	 billion for	 2016,	 25%	 lower	 than	 2015.	 Net	 revenues	 in	 equity securities	 were	 $2.57	 billion,	 including	 $2.17	 billion	 of	 net	 gains	 from private	 equities	 and	 $402	 million	 in	 net	 gains	 from	 public	 equities.	 Net revenues	in	equity	securities	were	32%	lower	than	2015,	primarily	reflecting a	significant	decrease	in	net	gains	from	private	equities,	driven	by	company- specific	events	and	corporate	performance.	Net	revenues	in	debt	securities and	loans	were	$1.51	billion,	9%	lower	than	2015,	reflecting	significantly lower	 net	 revenues	 related	 to	 relationship	 lending	 activities,	 due	 to	 the impact	of	changes	in	credit	spreads	on	economic	hedges.	Losses	related	to these	 hedges	 were $596	 million in	 2016,	 compared	 with	 gains	 of $329	million	in	2015.	This	decrease	was	partially	offset	by	higher	net	gains from	investments	in	debt	instruments	and	higher	net	interest	income.	See Note	9	to	the	consolidated	financial	statements	for	further	information	about economic	hedges	related	to	our	relationship	lending	activities.

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	and	distribution	channel	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	35 basis	points	for	both	2017	and	2016,	and	39	basis	points	for	2015.

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	our	period-end	assets	under	supervision	by	asset class.

|  |  | As	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tbillions | 2017 | 2016 | 2015 |
| Alternative\tinvestments | \t\t$\t\t\t168 | \t$\t\t\t154 | \t$\t\t\t148 |
| Equity | 321 | 266 | 252 |
| Fixed\tincome | 660 | 601 | 546 |
| Total\tlong-term\tAUS | 1,149 | 1,021 | 946 |
| Liquidity\tproducts | 345 | 358 | 306 |
| Total\tAUS | \t\t$1,494 | \t$1,379 | \t$1,252 |

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 our	period-end assets under supervision by distribution	channel.

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

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tbillions | 2017 | 2016 | 2015 |
| Beginning\tbalance | \t$1,379 | \t$1,252 | \t$1,178 |
| Net\tinflows/(outflows): |  |  |  |
| Alternative\tinvestments | 15 | 5 | 7 |
| Equity | 2 | (3) | 23 |
| Fixed\tincome | 25 | 40 | 41 |
| Total\tlong-term\tAUS\tnet\tinflows/(outflows) | 42 | 42 | 71 |
| Liquidity\tproducts | (13) | 52 | 23 |
| Total\tAUS\tnet\tinflows/(outflows) | 29 | 94 | 94 |
| Net\tmarket\tappreciation/(depreciation) | 86 | 33 | (20) |
| Ending\tbalance | \t$1,494 | \t$1,379 | \t$1,252 |

•	Total	AUS	net	inflows/(outflows)	for	2017	included	$23	billion	of	inflows ($20	billion	in	total	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).

•	Total	long-term	AUS	net	inflows/(outflows)	for	2015	included	$18	billion of	 fixed	 income,	 equity	 and	 alternative	 investments	 asset	 inflows	 in connection	 with	 our	 acquisition	 of	 Pacific	 Global	Advisors'	 solutions business.

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

|  |  | Average	for	the<br>Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tbillions | 2017 | 2016 | 2015 |
| Alternative\tinvestments | \t\t$\t\t\t162 | \t$\t\t\t149 | \t$\t\t\t145 |
| Equity | 292 | 256 | 247 |
| Fixed\tincome | 633 | 578 | 530 |
| Total\tlong-term\tAUS | 1,087 | 983 | 922 |
| Liquidity\tproducts | 330 | 326 | 272 |
| Total\tAUS | \t\t$1,417 | \t$1,309 | \t$1,194 |

Operating Environment. During	 2017,	 Investment	 Management operated	in	an	environment	characterized	by	generally	higher	asset	prices, resulting	 in	 appreciation	 in	 both	 equity	 and	 fixed	 income	 assets.	 In addition,	 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	average	assets	under	supervision	during	2017	shifted slightly	from	liquidity	products	to	long-term	assets	under	supervision	as compared	 to	 the	 mix	 at	 the	 end	 of	 2016.	 In	 the	 future,	 if	 asset	 prices decline,	 or	 investors	 favor	 assets	 that	 typically	 generate	 lower	 fees	 or investors	withdraw	their	assets,	net	revenues	in	Investment	Management would	likely	be	negatively	impacted.

Following	a	challenging	first	quarter	of	2016,	market	conditions	improved during	the	remainder	of	2016	with	higher	asset	prices	resulting	in	full	year appreciation	in	both	equity	and	fixed	income	assets.	Also,	our	assets	under supervision	 increased	 during	 2016	 from	 net	 inflows,	 primarily	 in	 fixed income	assets,	and	liquidity	products.	The	mix	of	our	average	assets	under supervision	 shifted	 slightly	 compared	 with	 2015	 from	 long-term	 assets under	supervision	to	liquidity	products.	Management	fees	were	impacted by	many	factors,	including	inflows	to	advisory	services	and	outflows	from actively-managed	mutual	funds.

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	 the	 year,	 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).

2016 versus 2015.	 Net revenues	 in	 Investment	 Management	 were $5.79 billion	 for	 2016, 7% lower	 than	 2015.	 This	 decrease	 primarily reflected	significantly	lower	incentive	fees	compared	with	a	strong	2015.	In addition,	management	and	other	fees	were	slightly	lower,	reflecting	shifts	in the	 mix	 of	 client	 assets	 and	 strategies,	 partially	 offset	 by	 the	 impact	 of higher	 average	 assets	 under	 supervision.	 During	 2016,	 total	 assets	 under supervision	increased	$127	billion	to	$1.38	trillion.	Long-term	assets	under supervision	 increased	 $75	 billion,	 including	 net	 inflows	 of	 $42	 billion, primarily	in	fixed	income	assets,	and	net	market	appreciation	of	$33	billion, primarily	in	equity	and	fixed	income	assets.	In	addition,	liquidity	products increased	$52	billion.

# 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	business	risk	managers	and	managers	from	our	independent control	and	support	functions	to	objectively	evaluate	balance	sheet	limit requests	from	business	managers	in	the	context	of	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.

Business	risk	managers	and	managers	from	our	independent	control	and support	functions	along	with	business	managers	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	Finance	Committee.	See	"Risk	Management	— Overview	and	Structure	of	Risk	Management"	for	an	overview	of	our	risk management	structure.

Balance	 Sheet	 Limits.	 The Firmwide	 Finance	 Committee	 has	 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	business	managers	and	managers	in	our independent	control	and	support	functions	on	a	routine	basis.	The	Firmwide Finance	Committee	reviews	and	approves	balance	sheet	limits	on	a	quarterly basis	and	may	also	approve	changes	in	limits	on	a	more	frequent	basis	in response	to	changing	business	needs	or	market	conditions.	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	on	a daily	 basis	 by	 business	 risk	 managers,	 as	 well	 as	 managers	 in	 our independent	control	and	support	functions.

Monitoring	of	Key	Metrics.	We	monitor	key	balance	sheet	metrics	daily both	by	business	and	on	a	consolidated	basis,	including	asset	and	liability size	and	composition,	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"	 below	 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.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| GCLA,\tsegregated\tassets\tand\tother | \t\t$285,270 | \t$280,563 |
| Secured\tclient\tfinancing | 164,123 | 153,978 |
| Inventory | 216,883 | 206,988 |
| Secured\tfinancing\tagreements | 64,991 | 65,606 |
| Receivables | 36,750 | 29,592 |
| Institutional\tClient\tServices | 318,624 | 302,186 |
| Public\tequity | 2,072 | 3,224 |
| Private\tequity | 20,253 | 18,224 |
| Total\tequity | 22,325 | 21,448 |
| Loans\treceivable | 65,933 | 49,672 |
| Loans,\tat\tfair\tvalue | 14,877 | 14,230 |
| Total\tloans | 80,810 | 63,902 |
| Debt\tsecurities | 8,797 | 7,445 |
| Other | 8,481 | 5,162 |
| Investing\t&amp;\tLending | 120,413 | 97,957 |
| Total\tinventory\tand\trelated\tassets | 439,037 | 400,143 |
| Other\tassets | 28,346 | 25,481 |
| Total\tassets | \t\t$916,776 | \t$860,165 |

In	2017,	we	aggregated	global	core	liquid	assets	(GCLA)	and	other	with cash	and	securities	segregated	for	regulatory	and	other	purposes	related	to client	activity	(previously	included	in	secured	client	financing).	Previously reported	amounts	have	been	conformed	to	the	current	presentation.

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

•	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"	below	for	details	on	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	 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. In	 Institutional	 Client	 Services,	 we maintain	inventory	positions	to	facilitate	market	making	in	fixed	income, equity,	currency	and	commodity	products.	Additionally,	as	part	of	market- making	 activities,	 we	 enter	 into	 resale	 or	 securities	 borrowing arrangements	 to	 obtain	 securities	 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.	In	Investing	&	Lending,	we	make	investments and	 originate	 loans	 to	 provide	 financing	 to	 clients.	 We	 also	 make unsecured	and	secured	loans	to	retail	clients.	These	investments	and	loans are	 typically	 longer-term	 in	 nature.	 In	 addition,	 we	 make	 investments, directly	and	indirectly	through	funds	that	we	manage,	in	debt	securities, loans,	 public	 and	 private	 equity	 securities,	 infrastructure,	 real	 estate entities	 and	 other	 investments.	 As	 of	 December	 2017,	 total	 equity included	 $2.07	 billion	 of	 private	 equity	 securities	 that	 were	 acquired during	2017.	The	regional	composition	of	total	equity	was	approximately 54%	and	55%	in	the	Americas,	18%	and	18%	in	Europe,	Middle	East	and Africa	(EMEA),	and	28%	and	27%	in	Asia	as	of	December	2017	and December	 2016,	 respectively.	 Other	 Investing	 &	 Lending	 primarily includes	receivables	from	customers	and	counterparties.

The	table	below	presents	details	about	loans.

|  | As	of	December	2017 | As	of	December	2017 |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | Loans\nReceivable | Loans,\tat\nFair\tValue | Total |
| Corporate\tloans | $30,749 | \t $\t\t3,924 | \t$34,673 |
| Loans\tto\tPrivate\tWealth |  |  |  |
| Management\tclients | 16,591 | 7,102 | 23,693 |
| Loans\tbacked\tby: |  |  |  |
| Commercial\treal\testate | 7,987 | 1,825 | 9,812 |
| Residential\treal\testate | 6,234 | 1,043 | 7,277 |
| Marcus\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 |

Loans	receivable	consists	of	loans	held	for	investment	that	are	accounted for	at	amortized	cost	net	of	allowance	for	loan	losses.	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.

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

•	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	2016	to	December	2017.

# Balance	Sheet	Analysis	and	Metrics

As	 of	 December	 2017,	 total	 assets	 in	 our	 consolidated	 statements	 of financial	condition	were	$916.78	billion,	an	increase	of	$56.61	billion	from December	 2016,	 primarily	 reflecting	 increases	 in	 financial	 instruments owned	of	$20.04	billion,	loans	receivable	of	$16.26	billion	and	receivables from	 customers	 and	 counterparties	 of $12.33 billion.	 The	 increase	 in financial	instruments	owned	primarily	reflected	higher	client	activity	and	an increase	 in	available-for-sale	 securities	 in	 U.S.	 government	 and	 agency obligations	and	corporate	loans	and	debt	securities,	partially	offset	by	the impact	 of	 currency	 movements	 on	 derivative	 valuations.	The	 increase	 in loans	 receivable	 primarily	 reflected	 an	 increase	 in	 loans	 to	 corporate borrowers	and	loans	backed	by	real	estate.	The	increase	in	receivables	from customers	and	counterparties	reflected	client	activity.

As	 of	 December	 2017,	 total	 liabilities	 in	 our	 consolidated	 statements	 of financial	condition	were	$834.53	billion,	an	increase	of	$61.26	billion	from December	 2016,	 primarily	 reflecting	 increases	 in	 unsecured	 long-term borrowings	of	$28.60	billion,	collateralized	financings	of	$23.44	billion	and deposits	 of	 $14.51	 billion,	 partially	 offset	 by	 a	 decrease	 in	 payables	 to customers	and	counterparties	of	$12.57	billion.	The	increase	in	unsecured long-term	borrowings	was	primarily	due	to	net	new	issuances.	The	increase in	collateralized	financings	reflected	the	impact	of	client	and	firm	activity. The	 increase	 in	 deposits	 reflected	 increases	 in	 institutional	 deposits	 and Marcus	deposits.	The	decrease	in	payables	to	customers	and	counterparties reflected	client	activity.

As	of	December	2017	and	December	2016,	our	total	securities	sold	under agreements	to	repurchase,	accounted	for	as	collateralized	financings,	were $84.72	billion	and	$71.82	billion,	respectively,	which	were	2%	lower	and 5%	lower	than	the	daily	average	amount	of	repurchase	agreements	during the	quarters	ended	December	2017	and	December	2016,	respectively,	and 1% lower	 and	 9%	 lower	 than	 the	 daily	 average	 amount	 of	 repurchase agreements	during	 the	years	ended	December	2017	and	December	2016, respectively.	The	decrease	in	our	repurchase	agreements	relative	to	the	daily averages	during	2017	and	2016	resulted	from	the	impact	of	firm	and	client activity	at	the	end	of	both	years.

The	 table	 below	 presents information about	 our	 balance sheet and	 our 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	Tier	1	leverage	ratio	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	our	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 |
| :--- | :--- | :--- |
| $\tin\tmillions,\texcept\tper\tshare\tamounts | 2017 | 2016 |
| Total\tshareholders'\tequity | \t\t$\t82,243 | \t\t\t$\t86,893 |
| Preferred\tstock | (11,853) | (11,203) |
| Common\tshareholders'\tequity | 70,390 | 75,690 |
| Goodwill\tand\tidentifiable\tintangible\tassets | (4,038) | (4,095) |
| Tangible\tcommon\tshareholders'\tequity | \t\t$\t66,352 | \t\t\t$\t71,595 |
| Book\tvalue\tper\tcommon\tshare | \t\t$\t181.00 | \t\t\t$\t182.47 |
| Tangible\tbook\tvalue\tper\tcommon\tshare | \t\t$\t170.61 | \t\t\t$\t172.60 |

•	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	as	of	December	2017	were	both	reduced	by	$11.31	due	 to	 the estimated	 impact	 of	 Tax	 Legislation.	 See	 "Results	 of	 Operations	 — Financial	 Overview"	 and	 "—	 Provision	 for	Taxes"	 above	 for	 further information	about	the	enactment	of	Tax	Legislation.

•	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	388.9	million	and	414.8	million	as	of	December	2017 and	December	2016,	respectively.	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	secured	financings,	unsecured	long-term and	short-term	borrowings,	and	deposits.	We	seek	to	maintain	broad	and diversified	 funding	 sources	 globally	 across	 products,	 programs,	 markets, currencies	and	creditors	to	avoid	funding	concentrations.

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

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

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

•	Savings,	 demand	 and	 time	 deposits	 through	 internal	 and third-party broker-dealers,	as	well	as	from	retail	and	institutional	clients;	and •	Short-term	 unsecured	 debt	 at	 the	 subsidiary	 level through	 U.S. and non-U.S.	hybrid	financial	instruments	and	other	methods.

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

Secured	 Funding.	 We fund	 a	 significant	 amount	 of	 inventory	 on	 a secured	 basis,	 including	 repurchase	 agreements,	 securities	 loaned	 and other	 secured	 financings.	 As	 of	 December	 2017	 and	 December	 2016, secured	funding	included	in	collateralized	financings	in	the	consolidated statements	of	financial	condition	was	$124.30	billion	and	$100.86	billion, respectively.	We	may	also	pledge	our	inventory	as	collateral	for	securities borrowed	 under	 a	 securities	 lending	 agreement	 or	 as	 collateral	 for derivative	 transactions.	 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 rollover	 probabilities.	 We	 seek	 to	 mitigate	 our	 refinancing	 risk	 by executing term trades with staggered maturities, diversifying counterparties,	 raising	 excess	 secured	 funding,	 and	pre-funding	 residual risk	through	our	GCLA.

We	seek	to	raise	secured	funding	with	a	term	appropriate	for	the	liquidity of	the	assets	that	are	being	financed,	and	we	seek	longer	maturities	for secured	funding	collateralized	by	asset	classes	that	may	be	harder	to	fund on	a	secured	basis,	especially	during	times	of	market	stress.	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	was	collateralized	by	liquid	government and	agency	obligations,	exceeded	120	days	as	of	December	2017.

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.	 Goldman	 Sachs	 Bank	 USA	 (GS	 Bank USA)	 has	 access	 to	 funding	 from	 the	 Federal	 Home	 Loan	 Bank.	As	 of December	2017	and	December	2016,	our	outstanding	borrowings	against the	 Federal	 Home	 Loan	 Bank	 were $3.40 billion	 and $2.43 billion, respectively.

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	 Long-Term	 Borrowings.	 We issue	 unsecured	 long-term borrowings	as	a	source	of	funding	for	 inventory	and	other	assets	and	 to finance	a	portion	of	our	GCLA.	We	issue	in	different	tenors,	currencies	and products	to	maximize	the	diversification	of	our	investor	base.

The	 table	 below	 presents	 our	 quarterly	 unsecured long-term	 borrowings maturity	profile	as	of	December	2017.

| $	in	millions | First<br>Quarter | Second<br>Quarter | Third<br>Quarter | Fourth<br>Quarter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| 2019 | \t\t$8,354 | \t$6,927 | \t$3,806 | \t$11,418 | \t$\t\t30,505 |
| 2020 | \t\t$5,264 | \t$8,071 | \t$6,039 | \t$\t\t3,746 | 23,120 |
| 2021 | \t\t$2,772 | \t$3,651 | \t$7,757 | \t$\t\t7,601 | 21,781 |
| 2022 | \t\t$5,998 | \t$5,991 | \t$4,869 | \t$\t\t5,744 | 22,602 |
| 2023\t-\tthereafter |  |  |  |  | 119,679 |
| Total |  |  |  |  | \t$217,687 |

The	weighted	average	maturity	of	our	unsecured	long-term	borrowings	as	of December	2017	was	approximately	eight	years.	To	mitigate	refinancing	risk, we	seek	to	limit	the	principal	amount	of	debt	maturing	on	any	one	day	or during	any	week	or	year.	We	enter	 into	 interest	rate	swaps	 to	convert	a 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.

Deposits.	Our	deposits	provide	us	with	a	diversified	source	of	funding	and reduce	our	reliance	on	wholesale	funding.	A	growing	source	of	our	deposit base	 consists	 of	 retail	 deposits.	 Deposits	 are	 primarily	 used	 to	 finance lending	 activity,	 other	 inventory	 and	 a	 portion	 of	 our	 GCLA.	 We	 raise deposits	primarily	through	GS	Bank	USA	and	Goldman	Sachs	International Bank	(GSIB).	As	of	December	2017	and	December	2016,	our	deposits	were $138.60 billion	 and $124.10 billion,	 respectively.	 See	 Note 14 to	 the consolidated	financial	statements	for	further	information	about	our	deposits.

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	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.

As	 of	 December	 2017	 and	 December	 2016,	 our	 unsecured	 short-term borrowings,	 including	 the	 current	 portion	 of	 unsecured	 long-term borrowings,	 were	 $46.92	 billion	 and	 $39.27	 billion,	 respectively.	 See Note	15	to	the	consolidated	financial	statements	for	further	information about	our	unsecured	short-term	borrowings.

# Equity	Capital	Management	and	Regulatory	Capital

Capital	 adequacy	 is	 of	 critical	 importance	 to	 us.	 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	level	and	composition	of	our	equity	capital by	 considering	 multiple	 factors	 including	 our	 current	 and	 future consolidated	 regulatory	 capital	 requirements,	 the	 results	 of	 our	 capital planning	and	stress	 testing	process,	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	consolidated	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	(Federal	Reserve	Board	or	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	a	range	of	macroeconomic	scenarios	and	firm-specific	assumptions.

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

With	respect	to	our	2017	CCAR	submission,	the	FRB	informed	us	that	it did	not	object	to	our	capital	actions.	These	capital	actions	included	the potential	to	repurchase	outstanding	common	stock	of	up	to	$8.70	billion, and	 the	 potential	 to	 issue	 and	 redeem	 other	 capital	 securities	 over	 the twelve-month	period	beginning	July	2017,	and	the	potential	to	increase	our common	stock	dividend	by	up	to	$0.05	per	share	in	the	second	quarter	of 2018.	 However,	 we	 do	 not	 expect	 that	 we	 will	 utilize	 our	 entire	 share repurchase	 authorization	 by	 June	 2018.	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	 2017.	 See "Business	—	Available	Information"	in	Part	I,	Item	1	of	this	Form	10-K.

In	October	2017,	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,	 the	 rules	 adopted	 by	 the	 FRB	 under	 the	 Dodd-Frank	Act require	 GS	 Bank	 USA	 to	 conduct	 stress	 tests	 on	 an	 annual	 basis	 and publish	a	summary	of	certain	results.	GS	Bank	USA	submitted	its	2017 annual	DFAST	results	to	the	FRB	in	April	2017	and	published	a	summary of	its	annual	DFAST	results	in	June	2017.	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	binding	capital	constraints. We	also	attribute	risk-weighted	assets	(RWAs)	to	our	business	segments.	As of	December	2017,	approximately	60%	and	55%	of	RWAs	calculated	 in accordance	with	the	Standardized	Capital	Rules	and	the	Basel	III	Advanced Rules,	respectively,	subject	to	transitional	provisions,	were	attributed	to	our Institutional	Client	Services	segment	and	substantially	all	of	the	remaining RWAs	were	attributed	to	our	Investing	&	Lending	segment.	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	 2017,	 the	 remaining	 share	 authorization	 under	 our existing	repurchase	program	was	47.6	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	 (RCAP)	 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)	 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	of	Directors	of	Group	Inc.	(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-term	and	short-term	bank	deposits. In	addition,	credit	rating	agencies	have	assigned	ratings	to	debt	obligations of	certain	other	subsidiaries	of	Group	Inc.

The	level	and	composition	of	our	equity	capital	are	among	the	many	factors considered	 in	 determining	 our	 credit	 ratings.	 Each	 agency	 has	 its	 own definition	 of	 eligible	 capital	 and	 methodology	 for	 evaluating	 capital adequacy,	and	assessments	are	generally	based	on	a	combination	of	factors rather	than	a	single	calculation.	See	"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	 the	FRB's	risk-based	capital	and	 leverage	regulations, subject	 to	 certain	 transitional	 provisions	 (Capital	 Framework).	 These regulations	 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,	we	are	an "Advanced	approach"	banking	organization	and	have	been	designated	as	a global	systemically	important	bank	(G-SIB).

We	calculate	our	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)	 as	 described	 in	 Note	 20	 to	 the consolidated	financial	statements.

The	lower	of	each	capital	ratio	calculated	in	(i)	and	(ii)	is	the	ratio	against which	our	compliance	with	minimum	ratio	requirements	is	assessed.	Each	of the	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	us	as	of	both	December	2017	and	December	2016.

See	Note	20	to	the	consolidated	financial	statements	for	further	information about	our	capital	ratios	as	of	both	December	2017	and	December	2016,	and for	further	information	about	the	Capital	Framework.

# Minimum	Capital	Ratios	and	Capital	Buffers

The	table	below	presents	our	minimum	required	ratios.

|  | December	2017<br>Minimum	Ratio |
| :--- | :--- |
| CET1\tratio | 7.000% |
| Tier\t1\tcapital\tratio | 8.500% |
| Total\tcapital\tratio | 10.500% |
| Tier\t1\tleverage\tratio | 4.000% |

•	The	minimum	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%	(based	on	2015	financial	data)	and (iii)	the	countercyclical	capital	buffer	of	zero	percent.

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

The	minimum	capital	ratios	applicable	to	us	as	of	January	2019	will	reflect the	fully	phased-in	capital	conservation	buffer,	the	countercyclical	capital buffer,	 if	 any,	 determined	 by	 the	 FRB	 and	 the	 fully	phased-in	 G-SIB buffer.	The	G-SIB	buffer	applicable	to	us	as	of	January	2019	is	2.5%	based on	financial	data	as	of	or	for	the	year	ended	December	2017.	The	G-SIB and	 countercyclical	 buffers	 in	 the	 future	 may	 differ	 due	 to	 additional guidance	from	our	regulators	and/or	positional	changes.

Our	 minimum	 required	 supplementary	 leverage	 ratio	 is 5.0% as	 of January	1,	2018.	See	"Supplementary	Leverage	Ratio"	below	for	further information.

See	Note	20	to	the	consolidated	financial	statements	for	information	about our	capital	buffers.

# Fully	Phased-in	Capital	Ratios

The	table	below	presents	our	capital	ratios	calculated	in	accordance	with	the Standardized	Capital	Rules	and the	Basel	III	Advanced	Rules	on	a	fully phased-in	basis.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Common\tshareholders'\tequity | \t\t$\t\t70,390 | \t\t$\t\t75,690 |
| Deduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets, |  |  |
| net\tof\tdeferred\ttax\tliabilities | (3,334) | (3,015) |
| Deduction\tfor\tinvestments\tin\tnonconsolidated\tfinancial |  |  |
| institutions | – | (765) |
| Other\tadjustments | (63) | (799) |
| Common\tEquity\tTier\t1 | 66,993 | 71,111 |
| Preferred\tstock | 11,853 | 11,203 |
| Deduction\tfor\tinvestments\tin\tcovered\tfunds | (590) | (445) |
| Other\tadjustments | (29) | (61) |
| Tier\t1\tcapital | \t\t$\t\t78,227 | \t\t$\t\t81,808 |
| Standardized\tTier\t2\tand\tTotal\tcapital |  |  |
| Tier\t1\tcapital | \t\t$\t\t78,227 | \t\t$\t\t81,808 |
| Qualifying\tsubordinated\tdebt | 13,360 | 14,566 |
| Allowance\tfor\tlosses\ton\tloans\tand\tlending\tcommitments | 1,078 | 722 |
| Other\tadjustments | (28) | (6) |
| Standardized\tTier\t2\tcapital | 14,410 | 15,282 |
| Standardized\tTotal\tcapital | \t\t$\t\t92,637 | \t\t$\t\t97,090 |
| Basel\tIII\tAdvanced\tTier\t2\tand\tTotal\tcapital |  |  |
| Tier\t1\tcapital | \t\t$\t\t78,227 | \t\t$\t\t81,808 |
| Standardized\tTier\t2\tcapital | 14,410 | 15,282 |
| Allowance\tfor\tlosses\ton\tloans\tand\tlending\tcommitments | (1,078) | (722) |
| Basel\tIII\tAdvanced\tTier\t2\tcapital | 13,332 | 14,560 |
| Basel\tIII\tAdvanced\tTotal\tcapital | \t\t$\t\t91,559 | \t\t$\t\t96,368 |
| RWAs |  |  |
| Credit\tRWAs | \t\t$476,594 | \t\t$422,544 |
| Market\tRWAs | 87,381 | 85,263 |
| Standardized\tRWAs | \t\t$563,975 | \t\t$507,807 |
| Credit\tRWAs | \t\t$421,763 | \t\t$361,223 |
| Market\tRWAs | 86,854 | 84,475 |
| Operational\tRWAs | 117,475 | 115,088 |
| Basel\tIII\tAdvanced\tRWAs | \t\t$626,092 | \t\t$560,786 |
| CET1\tratio |  |  |
| Standardized | 11.9% | 14.0% |
| Basel\tIII\tAdvanced | 10.7% | 12.7% |
| Tier\t1\tcapital\tratio |  |  |
| Standardized | 13.9% | 16.1% |
| Basel\tIII\tAdvanced | 12.5% | 14.6% |
| Total\tcapital\tratio |  |  |
| Standardized | 16.4% | 19.1% |
| Basel\tIII\tAdvanced | 14.6% | 17.2% |

Although	the	deductions	from	and	adjustments	to	regulatory	capital	in	the table	above	were	not	fully	phased-in	until	January	2018,	we	believe	that	the fully	phased-in	capital	ratios	are	meaningful	because	they	are	measures	that we,	 our	 regulators	 and investors	 use to	 assess	 our	 ability to	 meet	 future regulatory capital requirements.	 These fully	phased-in	 capital ratios	 are non-GAAP	 measures	 and	 may	 not	 be	 comparable to similar	non-GAAP measures	used	by	other	companies.

•	Deduction	for	goodwill	and	identifiable	intangible	assets,	net	of	deferred tax	 liabilities,	 included	 goodwill	 of $3.67 billion	 as	 of	 both December	2017	and	December	2016,	and	identifiable	intangible	assets of $373 million	 and $429 million	 as	 of	 December	 2017	 and December	2016,	respectively,	net	of	associated	deferred	tax	liabilities	of $704 million	 and $1.08 billion	 as	 of	 December	 2017	 and December	2016,	respectively.

•	Deduction	 for	 investments	 in	 nonconsolidated	 financial	 institutions represents	 the	 amount	 by	 which	 our	 investments	 in	 the	 capital	 of nonconsolidated	 financial	 institutions	 exceed	 certain	 prescribed thresholds.	 The	 decrease	 from	 December	 2016	 to	 December	 2017 primarily	reflects	reductions	in	our	fund	investments.

•	Deduction	 for	 investments	 in	 covered	 funds	 represents	 our	 aggregate investments	in	applicable	covered	funds,	excluding	investments	that	are subject	 to	 an	 extended	 conformance	 period.	 This	 deduction	 was	 not subject	to	a	transition	period.	See	"Business	—	Regulation"	in	Part	I, Item	 1	 of	 this	Form	10-K	 for	 further	 information	 about	 the	 Volcker Rule.

•	Other	 adjustments	 within	 CET1	 primarily	 include	 the	 overfunded portion	of	our	defined	benefit	pension	plan	obligation	net	of	associated deferred	tax	liabilities,	disallowed	deferred	tax	assets,	credit	valuation adjustments	 on	 derivative	 liabilities,	 debt	 valuation	 adjustments	 and other	required	credit	risk-based	deductions.

•	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	to	the consolidated	 financial	 statements	 for	 further	 information	 about	 our subordinated	debt.

See	Note	20	to	the	consolidated	financial	statements	for	information	about our	transitional	capital	ratios,	which	represent	the	ratios	that	are	applicable to	us	as	of	both	December	2017	and	December	2016.

# Supplementary	Leverage	Ratio

The	 Capital	 Framework	 includes	 a	 supplementary	 leverage	 ratio requirement	 for	 Advanced	 approach	 banking	 organizations.	 Under amendments	 to	 the	 Capital	 Framework,	 the	 U.S.	 federal	 bank	 regulatory agencies	approved	a	final	rule	that	implements	the	supplementary	leverage ratio	 aligned	 with	 the	 definition	 of	 leverage	 established	 by	 the	 Basel Committee.	The	supplementary	leverage	ratio	compares	Tier	1	capital	to	a measure	of	leverage	exposure,	which	consists	of	daily	average	total	assets for	the	quarter	and	certain	off-balance-sheet	exposures,	less	certain	balance sheet	 deductions.	 The	 Capital	 Framework	 requires	 a	 minimum supplementary	 leverage	 ratio	 of 5.0% (consisting	 of	 the	 minimum requirement	 of	 3.0%	 and	 a	 2.0%	 buffer)	 for	 U.S.	 BHCs	 deemed	 to	 be G-SIBs,	effective	on	January	1,	2018.

The	table	below	presents	our	supplementary	leverage	ratio,	calculated	on	a fully	phased-in	basis.

|  | For	the	Three	Months<br>Ended	or	as	of	December | For	the	Three	Months<br>Ended	or	as	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Tier\t1\tcapital | \t\t$\t\t\t\t\t78,227 | \t\t$\t\t\t\t\t81,808 |
| Average\ttotal\tassets | \t\t$\t\t\t937,424 | \t\t$\t\t\t883,515 |
| Deductions\tfrom\tTier\t1\tcapital | (4,572) | (4,897) |
| Average\tadjusted\ttotal\tassets | 932,852 | 878,618 |
| Off-balance-sheet\texposures | 408,164 | 391,555 |
| Total\tsupplementary\tleverage\texposure | \t\t$1,341,016 | \t\t$1,270,173 |
| Supplementary\tleverage\tratio | 5.8% | 6.4% |

In	the	table	above,	the	off-balance-sheet	exposures	consists	of	derivatives, securities	financing	transactions,	commitments	and	guarantees.

# Subsidiary	Capital	Requirements

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

GS Bank USA. GS	 Bank	 USA	 is	 subject	 to	 regulatory	 capital requirements	that	are	calculated	in	substantially	the	same	manner	as	those applicable	to	BHCs	and	calculates	its	capital	ratios	in	accordance	with	the risk-based	 capital	 and	 leverage	 requirements	 applicable	 to	 state	 member banks,	 which	 are	 based	 on	 the	 Capital	 Framework.	 See	 Note	 20	 to	 the consolidated	financial	statements	for	further	information	about	the	Capital Framework	as	it	relates	to	GS	Bank	USA,	including	GS	Bank	USA's	capital ratios	and	required	minimum	ratios.

In	addition,	under	FRB	rules,	commencing	on	January	1,	2018,	in	order	to be	considered	a	"well-capitalized"	depository	institution,	GS	Bank	USA must	 have	 a	 supplementary	 leverage	 ratio	 of 6.0% or	 greater.	 The supplementary	 leverage	 ratio	 compares	 Tier	 1	 capital	 to	 a	 measure	 of leverage	exposure,	defined	as	daily	average	total	assets	for	the	quarter	and certain	off-balance-sheet	exposures,	less	certain	balance	sheet	deductions. The	table	below	presents	GS	Bank	USA's	supplementary	leverage	ratio, calculated	on	a	fully	phased-in	basis.

|  | For	the	Three	Months<br>Ended	or	as	of	December | For	the	Three	Months<br>Ended	or	as	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Tier\t1\tcapital | \t\t$\t\t25,341 | \t$\t\t24,479 |
| Average\ttotal\tassets | \t\t$168,854 | \t$169,721 |
| Deductions\tfrom\tTier\t1\tcapital | (14) | (20) |
| Average\tadjusted\ttotal\tassets | 168,840 | 169,701 |
| Off-balance-sheet\texposures | 176,892 | 163,464 |
| Total\tsupplementary\tleverage\texposure | \t\t$345,732 | \t$333,165 |
| Supplementary\tleverage\tratio | 7.3% | 7.3% |

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

The	table	below	presents	GSI's	minimum	required	capital	ratios.

|  | December	2017<br>Minimum	Ratio | December	2016<br>Minimum	Ratio |
| :--- | :--- | :--- |
| CET1\tratio | 7.165% | 6.549% |
| Tier\t1\tcapital\tratio | 9.143% | 8.530% |
| Total\tcapital\tratio | 11.771% | 11.163% |

The	minimum	capital	ratios	in	the	table	above	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	capital	buffers	as	described	above	in	"Minimum	Capital Ratios	and	Capital	Buffers."

As	of	December	2017,	GSI	had	a	CET1	ratio	of	11.0%,	a	Tier	1	capital ratio	of	13.6%	and	a	Total	capital	ratio	of	16.0%.	Each	of	 these	ratios included	approximately	67	basis	points	attributable	to	amounts	which	will be	 finalized	 upon	 the	 issuance	 of	 GSI's	 2017	 annual	 audited	 financial statements.	As	 of	 December	 2016,	 GSI	 had	 a	 CET1	 ratio	 of	 12.9%,	 a Tier	1	capital	ratio	of	12.9%	and	a	Total	capital	ratio	of	17.2%.

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.	As	of	December	2017	and	December	2016,	GSI	had	a leverage	 ratio	 of 4.1% and 3.8%, respectively.	 The	 ratio	 as	 of December	 2017	 included	 approximately 20 basis	 points	 attributable	 to amounts	which	will	be	finalized	upon	the	issuance	of	GSI's	2017	annual audited	 financial	 statements.	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.

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

Subsidiaries	 not	 subject	 to	 separate	 regulatory	 capital	 requirements	 may hold	 capital	 to	 satisfy	 local	 tax	 and	 legal	 guidelines,	 rating	 agency requirements	(for	entities	with	assigned	credit	ratings)	or	internal	policies, including	policies	concerning	the	minimum	amount	of	capital	a	subsidiary should	hold	based	on	its	underlying	level	of	risk.	In	certain	instances,	Group Inc.	may	be	limited	in	its	ability	to	access	capital	held	at	certain	subsidiaries as	a	result	of	regulatory,	tax	or	other	constraints.	As	of	December	2017	and December	 2016,	 Group	 Inc.'s	 equity	 investment	 in	 subsidiaries	 was $93.88	 billion	 and	 $92.77	 billion,	 respectively,	 compared	 with	 its	 total shareholders'	equity	of	$82.24	billion	and	$86.89	billion,	respectively.

Our	capital	invested	in	non-U.S.	subsidiaries	is	generally	exposed	to	foreign exchange	risk,	substantially	all	of	which	is	managed	through	a	combination of	 derivatives	 and	non-U.S.	 denominated	 debt.	 See	 Note 7 to	 the consolidated	financial	statements	for	information	about	our	net	investment hedges,	which	are	used	to	hedge	this	risk.

Guarantees	of	Subsidiaries.	Group	Inc.	has	guaranteed the	payment obligations	of	GS&Co.	and	GS	Bank	USA,	in	each	case	subject	to	certain exceptions.

# Regulatory	Matters	and	Developments

Our	 businesses	 are	 subject	 to	 significant	 and	 evolving	 regulation.	 The Dodd-Frank	Act,	enacted	in	July	2010,	significantly	altered	the	financial regulatory	regime	within	which	we	operate.	In	addition,	other	reforms	have been	 adopted	 or	 are	 being	 considered	 by	 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.	 In	 addition,	 see	 Note 20 to	 the	 consolidated	 financial statements	for	information	about	regulatory	developments	as	they	relate	to our	regulatory	capital	and	leverage	ratios.

# 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.	The	FRB	and	the	FDIC	have	extended	the	next resolution	 plan	 filing	 deadline	 by	 one	 year	 to	 July 1, 2019.	 See "Business	—	Available	Information"	in	Part	I,	Item	1	of	this	Form	10-K.

As	part	of	our	resolution	planning	efforts,	we	put	in	place	a	Capital	and Liquidity	Support	Agreement	(CLSA)	among	Group	Inc.,	Goldman	Sachs Funding	 LLC	 (Funding	 IHC)	 and	 our	 major	 subsidiaries.	 See	 "Risk Factors"	in	Part	I,	Item	1A	of	this	Form	10-K	for	further	information	about the	CLSA.	Additionally,	as	part	of	our	preferred	resolution	strategy,	we have	established	RCAP,	Resolution	Liquidity	Adequacy	and	Positioning (RLAP),	Resolution	Liquidity	Execution	Need	(RLEN),	and	triggers	and alerts	 frameworks.	 See	 "Equity	 Capital	 Management	 and	 Regulatory Capital	 —	 Equity	 Capital	 Management"	 for	 further	 information	 about RCAP,	 and	 triggers	 and	 alerts	 frameworks,	 and	 see	 "Liquidity	 Risk Management	 —	 Liquidity	 Stress	 Tests"	 for	 further	 information	 about RLAP,	RLEN,	and	triggers	and	alerts	frameworks.

In	addition,	GS	Bank	USA	is	required	to	submit	periodic	resolution	plans to	the	FDIC.	GS	Bank	USA's	next	resolution	plan	is	due	on	July	1,	2018.

# Off-Balance-Sheet	 Arrangements and	 Contractual Obligations

# Off-Balance-Sheet	Arrangements

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

•	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.

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

The	 table	 below	 presents	 where	 information	 about	 our	 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.

# 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,	subordinated	liabilities	of	consolidated	VIEs 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	our	contractual	obligations	by	type.

| $	in	millions | 2017 | 2016 |
| :--- | :--- | :--- |
| Time\tdeposits | \t\t$\t\t30,075 | \t$\t\t27,394 |
| Secured\tlong-term\tfinancings | \t\t$\t\t\t\t9,892 | \t$\t\t\t\t8,405 |
| Unsecured\tlong-term\tborrowings | \t\t$217,687 | \t$189,086 |
| Contractual\tinterest\tpayments | \t\t$\t\t54,489 | \t$\t\t54,552 |
| Subordinated\tliabilities\tof\tconsolidated\tVIEs | \t\t$\t\t\t\t\t\t\t\t\t19 | \t$\t\t\t\t\t\t\t584 |
| Minimum\trental\tpayments | \t\t$\t\t\t\t1,964 | \t$\t\t\t\t1,941 |

The	table	below	presents	our	contractual	obligations	by	period	of	expiration.

|  |  | As	of	December	2017 | As	of	December	2017 |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2019\t-\n2020 | 2021\t-\n2022 | 2023\t-\nThereafter |
| Time\tdeposits | \t\t $\t\t\t\t\t\t\t– | \t $15,630 | \t $\t\t8,610 | $\t\t\t\t5,835 |
| Secured\tlong-term\tfinancings | \t\t $\t\t\t\t\t\t\t– | \t $\t\t4,994 | \t $\t\t3,019 | $\t\t\t\t1,879 |
| Unsecured\tlong-term\tborrowings | \t\t $\t\t\t\t\t\t\t– | \t $53,625 | \t $44,383 | $119,679 |
| Contractual\tinterest\tpayments | \t\t$6,497 | \t $11,562 | \t $\t\t8,515 | $\t\t27,915 |
| Subordinated\tliabilities\tof\tconsolidated |  |  |  |  |
| VIEs | \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\t19 |
| Minimum\trental\tpayments | \t\t $\t\t\t299 | \t $\t\t\t\t\t544 | \t $\t\t\t\t\t350 | $\t\t\t\t\t\t\t771 |

•	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	2017,	unsecured	 long-term	borrowings	had	maturities extending	 to	 2057,	 consisted	 principally	 of	 senior	 borrowings,	 and included	 $5.61	 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	2017,	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	 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	$1.69	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	2017,	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"	below.	Our	risks	include the	risks	across	our	risk	categories,	regions	or	global	businesses,	as	well	as those	which	have	uncertain	outcomes	and	have	the	potential	to	materially impact	our	financial	results,	our	liquidity	and	our	reputation.	For	further information	about	our	areas	of	risk,	see	"Liquidity	Risk	Management," "Market	 Risk	 Management,"	 "Credit	 Risk	 Management,"	 "Operational Risk	 Management"	 and	 "Model	 Risk	 Management"	 below	 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	of	primary	importance	to	our success.	Accordingly,	we	have	established	an	Enterprise	Risk	Management (ERM)	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	ERM	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	control	and	support	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.	The	chief	risk	officer,	as	part	of	the	review of	the	firmwide	risk	portfolio,	regularly	advises	the	Risk	Committee	of	the Board	of	relevant	risk	metrics	and	material	exposures,	including	risk	limits and	thresholds	established	in	our	risk	appetite	statement.

Next,	at	our	most	senior	levels,	our	leaders	are	experienced	risk	managers, with	a	sophisticated	and	detailed	understanding	of	the	risks	we	take.	Our senior	management,	and	senior	managers	 in	our	revenue-producing	units and	independent	control	and	support	functions,	lead	and	participate	in	risk- oriented	 committees.	 Independent	 control	 and	 support	 functions	 include Compliance,	the	Conflicts	Resolution	Group	(Conflicts),	Controllers,	Credit Risk	 Management,	 Human	 Capital	 Management,	 Legal,	 Liquidity	 Risk Management	 and	 Analysis	 (Liquidity	 Risk	 Management),	 Market	 Risk Management	 and	 Analysis	 (Market	 Risk	 Management),	 Model	 Risk Management,	 Operations,	 Operational	 Risk	 Management	 and	 Analysis (Operational	Risk	Management),	Tax,	Technology	and	Treasury.

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

We	maintain	strong	communication	about	risk	and	we	have	a	culture	of collaboration	 in	 decision-making	 among	 the	 revenue-producing	 units, independent	 control	 and	 support	 functions,	 committees	 and	 senior management.	 While	 our	 revenue-producing	 units	 are	 responsible	 for management	of	their	risk,	we	dedicate	extensive	resources	to	independent control	and	support	functions	in	order	to	ensure	a	strong	oversight	structure and	an	appropriate	segregation	of	duties.	We	regularly	reinforce	our	strong culture	of	escalation	and	accountability	across	all	functions.

Processes.	 We	 maintain	 various	 processes	 and	 procedures	 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	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	 (through	 delegated	 authority	 from	 the	 Firmwide	 Risk 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	which	reflect	our	maximum	risk	appetite. This	fosters	an	ongoing	dialogue	on	risk	among	revenue-producing	units, independent	 control	 and	 support	 functions,	 committees	 and	 senior management,	 as	 well	 as	 rapid	 escalation	 of	risk-related	 matters.	 See "Liquidity	Risk	Management,"	"Market	Risk	Management"	and	"Credit Risk	Management"	for	further	information	about	our	risk	limits.

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

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.	In	both our	 revenue-producing	 units	 and	 our	 independent	 control	 and	 support functions,	the	experience	of	our	professionals,	and	their	understanding	of the	 nuances	 and	 limitations	 of	 each	 risk	 measure,	 guide	 us	 in	 assessing exposures	and	maintaining	them	within	prudent	levels.

We	reinforce	a	culture	of	effective	risk	management,	consistent	with	our risk	appetite	statement,	in	our	training	and	development	programs,	as	well	as the	way	we	evaluate	performance,	and	recognize	and	reward	our	people. Our	training	and	development	programs,	including	certain	sessions	led	by our	most	senior	leaders,	are	focused	on	the	importance	of	risk	management, client	 relationships	 and	 reputational	 excellence.	 As	 part	 of	 our	 annual performance	 review	 process,	 we	 assess	 reputational	 excellence	 including how	 an	 employee	 exercises	 good	 risk	 management	 and	 reputational judgment,	and	adheres	to	our	code	of	conduct	and	compliance	policies.	Our review	and	reward	processes	are	designed	to	communicate	and	reinforce	to our	professionals	the	link	between	behavior	and	how	people	are	recognized, the	need	to	focus	on	our	clients	and	our	reputation,	and	the	need	to	always act	in	accordance	with	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	 revenue-producing	 units	 and	 our	 independent control	 and	 support	 functions.	We	 have	 established	 procedures	 for	 these committees	to	ensure	that	appropriate	information	barriers	are	in	place.	Our primary	 risk	 committees,	 most	 of	 which	 also	 have additional sub-committees	or	working	groups,	are	described	below.	In	addition	to	these committees,	 we	 have	 other	 risk-oriented	 committees	 which	 provide oversight	for	different	businesses,	activities,	products,	regions	and	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.

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

The	chart	below	presents	an	overview	of	our	risk	management	governance structure,	including	the	reporting	relationships	of	our	independent	control and	support	functions.

Management	Committee.	The	Management	Committee	oversees	our global	 activities,	 including	 all	 of	 our	 independent	 control	 and	 support functions.	 It	 provides	 this	 oversight	 directly	 and	 through	 authority delegated	to	committees	it	has	established.	This	committee	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 Client and Business Standards Committee.	 The

Firmwide	 Client	 and	 Business	 Standards	 Committee	 assesses	 and	 makes determinations	regarding	business	standards	and	practices,	reputational	risk management,	client	relationships	and	client	service,	is	chaired	by	one	of	our presidents	and	co-chief	operating	officers,	who	is	appointed	as	chair	by	the chief	executive	officer,	and	reports	 to	 the	Management	Committee.	This committee	 periodically	 updates	 and	 receives	 guidance	 from	 the	 Public Responsibilities	 Committee	 of	 the	 Board.	 This	 committee	 has	 also established	certain	committees	that	report	to	it,	including	divisional	Client and	 Business	 Standards	 Committees	 and	 risk-related	 committees.	 The following	are	the	risk-related	committees	that	report	to	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	 requiring mandatory	escalation	to	the	Firmwide	Reputational	Risk	Committee	or that	otherwise	have	potential	heightened	reputational	risk.	This	committee is	chaired	by	one	of	our	presidents	and	co-chief	operating	officers,	who	is appointed	as	chair	by	the	chief	executive	officer,	and	the	vice-chairs	are the	head	of	Compliance	and	the	head	of	the	Conflicts	Resolution	Group, who	are	appointed	as	vice-chairs	by	the	chair	of	the	Firmwide	Client	and Business	Standards	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-chief	operating	officer	of	Fixed	Income,	Currency and	 Commodities,	 who	 are	 appointed	 as	co-chairs	 by	 the	 chair	 of	 the Firmwide	Client	and	Business	Standards	Committee.

Firmwide	Risk	Committee.	The	Firmwide	Risk	Committee	is	globally responsible	for	the	ongoing	monitoring	and	management	of	our	financial risks.	The	Firmwide	Risk	Committee	approves	our	financial	risk	 limits framework,	metrics	and	methodologies,	and	reviews	results	of	stress	tests and	scenario	analyses.	This	committee	is	co-chaired	by	our	chief	financial officer	and	our	chief	risk	officer,	who	are	appointed	as	co-chairs	by	the chief	executive	officer,	and	reports	to	the	Management	Committee.	The following	are	 the	primary	committees	 that	report	 to	 the	Firmwide	Risk Committee:

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

•	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	a	deputy	chief	risk	officer	and	the	deputy head	of	Compliance,	who	are	appointed	as	co-chairs	by	the	co-chairs	of the	Firmwide	Risk	Committee.

•	Risk	 Governance	 Committee.	 The	 Risk	 Governance	 Committee (through	 delegated	 authority	 from	 the	 Firmwide	 Risk	 Committee)	 is globally	responsible	for	 the	ongoing	approval	and	monitoring	of	risk frameworks,	policies,	parameters	and	limits,	at	firmwide,	business	and product	levels.	This	committee	is	chaired	by	our	chief	risk	officer,	who is	appointed	as	chair	by	the	co-chairs	of	the	Firmwide	Risk	Committee.

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

•	Firmwide	 Capital	 Committee.	 The Firmwide	 Capital	 Committee provides	 approval	 and	 oversight	 of	 debt-related	 transactions,	 including principal	commitments	of	our	capital.	This	committee	aims	to	ensure	that business	 and	 reputational	 standards	 for	 underwritings	 and	 capital commitments	 are	 maintained	 on	 a	 global	 basis.	 This	 committee	 is co-chaired	by	the	head	of	Americas	Credit	Risk	Management,	and	 the head	 of	 the	 EMEA	 Financing	 Group.	 The	co-chairs	 of	 the	 Firmwide Capital	Committee	are	appointed	by	the	co-chairs	of	the	Firmwide	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,	 our	 chief	 underwriting	 officer,	 and	 a managing	director	in	Risk	Management,	who	are	appointed	as	co-chairs by	the	chair	of	the	Firmwide	Client	and	Business	Standards	Committee.

# Firmwide	Enterprise	Risk	Committee.	The	Firmwide	Enterprise	Risk

Committee	is	responsible	for	the	ongoing	review,	approval	and	monitoring of	 the	 ERM	 framework	 and	 for	 providing	 oversight	 of	 our	 aggregate financial	and	nonfinancial	risks.	This	committee	is	co-chaired	by	one	of	our presidents	and	co-chief	operating	officers	and	our	chief	risk	officer,	who	are appointed	 as	co-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	 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	control	and	the	co-head	of	EMEA FICC	sales,	who	are	appointed	as	co-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	a	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	the	head	of	Operational	Risk	Management, who	are	appointed	as	co-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	co-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.

# Conflicts	Management

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

We	 have	 a	 multilayered	 approach	 to	 resolving	 conflicts	 and	 addressing reputational	 risk.	 Our	 senior	 management	 oversees	 policies	 related	 to conflicts	 resolution,	 and,	 in	 conjunction	 with	 Conflicts,	 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	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	reports	to	one	of	our	presidents	and	co-chief operating	officers.

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

Treasury	 has	 the	 primary	 responsibility	 for	 assessing,	 monitoring	 and managing	our	liquidity	and	funding	strategy.	Treasury	is	independent	of the	revenue-producing	units	and	reports	to	our	chief	financial	officer.

Liquidity	Risk	Management	is	an	independent	risk	management	function responsible	 for	 control	 and	 oversight	 of	 our	 liquidity	 risk	 management framework,	including	stress	testing	and	limit	governance.	Liquidity	Risk Management	is	independent	of	the	revenue-producing	units	and	Treasury, and	reports	to	our	chief	risk	officer.

# 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.

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

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.,	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	details;

•	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	 details	 on	 our	 balance	 sheet	 management process	 and	 "—	 Funding	 Sources	 —	 Secured	 Funding"	 for	 further details	on	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	 Finance Committee	 on	 a	 quarterly	 basis.	 In	 addition,	 senior	 managers	 in	 our independent	 control	 and	 support	 functions	 regularly	 analyze,	 and	 the Firmwide	 Finance	 Committee	 reviews,	 our	 consolidated	 total	 capital position	(unsecured	long-term	borrowings	plus	total	shareholders'	equity) so	that	we	maintain	a	level	of	long-term	funding	that	is	sufficient	to	meet our	long-term	financing	requirements.	In	a	liquidity	crisis,	we	would	first use	our	GCLA	in	order	to	avoid	reliance	on	asset	sales	(other	than	our GCLA).	However,	we	recognize	that	orderly	asset	sales	may	be	prudent	or necessary	in	a	severe	or	persistent	liquidity	crisis.

# Subsidiary	Funding	Policies

The	 majority	 of	 our	 unsecured	 funding	 is	 raised	 by	 Group	 Inc.,	 which lends	the	necessary	funds	to	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	2017,	Group	Inc.	had	$29.60	billion	of	equity	and subordinated	indebtedness	invested	in	GS&Co.,	its	principal	U.S.	registered broker-dealer;	 $37.19	 billion	 invested	 in	 GSI,	 a	 regulated	 U.K.	 broker- dealer;	$2.69	billion	invested	in	GSJCL,	a	regulated	Japanese	broker-dealer; $27.56	 billion invested	 in	 GS	 Bank	 USA,	 a	 regulated	 New	York	 State- chartered	bank;	and	$3.86	billion	invested	in	GSIB,	a	regulated	U.K.	bank. Group	 Inc.	 also	 provided,	 directly	 or	 indirectly, $114.98 billion	 of unsubordinated	 loans	 (including	 secured	 loans	 of $50.59 billion),	 and $13.38	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	 2017.	 In	 addition,	 as	 of	 December	 2017,	 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	details	the	responsibilities	of	these	groups and	individuals,	which	include	making	and	disseminating	key	decisions, coordinating	all	contingency	activities	throughout	the	duration	of	the	crisis or	period	of	market	stress,	implementing	liquidity	maintenance	activities and	managing	internal	and	external	communication.

# Liquidity	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.

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 the critical	 modeling parameters 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	rollover	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	rollover	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	 RLAP	 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	 RLEN	 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.

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.

# Model	Review	and	Validation

Treasury	 regularly	 refines	 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	assessed	and	approved	by	Liquidity	Risk Management.

Model	 Risk	 Management	 is	 responsible	 for	 the	 independent	 review	 and validation	 of	 our	 liquidity	 models.	 See	 "Model	 Risk	 Management"	 for further	information	about	the	review	and	validation	of	these	models.

# 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	Firmwide	Finance	Committee approve	 liquidity	risk	 limits	at	 the	firmwide	 level.	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.	Treasury	is	responsible	for	identifying	and	escalating,	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	2017	and December	 2016	 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	the	average	fair	value	of	the	securities	and	certain overnight	cash	deposits	that	are	included	in	our	GCLA.

|  | Average	for	the<br>Year	Ended	December | Average	for	the<br>Year	Ended	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| U.S.\tdollar-denominated | \t\t$155,020 | \t$155,123 |
| Non-U.S.\tdollar-denominated | 63,528 | 55,980 |
| Total | \t\t$218,548 | \t$211,103 |

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

|  | Average	for	the<br>Year	Ended	December | Average	for	the<br>Year	Ended	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Overnight\tcash\tdeposits | \t\t$\t\t93,617 | \t$\t\t92,336 |
| U.S.\tgovernment\tobligations | 75,108 | 68,708 |
| U.S.\tagency\tobligations | 11,813 | 13,645 |
| Non-U.S.\tgovernment\tobligations | 38,010 | 36,414 |
| Total | \t\t$218,548 | \t$211,103 |

In	the	tables	above:

•	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.

The	 table	below	presents	 the	average	GCLA	of	Group	Inc.	and	Funding IHC,	and	Group	Inc.'s	major	broker-dealer	and	bank	subsidiaries.

|  | Average	for	the<br>Year	Ended	December | Average	for	the<br>Year	Ended	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Group\tInc.\tand\tFunding\tIHC | \t\t$\t\t37,507 | \t$\t\t43,638 |
| Major\tbroker-dealer\tsubsidiaries | 98,160 | 86,519 |
| Major\tbank\tsubsidiaries | 82,881 | 80,946 |
| Total | \t\t$218,548 | \t$211,103 |

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. During	the	second	quarter	of	2017,	in	connection	with	our	resolution	plan, Group	 Inc.	 transferred	 substantially	 all	 of	 its	 GCLA	 to	 Funding	 IHC. 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	 $158.41	 billion	 and	 $142.33	 billion	 for	 2017	 and	 2016, respectively.	We	do	not	consider	these	assets	liquid	enough	to	be	eligible	for our	GCLA.

# Liquidity	Regulatory	Framework

As	a	BHC,	we	are	subject	to	the	U.S.	federal	bank	regulatory	agencies' LCR	rule.	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%.

The	table	below	presents	information	about	our	average	daily	LCR.

| $	in	millions | Average	for	the	Three	Months<br>Ended	December	2017 |
| :--- | :--- |
| Total\tHQLA | $219,108 |
| Eligible\tHQLA | $162,829 |
| Net\tcash\toutflows | $123,518 |
| LCR | 132% |

We	expect	that	fluctuations	in	client	activity,	business	mix	and	the	overall market	environment	will	impact	our	average	LCR	in	the	future.

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,	as	well	as	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	 by	 the effective	date	of	the	final	rule.

The	 following is information on our subsidiary liquidity regulatory requirements:

•	GS	 Bank	 USA.	 GS	 Bank	 USA	 is	 subject	 to	 minimum	 liquidity standards	 under	 the	 LCR	 rule	 approved	 by	 the	 U.S.	 federal	 bank regulatory	 agencies.	 As	 of	 December	 2017,	 GS	 Bank	 USA's	 LCR exceeded	the	minimum	requirement.	The	U.S.	federal	bank	regulatory agencies'	 proposed	 NSFR	 requirement	 described	 above	 would	 also apply	to	GS	Bank	USA.

•	GSI.	The	LCR	rule	issued	by	the	U.K.	regulatory	authorities	became effective	in	the	U.K.	on	October	1,	2015,	with	a	phase-in	period	whereby certain	financial	institutions,	including	GSI,	were	required	to	have	an 80%	minimum	ratio	initially,	increasing	to	90%	on	January	1,	2017	and 100%	on	January	1,	2018.	GSI's	average	monthly	LCR	for	the	trailing twelve-month	 period	 ended	 December	 2017	 exceeded	 the	 minimum requirement.

•	Other Subsidiaries.	We monitor	 the	 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 applicable	 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.	by	DBRS,	Inc.	(DBRS),	Fitch,	Inc.	(Fitch),	Moody's	Investors	Service (Moody's),	Rating	and	Investment	Information,	Inc.	(R&I),	and	Standard	& Poor's	Ratings	Services	(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 | \t Stable | \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 | \t Stable | \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	2017.	Our	cash	and	cash	equivalents	decreased by $11.66 billion	 to $110.05 billion	 at	 the	 end	 of	 2017.	 We	 used $17.74	billion	in	net	cash	for	operating	activities,	reflecting	a	decrease	in	the net	 liability	for	receivables	and	payables	due	 to	client	activity.	We	used $29.12	billion	in	net	cash	for	investing	activities,	primarily	to	fund	loans receivable	 to	 corporate	 borrowers	 and	 loans	 backed	 by	 real	 estate	 and investments	in	U.S.	government	and	agency	obligations	accounted	for	as available-for-sale	securities.	We	generated	$35.20	billion	in	net	cash	from financing	activities,	primarily	from	net	 issuances	of	unsecured	 long-term borrowings	 and	 increases	 in	 institutional	 deposits	 and	 Marcus	 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 $9.27	billion	in	net	cash	from	investing	activities,	primarily	from	net	cash acquired	in	business	acquisitions.	We	generated	$19.00	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.

Year	Ended	December	2015.	Our	cash	and	cash	equivalents	increased by $18.41 billion	 to $93.44 billion	 at	 the	 end	 of	 2015.	 We	 used $18.57	billion	in	net	cash	for	investing	activities,	primarily	due	to	funding	of loans	receivable.	We	generated	$36.99	billion	in	net	cash	from	financing activities	and	operating	activities	primarily	from	net	issuances	of	long-term borrowings	and	bank	deposits,	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	the	revenue-producing units	and	reports	to	our	chief	risk	officer,	has	primary	responsibility	for assessing,	 monitoring	 and	 managing	 our	 market	 risk.	 We	 monitor	 and control	risks	through	strong	firmwide	oversight	and	independent	control and	support	functions	across	our	global	businesses.

Managers	 in	 revenue-producing	 units	 and	 Market	 Risk	 Management discuss	market	information,	positions	and	estimated	risk	and	loss	scenarios on	an	ongoing	basis.	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

We	manage	our	market	risk	by	diversifying	exposures,	controlling	position sizes	and	establishing	economic	hedges	in	related	securities	or	derivatives. This	process	includes:

•	Accurate	 and timely	 exposure information incorporating	 multiple risk metrics;

•	A	dynamic	limit	setting	framework;	and

•	Constant	communication	among	revenue-producing	units,	risk	managers and	senior	management.

# 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	control	and	support	functions.

Value-at-Risk.	VaR	is	the	potential	loss	in	value	due	to	adverse	market movements	over	a	defined	time	horizon	with	a	specified	confidence	level. For	 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.

When	calculating	VaR,	we	use	historical	simulations	with	full	valuation	of approximately	70,000	market	factors.	VaR	is	calculated	at	a	position	level based	on	simultaneously	shocking	the	relevant	market	risk	factors	for	that position.	 We	 sample	 from	 five	 years	 of	 historical	 data	 to	 generate	 the scenarios	for	our	VaR	calculation.	The	historical	data	is	weighted	so	that the	relative	importance	of	the	data	reduces	over	time.	This	gives	greater importance	 to	 more	 recent	 observations	 and	 reflects	 current	 asset volatilities,	which	improves	the	accuracy	of	our	estimates	of	potential	loss. As	a	result,	even	if	our	positions	included	in	VaR	were	unchanged,	our VaR	would	increase	with	increasing	market	volatility	and	vice	versa.

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

Our	VaR	measure	does	not	include:

•	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	firmwide stress	tests.	The	results	of	our	various	stress	tests	are	analyzed	together	for risk	management	purposes.

Sensitivity	analysis	is	used	to	quantify	the	impact	of	a	market	move	in	a single	risk	factor	across	all	positions	(e.g.,	equity	prices	or	credit	spreads) using	a	variety	of	defined	market	shocks,	ranging	from	those	that	could	be expected	over	a	one-day	time	horizon	up	to	those	that	could	take	many months	to	occur.	We	also	use	sensitivity	analysis	to	quantify	the	impact	of the	 default	 of	 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.

Firmwide	stress	testing	combines	market,	credit,	operational	and	liquidity risks	into	a	single	combined	scenario.	Firmwide	stress	tests	are	primarily used	to	assess	capital	adequacy	as	part	of	our	capital	planning	and	stress testing	process;	however,	firmwide	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"	above for	further	information.

Unlike	VaR	measures,	which	have	an	implied	probability	because	they	are calculated	 at	 a	 specified	 confidence	 level,	 there	 is	 generally	 no	 implied probability	that	our	stress	test	scenarios	will	occur.	Instead,	stress	tests	are used	to	model	both	moderate	and	more	extreme	moves	in	underlying	market factors.	 When	 estimating	 potential	 loss,	 we	 generally	 assume	 that	 our positions	cannot	be	reduced	or	hedged	(although	experience	demonstrates that	we	are	generally	able	to	do	so).

Stress	test	scenarios	are	conducted	on	a	regular	basis	as	part	of	our	routine risk	 management	 process	 and	 on	 an	 ad	 hoc	 basis	 in	 response	 to	 market events	 or	 concerns.	 Stress	 testing	 is	 an	 important	 part	 of	 our	 risk management	process	because	it	allows	us	to	quantify	our	exposure	to	tail risks,	highlight	potential	loss	concentrations,	undertake	risk/reward	analysis, and	assess	and	mitigate	our	risk	positions.

Limits.	We	use	risk	limits	at	various	levels	(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 (through	delegated	authority	from	the	Firmwide	Risk	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	daily	by	Market	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	(e.g.,	due	to	positional	changes	or changes	in	market	conditions,	such	as	increased	volatilities	or	changes	in correlations),	 it	 is	 escalated	 to	 senior	 managers	 in	 Market	 Risk 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	Firmwide	Risk	Committee.

See	"Model	Risk	Management"	for	further	information	about	the	review and	validation	of	these	models.

# Systems

We	have	made	a	significant	investment	in	technology	to	monitor	market	risk including:

•	An	independent	calculation	of	VaR	and	stress	measures;

•	Risk	measures	calculated	at	individual	position	levels;

•	Attribution	of	risk	measures	to	individual	risk	factors	of	each	position;

•	The	ability	to	report	many	different	views	of	the	risk	measures	(e.g.,	by desk,	business,	product	type	or	entity);	and

•	The	ability	to	produce	ad	hoc	analyses	in	a	timely	manner.

# Metrics

We	analyze	VaR	at	the	firmwide	level	and	a	variety	of	more	detailed	levels, including	by	risk	category,	business,	and	region.	The	tables	below	present 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 | Year	Ended	December |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | \t2017 | \t2016 | \t2015 |
| Interest\trates | \t$\t40 | \t$\t45 | \t$\t47 |
| Equity\tprices | 24 | 25 | 26 |
| Currency\trates | 12 | 21 | 30 |
| Commodity\tprices | 13 | 17 | 20 |
| Diversification\teffect | (35) | (45) | (47) |
| Total | \t$\t54 | \t$\t63 | \t$\t76 |

Our	average	daily	VaR	decreased	to	$54	million	in	2017	from	$63	million	in 2016,	 due	 to	 reductions	 across	 all	 risk	 categories,	 partially	 offset	 by	 a decrease	in	the	diversification	effect.	The	overall	decrease	was	primarily	due to	lower	levels	of	volatility.

Our	average	daily	VaR	decreased	to	$63	million	in	2016	from	$76	million	in 2015,	 due	 to	 reductions	 across	 all	 risk	 categories,	 partially	 offset	 by	 a decrease	in	the	diversification	effect.	The	overall	decrease	was	primarily	due to	reduced	exposures.

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

|  | As	of	December | As	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | \t2017 | \t2016 | \t2015 |
| Interest\trates | \t$\t48 | \t$\t45 | \t$\t43 |
| Equity\tprices | 31 | 34 | 24 |
| Currency\trates | 7 | 23 | 31 |
| Commodity\tprices | 9 | 19 | 17 |
| Diversification\teffect | (30) | (39) | (48) |
| Total | \t$\t65 | \t$\t82 | \t$\t67 |

Our	 daily	 VaR	 decreased	 to	 $65	 million	 as	 of	 December	 2017	 from $82	 million	 as	 of	 December	 2016,	 primarily	 due	 to	 reductions	 in	 the currency	rates,	commodity	prices	and	equity	prices	categories,	partially offset	by	a	decrease	 in	 the	diversification	effect	and	an	 increase	 in	 the interest	rates	category.	The	overall	decrease	was	primarily	due	to	lower levels	of	volatility.

Our	 daily	 VaR	 increased	 to	 $82	 million	 as	 of	 December	 2016	 from $67	 million	 as	 of	 December	 2015,	 primarily	 due	 to	 an	 increase	 in	 the equity	prices	category	and	a	decrease	in	the	diversification	effect,	partially offset	by	a	decrease	in	the	currency	rates	category.	The	overall	increase was	primarily	due	to	increased	exposures.

During	2017	and	2016,	the	firmwide	VaR	risk	limit	was	not	exceeded, raised	 or	 reduced.	 During	 2015,	 the	 firmwide	 VaR	 risk	 limit	 was temporarily	 raised	 on	 two	 occasions	 in	 order	 to	 facilitate	 client transactions.	Separately,	in	March	2015,	the	firmwide	VaR	risk	limit	was reduced,	reflecting	lower	risk	utilization	over	the	prior	year.

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

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

The	high	and	low	total	VaR	was	$86	million	and	$37	million,	respectively, for	the	year	ended	December	2017.

The	chart	below	reflects	our	daily	VaR	over	the	last	four	quarters.

The	chart	below	presents	the	frequency	distribution	of	our	daily	net	revenues for	positions	included	in	VaR	for	2017.

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	did	not	exceed	our	95%	one-day	VaR	during 2017,	2016	and	2015	(i.e.,	a	VaR	exception).

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	for positions,	accounted	for	at	fair	value,	that	are	not	included	in	VaR	by	asset category.

|  |  | As	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Equity | \t\t$2,096 | \t$2,085 | \t$2,157 |
| Debt | 1,606 | 1,702 | 1,479 |
| Total | \t\t$3,702 | \t$3,787 | \t$3,636 |

•	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.

•	Equity	 and	 debt	 funded	 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	and	$2	million	(including	hedges)	as	of	December	2017 and	December	2016,	respectively.	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	 $35	 million	 and $25	 million as	 of	 December	 2017	 and	 December	 2016,	 respectively. However,	the	actual	net	impact	of	a	change	in	our	own	credit	spreads	is	also affected	by	the	liquidity,	duration	and	convexity	(as	the	sensitivity	is	not linear	to	changes	in	yields)	of	those	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	as	of	December	2017	and December	 2016	 were $65.93 billion	 and $49.67 billion,	 respectively, substantially	all	of	which	had	floating	interest	rates.	As	of	December	2017 and	December	2016,	the	estimated	sensitivity	to	a	100	basis	point	increase in	 interest	 rates	 on	 such	 loans	 was $527	 million and	 $405	 million, respectively,	 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	December	2017	and	December	2016,	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	in	our	consolidated	statements of	financial	condition	and	the	market	risk	measures	used	to	assess	those assets	and	liabilities.	Certain	categories	in	the	consolidated	statements	of financial	condition	are	incorporated	in	more	than	one	risk	measure.

# Categories	in	the	Consolidated	Statements

# of	Financial	Condition

Receivables

# 	Market	Risk	Measures

	VaR VaR Interest	Rate	Sensitivity

# Credit	Risk	Management

Credit	 risk	 represents	 the	 potential	 for	 loss	 due	 to	 the	 default	 or deterioration	in	credit	quality	of	a	counterparty	(e.g.,	an	OTC	derivatives counterparty	or	a	borrower)	or	an	issuer	of	securities	or	other	instruments we	hold.	Our	exposure	to	credit	risk	comes	mostly	from	client	transactions in	OTC	derivatives	and	loans	and	lending	commitments.	Credit	risk	also comes	from	cash	placed	with	banks,	securities	financing	transactions	(i.e., resale	 and	 repurchase	 agreements	 and	 securities	 borrowing	 and	 lending activities)	and	receivables	from	brokers,	dealers,	clearing	organizations, customers	and	counterparties.

Credit	Risk	Management,	which	is	independent	of	the	revenue-producing units	and	reports	 to	our	chief	risk	officer,	has	primary	responsibility	for assessing,	 monitoring	 and	 managing	 credit	 risk.	 The	 Firmwide	 Risk Committee	and	the	Risk	Governance	Committee	establish	and	review	credit policies	and	parameters.	In	addition,	we	hold	other	positions	that	give	rise	to credit	risk	(e.g.,	bonds	held	in	our	inventory	and	secondary	bank	loans). These	credit	risks	are	captured	as	a	component	of	market	risk	measures, which	are	monitored	and	managed	by	Market	Risk	Management,	consistent with	other	 inventory	positions.	We	also	enter	 into	derivatives	 to	manage market	risk	exposures.	Such	derivatives	also	give	rise	to	credit	risk,	which	is monitored	and	managed	by	Credit	Risk	Management.

# Credit	Risk	Management	Process

Effective	 management	 of	 credit	 risk	 requires	 accurate	 and	 timely information,	a	high	level	of	communication	and	knowledge	of	customers, countries,	 industries	 and	 products.	 Our	 process	 for	 managing	 credit	 risk includes:

•	Approving	transactions	and	setting	and	communicating	credit	exposure limits;

•	Establishing	or	approving	underwriting	standards;

•	Monitoring	compliance	with	established	credit	exposure	limits;

•	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;

•	Reporting	 of credit exposures to senior	 management, the	 Board and regulators;

•	Using	credit	risk	mitigants,	including	collateral	and	hedging;	and

•	Communicating	 and	 collaborating	 with	 other	 independent	 control	 and support	functions	such	as	operations,	legal	and	compliance.

As	part	of	the	risk	assessment	process,	Credit	Risk	Management	performs credit	 reviews,	 which	 include	 initial	 and	 ongoing	 analyses	 of	 our counterparties.	For	substantially	all	of	our	credit	exposures,	the	core	of	our process	 is	 an	 annual	 counterparty	 credit	 review.	 A	 credit	 review	 is	 an independent	analysis	of	the	capacity	and	willingness	of	a	counterparty	to meet	 its	 financial	 obligations,	 resulting	 in	 an	 internal	 credit	 rating.	 The determination	of	internal	credit	ratings	also	incorporates	assumptions	with respect	to	the	nature	of	and	outlook	for	the	counterparty's	industry,	and	the economic	environment.	Senior	personnel	within	Credit	Risk	Management, with	expertise	in	specific	industries,	inspect	and	approve	credit	reviews	and internal	credit	ratings.

Our	risk	assessment	process	may	also	include,	where	applicable,	reviewing certain	key	metrics,	such	as	delinquency	status,	collateral	values,	FICO 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	on	our	aggregate	credit	risk by	product,	internal	credit	rating,	industry,	country	and	region.

# Risk	Measures	and	Limits

We	measure	our	credit	risk	based	on	 the	potential	 loss	 in	 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.

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	tolerance	and	are	designed	to	allow	for regular	 monitoring,	 review,	 escalation	 and	 management	 of	 credit	 risk concentrations.

The	Risk	Committee	of	the	Board	and	the	Risk	Governance	Committee (through	delegated	authority	from	the	Firmwide	Risk	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	 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.

# Stress	Tests

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.	Stress	tests	are	conducted	jointly	with	our market	and	liquidity	risk	functions.

Our	potential	credit	exposure	and	stress	testing	models,	and	any	changes	to such	models	or	assumptions,	are	reviewed	by	Model	Risk	Management.	See "Model	Risk	Management"	for	further	 information	about	 the	review	and validation	of	these	models.

# Risk	Mitigants

To	 reduce	 our	 credit	 exposures	 on	 derivatives	 and	 securities	 financing transactions,	we	may	enter	into	netting	agreements	with	counterparties	that permit	us	to	offset	receivables	and	payables	with	such	counterparties.	We may	also	reduce	credit	risk	with	counterparties	by	entering	into	agreements that	enable	us	to	obtain	collateral	from	them	on	an	upfront	or	contingent basis	and/or	to	terminate	transactions	if	the	counterparty's	credit	rating	falls below	a	specified	level.	We	monitor	the	fair	value	of	the	collateral	on	a	daily basis	to	ensure	that	our	credit	exposures	are	appropriately	collateralized.	We seek	to	minimize	exposures	where	there	is	a	significant	positive	correlation between	the	creditworthiness	of	our	counterparties	and	the	market	value	of collateral	we	receive.

For	loans	and	lending	commitments,	depending	on	the	credit	quality	of	the borrower	and	other	characteristics	of	the	transaction,	we	employ	a	variety of	 potential	 risk	 mitigants.	 Risk	 mitigants	 include	 collateral	 provisions, guarantees,	covenants,	structural	seniority	of	the	bank	loan	claims	and,	for certain	lending	commitments,	provisions	in	the	legal	documentation	that allow	 us	 to	 adjust	 loan	 amounts,	 pricing,	 structure	 and	 other	 terms	 as market	 conditions	 change.	 The	 type	 and	 structure	 of	 risk	 mitigants employed	can	significantly	influence	the	degree	of	credit	risk	involved	in	a loan	or	lending	commitment.

When	we	do	not	have	sufficient	visibility	into	a	counterparty's	financial strength	 or	 when	 we	 believe	 a	 counterparty	 requires	 support	 from	 its parent,	 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	 2017,	 our	 aggregate	 credit	 exposure	 increased	 as compared	with	December	2016,	primarily	reflecting	an	increase	in	loans and	lending	commitments.	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	2016,	primarily	reflecting	an	increase	in	non-investment-grade loans	and	lending	commitments.	Our	credit	exposure	to	counterparties	that defaulted	during	2017	was	higher	as	compared	with	our	credit	exposure	to counterparties	that	defaulted	during	the	prior	year,	and	substantially	all	of such	 exposure	 related	 to	 loans	 and	 lending	 commitments.	 Our	 credit exposure	 to	 counterparties	 that	 defaulted	 during	 2017	 remained	 low, representing	 less	 than	 0.5%	 of	 our	 total	 credit	 exposure,	 and	 estimated losses,	while	higher	compared	with	the	prior	year,	were	still	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	our	credit	exposure	related	to	unrestricted	cash	and cash	equivalents	by	industry,	region	and	credit	quality.

| $	in	millions | 2017 | 2016 |
| :--- | :--- | :--- |
| Credit\tExposure\tby\tIndustry |  |  |
| Funds | \t\t$\t\t\t\t\t\t\t\t\t– | \t$\t\t\t\t\t\t\t138 |
| Financial\tInstitutions | 15,609 | 11,836 |
| Sovereign | 76,000 | 95,092 |
| Total | \t\t$91,609 | \t$107,066 |
| Credit\tExposure\tby\tRegion |  |  |
| Americas | \t\t$58,300 | \t$\t\t80,381 |
| EMEA | 20,625 | 16,099 |
| Asia | 12,684 | 10,586 |
| Total | \t\t$91,609 | \t$107,066 |
| Credit\tExposure\tby\tCredit\tQuality\t(Credit\tRating\tEquivalent) |  |  |
| AAA | \t\t$65,972 | \t$\t\t83,899 |
| AA | 7,939 | 8,784 |
| A | 16,422 | 13,344 |
| BBB | 1,060 | 971 |
| BB\tor\tlower | 216 | 68 |
| Total | \t\t$91,609 | \t$107,066 |

The	table	above	excludes	cash	segregated	for	regulatory	and	other	purposes of $18.44 billion	 and $14.65 billion	 as	 of	 December	 2017	 and December	2016,	respectively.

OTC Derivatives.	Our credit	 exposure	 on	 OTC	 derivatives	 arises primarily	from	our	market-making	activities.	As	a	market	maker,	we	enter into	derivative	transactions	to	provide	liquidity	to	clients	and	to	facilitate	the transfer	and	hedging	of	their	risks.	We	also	enter	into	derivatives	to	manage market	risk	exposures.	We	manage	our	credit	exposure	on	OTC	derivatives using	the	credit	risk	process,	measures,	limits	and	risk	mitigants	described above.

Derivatives	are	reported	on	a	net-by-counterparty	basis	(i.e.,	the	net	payable or	receivable	for	derivative	assets	and	liabilities	for	a	given	counterparty) when	a	legal	right	of	setoff	exists	under	an	enforceable	netting	agreement (counterparty	netting).	Derivatives	are	accounted	for	at	fair	value,	net	of cash	 collateral	 received	 or	 posted	 under	 enforceable	 credit	 support agreements	 (cash	 collateral	 netting).	 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	our	credit	exposure	related	to	OTC	derivatives	by industry	and	region.

The	table	below	presents	the	distribution	of	our	credit	exposure	to	OTC derivatives	 by tenor,	 both	 before	 and	 after the	 effect	 of	 collateral	 and netting	agreements.

•	Tenor is based on expected duration for	 mortgage-related credit derivatives	and	generally	on	remaining	contractual	maturity	for	other derivatives.

•	Counterparty	netting	within	the	same	tenor	category	is	included	within such tenor	 category.	 Counterparty	 netting	 across tenor	 categories,	 as well as cash collateral received under enforceable credit support agreements,	is	included	in	netting.

•	Net	 credit	 exposure	 represents	 OTC	 derivative	 assets,	 included	 in financial	 instruments	 owned,	 less	 cash	 collateral	 and	 the	 fair	 value	 of securities	collateral,	primarily	U.S.	government	and	agency	obligations and	non-U.S.	government	and	agency	obligations,	received	under	credit support	 agreements,	 which	 management	 considers	 when	 determining credit	risk,	but	such	collateral	is	not	eligible	for	netting	under	U.S.	GAAP.

The	 tables	below	present	 the	distribution	of	our	credit	exposure	 to	OTC derivatives	 by	 tenor	 and	 our	 internally	 determined	 public	 rating	 agency equivalents.

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	 our	 credit	 exposure	 related	 to	 commercial loans	and	lending	commitments	by	industry,	region	and	credit	quality.

|  | Loans	and	Lending<br>Commitments<br>as	of	December | Loans	and	Lending<br>Commitments<br>as	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Credit\tExposure\tby\tIndustry |  |  |
| Funds | \t\t$\t\t\t\t5,823 | \t$\t\t\t\t3,854 |
| Financial\tInstitutions | 14,255 | 13,630 |
| Consumer,\tRetail\t&amp;\tHealthcare | 44,558 | 30,007 |
| Sovereign | 1,020 | 902 |
| Municipalities\t&amp;\tNonprofit | 804 | 709 |
| Natural\tResources\t&amp;\tUtilities | 27,196 | 25,694 |
| Real\tEstate | 23,540 | 13,034 |
| Technology,\tMedia\t&amp;\tTelecommunications | 37,282 | 33,232 |
| Diversified\tIndustrials | 25,686 | 20,847 |
| Other\t(including\tSpecial\tPurpose\tVehicles) | 17,848 | 12,301 |
| Total | \t\t$198,012 | \t$154,210 |
| Credit\tExposure\tby\tRegion |  |  |
| Americas | \t\t$143,668 | \t$115,145 |
| EMEA | 48,239 | 35,044 |
| Asia | 6,105 | 4,021 |
| Total | \t\t$198,012 | \t$154,210 |
| Credit\tExposure\tby\tCredit\tQuality\t(Credit\tRating\tEquivalent) |  |  |
| AAA | \t\t$\t\t\t\t3,193 | \t$\t\t\t\t3,135 |
| AA | 8,799 | 8,375 |
| A | 33,055 | 29,227 |
| BBB | 63,225 | 43,151 |
| BB\tor\tlower | 89,243 | 69,745 |
| Unrated | 497 | 577 |
| Total | \t\t$198,012 | \t$154,210 |

•	Private	 Wealth	 Management	 and	 Retail	 Lending.	 We	 extend loans	 and	 lending	 commitments	 to	 our	 Private	 Wealth	 Management clients	that	are	primarily	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.	The gross	 exposure	 related	 to	 such	 loans	 and	 lending	 commitments	 was $24.86 billion	 and $22.51 billion	 as	 of	 December	 2017	 and December	2016,	respectively.	Our	regional	net	credit	exposure	related	to these	 activities	 was	 approximately	 90%	 and	 92%	 in	 the	 Americas, approximately	5%	and	5%	in	EMEA,	and	approximately	5%	and	3%	in Asia	as	of	December	2017	and	December	2016,	respectively.

In	addition,	we	extend	unsecured	loans	to	retail	clients	through	Marcus. The	 gross	 exposure	 related	 to	 such	 loans	 was $1.91 billion	 and $208	million	as	of	December	2017	and	December	2016,	respectively.	See Note	 9	 to	 the	 consolidated	 financial	 statements	 for	 further	 information about	the	credit	quality	indicators	of	such	loans.

We	also	purchase	and	have	commitments	 to	purchase	 loans	(including distressed	loans)	and	securities.	Such	loans	and	securities	are	primarily backed	by	residential	real	estate.	The	gross	exposure	related	to	such	loans and	 lending	 commitments	 was	 $10.24	 billion	 and	 $5.38	 billion	 as	 of December	2017	and	December	2016,	respectively.	Our	regional	net	credit exposure	related	to	these	activities	was	approximately	74%	and	79%	in	the Americas	 and	 approximately 26% and 21% in	 EMEA	 as	 of December	2017	and	December	2016,	respectively.

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.	 government	 and	 agency obligations	 and	non-U.S.	 government	 and	 agency	 obligations.	 We	 had $29.07	billion	and	$28.64	billion	as	of	December	2017	and	December	2016, respectively,	of	credit	exposure	related	to	securities	financing	transactions reflecting	both	netting	agreements	and	collateral	that	management	considers when	 determining	 credit	 risk.	 As	 of	 both	 December	 2017	 and December	2016,	substantially	all	of	our	credit	exposure	related	to	securities financing	 transactions	 was	 with	 investment-grade	 financial	 institutions, funds,	governments	and	municipalities	and	nonprofits,	primarily	located	in the	Americas	and	EMEA.

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.	 Our	 net	 credit exposure	related	to	these	activities	was	$34.32	billion	and	$31.39	billion	as of	 December	 2017	 and	 December	 2016,	 respectively,	 and	 primarily consisted	 of	 initial	 margin	 (both	 cash	 and	 securities)	 placed	 with investment-grade	clearing	organizations.	Our	regional	net	credit	exposure related	 to	 these	 activities	 was	 approximately 41% and 44% in	 the Americas,	approximately	49%	and	42%	in	EMEA,	and	approximately	10% and	14%	in	Asia	as	of	December	2017	and	December	2016,	respectively.

# 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	debt	crisis	in	Mozambique	has	resulted	in	credit	rating	downgrades and	 Venezuela	 has	 delayed	 payments	 on	 its	 sovereign	 debt.	 Our	 total credit	and	market	exposure	to	each	of	Mozambique	and	Venezuela	as	of December	2017	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	—	Liquidity	Stress Tests"	 and	 "Market	 Risk	 Management	 —	 Market	 Risk	 Management Process	—	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 and limits which govern our operational risks. Operational Risk Management	is	a	risk	management	function	independent	of	our	revenue- producing	units,	reports	to	our	chief	risk	officer,	and	is	responsible	for developing	 and implementing	 policies,	 methodologies	 and	 a	 formalized framework	for	operational	risk	management	with	the	goal	of	maintaining our	exposure	to	operational	risk	at	levels	that	are	within	our	risk	appetite.

# Operational	Risk	Management	Process

Managing	 operational	 risk	 requires timely	 and	 accurate information,	 as well	as	a	strong	control	culture.	We	seek	to	manage	our	operational	risk through:

•	Training,	supervision	and	development	of	our	people;

•	Active	participation	of	senior	management	in	identifying	and	mitigating our	key	operational	risks;

•	Independent	control	and	support	functions	that	monitor	operational	risk on a daily basis, and implementation of extensive policies and procedures, and controls designed to prevent the occurrence of operational	risk	events;

•	Proactive	communication	between	our	revenue-producing	units	and	our independent	control	and	support	functions;	and

•	A	network	of	systems	to	facilitate	the	collection	of	data	used	to	analyze and	assess	our	operational	risk	exposure.

We	combine	top-down	and	bottom-up	approaches	to	manage	and	measure operational risk.	 From	 a	top-down	 perspective,	 our	 senior	 management assesses firmwide	 and	 business-level	 operational risk	 profiles.	 From	 a bottom-up	perspective,	revenue-producing	units	and	independent	control and support functions are responsible for risk 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	our	revenue-producing	units	and our	 independent	 control	 and	 support	 functions	 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.

In	addition,	our	systems	capture	 internal	operational	risk	event	data,	key metrics	 such	 as	 transaction	 volumes,	 and	 statistical	 information	 such	 as performance	 trends.	 We	 use	 an	 internally	 developed	 operational	 risk management	application	to	aggregate	and	organize	this	information.	One	of our	key	risk	identification	and	assessment	tools	is	an	operational	risk	and control	self-assessment	process,	which	is	performed	by	managers	from	both revenue-producing	 units	 and	 independent	 control	 and	 support	 functions. 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	 over	 a	 twelve-month	 time horizon	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	 ultimately	 are	 used	 in	 the determination	of	the	appropriate	level	of	operational	risk	capital	to	hold.

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,	as	well	as	escalation	protocols.	We	provide	periodic	operational risk	reports,	which	include	instances	that	breach	escalation	thresholds,	to senior	management,	risk	committees	and	the	Risk	Committee	of	the	Board.

The	 statistical	 models	 utilized	 by	 Operational	 Risk	 Management	 are subject	to	independent	review	and	validation	by	Model	Risk	Management. See	"Model	Risk	Management"	for	further	information	about	the	review and	validation	of	these	models.

# 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	model	developers,	model	owners	and	model	users,	reports	to	our	chief risk	officer,	is	responsible	for	identifying	and	reporting	significant	risks associated	 with	 models,	 and	 provides	 periodic	 updates	 to	 senior management,	risk	committees	and	the	Risk	Committee	of	the	Board.

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,	2017,	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,	2017 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,	2017 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,	2017.

# 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, 2017 and 2016, 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,	2017,	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,	2017,	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,	 2017 and	 2016, and the results	 of its operations	and	its	cash	flows	for	each	of	the	three	years	in	the	period	ended December	 31,	 2017 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, 2017, 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 | 2017 | 2016 | 2015 |
| Revenues |  |  |  |
| Investment\tbanking | \t$\t\t7,371 | \t$\t\t6,273 | \t$\t\t7,027 |
| Investment\tmanagement | 5,803 | 5,407 | 5,868 |
| Commissions\tand\tfees | 3,051 | 3,208 | 3,320 |
| Market\tmaking | 7,660 | 9,933 | 9,523 |
| Other\tprincipal\ttransactions | 5,256 | 3,200 | 5,018 |
| Total\tnon-interest\trevenues | 29,141 | 28,021 | 30,756 |
| Interest\tincome | 13,113 | 9,691 | 8,452 |
| Interest\texpense | 10,181 | 7,104 | 5,388 |
| Net\tinterest\tincome | 2,932 | 2,587 | 3,064 |
| Net\trevenues,\tincluding\tnet\tinterest\tincome | 32,073 | 30,608 | 33,820 |
| Operating\texpenses |  |  |  |
| Compensation\tand\tbenefits | 11,853 | 11,647 | 12,678 |
| Brokerage,\tclearing,\texchange\tand\tdistribution\tfees | 2,540 | 2,555 | 2,576 |
| Market\tdevelopment | 588 | 457 | 557 |
| Communications\tand\ttechnology | 897 | 809 | 806 |
| Depreciation\tand\tamortization | 1,152 | 998 | 991 |
| Occupancy | 733 | 788 | 772 |
| Professional\tfees | 965 | 882 | 963 |
| Other\texpenses | 2,213 | 2,168 | 5,699 |
| Total\tnon-compensation\texpenses | 9,088 | 8,657 | 12,364 |
| Total\toperating\texpenses | 20,941 | 20,304 | 25,042 |
| Pre-tax\tearnings | 11,132 | 10,304 | 8,778 |
| Provision\tfor\ttaxes | 6,846 | 2,906 | 2,695 |
| Net\tearnings | 4,286 | 7,398 | 6,083 |
| Preferred\tstock\tdividends | 601 | 311 | 515 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders | \t$\t\t3,685 | \t$\t\t7,087 | \t$\t\t5,568 |
| Earnings\tper\tcommon\tshare |  |  |  |
| Basic | \t$\t\t\t\t9.12 | \t$\t\t16.53 | \t$\t\t12.35 |
| Diluted | \t$\t\t\t\t9.01 | \t$\t\t16.29 | \t$\t\t12.14 |
| Average\tcommon\tshares |  |  |  |
| Basic | 401.6 | 427.4 | 448.9 |
| Diluted | 409.1 | 435.1 | 458.6 |

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

# Consolidated	Statements	of	Comprehensive	Income

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Net\tearnings | \t$4,286 | \t\t\t$7,398 | \t\t\t$6,083 |
| Other\tcomprehensive\tincome/(loss)\tadjustments,\tnet\tof\ttax: |  |  |  |
| Currency\ttranslation | 22 | (60) | (114) |
| Debt\tvaluation\tadjustment | (807) | (544) | – |
| Pension\tand\tpostretirement\tliabilities | 130 | (199) | 139 |
| Available-for-sale\tsecurities | (9) | – | – |
| Other\tcomprehensive\tincome/(loss) | (664) | (803) | 25 |
| Comprehensive\tincome | \t$3,622 | \t\t\t$6,595 | \t\t\t$6,108 |
|  | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | 105 |

# Consolidated	Statements	of	Financial	Condition

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Assets |  |  |
| Cash\tand\tcash\tequivalents | \t$110,051 | \t$121,711 |
| Collateralized\tagreements: |  |  |
| Securities\tpurchased\tunder\tagreements\tto\tresell\t(includes\t$120,420\tand\t$116,077\tat\tfair\tvalue) | 120,822 | 116,925 |
| Securities\tborrowed\t(includes\t$78,189\tand\t$82,398\tat\tfair\tvalue) | 190,848 | 184,600 |
| Receivables: |  |  |
| Brokers,\tdealers\tand\tclearing\torganizations | 24,676 | 18,044 |
| Customers\tand\tcounterparties\t(includes\t$3,526\tand\t$3,266\tat\tfair\tvalue) | 60,112 | 47,780 |
| Loans\treceivable | 65,933 | 49,672 |
| Financial\tinstruments\towned\t(at\tfair\tvalue\tand\tincludes\t$50,335\tand\t$51,278\tpledged\tas\tcollateral) | 315,988 | 295,952 |
| Other\tassets | 28,346 | 25,481 |
| Total\tassets | \t$916,776 | \t$860,165 |
| Liabilities\tand\tshareholders'\tequity |  |  |
| Deposits\t(includes\t$22,902\tand\t$13,782\tat\tfair\tvalue) | \t$138,604 | \t$124,098 |
| Collateralized\tfinancings: |  |  |
| Securities\tsold\tunder\tagreements\tto\trepurchase\t(at\tfair\tvalue) | 84,718 | 71,816 |
| Securities\tloaned\t(includes\t$5,357\tand\t$2,647\tat\tfair\tvalue) | 14,793 | 7,524 |
| Other\tsecured\tfinancings\t(includes\t$24,345\tand\t$21,073\tat\tfair\tvalue) | 24,788 | 21,523 |
| Payables: |  |  |
| Brokers,\tdealers\tand\tclearing\torganizations | 6,672 | 4,386 |
| Customers\tand\tcounterparties | 171,497 | 184,069 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased\t(at\tfair\tvalue) | 111,930 | 117,143 |
| Unsecured\tshort-term\tborrowings\t(includes\t$16,904\tand\t$14,792\tat\tfair\tvalue) | 46,922 | 39,265 |
| Unsecured\tlong-term\tborrowings\t(includes\t$38,638\tand\t$29,410\tat\tfair\tvalue) | 217,687 | 189,086 |
| Other\tliabilities\tand\taccrued\texpenses\t(includes\t$268\tand\t$621\tat\tfair\tvalue) | 16,922 | 14,362 |
| Total\tliabilities | 834,533 | 773,272 |
| Commitments,\tcontingencies\tand\tguarantees |  |  |
| Shareholders'\tequity |  |  |
| Preferred\tstock;\taggregate\tliquidation\tpreference\tof\t$11,853\tand\t$11,203 | 11,853 | 11,203 |
| Common\tstock;\t884,592,863\tand\t873,608,100\tshares\tissued,\tand\t374,808,805\tand\t392,632,230\tshares\toutstanding | 9 | 9 |
| Share-based\tawards | 2,777 | 3,914 |
| Nonvoting\tcommon\tstock;\tno\tshares\tissued\tand\toutstanding | – | – |
| Additional\tpaid-in\tcapital | 53,357 | 52,638 |
| Retained\tearnings | 91,519 | 89,039 |
| Accumulated\tother\tcomprehensive\tloss | (1,880) | (1,216) |
| Stock\theld\tin\ttreasury,\tat\tcost;\t509,784,060\tand\t480,975,872\tshares | (75,392) | (68,694) |
| Total\tshareholders'\tequity | 82,243 | 86,893 |
| Total\tliabilities\tand\tshareholders'\tequity | \t$916,776 | \t$860,165 |

# Consolidated	Statements	of	Changes	in	Shareholders'	Equity

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Preferred\tstock |  |  |  |
| Beginning\tbalance | \t$\t11,203 | \t\t\t$\t11,200 | \t\t\t$\t\t\t9,200 |
| Issued | 1,500 | 1,325 | 2,000 |
| Redeemed | (850) | (1,322) | – |
| Ending\tbalance | 11,853 | 11,203 | 11,200 |
| Common\tstock |  |  |  |
| Beginning\tbalance | 9 | 9 | 9 |
| Issued | – | – | – |
| Ending\tbalance | 9 | 9 | 9 |
| Share-based\tawards |  |  |  |
| Beginning\tbalance,\tas\tpreviously\treported | 3,914 | 4,151 | 3,766 |
| Cumulative\teffect\tof\tthe\tchange\tin\taccounting\tprinciple\trelated\tto\tforfeiture\tof\tshare-based\tawards | 35 | – | – |
| Beginning\tbalance,\tadjusted | 3,949 | 4,151 | 3,766 |
| Issuance\tand\tamortization\tof\tshare-based\tawards | 1,810 | 2,143 | 2,308 |
| Delivery\tof\tcommon\tstock\tunderlying\tshare-based\tawards | (2,704) | (2,068) | (1,742) |
| Forfeiture\tof\tshare-based\tawards | (89) | (102) | (72) |
| Exercise\tof\tshare-based\tawards | (189) | (210) | (109) |
| Ending\tbalance | 2,777 | 3,914 | 4,151 |
| Additional\tpaid-in\tcapital |  |  |  |
| Beginning\tbalance | 52,638 | 51,340 | 50,049 |
| Delivery\tof\tcommon\tstock\tunderlying\tshare-based\tawards | 2,934 | 2,282 | 2,092 |
| Cancellation\tof\tshare-based\tawards\tin\tsatisfaction\tof\twithholding\ttax\trequirements | (2,220) | (1,121) | (1,198) |
| Preferred\tstock\tissuance\tcosts,\tnet\tof\treversals\tupon\tredemption | 8 | (10) | (7) |
| Excess\tnet\ttax\tbenefit\trelated\tto\tshare-based\tawards | – | 147 | 406 |
| Cash\tsettlement\tof\tshare-based\tawards | (3) | – | (2) |
| Ending\tbalance | 53,357 | 52,638 | 51,340 |
| Retained\tearnings |  |  |  |
| Beginning\tbalance,\tas\tpreviously\treported | 89,039 | 83,386 | 78,984 |
| Cumulative\teffect\tof\tthe\tchange\tin\taccounting\tprinciple\trelated\tto: |  |  |  |
| Debt\tvaluation\tadjustment,\tnet\tof\ttax | – | (305) | – |
| Forfeiture\tof\tshare-based\tawards,\tnet\tof\ttax | (24) | – | – |
| Beginning\tbalance,\tadjusted | 89,015 | 83,081 | 78,984 |
| Net\tearnings | 4,286 | 7,398 | 6,083 |
| Dividends\tand\tdividend\tequivalents\tdeclared\ton\tcommon\tstock\tand\tshare-based\tawards | (1,181) | (1,129) | (1,166) |
| Dividends\tdeclared\ton\tpreferred\tstock | (587) | (577) | (515) |
| Preferred\tstock\tredemption\tdiscount/(premium) | (14) | 266 | – |
| Ending\tbalance | 91,519 | 89,039 | 83,386 |
| Accumulated\tother\tcomprehensive\tloss |  |  |  |
| Beginning\tbalance,\tas\tpreviously\treported | (1,216) | (718) | (743) |
| Cumulative\teffect\tof\tthe\tchange\tin\taccounting\tprinciple\trelated\tto\tdebt\tvaluation\tadjustment,\tnet\tof\ttax | – | 305 | – |
| Beginning\tbalance,\tadjusted | (1,216) | (413) | (743) |
| Other\tcomprehensive\tincome/(loss) | (664) | (803) | 25 |
| Ending\tbalance | (1,880) | (1,216) | (718) |
| Stock\theld\tin\ttreasury,\tat\tcost |  |  |  |
| Beginning\tbalance | (68,694) | (62,640) | (58,468) |
| Repurchased | (6,721) | (6,069) | (4,195) |
| Reissued | 34 | 22 | 32 |
| Other | (11) | (7) | (9) |
| Ending\tbalance | (75,392) | (68,694) | (62,640) |
| Total\tshareholders'\tequity | \t$\t82,243 | \t\t\t$\t86,893 | \t\t\t$\t86,728 |
|  | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | 107 |

# Consolidated	Statements	of	Cash	Flows

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Cash\tflows\tfrom\toperating\tactivities |  |  |  |
| Net\tearnings | \t$\t\t\t\t4,286 | \t\t\t$\t\t\t\t7,398 | \t\t\t$\t\t\t6,083 |
| Adjustments\tto\treconcile\tnet\tearnings\tto\tnet\tcash\tprovided\tby/(used\tfor)\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization | 1,152 | 998 | 991 |
| Deferred\tincome\ttaxes | 5,458 | 551 | 425 |
| Share-based\tcompensation | 1,769 | 2,111 | 2,272 |
| Loss/(gain)\trelated\tto\textinguishment\tof\tsubordinated\tborrowings | (114) | 3 | (34) |
| Changes\tin\toperating\tassets\tand\tliabilities: |  |  |  |
| Receivables\tand\tpayables\t(excluding\tloans\treceivable),\tnet | (30,082) | (15,813) | 19,132 |
| Collateralized\ttransactions\t(excluding\tother\tsecured\tfinancings),\tnet | 10,025 | 78 | (14,825) |
| Financial\tinstruments\towned\t(excluding\tavailable-for-sale\tsecurities) | (11,327) | 15,253 | 16,078 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased | (5,296) | 1,960 | (16,835) |
| Other,\tnet | 6,387 | (5,639) | (3,806) |
| Net\tcash\tprovided\tby/(used\tfor)\toperating\tactivities | (17,742) | 6,900 | 9,481 |
| Cash\tflows\tfrom\tinvesting\tactivities |  |  |  |
| Purchase\tof\tproperty,\tleasehold\timprovements\tand\tequipment | (3,185) | (2,876) | (1,833) |
| Proceeds\tfrom\tsales\tof\tproperty,\tleasehold\timprovements\tand\tequipment | 574 | 381 | 228 |
| Net\tcash\tacquired\tin/(used\tfor)\tbusiness\tacquisitions | (2,383) | 14,922 | (1,808) |
| Purchase\tof\tinvestments | (9,853) | – | – |
| Proceeds\tfrom\tsales\tand\tpaydowns\tof\tinvestments | 2,887 | 1,512 | 1,019 |
| Loans\treceivable,\tnet | (17,156) | (4,669) | (16,180) |
| Net\tcash\tprovided\tby/(used\tfor)\tinvesting\tactivities | (29,116) | 9,270 | (18,574) |
| Cash\tflows\tfrom\tfinancing\tactivities |  |  |  |
| Unsecured\tshort-term\tborrowings,\tnet | (501) | (1,506) | (369) |
| Other\tsecured\tfinancings\t(short-term),\tnet | (405) | (808) | (867) |
| Proceeds\tfrom\tissuance\tof\tother\tsecured\tfinancings\t(long-term) | 7,401 | 4,186 | 10,349 |
| Repayment\tof\tother\tsecured\tfinancings\t(long-term),\tincluding\tthe\tcurrent\tportion | (4,726) | (7,375) | (6,502) |
| Purchase\tof\tAPEX,\tsenior\tguaranteed\tsecurities\tand\ttrust\tpreferred\tsecurities | (237) | (1,171) | (1) |
| Proceeds\tfrom\tissuance\tof\tunsecured\tlong-term\tborrowings | 58,347 | 50,763 | 44,595 |
| Repayment\tof\tunsecured\tlong-term\tborrowings,\tincluding\tthe\tcurrent\tportion | (30,756) | (36,557) | (29,520) |
| Derivative\tcontracts\twith\ta\tfinancing\telement,\tnet | 1,684 | 2,115 | (47) |
| Deposits,\tnet | 14,506 | 10,058 | 14,639 |
| Preferred\tstock\tredemption | (850) | – | – |
| Common\tstock\trepurchased | (6,772) | (6,078) | (4,135) |
| Settlement\tof\tshare-based\tawards\tin\tsatisfaction\tof\twithholding\ttax\trequirements | (2,223) | (1,128) | (1,204) |
| Dividends\tand\tdividend\tequivalents\tpaid\ton\tcommon\tstock,\tpreferred\tstock\tand\tshare-based\tawards | (1,769) | (1,706) | (1,681) |
| Proceeds\tfrom\tissuance\tof\tpreferred\tstock,\tnet\tof\tissuance\tcosts | 1,495 | 1,303 | 1,993 |
| Proceeds\tfrom\tissuance\tof\tcommon\tstock,\tincluding\texercise\tof\tshare-based\tawards | 7 | 6 | 259 |
| Cash\tsettlement\tof\tshare-based\tawards | (3) | – | (2) |
| Net\tcash\tprovided\tby\tfinancing\tactivities | 35,198 | 12,102 | 27,507 |
| Net\tincrease/(decrease)\tin\tcash\tand\tcash\tequivalents | (11,660) | 28,272 | 18,414 |
| Cash\tand\tcash\tequivalents,\tbeginning\tbalance | 121,711 | 93,439 | 75,025 |
| Cash\tand\tcash\tequivalents,\tending\tbalance | \t$110,051 | \t\t\t$121,711 | \t\t\t$\t93,439 |

# SUPPLEMENTAL	DISCLOSURES:

Cash	payments	for	interest,	net	of	capitalized	interest,	were	$11.17	billion,	$7.14	billion	and	$4.82	billion,	and	cash	payments	for	income	taxes,	net	of	refunds,	were	$1.42	billion,	$1.06	billion	and $2.65	billion	for	2017,	2016	and	2015,	respectively.	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	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	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	and	liabilities	of	$1.81	billion	and	$697	million,	respectively,	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	and	secured	loans	to	retail clients	through	its	digital	platforms,	Marcus:	 by	 Goldman	 Sachs	(Marcus) and	Goldman	Sachs	Private	Bank	Select	(GS	Select),	respectively.

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	2017,	2016	and	2015	refer	to	the	firm's	years	ended,	or	the dates,	as	the	context	requires,	December	31,	2017,	December	31,	2016	and December	31,	2015,	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,	income	tax	expense	related	to the	Tax	Cuts	and	Jobs	Act	(Tax	Legislation),	provisions	for	losses	that	may arise	from	litigation	and	regulatory	proceedings	(including	governmental investigations),	the	allowance	for	losses	on	loans	receivable	and	lending commitments	held	for	investment,	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.

Investment	 Banking.	 Fees from	 financial	 advisory	 assignments	 and underwriting	revenues	are	recognized	in	earnings	when	the	services	related to	 the	 underlying	 transaction	 are	 completed	 under	 the	 terms	 of	 the assignment.	Expenses	associated	with	such	transactions	are	deferred	until the	related	revenue	is	recognized	or	the	assignment	is	otherwise	concluded. Expenses	 associated	 with	 financial	 advisory	 assignments	 are	 recorded	 as non-compensation	 expenses,	 net	 of	 client	 reimbursements.	 Underwriting revenues	are	presented	net	of	related	expenses.	As	a	result	of	adopting	ASU No.	2014-09,	"Revenue	from	Contracts	with	Customers	(Topic	606),"	the firm	will	amend	its	accounting	policy	on	the	recognition	and	presentation	of certain	 investment	 banking	 revenues	 and	 related	 expenses.	 See	 "Recent Accounting	Developments"	for	further	information.

Investment	 Management. The	 firm	 earns	 management	 fees	 and incentive	fees	for	investment	management	services.	Management	fees	for mutual	funds	are	calculated	as	a	percentage	of	daily	net	asset	value	and	are received	 monthly.	 Management	 fees	 for	 hedge	 funds	 and	 separately managed	accounts	are	calculated	 as	 a	 percentage	 of	month-end	net	asset value	 and	 are	 generally	 received	 quarterly.	 Management	 fees	 for	 private equity	funds	are	calculated	as	a	percentage	of	monthly	invested	capital	or commitments	 and	 are	 received	 quarterly,	 semi-annually	 or	 annually, depending	on	the	fund.	All	management	fees	are	recognized	over	the	period that	 the	 related	 service	 is	 provided.	 Incentive	 fees	 are	 calculated	 as	 a percentage	of	a	fund's	or	separately	managed	account's	return,	or	excess return	above	a	specified	benchmark	or	other	performance	target.	Incentive fees	are	generally	based	on	investment	performance	over	a	12-month	period or	 over	 the	 life	 of	 a	 fund.	 Fees	 that	 are	 based	 on	 performance	 over	 a 12-month period	 are	 subject	 to	 adjustment	 prior	 to	 the	 end	 of	 the measurement	 period.	 For	 fees	 that	 are	 based	 on	 investment	 performance over	the	life	of	the	fund,	future	investment	underperformance	may	require fees	previously	distributed	to	the	firm	to	be	returned	to	the	fund.	Incentive fees	 are	 recognized	 only	 when	 all	 material	 contingencies	 have	 been resolved.	Management	and	incentive	fee	revenues	are	included	in	investment management	revenues.

The	firm	makes	payments	to	brokers	and	advisors	related	to	the	placement of	 the	 firm's	 investment	 funds.	These	 payments	 are	 calculated	 based	 on either	a	percentage	of	the	management	fee	or	the	investment	fund's	net	asset value.	 Where	 the	 firm	 is	 principal	 to	 the	 arrangement,	 such	 costs	 are recorded	on	a	gross	basis	and	included	in	brokerage,	clearing,	exchange	and distribution	fees,	and	where	the	firm	is	agent	to	the	arrangement,	such	costs are	recorded	on	a	net	basis	in	investment	management	revenues.

As	 a	 result	 of	 adopting	 ASU	No.	 2014-09,	 the	 firm	 will	 amend	 its accounting	 policy	 on	 the	 recognition	 and	 presentation	 of	 certain investment	 management	 revenues	 and	 related	 expenses.	 See	 "Recent Accounting	Developments"	for	further	information.

Commissions	and	Fees.	The	firm	earns	commissions	and	fees	from executing	and	clearing	client	 transactions	on	stock,	options	and	futures markets,	as	well	as	over-the-counter	(OTC)	transactions.	Commissions	and fees	are	recognized	on	the	day	the	trade	is	executed.

# Transfers	of	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.	 As	 of	 December	 2017	 and December	2016,	cash	and	cash	equivalents	 included	$10.79	billion	and $11.15 billion,	 respectively,	 of	 cash	 and	 due	 from	 banks,	 and $99.26 billion	 and $110.56 billion,	 respectively,	 of	 interest-bearing deposits	with	banks.	The	firm	segregates	cash	for	regulatory	and	other purposes	 related	 to	 client	 activity.	 As	 of	 December	 2017	 and December	2016,	$18.44	billion	and	$14.65	billion,	respectively,	of	cash and	cash	equivalents	were	segregated	for	regulatory	and	other	purposes. See	 "Recent	 Accounting	 Developments"	 for	 further	 information.	 In addition,	the	firm	segregates	securities	for	regulatory	and	other	purposes related	 to	 client	 activity.	 See	 Note 10 for	 further	 information	 about segregated	securities.

# Receivables from and Payables to Brokers, Dealers and Clearing	Organizations

Receivables	 from	 and	 payables	 to	 brokers,	 dealers	 and	 clearing organizations	 are	 accounted	 for	 at	 cost	 plus	 accrued	 interest,	 which generally	approximates	fair	value.	While	these	receivables	and	payables	are carried	at	amounts	that	approximate	fair	value,	they	are	not	accounted	for	at fair	value	under	the	fair	value	option	or	at	fair	value	in	accordance	with	other U.S.	GAAP	and	therefore	are	not	included	in	the	firm's	fair	value	hierarchy in	Notes	6	through	8.	Had	these	receivables	and	payables	been	included	in the	firm's	fair	value	hierarchy,	substantially	all	would	have	been	classified in	level	2	as	of	both	December	2017	and	December	2016.

# Receivables	from	Customers	and	Counterparties

Receivables	 from	 customers	 and	 counterparties	 generally	 relate	 to collateralized	transactions.	Such	receivables	primarily	consist	of	customer margin	 loans,	 certain	 transfers	 of	 assets	 accounted	 for	 as	 secured	 loans rather	than	purchases	at	fair	value	and	collateral	posted	in	connection	with certain	 derivative	 transactions.	 Substantially	 all	 of	 these	 receivables	 are accounted	 for	 at	 amortized	 cost	 net	 of	 estimated	 uncollectible	 amounts. Certain	 of	 the	 firm's	 receivables	 from	 customers	 and	 counterparties	 are accounted	for	at	fair	value	under	the	fair	value	option,	with	changes	in	fair value	generally	included	in	market	making	revenues.	See	Note	8	for	further information	about	receivables	from	customers	and	counterparties	accounted for	 at	 fair	 value	 under	 the	 fair	 value	 option.	 In	 addition,	 as	 of December	2017	and	December	2016,	the	firm's	receivables	from	customers and	counterparties	included	$4.63	billion	and	$2.60	billion,	respectively,	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	 2017	 and	 December	 2016,	 the	 carrying	 value	 of receivables	 not	 accounted	 for	 at	 fair	 value	 generally	 approximated	 fair value.	While	these	receivables	are	carried	at	amounts	that	approximate	fair value,	they	are	not	accounted	for	at	fair	value	under	the	fair	value	option	or at	fair	value	 in	accordance	with	other	U.S.	GAAP	and	 therefore	are	not included	in	the	firm's	fair	value	hierarchy	in	Notes	6	through	8.	Had	these receivables	been	included	in	the	firm's	fair	value	hierarchy,	substantially	all would	 have	 been	 classified	 in	 level	 2	 as	 of	 both	 December	 2017	 and December	2016.	Interest	on	receivables	from	customers	and	counterparties is	recognized	over	the	life	of	the	transaction	and	included	in	interest	income.

# Payables	to	Customers	and	Counterparties

Payables	 to	 customers	 and	 counterparties	 primarily	 consist	 of	 customer credit	balances	related	to	the	firm's	prime	brokerage	activities.	Payables	to customers	 and	 counterparties	 are	 accounted	 for	 at	 cost	 plus	 accrued interest,	which	generally	approximates	fair	value.	While	these	payables	are carried	at	amounts	that	approximate	fair	value,	they	are	not	accounted	for at	fair	value	under	the	fair	value	option	or	at	fair	value	in	accordance	with other	U.S.	GAAP	and	therefore	are	not	included	in	the	firm's	fair	value hierarchy	in	Notes	6	through	8.	Had	these	payables	been	included	in	the firm's	fair	value	hierarchy,	substantially	all	would	have	been	classified	in level 2 as	 of	 both	 December	 2017	 and	 December	 2016.	 Interest	 on payables	to	customers	and	counterparties	is	recognized	over	the	life	of	the transaction	and	included	in	interest	expense.

# Offsetting	Assets	and	Liabilities

To	 reduce	 credit	 exposures	 on	 derivatives	 and	 securities	 financing transactions,	the	firm	may	enter	into	master	netting	agreements	or	similar arrangements	 (collectively,	 netting	 agreements)	 with	 counterparties	 that permit	it	to	offset	receivables	and	payables	with	such	counterparties.	A netting	 agreement	 is	 a	 contract	 with	 a	 counterparty	 that	 permits	 net settlement	of	multiple	transactions	with	that	counterparty,	including	upon the	exercise	of	termination	rights	by	a	non-defaulting	party.	Upon	exercise of	 such	 termination	 rights,	 all	 transactions	 governed	 by	 the	 netting agreement	are	 terminated	and	a	net	settlement	amount	 is	calculated.	In addition,	 the	firm	receives	and	posts	cash	and	securities	collateral	with respect	to	its	derivatives	and	securities	financing	transactions,	subject	to the	terms	of	the	related	credit	support	agreements	or	similar	arrangements (collectively,	 credit	 support	 agreements).	An	 enforceable	 credit	 support agreement	grants	the	non-defaulting	party	exercising	termination	rights	the right	 to	 liquidate	 the	collateral	and	apply	 the	proceeds	 to	any	amounts owed.	In	order	to	assess	enforceability	of	the	firm's	right	of	setoff	under netting	and	credit	support	agreements,	the	firm	evaluates	various	factors including	 applicable	 bankruptcy	 laws,	 local	 statutes	 and	 regulatory provisions	in	the	jurisdiction	of	the	parties	to	the	agreement.

Derivatives	 are	 reported	 on	 a	net-by-counterparty	 basis	 (i.e.,	 the	 net payable	 or	 receivable	 for	 derivative	 assets	 and	 liabilities	 for	 a	 given counterparty)	in	the	consolidated	statements	of	financial	condition	when	a legal	right	of	setoff	exists	under	an	enforceable	netting	agreement.	Resale and	 repurchase	 agreements	 and	 securities	 borrowed	 and	 loaned transactions	 with	 the	 same	 term	 and	 currency	 are	 presented	 on	 a net-by-counterparty	 basis	 in	 the	 consolidated	 statements	 of	 financial condition	when	such	transactions	meet	certain	settlement	criteria	and	are subject	to	netting	agreements.

In	 the	 consolidated	 statements	 of	 financial	 condition,	 derivatives	 are reported	net	of	cash	collateral	received	and	posted	under	enforceable	credit support	 agreements,	 when	 transacted	 under	 an	 enforceable	 netting agreement.	In	the	consolidated	statements	of	financial	condition,	resale	and repurchase	agreements,	and	securities	borrowed	and	loaned,	are	not	reported net	of	the	related	cash	and	securities	received	or	posted	as	collateral.	See Note	 10	 for	 further	 information	 about	 collateral	 received	 and	 pledged, including	rights	to	deliver	or	repledge	collateral.	See	Notes	7	and	10	for further	information	about	offsetting.

# Foreign	Currency	Translation

Assets	and	liabilities	denominated	in	non-U.S.	currencies	are	translated	at rates	of	exchange	prevailing	on	the	date	of	the	consolidated	statements	of financial	condition	and	revenues	and	expenses	are	translated	at	average	rates of	exchange	for	the	period.	Foreign	currency	remeasurement	gains	or	losses on	 transactions	 in	 nonfunctional	 currencies	 are	 recognized	 in	 earnings. Gains	 or	 losses	 on	 translation	 of	 the	 financial	 statements	 of	 a	non-U.S. operation,	when	the	functional	currency	is	other	than	the	U.S.	dollar,	are included,	 net	 of	 hedges	 and	 taxes,	 in	 the	 consolidated	 statements	 of comprehensive	income.

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	 from	 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	 will,	 among	 other things,	 delay	 recognition	 of	non-refundable	 and	 milestone	 payments	 on financial	 advisory	 assignments	 until	 the	 assignments	 are	 completed,	 and recognize	certain	investment	management	fees	earlier	than	under	the	firm's existing	revenue	recognition	policies.	The	cumulative	effect	of	adopting	this ASU	on	January	1,	2018	was	a	decrease	to	retained	earnings	of	$53	million (net	of	tax).

The	firm	will	also	prospectively	change	the	presentation	of	certain	costs from	a	net	presentation	within	net	revenues	to	a	gross	basis,	and	vice	versa. Beginning	 in	 2018,	 certain	 underwriting	 expenses,	 which	 are	 currently netted	against	Investment	Banking	revenues	and	certain	distribution	costs, which	are	currently	netted	against	Investment	Management	revenues,	will be	presented	gross	as	operating	expenses.	Soft	dollar	commissions,	which are	currently	reported	gross	as	operating	expenses,	will	be	presented	net within	commissions	and	fees.	The	impact	of	this	ASU	will	depend	on	the nature	of	 the	firm's	activities	after	adoption,	although	 these	changes	 in presentation	 are	 not	 expected	 to	 have	 a	 material	 impact	 on	 the	 firm's results	of	operations.

Measuring	the	Financial	Assets	and	the	Financial	Liabilities	of a	 Consolidated	 Collateralized	 Financing	 Entity (ASC	 810). In August	 2014,	 the	 FASB	 issued	 ASU	No.	 2014-13,	 "Consolidation (Topic 810)	 —	 Measuring the	 Financial	 Assets	 and	 the	 Financial Liabilities	of	a	Consolidated	Collateralized	Financing	Entity	(CFE)."	This ASU	provides	an	alternative	 to	reflect	changes	 in	 the	fair	value	of	 the financial	assets	and	the	financial	liabilities	of	the	CFE	by	measuring	either the	fair	value	of	the	assets	or	liabilities,	whichever	is	more	observable,	and provides	new	disclosure	requirements	for	those	electing	this	approach.

The	firm	adopted	the	ASU	in	January	2016.	Adoption	of	the	ASU	did	not materially	 affect	 the	 firm's	 financial	 condition,	 results	 of	 operations	 or cash	flows.

Amendments to the	 Consolidation	 Analysis (ASC 810). In February	 2015,	 the	 FASB	 issued	 ASU	No.	 2015-02,	 "Consolidation (Topic	810)	—	Amendments	to	the	Consolidation	Analysis."	This	ASU eliminates	 the	 deferral	 of	 the	 requirements	 of	 ASU	No.	 2009-17, "Consolidations	(Topic	810)	—	Improvements	to	Financial	Reporting	by Enterprises	Involved	with	Variable	Interest	Entities"	for	certain	interests	in investment	funds	and	provides	a	scope	exception	for	certain	investments	in money	 market	 funds.	 It	 also	 makes	 several	 modifications	 to	 the consolidation	 guidance	 for	 VIEs	 and	 general	 partners'	 investments	 in limited	partnerships,	as	well	as	modifications	to	the	evaluation	of	whether limited	partnerships	are	VIEs	or	voting	interest	entities.

The	firm	adopted	the	ASU	in	January	2016,	using	a	modified	retrospective approach.	The	impact	of	adoption	was	a	net	reduction	to	both	total	assets and	 total	 liabilities	 of	 approximately	 $200	 million,	 substantially	 all included	 in	 financial	 instruments	 owned	 and	 in	 other	 liabilities	 and accrued	 expenses,	 respectively.	Adoption	 of	 this	ASU	 did	 not	 have	 an impact	 on	 the	 firm's	 results	 of	 operations.	 See	 Note 12 for	 further information	about	the	adoption.

# Simplifying the Accounting for Measurement-Period Adjustments (ASC	 805). In	 September	 2015,	 the	 FASB	 issued	ASU No.	 2015-16,	 "Business	 Combinations	 (Topic	 805)	 —	 Simplifying	 the Accounting	 for	 Measurement-Period	Adjustments."	 This	ASU	 eliminates the	requirement	for	an	acquirer	in	a	business	combination	to	account	for measurement-period	adjustments	retrospectively.

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.

The	ASU	was	effective	for	the	firm	in	January	2018.	Early	adoption	was permitted	 under	 a	 modified	 retrospective	 approach	 for	 the	 requirements related	to	DVA.	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	the	gain	or	loss	at	the	time	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	 ASU	 is	 effective	 for	 the	 firm	 in	 January	 2019	 under	 a	 modified retrospective	 approach.	 Early	 adoption	 is	 permitted.	 The	 firm's implementation	efforts	include	reviewing	the	terms	of	existing	leases	and service	 contracts,	 which	 may	 include	 embedded	 leases.	 Based	 on	 the implementation	 efforts	 to	 date,	 the	 firm	 expects	 a	 gross	 up	 on	 its consolidated	 statements	 of	 financial	 condition	 upon	 recognition	 of	 the right-of-use	assets	and	lease	liabilities	and	does	not	expect	the	amount	of the	gross	up	to	have	a	material	impact	on	its	financial	condition.

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	the	impact	of	the	restricted stock	 unit	 (RSU)	 deliveries	 and	 option	 exercises	 during	 2017	 was	 a reduction	to	the	provision	for	taxes	of	$719	million,	which	was	recognized in	the	consolidated	statements	of	earnings.	The	impact	will	vary	in	future periods	 depending	 upon,	 among	 other	 things,	 the	 number	 of	 RSUs delivered	and	their	change	in	value	since	grant.	Prior	to	the	adoption	of	this ASU,	this	amount	would	have	been	recorded	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.	As	a	result,	the	firm reclassified,	on	a	retrospective	basis,	a	cash	outflow	of	$1.13	billion	and $1.20	billion	related	to	the	settlement	of	share-based	awards	in	satisfaction of	 withholding	 tax	 requirements	 from	 operating	 activities	 to	 financing activities	and	a	cash	inflow	of	$202	million	and	$407	million	of	excess	tax benefits	 related	 to	 share-based	 awards	 from	 financing	 activities	 to operating	activities	for	2016	and	2015,	respectively.

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.	 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	 ASU	 is	 effective	 for	 the	 firm	 in	 January	 2020	 under	 a	 modified retrospective	 approach.	 Early	 adoption	 is	 permitted	 in	 January	 2019. Adoption	of	the	ASU	will	result	in	earlier	recognition	of	credit	losses	and	an increase	 in	 the	 recorded	 allowance	 for	 certain	 purchased	 loans	 with deterioration	 in	 credit	 quality	 since	 origination	 with	 a	 corresponding increase	to	their	gross	carrying	value.	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	type	of financial	assets	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	of	this	ASU	will	depend	on	the	nature	of	the	firm's	activities after	adoption,	although	the	firm	does	not	expect	the	change	in	classification to	have	a	material	impact	on	the	consolidated	statements	of	cash	flows.

Restricted	 Cash (ASC	 230). In	 November	 2016,	 the	 FASB	 issued ASU	No.	2016-18,	"Statement	of	Cash	Flows	(Topic	230)	—	Restricted Cash."	This	ASU	requires	that	cash	segregated	for	regulatory	and	other purposes	 be	 included	 in	 cash	 and	 cash	 equivalents	 disclosed	 in	 the statements	of	cash	flows	and	is	required	to	be	applied	retrospectively.

The	firm	early	adopted	the	ASU	in	December	2016	and	reclassified	cash segregated	for	regulatory	and	other	purposes	into	cash	and	cash	equivalents disclosed	 in	 the	 consolidated	 statements	 of	 cash	 flows.	 The	 impact	 of adoption	was	a	decrease	of	$3.69	billion	and	an	increase	of	$909	million for	 2016	 and	 2015,	 respectively,	 to	 net	 cash	 provided	 by	 operating activities.	 In	 addition,	 in	 December	 2016,	 to	 be	 consistent	 with	 the presentation	 of	 segregated	 cash	 in	 the	 consolidated	 statements	 of	 cash flows	under	the	ASU,	the	firm	reclassified	amounts	previously	included	in cash	and	securities	segregated	for	regulatory	and	other	purposes	into	cash and	 cash	 equivalents,	 securities	 purchased	 under	 agreements	 to	 resell, securities	borrowed	and	financial	instruments	owned	in	the	consolidated statements	 of	 financial	 condition.	 Previously	 reported	 amounts	 in	 the consolidated	 statements	 of	 cash	 flows	 and	 notes	 to	 the	 consolidated financial	statements	have	been	conformed	to	the	current	presentation.

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. The	impact	of	this	ASU	will	depend	on	the	nature	of	the	firm's	activities after	adoption,	although	the	firm	expects	that	fewer	transactions	will	be treated	as	acquisitions	(or	disposals)	of	businesses.

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	ASU	is	effective	for	the	firm	in	2020.	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	of	the	rules for	hedging	relationships	and	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.

The	firm	early	adopted	this	ASU	in	January	2018.	Adoption	of	this	ASU	did not	 have	 a	 material	 impact	 on	 the	 firm's	 financial	 condition,	 results	 of operations	or	cash	flows.

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	Tax	Legislation	on	items	within accumulated	other	comprehensive	income	to	retained	earnings.

The	ASU	is	effective	for	the	firm	in	January	2019	under	a	retrospective	or	a modified	 retrospective	 approach.	 Early	 adoption	 is	 permitted.	 Since	 this ASU	only	permits	reclassification	within	shareholders'	equity,	adoption	of this	ASU	will	not	have	a	material	impact	on	the	firm's	financial	condition.

# 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	 the	 firm's	 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\t2017 |  |  |
| Money\tmarket\tinstruments | \t\t$\t\t\t\t1,608 | \t$\t\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\tloans\tand\tdebt\tsecurities | 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$111,930 |
| As\tof\tDecember\t2016 |  |  |
| Money\tmarket\tinstruments | \t\t$\t\t\t\t1,319 | \t$\t\t\t\t\t\t\t\t\t\t\t– |
| Government\tand\tagency\tobligations: |  |  |
| U.S. | 57,657 | 16,627 |
| Non-U.S. | 29,381 | 20,502 |
| Loans\tand\tsecurities\tbacked\tby: |  |  |
| Commercial\treal\testate | 3,842 | – |
| Residential\treal\testate | 12,195 | 3 |
| Corporate\tloans\tand\tdebt\tsecurities | 28,659 | 6,570 |
| State\tand\tmunicipal\tobligations | 1,059 | – |
| Other\tdebt\tobligations | 1,358 | 1 |
| Equity\tsecurities | 94,692 | 25,941 |
| Commodities | 5,653 | – |
| Investments\tin\tfunds\tat\tNAV | 6,465 | – |
| Subtotal | 242,280 | 69,644 |
| Derivatives | 53,672 | 47,499 |
| Total | \t\t$295,952 | \t$117,143 |

•	Money	market	 instruments	 includes	 commercial	 paper,	 certificates	 of deposit	and	time	deposits,	substantially	all	of	which	have	a	maturity	of less	than	one	year.

•	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	$8.49	billion and $7.92 billion	 as	 of	 December	 2017	 and	 December	 2016, respectively.

# Gains and	 Losses from	 Market	 Making and	 Other	 Principal Transactions

The	table	below	presents	market	making	revenues	by	major	product	type,	as well	as	other	principal	transactions	revenues.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Interest\trates | \t$\t\t6,406 | \t$\t(1,979) | \t$\t(1,360) |
| Credit | 701 | 1,854 | 920 |
| Currencies | (3,249) | 6,158 | 3,345 |
| Equities | 3,162 | 2,873 | 5,515 |
| Commodities | 640 | 1,027 | 1,103 |
| Market\tmaking | 7,660 | 9,933 | 9,523 |
| Other\tprincipal\ttransactions | 5,256 | 3,200 | 5,018 |
| Total | \t$12,916 | \t$13,133 | \t$14,541 |

•	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 | 2017 | 2016 |
| Total\tlevel\t1\tfinancial\tassets | \t\t$155,086 | \t$135,401 |
| Total\tlevel\t2\tfinancial\tassets | 395,606 | 419,585 |
| Total\tlevel\t3\tfinancial\tassets | 19,201 | 23,280 |
| Investments\tin\tfunds\tat\tNAV | 4,596 | 6,465 |
| Counterparty\tand\tcash\tcollateral\tnetting | (56,366) | (87,038) |
| Total\tfinancial\tassets\tat\tfair\tvalue | \t\t$518,123 | \t$497,693 |
| Total\tassets | \t\t$916,776 | \t$860,165 |
| Total\tlevel\t3\tfinancial\tassets\tdivided\tby: |  |  |
| Total\tassets | 2.1% | 2.7% |
| Total\tfinancial\tassets\tat\tfair\tvalue | 3.7% | 4.7% |
| Total\tlevel\t1\tfinancial\tliabilities | \t\t$\t\t63,589 | \t$\t\t62,504 |
| Total\tlevel\t2\tfinancial\tliabilities | 261,719 | 232,027 |
| Total\tlevel\t3\tfinancial\tliabilities | 19,620 | 21,448 |
| Counterparty\tand\tcash\tcollateral\tnetting | (39,866) | (44,695) |
| Total\tfinancial\tliabilities\tat\tfair\tvalue | \t\t$305,062 | \t$271,284 |
| Total\tlevel\t3\tfinancial\tliabilities\tdivided\tby\ntotal\tfinancial\tliabilities\tat\tfair\tvalue | 6.4% | 7.9% |

•	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.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Cash\tinstruments | \t$15,395 | \t$18,035 |
| Derivatives | 3,802 | 5,190 |
| Other\tfinancial\tassets | 4 | 55 |
| Total | \t$19,201 | \t$23,280 |

Level	3	financial	assets	as	of	December	2017	decreased	compared	with December	 2016,	 primarily	 reflecting	 a	 decrease	 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	 loans	 and	 debt	 securities,	 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	 securities	 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	loans	and	debt securities,	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	of	financial	assets.

# 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:

•	Transaction	prices	in	both	the	underlying	collateral	and	instruments	with the	same	or	similar	underlying	collateral;

•	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);

•	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	 Loans	 and	 Debt	 Securities.	 Corporate loans	 and	 debt securities	 includes	 bank	 loans	 and	 bridge	 loans	 and	 corporate	 debt securities.	Significant	 inputs	are	generally	determined	based	on	relative value	 analyses,	 which	 incorporate	 comparisons	 both	 to	 prices	 of	 credit default	swaps	that	reference	the	same	or	similar	underlying	instrument	or entity	 and	 to	 other	 debt	 instruments	 for	 the	 same	 issuer	 for	 which observable	 prices	 or	 broker	 quotations	 are	 available.	 Significant	 inputs include:

•	Market	yields	implied	by	transactions	of	similar	or	related	assets	and/or current	 levels	and	 trends	of	market	 indices	such	as	CDX	and	LCDX (indices	 that	 track	 the	 performance	 of	 corporate	 credit	 and	 loans, respectively);

•	Current	performance	and	recovery	assumptions	and,	where	the	firm	uses credit	 default	 swaps	 to	 value	 the	 related	 cash	 instrument,	 the	 cost	 of borrowing	the	underlying	reference	obligation;	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	consists	of	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;

# Fair	Value	of	Cash	Instruments	by	Level

The	tables	below	present	cash	instrument	assets	and	liabilities	at	fair	value by	level	within	the	fair	value	hierarchy.

|  |  | As	of	December	2017 | As	of	December	2017 |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Total |
| Assets |  |  |  |  |
| Money\tmarket\tinstruments | \t\t$\t\t\t\t\t\t\t398 | \t\t$\t\t1,209 | \t\t$\t\t\t\t\t\t\t\t\t1 | \t\t$\t\t\t\t1,608 |
| Government\tand\tagency\tobligations: |  |  |  |  |
| U.S. | 50,796 | 25,622 | – | 76,418 |
| Non-U.S. | 27,070 | 6,882 | 4 | 33,956 |
| Loans\tand\tsecurities\tbacked\tby: |  |  |  |  |
| Commercial\treal\testate | – | 2,310 | 1,126 | 3,436 |
| Residential\treal\testate | – | 11,325 | 668 | 11,993 |
| Corporate\tloans\tand\tdebt\tsecurities | 752 | 29,661 | 3,270 | 33,683 |
| State\tand\tmunicipal\tobligations | – | 1,401 | 70 | 1,471 |
| Other\tdebt\tobligations | – | 1,812 | 352 | 2,164 |
| Equity\tsecurities | 76,044 | 10,184 | 9,904 | 96,132 |
| Commodities | – | 3,194 | – | 3,194 |
| Subtotal | \t\t$155,060 | \t\t$93,600 | \t\t$15,395 | \t\t$264,055 |
| Investments\tin\tfunds\tat\tNAV |  |  |  | 4,596 |
| Total\tcash\tinstrument\tassets |  |  |  | \t\t$268,651 |
| Liabilities |  |  |  |  |
| Government\tand\tagency\tobligations: |  |  |  |  |
| U.S. | \t\t$\t(17,845)\t\t\t$\t\t\t\t\t\t(66)\t\t\t$\t\t\t\t\t\t\t\t\t– | \t\t$\t(17,845)\t\t\t$\t\t\t\t\t\t(66)\t\t\t$\t\t\t\t\t\t\t\t\t– | \t\t$\t(17,845)\t\t\t$\t\t\t\t\t\t(66)\t\t\t$\t\t\t\t\t\t\t\t\t– | \t\t$\t(17,911) |
| Non-U.S. | (21,820) | (1,491) | – | (23,311) |
| Loans\tand\tsecurities\tbacked\tby |  |  |  |  |
| commercial\treal\testate | – | (1) | – | (1) |
| Corporate\tloans\tand\tdebt\tsecurities | (2) | (7,099) | (52) | (7,153) |
| Other\tdebt\tobligations | – | (1) | – | (1) |
| Equity\tsecurities | (23,866) | – | (16) | (23,882) |
| Commodities | – | (40) | – | (40) |
| Total\tcash\tinstrument\tliabilities | \t\t$\t(63,533)\t\t\t$\t(8,698)\t\t\t$\t\t\t\t\t\t(68)\t\t\t$\t(72,299) | \t\t$\t(63,533)\t\t\t$\t(8,698)\t\t\t$\t\t\t\t\t\t(68)\t\t\t$\t(72,299) | \t\t$\t(63,533)\t\t\t$\t(8,698)\t\t\t$\t\t\t\t\t\t(68)\t\t\t$\t(72,299) | \t\t$\t(63,533)\t\t\t$\t(8,698)\t\t\t$\t\t\t\t\t\t(68)\t\t\t$\t(72,299) |

|  |  | As	of	December	2016 | As	of	December	2016 |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Level\t1 | Level\t2 | Level\t3 | Total |
| Assets |  |  |  |  |
| Money\tmarket\tinstruments | \t\t$\t\t\t\t\t\t\t188 | \t\t$\t\t1,131 | \t\t$\t\t\t\t\t\t\t\t\t\t– | \t\t$\t\t\t\t1,319 |
| Government\tand\tagency\tobligations: |  |  |  |  |
| U.S. | 35,254 | 22,403 | – | 57,657 |
| Non-U.S. | 22,433 | 6,933 | 15 | 29,381 |
| Loans\tand\tsecurities\tbacked\tby: |  |  |  |  |
| Commercial\treal\testate | – | 2,197 | 1,645 | 3,842 |
| Residential\treal\testate | – | 11,350 | 845 | 12,195 |
| Corporate\tloans\tand\tdebt |  |  |  |  |
| securities | 215 | 23,804 | 4,640 | 28,659 |
| State\tand\tmunicipal\tobligations | – | 960 | 99 | 1,059 |
| Other\tdebt\tobligations | – | 830 | 528 | 1,358 |
| Equity\tsecurities | 77,276 | 7,153 | 10,263 | 94,692 |
| Commodities | – | 5,653 | – | 5,653 |
| Subtotal | \t\t$135,366 | \t\t$82,414 | \t\t $18,035 | \t\t$235,815 |
| Investments\tin\tfunds\tat\tNAV |  |  |  | 6,465 |
| Total\tcash\tinstrument\tassets |  |  |  | \t\t$242,280 |
| Liabilities |  |  |  |  |
| Government\tand\tagency\tobligations: |  |  |  |  |
| U.S. | \t\t$\t(16,615)\t\t\t$\t\t\t\t\t\t(12)\t\t\t$\t\t\t\t\t\t\t\t\t\t– | \t\t$\t(16,615)\t\t\t$\t\t\t\t\t\t(12)\t\t\t$\t\t\t\t\t\t\t\t\t\t– | \t\t$\t(16,615)\t\t\t$\t\t\t\t\t\t(12)\t\t\t$\t\t\t\t\t\t\t\t\t\t– | \t\t$\t(16,627) |
| Non-U.S. | (19,137) | (1,364) | (1) | (20,502) |
| Loans\tand\tsecurities\tbacked\tby |  |  |  |  |
| residential\treal\testate | – | (3) | – | (3) |
| Corporate\tloans\tand\tdebt |  |  |  |  |
| securities | (2) | (6,524) | (44) | (6,570) |
| Other\tdebt\tobligations | – | (1) | – | (1) |
| Equity\tsecurities | (25,768) | (156) | (17) | (25,941) |
| Total\tcash\tinstrument\tliabilities | \t\t$\t(61,522)\t\t\t$\t(8,060)\t\t\t $\t\t\t\t\t\t(62)\t\t\t$\t(69,644) | \t\t$\t(61,522)\t\t\t$\t(8,060)\t\t\t $\t\t\t\t\t\t(62)\t\t\t$\t(69,644) | \t\t$\t(61,522)\t\t\t$\t(8,060)\t\t\t $\t\t\t\t\t\t(62)\t\t\t$\t(69,644) | \t\t$\t(61,522)\t\t\t$\t(8,060)\t\t\t $\t\t\t\t\t\t(62)\t\t\t$\t(69,644) |

•	Cash	instrument	assets	and	liabilities	are	included	in	financial	instruments owned	and	financial	instruments	sold,	but	not	yet	purchased,	respectively.

•	Cash	instrument	assets	are	shown	as	positive	amounts	and	cash	instrument liabilities	are	shown	as	negative	amounts.

•	Money	 market	 instruments includes commercial	 paper, certificates	 of deposit	and	time	deposits.

•	Equity	 securities	 includes	 public	 and	 private	 equities,	 exchange-traded funds	and	convertible	debentures.

•	As	of	both	December	2017	and	December	2016,	substantially	all	of	the firm's	level	3	equity	securities	consisted	of	private	equity	securities.

•	Total	 cash	 instrument	 assets	 included	 collateralized	 debt	 obligations (CDOs)	and	collateralized	loan	obligations	(CLOs)	backed	by	real	estate and	corporate	obligations	of	$918	million	and	$461	million	in	level	2,	and $250	 million	 and	 $624	 million	 in	 level	 3	 as	 of	 December	 2017	 and December	2016,	respectively.

Significant	Unobservable	Inputs The table	below	presents the	amount	of level	3	assets,	and	ranges	and weighted	 averages	 of	 significant	 unobservable inputs	 used to	 value the firm's	level	3	cash	instruments.

•	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	the	firm's	level	3	cash instruments.

•	Increases	in	yield,	discount	rate,	capitalization	rate,	duration	or	cumulative loss	rate	used	in	the	valuation	of	the	firm's	level	3	cash	instruments	would result	in	a	lower	fair	value	measurement,	while	increases	in	recovery	rate or	multiples	would	result	in	a	higher	fair	value	measurement.	Due	to	the distinctive	 nature	 of	 each	 of	 the	 firm's	 level	 3	 cash	 instruments,	 the interrelationship	of	inputs	is	not	necessarily	uniform	within	each	product type.

•	Equity	 securities includes private equity securities and convertible debentures.

•	Loans	and	securities	backed	by	commercial	and	residential	real	estate, corporate	loans	and	debt	securities	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.

•	Recovery	rate	was	not	significant	to	the	valuation	of	level	3	other	cash instrument	assets	as	of	December	2017.

# Transfers	Between	Levels	of	the	Fair	Value	Hierarchy

Transfers	 between	 levels	 of	 the	 fair	 value	 hierarchy	 are	 reported	 at	 the beginning	 of	 the	 reporting	 period	 in	 which	 they	 occur.	 See	 "Level 3 Rollforward"	 below	 for	 information	 about	 transfers	 between	 level	 2	 and level	3.

During	2017,	transfers	into	level	2	from	level	1	of	cash	instruments	were $63	million,	reflecting	transfers	of	public	equity	securities	due	to	decreased market	activity	in	these	instruments.	Transfers	into	level	1	from	level	2	of cash	 instruments	 during	 2017	 were	 $154	 million,	 reflecting	 transfers	 of public	equity	securities	due	to	increased	market	activity	in	these	instruments.

# Level	3	Rollforward

The	table	below	presents	a	summary	of	the	changes	in	fair	value	for	level	3 cash	instrument	assets	and	liabilities.

|  | Year	Ended	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Total\tcash\tinstrument\tassets |  |  |
| Beginning\tbalance | \t$18,035 | \t$18,131 |
| Net\trealized\tgains/(losses) | 419 | 574 |
| Net\tunrealized\tgains/(losses) | 1,144 | 397 |
| Purchases | 1,635 | 3,072 |
| Sales | (3,315) | (2,326) |
| Settlements | (2,265) | (3,503) |
| Transfers\tinto\tlevel\t3 | 2,405 | 3,405 |
| Transfers\tout\tof\tlevel\t3 | (2,663) | (1,715) |
| Ending\tbalance | \t$15,395 | \t$18,035 |
| Total\tcash\tinstrument\tliabilities |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t\t(62) | \t$\t\t\t\t(193) |
| Net\trealized\tgains/(losses) | (8) | 20 |
| Net\tunrealized\tgains/(losses) | (28) | 19 |
| Purchases | 97 |  |
| Sales | (20) |  |
| Settlements | (32) |  |
| Transfers\tinto\tlevel\t3 | (18) |  |
| Transfers\tout\tof\tlevel\t3 | 3 |  |
| Ending\tbalance | \t$\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.

•	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.

# Level	3	Rollforward	Commentary

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	approximately	$(99)	million,	$1.13	billion	and $532	million	reported	in	market	making,	other	principal	transactions	and interest	income,	respectively.

The	 net	 unrealized	 gains	 on	 level	 3	 cash	 instrument	 assets	 for	 2017 primarily	reflected	gains	on	private	equity	securities,	principally	driven	by strong	corporate	performance	and	company-specific	events.

Transfers	into	level	3	during	2017	primarily	reflected	transfers	of	certain corporate	 loans	 and	 debt	 securities	 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	loans	and	debt	securities	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	loans	and	debt	securities	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	2016.	The	net	realized	and	unrealized	gains	on level	3	cash	instrument	assets	of	$971	million	(reflecting	$574	million	of net	 realized	 gains	 and	 $397	 million	 of	 net	 unrealized	 gains)	 for	 2016 included	gains/(losses)	of	approximately	$(311)	million,	$625	million	and $657	million	reported	in	market	making,	other	principal	transactions	and interest	income,	respectively.

Transfers	into	level	3	during	2016	primarily	reflected	transfers	of	certain private	equity	securities,	corporate	loans	and	debt	securities,	and	loans	and securities	backed	by	commercial	real	estate	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	2016	primarily	reflected	transfers	of	certain private	equity	securities,	corporate	loans	and	debt	securities,	and	loans	and securities	backed	by	residential	real	estate	to	level	2,	principally	due	to increased	 price	 transparency	 as	 a	 result	 of	 market	 evidence,	 including market	transactions	in	these	instruments.

# Available-for-Sale	Securities

The	table	below	presents	details	about	cash	instruments	that	are	accounted for	as	available-for-sale.

| $	in	millions | Amortized<br>Cost | Fair<br>Value | Average<br>Yield |
| :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2017 |  |  |  |
| Less\tthan\t5\tyears | $3,834 | \t\t$3,800 | 1.95% |
| Greater\tthan\t5\tyears | 5,207 | 5,222 | 2.41% |
| Total\tU.S.\tgovernment\tobligations | 9,041 | 9,022 | 2.22% |
| Less\tthan\t5\tyears | 19 | 19 | 0.43% |
| Greater\tthan\t5\tyears | 233 | 235 | 4.62% |
| Total\tother\tavailable-for-sale\tsecurities | 252 | 254 | 4.30% |
| Total\tavailable-for-sale\tsecurities | $9,293 | \t\t$9,276 | 2.27% |
| As\tof\tDecember\t2016 |  |  |  |
| Less\tthan\t5\tyears | $\t\t\t\t\t24 | \t\t$\t\t\t\t\t24 | 0.43% |
| Total\tU.S.\tgovernment\tobligations | 24 | 24 | 0.43% |
| Less\tthan\t5\tyears | 31 | 31 | 2.11% |
| Greater\tthan\t5\tyears | 34 | 34 | 3.85% |
| Total\tother\tavailable-for-sale\tsecurities | 65 | 65 | 3.03% |
| Total\tavailable-for-sale\tsecurities | $\t\t\t\t\t89 | \t\t$\t\t\t\t\t89 | 2.32% |

•	U.S.	government	obligations	were	classified	in	level	1	of	the	fair	value hierarchy	as	of	both	December	2017	and	December	2016.

•	Other	available-for-sale	securities	includes	corporate	debt	securities,	other debt	obligations,	securities	backed	by	commercial	real	estate	and	money market	 instruments.	 As	 of	 December	 2017,	 substantially	 all	 of	 these securities	 were	 classified	 in	 level	 2	 of	 the	 fair	 value	 hierarchy.	As	 of December	2016,	these	securities	were	primarily	classified	in	level	2	of	the fair	value	hierarchy.

•	The	 gross	 unrealized	 gains/(losses)	 included	 in	 accumulated	 other comprehensive	 loss	 related	 to	available-for-sale	 securities	 were	 not material.

# 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	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.

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	(Federal	Reserve	Board	or	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,	covered funds	in	the	table	below.

The	table	below	presents	the	fair	value	of	the	firm's	investments	in	funds	at NAV	and	related	unfunded	commitments.

| $	in	millions | Fair	Value	of<br>Investments | Unfunded<br>Commitments |
| :--- | :--- | :--- |
| 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 |
| As\tof\tDecember\t2016 |  |  |
| Private\tequity\tfunds | $4,628 | $1,393 |
| Credit\tfunds | 421 | 166 |
| Hedge\tfunds | 410 | – |
| Real\testate\tfunds | 1,006 | 272 |
| Total | $6,465 | $1,831 |

# 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	and liabilities	 are	 included	 in	 financial	 instruments	 owned	 and	 financial instruments	 sold,	 but	 not	 yet	 purchased,	 respectively.	 Realized	 and unrealized	gains	and	losses	on	derivatives	not	designated	as	hedges	under ASC	815	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.

|  | As	of	December	2017 |  | As	of	December	2016 | As	of	December	2016 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Derivative\nAssets | Derivative\nLiabilities | Derivative\nAssets | Derivative\nLiabilities |
| Not\taccounted\tfor\tas\thedges |  |  |  |  |
| Exchange-traded | \t\t$\t\t\t\t\t\t\t\t554 | \t\t$\t\t\t\t\t\t\t\t644 | \t\t$\t\t\t\t\t\t\t\t443 | \t\t$\t\t\t\t\t\t\t\t382 |
| OTC-cleared | 5,392 | 2,773 | 189,471 | 168,946 |
| Bilateral\tOTC | 274,986 | 249,750 | 309,037 | 289,491 |
| Total\tinterest\trates | 280,932 | 253,167 | 498,951 | 458,819 |
| OTC-cleared | 5,727 | 5,670 | 4,837 | 4,811 |
| Bilateral\tOTC | 16,966 | 15,600 | 21,530 | 18,770 |
| Total\tcredit | 22,693 | 21,270 | 26,367 | 23,581 |
| Exchange-traded | 23 | 363 | 36 | 176 |
| OTC-cleared | 988 | 847 | 796 | 798 |
| Bilateral\tOTC | 94,481 | 95,127 | 111,032 | 106,318 |
| Total\tcurrencies | 95,492 | 96,337 | 111,864 | 107,292 |
| Exchange-traded | 4,135 | 3,854 | 3,219 | 3,187 |
| OTC-cleared | 197 | 197 | 189 | 197 |
| Bilateral\tOTC | 9,748 | 12,097 | 8,945 | 10,487 |
| Total\tcommodities | 14,080 | 16,148 | 12,353 | 13,871 |
| Exchange-traded | 10,552 | 10,335 | 8,576 | 8,064 |
| Bilateral\tOTC | 40,735 | 45,253 | 39,516 | 45,826 |
| Total\tequities | 51,287 | 55,588 | 48,092 | 53,890 |
| Subtotal | 464,484 | 442,510 | 697,627 | 657,453 |
| Accounted\tfor\tas\thedges |  |  |  |  |
| OTC-cleared | 21 | – | 4,347 | 156 |
| Bilateral\tOTC | 2,309 | 3 | 4,180 | 10 |
| Total\tinterest\trates | 2,330 | 3 | 8,527 | 166 |
| OTC-cleared | 15 | 30 | 30 | 40 |
| Bilateral\tOTC | 34 | 114 | 55 | 64 |
| Total\tcurrencies | 49 | 144 | 85 | 104 |
| Subtotal | 2,379 | 147 | 8,612 | 270 |
| Total\tgross\tfair\tvalue | \t\t$\t466,863 | \t\t$\t442,657 | \t\t$\t706,239 | \t\t$\t657,723 |
| Offset\tin\tconsolidated\tstatements\tof\tfinancial\tcondition |  |  |  |  |
| Exchange-traded | \t\t$\t\t(12,963)\t\t\t$\t\t(12,963) | \t\t$\t\t(12,963)\t\t\t$\t\t(12,963) | \t\t$\t\t\t\t(9,727)\t\t\t$\t\t\t\t(9,727) | \t\t$\t\t\t\t(9,727)\t\t\t$\t\t\t\t(9,727) |
| OTC-cleared | (9,267) | (9,267) | (171,864) | (171,864) |
| Bilateral\tOTC | (341,824) | (341,824) | (385,647) | (385,647) |
| Counterparty\tnetting | (364,054) | (364,054) | (567,238) | (567,238) |
| OTC-cleared | (2,423) | (180) | (27,560) | (2,940) |
| Bilateral\tOTC | (53,049) | (38,792) | (57,769) | (40,046) |
| Cash\tcollateral\tnetting | (55,472) | (38,972) | (85,329) | (42,986) |
| Total\tamounts\toffset | \t\t$(419,526)\t\t\t$(403,026) | \t\t$(419,526)\t\t\t$(403,026) | \t\t$(652,567)\t\t\t$(610,224) | \t\t$(652,567)\t\t\t$(610,224) |

|  | Notional	Amounts	as	of	December | Notional	Amounts	as	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Not\taccounted\tfor\tas\thedges |  |  |
| Exchange-traded | \t\t$10,212,510 | \t$\t\t4,425,532 |
| OTC-cleared | 14,739,556 | 16,646,145 |
| Bilateral\tOTC | 12,862,328 | 11,131,442 |
| Total\tinterest\trates | 37,814,394 | 32,203,119 |
| OTC-cleared | 386,163 | 378,432 |
| Bilateral\tOTC | 868,226 | 1,045,913 |
| Total\tcredit | 1,254,389 | 1,424,345 |
| Exchange-traded | 10,450 | 13,800 |
| OTC-cleared | 98,549 | 62,799 |
| Bilateral\tOTC | 7,331,516 | 5,576,748 |
| Total\tcurrencies | 7,440,515 | 5,653,347 |
| Exchange-traded | 239,749 | 227,707 |
| OTC-cleared | 3,925 | 3,506 |
| Bilateral\tOTC | 250,547 | 196,899 |
| Total\tcommodities | 494,221 | 428,112 |
| Exchange-traded | 655,485 | 605,335 |
| Bilateral\tOTC | 1,127,812 | 959,112 |
| Total\tequities | 1,783,297 | 1,564,447 |
| Subtotal | 48,786,816 | 41,273,370 |
| Accounted\tfor\tas\thedges |  |  |
| OTC-cleared | 52,785 | 55,328 |
| Bilateral\tOTC | 15,188 | 36,607 |
| Total\tinterest\trates | 67,973 | 91,935 |
| OTC-cleared | 2,210 | 1,703 |
| Bilateral\tOTC | 8,347 | 8,544 |
| Total\tcurrencies | 10,557 | 10,247 |
| Subtotal | 78,530 | 102,182 |
| Total\tnotional\tamounts | \t\t$48,865,346 | \t$41,375,552 |

•	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	 and derivative	liabilities	of	$11.24	billion	and	$13.00	billion,	respectively,	as of	 December	 2017,	 and	 derivative	 assets	 and	 derivative	 liabilities	 of $19.92	billion	and	$20.79	billion,	respectively,	as	of	December	2016, 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	2017,	pursuant	to	a	rule	change	at	a	clearing	organization	and	to	an election	under	the	rules	of	another	clearing	organization,	transactions	with such	clearing	organizations	are	considered	settled	each	day.	The	impact	of reflecting	transactions	with	these	two	clearing	organizations	as	settled	would have	 been	 a	 reduction	 in	 gross	 derivative	 assets	 and	 liabilities	 as	 of December	2016	of	$189.08	billion	and	$166.04	billion,	respectively,	and	a corresponding	decrease	in	counterparty	and	cash	collateral	netting,	with	no impact	to	the	consolidated	statements	of	financial	condition.

# 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	 the	 majority	 of	 the	 firm's	 interest	 rate	 and	 currency	 derivatives classified	in	level	3,	significant	unobservable	inputs	include	correlations of	certain	currencies	and	interest	rates	(e.g.,	the	correlation	between	Euro inflation	and	Euro	interest	rates)	and	specific	interest	rate	volatilities.

•	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	tables	below	present	the	fair	value	of	derivatives	on	a	gross	basis	by level	and	major	product	type,	as	well	as	the	impact	of	netting,	included	in the	consolidated	statements	of	financial	condition.

|  |  | As	of	December	2017 | As	of	December	2017 |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | \tLevel\t1 | Level\t2 | Level\t3 | Total |
| Assets |  |  |  |  |
| Interest\trates | $\t\t\t18 | \t$\t282,933 | \t$\t\t\t\t311 | \t$\t283,262 |
| Credit | – | 19,053 | 3,640 | 22,693 |
| Currencies | – | 95,401 | 140 | 95,541 |
| Commodities | – | 13,727 | 353 | 14,080 |
| Equities | 8 | 50,870 | 409 | 51,287 |
| Gross\tfair\tvalue | 26 | 461,984 | 4,853 | 466,863 |
| Counterparty\tnetting\tin\tlevels | – | (362,109) | (1,051) | (363,160) |
| Subtotal | $\t\t\t26 | \t$\t\t\t99,875 | \t$\t3,802 | \t$\t103,703 |
| Cross-level\tcounterparty\tnetting |  |  |  | (894) |
| Cash\tcollateral\tnetting |  |  |  | (55,472) |
| Net\tfair\tvalue |  |  |  | \t$\t\t\t47,337 |
| Liabilities |  |  |  |  |
| Interest\trates | $\t\t(28) | \t$(252,421) | \t$\t\t\t(721) | \t$(253,170) |
| Credit | – | (19,135) | (2,135) | (21,270) |
| Currencies | – | (96,160) | (321) | (96,481) |
| Commodities | – | (15,842) | (306) | (16,148) |
| Equities | (28) | (53,902) | (1,658) | (55,588) |
| Gross\tfair\tvalue | (56) | (437,460) | (5,141) | (442,657) |
| Counterparty\tnetting\tin\tlevels | – | 362,109 | 1,051 | 363,160 |
| Subtotal | $\t\t(56) | \t$\t\t(75,351) | \t$(4,090) | \t$\t\t(79,497) |
| Cross-level\tcounterparty\tnetting |  |  |  | 894 |
| Cash\tcollateral\tnetting |  |  |  | 38,972 |
| Net\tfair\tvalue |  |  |  | \t$\t\t(39,631) |

|  |  | As	of	December	2016 | As	of	December	2016 |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | \tLevel\t1 | Level\t2 | Level\t3 | Total |
| Assets |  |  |  |  |
| Interest\trates | $\t\t\t46 | \t$\t506,818 | \t$\t\t\t\t614 | \t$\t507,478 |
| Credit | – | 21,388 | 4,979 | 26,367 |
| Currencies | – | 111,762 | 187 | 111,949 |
| Commodities | – | 11,950 | 403 | 12,353 |
| Equities | 1 | 47,667 | 424 | 48,092 |
| Gross\tfair\tvalue | 47 | 699,585 | 6,607 | 706,239 |
| Counterparty\tnetting\tin\tlevels | (12) | (564,100) | (1,417) | (565,529) |
| Subtotal | $\t\t\t35 | \t$\t135,485 | \t$\t5,190 | \t$\t140,710 |
| Cross-level\tcounterparty\tnetting |  |  |  | (1,709) |
| Cash\tcollateral\tnetting |  |  |  | (85,329) |
| Net\tfair\tvalue |  |  |  | \t$\t\t\t53,672 |
| Liabilities |  |  |  |  |
| Interest\trates | $\t\t(27) | \t$(457,963) | \t$\t\t\t(995) | \t$(458,985) |
| Credit | – | (21,106) | (2,475) | (23,581) |
| Currencies | – | (107,212) | (184) | (107,396) |
| Commodities | – | (13,541) | (330) | (13,871) |
| Equities | (967) | (49,083) | (3,840) | (53,890) |
| Gross\tfair\tvalue | (994) | (648,905) | (7,824) | (657,723) |
| Counterparty\tnetting\tin\tlevels | 12 | 564,100 | 1,417 | 565,529 |
| Subtotal | $(982) | \t$\t\t(84,805) | \t$(6,407) | \t$\t\t(92,194) |
| Cross-level\tcounterparty\tnetting |  |  |  | 1,709 |
| Cash\tcollateral\tnetting |  |  |  | 42,986 |
| Net\tfair\tvalue |  |  |  | \t$\t\t(47,499) |
|  | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | 129 |

•	The	gross	fair	values	exclude	the	effects	of	both	counterparty	netting	and collateral	 netting,	 and therefore	 are	 not representative	 of the firm's exposure.

•	Counterparty netting is reflected in each level to the extent that receivable	and	payable	balances	are	netted	within	the	same	level	and	is included in counterparty netting in levels.	 Where the counterparty netting is across levels, the netting is included in cross-level counterparty	netting.

•	Derivative	assets	are	shown	as	positive	amounts	and	derivative	liabilities are	shown	as	negative	amounts.

# Significant	Unobservable	Inputs

The table	 below	 presents the	 amount	 of level	 3	 assets	 (liabilities),	 and ranges,	averages	and	medians	of	significant	unobservable	inputs	used	to value	the	firm's	level	3	derivatives.

•	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	and	oil	spread inputs	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	 the	 firm's	 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	 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	 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	all level	3	derivatives.

|  | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Total\tlevel\t3\tderivatives |  |  |
| Beginning\tbalance | \t$(1,217) | \t$\t\t\t\t495 |
| Net\trealized\tgains/(losses) | (119) | (37) |
| Net\tunrealized\tgains/(losses) | (436) | 777 |
| Purchases | 301 | 115 |
| Sales | (611) | (3,557) |
| Settlements | 1,891 | 782 |
| Transfers\tinto\tlevel\t3 | (39) | 352 |
| Transfers\tout\tof\tlevel\t3 | (58) | (144) |
| Ending\tbalance | \t$\t\t\t(288) | \t$(1,217) |

•	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.

•	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.	Transfers	between levels	are	reported	at	the	beginning	of	the	reporting	period	in	which	they occur.

•	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.

|  | Year	Ended	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Interest\trates,\tnet |  |  |
| Beginning\tbalance | \t$\t\t\t(381) | \t$\t\t\t(398) |
| Net\trealized\tgains/(losses) | (62) | (41) |
| Net\tunrealized\tgains/(losses) | 20 | (138) |
| Purchases | 4 | 5 |
| Sales | (14) | (3) |
| Settlements | 30 | 36 |
| Transfers\tinto\tlevel\t3 | (12) | 195 |
| Transfers\tout\tof\tlevel\t3 | 5 | (37) |
| Ending\tbalance | \t$\t\t\t(410) | \t$\t\t\t(381) |
| Credit,\tnet |  |  |
| Beginning\tbalance | \t$\t2,504 | \t$\t2,793 |
| Net\trealized\tgains/(losses) | 42 | – |
| Net\tunrealized\tgains/(losses) | (188) | 196 |
| Purchases | 20 | 20 |
| Sales | (27) | (73) |
| Settlements | (739) | (516) |
| Transfers\tinto\tlevel\t3 | 3 | 179 |
| Transfers\tout\tof\tlevel\t3 | (110) | (95) |
| Ending\tbalance | \t$\t1,505 | \t$\t2,504 |
| Currencies,\tnet |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t\t\t\t3 | \t$\t\t\t\t\t(34) |
| Net\trealized\tgains/(losses) | (39) | (30) |
| Net\tunrealized\tgains/(losses) | (192) | (42) |
| Purchases | 4 | 14 |
| Sales | (3) | (2) |
| Settlements | 62 | 90 |
| Transfers\tinto\tlevel\t3 | (9) | 1 |
| Transfers\tout\tof\tlevel\t3 | (7) | 6 |
| Ending\tbalance | \t$\t\t\t(181) | \t$\t\t\t\t\t\t\t\t3 |
| Commodities,\tnet |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t\t73 | \t$\t\t\t(262) |
| Net\trealized\tgains/(losses) | (4) | (23) |
| Net\tunrealized\tgains/(losses) | 216 | 101 |
| Purchases | 102 | 24 |
| Sales | (301) | (119) |
| Settlements | (27) | 391 |
| Transfers\tinto\tlevel\t3 | (25) | (23) |
| Transfers\tout\tof\tlevel\t3 | 13 | (16) |
| Ending\tbalance | \t$\t\t\t\t\t\t47 | \t$\t\t\t\t\t\t73 |
| Equities,\tnet |  |  |
| Beginning\tbalance | \t$(3,416) | \t$(1,604) |
| Net\trealized\tgains/(losses) | (56) | 57 |
| Net\tunrealized\tgains/(losses) | (292) | 660 |
| Purchases | 171 | 52 |
| Sales | (266) | (3,360) |
| Settlements | 2,565 | 781 |
| Transfers\tinto\tlevel\t3 | 4 | – |
| Transfers\tout\tof\tlevel\t3 | 41 | (2) |
| Ending\tbalance | \t$(1,249) | \t$(3,416) |

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	and	$465	million	reported	in	market	making	and	other	principal transactions,	respectively.

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.

Year	Ended	December	2016.	The	net	realized	and	unrealized	gains	on level	3	derivatives	of	$740	million	(reflecting	$37	million	of	net	realized losses	 and $777	 million of	 net	 unrealized	 gains)	 for	 2016	 included gains/(losses)	of	approximately	$980	million	and	$(240)	million	reported	in market	making	and	other	principal	transactions,	respectively.

The	 net	 unrealized	 gains	 on	 level	 3	 derivatives	 for	 2016	 were	 primarily attributable	to	gains	on	certain	equity	derivatives,	reflecting	the	impact	of	an increase	in	equity	prices.

Transfers	into	level	3	derivatives	during	2016	primarily	reflected	transfers	of certain	interest	rate	derivative	assets	from	level	2,	principally	due	to	reduced transparency	of	certain	unobservable	inputs	used	to	value	these	derivatives, and	transfers	of	certain	credit	derivative	assets	from	level	2	primarily	due	to unobservable	credit	spread	 inputs	becoming	significant	 to	 the	net	risk	of certain	portfolios.

Transfers	out	of	level	3	derivatives	during	2016	primarily	reflected	transfers of	certain	credit	derivatives	assets	to	level	2,	primarily	due	to	unobservable credit	spread	inputs	no	longer	being	significant	to	the	net	risk	of	certain portfolios.

The table	 below	 presents the fair	 values	 of	 OTC	 derivative	 assets	 and liabilities	by	tenor	and	major	product	type.

|  | Less	than | 1	-	5 | Greater	than |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | 1\tYear | Years | 5\tYears | Total |
| As\tof\tDecember\t2017 |  |  |  |  |
| Assets |  |  |  |  |
| Interest\trates | \t\t$\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$116,912 |
| Cross-tenor\tcounterparty\tnetting |  |  |  | (16,404) |
| Cash\tcollateral\tnetting |  |  |  | (55,472) |
| Total |  |  |  | \t\t$\t\t45,036 |
| Liabilities |  |  |  |  |
| Interest\trates | \t\t$\t\t4,517 | \t\t$\t\t8,471 | $33,193 | \t\t$\t\t46,181 |
| 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 | Cross-tenor\tcounterparty\tnetting |  |  | (16,404) |
| Cash\tcollateral\tnetting |  |  |  | (38,972) |
| Total |  |  |  | \t\t$\t\t37,398 |
| As\tof\tDecember\t2016 |  |  |  |  |
| Assets |  |  |  |  |
| Interest\trates | \t\t$\t\t5,845 | \t\t$18,376 | $79,507 | \t\t$103,728 |
| Credit | 1,763 | 2,695 | 4,889 | 9,347 |
| Currencies | 18,344 | 8,292 | 8,428 | 35,064 |
| Commodities | 3,273 | 1,415 | 179 | 4,867 |
| Equities | 3,141 | 9,249 | 1,341 | 13,731 |
| Counterparty\tnetting\tin\ttenors | (3,543) | (5,550) | (3,794) | (12,887) |
| Subtotal | \t\t$28,823 | \t\t$34,477 | $90,550 | \t\t$153,850 |
| Cross-tenor\tcounterparty\tnetting | Cross-tenor\tcounterparty\tnetting |  |  | (17,396) |
| Cash\tcollateral\tnetting |  |  |  | (85,329) |
| Total |  |  |  | \t\t$\t\t51,125 |
| Liabilities |  |  |  |  |
| Interest\trates | \t\t$\t\t5,679 | \t\t$10,814 | $38,812 | \t\t$\t\t55,305 |
| Credit | 2,060 | 3,328 | 1,167 | 6,555 |
| Currencies | 14,720 | 9,771 | 5,879 | 30,370 |
| Commodities | 2,546 | 1,555 | 2,315 | 6,416 |
| Equities | 7,000 | 10,426 | 2,614 | 20,040 |
| Counterparty\tnetting\tin\ttenors | (3,543) | (5,550) | (3,794) | (12,887) |
| Subtotal | \t\t$28,462 | \t\t$30,344 | $46,993 | \t\t$105,799 |
| Cross-tenor\tcounterparty\tnetting |  |  |  | (17,396) |
| Cash\tcollateral\tnetting |  |  |  | (42,986) |
| Total |  |  |  | \t\t$\t\t45,417 |

•	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	(reference	entity) of	the	reference	obligations	suffers	a	credit	event.	The	buyer	of	protection pays	an	initial	or	periodic	premium	to	the	seller	and	receives	protection for	the	period	of	the	contract.	If	there	is	no	credit	event,	as	defined	in	the contract,	 the	 seller	 of	 protection	 makes	 no	 payments	 to	 the	 buyer	 of protection.	However,	if	a	credit	event	occurs,	the	seller	of	protection	is required	to	make	a	payment	to	the	buyer	of	protection,	which	is	calculated in	accordance	with	the	terms	of	the	contract.

•	Credit	 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	in	the	capital	structure.

•	Total	Return	Swaps.	A	total	return	swap	transfers	the	risks	relating	to economic	 performance	 of	 a	 reference	 obligation	 from	 the	 protection buyer	to	the	protection	seller.	Typically,	the	protection	buyer	receives from	 the	 protection	 seller	 a	 floating	 rate	 of	 interest	 and	 protection against	any	reduction	in	fair	value	of	the	reference	obligation,	and	in return	the	protection	seller	receives	the	cash	flows	associated	with	the reference	obligation,	plus	any	increase	in	the	fair	value	of	the	reference obligation.

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	2017,	written	and	purchased	credit	derivatives	had	total gross	 notional	 amounts	 of $611.04 billion	 and $643.37 billion, respectively,	for	total	net	notional	purchased	protection	of	$32.33	billion. As	of	December	2016,	written	and	purchased	credit	derivatives	had	total gross	 notional	 amounts	 of $690.47 billion	 and $733.98 billion, respectively,	for	total	net	notional	purchased	protection	of	$43.51	billion. Substantially	all	of	the	firm's	written	and	purchased	credit	derivatives	are credit	default	swaps.

The	table	below	presents	certain	information	about	credit	derivatives.

Maximum	Payout/Notional	Amount	of	Written	Credit	Derivatives	by	Tenor

| Less	than	1	year | $207,727 | $		5,819 | $		1,016 | $		8,629 | $223,191 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| 1\t–\t5\tyears | 375,208 | 17,255 | 8,643 | 7,986 | 409,092 |
| Greater\tthan\t5\tyears | 52,977 | 3,928 | 1,045 | 233 | 58,183 |
| Total | \t\t$635,912 | \t\t$27,002 | \t\t$10,704 | \t\t$16,848 | \t\t $690,466 |
| Maximum\tPayout/Notional\tAmount\tof\tPurchased\tCredit\tDerivatives |  |  |  |  |  |
| Offsetting | \t\t$558,305 | \t\t$20,588 | \t\t$10,133 | \t\t$15,186 | \t\t $604,212 |
| Other | 119,509 | 7,712 | 1,098 | 1,446 | 129,765 |
| Fair\tValue\tof\tWritten\tCredit\tDerivatives |  |  |  |  |  |
| Asset | \t\t$\t\t13,919 | \t\t$\t\t\t\t\t606 | \t\t$\t\t\t\t\t187 | \t\t$\t\t\t\t\t\t\t45 | \t\t $\t\t14,757 |
| Liability | 2,436 | 902 | 809 | 5,686 | 9,833 |
| Net\tasset/(liability) | \t\t$\t\t11,483 | \t\t$\t\t\t\t(296)\t\t\t$\t\t\t\t(622)\t\t\t$\t(5,641)\t\t\t $\t\t\t\t4,924 | \t\t$\t\t\t\t(296)\t\t\t$\t\t\t\t(622)\t\t\t$\t(5,641)\t\t\t $\t\t\t\t4,924 | \t\t$\t\t\t\t(296)\t\t\t$\t\t\t\t(622)\t\t\t$\t(5,641)\t\t\t $\t\t\t\t4,924 | \t\t$\t\t\t\t(296)\t\t\t$\t\t\t\t(622)\t\t\t$\t(5,641)\t\t\t $\t\t\t\t4,924 |

•	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.

•	Tenor	 is	 based	 on	 expected	 duration	 for	 mortgage-related	 credit derivatives	 and	 on	 remaining	 contractual	 maturity	 for	 other	 credit derivatives.

•	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	and	are	included	in	offsetting.

•	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	gain,	including	hedges,	attributable	to	the	impact	of	changes	in credit	 exposure	 and	 credit	 spreads	 (counterparty	 and	 the	 firm's)	 on derivatives	was	$66	million	for	2017,	$85	million	for	2016	and	$9	million for	2015.

# Bifurcated	Embedded	Derivatives

The	 table	 below	 presents	 the	 fair	 value	 and	 the	 notional	 amount of derivatives	that	have	been	bifurcated	from	their	related	borrowings.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Fair\tvalue\tof\tassets | \t\t$\t\t\t882 | \t$\t\t\t676 |
| Fair\tvalue\tof\tliabilities | 1,200 | 864 |
| Net\tliability | \t\t$\t\t\t318 | \t$\t\t\t188 |
| Notional\tamount | \t\t$9,578 | \t$8,726 |

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	the	aggregate	fair	value	of	net	derivative	liabilities under	such	agreements	(excluding	application	of	collateral	posted	to	reduce these liabilities), the related	 aggregate fair	 value	 of the	 assets	 posted	 as collateral	and	the	additional	collateral	or	termination	payments	that	could have	been	called	by	counterparties	in	the	event	of	a	one-notch	and	two-notch downgrade	in	the	firm's	credit	ratings.

|  | As	of	December |
| :--- | :--- |
| $\tin\tmillions | 2017\n2016 |
| Net\tderivative\tliabilities\tunder\tbilateral\tagreements | \t\t$29,877\t\t\t$32,927 |
| Collateral\tposted | \t\t$25,329\t\t\t$27,840 |
| Additional\tcollateral\tor\ttermination\tpayments: |  |
| One-notch\tdowngrade | \t\t$\t\t\t\t\t358\t\t\t$\t\t\t\t\t677 |
| Two-notch\tdowngrade | \t\t$\t\t1,856\t\t\t$\t\t2,216 |

# 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 test the	 hedging relationship	 at least	 on	 a	 quarterly	 basis to	 ensure the hedging instrument	 continues to	 be	 highly	 effective	 over the life	 of the hedging	relationship.

# 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	and	is	subsequently	amortized	into	interest	expense	over	its remaining	 life.	Gains	or	 losses	resulting	from	hedge	 ineffectiveness	are included	in	interest	expense.	When	a	derivative	is	no	longer	designated	as	a hedge,	any	remaining	difference	between	the	carrying	value	and	par	value of	the	hedged	item	is	amortized	to	interest	expense	over	the	remaining	life of	the	hedged	item	using	the	effective	interest	method.	See	Note	23	for further	information	about	interest	income	and	interest	expense.

The	table	below	presents	the	gains/(losses)	from	interest	rate	derivatives accounted	for	as	hedges,	the	related	hedged	borrowings	and	deposits,	and the	hedge	ineffectiveness	on	these	derivatives,	which	primarily	consists	of amortization	of	prepaid	credit	spreads	resulting	from	the	passage	of	time.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Interest\trate\thedges | \t$(2,867) | \t$(1,480) | \t$(1,613) |
| Hedged\tborrowings\tand\tdeposits | 2,183 | 834 | 898 |
| Hedge\tineffectiveness | \t$\t\t\t(684) | \t$\t\t\t(646) | \t$\t\t\t(715) |

# 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.

For	qualifying	net	investment	hedges,	the	gains	or	losses	on	the	hedging instruments,	to	the	extent	effective,	are	included	in	currency	translation.

# The	table	below	presents	the	gains/(losses)	from	net	investment	hedging.

|  | Year	Ended	December | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Hedges: |  |  |  |
| Foreign\tcurrency\tforward\tcontract | \t\t$(805) | \t$135 | \t$695 |
| Foreign\tcurrency-denominated\tdebt | \t\t$\t\t(67) | \t$\t(85) | \t$\t\t\t(9) |

The	gain/(loss)	related	to	ineffectiveness	was	not	material	for	2017,	2016	or 2015.	The	net	gain/(loss)	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, $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	and	not	material	for	2015.

As	 of	 December	 2017	 and	 December	 2016,	 the	 firm	 had	 designated $1.81 billion	 and $1.69 billion,	 respectively,	 of	 foreign	 currency- denominated	 debt,	 included	 in	 unsecured	 long-term	 borrowings	 and unsecured	short-term	borrowings,	as	hedges	of	net	investments	in	non-U.S. subsidiaries.

# Fair	Value	Option

# Other	Financial	Assets	and	Financial	Liabilities	at	Fair	Value

In	 addition	 to	 all	 cash	 and	 derivative	 instruments	 included	 in	 financial instruments	owned	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	of	which	are	accounted	for	at	fair	value	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	 within	 Fixed	 Income,	 Currency	 and Commodities	Client	Execution	(FICC	Client	Execution);

•	Substantially	all	other	secured	financings,	including	transfers	of	assets accounted	for	as	financings	rather	than	sales;

•	Certain	 unsecured	 short-term	 and	 long-term	 borrowings,	 substantially all	of	which	are	hybrid	financial	instruments;

•	Certain	 receivables	 from	 customers	 and	 counterparties,	 including transfers	of	assets	accounted	for	as	secured	loans	rather	than	purchases and	certain	margin	loans;

•	Certain	time	deposits	issued	by	the	firm's	bank	subsidiaries	(deposits with	no	stated	maturity	are	not	eligible	for	a	fair	value	option	election), including	structured	certificates	of	deposit,	which	are	hybrid	financial instruments;	and

•	Certain	subordinated	liabilities	of	consolidated	VIEs.

# 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	2017	and	December	2016,	the	firm	had	no level	3	resale	agreements,	securities	borrowed	or	securities	loaned.	As	of both	December	2017	and	December	2016,	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.	The ranges	of	significant	unobservable	inputs	used	to	value	level	3	other	secured financings	are	as	follows:

Generally,	 increases	 in	 funding	 spreads,	 yield	 or	 duration,	 in	 isolation, would	result	in	a	lower	fair	value	measurement.	Due	to	the	distinctive	nature of	each	of	the	firm's	level	3	other	secured	financings,	the	interrelationship	of inputs	is	not	necessarily	uniform	across	such	financings.	See	Note	10	for further	information	about	collateralized	agreements	and	financings.

Unsecured	Short-term	and	Long-term	Borrowings.	The	significant inputs	to	the	valuation	of	unsecured	short-term	and	long-term	borrowings	at fair	value	are	the	amount	and	timing	of	expected	future	cash	flows,	interest rates,	the	credit	spreads	of	the	firm,	as	well	as	commodity	prices	in	the	case of	prepaid	commodity	transactions.	The	inputs	used	to	value	the	embedded derivative	component	of	hybrid	financial	instruments	are	consistent	with	the inputs	used	to	value	the	firm's	other	derivative	instruments.	See	Note	7	for further	 information	 about	 derivatives.	 See	 Notes	 15	 and	 16	 for	 further information	 about	 unsecured	 short-term	 and	 long-term	 borrowings, respectively.

Certain	of	 the	firm's	unsecured	short-term	and	 long-term	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.

Receivables from	 Customers	 and	 Counterparties.	 Receivables from	 customers	 and	 counterparties	 at	 fair	 value	 primarily	 consist	 of transfers	of	assets	accounted	for	as	secured	loans	rather	than	purchases. The	significant	inputs	to	the	valuation	of	such	receivables	are	commodity prices,	interest	rates,	the	amount	and	timing	of	expected	future	cash	flows and	funding	spreads.	As	of	both	December	2017	and	December	2016,	the firm's	 level	 3	 receivables	 from	 customers	 and	 counterparties	 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.

Transfers	between	 levels	of	 the	fair	value	hierarchy	are	reported	at	 the beginning	 of	 the	 reporting	 period	 in	 which	 they	 occur.	 There	 were	 no transfers	of	other	financial	assets	and	financial	liabilities	between	level	1 and	level	2	during	both	2017	and	2016.	See	"Level	3	Rollforward"	below for	information	about	transfers	between	level	2	and	level	3.

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.

|  | Year	Ended	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Total\tother\tfinancial\tassets |  |  |
| Beginning\tbalance | \t$\t\t\t\t\t\t\t\t\t55 | \t$\t\t\t\t\t\t\t\t\t45 |
| Net\trealized\tgains/(losses) | – | 6 |
| Net\tunrealized\tgains/(losses) | – | 1 |
| Purchases | 1 | 10 |
| Settlements | (52) | (7) |
| Ending\tbalance | \t$\t\t\t\t\t\t\t\t\t\t\t4 | \t$\t\t\t\t\t\t\t\t\t55 |
| Total\tother\tfinancial\tliabilities |  |  |
| Beginning\tbalance | \t $(14,979) | \t $(11,244) |
| Net\trealized\tgains/(losses) | (362) | (99) |
| Net\tunrealized\tgains/(losses) | (1,047) | (7) |
| Purchases | (3) | (8) |
| Sales | 1 | – |
| Issuances | (8,382) | (10,236) |
| Settlements | 6,859 | 5,983 |
| Transfers\tinto\tlevel\t3 | (611) | (759) |
| Transfers\tout\tof\tlevel\t3 | 3,062 | 1,391 |
| Ending\tbalance | \t $(15,462) | \t $(14,979) |

•	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.

•	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.

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,	$45	million	and	$10	million	reported	in market	 making,	 other	 principal	 transactions	 and	 interest	 expense, respectively,	 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	 of	 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	of	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.

Year	Ended	December	2016.	The	net	realized	and	unrealized	losses	on level	3	other	financial	liabilities	of	$106	million	(reflecting	$99	million	of net	realized	losses	and	$7	million	of	net	unrealized	losses)	for	2016	included losses	 of	 approximately	 $21	 million	 and	 $10	 million	 reported	 in	 market making	and	interest	expense,	respectively,	in	the	consolidated	statements	of earnings,	and	losses	of	$75	million	reported	in	debt	valuation	adjustment	in the	consolidated	statements	of	comprehensive	income.

The	 net	 unrealized	 losses	 on	 level	 3	 other	 financial	 liabilities	 for	 2016 primarily	reflected	losses	on	certain	hybrid	financial	instruments	included	in unsecured	short-term	borrowings,	principally	due	to	an	increase	in	global equity	prices,	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,	partially	offset	by	gains	on	certain	hybrid	financial instruments	included	in	unsecured	long-term	borrowings,	principally	due	to changes	in	foreign	exchange	rates.

Transfers	into	level	3	of	other	financial	liabilities	during	2016	primarily reflected	 transfers	 of	 certain	 hybrid	 financial	 instruments	 included	 in unsecured	short-term	and	long-term	borrowings	from	level	2,	principally due	to	reduced	transparency	of	certain	inputs,	including	correlation	and volatility	inputs	used	to	value	these	instruments.

Transfers	out	of	level	3	of	other	financial	liabilities	during	2016	primarily reflected	 transfers	 of	 certain	 hybrid	 financial	 instruments	 included	 in unsecured	short-term	and	long-term	borrowings	to	level	2,	principally	due to	increased	transparency	of	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 | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Unsecured\tshort-term\tborrowings | \t$(2,585) | \t$(1,028) | \t$\t346 |
| Unsecured\tlong-term\tborrowings | (1,357) | 584 | 771 |
| Other\tliabilities\tand\taccrued\texpenses | 222 | (55) | (684) |
| Other | (620) | (630) | (217) |
| Total | \t$(4,340) | \t$(1,129) | \t$\t216 |

•	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	 borrowings	 are substantially	all	related	to	the	embedded	derivative	component	of	hybrid financial	instruments	for	2017,	2016	and	2015.	Gains/(losses)	included in	 unsecured	 long-term	 borrowings	 are	 primarily	 related	 to	 the embedded	 derivative	 component	 of	 hybrid	 financial	 instruments	 for 2017,	 2016	 and	 2015.	 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	liabilities	and	accrued	expenses	includes	gains/(losses)	on	certain subordinated	liabilities	of	consolidated	VIEs.

•	Other	primarily	consists	of	gains/(losses)	on	receivables	from	customers and	counterparties,	deposits	and	other	secured	financings.

Excluding	the	gains	and	losses	on	the	instruments	accounted	for	under	the fair value option described above,	 market	 making and other principal transactions	primarily	represent	gains	and losses	on	financial instruments owned	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	millions | 2017 | 2016 |
| :--- | :--- | :--- |
| Performing\tloans\tand\tlong-term\treceivables |  |  |
| Aggregate\tcontractual\tprincipal\tin\texcess\tof\tfair\tvalue | \t\t$\t\t\t952 | \t$\t\t\t478 |
| Loans\ton\tnonaccrual\tstatus\tand/or\tmore\tthan\t90\tdays\tpast\tdue |  |  |
| Aggregate\tcontractual\tprincipal\tin\texcess\tof\tfair\tvalue | \t\t$5,266 | \t$8,101 |
| Aggregate\tfair\tvalue\tof\tloans\ton\tnonaccrual\tstatus\tand/or |  |  |
| more\tthan\t90\tdays\tpast\tdue | \t\t$2,104 | \t$2,138 |

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.

As	 of	 December	 2017	 and	 December	 2016, the fair	 value	 of	 unfunded lending	commitments	for	which the	fair	value	option	was	elected	was	a liability	of	$31	million	and	$80	million,	respectively,	and	the	related	total contractual	 amount	 of these lending	 commitments	 was	 $9.94	 billion	 and $7.19 billion, respectively.	 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	December	2017,	and	the aggregate	contractual	principal	amount	exceeded	the	related	fair	value	by $361	 million	 as	 of	 December	 2016.	 The	 aggregate	 contractual	 principal amount	of	unsecured	long-term	borrowings	for	which	the	fair	value	option was elected exceeded the related fair value by $1.69 billion and $1.56	billion	as	of	December	2017	and	December	2016,	respectively.	The amounts	 above include	 both	 principal-	 and	non-principal-protected long- term	borrowings.

# Impact	of	Credit	Spreads	on	Loans	and	Lending	Commitments

The	estimated	net	gain	attributable	to	changes	in	instrument-specific	credit spreads	on	loans	and	lending	commitments	for	which	the	fair	value	option was elected	 was $268	 million for 2017, $281	 million for 2016 and $751	million	for	2015.	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	 details about the	 net	 DVA losses	 on such financial	liabilities.

•	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	both	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	details	about	loans	receivable.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Corporate\tloans | \t$30,749 | \t$24,837 |
| Loans\tto\tPWM\tclients | 16,591 | 13,828 |
| Loans\tbacked\tby\tcommercial\treal\testate | 7,987 | 4,761 |
| Loans\tbacked\tby\tresidential\treal\testate | 6,234 | 3,865 |
| Marcus\tloans | 1,912 | 208 |
| Other\tloans | 3,263 | 2,682 |
| Total\tloans\treceivable,\tgross | 66,736 | 50,181 |
| Allowance\tfor\tloan\tlosses | (803) | (509) |
| Total\tloans\treceivable | \t$65,933 | \t$49,672 |

As	of	December	2017	and	December	2016,	the	fair	value	of	loans	receivable was	$66.29	billion	and	$49.80	billion,	respectively.	Had	these	loans	been carried	at	fair	value	and	included	in	the	fair	value	hierarchy,	$38.75	billion and	$28.40	billion	would	have	been	classified	in	level	2,	and	$27.54	billion and $21.40 billion	 would	 have	 been	 classified	 in	 level 3, as	 of December	2017	and	December	2016,	respectively.

•	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.

# •	Loans	to	Private	Wealth	Management	Clients.	Loans	to	Private

Wealth	 Management	 (PWM)	 clients	 includes	 loans	 used	 by	 clients	 to finance	private	asset	purchases,	employ	leverage	for	strategic	investments in	 real	 or	 financial	 assets,	 bridge	 cash	 flow	 timing	 gaps	 or	 provide liquidity	for	other	needs.	Such	loans	are	primarily	secured	by	securities	or other	assets.

•	Loans	 Backed	 by	 Commercial	 Real	 Estate.	Loans	 backed	 by commercial	 real	 estate	 includes	 loans	 extended	 by	 the	 firm	 that	 are directly	or	indirectly	secured	by	hotels,	retail	stores,	multifamily	housing complexes	 and	 commercial	 and	 industrial	 properties.	 Loans	 backed	 by commercial	real	estate	also	includes	loans	purchased	by	the	firm.

•	Loans	 Backed	 by	 Residential	 Real	 Estate.	 Loans	 backed	 by residential	real	estate	includes	loans	extended	by	the	firm	to	clients	who warehouse	assets	 that	are	directly	or	 indirectly	secured	by	residential real	estate.	Loans	backed	by	residential	real	estate	also	includes	loans purchased	by	the	firm.

•	Marcus	 Loans.	 Marcus loans represents	 unsecured loans to retail clients.

•	Other	Loans.	Other	loans	primarily	includes	loans	extended	to	clients who	warehouse	assets	that	are	directly	or	indirectly	secured	by	retail loans,	including	auto	loans,	and	private	student	loans	and	other	assets.

The	firm	monitors	the	geographic	diversification	of	loans	receivable.	The regional	composition	of	such	loans	was	approximately	79%	and	78%	in the	Americas,	approximately	17%	and	18%	in	Europe,	Middle	East	and Africa	 (EMEA),	 and	 approximately 4% and 4% in	 Asia	 as	 of December	2017	and	December	2016,	respectively.

# Lending	Commitments

The	table	below	presents	details	about	lending	commitments	that	are	held for	investment	and	accounted	for	on	an	accrual	basis.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Corporate | \t\t$118,553 | \t$93,407 |
| Other | 5,951 | 4,638 |
| Total | \t\t$124,504 | \t$98,045 |

•	Corporate	 lending	 commitments primarily relates to the firm's relationship	lending	activities.

•	Other	lending	commitments	primarily	relates	to	lending	commitments extended	by	the	firm	to	clients	who	warehouse	assets	backed	by	real estate	and	other	assets.

•	The	 carrying	 value	 of	 lending	 commitments	 were	 liabilities	 of $423	 million (including	 allowance	 for	 losses	 of	 $274	 million)	 and $327	 million (including	 allowance	 for	 losses	 of	 $212	 million)	 as	 of December	2017	and	December	2016,	respectively.

•	The	estimated	fair	value	of	such	lending	commitments	were	liabilities	of $2.27 billion	 and $2.55 billion	 as	 of	 December	 2017	 and December	 2016,	 respectively.	 Had	 these	 lending	 commitments	 been carried	 at	 fair	 value	 and	 included	 in	 the	 fair	 value	 hierarchy, $772	million	and	$1.10	billion	would	have	been	classified	in	level	2, and $1.50 billion	 and $1.45 billion	 would	 have	 been	 classified	 in level	3,	as	of	December	2017	and	December	2016,	respectively.

# Purchased	Credit	Impaired	(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	table	below	presents	details	about	PCI	loans.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Loans\tbacked\tby\tcommercial\treal\testate | \t\t$1,116 | \t$1,444 |
| Loans\tbacked\tby\tresidential\treal\testate | 3,327 | 2,508 |
| Other\tloans | 10 | 18 |
| Total\tgross\tcarrying\tvalue | \t\t$4,453 | \t$3,970 |
| Total\toutstanding\tprincipal\tbalance | \t\t$9,512 | \t$8,515 |
| Total\taccretable\tyield | \t\t$\t\t\t662 | \t$\t\t\t526 |

The	table	below	presents	details	about	PCI	loans	at	the	time	of	acquisition.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Fair\tvalue | \t\t$1,769 | \t$2,514 | \t$2,267 |
| Expected\tcash\tflows | \t\t$1,961 | \t$2,818 | \t$2,499 |
| Contractually\trequired\tcash\tflows | \t\t$4,092 | \t$6,389 | \t$6,472 |
|  | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | 143 |

# 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	 Marcus	 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 Marcus	loans	of	$6.37	billion	and	$4.18	billion	as	of	December	2017	and December	 2016,	 respectively)	 and	 lending	 commitments	 by	 the	 firm's internally	determined	public	rating	agency	equivalent	and	by	regulatory risk	rating.

| $	in	millions | Loans | Commitments | Total |
| :--- | :--- | :--- | :--- |
| Credit\tRating\tEquivalent |  |  |  |
| 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 |
| As\tof\tDecember\t2016 |  |  |  |
| Investment-grade | \t\t$18,434 | $\t\t72,323 | \t$\t\t90,757 |
| Non-investment-grade | 27,569 | 25,722 | 53,291 |
| Total | \t\t$46,003 | $\t\t98,045 | \t$144,048 |
| Regulatory\tRisk\tRating |  |  |  |
| 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 |
| As\tof\tDecember\t2016 |  |  |  |
| Non-criticized/pass | \t\t$42,938 | $\t\t94,966 | \t$137,904 |
| Criticized | 3,065 | 3,079 | 6,144 |
| Total | \t\t$46,003 | $\t\t98,045 | \t$144,048 |

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	 Marcus	 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.	 As	 of	 December	 2017	 and December	2016,	greater	than	80%	of	the	Marcus	loans	receivable	had	an underlying	FICO	credit	score	above	660	(with	a	weighted	average	FICO credit	score	in	excess	of	700).

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	be	able	to	collect	all principal	and	interest	due	under	the	contractual	terms	of	the	loan.	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.

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.

As	 of	 December	 2017	 and	 December	 2016,	 the	 gross	 carrying	 value	 of impaired	loans	receivable	(excluding	PCI	loans)	on	nonaccrual	status	was $845	 million	 and	 $404	 million,	 respectively.	As	 of	 December	 2017	 and December	 2016,	 such	 loans	 included $61	 million and	 $142	 million, respectively,	 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	 December	 2017.	 Such	 lending	 commitments	 were $144	million	as	of	December	2016.

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	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	 Marcus	 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	 and	 accrued expenses.

The	tables	below	present	gross	loans	receivable	and	lending	commitments by	impairment	methodology.

|  |  | As	of	December	2017 | As	of	December	2017 |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | \t\tSpecific | Portfolio | PCI | Total |
| Loans\tReceivable |  |  |  |  |
| Corporate\tloans | $377 | \t$\t\t30,372 | \t$\t\t\t\t\t\t\t– | \t$\t\t30,749 |
| Loans\tto\tPWM\tclients | 163 | 16,428 | – | 16,591 |
| Loans\tbacked\tby: |  |  |  |  |
| Commercial\treal\testate | – | 6,871 | 1,116 | 7,987 |
| Residential\treal\testate | 231 | 2,676 | 3,327 | 6,234 |
| Marcus\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 |

|  |  | As	of	December	2016 | As	of	December	2016 |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | \t\t Specific | Portfolio | PCI | Total |
| Loans\tReceivable |  |  |  |  |
| Corporate\tloans | $327 | \t$\t\t24,510 | \t$\t\t\t\t\t\t\t– | \t$\t\t24,837 |
| Loans\tto\tPWM\tclients | 77 | 13,751 | – | 13,828 |
| Loans\tbacked\tby: |  |  |  |  |
| Commercial\treal\testate | – | 3,317 | 1,444 | 4,761 |
| Residential\treal\testate | – | 1,357 | 2,508 | 3,865 |
| Marcus\tloans | – | 208 | – | 208 |
| Other\tloans | – | 2,664 | 18 | 2,682 |
| Total | $404 | \t$\t\t45,807 | \t$3,970 | \t$\t\t50,181 |
| Lending\tCommitments |  |  |  |  |
| Corporate | $211 | \t$\t\t93,196 | \t$\t\t\t\t\t\t\t– | \t$\t\t93,407 |
| Other | – | 4,638 | – | 4,638 |
| Total | $211 | \t$\t\t97,834 | \t$\t\t\t\t\t\t\t– | \t$\t\t98,045 |

In	 the	 tables	 above,	 gross	 loans	 receivable	 and	 lending	 commitments, subject	 to	 specific	 loan-level	 reserves,	 included $492 million	 and $122 million	 of	 impaired	 loans	 and	 lending	 commitments	 as	 of December	2017	and	December	2016,	respectively,	which	did	not	require	a reserve	as	the	loan	was	deemed	to	be	recoverable.

The	table	below	presents	changes	in	the	allowance	for	loan	losses	and	the allowance	 for	 losses	 on	 lending	 commitments,	 as	 well	 as	 details	 by impairment	methodology.

|  | Year	Ended	December	2017 | Year	Ended	December	2017 | Year	Ended	December	2016 | Year	Ended	December	2016 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Loans\nReceivable | Lending\nCommitments | Loans\nReceivable | Lending\nCommitments |
| Changes\tin\tthe\tallowance\tfor\tlosses |  |  |  |  |
| Beginning\tbalance | $\t509 | $212 | $414 | $188 |
| Charge-offs | (203) | – | (8) | – |
| Provision | 574 | 83 | 138 | 44 |
| Other | (77) | (21) | (35) | (20) |
| Ending\tbalance | $\t803 | $274 | $509 | $212 |
| Allowance\tfor\tlosses\tby\timpairment\tmethodology |  |  |  |  |
| Specific | $\t119 | $\t\t14 | $127 | $\t\t39 |
| Portfolio | 518 | 260 | 370 | 173 |
| PCI | 166 | – | 12 | – |
| Total | $\t803 | $274 | $509 | $212 |

•	The	provision	for	losses	on	loans	and	lending	commitments	is	included in	other	principal	transactions,	and	was	primarily	related	to	corporate loans	and	lending	commitments,	and	loans	backed	by	commercial	real estate.

•	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, specific	 loan-level	reserves	were	substantially	all	related	 to	corporate loans	and	reserves	on	PCI	loans	were	related	to	loans	backed	by	real estate.

•	Substantially	all	of	 the	allowance	for	 losses	on lending	commitments were	related	to	corporate	lending	commitments.

# Collateralized	Agreements	and	Financings

Collateralized	 agreements	 are	 securities	 purchased	 under	 agreements	 to resell	 (resale	 agreements)	 and	 securities	 borrowed.	 Collateralized financings	are	securities	sold	under	agreements	to	repurchase	(repurchase agreements),	 securities	 loaned	 and	 other	 secured	 financings.	 The	 firm enters	 into	 these	 transactions	 in	order	 to,	among	other	 things,	facilitate client	 activities,	 invest	 excess	 cash,	 acquire	 securities	 to	 cover	 short positions	and	finance	certain	firm	activities.

Collateralized	 agreements	 and	 financings	 are	 presented	 on	 a net-by-counterparty	basis	when	a	legal	right	of	setoff	exists.	Interest	on collateralized	agreements	and	collateralized	financings	is	recognized	over the	 life	 of	 the	 transaction	 and	 included	 in	 interest	 income	 and	 interest expense,	respectively.	See	Note	23	for	further	information	about	interest income	and	interest	expense.

The	 table	 below	 presents	 the	 carrying	 value	 of	 resale and repurchase agreements	and	securities	borrowed	and	loaned	transactions.

•	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.	While	these agreements	are	carried	at	amounts	that	approximate	fair	value,	they	are	not accounted	for	at	fair	value	under	the	fair	value	option	or	at	fair	value	in accordance	with	other	U.S.	GAAP	and	therefore	are	not	included	in	the firm's	fair	value	hierarchy	in	Notes	6	through	8.	Had	these	agreements been	 included	 in	 the	firm's	fair	value	hierarchy,	 they	would	have	been classified	in	level	2	as	of	both	December	2017	and	December	2016.

# 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.

•	Amounts	not	offset	includes	counterparty	netting	that	does	not	meet	the criteria	 for	 netting	 under	 U.S.	 GAAP	 and	 the	 fair	 value	 of	 cash	 or securities	 collateral	 received	 or	 posted	 subject	 to	 enforceable	 credit support	agreements.

# 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.

|  | Repurchase | Securities |
| :--- | :--- | :--- |
| $\tin\tmillions | agreements | loaned |
| As\tof\tDecember\t2017 |  |  |
| Money\tmarket\tinstruments | $\t\t\t\t\t\t\t\t97 | \t$\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 |
| State\tand\tmunicipal\tobligations | – | – |
| Other\tdebt\tobligations | 55 | – |
| Equity\tsecurities | 12,573 | 16,338 |
| Total | \t\t$173,868 | \t$19,728 |
| As\tof\tDecember\t2016 |  |  |
| Money\tmarket\tinstruments | \t\t$\t\t\t\t\t\t\t317 | \t$\t\t\t\t\t\t\t\t\t– |
| U.S.\tgovernment\tand\tagency\tobligations | 47,207 | 115 |
| Non-U.S.\tgovernment\tand\tagency\tobligations | 56,156 | 1,846 |
| Securities\tbacked\tby\tcommercial\treal\testate | 208 | – |
| Securities\tbacked\tby\tresidential\treal\testate | 122 | – |
| Corporate\tdebt\tsecurities | 8,297 | 39 |
| State\tand\tmunicipal\tobligations | 831 | – |
| Other\tdebt\tobligations | 286 | – |
| Equity\tsecurities | 15,028 | 10,495 |
| Total | \t\t$128,452 | \t$12,495 |

The table below presents the gross carrying value of repurchase agreements	and	securities	loaned	by	maturity	date.

•	Repurchase	agreements	and	securities	loaned	that	are	repayable	prior	to maturity	 at the	 option	 of the firm	 are reflected	 at their	 contractual maturity	dates.

•	Repurchase	agreements	and	securities	loaned	that	are	redeemable	prior to	maturity	at	the	option	of	the	holder	are	reflected	at	the	earliest	dates such	options	become	exercisable.

# 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	(primarily collateralized	central	bank	financings,	pledged	commodities,	bank	loans and	mortgage	whole	loans);	and

•	Other	structured	financing	arrangements.

Other	secured	financings	includes	arrangements	that	are	nonrecourse.	As	of December	2017	and	December	2016,	nonrecourse	other	secured	financings were	$5.31	billion	and	$2.54	billion,	respectively.

The	firm	has	elected	to	apply	the	fair	value	option	to	substantially	all	other secured	financings	because	the	use	of	fair	value	eliminates	non-economic volatility	 in	 earnings	 that	 would	 arise	 from	 using	 different	 measurement attributes.	See	Note	8	for	further	information	about	other	secured	financings that	are	accounted	for	at	fair	value.

Other	secured	financings	 that	are	not	recorded	at	fair	value	are	recorded based	on	the	amount	of	cash	received	plus	accrued	interest,	which	generally approximates	fair	value.	While	these	financings	are	carried	at	amounts	that approximate	fair	value,	they	are	not	accounted	for	at	fair	value	under	the	fair value	 option	 or	 at	 fair	 value	 in	 accordance	 with	 other	 U.S.	 GAAP	 and therefore	 are	 not	 included	 in	 the	 firm's	 fair	 value	 hierarchy	 in	 Notes	 6 through	 8.	 Had	 these	 financings	 been	 included	 in	 the	 firm's	 fair	 value hierarchy,	they	would	have	been	primarily	classified	in	level	2	as	of	both December	2017	and	December	2016.

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.

•	Weighted	average	interest	rates	excludes	other	secured	financings	at	fair value	and	includes	the	effect	of	hedging	activities.	See	Note	7	for	further information	about	hedging	activities.

•	Total	other	secured	financings	included	$1.55	billion	and	$285	million related	to	transfers	of	financial	assets	accounted	for	as	financings	rather than	sales	as	of	December	2017	and	December	2016,	respectively.	Such financings	were	collateralized	by	financial	assets	of	$1.57	billion	and $285	million	as	of	December	2017	and	December	2016,	respectively, primarily	included	in	financial	instruments	owned.

•	Other	 secured	 financings	 collateralized	 by	 financial	 instruments included	$16.61	billion	and	$13.65	billion	of	other	secured	financings collateralized	by	financial	instruments	owned	as	of	December	2017	and December	 2016,	 respectively,	 and	 $5.71	 billion	 and	 $6.18	 billion	 of other	secured	financings	collateralized	by	financial	instruments	received as	collateral	and	repledged	as	of	December	2017	and	December	2016, respectively.

The	table	below	presents	other	secured	financings	by	maturity	date.

•	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	by	the	firm.

| $	in	millions | 2017 | 2016 |
| :--- | :--- | :--- |
| Collateral\tavailable\tto\tbe\tdelivered\tor\trepledged | \t\t$763,984 | \t$634,609 |
| Collateral\tthat\twas\tdelivered\tor\trepledged | \t\t$599,565 | \t$495,717 |

In	the	table	above,	as	of	December	2017	and	December	2016,	collateral available	 to	 be	 delivered	 or	 repledged	 excludes $1.52 billion	 and $15.47	billion,	respectively,	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.

| $	in	millions | 2017 | 2016 |
| :--- | :--- | :--- |
| Financial\tinstruments\towned\tpledged\tto\tcounterparties\tthat: |  |  |
| Had\tthe\tright\tto\tdeliver\tor\trepledge | \t\t$\t\t50,335 | \t$\t\t51,278 |
| Did\tnot\thave\tthe\tright\tto\tdeliver\tor\trepledge | \t\t$\t\t78,656 | \t$\t\t61,099 |
| Other\tassets\tpledged\tto\tcounterparties\tthat |  |  |
| did\tnot\thave\tthe\tright\tto\tdeliver\tor\trepledge | \t\t$\t\t\t\t4,838 | \t$\t\t\t\t3,287 |

The	firm	also	segregated	$10.42	billion	and	$15.29	billion	of	securities included	 in	 financial	 instruments	 owned	 as	 of	 December	 2017	 and December	 2016,	 respectively,	 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	Notes	10	and	23	for	further	information	about collateralized	financings	and	interest	expense,	respectively.

The	firm	generally	receives	cash	in	exchange	for	the	transferred	assets	but may	also	have	continuing	involvement	with	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 | 2017 | 2016 | 2015 |
| Residential\tmortgages | \t\t$18,142 | \t$12,164 | \t$10,479 |
| Commercial\tmortgages | 7,872 | 233 | 6,043 |
| Other\tfinancial\tassets | 481 | 181 | – |
| Total | \t\t$26,495 | \t$12,578 | \t$16,522 |
| Retained\tinterests\tcash\tflows | \t\t$\t\t\t\t\t264 | \t$\t\t\t\t\t189 | \t$\t\t\t\t\t174 |

The	 table	 below	 presents	 the	 firm's	 continuing	 involvement	 in nonconsolidated	securitization	entities	 to	which	 the	firm	sold	assets,	as well	 as	 the	 total	 outstanding	 principal	 amount	 of	 transferred	 assets	 in which	the	firm	has	continuing	involvement.

•	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	2012	and	thereafter.

•	The	fair	value	of	retained	interests	was	$2.13	billion	and	$1.58	billion	as of	December	2017	and	December	2016,	respectively.

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	 $86	 million	 and	 $48	 million	 as	 of December	2017	and	December	2016,	respectively.	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	the	weighted	average	key	economic	assumptions used	in	measuring	the	fair	value	of	mortgage-backed	retained	interests	and the	sensitivity	of	this	fair	value	to	immediate	adverse	changes	of	10%	and 20%	in	those	assumptions.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Fair\tvalue\tof\tretained\tinterests | \t$2,071 | \t$1,519 |
| Weighted\taverage\tlife\t(years) | 6.0 | 7.5 |
| Constant\tprepayment\trate | 9.4% | 8.1% |
| Impact\tof\t10%\tadverse\tchange | \t$\t\t\t\t(19) | \t$\t\t\t\t(14) |
| Impact\tof\t20%\tadverse\tchange | \t$\t\t\t\t(35) | \t$\t\t\t\t(28) |
| Discount\trate | 4.2% | 5.3% |
| Impact\tof\t10%\tadverse\tchange | \t$\t\t\t\t(35) | \t$\t\t\t\t(37) |
| Impact\tof\t20%\tadverse\tchange | \t$\t\t\t\t(70) | \t$\t\t\t\t(71) |

•	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	$56	million	and	a	weighted	average	 life	of	4.5	years	as	of December	2017,	and	a	fair	value	of	$56	million	and	a	weighted	average	life of	3.5	years	as	of	December	2016.	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	2017	and	December	2016.	The firm's	maximum	exposure	to	adverse	changes	in	the	value	of	these	interests is	the	carrying	value	of	$56	million	and	$56	million	as	of	December	2017 and	December	2016,	respectively.

# Variable	Interest	Entities

A	 variable	 interest	 in	 a	 VIE	 is	 an	 investment	 (e.g.,	 debt	 or	 equity securities)	 or	 other	 interest	 (e.g.,	 derivatives	 or	 loans	 and	 lending commitments)	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

In	2017,	the	firm	aggregated	corporate	debt	VIEs	with	other	asset-backed VIEs	and	aggregated	power-related	VIEs	with	real	estate,	credit-related	and other	investing	VIEs	(rather	than	in	investments	in	funds	and	other	VIEs). Previously	 reported	 amounts	 have	 been	 conformed	 to	 the	 current presentation.

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 typically	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,	and	purchases	and	sells	beneficial	interests issued	by	corporate	debt	and	other	asset-backed	VIEs	in	connection	with market-making	 activities.	 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	of the	investment	fund	VIEs	it	manages	and	is	entitled	to	receive	fees	from these	 VIEs.	 The	 firm	 typically	 does	 not	 sell	 assets	 to,	 or	 enter	 into derivatives	with,	these	VIEs.

The	firm	adopted	ASU	No.	2015-02	as	of	January	1,	2016.	Upon	adoption, certain	of	the	firm's	investments	in	entities	that	were	previously	classified as	 voting	 interest	 entities	 are	 now	 classified	 as	 VIEs.	 These	 include investments	 in	 certain	 limited	 partnership	 entities	 that	 have	 been deconsolidated	upon	adoption	as	certain	fee	interests	are	not	considered significant	interests	under	the	guidance,	and	the	firm	is	no	longer	deemed to	 have	 a	 controlling	 financial	 interest	 in	 such	 entities.	 See	 Note	 3	 for further	information	about	the	adoption	of	ASU	No.	2015-02.

Nonconsolidated	VIEs.	As	a	result	of	adoption	as	of	January	1,	2016, investments	 in	 funds	 nonconsolidated	 VIEs	 included	 $10.70	 billion	 in assets	 in	VIEs,	 $543	 million	 in	 carrying	 value	 of	 variable	 interests	 — assets	 and $559	 million in	 maximum	 exposure	 to	 loss	 related	 to investments	in	limited	partnership	entities	that	were	previously	classified as	nonconsolidated	voting	interest	entities.

Consolidated	VIEs.	As	a	result	of	adoption	as	of	January	1,	2016,	real estate,	 credit-related	 and	 other	 investing	 consolidated	 VIEs	 included $302	million	of	assets,	substantially	all	included	in	financial	instruments owned,	 and	 $122	 million	 of	 liabilities,	 included	 in	 other	 liabilities	 and accrued	expenses,	primarily	related	to	investments	in	limited	partnership entities	 that	 were	 previously	 classified	 as	 consolidated	 voting	 interest entities.

# Nonconsolidated	VIEs

The	table	below	presents	a	summary	of	the	nonconsolidated	VIEs	in	which the	firm	holds	variable	interests.	The	nature	of	the	firm's	variable	interests can	take	different	forms,	as	described	in	the	rows	under	maximum	exposure to	loss.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Total\tnonconsolidated\tVIEs |  |  |
| Assets\tin\tVIEs | \t\t$97,962 | \t$70,083 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tassets | 8,425 | 6,199 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tliabilities | 214 | 254 |
| Maximum\texposure\tto\tloss: |  |  |
| Retained\tinterests | 2,115 | 1,564 |
| Purchased\tinterests | 1,172 | 544 |
| Commitments\tand\tguarantees | 3,462 | 2,196 |
| Derivatives | 8,406 | 7,144 |
| Loans\tand\tinvestments | 4,454 | 3,760 |
| Total\tmaximum\texposure\tto\tloss | \t\t$19,609 | \t$15,208 |

•	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	 also	 has	 not	 been	 reduced	 by	 unrealized	 losses	 already recorded.	As	a	result,	the	maximum	exposure	to	loss	exceeds	liabilities recorded	for	commitments	and	guarantees,	and	derivatives	provided	 to VIEs.

•	Total	maximum	exposure	to	loss	from	commitments	and	guarantees,	and derivatives	included	$1.26	billion	and	$1.28	billion	as	of	December	2017 and	December	2016,	respectively,	related	 to	 transactions	with	VIEs	 to which	the	firm	transferred	assets.

The table below disaggregates, by principal business activity, the information for	 nonconsolidated	 VIEs included in the summary table above.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Mortgage-backed |  |  |
| Assets\tin\tVIEs | \t\t$55,153 | \t$32,714 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tassets | 3,128 | 1,936 |
| Maximum\texposure\tto\tloss: |  |  |
| Retained\tinterests | 2,059 | 1,508 |
| Purchased\tinterests | 1,067 | 429 |
| Commitments\tand\tguarantees | 11 | 9 |
| Derivatives | 99 | 163 |
| Total\tmaximum\texposure\tto\tloss | \t\t$\t\t3,236 | \t$\t\t2,109 |
| Real\testate,\tcredit-\tand\tpower-related\tand\tother\tinvesting |  |  |
| Assets\tin\tVIEs | \t\t$15,539 | \t$11,771 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tassets | 3,289 | 2,911 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tliabilities | 2 | 9 |
| Maximum\texposure\tto\tloss: |  |  |
| Commitments\tand\tguarantees | 1,617 | 1,658 |
| Loans\tand\tinvestments | 3,289 | 2,911 |
| Total\tmaximum\texposure\tto\tloss | \t\t$\t\t4,906 | \t$\t\t4,569 |
| Corporate\tdebt\tand\tother\tasset-backed |  |  |
| Assets\tin\tVIEs | \t\t$16,251 | \t$11,540 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tassets | 1,660 | 602 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tliabilities | 212 | 245 |
| Maximum\texposure\tto\tloss: |  |  |
| Retained\tinterests | 56 | 56 |
| Purchased\tinterests | 105 | 115 |
| Commitments\tand\tguarantees | 1,779 | 461 |
| Derivatives | 8,303 | 6,975 |
| Loans\tand\tinvestments | 817 | 99 |
| Total\tmaximum\texposure\tto\tloss | \t\t$11,060 | \t$\t\t7,706 |
| Investments\tin\tfunds |  |  |
| Assets\tin\tVIEs | \t\t$11,019 | \t$14,058 |
| Carrying\tvalue\tof\tvariable\tinterests\t—\tassets | 348 | 750 |
| Maximum\texposure\tto\tloss: |  |  |
| Commitments\tand\tguarantees | 55 | 68 |
| Derivatives | 4 | 6 |
| Loans\tand\tinvestments | 348 | 750 |
| Total\tmaximum\texposure\tto\tloss | \t\t$\t\t\t\t\t407 | \t$\t\t\t\t\t824 |

As	of	both	December	2017	and	December	2016,	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	and	accrued	expenses.

•	Corporate	 debt	 and	 other	 asset-backed:	 Substantially	 all	 assets	 were included	in	financial	instruments	owned	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.

•	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 |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Real\testate,\tcredit-related\tand\tother\tinvesting |  |  |
| Assets |  |  |
| Cash\tand\tcash\tequivalents | \t\t$\t\t\t275 | \t\t$\t\t\t300 |
| Loans\treceivable | 375 | 603 |
| Financial\tinstruments\towned | 896 | 1,708 |
| Other\tassets | 1,267 | 680 |
| Total | \t\t$2,813 | \t\t$3,291 |
| Liabilities |  |  |
| Other\tsecured\tfinancings | \t\t$\t\t\t327 | \t\t$\t\t\t284 |
| Payables\tto\tbrokers,\tdealers\tand\tclearing\torganizations | – | 1 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased | 15 | 7 |
| Other\tliabilities\tand\taccrued\texpenses | 577 | 803 |
| Total | \t\t$\t\t\t919 | \t\t$1,095 |
| Mortgage-backed\tand\tother\tasset-backed |  |  |
| Assets |  |  |
| Receivables\tfrom\tcustomers\tand\tcounterparties | \t\t$\t\t\t\t\t\t\t2 | \t\t$\t\t\t\t\t\t\t– |
| Loans\treceivable | 52 | – |
| Financial\tinstruments\towned | 242 | 253 |
| Other\tassets | 6 | 2 |
| Total | \t\t$\t\t\t302 | \t\t$\t\t\t255 |
| Liabilities |  |  |
| Other\tsecured\tfinancings | \t\t$\t\t\t207 | \t\t$\t\t\t139 |
| Total | \t\t$\t\t\t207 | \t\t$\t\t\t139 |
| Principal-protected\tnotes |  |  |
| Assets |  |  |
| Financial\tinstruments\towned | \t\t$\t\t\t\t\t56 | \t\t$\t\t\t\t\t86 |
| Total | \t\t$\t\t\t\t\t56 | \t\t$\t\t\t\t\t86 |
| Liabilities |  |  |
| Other\tsecured\tfinancings | \t\t$\t\t\t489 | \t\t$\t\t\t431 |
| Unsecured\tshort-term\tborrowings | 79 | 197 |
| Unsecured\tlong-term\tborrowings | 225 | 334 |
| Total | \t\t$\t\t\t793 | \t\t$\t\t\t962 |

•	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

Other	assets	are	generally	less	liquid,	nonfinancial	assets.	The	table	below presents	other	assets	by	type.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Property,\tleasehold\timprovements\tand\tequipment | \t\t$15,094 | \t$12,070 |
| Goodwill\tand\tidentifiable\tintangible\tassets | 4,038 | 4,095 |
| Income\ttax-related\tassets | 3,728 | 5,550 |
| Miscellaneous\treceivables\tand\tother | 5,486 | 3,766 |
| Total | \t\t$28,346 | \t$25,481 |

•	Property,	leasehold	improvements	and	equipment	is	net	of	accumulated depreciation	 and	 amortization	 of	 $8.28	 billion	 and	 $7.68	 billion	 as	 of December	 2017	 and	 December	 2016,	 respectively.	 Property,	 leasehold improvements	and	equipment	included	$5.97	billion	and	$5.96	billion	as of	December	2017	and	December	2016,	respectively,	related	to	property, leasehold	improvements	and	equipment	that	the	firm	uses	in	connection with	 its	 operations.	 The	 remainder	 is	 held	 by	 investment	 entities, including	VIEs,	consolidated	by	the	firm.	Substantially	all	property	and equipment	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	useful	life	of	the	improvement	or	the	term	of	the	lease,	whichever	is shorter.	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	during	2017	primarily	reflected the	estimated	impact	of	Tax	Legislation	on	income	tax-related	assets.	See Note	24	for	further	information	about	Tax	Legislation.

•	Miscellaneous	receivables	and	other	included	debt	securities	accounted for as	held-to-maturity	 of $800 million	 and $87 million	 as	 of December	 2017	 and	 December	 2016,	 respectively.	 As	 of	 both December	 2017	 and	 December	 2016,	 these	 securities	 were	 backed	 by residential	real	estate	and	had	maturities	of	greater	than	ten	years.	These securities	are	carried	at	amortized	cost	and	the	carrying	value	of	these securities	 approximated	 fair	 value	 as	 of	 both	 December	 2017	 and December	2016.	As	these	securities	are	not	accounted	for	at	fair	value under	the	fair	value	option	or	at	fair	value	in	accordance	with	other	U.S. GAAP,	their	fair	value	is	not	included	in	the	firm's	fair	value	hierarchy	in Notes	6	through	8.	Had	these	securities	been	included	in	the	firm's	fair value	hierarchy,	substantially	all	would	have	been	classified	in	level	2	as of	both	December	2017	and	December	2016.

•	Miscellaneous	receivables	and	other	included	investments	in	qualified affordable	 housing	 projects	 of	 $679	 million	 and	 $682	 million	 as	 of December	2017	and	December	2016,	respectively.

•	Miscellaneous receivables and other included equity-method investments	of	$275	million	and	$219	million	as	of	December	2017	and December	2016,	respectively.

•	Miscellaneous	receivables	and	other	included	assets	classified	as	held for	sale	of	$634	million	as	of	December	2017	related	to	certain	of	the firm's	 consolidated	 investments	 within	 its	 Investing	 &	 Lending segment,	substantially	all	of	which	consisted	of	property	and	equipment.

Goodwill.	The	table	below	presents	the	carrying	value	of	goodwill.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Investment\tBanking: |  |  |
| Financial\tAdvisory | \t\t$\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 | 2 | 2 |
| Investment\tManagement | 605 | 606 |
| Total | \t\t$3,665 | \t$3,666 |

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	fair	value	of	a	reporting	unit	is	less	than	its	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,	with	the	amount	of	impairment	equal	to the	 difference	 between	 those	 values.	 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	2017,	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	2017,	 the	firm's	net	revenues	and pre-tax	margin	increased	as	compared	with	2016.	Net	earnings,	diluted earnings	 per	 common	 share,	 return	 on	 average	 common	 shareholders' equity	and	book	value	per	common	share	for	2017	decreased	as	compared with	2016	due	to	Tax	Legislation.	However,	Tax	Legislation	will	result	in a	lower	effective	income	tax	rate	in	the	future.	See	Note	24	for	further information	about	Tax	Legislation.	In	addition,	although	certain	expenses increased,	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,	since	the	prior	quantitative	goodwill	tests	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	as	concerns about	the	outlook	for	global	economic	growth	moderated.

•	Fair	Value	Indicators.	Since	the	prior	quantitative	goodwill	tests,	fair value	indicators	improved	as	global	equity	prices	increased	and	credit spreads	 tightened.	 In	 addition,	 most	 publicly	 traded	 industry participants,	 including	 the	 firm,	 experienced	 increases	 in	 stock	 price, price-to-book	multiples	and	price-to-earnings	multiples.

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.

Identifiable	Intangible	Assets.	The	table	below	presents	the	carrying value	of	identifiable	intangible	assets.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Institutional\tClient\tServices: |  |  |
| FICC\tClient\tExecution | \t\t$\t\t\t\t\t\t37 | \t$\t\t\t\t\t\t65 |
| Equities\tclient\texecution | 88 | 141 |
| Investing\t&amp;\tLending | 140 | 105 |
| Investment\tManagement | 108 | 118 |
| Total | \t\t$\t\t\t\t373 | \t$\t\t\t\t429 |

The	 table	 below	 presents further	 details	 on the	 net	 carrying	 value	 of identifiable	intangible	assets.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Customer\tlists |  |  |
| Gross\tcarrying\tvalue | \t$\t1,091 | \t$\t1,065 |
| Accumulated\tamortization | (903) | (837) |
| Net\tcarrying\tvalue | 188 | 228 |
| Other |  |  |
| Gross\tcarrying\tvalue | 584 | 543 |
| Accumulated\tamortization | (399) | (342) |
| Net\tcarrying\tvalue | 185 | 201 |
| Total\tgross\tcarrying\tvalue | 1,675 | 1,608 |
| Total\taccumulated\tamortization | (1,302) | (1,179) |
| Total\tnet\tcarrying\tvalue | \t$\t\t\t\t373 | \t$\t\t\t\t429 |

•	The	net	carrying	value	of	other	intangibles	primarily	includes	intangible assets	related	to	acquired	leases	and	commodities	transportation	rights.

•	During	2017	and	2016,	the	firm	acquired	$113	million	and	$89	million, respectively,	of	intangible	assets,	primarily	related	to	acquired	leases, with	a	weighted	average	amortization	period	of	five	and	 three	years, respectively.

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	details	about	amortization	of	identifiable	intangible assets.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Amortization | \t\t$150 | \t$162 | \t$132 |

| $	in	millions | As	of<br>December	2017 |
| :--- | :--- |
| Estimated\tfuture\tamortization |  |
| 2018 | $133 |
| 2019 | $\t\t98 |
| 2020 | $\t\t39 |
| 2021 | $\t\t27 |
| 2022 | $\t\t20 |

# 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	2017,	2016	and	2015,	impairments	were	not	material	to	the	firm's results	of	operations	or	financial	condition.

The	table	below	presents	the	types	and	sources	of	the	firm's	deposits.

| $	in	millions | Savings	and<br>Demand | Time | Total |
| :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2017 |  |  |  |
| Private\tbank\tdeposits | $50,579 | \t$\t\t1,623 | \t$\t\t52,202 |
| Marcus\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 |
| As\tof\tDecember\t2016 |  |  |  |
| Private\tbank\tdeposits | $50,655 | \t$\t\t3,100 | \t$\t\t53,755 |
| Marcus\tdeposits | 10,511 | 1,337 | 11,848 |
| Brokered\tcertificates\tof\tdeposit | – | 34,905 | 34,905 |
| Deposit\tsweep\tprograms | 16,019 | – | 16,019 |
| Institutional\tdeposits | 12 | 7,559 | 7,571 |
| Total | $77,197 | \t$46,901 | \t$124,098 |

•	Substantially	all	deposits	are	interest-bearing. •	Savings	and	demand	deposits	have	no	stated	maturity.

•	Time deposits included $22.90 billion and $13.78 billion as of December	2017	and	December	2016,	respectively,	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	2	years and	2.5	years	as	of	December	2017	and	December	2016,	respectively.

•	Deposit sweep	 programs represent long-term	 contractual	 agreements with	several	U.S.	broker-dealers	who	sweep	client	cash	to	FDIC-insured deposits.

•	Deposits	insured	by	the	FDIC	as	of	December	2017	and	December	2016 were	approximately	$75.02	billion	and	$69.91	billion,	respectively.

The	table	below	presents	deposits	held	in	U.S.	and	non-U.S.	offices.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| U.S.\toffices | \t\t$111,002 | \t$106,037 |
| Non-U.S.\toffices | 27,602 | 18,061 |
| Total | \t\t$138,604 | \t$124,098 |

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.

|  |  | As	of	December	2017 |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | U.S. | \t Non-U.S. | Total |
| 2018 | \t\t$13,106 | \t$15,037 | \t$28,143 |
| 2019 | 7,297 | 3,179 | 10,476 |
| 2020 | 5,142 | 12 | 5,154 |
| 2021 | 3,574 | 43 | 3,617 |
| 2022 | 4,907 | 86 | 4,993 |
| 2023\t-\tthereafter | 5,289 | 546 | 5,835 |
| Total | \t\t$39,315 | \t$18,903 | \t$58,218 |

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	2017	and	December	2016.	While	these	savings	and	demand deposits	 and	 time	 deposits	 are	 carried	 at	 amounts	 that	 approximate	 fair value,	they	are	not	accounted	for	at	fair	value	under	the	fair	value	option	or at	fair	value	 in	accordance	with	other	U.S.	GAAP	and	 therefore	are	not included	in	the	firm's	fair	value	hierarchy	in	Notes	6	through	8.	Had	these deposits	been	included	in	the	firm's	fair	value	hierarchy,	they	would	have been	classified	in	level	2	as	of	both	December	2017	and	December	2016.

# Short-Term	Borrowings

The	table	below	presents	details	about	the	firm's	short-term	borrowings.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Other\tsecured\tfinancings\t(short-term) | \t\t$14,896 | \t$13,118 |
| Unsecured\tshort-term\tborrowings | 46,922 | 39,265 |
| Total | \t\t$61,818 | \t$52,383 |

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.	The carrying	value	of	unsecured	short-term	borrowings	that	are	not	recorded	at fair	value	generally	approximates	fair	value	due	to	the	short-term	nature	of the	obligations.	While	these	unsecured	short-term	borrowings	are	carried at	amounts	that	approximate	fair	value,	they	are	not	accounted	for	at	fair value	under	the	fair	value	option	or	at	fair	value	in	accordance	with	other U.S.	 GAAP	 and	 therefore	 are	 not	 included	 in	 the	 firm's	 fair	 value hierarchy	in	Notes	6	through	8.	Had	these	borrowings	been	included	in	the firm's	fair	value	hierarchy,	substantially	all	would	have	been	classified	in level	2	as	of	both	December	2017	and	December	2016.

The	 table	 below	 presents	 details	 about the firm's	 unsecured	 short-term borrowings.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Current\tportion\tof\tunsecured\tlong-term\tborrowings | \t\t$30,090 | \t$23,528 |
| Hybrid\tfinancial\tinstruments | 12,973 | 11,700 |
| Other\tunsecured\tshort-term\tborrowings | 3,859 | 4,037 |
| Total | \t\t$46,922 | \t$39,265 |
| Weighted\taverage\tinterest\trate | 2.28% | 1.68% |

•	The	 current	 portion	 of	 unsecured	 long-term	 borrowings	 included $26.28 billion	 and $21.53 billion	 as	 of	 December	 2017	 and December	2016,	respectively,	issued	by	Group	Inc.

•	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	details	about	the	firm's	long-term	borrowings.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Other\tsecured\tfinancings\t(long-term) | \t\t$\t\t\t\t9,892 | \t$\t\t\t\t8,405 |
| Unsecured\tlong-term\tborrowings | 217,687 | 189,086 |
| Total | \t\t$227,579 | \t$197,491 |

The	 table	 below	 presents	 unsecured	 long-term	 borrowings extending through	2057,	which	consists	principally	of	senior	borrowings.

|  | U.S. | Non-U.S. |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | Dollar | Dollar | Total |
| As\tof\tDecember\t2017 |  |  |  |
| Fixed-rate\tobligations: |  |  |  |
| Group\tInc. | \t\t$101,791 | \t$\t\t35,116 | \t$136,907 |
| Subsidiaries | 2,244 | 1,859 | 4,103 |
| Floating-rate\tobligations: |  |  |  |
| Group\tInc. | 29,637 | 23,938 | 53,575 |
| Subsidiaries | 14,977 | 8,125 | 23,102 |
| Total | \t\t$148,649 | \t$\t\t69,038 | \t$217,687 |
| As\tof\tDecember\t2016 |  |  |  |
| Fixed-rate\tobligations: |  |  |  |
| Group\tInc. | \t\t$\t\t93,885 | \t$\t\t31,274 | \t$125,159 |
| Subsidiaries | 2,228 | 885 | 3,113 |
| Floating-rate\tobligations: |  |  |  |
| Group\tInc. | 27,864 | 19,112 | 46,976 |
| Subsidiaries | 8,884 | 4,954 | 13,838 |
| Total | \t\t$132,861 | \t$\t\t56,225 | \t$189,086 |

•	Floating	interest	rates	are	generally	based	on	LIBOR	or	Overnight	Index Swap	 Rate.	 Equity-linked	 and	 indexed	 instruments	 are	 included	 in floating-rate	obligations.

The table	 below	 presents	 unsecured long-term	 borrowings	 by	 maturity date.

•	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	$5.61	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:	$167	million	in	2019,	$192	million	in	2020,	$387	million	in 2021,	$(82)	million	in	2022,	and	$4.95	billion	in	2023	and	thereafter.

The	firm	designates	certain	derivatives	as	fair	value	hedges	to	convert	a portion	of	its	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\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\nFloating-rate\tobligations: | 86,951 | 3,852 | 90,803 |
| 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$217,687 |
| As\tof\tDecember\t2016 |  |  |  |
| Fixed-rate\tobligations: |  |  |  |
| At\tfair\tvalue | \t\t$\t\t\t\t\t\t\t\t\t\t\t– | $\t\t\t\t\t150 | \t$\t\t\t\t\t\t\t150 |
| At\tamortized\tcost\nFloating-rate\tobligations: | 71,225 | 3,493 | 74,718 |
| At\tfair\tvalue | 17,591 | 11,669 | 29,260 |
| At\tamortized\tcost | 83,319 | 1,639 | 84,958 |
| Total | \t\t$172,135 | $16,951 | \t$189,086 |

In	 the	 table	 above,	 the	 weighted	 average	 interest	 rates	 on	 the	 aggregate amounts	were	2.86%	(3.67%	related	 to	fixed-rate	obligations	and	2.02% related	to	floating-rate	obligations)	and	2.87%	(3.90%	related	to	fixed-rate obligations	 and 1.97% related	 to	 floating-rate	 obligations)	 as	 of December	 2017	 and	 December	 2016,	 respectively.	 These	 rates	 exclude unsecured	long-term	borrowings	accounted	for	at	fair	value	under	the	fair value	option.

As	 of	 both	 December	 2017	 and	 December	 2016,	 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	under	the	fair	value	option	or	at	fair	value	in accordance	with	other	U.S.	GAAP,	their	fair	value	is	not	included	in	the firm's	fair	value	hierarchy	in	Notes	6	through	8.	Had	these	borrowings	been included	in	the	firm's	fair	value	hierarchy,	substantially	all	would	have	been classified	in	level	2	as	of	both	December	2017	and	December	2016.

# 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.	As	of December	 2017	 and	 December	 2016,	 subordinated	 debt	 had	 maturities ranging	from	2020	to	2045,	and	2018	to	2045,	respectively.	Subordinated debt	 that	 matures	 within	 one	 year	 is	 included	 in	 unsecured	 short-term borrowings.

The	table	below	presents	details	about	the	firm's	subordinated	borrowings.

| $	in	millions | Par<br>Amount | Carrying<br>Amount | Rate |
| :--- | :--- | :--- | :--- |
| 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% |
| As\tof\tDecember\t2016 |  |  |  |
| Subordinated\tdebt | \t\t$15,058 | \t$17,604 | \t4.29% |
| Junior\tsubordinated\tdebt | 1,360 | 1,809 | \t5.70% |
| Total | \t\t$16,418 | \t$19,413 | \t4.41% |

•	Par	amount	and	carrying	amount	of	subordinated	debt	issued	by	Group Inc.	 were $13.96 billion	 and $16.08 billion,	 respectively,	 as	 of December	2017,	and	$14.84	billion	and	$17.39	billion,	respectively,	as	of December	2016.

•	The	 rate	 is	 the	 weighted	 average	 interest	 rate	 for	 these	 borrowings, 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.	 The	 rates	 exclude	 subordinated borrowings	accounted	for	at	fair	value	under	the	fair	value	option.

During	2017,	the	firm	repurchased	or	redeemed	subordinated	debt	with	a par	 amount	 of $1.45 billion	 (carrying	 value	 of $1.80 billion)	 for $1.70	billion.	As	a	result,	such	debt	was	extinguished.

# Junior	Subordinated	Debt

Junior	 Subordinated	 Debt	 Held	 by	 Trusts. In	 2012,	 the	 Vesey Street	 Investment	 Trust	 I	 (Vesey	 Street	 Trust)	 and	 the	 Murray	 Street Investment	 Trust	 I	 (Murray	 Street	 Trust)	 issued	 an	 aggregate	 of $2.25	 billion	 of	 senior	 guaranteed	 trust	 securities	 to	 third	 parties,	 the proceeds	of	which	were	used	to	purchase	junior	subordinated	debt	issued by	 Group	 Inc.	 from	 Goldman	 Sachs	 Capital	 II	 and	 Goldman	 Sachs Capital	III	(APEX	Trusts).	The	APEX	Trusts	used	the	proceeds	to	purchase shares	of	Group	Inc.'s	Perpetual	Non-Cumulative	Preferred	Stock,	Series	E (Series	E	Preferred	Stock)	and	Perpetual	Non-Cumulative	Preferred	Stock, Series	F	(Series	F	Preferred	Stock).	The	senior	guaranteed	trust	securities issued	by	the	Vesey	Street	Trust	and	the	related	junior	subordinated	debt matured	 during	 the	 third	 quarter	 of	 2016.	 As	 of	 December	 2016, $1.45	billion	of	senior	guaranteed	trust	securities	issued	by	 the	Murray Street	Trust	 and	 the	 related	 junior	 subordinated	 debt	 were	 outstanding. These	securities	and	the	related	junior	subordinated	debt	matured	during the	first	quarter	of	2017.

The	APEX	Trusts	are	Delaware	statutory	trusts	sponsored	by	the	firm	and wholly-owned	 finance	 subsidiaries	 of	 the	 firm	 for	 regulatory	 and	 legal purposes	but	are	not	consolidated	for	accounting	purposes.

The	firm	has	covenanted	in	favor	of	the	holders	of	Group	Inc.'s	6.345% junior	subordinated	debt	due	February	15,	2034,	that,	subject	to	certain exceptions,	 the	 firm	 will	 not	 redeem	 or	 purchase	 the	 capital	 securities issued	by	the	APEX	Trusts,	shares	of	Group	Inc.'s	Series	E	or	Series	F Preferred	 Stock	 or	 shares	 of	 Group	 Inc.'s	 Series	 O	 Perpetual Non-Cumulative	Preferred	Stock	if	the	redemption	or	purchase	results	in less	than	$253	million	aggregate	liquidation	preference	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.	During	2016,	the	firm	exchanged	a par	amount	of	$1.32	billion	of	APEX	issued	by	the	APEX	Trusts	for	a corresponding	redemption	value	of	 the	Series	E	and	Series	F	Preferred Stock,	which	was	permitted	under	the	covenants	referenced	above.

Junior Subordinated	 Debt Issued in	 Connection	 with Trust Preferred Securities. Group	 Inc.	 issued $2.84 billion	 of	 junior subordinated	debt	in	2004	to	Goldman	Sachs	Capital	I	(Trust),	a	Delaware statutory	 trust.	 The	 Trust	 issued $2.75 billion	 of	 guaranteed	 preferred beneficial	 interests	 (Trust	 Preferred	 Securities)	 to	 third	 parties	 and $85	 million	 of	 common	 beneficial	 interests	 to	 Group	 Inc.	 and	 used	 the proceeds	from	the	issuances	to	purchase	the	junior	subordinated	debt	from Group	Inc.	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.	During 2017,	 the	 firm	 purchased	 $186	 million	 (par	 amount)	 of	 Trust	 Preferred Securities	and	delivered	these	securities,	along	with	$5.7	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	2016,	the	outstanding	par	amount of	 junior	 subordinated	 debt	 held	 by	 the	Trust	 was	 $1.36	 billion	 and	 the outstanding	par	amount	of	Trust	Preferred	Securities	and	common	beneficial interests	 issued	 by	 the	 Trust	 was $1.32 billion	 and	 $40.8	 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.

# Other	Liabilities	and	Accrued	Expenses

The	table	below	presents	other	liabilities	and	accrued	expenses	by	type.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Compensation\tand\tbenefits | \t\t$\t\t6,710 | \t$\t\t7,181 |
| Noncontrolling\tinterests | 553 | 506 |
| Income\ttax-related\tliabilities | 4,051 | 1,794 |
| Employee\tinterests\tin\tconsolidated\tfunds | 156 | 77 |
| Subordinated\tliabilities\tof\tconsolidated\tVIEs | 19 | 584 |
| Accrued\texpenses\tand\tother | 5,433 | 4,220 |
| Total | \t\t$16,922 | \t$14,362 |

In the table	 above, the increase in income	tax-related liabilities	 during 2017 reflected the estimated impact of Tax Legislation on income tax-related liabilities.	 See	 Note	 24 for further information about	 Tax Legislation.

# Commitments,	Contingencies	and	Guarantees

# Commitments

The	table	below	presents	the	firm's	commitments	by	type.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Commercial\tlending: |  |  |
| Investment-grade | \t\t$\t\t93,115 | \t$\t\t73,664 |
| Non-investment-grade | 45,291 | 34,878 |
| Warehouse\tfinancing | 5,340 | 3,514 |
| Total\tcommitments\tto\textend\tcredit | 143,746 | 112,056 |
| Contingent\tand\tforward\tstarting\tcollateralized |  |  |
| agreements | 41,756 | 25,348 |
| Forward\tstarting\tcollateralized\tfinancings | 16,902 | 8,939 |
| Letters\tof\tcredit | 437 | 373 |
| Investment\tcommitments | 6,840 | 8,444 |
| Other | 6,310 | 6,014 |
| Total\tcommitments | \t\t$215,991 | \t$161,174 |

The	table	below	presents	the	firm's	commitments	by	period	of	expiration.

|  |  | As	of	December	2017 | As	of	December	2017 |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2018 | 2019\t-\n2020 | 2021\t-\n2022 | 2023\t-\nThereafter |
| Commercial\tlending: |  |  |  |  |
| Investment-grade | \t\t$14,593\t\t\t$38,836\t\t\t$38,431 | \t\t$14,593\t\t\t$38,836\t\t\t$38,431 | \t\t$14,593\t\t\t$38,836\t\t\t$38,431 | $\t\t1,255 |
| Non-investment-grade | 2,614 | 12,297 | 21,833 | 8,547 |
| Warehouse\tfinancing | 1,688 | 1,730 | 1,241 | 681 |
| Total\tcommitments\tto\textend\tcredit | 18,895 | 52,863 | 61,505 | 10,483 |
| Contingent\tand\tforward\tstarting |  |  |  |  |
| collateralized\tagreements | 41,756 | – | – | – |
| Forward\tstarting\tcollateralized\tfinancings | 16,902 | – | – | – |
| Letters\tof\tcredit | 288 | 109 | – | 40 |
| Investment\tcommitments | 2,836 | 676 | 493 | 2,835 |
| Other | 6,089 | 171 | 50 | – |
| Total\tcommitments | \t\t$86,766\t\t\t$53,819\t\t\t$62,048 | \t\t$86,766\t\t\t$53,819\t\t\t$62,048 | \t\t$86,766\t\t\t$53,819\t\t\t$62,048 | $13,358 |

# Commitments	to	Extend	Credit

The	firm's	commitments	to	extend	credit	are	agreements	to	lend	with	fixed termination	dates	and	depend	on	the	satisfaction	of	all	contractual	conditions to	borrowing.	These	commitments	are	presented	net	of	amounts	syndicated to	third	parties.	The	total	commitment	amount	does	not	necessarily	reflect actual	future	cash	flows	because	the	firm	may	syndicate	all	or	substantial additional	 portions	 of	 these	 commitments.	 In	 addition,	 commitments	 can expire	unused	or	be	reduced	or	cancelled	at	the	counterparty's	request.

As	 of	 December	 2017	 and	 December	 2016, $124.50 billion	 and $98.05	billion,	respectively,	of	the	firm's	lending	commitments	were	held for	investment	and	were	accounted	for	on	an	accrual	basis.	See	Note	9	for further	 information	 about	 such	 commitments.	 In	 addition,	 as	 of December	 2017	 and	 December	 2016, $9.84 billion	 and $6.87 billion, respectively,	of	the	firm's	lending	commitments	were	held	for	sale	and	were accounted	for	at	the	lower	of	cost	or	fair	value.	The	firm	accounts	for	the remaining	commitments	to	extend	credit	at	fair	value.	Losses,	if	any,	are generally	recorded,	net	of	any	fees	in	other	principal	transactions.

Commercial	Lending.	The	firm's	commercial	lending	commitments	are extended to investment-grade and	non-investment-grade	 corporate borrowers.	 Commitments	 to	 investment-grade	 corporate	 borrowers	 are principally	used	for	operating	liquidity	and	general	corporate	purposes.	The firm	 also	 extends	 lending	 commitments	 in	 connection	 with	 contingent acquisition	 financing	 and	 other	 types	 of	 corporate	 lending,	 as	 well	 as commercial	 real	 estate	 financing.	 Commitments	 that	 are	 extended	 for contingent	 acquisition	 financing	 are	 often	 intended	 to	 be	 short-term	 in nature,	as	borrowers	often	seek	to	replace	them	with	other	funding	sources.

Sumitomo	Mitsui	Financial	Group,	Inc.	(SMFG)	provides	the	firm	with credit	 loss	protection	on	certain	approved	 loan	commitments	(primarily investment-grade	commercial	lending	commitments).	The	notional	amount of	such	 loan	commitments	was	$25.70	billion	and	$26.88	billion	as	of December	 2017	 and	 December	 2016,	 respectively.	 The	 credit	 loss protection	on	loan	commitments	provided	by	SMFG	is	generally	limited	to 95%	 of the	 first	 loss	 the	 firm	 realizes	 on	 such	 commitments,	 up	 to	 a maximum	 of	 approximately	 $950	 million.	 In	 addition,	 subject	 to	 the satisfaction	 of	 certain	 conditions,	 upon	 the	 firm's	 request,	 SMFG	 will provide	protection	for	70%	of	additional	losses	on	such	commitments,	up to	a	maximum	of	$1.13	billion,	of	which	$550	million	and	$768	million	of protection	had	been	provided	as	of	December	2017	and	December	2016, respectively.	The	 firm	 also	 uses	 other	 financial	 instruments	 to	 mitigate credit	risks	related	to	certain	commitments	not	covered	by	SMFG.	These instruments	primarily	include	credit	default	swaps	that	reference	the	same or	 similar	 underlying	 instrument	 or	 entity,	 or	 credit	 default	 swaps	 that reference	a	market	index.

Warehouse	 Financing.	 The firm	 provides	 financing	 to	 clients	 who warehouse	 financial	 assets.	 These	 arrangements	 are	 secured	 by	 the warehoused	assets,	primarily	consisting	of	retail	and	corporate	loans.

# Contingent	 and	 Forward	 Starting	 Collateralized	 Agreements Forward	Starting	Collateralized	Financings

Contingent	and	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 $2.09 billion	 and $2.10	billion	as	of	December	2017	and	December	2016,	respectively,	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.

| $	in	millions | As	of<br>December	2017 |
| :--- | :--- |
| 2018 | $\t\t\t299 |
| 2019 | 282 |
| 2020 | 262 |
| 2021 | 205 |
| 2022 | 145 |
| 2023\t-\tthereafter | 771 |
| Total | $1,964 |

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	2017	and 2015,	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.	There	are	multiple	areas of	 focus	 by	 regulators,	 governmental	 agencies	 and	 others	 within	 the mortgage	 market	 that	 may	 impact	 originators,	 issuers,	 servicers	 and investors.	There	remains	significant	uncertainty	surrounding	the	nature	and extent	of	any	potential	exposure	for	participants	in	this	market.

The	 firm	 has	 not	 been	 a	 significant	 originator	 of	 residential	 mortgage loans.	 The	 firm	 did	 purchase	 loans	 originated	 by	 others	 and	 generally received	loan-level	representations.	During	the	period	2005	through	2008, the	firm	sold	approximately	$10	billion	of	loans	to	government-sponsored enterprises	and	approximately	$11	billion	of	loans	to	other	third	parties.	In addition,	 the	 firm	 transferred	 $125	 billion	 of	 loans	 to	 trusts	 and	 other mortgage	securitization	vehicles.	In	connection	with	both	sales	of	loans and	 securitizations,	 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	 (RMBS	 Working	 Group),	 the	 firm	 agreed	 to	 provide $1.80	 billion in	 consumer	 relief	 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	information	about	certain	derivatives	that	meet	the definition	 of	 a	 guarantee,	 securities	 lending	 indemnifications	 and	 certain other	financial	guarantees.

|  |  | Securities | Other |
| :--- | :--- | :--- | :--- |
|  |  | lending | financial |
| $\tin\tmillions | Derivatives | indemnifications | guarantees |
| As\tof\tDecember\t2017 |  |  |  |
| Carrying\tValue\tof\tNet\tLiability | \t\t$\t\t\t\t\t\t\t5,406 | $\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$1,139,751 | $37,959 | $\t\t\t723 |
| 2019\t-\t2020 | 205,983 | – | 1,515 |
| 2021\t-\t2022 | 71,599 | – | 1,209 |
| 2023\t-\tthereafter | 76,540 | – | 137 |
| Total | \t\t$1,493,873 | $37,959 | $3,584 |
| As\tof\tDecember\t2016 |  |  |  |
| Carrying\tValue\tof\tNet\tLiability | \t\t$\t\t\t\t\t\t\t8,873 | $\t\t\t\t\t\t\t\t\t– | $\t\t\t\t\t50 |
| Maximum\tPayout/Notional\tAmount\tby\tPeriod\tof\tExpiration |  |  |  |
| 2017 | \t\t$\t\t\t432,328 | $33,403 | $1,064 |
| 2018\t-\t2019 | 261,676 | – | 763 |
| 2020\t-\t2021 | 71,264 | – | 1,662 |
| 2022\t-\tthereafter | 51,506 | – | 173 |
| Total | \t\t$\t\t\t816,774 | $33,403 | $3,662 |

•	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	 commitments	 to	 extend	 credit.	 See	 the	 tables	 in "Commitments"	above	for	a	summary	of	the	firm's	commitments.

•	The	 carrying	 value	 for	 derivatives	 included	 derivative	 assets	 of $2.20	billion	and	$1.20	billion	and	derivative	liabilities	of	$7.61	billion and $10.07 billion	 as	 of	 December	 2017	 and	 December	 2016, respectively.

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	its	derivative	activities.	Disclosures	about	derivatives are	not	required	if	they	may	be	cash	settled	and	the	firm	has	no	basis	to conclude	 it	 is	 probable	 that	 the	 counterparties	 held	 the	 underlying instruments	at	inception	of	the	contract.	The	firm	has	concluded	that	these conditions	 have	 been	 met	 for	 certain	 large,	 internationally	 active commercial	 and	 investment	 bank	 counterparties,	 central	 clearing counterparties	and	certain	other	counterparties.	Accordingly,	the	firm	has not	included	such	contracts	in	the	table	above.	In	addition,	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	 $39.03	 billion	 and	 $34.33	 billion	 as	 of December	2017	and	December	2016,	respectively.	Because	the	contractual nature	of	these	arrangements	requires	the	firm	to	obtain	collateral	with	a market	value	that	exceeds	the	value	of	the	securities	lent	to	the	borrower, there	is	minimal	performance	risk	associated	with	these	guarantees.

Other	Financial	Guarantees.	In	the	ordinary	course	of	business,	the firm	provides	other	financial	guarantees	of	the	obligations	of	third	parties (e.g.,	standby	 letters	of	credit	and	other	guarantees	 to	enable	clients	 to complete	 transactions	 and	 fund-related	 guarantees).	 These	 guarantees represent	obligations	to	make	payments	to	beneficiaries	if	the	guaranteed party	fails	to	fulfill	its	obligation	under	a	contractual	arrangement	with	that beneficiary.

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	2017	and	December	2016.

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	2017	and	December	2016.

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.

In	addition,	Group	Inc.	guarantees	many	of	 the	obligations	of	 its	other consolidated subsidiaries on a	transaction-by-transaction	 basis,	 as negotiated	with	counterparties.	Group	Inc.	is	unable	to	develop	an	estimate of	the	maximum	payout	under	its	subsidiary	guarantees;	however,	because these	 guaranteed	 obligations	 are	 also	 obligations	 of	 consolidated subsidiaries,	 Group	 Inc.'s	 liabilities	 as	 guarantor	 are	 not	 separately disclosed.

# Shareholders'	Equity

# Common	Equity

As	of	both	December	2017	and	December	2016,	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,	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	by	the firm	under	the	share	repurchase	program.

Pursuant	to	the	terms	of	certain	share-based	compensation	plans,	employees may	remit	shares	to	the	firm	or	the	firm	may	cancel	RSUs	or	stock	options to	satisfy	minimum	statutory	employee	tax	withholding	requirements	and the	exercise	price	of	stock	options.	Under	these	plans,	during	2017,	2016 and	2015,	12,165	shares,	49,374	shares	and	35,217	shares	were	remitted with	a	total	value	of	$3	million,	$7	million	and	$6	million,	and	the	firm cancelled	8.1	million,	6.1	million	and	5.7	million	of	RSUs	with	a	total	value of	$1.94	billion,	$921	million	and	$1.03	billion,	respectively.	Under	these plans,	the	firm	also	cancelled	4.6	million,	5.5	million	and	2.0	million	of stock	 options	 with	 a	 total	 value	 of $1.09 billion, $1.11 billion	 and $406	million	during	2017,	2016	and	2015,	respectively.

# Preferred	Equity

The	tables	below	present	details	about	the	perpetual	preferred	stock	issued and	outstanding	as	of	December	2017.

| 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 | 32,000 | 32,000 | 1,000 |
| C | 25,000 | 8,000 | 8,000 | 1,000 |
| D | 60,000 | 54,000 | 53,999 | 1,000 |
| E | 17,500 | 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 | \t 446,282 | 446,280 |  |

|  |  | Liquidation | Value |
| :--- | :--- | :--- | :--- |
| Series | \t\tEarliest\tRedemption\tDate | Preference | ($\tin\tmillions) |
| A | Currently\tredeemable | $\t\t25,000 | $\t\t\t\t\t750 |
| B | Currently\tredeemable | $\t\t25,000 | 800 |
| C | Currently\tredeemable | $\t\t25,000 | 200 |
| D | Currently\tredeemable | $\t\t25,000 | 1,350 |
| E | Currently\tredeemable | $100,000 | 767 |
| F | Currently\tredeemable | $100,000 | 161 |
| J | May\t10,\t2023 | $\t\t25,000 | 1,000 |
| K | May\t10,\t2024 | $\t\t25,000 | 700 |
| L | May\t10,\t2019 | $\t\t25,000 | 1,300 |
| M | May\t10,\t2020 | $\t\t25,000 | 2,000 |
| N | May\t10,\t2021 | $\t\t25,000 | 675 |
| O | November\t10,\t2026 | $\t\t25,000 | 650 |
| P | November\t10,\t2022 | $\t\t25,000 | 1,500 |
| Total |  |  | $11,853 |

•	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	capital	action.

•	In	 November	 2017,	 Group	 Inc.	 issued 60,000 shares	 of	 Series	 P perpetual 5.00%	Fixed-to-Floating Rate	Non-Cumulative	 Preferred Stock	(Series	P	Preferred	Stock).

•	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.

During	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.	This	difference	was	recorded	as	a	reduction	to	preferred stock	dividends	in	2016.	See	Note	16	for	further	information	about	APEX.

In	November	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.	This	difference	was	recorded	as	an	addition	to	preferred stock	dividends	in	2017.

In	 February	 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.	This	difference will	 be	 recorded	 as	 an	 addition	 to	 preferred	 stock	 dividends	 in	 the	 first quarter	of	2018.

The	 table	 below	 presents	 the	 dividend rates of the firm's perpetual preferred	stock	as	of	December	2017.

5.375%,	payable	semi-annually,	from	issuance	date	to,	but	excluding,

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	dividends	declared	on	the	firm's	preferred	stock.

|  |  |  | Year	Ended	December | Year	Ended	December |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2017 |  | 2016 |  | 2015 |  |
|  | per | $\tin | per | $\tin | per | $\tin |
| Series | share | millions | share | millions | share | millions |
| A | $\t\t\t950.51 | $\t\t29 | $\t\t\t953.12 | $\t\t29 | $\t\t\t950.52 | $\t\t28 |
| B | $1,550.00 | 50 | $1,550.00 | 50 | $1,550.00 | 50 |
| C | $1,013.90 | 8 | $1,016.68 | 8 | $1,013.90 | 8 |
| D | $1,013.90 | 55 | $1,016.68 | 55 | $1,013.90 | 54 |
| E | $4,055.55 | 31 | $4,066.66 | 50 | $4,055.55 | 71 |
| F | $4,055.55 | 6 | $4,066.66 | 13 | $4,055.55 | 20 |
| I | $1,487.52 | 51 | $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 | $\t\t\t735.33 | 59 |
| N | $1,575.00 | 42 | $1,124.38 | 30 | $\t\t\t\t\t\t\t\t\t\t\t\t– | – |
| O | $1,325.00 | 34 | $\t\t\t379.10 | 10 | $\t\t\t\t\t\t\t\t\t\t\t\t– | – |
| Total |  | $587 |  | $577 |  | $515 |

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	Loss

The	table	below	presents	changes	in	the	accumulated	other	comprehensive loss,	net	of	tax,	by	type.

In	 the	 table	 above,	 the	 beginning	 balance	 of	 accumulated	 other comprehensive	 loss	 for	 December	 2016	 has	 been	 adjusted	 to	 reflect	 the cumulative	 effect	 of	 the	 change	 in	 accounting	 principle	 related	 to	 debt valuation	adjustment,	net	of	tax.	See	Note	3	for	further	information	about the	adoption	of	ASU	No.	2016-01.	See	Note	8	for	further	information	about the	debt	valuation	adjustment.

# 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	 risk-based	 capital	 and	 leverage regulations	of	the	FRB,	subject	to	certain	transitional	provisions	(Capital Framework).

The	 risk-based	 capital	 requirements	 are	 expressed	 as	 capital	 ratios	 that compare	measures	of	regulatory	capital	to	risk-weighted	assets	(RWAs). Failure	 to	 comply	 with	 these	 capital	 requirements	 could	 result	 in restrictions	 being	 imposed	 by	 the	 firm's	 regulators.	 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	as	described	below.

# 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	firm	calculates	its	Common	Equity	Tier	1	(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	capital	ratio	calculated	in	(i)	and	(ii) is	the	ratio	against	which	the	firm's	compliance	with	its	minimum	ratio requirements	 is	 assessed.	 Each	 of	 the	 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	2017	and	December	2016.	The	capital	ratios	that	apply	to the	 firm	 can	 change	 in	 future	 reporting	 periods	 as	 a	 result	 of	 these regulatory	requirements.

# Regulatory	Capital	and	Capital	Ratios.	The	table	below	presents	the

minimum	ratios	required	for	the	firm.

|  | As	of	December |  |
| :--- | :--- | :--- |
|  | 2017 | 2016 |
| CET1\tratio | 7.000% | \t5.875% |
| Tier\t1\tcapital\tratio | 8.500% | \t7.375% |
| Total\tcapital\tratio | \t\t10.500% | \t9.375% |
| Tier\t1\tleverage\tratio | 4.000% | \t4.000% |

•	The	 minimum	 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%	(based	on	2015	financial	data),	and	(iii)	the countercyclical	capital	buffer	of	zero	percent,	each	described	below.

•	The	 minimum	 capital	 ratios	 as	 of	 December	 2016	 reflect	 (i)	 the	 25% phase-in	of	the	capital	conservation	buffer	of	2.5%,	(ii)	the	25%	phase-in of	 the	G-SIB	buffer	of	3%	(based	on	2014	financial	data),	and	(iii)	the countercyclical	capital	buffer	of	zero	percent,	each	described	below.

Certain	aspects	of	the	Capital	Framework's	requirements	phase	in	over	time (transitional	 provisions).	 These	 include	 capital	 buffers	 and	 certain deductions	from	regulatory	capital	(such	as	investments	in	nonconsolidated financial	institutions).	These	deductions	from	regulatory	capital	are	required to	be	phased	in	ratably	per	year	from	2014	to	2018,	with	residual	amounts not	 deducted	 during	 the	 transitional	 period	 subject	 to	 risk	 weighting.	 In addition,	junior	subordinated	debt	issued	to	trusts	is	being	phased	out	of regulatory	capital.	The	minimum	CET1,	Tier	1	and	Total	capital	ratios	that apply	to	the	firm	will	increase	as	the	capital	buffers	are	phased	in.

The	 capital	 conservation	 buffer,	 which	 consists	 entirely	 of	 capital	 that qualifies	as	CET1,	began	to	phase	in	on	January	1,	2016	and	will	continue	to do	so	in	increments	of	0.625%	per	year	until	it	reaches	2.5%	of	RWAs	on January	1,	2019.

The	G-SIB	buffer,	which	is	an	extension	of	the	capital	conservation	buffer, phases	in	ratably,	beginning	on	January	1,	2016,	becoming	fully	effective on	January	1,	2019,	and	must	consist	entirely	of	capital	that	qualifies	as CET1.	The	buffer	must	be	calculated	using	two	methodologies,	the	higher of	which	is	reflected	in	the	firm's	minimum	risk-based	capital	ratios.	The first	calculation	is	based	upon	the	Basel	Committee's	methodology	which, among	 other	 factors,	 relies	 upon	 measures	 of	 the	 size,	 activity	 and complexity	of	each	G-SIB.	The	second	calculation	uses	similar	inputs,	but it	 includes	a	measure	of	reliance	on	short-term	wholesale	funding.	The firm's	G-SIB	buffer	will	be	updated	annually	based	on	financial	data	from the	prior	year,	and	will	be	generally	applicable	for	the	following	year.

The	Capital	Framework	also	provides	for	a	countercyclical	capital	buffer, which	is	an	extension	of	the	capital	conservation	buffer,	of	up	to	2.5% (consisting	 entirely	 of	 CET1)	 intended	 to	 counteract	 systemic vulnerabilities.	As	of	December	2017,	the	FRB	has	set	the	countercyclical capital	buffer	at	zero	percent.

Failure	to	meet	the	capital	levels	inclusive	of	the	buffers	could	limit	the firm's	 ability	 to	 distribute	 capital,	 including	 share	 repurchases	 and dividend	 payments,	 and	 to	 make	 certain	 discretionary	 compensation payments.

Definition of	 Risk-Weighted	 Assets. RWAs	 are	 calculated	 in accordance	 with	 both	 the	 Standardized	 Capital	 Rules	 and	 the	 Basel	 III Advanced	 Rules.	 The	 following	 is	 a	 comparison	 of	 RWA	 calculations under	these	rules:

•	RWAs	for	credit	risk	in	accordance	with	the	Standardized	Capital	Rules are	calculated	in	a	different	manner	than	the	Basel	III	Advanced	Rules. The	primary	difference	 is	 that	 the	Standardized	Capital	Rules	do	not contemplate	the	use	of	internal	models	to	compute	exposure	for	credit risk	 on	 derivatives	 and	 securities	 financing	 transactions,	 whereas	 the Basel	 III	Advanced	 Rules	 permit	 the	 use	 of	 such	 models,	 subject	 to supervisory	approval.	In	addition,	credit	RWAs	calculated	in	accordance with	 the	 Standardized	 Capital	 Rules	 utilize	 prescribed	 risk-weights which	depend	largely	on	the	type	of	counterparty,	rather	than	on	internal assessments	of	the	creditworthiness	of	such	counterparties;

•	RWAs	for	market	risk	in	accordance	with	the	Standardized	Capital	Rules and	the	Basel	III	Advanced	Rules	are	generally	consistent;	and

•	RWAs	for	operational	risk	are	not	required	by	the	Standardized	Capital Rules,	 whereas	 the	 Basel	 III	 Advanced	 Rules	 do	 include	 such	 a requirement.

# Credit	Risk

Credit	RWAs	are	calculated	based	upon	measures	of	exposure,	which	are then	risk	weighted.	The	following	is	a	description	of	the	calculation	of	credit RWAs	in	accordance	with	the	Standardized	Capital	Rules	and	the	Basel	III Advanced	Rules:

•	For	credit	RWAs	calculated	in	accordance	with	the	Standardized	Capital Rules,	the	firm	utilizes	prescribed	risk-weights	which	depend	largely	on the	type	of	counterparty	(e.g.,	whether	the	counterparty	is	a	sovereign, bank,	broker-dealer	or	other	entity).	The	exposure	measure	for	derivatives is	 based	 on	 a	 combination	 of	 positive	 net	 current	 exposure	 and	 a percentage	 of	 the	 notional	 amount	 of	 each	 derivative.	 The	 exposure measure	 for	 securities	 financing	 transactions	 is	 calculated	 to	 reflect adjustments	for	potential	price	volatility,	the	size	of	which	depends	on factors	such	as	the	type	and	maturity	of	the	security,	and	whether	it	is denominated	 in	 the	 same	 currency	 as	 the	 other	 side	 of	 the	 financing transaction.	The	firm	utilizes	specific	required	formulaic	approaches	to measure	exposure	for	securitizations	and	equities;	and

•	For	credit	RWAs	calculated	in	accordance	with	the	Basel	III	Advanced Rules,	the	firm	has	been	given	permission	by	its	regulators	to	compute risk-weights	for	wholesale	and	retail	credit	exposures	in	accordance	with the	Advanced	Internal	Ratings-Based	approach.	This	approach	is	based	on internal	assessments	of	the	creditworthiness	of	counterparties,	with	key inputs	being	the	probability	of	default,	loss	given	default	and	the	effective maturity.	 The	 firm	 utilizes	 internal	 models	 to	 measure	 exposure	 for derivatives	and	securities	financing	transactions.	The	Capital	Framework requires	that	a	BHC	obtain	prior	written	agreement	from	 its	regulators before	using	internal	models	for	such	purposes.	The	firm	utilizes	specific required	formulaic	approaches	to	measure	exposure	for	securitizations	and equities.

# Market	Risk

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.	The	market	risk	regulatory	capital rules	require	that	a	BHC	obtain	prior	written	agreement	from	its	regulators before	 using	 any	 internal	 model	 to	 calculate	 its	 risk-based	 capital requirement.	The	following	is	further	information	regarding	the	measures of exposure	 for	 market	 RWAs	 calculated	 in	 accordance	 with	 the Standardized	Capital	Rules	and	Basel	III	Advanced	Rules:

•	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	 did	 not	 exceed	 its	 99%	one-day regulatory	VaR	during	2017	and	exceeded	its	99%	one-day	regulatory VaR	on	two	occasions	during	2016.	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	has	been	given	permission	by	its	regulators	to calculate	 operational	 RWAs	 in	 accordance	 with	 the	 "Advanced Measurement	 Approach,"	 and	 therefore	 utilizes	 an	 internal	 risk-based model	to	quantify	Operational	RWAs.

# Consolidated	Regulatory	Capital	Ratios

Capital	 Ratios	 and	 RWAs.	 Each	 of the	 capital	 ratios	 calculated	 in accordance	 with	 the	 Basel	 III	 Advanced	 Rules	 was	 lower	 than	 that calculated	 in	 accordance	 with	 the	 Standardized	 Capital	 Rules	 as	 of	 both December	 2017	 and	 December	 2016,	 and	 therefore	 such	 lower	 ratios applied	to	the	firm	as	of	these	dates.

The	table	below	presents	the	ratios	calculated	in	accordance	with	both	the Standardized	Capital	Rules	and	Basel	III	Advanced	Rules.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Common\tshareholders'\tequity | \t\t$\t\t70,390 | \t\t$\t\t75,690 |
| Deduction\tfor\tgoodwill\tand\tidentifiable\tintangible\tassets, |  |  |
| net\tof\tdeferred\ttax\tliabilities | (3,269) | (2,874) |
| Deduction\tfor\tinvestments\tin\tnonconsolidated\tfinancial |  |  |
| institutions | – | (424) |
| Other\tadjustments | (11) | (346) |
| Common\tEquity\tTier\t1 | 67,110 | 72,046 |
| Preferred\tstock | 11,853 | 11,203 |
| Deduction\tfor\tinvestments\tin\tcovered\tfunds | (590) | (445) |
| Other\tadjustments | (42) | (364) |
| Tier\t1\tcapital | \t\t$\t\t78,331 | \t\t$\t\t82,440 |
| Standardized\tTier\t2\tand\tTotal\tcapital |  |  |
| Tier\t1\tcapital | \t\t$\t\t78,331 | \t\t$\t\t82,440 |
| Qualifying\tsubordinated\tdebt | 13,360 | 14,566 |
| Junior\tsubordinated\tdebt\tissued\tto\ttrusts | 567 | 792 |
| Allowance\tfor\tlosses\ton\tloans\tand\tlending\tcommitments | 1,078 | 722 |
| Other\tadjustments | (28) | (6) |
| Standardized\tTier\t2\tcapital | 14,977 | 16,074 |
| Standardized\tTotal\tcapital | \t\t$\t\t93,308 | \t\t$\t\t98,514 |
| Basel\tIII\tAdvanced\tTier\t2\tand\tTotal\tcapital |  |  |
| Tier\t1\tcapital | \t\t$\t\t78,331 | \t\t$\t\t82,440 |
| Standardized\tTier\t2\tcapital | 14,977 | 16,074 |
| Allowance\tfor\tlosses\ton\tloans\tand\tlending\tcommitments | (1,078) | (722) |
| Basel\tIII\tAdvanced\tTier\t2\tcapital | 13,899 | 15,352 |
| Basel\tIII\tAdvanced\tTotal\tcapital | \t\t$\t\t92,230 | \t\t$\t\t97,792 |
| RWAs |  |  |
| Standardized | \t\t$555,611 | \t\t$496,676 |
| Basel\tIII\tAdvanced | \t\t$617,646 | \t\t$549,650 |
| CET1\tratio |  |  |
| Standardized | 12.1% | 14.5% |
| Basel\tIII\tAdvanced | 10.9% | 13.1% |
| Tier\t1\tcapital\tratio |  |  |
| Standardized | 14.1% | 16.6% |
| Basel\tIII\tAdvanced | 12.7% | 15.0% |
| Total\tcapital\tratio |  |  |
| Standardized | 16.8% | 19.8% |
| Basel\tIII\tAdvanced | 14.9% | 17.8% |
| Tier\t1\tleverage\tratio | 8.4% | 9.4% |

Effective	January	2018,	the	firm	was	subject	to	the	fully	phased-in	CET1 ratios.	As	of	December	2017,	the	firm's	CET1	ratios,	on	a	fully	phased-in basis,	calculated	in	accordance	with	the	Standardized	Capital	Rules	and Basel	 III	 Advanced	 Rules	 were	 lower	 by 0.2 percentage	 points,	 as compared	to	the	transitional	CET1	ratios.

•	Deduction	for	goodwill	and	identifiable	intangible	assets,	net	of	deferred tax	 liabilities,	 included	 goodwill	 of $3.67 billion	 as	 of	 both December	2017	and	December	2016,	and	identifiable	intangible	assets	of $298	 million (80% of $373	 million) and $257	 million (60% of $429	million)	as	of	December	2017	and	December	2016,	respectively,	net of	associated	deferred	tax	liabilities	of	$694	million	and	$1.05	billion	as of	December	2017	and	December	2016,	respectively.	Goodwill	is	fully deducted	 from	 CET1,	 while	 the	 deduction	 for	 identifiable	 intangible assets	is	required	to	be	phased	into	CET1	ratably	over	five	years	from 2014	 to	2018.	The	balance	 that	 is	not	deducted	during	 the	 transitional period	is	risk	weighted.

•	Deduction	 for	 investments	 in	 nonconsolidated	 financial	 institutions represents	the	amount	by	which	the	firm's	investments	in	the	capital	of nonconsolidated financial institutions exceed certain prescribed thresholds.	The	deduction	for	such	investments	is	required	to	be	phased into	 CET1	 ratably	 over	 five	 years	 from	 2014	 to	 2018.	 As	 of December	2017	and	December	2016,	CET1	reflects	80%	and	60%	of	the deduction,	 respectively.	 The	 balance	 that	 is	 not	 deducted	 during	 the transitional	period	is	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.	This	deduction	was not	subject	to	a	transition	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	is	generally	required to	be	phased	into	CET1	ratably	over	five	years	from	2014	to	2018.	As	of December	2017	and	December	2016,	CET1	reflects	80%	and	60%	of	such deduction,	 respectively.	 The	 balance	 that	 is	 not	 deducted	 from	 CET1 during	the	transitional	period	is	generally	deducted	from	Tier	1	capital within	other	adjustments.

•	As	of	December	2017,	junior	subordinated	debt	issued	to	trusts	was	fully phased	out	of	Tier	1	capital,	with	50%	included	in	Tier	2	capital	and 50%	fully	phased	out	of	regulatory	capital.	As	of	December	2016,	junior subordinated	debt	issued	to	trusts	was	fully	phased	out	of	Tier	1	capital, with	 60%	 included	 in	 Tier	 2	 capital	 and	 40%	 fully	 phased	 out	 of regulatory	capital.	Junior	subordinated	debt	issued	to	trusts	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	issued	to	trusts	and	trust	preferred	securities	purchased	by	the	firm.

•	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.

The	 tables	 below	 present	 changes in	 CET1,	 Tier	 1	 capital	 and	 Tier	 2 capital.

| $	in	millions | Standardized | Advanced |
| :--- | :--- | :--- |
| Common\tEquity\tTier\t1 |  |  |
| Beginning\tbalance | $72,046 | \t $72,046 |
| Change\tin\tcommon\tshareholders'\tequity | (5,300) | (5,300) |
| Change\tin\tdeduction\tfor: |  |  |
| Transitional\tprovisions | (426) | (426) |
| Goodwill\tand\tidentifiable\tintangible |  |  |
| assets,\tnet\tof\tdeferred\ttax\tliabilities | (324) | (324) |
| Investments\tin\tnonconsolidated\tfinancial |  |  |
| institutions | 586 | 586 |
| Change\tin\tother\tadjustments | 528 | 528 |
| Ending\tbalance | $67,110 | \t $67,110 |
| Tier\t1\tcapital |  |  |
| Beginning\tbalance | $82,440 | \t $82,440 |
| Change\tin\tdeduction\tfor: |  |  |
| Transitional\tprovisions | (274) | (274) |
| Investments\tin\tcovered\tfunds | (145) | (145) |
| Other\tnet\tdecrease\tin\tCET1 | (4,510) | (4,510) |
| Change\tin\tpreferred\tstock | 650 | 650 |
| Change\tin\tother\tadjustments | 170 | 170 |
| Ending\tbalance | 78,331 | 78,331 |
| Tier\t2\tcapital |  |  |
| Beginning\tbalance | 16,074 | 15,352 |
| Change\tin\tqualifying\tsubordinated\tdebt | (1,206) | (1,206) |
| Redesignation\tof\tjunior\tsubordinated\tdebt |  |  |
| issued\tto\ttrusts | (225) | (225) |
| Change\tin\tthe\tallowance\tfor\tlosses\ton\tloans |  |  |
| and\tlending\tcommitments | 356 | – |
| Change\tin\tother\tadjustments | (22) | (22) |
| Ending\tbalance | 14,977 | 13,899 |
| Total\tcapital | $93,308 | \t $92,230 |

| $	in	millions | Standardized | Advanced |
| :--- | :--- | :--- |
| Common\tEquity\tTier\t1 |  |  |
| Beginning\tbalance | $71,363 | \t$71,363 |
| Change\tin\tcommon\tshareholders'\tequity | 162 | 162 |
| Change\tin\tdeduction\tfor: |  |  |
| Transitional\tprovisions | (839) | (839) |
| Goodwill\tand\tidentifiable\tintangible |  |  |
| assets,\tnet\tof\tdeferred\ttax\tliabilities | 16 | 16 |
| Investments\tin\tnonconsolidated\tfinancial\tinstitutions | 895 | 895 |
| Change\tin\tother\tadjustments | 449 | 449 |
| Ending\tbalance | $72,046 | \t$72,046 |
| Tier\t1\tcapital |  |  |
| Beginning\tbalance | $81,511 | \t$81,511 |
| Change\tin\tdeduction\tfor: |  |  |
| Transitional\tprovisions | (558) | (558) |
| Investments\tin\tcovered\tfunds | (32) | (32) |
| Other\tnet\tincrease\tin\tCET1 | 1,522 | 1,522 |
| Redesignation\tof\tjunior\tsubordinated\tdebt |  |  |
| issued\tto\ttrusts | (330) | (330) |
| Change\tin\tpreferred\tstock | 3 | 3 |
| Change\tin\tother\tadjustments | 324 | 324 |
| Ending\tbalance | 82,440 | 82,440 |
| Tier\t2\tcapital |  |  |
| Beginning\tbalance | 16,705 | 16,103 |
| Change\tin\tqualifying\tsubordinated\tdebt | (566) | (566) |
| Redesignation\tof\tjunior\tsubordinated\tdebt |  |  |
| issued\tto\ttrusts | (198) | (198) |
| Change\tin\tthe\tallowance\tfor\tlosses\ton\tloans |  |  |
| and\tlending\tcommitments | 120 | – |
| Change\tin\tother\tadjustments | 13 | 13 |
| Ending\tbalance | 16,074 | 15,352 |
| Total\tcapital | $98,514 | \t$97,792 |

In	the	tables	above,	the	change	in	the	deduction	for	transitional	provisions represents the increased	phase-in of the deduction from 60% to 80% (effective January	 1,	 2017) for	 2017	 and from	 40% to	 60% (effective January	1,	2016)	for	2016.

The tables below present the components of RWAs calculated in accordance	with	the	Standardized	Capital	Rules	and	Basel	III	Advanced Rules.

|  | Standardized	Capital	Rules | Standardized	Capital	Rules |
| :--- | :--- | :--- |
|  | as\tof\tDecember |  |
| $\tin\tmillions | 2017 | 2016 |
| Credit\tRWAs |  |  |
| Derivatives | \t\t$126,076 | \t$124,286 |
| Commitments,\tguarantees\tand\tloans | 145,104 | 115,744 |
| Securities\tfinancing\ttransactions | 77,962 | 71,319 |
| Equity\tinvestments | 48,155 | 41,428 |
| Other | 70,933 | 58,636 |
| Total\tCredit\tRWAs | 468,230 | 411,413 |
| Market\tRWAs |  |  |
| Regulatory\tVaR | 7,532 | 9,750 |
| Stressed\tVaR | 32,753 | 22,475 |
| Incremental\trisk | 8,441 | 7,875 |
| Comprehensive\trisk | 2,397 | 5,338 |
| Specific\trisk | 36,258 | 39,825 |
| Total\tMarket\tRWAs | 87,381 | 85,263 |
| Total\tRWAs | \t\t$555,611 | \t$496,676 |

|  | Basel	III	Advanced	Rules | Basel	III	Advanced	Rules |
| :--- | :--- | :--- |
|  | as\tof\tDecember |  |
| $\tin\tmillions | 2017 | 2016 |
| Credit\tRWAs |  |  |
| Derivatives | \t\t$102,986 | \t$105,096 |
| Commitments,\tguarantees\tand\tloans | 163,375 | 122,792 |
| Securities\tfinancing\ttransactions | 19,362 | 14,673 |
| Equity\tinvestments | 51,626 | 44,095 |
| Other | 75,968 | 63,431 |
| Total\tCredit\tRWAs | 413,317 | 350,087 |
| Market\tRWAs |  |  |
| Regulatory\tVaR | 7,532 | 9,750 |
| Stressed\tVaR | 32,753 | 22,475 |
| Incremental\trisk | 8,441 | 7,875 |
| Comprehensive\trisk | 1,870 | 4,550 |
| Specific\trisk | 36,258 | 39,825 |
| Total\tMarket\tRWAs | 86,854 | 84,475 |
| Total\tOperational\tRWAs | 117,475 | 115,088 |
| Total\tRWAs | \t\t$617,646 | \t$549,650 |

•	Securities financing transactions represent resale and repurchase agreements	and	securities	borrowed	and	loaned	transactions.

•	Other includes receivables, certain debt securities, cash and cash equivalents	and	other	assets.

The	table	below	presents	changes	in	RWAs	calculated	in	accordance	with the	Standardized	Capital	Rules	and	Basel	III	Advanced	Rules.

| $	in	millions | Standardized | Advanced |
| :--- | :--- | :--- |
| Risk-Weighted\tAssets |  |  |
| Beginning\tbalance | $496,676 | \t$549,650 |
| Credit\tRWAs |  |  |
| Change\tin: |  |  |
| Deduction\tfor\ttransitional\tprovisions | (233) | (233) |
| Derivatives | 1,790 | (2,110) |
| Commitments,\tguarantees\tand\tloans | 29,360 | 40,583 |
| Securities\tfinancing\ttransactions | 6,643 | 4,689 |
| Equity\tinvestments | 6,889 | 7,693 |
| Other | 12,368 | 12,608 |
| Change\tin\tCredit\tRWAs | 56,817 | 63,230 |
| Market\tRWAs |  |  |
| Change\tin: |  |  |
| Regulatory\tVaR | (2,218) | (2,218) |
| Stressed\tVaR | 10,278 | 10,278 |
| Incremental\trisk | 566 | 566 |
| Comprehensive\trisk | (2,941) | (2,680) |
| Specific\trisk | (3,567) | (3,567) |
| Change\tin\tMarket\tRWAs | 2,118 | 2,379 |
| Operational\tRWAs |  |  |
| Change\tin\toperational\trisk | – | 2,387 |
| Change\tin\tOperational\tRWAs | – | 2,387 |
| Ending\tbalance | $555,611 | \t$617,646 |

In	 the	 table	 above,	 the	 increased	 deduction	 for	 transitional	 provisions represents	 the	 increased	phase-in	 of	 the	 deduction	 from	 60%	 to	 80%, effective	January	1,	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.

| $	in	millions | Standardized | Advanced |
| :--- | :--- | :--- |
| Risk-Weighted\tAssets |  |  |
| Beginning\tbalance | $524,107 | \t$577,651 |
| Credit\tRWAs |  |  |
| Change\tin: |  |  |
| Deduction\tfor\ttransitional\tprovisions | (531) | (531) |
| Derivatives | (12,555) | (8,575) |
| Commitments,\tguarantees\tand\tloans | 4,353 | 8,269 |
| Securities\tfinancing\ttransactions | (73) | (228) |
| Equity\tinvestments | 4,196 | 4,440 |
| Other | (4,095) | 2,630 |
| Change\tin\tCredit\tRWAs | (8,705) | 6,005 |
| Market\tRWAs |  |  |
| Change\tin: |  |  |
| Regulatory\tVaR | (2,250) | (2,250) |
| Stressed\tVaR | 737 | 737 |
| Incremental\trisk | (1,638) | (1,638) |
| Comprehensive\trisk | (387) | (167) |
| Specific\trisk | (15,188) | (15,188) |
| Change\tin\tMarket\tRWAs | (18,726) | (18,506) |
| Operational\tRWAs |  |  |
| Change\tin\toperational\trisk | – | (15,500) |
| Change\tin\tOperational\tRWAs | – | (15,500) |
| Ending\tbalance | $496,676 | \t$549,650 |

Standardized	 Credit	 RWAs	 as	 of	 December	 2016	 decreased	 by $8.71 billion	 compared	 with	 December	 2015,	 primarily	 reflecting	 a decrease	 in	 derivatives,	 principally	 due	 to	 reduced	 exposures,	 and	 a decrease	 in	 receivables	 included	 in	 other	 credit	 RWAs	 reflecting	 the impact	of	firm	and	client	activity.	This	decrease	was	partially	offset	by increases	 in	 commitments,	 guarantees	 and	 loans	 principally	 due	 to increased	 lending	 activity,	 and	 equity	 investments,	 principally	 due	 to increased	exposures	and	the	impact	of	market	movements.	Standardized Market	RWAs	as	of	December	2016	decreased	by	$18.73	billion	compared with	December	2015,	primarily	reflecting	a	decrease	in	specific	risk	as	a result	of	reduced	risk	exposures.

Basel	 III	 Advanced	 Credit	 RWAs	 as	 of	 December	 2016	 increased	 by $6.01 billion	 compared	 with	 December	 2015,	 primarily	 reflecting	 an increase	in	commitments,	guarantees	and	loans	principally	due	to	increased lending	activity,	and	an	increase	in	equity	investments,	principally	due	to increased	exposures	and	the	impact	of	market	movements.	These	increases were	partially	offset	by	a	decrease	in	derivatives,	principally	due	to	lower counterparty	credit	risk	and	reduced	exposure.	Basel	III	Advanced	Market RWAs	as	of	December	2016	decreased	by	$18.51	billion	compared	with December	2015,	primarily	reflecting	a	decrease	in	specific	risk	as	a	result	of reduced	 risk	 exposures.	 Basel	 III	 Advanced	 Operational	 RWAs	 as	 of December	2016	decreased	by	$15.50	billion	compared	with	December	2015, reflecting	a	decrease	in	the	frequency	of	certain	events	incorporated	within the	firm's	risk-based	model.

# 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	Consumer	Financial	Protection Bureau,	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	risk-based	capital	and	leverage	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.	As	of both	 December	 2017	 and	 December	 2016,	 GS	 Bank	 USA	 was	 in compliance	 with	 its	 minimum	 capital	 requirements	 and	 the	 "well- capitalized"	minimum	ratios.

The	table	below	presents	the	minimum	ratios	and	the	"well-capitalized" minimum	ratios	required	for	GS	Bank	USA.

|  | Minimum	Ratio	as	of	December | Minimum	Ratio	as	of	December | "Well-capitalized" |
| :--- | :--- | :--- | :--- |
|  | 2017 | 2016 | Minimum\tRatio |
| CET1\tratio | 5.750% | 5.125% | 6.5% |
| Tier\t1\tcapital\tratio | 7.250% | 6.625% | 8.0% |
| Total\tcapital\tratio | 9.250% | 8.625% | 10.0% |
| Tier\t1\tleverage\tratio | 4.000% | 4.000% | 5.0% |

•	The	minimum	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,	each	described	above.

•	The	minimum	capital	ratios	as	of	December	2016	reflect	(i)	the	25% phase-in	 of	 the	 capital	 conservation	 buffer	 of 2.5% and	 (ii)	 the countercyclical	capital	buffer	of	zero	percent,	each	described	above.

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	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.	Each of	the	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	 2017	 and December	2016.	The	capital	ratios	that	apply	to	GS	Bank	USA	can	change in	future	reporting	periods	as	a	result	of	these	regulatory	requirements.

The	 table	 below	 presents	 the	 ratios	 for	 GS	 Bank	 USA	 calculated	 in accordance	 with	 both	 the	 Standardized	 Capital	 Rules	 and	 Basel	 III Advanced	Rules.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Standardized |  |  |
| Common\tEquity\tTier\t1 | \t\t$\t\t25,343 | \t$\t\t24,485 |
| Tier\t1\tcapital | 25,343 | 24,485 |
| Tier\t2\tcapital | 2,547 | 2,382 |
| Total\tcapital | \t\t$\t\t27,890 | \t$\t\t26,867 |
| Basel\tIII\tAdvanced |  |  |
| Common\tEquity\tTier\t1 | \t\t$\t\t25,343 | \t$\t\t24,485 |
| Tier\t1\tcapital | 25,343 | 24,485 |
| Standardized\tTier\t2\tcapital | 2,547 | 2,382 |
| Allowance\tfor\tlosses\ton\tloans\tand |  |  |
| lending\tcommitments | (547) | (382) |
| Tier\t2\tcapital | 2,000 | 2,000 |
| Total\tcapital | \t\t$\t\t27,343 | \t$\t\t26,485 |
| RWAs |  |  |
| Standardized | \t\t$229,775 | \t$204,232 |
| Basel\tIII\tAdvanced | \t\t$164,602 | \t$131,051 |
| CET1\tratio |  |  |
| Standardized | 11.0% | 12.0% |
| Basel\tIII\tAdvanced | 15.4% | 18.7% |
| Tier\t1\tcapital\tratio |  |  |
| Standardized | 11.0% | 12.0% |
| Basel\tIII\tAdvanced | 15.4% | 18.7% |
| Total\tcapital\tratio |  |  |
| Standardized | 12.1% | 13.2% |
| Basel\tIII\tAdvanced | 16.6% | 20.2% |
| Tier\t1\tleverage\tratio | 15.0% | 14.4% |

The	 decrease	 in	 GS	 Bank	 USA's	 Standardized	 and	 Basel	 III	Advanced capital	ratios	from	December	2016	to	December	2017	is	primarily	due	to	an increase	in	credit	RWAs,	principally	due	to	an	increase	in	lending	activity.

The	 firm's	 principal	non-U.S.	bank	subsidiary,	GSIB,	 is	a	wholly-owned credit	institution,	regulated	by	the	Prudential	Regulation	Authority	(PRA) and	 the	 Financial	 Conduct	Authority	 (FCA)	 and	 is	 subject	 to	 minimum capital	requirements.	As	of	both	December	2017	and	December	2016,	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 $50.86	billion	and	$74.24	billion	as	of	December	2017	and	December	2016, respectively,	which	exceeded	required	reserve	amounts	by	$50.74	billion and	$74.09	billion	as	of	December	2017	and	December	2016,	respectively.

# Broker-Dealer	Subsidiaries

U.S.	Regulated	Broker-Dealer	Subsidiaries.	GS&Co.	is	the	firm's 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.

As	of	December	2017	and	December	2016,	GS&Co.	had	regulatory	net capital,	as	defined	by	Rule	15c3-1,	of	$15.57	billion	and	$17.17	billion, respectively,	which	exceeded	the	amount	required	by	$13.15	billion	and $14.66	 billion,	 respectively.	 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	2017 and	December	2016,	GS&Co.	had	tentative	net	capital	and	net	capital	in excess	of	both	the	minimum	and	the	notification	requirements.

Non-U.S. Regulated Broker-Dealer Subsidiaries. The	 firm's principal	non-U.S.	regulated	broker-dealer	subsidiaries	include	Goldman Sachs	International	(GSI)	and	Goldman	Sachs	Japan	Co.,	Ltd.	(GSJCL). GSI,	the	firm's	U.K.	broker-dealer,	is	regulated	by	the	PRA	and	the	FCA. GSJCL,	 the	 firm's	 Japanese	 broker-dealer,	 is	 regulated	 by	 Japan's Financial	Services	Agency.	These	and	certain	other	non-U.S.	subsidiaries of	the	firm	are	also	subject	to	capital	adequacy	requirements	promulgated by	 authorities	 of	 the	 countries	 in	 which	 they	 operate.	 As	 of	 both December	 2017	 and	 December	 2016,	 these	 subsidiaries	 were	 in compliance	with	their	local	capital	adequacy	requirements.

# Restrictions	on	Payments

Group	Inc.'s	ability	to	withdraw	capital	from	its	regulated	subsidiaries	is limited	 by	 minimum	 equity	 capital	 requirements	 applicable	 to	 those subsidiaries,	 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.,	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)	 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	relevant	regulator's	opinion,	payment	of	a	dividend	would constitute	 an	 unsafe	 or	 unsound	 practice	 in	 the	 light	 of	 the	 financial condition	of	the	banking	organization.

As	 of	 December	 2017	 and	 December	 2016,	 Group	 Inc.	 was	 required	 to maintain	$53.02	billion	and	$46.49	billion,	respectively,	of	minimum	equity capital	 in	 its	 regulated	 subsidiaries	 in	 order	 to	 satisfy	 the	 regulatory requirements	of	such	subsidiaries.

# 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	 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	the	computations	of	basic	and	diluted	EPS.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| in\tmillions,\texcept\tper\tshare\tamounts | 2017 | 2016 | 2015 |
| Net\tearnings\tapplicable\tto\tcommon |  |  |  |
| shareholders | \t\t$3,685 | \t$7,087 | \t$5,568 |
| Weighted\taverage\tbasic\tshares | 401.6 | 427.4 | 448.9 |
| Effect\tof\tdilutive\tsecurities: |  |  |  |
| RSUs | 5.3 | 4.7 | 5.3 |
| Stock\toptions | 2.2 | 3.0 | 4.4 |
| Dilutive\tsecurities | 7.5 | 7.7 | 9.7 |
| Weighted\taverage\tbasic\tshares |  |  |  |
| and\tdilutive\tsecurities | 409.1 | 435.1 | 458.6 |
| Basic\tEPS | \t\t$\t\t9.12 | \t$16.53 | \t$12.35 |
| Diluted\tEPS | \t\t$\t\t9.01 | \t$16.29 | \t$12.14 |

In	the	table	above,	unvested	share-based	awards	that	have	non-forfeitable rights	to	dividends	or	dividend	equivalents	are	treated	as	a	separate	class	of securities	 in	calculating	EPS.	The	 impact	of	applying	 this	methodology was	a	reduction	in	basic	EPS	of	$0.06	for	2017,	and	$0.05	for	both	2016 and	2015.

The	 diluted	 EPS	 computations	 in	 the	 table	 above	 do	 not	 include antidilutive	 securities	 (RSUs	 and	 common	 shares	 underlying	 stock options)	of	0.1	million	for	2017,	2.8	million	for	2016	and	6.0	million	for 2015.

# 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	$98	million and	$104	million	for	2017	and	2016,	respectively.

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.

As	of	December	2017	and	December	2016,	 the	firm	had	an	outstanding guarantee,	as	permitted	under	the	Volcker	Rule,	on	behalf	of	its	funds	of $154	 million and	 $300	 million,	 respectively.	 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	 2017	 and December	 2016,	 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 the	firm's sources	of	interest	income	and	interest	expense.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Interest\tincome |  |  |  |
| Deposits\twith\tbanks | \t\t$\t\t\t\t\t819 | \t$\t\t\t452 | \t$\t\t\t241 |
| Collateralized\tagreements | 1,661 | 691 | 17 |
| Financial\tinstruments\towned | 5,904 | 5,444 | 5,862 |
| Loans\treceivable | 2,678 | 1,843 | 1,191 |
| Other\tinterest | 2,051 | 1,261 | 1,141 |
| Total\tinterest\tincome | 13,113 | 9,691 | 8,452 |
| Interest\texpense |  |  |  |
| Deposits | 1,380 | 878 | 408 |
| Collateralized\tfinancings | 863 | 442 | 330 |
| Financial\tinstruments\tsold,\tbut |  |  |  |
| not\tyet\tpurchased | 1,388 | 1,251 | 1,319 |
| Short-term\tsecured\tand |  |  |  |
| unsecured\tborrowings | 698 | 446 | 429 |
| Long-term\tsecured\tand |  |  |  |
| unsecured\tborrowings | 4,599 | 4,242 | 3,878 |
| Other\tinterest | 1,253 | (155) | (976) |
| Total\tinterest\texpense | 10,181 | 7,104 | 5,388 |
| Net\tinterest\tincome | \t\t$\t\t2,932 | \t$2,587 | \t$3,064 |

•	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	securities	sold	under	agreements	to repurchase	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	in	2017	reflected	an	increase	in	Income	tax	expense of $4.40 billion	 representing	 the	 estimated	 impact	 of	 Tax	 Legislation enacted	 on	 December	 22,	 2017.	 The	 $4.40	 billion	 income	 tax	 expense includes	 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.

The	repatriation	tax	is	based	on	the	greater	of	the	firm's	post-1986	earnings and	profits	as	of	November	2,	2017	or	December	31,	2017.	Income	taxes paid	or	payable	to	foreign	jurisdictions	partially	reduce	the	repatriation	tax as	a	foreign	tax	credit,	based	on	a	formula	that	includes	future	earnings	of certain	foreign	subsidiaries.	The	calculation	resulted	in	an	estimated	income tax	expense	of	$3.32	billion.

U.S.	deferred	tax	assets	and	liabilities	were	required	to	be	remeasured	as	of December	22,	2017	to	the	new	U.S.	federal	income	tax	rate	of	21%	and	to any	federal	impact	associated	with	state	and	local	deferred	income	taxes,	as well	 as	 due	 to	 the	 implementation	 of	 the	 territorial	 tax	 system.	 This remeasurement	resulted	in	an	estimated	income	tax	expense	of	$1.08	billion.

While	 the	components	of	 the	 impact	of	Tax	Legislation	described	above were	calculated	to	account	for	all	available	information,	these	amounts	are estimates.	The	firm	anticipates	modification	to	the	estimate	may	occur	as	a result	 of	 (i)	 refinement	 of	 the	 firm's	 calculations	 based	 on	 updated information,	 (ii)	 changes	 in	 the	 firm's	 interpretations	 and	 assumptions, (iii)	updates	from	issuance	of	future	legislative	guidance	and	(iv)	actions	the firm	may	take	as	a	result	of	Tax	Legislation.

# 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	the	components	of	the	provision	for	taxes.

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Current\ttaxes |  |  |  |
| U.S.\tfederal | \t\t$\t\t\t320 | \t$1,032 | \t$1,116 |
| State\tand\tlocal | 64 | 139 | (12) |
| Non-U.S. | 1,004 | 1,184 | 1,166 |
| Total\tcurrent\ttax\texpense | 1,388 | 2,355 | 2,270 |
| Deferred\ttaxes |  |  |  |
| U.S.\tfederal | 5,083 | 399 | 397 |
| State\tand\tlocal | 157 | 51 | 62 |
| Non-U.S. | 218 | 101 | (34) |
| Total\tdeferred\ttax\texpense | 5,458 | 551 | 425 |
| Provision\tfor\ttaxes | \t\t$6,846 | \t$2,906 | \t$2,695 |

•	State	and	local	current	taxes	includes	the	impact	of	settlements	of	state and	local	examinations.

•	U.S.	federal	deferred	tax	expense	includes	the	estimated	impact	of	Tax Legislation.

The	 table	 below	 presents	 a	 reconciliation	 of	 the	 U.S. federal	 statutory income	tax	rate	to	the	firm's	effective	income	tax	rate.

|  | Year	Ended	December | Year	Ended	December | Year	Ended	December |
| :--- | :--- | :--- | :--- |
|  | 2017 | 2016 | 2015 |
| U.S.\tfederal\tstatutory\tincome\ttax\trate | \t\t35.0%\t\t\t35.0% | \t\t35.0%\t\t\t35.0% | 35.0% |
| State\tand\tlocal\ttaxes,\tnet\tof\tU.S.\tfederal |  |  |  |
| income\ttax\teffects | 1.5% | 0.9% | 0.3% |
| ASU\tNo.\t2016-09\ttax\tbenefits\ton\tsettlement\tof |  |  |  |
| employee\tshare-based\tawards | \t\t(6.4)% | – | – |
| Non-U.S.\toperations | \t\t(6.3)%\t\t\t(6.7)%\t\t\t(12.1)% | \t\t(6.3)%\t\t\t(6.7)%\t\t\t(12.1)% | \t\t(6.3)%\t\t\t(6.7)%\t\t\t(12.1)% |
| Tax\tcredits | \t\t(2.1)%\t\t\t(2.0)% | \t\t(2.1)%\t\t\t(2.0)% | (1.7)% |
| Tax-exempt\tincome,\tincluding\tdividends | \t\t(0.2)%\t\t\t(0.3)% | \t\t(0.2)%\t\t\t(0.3)% | (0.7)% |
| Tax\tLegislation\t—\trepatriation\ttax | \t\t29.8% | – | – |
| Tax\tLegislation\t—\tremeasurement\tof |  |  |  |
| deferred\ttax\tassets | 9.7% | – | – |
| Non-deductible\tlegal\texpenses | 0.5% | 1.0% | 10.2% |
| Other | – | 0.3% | (0.3)% |
| Effective\tincome\ttax\trate | \t\t61.5%\t\t\t28.2% | \t\t61.5%\t\t\t28.2% | 30.7% |

•	Non-U.S.	 operations	 includes	 the	 impact	 of	 permanently reinvested earnings	and	excludes	the	estimated	impact	of	Tax	Legislation.

•	State	and	local	taxes,	net	of	U.S.	federal	income	tax	effects	includes	the impact	of	settlements	of	state	and	local	examinations.

•	Substantially	all	of	the	non-deductible	legal	expenses	for	2015	relate	to provisions	for	the	settlement	agreement	with	the	RMBS	Working	Group.

# Deferred	Income	Taxes

Deferred	income	taxes	reflect	the	net	tax	effects	of	temporary	differences between	the	financial	reporting	and	tax	bases	of	assets	and	liabilities.	These temporary	differences	result	in	taxable	or	deductible	amounts	in	future	years and	are	measured	using	the	tax	rates	and	laws	that	will	be	in	effect	when such	 differences	 are	 expected	 to	 reverse.	 Valuation	 allowances	 are established	to	reduce	deferred	tax	assets	to	the	amount	that	more	likely	than not	will	be	realized	and	primarily	relate	to	the	ability	to	utilize	losses	in various	 tax	 jurisdictions.	 Tax	 assets	 and	 liabilities	 are	 presented	 as	 a component	 of	 other	 assets	 and	 other	 liabilities	 and	 accrued	 expenses, respectively.

The	table	below	presents	the	significant	components	of	deferred	tax	assets and	liabilities,	excluding	the	impact	of	netting	within	tax	jurisdictions.

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Deferred\ttax\tassets |  |  |
| Compensation\tand\tbenefits | \t$1,233 | \t$2,461 |
| ASC\t740\tasset\trelated\tto\tunrecognized\ttax\tbenefits | 75 | 231 |
| Non-U.S.\toperations | – | 967 |
| Net\toperating\tlosses | 428 | 427 |
| Occupancy-related | 67 | 100 |
| Other\tcomprehensive\tincome-related | 408 | 757 |
| Tax\tcredits\tcarryforward | 1,006 | – |
| Other,\tnet | 113 | 394 |
| Subtotal | 3,330 | 5,337 |
| Valuation\tallowance | (156) | (115) |
| Total\tdeferred\ttax\tassets | \t$3,174 | \t$5,222 |
| Deferred\ttax\tliabilities |  |  |
| Depreciation\tand\tamortization | \t$\t\t\t826 | \t$1,200 |
| Tax\tLegislation\t—\trepatriation\ttax | 3,114 | – |
| Non-U.S.\toperations | 180 | – |
| Unrealized\tgains | 742 | 342 |
| Total\tdeferred\ttax\tliabilities | \t$4,862 | \t$1,542 |

The	firm	has	recorded	deferred	tax	assets	of	$428	million	and	$427	million as	of	December	2017	and	December	2016,	respectively,	in	connection	with U.S.	federal,	state	and	local	and	foreign	net	operating	loss	carryforwards. The	 firm	 also	 recorded	 a	 valuation	 allowance	 of $128	 million and $67	million	as	of	December	2017	and	December	2016,	respectively,	related to	these	net	operating	loss	carryforwards.

As	of	December	2017,	the	U.S.	federal,	state	and	local,	and	foreign	net operating	 loss	 carryforwards	 were	 $268	 million, $1.33 billion	 and $1.23	billion,	respectively.	If	not	utilized,	the	U.S.	federal,	state	and	local, and	foreign	net	operating	loss	carryforwards	will	begin	to	expire	in	2018. If	these	carryforwards	expire,	they	will	not	have	a	material	impact	on	the firm's	results	of	operations.	As	of	December	2017,	the	foreign	tax	credit carryforwards	were	$446	million,	the	general	business	credit	carryforwards were	$533	million	and	the	state	and	local	tax	credit	carryforwards	were $27	million.	If	not	utilized,	the	foreign	tax	credit	carryforward	will	begin to	expire	in	2027,	the	general	business	credit	carryforward	will	begin	to expire	in	2037,	and	the	state	and	local	tax	credit	carryforward	will	begin	to expire	in	2020.

The	firm	had	no	capital	 loss	carryforwards	and	no	related	net	deferred income	tax	assets	as	of	December	2017	and	December	2016.

The	 valuation	 allowance	 increased	 by $41	 million during	 2017	 and increased	by	$42	million	during	2016.	The	increases	in	2017	and	2016 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	 2017,	 substantially	 all	 U.S.	 taxes	 were accrued	 on	 these	 subsidiaries'	 earnings	 and	 profits	 as	 a	 result	 of	 Tax Legislation	repatriation	tax.	As	of	December	2016,	the	firm	did	not	accrue any	U.S.	income	taxes	that	would	arise	if	such	earnings	were	repatriated, resulting	 in	 an	 unrecognized	 net	 deferred	 tax	 liability	 of	 $6.18	 billion, attributable	to	reinvested	earnings	of	$31.24	billion.

# 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	$81	million	and	$141	million	as	of	December	2017 and	December	2016,	respectively.	The	firm	recognized	interest	expense	and income	 tax	 penalties	 of	 $63	 million,	 $27	 million	 and	 $17	 million	 for 2017,	 2016	 and	 2015,	 respectively.	 It	 is	 reasonably	 possible	 that unrecognized	 tax	 benefits	 could	 change	 significantly	 during	 the	 twelve months	subsequent	 to	December	2017	due	 to	potential	audit	settlements. However,	at	this	time	it	is	not	possible	to	estimate	any	potential	change.

The	table	below	presents	the	changes	in	the	liability	for	unrecognized	tax benefits.	This	liability	is	included	in	other	liabilities	and	accrued	expenses. See	Note	17	for	further	information.

|  | Year	Ended	or	as	of	December | Year	Ended	or	as	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Beginning\tbalance | \t\t$\t852 | \t$\t825 | $\t871 |
| Increases\tbased\ton\ttax\tpositions\trelated |  |  |  |
| to\tthe\tcurrent\tyear | 94 | 113 | 65 |
| Increases\tbased\ton\ttax\tpositions\trelated |  |  |  |
| to\tprior\tyears | 101 | 188 | 158 |
| Decreases\tbased\ton\ttax\tpositions\trelated |  |  |  |
| to\tprior\tyears | (128) | (88) | (205) |
| Decreases\trelated\tto\tsettlements | (255) | (186) | (87) |
| Exchange\trate\tfluctuations | 1 | – | 23 |
| Ending\tbalance | \t\t$\t665 | \t$\t852 | $\t825 |
| Related\tdeferred\tincome\ttax\tasset | 75 | 231 | 197 |
| Net\tunrecognized\ttax\tbenefit | \t\t$\t590 | \t$\t621 | $\t628 |

# Regulatory	Tax	Examinations

The	firm	is	subject	to	examination	by	the	U.S.	Internal	Revenue	Service (IRS)	 and	 other	 taxing	 authorities	 in	 jurisdictions	 where	 the	 firm	 has significant	business	operations,	such	as	the	United	Kingdom,	Japan,	Hong Kong	 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	2018.	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	2016	tax	years remain	subject	to	post-filing	review.

During	the	fourth	quarter	of	2017,	New	York	State	and	City	examinations for	the	firm	(excluding	GS	Bank	USA)	of	fiscal	2007	through	calendar 2010	were	completed.	The	completion	of	these	examinations	did	not	have a	material	impact	on	the	firm's	effective	income	tax	rate.	New	York	State and	City	examinations	(excluding	GS	Bank	USA)	of	2011	through	2014 began	 in	 the	 fourth	 quarter	 of	 2017.	 New	 York	 State	 and	 City examinations	for	GS	Bank	USA	have	been	completed	through	2014.

During	the	first	quarter	of	2017,	the	firm	concluded	examinations	with	the Hong	 Kong	 tax	 authorities	 related	 to	 2007	 through	 2015,	 with	 2011 through	 2015	 subject	 to	 final	 review.	 The	 completion	 of	 these examinations	 did	 not	 have	 a	 material	 impact	 on	 the	 firm's	 effective income	tax	rate.

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. Transactions	between	segments	are	based	on	specific	criteria	or	approximate third-party	rates.

The	table	below	presents	the	firm's	net	revenues,	pre-tax	earnings	and	total assets	by	segment.	Management	believes	that	this	information	provides	a reasonable	 representation	 of	 each	 segment's	 contribution	 to	 consolidated pre-tax	earnings	and	total	assets.

|  | Year	Ended	or	as	of	December | Year	Ended	or	as	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Investment\tBanking |  |  |  |
| Financial\tAdvisory | \t\t$\t\t\t\t3,188 | \t$\t\t\t\t2,932 | \t$\t\t\t\t3,470 |
| Equity\tunderwriting | 1,243 | 891 | 1,546 |
| Debt\tunderwriting | 2,940 | 2,450 | 2,011 |
| Total\tUnderwriting | 4,183 | 3,341 | 3,557 |
| Total\tnet\trevenues | 7,371 | 6,273 | 7,027 |
| Operating\texpenses | 3,526 | 3,437 | 3,713 |
| Pre-tax\tearnings | \t\t$\t\t\t\t3,845 | \t$\t\t\t\t2,836 | \t$\t\t\t\t3,314 |
| Segment\tassets | \t\t$\t\t\t\t2,202 | \t$\t\t\t\t1,824 | \t$\t\t\t\t2,564 |
| Institutional\tClient\tServices |  |  |  |
| FICC\tClient\tExecution | \t\t$\t\t\t\t5,299 | \t$\t\t\t\t7,556 | \t$\t\t\t\t7,322 |
| Equities\tclient\texecution | 2,046 | 2,194 | 3,028 |
| Commissions\tand\tfees | 2,920 | 3,078 | 3,156 |
| Securities\tservices | 1,637 | 1,639 | 1,645 |
| Total\tEquities | 6,603 | 6,911 | 7,829 |
| Total\tnet\trevenues | 11,902 | 14,467 | 15,151 |
| Operating\texpenses | 9,692 | 9,713 | 13,938 |
| Pre-tax\tearnings | \t\t$\t\t\t\t2,210 | \t$\t\t\t\t4,754 | \t$\t\t\t\t1,213 |
| Segment\tassets | \t\t$675,255 | \t$645,689 | \t$663,394 |
| Investing\t&amp;\tLending |  |  |  |
| Equity\tsecurities | \t\t$\t\t\t\t4,578 | \t$\t\t\t\t2,573 | \t$\t\t\t\t3,781 |
| Debt\tsecurities\tand\tloans | 2,003 | 1,507 | 1,655 |
| Total\tnet\trevenues | 6,581 | 4,080 | 5,436 |
| Operating\texpenses | 2,796 | 2,386 | 2,402 |
| Pre-tax\tearnings | \t\t$\t\t\t\t3,785 | \t$\t\t\t\t1,694 | \t$\t\t\t\t3,034 |
| Segment\tassets | \t\t$226,016 | \t$198,181 | \t$179,428 |
| Investment\tManagement |  |  |  |
| Management\tand\tother\tfees | \t\t$\t\t\t\t5,144 | \t$\t\t\t\t4,798 | \t$\t\t\t\t4,887 |
| Incentive\tfees | 417 | 421 | 780 |
| Transaction\trevenues | 658 | 569 | 539 |
| Total\tnet\trevenues | 6,219 | 5,788 | 6,206 |
| Operating\texpenses | 4,800 | 4,654 | 4,841 |
| Pre-tax\tearnings | \t\t$\t\t\t\t1,419 | \t$\t\t\t\t1,134 | \t$\t\t\t\t1,365 |
| Segment\tassets | \t\t$\t\t13,303 | \t$\t\t14,471 | \t$\t\t16,009 |
| Total\tnet\trevenues | \t\t$\t\t32,073 | \t$\t\t30,608 | \t$\t\t33,820 |
| Total\toperating\texpenses | 20,941 | 20,304 | 25,042 |
| Total\tpre-tax\tearnings | \t\t$\t\t11,132 | \t$\t\t10,304 | \t$\t\t\t\t8,778 |
| Total\tassets | \t\t$916,776 | \t$860,165 | \t$861,395 |

•	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	 interest	 expense	 to	 specific	 securities,	 commodities	 and other	 positions	 in	 relation	 to	 the	 cash	 generated	 by,	 or	 funding requirements	of,	such	underlying	positions.	Net	interest	is	included	in segment	 net	 revenues	 as	 it	 is	 consistent	 with	 the	 way	 in	 which management	assesses	segment	performance.

•	Overhead	 expenses	 not	 directly	 allocable	 to	 specific segments are allocated	ratably	based	on	direct	segment	expenses.

•	Total	 operating	 expenses	 included	 net	 provisions	 for	 litigation	 and regulatory	proceedings	of	$188	million	for	2017,	$396	million	for	2016 and	$4.01	billion	(of	which	$3.37	billion	was	related	to	the	settlement agreement	with	the	RMBS	Working	Group)	for	2015.

The	table	below	presents	the	amounts	of	net	interest	income	by	segment included	in	net	revenues.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Investment\tBanking | \t\t$\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 | 1,322 | 1,456 | 2,472 |
| Investing\t&amp;\tLending | 1,325 | 880 | 418 |
| Investment\tManagement | 285 | 251 | 174 |
| Total\tnet\tinterest\tincome | \t\t$2,932 | \t$2,587 | \t$3,064 |

The	 table	below	presents	 the	amounts	of	depreciation	and	amortization expense	by	segment	included	in	pre-tax	earnings.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Investment\tBanking | \t\t$\t\t\t124 | \t$\t\t\t126 | \t$\t\t\t123 |
| Institutional\tClient\tServices | 514 | 489 | 462 |
| Investing\t&amp;\tLending | 314 | 215 | 253 |
| Investment\tManagement | 200 | 168 | 153 |
| Total\tdepreciation\tand\tamortization | \t\t$1,152 | \t$\t\t\t998 | \t$\t\t\t991 |

# 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	 the	 total	 net	 revenues,	pre-tax	 earnings	 and	 net earnings	 of	 the	 firm	 by	 geographic	 region	 allocated	 based	 on	 the methodology	 referred	 to	 above,	 as	 well	 as	 the	 percentage	 of	 total	 net revenues,	pre-tax	earnings	and	net	earnings	(excluding	Corporate)	for	each geographic	region.

| $	in	millions | 2017 |  | 2016 |  | 2015 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Net\trevenues |  |  |  |  |  |  |
| Americas | \t\t$19,405 | 61%\t\t\t$18,144 | 61%\t\t\t$18,144 | 60%\t\t\t$19,202 | 60%\t\t\t$19,202 | 56% |
| EMEA | 7,852 | 24% | 8,040 | 26% | 8,981 | 27% |
| Asia | 4,816 | 15% | 4,424 | 14% | 5,637 | 17% |
| Total\tnet\trevenues | \t\t$32,073 | \t\t100%\t\t\t$30,608 | \t\t100%\t\t\t$30,608 | \t\t100%\t\t\t$33,820 | \t\t100%\t\t\t$33,820 | \t\t100% |
| Pre-tax\tearnings |  |  |  |  |  |  |
| Americas | \t\t$\t\t7,119 | 63%\t\t\t$\t\t6,352 | 63%\t\t\t$\t\t6,352 | 61%\t\t\t$\t\t3,359 | 61%\t\t\t$\t\t3,359 | 37% |
| EMEA | 2,583 | 23% | 2,883 | 28% | 3,364 | 38% |
| Asia | 1,557 | 14% | 1,183 | 11% | 2,203 | 25% |
| Subtotal | 11,259 | \t\t100% | 10,418 | \t\t100% | 8,926 | \t\t100% |
| Corporate | (127) |  | (114) |  | (148) |  |
| Total\tpre-tax\tearnings | \t\t$11,132 | \t\t\t$10,304 | \t\t\t$10,304 | \t\t\t$\t\t8,778 | \t\t\t$\t\t8,778 |  |
| Net\tearnings |  |  |  |  |  |  |
| Americas | \t\t$\t\t\t\t\t997 | 23%\t\t\t$\t\t4,337 | 23%\t\t\t$\t\t4,337 | 58%\t\t\t$\t\t1,587 | 58%\t\t\t$\t\t1,587 | 26% |
| EMEA | 2,144 | 49% | 2,270 | 30% | 2,914 | 47% |
| Asia | 1,241 | 28% | 870 | 12% | 1,686 | 27% |
| Subtotal | 4,382 | \t\t100% | 7,477 | \t\t100% | 6,187 | \t\t100% |
| Corporate | (96) |  | (79) |  | (104) |  |
| Total\tnet\tearnings | \t\t$\t\t4,286 | \t\t\t$\t\t7,398 | \t\t\t$\t\t7,398 | \t\t\t$\t\t6,083 | \t\t\t$\t\t6,083 |  |
|  |  | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | 183 |

•	Americas	 net	 earnings	 included	 estimated	 income	 tax expense of $4.40	billion	recorded	in	2017	related	to	Tax	Legislation.

•	Americas	pre-tax	earnings	included	provisions	of	$3.37	billion	recorded in	2015	related	to	the	settlement	agreement	with	the	RMBS	Working Group.

•	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	held by	the	firm	and	included	in	financial	instruments	owned.

|  | As	of	December | As	of	December |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| U.S.\tgovernment\tand\tagency\tobligations | \t\t$76,418 | \t$57,657 |
| %\tof\ttotal\tassets | 8.3% | 6.7% |
| Non-U.S.\tgovernment\tand\tagency\tobligations | \t\t$33,956 | \t$29,381 |
| %\tof\ttotal\tassets | 3.7% | 3.4% |

As	of	both	December	2017	and	December	2016,	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 | 2017 | 2016 |
| U.S.\tgovernment\tand\tagency\tobligations | \t\t$96,905 | \t$89,721 |
| Non-U.S.\tgovernment\tand\tagency\tobligations | \t\t$92,850 | \t$80,234 |

•	Non-U.S.	 government	 and	 agency	 obligations	 primarily	 consist	 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	2017	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	$1.5	billion	in	excess	of	the aggregate	reserves	for	such	matters.

Management	is	generally	unable	to	estimate	a	range	of	reasonably	possible loss	for	matters	other	than	those	included	in	the	estimate	above,	including where	(i)	actual	or	potential	plaintiffs	have	not	claimed	an	amount	of	money damages,	 except	 in	 those	 instances	 where	 management	 can	 otherwise determine	an	appropriate	amount,	(ii)	matters	are	in	early	stages,	(iii)	matters relate	 to	 regulatory	 investigations	 or	 reviews,	 except	 in	 those	 instances where	 management	 can	 otherwise	 determine	 an	 appropriate	 amount, (iv)	there	is	uncertainty	as	to	the	likelihood	of	a	class	being	certified	or	the ultimate	 size	 of	 the	 class,	 (v)	 there	 is	 uncertainty	 as	 to	 the	 outcome	 of pending	appeals	or	motions,	(vi)	there	are	significant	factual	issues	to	be resolved,	and/or	(vii)	there	are	novel	legal	issues	presented.	For	example,	the firm's	potential	liabilities	with	respect	to	future	mortgage-related	"put-back" claims	described	below	may	ultimately	result	in	an	increase	in	the	firm's liabilities,	 but	 are	 not	 included	 in	 management's	 estimate	 of	 reasonably possible	 loss.	 As	 another	 example,	 the	 firm's	 potential	 liabilities	 with respect	 to	 the	 investigations	and	reviews	described	below	 in	"Regulatory Investigations	and	Reviews	and	Related	Litigation"	also	generally	are	not included	in	management's	estimate	of	reasonably	possible	loss.	However, management	does	not	believe,	based	on	currently	available	information,	that the	outcomes	of	such	other	matters	will	have	a	material	adverse	effect	on	the firm's	financial	condition,	 though	 the	outcomes	could	be	material	 to	 the firm's	operating	results	for	any	particular	period,	depending,	in	part,	upon the	operating	results	for	such	period.	See	Note	18	for	further	information about	mortgage-related	contingencies.

# Mortgage-Related	Matters

Beginning	in	April	2010,	a	number	of	purported	securities	law	class	actions were	filed	in	the	U.S.	District	Court	for	the	Southern	District	of	New	York challenging	the	adequacy	of	Group	Inc.'s	public	disclosure	of,	among	other things,	the	firm's	activities	in	the	CDO	market,	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.	On	January	12,	2018,	the	U.S.	Court	of	Appeals	for	the	Second Circuit	vacated	the	district	court's	class	certification	order	and	remanded	for reconsideration.

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.

The	firm	has	entered	into	agreements	with	U.S.	Bank	National	Association to	 toll	 the	 relevant	 statute	 of	 limitations	 with	 respect	 to	 claims	 for repurchase	 of	 residential	 mortgage	 loans	 based	 on	 alleged	 breaches	 of representations	 related	 to	 $1.7	 billion	 original	 notional	 face	 amount	 of securitizations	issued	by	trusts	for	which	U.S.	Bank	National	Association acts	as	trustee.

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	stockholder	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.	Defendants	moved to	dismiss	on	July	28,	2017.

# 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	alleges	a	conspiracy	to	manipulate	the	foreign currency	 exchange	 markets	 and	 asserts	 claims	 under	 federal	 and	 state antitrust	laws	and	state	consumer	protection	laws	and	seeks	injunctive	relief, as	well	as	treble	damages	in	an	unspecified	amount.	Defendants	moved	to dismiss	on	August	11,	2017.

# 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. Cobalt	 International	 Energy,	 Inc. (Cobalt),	 certain	 of	 its	 officers	 and	 directors	 (including	 employees	 of affiliates	of	Group	Inc.	who	served	as	directors	of	Cobalt),	affiliates	of shareholders	 of	 Cobalt	 (including	 Group	 Inc.)	 and	 the	 underwriters (including	 GS&Co.)	 for	 certain	 offerings	 of	 Cobalt's	 securities	 are defendants	in	a	putative	securities	class	action	filed	on	November	30,	2014 in	the	U.S.	District	Court	for	the	Southern	District	of	Texas.	The	second consolidated	amended	complaint,	filed	on	March	15,	2017,	relates	 to	a $1.67 billion	 February	 2012	 offering	 of	 Cobalt	 common	 stock,	 a $1.38	 billion	 December	 2012	 offering	 of	 Cobalt's	 convertible	 notes,	 a $1.00 billion	 January	 2013	 offering	 of	 Cobalt's	 common	 stock,	 a $1.33 billion	 May	 2013	 offering	 of	 Cobalt's	 common	 stock,	 and	 a $1.30	billion	May	2014	offering	of	Cobalt's	convertible	notes.

The	consolidated	amended	complaint	alleges	that,	among	others,	Group Inc.	and	GS&Co.	are	liable	as	controlling	persons	with	respect	to	all	five offerings,	 and	 that	 the	 shareholder	 affiliates	 (including	 Group	 Inc.)	 are liable	 for	 the	 sale	 of	 Cobalt	 common	 stock	 on	 the	 basis	 of	 inside information.	 The	 consolidated	 amended	 complaint	 also	 seeks	 damages from	 GS&Co.	 in	 connection	 with	 its	 acting	 as	 an	 underwriter	 of 16,594,500	 shares	 of	 common	 stock	 representing	 an	 aggregate	 offering price	 of	 approximately	 $465	 million,	 $690	 million	 principal	 amount	 of convertible	 notes,	 and	 approximately	 $508	 million	 principal	 amount	 of convertible	notes	in	the	February	2012,	December	2012	and	May	2014 offerings,	respectively,	for	an	aggregate	offering	price	of	approximately $1.66	billion.

On	 January 19, 2016,	 the	 court	 granted,	 with	 leave	 to	 replead,	 the underwriter	defendants'	motions	to	dismiss	as	to	claims	by	plaintiffs	who purchased	Cobalt	securities	after	April	30,	2013,	but	denied	the	motions	to dismiss	 in	 all	 other	 respects.	 On	 June	 15,	 2017,	 the	 court	 granted	 the plaintiffs'	motion	for	class	certification	and	denied	certain	of	the	shareholder affiliates'	motions	(including	Group	Inc.)	to	dismiss	the	claim	alleging	sales based	on	inside	information.	On	August	4,	2017,	the	U.S.	Court	of	Appeals for	the	Fifth	Circuit	granted	defendants'	petition	for	interlocutory	review	of the	class	certification	order.	On	August	23,	2017,	the	district	court	denied the	defendants'	motion	for	reconsideration	of	certain	aspects	of	the	class certification	 order.	 The	 district	 court	 and	 the	 Fifth	 Circuit	 denied defendants'	request	to	stay	discovery	pending	resolution	of	the	Fifth	Circuit proceeding.	On	December	14,	2017,	Cobalt	filed	for	Chapter	11	bankruptcy.

Cobalt,	 certain	 of	 its	 officers	 and	 directors	 (including	 employees	 of affiliates	 of	 Group	 Inc.	 who	 served	 as	 directors	 of	 Cobalt),	 certain shareholders	 of	 Cobalt	 (including	 funds	 affiliated	 with	 Group	 Inc.),	 and affiliates	 of	 these	 shareholders	 (including	 Group	 Inc.)	 are	 defendants	 in putative	 shareholder	 derivative	 actions	 filed	 on	 May 6, 2016	 and November	 29,	 2016	 in	 Texas	 District	 Court,	 Harris	 County.	 As	 to	 the director	and	officer	defendants	(including	employees	of	affiliates	of	Group Inc.	who	served	as	directors	of	Cobalt),	the	petitions	generally	allege	that they	breached	their	fiduciary	duties	under	state	law	by	making	materially false	and	misleading	statements	concerning	Cobalt.	As	to	the	shareholder defendants	and	their	affiliates	(including	Group	Inc.	and	several	affiliated funds),	the	original	petition	also	alleges	that	they	breached	their	fiduciary duties	by	selling	Cobalt	securities	in	the	common	stock	offerings	described above	on	the	basis	of	inside	information.	The	petitions	seek,	among	other things,	unspecified	monetary	damages	and	disgorgement	of	proceeds	from the	 sale	 of	 Cobalt	 common	 stock.	 On	 March	 6,	 2017,	 the	 court	 denied defendants'	 motion	 to	 dismiss	 the	 May	 petition	 as	 to	 the	 shareholder defendants	and	their	affiliates	(including	Group	Inc.	and	its	affiliated	funds). Defendants	moved	to	dismiss	the	November	petition	on	January	30,	2017.

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	of	Adeptus	Health	Inc.'s	(Adeptus)	past	and	present	directors	and officers	 as	 well	 as	 its	 principal	 private	 equity	 investor.	 As	 to	 the underwriters, the consolidated amended 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.	 The	 defendants	 filed	 motions	 to	 dismiss	 on February	5,	2018.

TerraForm Global.	GS&Co. is	 among	 the	 underwriters,	 placement agents	and	initial	purchasers	named	as	defendants	in	several	putative	class actions	and	individual	actions	filed	beginning	in	October	2015	relating	to the	$675	million	July	2015	initial	public	offering	of	the	common	stock	of TerraForm	 Global,	 Inc.	 (TerraForm	 Global),	 the	 June	 2015	 private placement	of	$335	million	of	TerraForm	Global	Class	D	units,	and	the August	 2015	 Rule	 144A	 offering	 of	 $810	 million	 principal	 amount	 of TerraForm	 Global	 senior	 notes.	 On	 December 20, 2017,	 the	 parties reached	 a	 definitive	 settlement	 in	 the	 individual	 actions	 relating	 to TerraForm	 Global's	 offerings,	 which	 resolved	 all	 claims	 without	 any contribution	by	GS&Co.	On	the	same	date,	the	U.S.	District	Court	for	the Southern	District	of	New	York	preliminarily	approved	a	settlement	funded by	TerraForm	Global	in	the	class	action	relating	to	TerraForm	Global's initial	public	offering,	which	would	resolve	the	litigation.

GS&Co.,	 as	 underwriter,	 sold	 2,340,000	 shares	 of	 TerraForm	 Global common	 stock	 in	 the	 initial	 public	 offering	 representing	 an	 aggregate offering	price	of	approximately	$35	million.	GS&Co.,	as	initial	purchaser, sold	 approximately	 $49	 million	 principal	 amount	 of	 TerraForm	 Global senior	notes	in	the	Rule	144A	offering.

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.	 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,	 certain	 plaintiffs	 filed	 an	 amended complaint.	The	defendants	also	include	certain	of	SunEdison's	directors	and officers.	 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.

# 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. Defendant's	 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,	California	Superior	Court,	County	of	San	Mateo 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.	Defendants	moved	to	dismiss	the	federal	court action	on	December	1,	2017.

# 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	an	antitrust	action	relating	to	the	trading	of interest	rate	swaps	filed	in	the	U.S.	District	Court	for	the	Southern	District of	New	York	in	April	2016	by	two	operators	of	swap	execution	facilities and	certain	of	their	affiliates.	These	actions	have	been	consolidated	for pretrial	proceedings.	The	second	consolidated	amended	complaint	in	both actions,	filed	on	December	9,	2016,	generally	asserts	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	complaint	in	the	individual	action	also	asserts	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	both	actions	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	individual	action	and	otherwise	limiting	the	antitrust claims	in	both	actions	and	the	state	common	law	claim	in	the	putative	class action	to	the	period	from	2013	to	2016.

# Securities	Lending	Antitrust	Litigation

Group	Inc.	and	GS&Co.	are	among	the	defendants	named	in	a	putative antitrust	class	action	and	an	individual	action	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 complaint	 also	 asserts	 claims	 for	 tortious	 interference	 with	 business relations	 and	 under	 state	 trade	 practices	 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	class	action	complaint	on	January	26,	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.

# Employment-Related	Matters

On	 September	 15,	 2010,	 a	 putative	 class	 action	 was	 filed	 in	 the	 U.S. District	 Court	 for	 the	 Southern	 District	 of	 New	York	 by	 three	 female former	 employees	 alleging	 that	 Group	 Inc.	 and	 GS&Co.	 have systematically	 discriminated	 against	 female	 employees	 in	 respect	 of compensation,	 promotion,	 assignments,	 mentoring	 and	 performance evaluations.	 The	 complaint	 alleges	 a	 class	 consisting	 of	 all	 female employees	employed	at	specified	levels	in	specified	areas	by	Group	Inc. and	GS&Co.	since	July	2002,	and	asserts	claims	under	federal	and	New York	City	discrimination	laws.	The	complaint	seeks	class	action	status, injunctive	relief	and	unspecified	amounts	of	compensatory,	punitive	and other	damages.

On	 July	 17,	 2012,	 the	 district	 court	 issued	 a	 decision	 granting	 in	 part Group	Inc.'s	and	GS&Co.'s	motion	 to	strike	certain	of	plaintiffs'	class allegations	on	the	ground	that	plaintiffs	lacked	standing	to	pursue	certain equitable	 remedies	 and	 denying	 Group	 Inc.'s	 and	 GS&Co.'s	 motion	 to strike	 plaintiffs'	 class	 allegations	 in	 their	 entirety	 as	 premature.	 On March	21,	2013,	the	U.S.	Court	of	Appeals	for	the	Second	Circuit	held	that arbitration	should	be	compelled	with	one	of	the	named	plaintiffs,	who	as	a managing	director	was	a	party	to	an	arbitration	agreement	with	the	firm. On	 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 August	30,	2017,	the	district	court	vacated	that	portion	of	the	magistrate judge's	March	10,	2015	decision	that	recommended	denial	of	plaintiffs' motion	for	certification	of	an	injunctive	and	declaratory	judgment	class.

# 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.	The	firm	is	cooperating	with	all	such	governmental and	regulatory	investigations	and	reviews.

# 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	the	SEC's	short	sale	rule,	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	U.S.	Foreign	Corrupt	Practices	Act;

•	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	 the	 employee's	 eligible compensation.	The	firm	maintains	a	defined	benefit	pension	plan	for	certain U.K.	employees.	As	of	April	2008,	the	U.K.	defined	benefit	plan	was	closed to	 new	 participants	 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	2017,	other	assets	and	other	liabilities and	accrued	expenses	included	$346	million	(related	to	overfunded	pension plans)	 and	 $606	 million,	 respectively,	 related	 to	 these	 plans.	 As	 of December	 2016,	 other	 assets	 and	 other	 liabilities	 and	 accrued	 expenses included $72 million	 (related	 to	 overfunded	 pension	 plans)	 and $592	million,	respectively,	related	to	these	plans.

# Defined	Contribution	Plans

The	 firm	 contributes	 to	 employer-sponsored	 U.S.	 and	non-U.S.	 defined contribution	plans.	The	firm's	contribution	to	these	plans	was	$257	million for	2017,	$236	million	for	2016	and	$231	million	for	2015.

# 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	 outstanding	 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	(2015)	(2015	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	 21,	 2015,	 shareholders	 approved	 the	 2015	 SIP.	The 2015	 SIP	 replaced	 The	 Goldman	 Sachs	 Amended	 and	 Restated	 Stock Incentive	Plan	(2013)	(2013	SIP)	previously	in	effect,	and	applies	to	awards granted	on	or	after	the	date	of	approval.

As	of	December	2017,	73.0	million	shares	were	available	for	grant	under	the 2015	SIP.	If	any	shares	of	common	stock	underlying	awards	granted	under the	2015	SIP	or	2013	SIP	are	not	delivered	due	to	forfeiture,	termination	or cancellation	or	are	surrendered	or	withheld,	those	shares	will	again	become available	to	be	delivered	under	the	2015	SIP.	Shares	available	for	grant	are also	 subject	 to	 adjustment	 for	 certain	 changes	 in	 corporate	 structure	 as permitted	under	the	2015	SIP.	The	2015	SIP	is	scheduled	to	terminate	on	the date	of	the	annual	meeting	of	shareholders	that	occurs	in	2019.

# Restricted	Stock	Units

The	firm	grants	RSUs	(including	RSUs	subject	to	performance	conditions) to	employees	under	the	2015	SIP,	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.	 Employee	 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	activity	related	to	RSUs.

|  | Restricted	Stock<br>Units	Outstanding<br>Future<br>Service<br>Required | No	Future<br>Service<br>Required | Weighted	Average<br>Grant-Date	Fair	Value	of<br>Restricted	Stock<br>Units	Outstanding<br>Future<br>Service<br>Required | No	Future<br>Service<br>Required |
| :--- | :--- | :--- | :--- | :--- |
| Outstanding, |  |  |  |  |
| December\t2016 | 5,623,239 | 22,202,431 | \t\t$147.25 | \t$145.97 |
| Granted | 3,764,395 | 5,235,283 | \t\t$208.24 | \t$205.91 |
| Forfeited | (466,715) | (260,762) | \t\t$167.02 | \t$164.06 |
| Delivered | – | \t\t(17,811,461) | \t\t$\t\t\t\t\t\t\t\t\t– | \t$151.72 |
| Vested | \t\t(4,797,337) | 4,797,337 | \t\t$162.88 | \t$162.88 |
| Outstanding, |  |  |  |  |
| December\t2017 | 4,123,582 | 14,162,828 | \t\t$182.50 | \t$166.30 |

•	Delivered	RSUs	include	RSUs	that	were	cash	settled.

•	RSUs	 outstanding	 include	 restricted	 stock	 subject	 to	 future	 service requirements	as	of	December	2017	and	December	2016	of	3,298	and 39,957	shares,	respectively.

•	RSUs	 outstanding	 include 62,023 RSUs	 subject	 to	 performance conditions	 and	 not	 subject	 to	 future	 service	 requirements	 as	 of December	 2017.	 There	 were	 no	 such	 RSUs	 outstanding	 as	 of December	2016.

In	 relation	 to	2017	year-end,	 during	 the	 first	 quarter	 of	 2018,	 the	 firm granted	to	its	employees	5.7	million	RSUs	(of	which	2.9	million	require future	service	as	a	condition	of	delivery	for	the	related	shares	of	common stock)	and	delivered,	net	of	required	withholding	tax,	1.2	million	shares	of restricted	 stock	 (which	 do	 not	 require	 future	 service).	 Both	 RSU	 and restricted	stock	awards	are	subject	to	additional	conditions	as	outlined	in the	 award	 agreements,	 including	 post-vesting	 and	 delivery	 transfer restrictions	through	January	2023.	These	awards	are	not	included	in	the table	above.

# Stock	Options

Stock	 options	 generally	 vest	 as	 outlined	 in	 the	 applicable	 stock	 option agreement.	In	general,	options	expire	on	the	tenth	anniversary	of	the	grant date,	 although	 they	 may	 be	 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.

As	of	December	2017	and	December	2016,	 there	were	2.10	million	and 7.96 million	 options	 outstanding,	 respectively,	 all	 of	 which	 were exercisable.	The	 options	 outstanding	 as	 of	 December	 2017,	 all	 of	 which were	granted	in	2008	with	an	exercise	price	of	$78.78,	had	an	aggregate intrinsic	value	of	$370	million	and	a	remaining	life	of	1	year.	The	options outstanding	as	of	December	2016	had	a	weighted	average	exercise	price	of $123.36, an	 aggregate	 intrinsic	 value	 of	 $924	 million	 and	 a	 weighted average	 remaining	 life	 of 1.61 years.	 Options	 outstanding	 as	 of December	2016	consisted	of	5.13	million	options	with	an	exercise	price	of $78.78	and	a	remaining	life	of	2.00	years,	and	2.83	million	options	with	an exercise	price	of	$204.16	and	a	remaining	life	of	0.92	years.

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.

As	 of	 December	 2017,	 there	 was $386	 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	1.82	years.

# Parent	Company

# Group	Inc.	—	Condensed	Statements	of	Earnings

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Revenues |  |  |  |
| Dividends\tfrom\tsubsidiaries\tand\tother\taffiliates: |  |  |  |
| Bank | \t\t$\t\t\t\t\t550 | \t$\t\t\t\t\t53 | \t$\t\t\t\t\t32 |
| Nonbank | 11,016 | 5,465 | 3,181 |
| Other\trevenues | (384) | 155 | (132) |
| Total\tnon-interest\trevenues | 11,182 | 5,673 | 3,081 |
| Interest\tincome | 4,638 | 4,140 | 3,519 |
| Interest\texpense | 5,978 | 4,543 | 4,165 |
| Net\tinterest\tloss | (1,340) | (403) | (646) |
| Net\trevenues,\tincluding\tnet\tinterest\tloss | 9,842 | 5,270 | 2,435 |
| Operating\texpenses |  |  |  |
| Compensation\tand\tbenefits | 330 | 343 | 498 |
| Other\texpenses | 428 | 332 | 188 |
| Total\toperating\texpenses | 758 | 675 | 686 |
| Pre-tax\tearnings | 9,084 | 4,595 | 1,749 |
| Provision/(benefit)\tfor\ttaxes | 3,404 | (518) | (828) |
| Undistributed\tearnings/(loss)\tof\tsubsidiaries\nand\tother\taffiliates | (1,394) | 2,285 | 3,506 |
| Net\tearnings | 4,286 | 7,398 | 6,083 |
| Preferred\tstock\tdividends | 601 | 311 | 515 |
| Net\tearnings\tapplicable\tto\tcommon\tshareholders | \t\t$\t\t3,685 | \t$7,087 | \t$5,568 |

Dividends	from	bank	subsidiaries	included	cash	dividends	of	$525	million, $32	million	and	$14	million	for	2017,	2016	and	2015,	respectively.

Interest	expense	included	$1.05	billion,	$201	million	and	$187	million	of interest	expense	with	subsidiaries	for	2017,	2016	and	2015,	respectively.

Group	Inc.'s	provision/(benefit)	for	taxes	for	2017	included	substantially all	of	the	firm's	$4.40	billion	estimated	income	tax	expense	related	to	Tax Legislation.	See	Note	24	for	further	information	on	Tax	Legislation.

# Group	Inc.	—	Condensed	Statements	of	Financial	Condition

|  | As	of	December |  |
| :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 |
| Assets |  |  |
| Cash\tand\tcash\tequivalents: |  |  |
| With\tthird-party\tbanks | \t\t$\t\t\t\t\t\t\t\t\t38 | \t\t$\t\t\t\t\t\t\t\t\t81 |
| With\tsubsidiary\tbank | – | 3,000 |
| Loans\tto\tand\treceivables\tfrom\tsubsidiaries: |  |  |
| Bank | 721 | 9,131 |
| Nonbank | 236,050 | 179,899 |
| Investments\tin\tsubsidiaries\tand\tother\taffiliates: |  |  |
| Bank | 26,599 | 25,571 |
| Nonbank | 67,279 | 67,203 |
| Financial\tinstruments\towned\t(at\tfair\tvalue) | 10,248 | 4,524 |
| Other\tassets | 5,898 | 6,273 |
| Total\tassets | \t\t$346,833 | \t\t$295,682 |
| Liabilities\tand\tshareholders'\tequity |  |  |
| Payables\tto\tsubsidiaries | \t\t$\t\t\t\t1,005 | \t\t$\t\t\t\t\t\t\t875 |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased |  |  |
| (at\tfair\tvalue) | 254 | 775 |
| Unsecured\tshort-term\tborrowings: |  |  |
| With\tthird\tparties\t(includes\t$2,484\tand\t$3,256 |  |  |
| at\tfair\tvalue) | 31,871 | 27,159 |
| With\tsubsidiaries | 25,699 | 999 |
| Unsecured\tlong-term\tborrowings: |  |  |
| With\tthird\tparties\t(includes\t$18,207\tand\t$17,591 |  |  |
| at\tfair\tvalue) | 190,502 | 172,164 |
| With\tsubsidiaries | 11,068 | 5,233 |
| Other\tliabilities\tand\taccrued\texpenses | 4,191 | 1,584 |
| Total\tliabilities | 264,590 | 208,789 |
| Commitments,\tcontingencies\tand\tguarantees |  |  |
| Shareholders'\tequity |  |  |
| Preferred\tstock | 11,853 | 11,203 |
| Common\tstock | 9 | 9 |
| Share-based\tawards | 2,777 | 3,914 |
| Additional\tpaid-in\tcapital | 53,357 | 52,638 |
| Retained\tearnings | 91,519 | 89,039 |
| Accumulated\tother\tcomprehensive\tloss | (1,880) | (1,216) |
| Stock\theld\tin\ttreasury,\tat\tcost | (75,392) | (68,694) |
| Total\tshareholders'\tequity | 82,243 | 86,893 |
| Total\tliabilities\tand\tshareholders'\tequity | \t\t$346,833 | \t\t$295,682 |

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	 $570	 million	 and	 $1.08	 billion	 of derivative	 contracts	 with	 subsidiaries	 as	 of	 December	 2017	 and December	2016,	respectively.

# Group	Inc.	—	Condensed	Statements	of	Cash	Flows

|  | Year	Ended	December | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Cash\tflows\tfrom\toperating\tactivities |  |  |  |
| Net\tearnings | \t\t$\t\t\t4,286 | \t\t$\t\t\t7,398 | \t\t$\t\t\t6,083 |
| Adjustments\tto\treconcile\tnet\tearnings\tto\tnet\tcash |  |  |  |
| provided\tby\toperating\tactivities: |  |  |  |
| Undistributed\t(earnings)/loss\tof\tsubsidiaries\tand |  |  |  |
| other\taffiliates | 1,394 | (2,285) | (3,506) |
| Depreciation\tand\tamortization | 56 | 52 | 50 |
| Deferred\tincome\ttaxes | 4,358 | 134 | 86 |
| Share-based\tcompensation | 152 | 193 | 178 |
| Loss/(gain)\trelated\tto\textinguishment\tof |  |  |  |
| subordinated\tborrowings\nChanges\tin\toperating\tassets\tand\tliabilities: | (114) | 3 | (34) |
| Financial\tinstruments\towned\t(excluding |  |  |  |
| available-for-sale\tsecurities) | (309) | (1,580) | (620) |
| Financial\tinstruments\tsold,\tbut\tnot\tyet\tpurchased | (521) | 332 | 274 |
| Other,\tnet | (757) | 337 | 1,555 |
| Net\tcash\tprovided\tby\toperating\tactivities | 8,545 | 4,584 | 4,066 |
| Cash\tflows\tfrom\tinvesting\tactivities |  |  |  |
| Purchase\tof\tproperty,\tleasehold\timprovements\tand\nequipment | (66) | (79) | (33) |
| Issuances\tof\tshort-term\tloans\tto\tsubsidiaries,\tnet | (14,415) | (3,994) | (24,417) |
| Issuance\tof\tterm\tloans\tto\tsubsidiaries | (42,234) | (28,498) | (8,632) |
| Repayments\tof\tterm\tloans\tby\tsubsidiaries | 22,039 | 32,265 | 24,196 |
| Purchase\tof\tinvestments | (6,491) | – | – |
| Capital\tdistributions\tfrom/(contributions\tto) |  |  |  |
| subsidiaries,\tnet | 388 | (3,265) | (1,500) |
| Net\tcash\tused\tfor\tinvesting\tactivities | (40,779) | (3,571) | (10,386) |
| Cash\tflows\tfrom\tfinancing\tactivities |  |  |  |
| Unsecured\tshort-term\tborrowings,\tnet: |  |  |  |
| With\tthird\tparties | (424) | (178) | (1,570) |
| With\tsubsidiaries | 23,078 | 2,290 | (1,114) |
| Proceeds\tfrom\tissuance\tof\tlong-term\tborrowings | 43,917 | 40,708 | 42,795 |
| Repayment\tof\tlong-term\tborrowings,\tincluding\tthe |  |  |  |
| current\tportion | (27,028) | (33,314) | (27,726) |
| Purchase\tof\tAPEX,\tsenior\tguaranteed\tsecurities\tand |  |  |  |
| trust\tpreferred\tsecurities | (237) | (1,171) | (1) |
| Preferred\tstock\tredemption | (850) | – | – |
| Common\tstock\trepurchased | (6,772) | (6,078) | (4,135) |
| Settlement\tof\tshare-based\tawards\tin\tsatisfaction\tof\nwithholding\ttax\trequirements | (2,223) | (1,128) | (1,204) |
| Dividends\tand\tdividend\tequivalents\tpaid\ton\tcommon |  |  |  |
| stock,\tpreferred\tstock\tand\tshare-based\tawards | (1,769) | (1,706) | (1,681) |
| Proceeds\tfrom\tissuance\tof\tpreferred\tstock,\tnet\tof |  |  |  |
| issuance\tcosts | 1,495 | 1,303 | 1,993 |
| Proceeds\tfrom\tissuance\tof\tcommon\tstock,\tincluding |  |  |  |
| exercise\tof\tshare-based\tawards | 7 | 6 | 259 |
| Cash\tsettlement\tof\tshare-based\tawards | (3) | – | (2) |
| Net\tcash\tprovided\tby\tfinancing\tactivities | 29,191 | 732 | 7,614 |
| Net\tincrease/(decrease)\tin\tcash\tand\tcash\tequivalents | (3,043) | 1,745 | 1,294 |
| Cash\tand\tcash\tequivalents,\tbeginning\tbalance | 3,081 | 1,336 | 42 |
| Cash\tand\tcash\tequivalents,\tending\tbalance | \t\t$\t\t\t\t\t\t\t\t38 | \t\t$\t\t\t3,081 | \t\t$\t\t\t1,336 |

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	2017:

•	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.

•	Group	Inc.	exchanged	$6.12	billion	in	financial	instruments	owned,	at	fair value,	held	by	Group	Inc.	for	$5.20	billion	of	loans	to	and	$918	million	of equity	in	certain	of	its	subsidiaries.

•	Group	 Inc.	 exchanged	 $262	 million	 of	 Trust	 Preferred	 Securities	 and common	beneficial	interests	held	by	Group	Inc.	for	$296	million	of	Group Inc.'s	junior	subordinated	debt.

# Supplemental	Financial	Information

# Quarterly	Results	(unaudited)

The	tables	below	present	the	firm's	unaudited	quarterly	results	for	2017 and	2016.	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.

|  |  | Three	Months	Ended | Three	Months	Ended |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions,\texcept\tper\nshare\tamounts | December\n2017 | September\n2017 | June\n2017 | March\n2017 |
| Non-interest\trevenues | $\t6,936 | $7,596 | \t\t$7,099\t\t\t$7,510 | \t\t$7,099\t\t\t$7,510 |
| 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 |
| Net\trevenues,\tincluding\tnet |  |  |  |  |
| interest\tincome | 7,834 | 8,326 | 7,887 | 8,026 |
| 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\tto\ncommon\tshareholders | $(2,143) | $2,035 | \t\t$1,631\t\t\t$2,162 | \t\t$1,631\t\t\t$2,162 |
| Earnings/(loss)\tper\tcommon\tshare: |  |  |  |  |
| Basic | $\t\t(5.51) | $\t\t5.09 | \t\t$\t\t4.00\t\t\t$\t\t5.23 | \t\t$\t\t4.00\t\t\t$\t\t5.23 |
| Diluted | $\t\t(5.51) | $\t\t5.02 | \t\t$\t\t3.95\t\t\t$\t\t5.15 | \t\t$\t\t3.95\t\t\t$\t\t5.15 |
| Dividends\tdeclared\tper\tcommon\tshare | $\t\t\t0.75 | $\t\t0.75 | \t\t$\t\t0.75\t\t\t$\t\t0.65 | \t\t$\t\t0.75\t\t\t$\t\t0.65 |

|  |  | Three	Months	Ended | Three	Months	Ended |  |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions,\texcept\tper\nshare\tamounts | December\n2016 | September\n2016 | June\n2016 | March\n2016 |
| Non-interest\trevenues | $\t7,834 | $7,554 | \t\t$7,178\t\t\t$5,455 | \t\t$7,178\t\t\t$5,455 |
| Interest\tincome | 2,424 | 2,389 | 2,530 | 2,348 |
| Interest\texpense | 2,088 | 1,775 | 1,776 | 1,465 |
| Net\tinterest\tincome | 336 | 614 | 754 | 883 |
| Net\trevenues,\tincluding\tnet |  |  |  |  |
| interest\tincome | 8,170 | 8,168 | 7,932 | 6,338 |
| Operating\texpenses | 4,773 | 5,300 | 5,469 | 4,762 |
| Pre-tax\tearnings | 3,397 | 2,868 | 2,463 | 1,576 |
| Provision\tfor\ttaxes | 1,050 | 774 | 641 | 441 |
| Net\tearnings | 2,347 | 2,094 | 1,822 | 1,135 |
| Preferred\tstock\tdividends | 194 | (6) | 188 | (65) |
| Net\tearnings\tapplicable\tto |  |  |  |  |
| common\tshareholders | $\t2,153 | $2,100 | \t\t$1,634\t\t\t$1,200 | \t\t$1,634\t\t\t$1,200 |
| Earnings\tper\tcommon\tshare: |  |  |  |  |
| Basic | $\t\t\t5.17 | $\t\t4.96 | \t\t$\t\t3.77\t\t\t$\t\t2.71 | \t\t$\t\t3.77\t\t\t$\t\t2.71 |
| Diluted | $\t\t\t5.08 | $\t\t4.88 | \t\t$\t\t3.72\t\t\t$\t\t2.68 | \t\t$\t\t3.72\t\t\t$\t\t2.68 |
| Dividends\tdeclared\tper\tcommon\tshare | $\t\t\t0.65 | $\t\t0.65 | \t\t$\t\t0.65\t\t\t$\t\t0.65 | \t\t$\t\t0.65\t\t\t$\t\t0.65 |

# Common	Stock	Price	Range

The	 table	below	presents the	high	and low	sales	prices	per	share	of the firm's	common	stock.

|  | 2017 |  | 2016 |  | 2015 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | High | Low | High | Low | High\nLow |
| First\tquarter | \t\t$255.15\t\t\t$220.85 | \t\t$255.15\t\t\t$220.85 | \t\t$177.50\t\t\t$139.05 | \t\t$177.50\t\t\t$139.05 | \t\t$195.73\t\t\t$172.26 |
| Second\tquarter | \t\t$232.89\t\t\t$209.62 | \t\t$232.89\t\t\t$209.62 | \t\t$168.90\t\t\t$138.20 | \t\t$168.90\t\t\t$138.20 | \t\t$218.77\t\t\t$186.96 |
| Third\tquarter | \t\t$237.60\t\t\t$214.64 | \t\t$237.60\t\t\t$214.64 | \t\t$172.42\t\t\t$142.62 | \t\t$172.42\t\t\t$142.62 | \t\t$214.61\t\t\t$167.49 |
| Fourth\tquarter | \t\t$262.14\t\t\t$233.55 | \t\t$262.14\t\t\t$233.55 | \t\t$245.57\t\t\t$160.25 | \t\t$245.57\t\t\t$160.25 | \t\t$199.90\t\t\t$169.87 |

As	of	February	9,	2018,	there	were	7,652	holders	of	record	of	the	firm's common	stock.

On	February	9,	2018,	the	last	reported	sales	price	for	the	firm's	common stock	on	the	New	York	Stock	Exchange	was	$249.30	per	share.

# Common	Stock	Performance

The	graph	and	table	below	compare	the	performance	of	an	investment	in	the firm's	common	stock	from	December	31,	2012	(the	last	trading	day	before the	firm's	2013	fiscal	year)	through	December	31,	2017,	with	the	S&P	500 Index	and	the	S&P	500	Financials	Index.	The	graph	and	table	assume	$100 was	invested	on	December	31,	2012	in	each	of	the	firm's	common	stock,	the S&P	500	Index	and	the	S&P	500	Financials	Index,	and	the	dividends	were reinvested	on	the	date	of	payment	without	payment	of	any	commissions.	The performance	 shown	 represents	 past	 performance	 and	 should	 not	 be considered	an	indication	of	future	performance.

|  | 2012 | 2013 | As	of	December<br>2014 | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| The\tGoldman |  |  |  |  |  |  |
| Sachs\tGroup,\tInc. | \t\t$100.00\t\t\t$140.78\t\t\t$155.96\t\t\t$146.93\t\t\t$198.22\t\t\t$213.56 | \t\t$100.00\t\t\t$140.78\t\t\t$155.96\t\t\t$146.93\t\t\t$198.22\t\t\t$213.56 | \t\t$100.00\t\t\t$140.78\t\t\t$155.96\t\t\t$146.93\t\t\t$198.22\t\t\t$213.56 | \t\t$100.00\t\t\t$140.78\t\t\t$155.96\t\t\t$146.93\t\t\t$198.22\t\t\t$213.56 | \t\t$100.00\t\t\t$140.78\t\t\t$155.96\t\t\t$146.93\t\t\t$198.22\t\t\t$213.56 | \t\t$100.00\t\t\t$140.78\t\t\t$155.96\t\t\t$146.93\t\t\t$198.22\t\t\t$213.56 |
| S&amp;P\t500\tIndex | \t\t$100.00\t\t\t$132.37\t\t\t$150.48\t\t\t$152.54\t\t\t$170.77\t\t\t$208.03 | \t\t$100.00\t\t\t$132.37\t\t\t$150.48\t\t\t$152.54\t\t\t$170.77\t\t\t$208.03 | \t\t$100.00\t\t\t$132.37\t\t\t$150.48\t\t\t$152.54\t\t\t$170.77\t\t\t$208.03 | \t\t$100.00\t\t\t$132.37\t\t\t$150.48\t\t\t$152.54\t\t\t$170.77\t\t\t$208.03 | \t\t$100.00\t\t\t$132.37\t\t\t$150.48\t\t\t$152.54\t\t\t$170.77\t\t\t$208.03 | \t\t$100.00\t\t\t$132.37\t\t\t$150.48\t\t\t$152.54\t\t\t$170.77\t\t\t$208.03 |
| S&amp;P\t500\tFinancials |  |  |  |  |  |  |
| Index | \t\t$100.00\t\t\t$135.59\t\t\t$156.17\t\t\t$153.74\t\t\t$188.71\t\t\t$230.49 | \t\t$100.00\t\t\t$135.59\t\t\t$156.17\t\t\t$153.74\t\t\t$188.71\t\t\t$230.49 | \t\t$100.00\t\t\t$135.59\t\t\t$156.17\t\t\t$153.74\t\t\t$188.71\t\t\t$230.49 | \t\t$100.00\t\t\t$135.59\t\t\t$156.17\t\t\t$153.74\t\t\t$188.71\t\t\t$230.49 | \t\t$100.00\t\t\t$135.59\t\t\t$156.17\t\t\t$153.74\t\t\t$188.71\t\t\t$230.49 | \t\t$100.00\t\t\t$135.59\t\t\t$156.17\t\t\t$153.74\t\t\t$188.71\t\t\t$230.49 |

# Selected	Financial	Data

|  | 2017 | 2016 | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Income\tstatement\tdata\t($\tin\tmillions) |  |  |  |  |  |
| Non-interest\trevenues | \t\t$\t\t29,141 | \t\t$\t\t28,021 | \t\t$\t\t30,756\t\t\t$\t\t30,481\t\t\t$\t\t30,814 | \t\t$\t\t30,756\t\t\t$\t\t30,481\t\t\t$\t\t30,814 | \t\t$\t\t30,756\t\t\t$\t\t30,481\t\t\t$\t\t30,814 |
| Interest\tincome | 13,113 | 9,691 | 8,452 | 9,604 | 10,060 |
| Interest\texpense | 10,181 | 7,104 | 5,388 | 5,557 | 6,668 |
| Net\tinterest\tincome | 2,932 | 2,587 | 3,064 | 4,047 | 3,392 |
| Net\trevenues,\tincluding |  |  |  |  |  |
| net\tinterest\tincome | 32,073 | 30,608 | 33,820 | 34,528 | 34,206 |
| Compensation\tand\nbenefits | 11,853 | 11,647 | 12,678 | 12,691 | 12,613 |
| Non-compensation\texpenses | 9,088 | 8,657 | 12,364 | 9,480 | 9,856 |
| Pre-tax\tearnings | \t\t$\t\t11,132 | \t\t$\t\t10,304 | \t\t$\t\t\t\t8,778\t\t\t$\t\t12,357\t\t\t$\t\t11,737 | \t\t$\t\t\t\t8,778\t\t\t$\t\t12,357\t\t\t$\t\t11,737 | \t\t$\t\t\t\t8,778\t\t\t$\t\t12,357\t\t\t$\t\t11,737 |
| Balance\tsheet\tdata\t($\tin\tmillions) |  |  |  |  |  |
| Total\tassets | \t\t$916,776 | \t\t$860,165 | \t\t$861,395\t\t\t$855,842\t\t\t$911,124 | \t\t$861,395\t\t\t$855,842\t\t\t$911,124 | \t\t$861,395\t\t\t$855,842\t\t\t$911,124 |
| Deposits | \t\t$138,604 | \t\t$124,098 | \t\t$\t\t97,519\t\t\t$\t\t82,880\t\t\t$\t\t70,696 | \t\t$\t\t97,519\t\t\t$\t\t82,880\t\t\t$\t\t70,696 | \t\t$\t\t97,519\t\t\t$\t\t82,880\t\t\t$\t\t70,696 |
| Other\tsecured\tfinancings |  |  |  |  |  |
| (long-term) | \t\t$\t\t\t\t9,892 | \t\t$\t\t\t\t8,405 | \t\t$\t\t10,520\t\t\t$\t\t\t\t7,249\t\t\t$\t\t\t\t7,524 | \t\t$\t\t10,520\t\t\t$\t\t\t\t7,249\t\t\t$\t\t\t\t7,524 | \t\t$\t\t10,520\t\t\t$\t\t\t\t7,249\t\t\t$\t\t\t\t7,524 |
| Unsecured\tlong-term |  |  |  |  |  |
| borrowings | \t\t$217,687 | \t\t$189,086 | \t\t$175,422\t\t\t$167,302\t\t\t$160,695 | \t\t$175,422\t\t\t$167,302\t\t\t$160,695 | \t\t$175,422\t\t\t$167,302\t\t\t$160,695 |
| Total\tliabilities | \t\t$834,533 | \t\t$773,272 | \t\t$774,667\t\t\t$773,045\t\t\t$832,657 | \t\t$774,667\t\t\t$773,045\t\t\t$832,657 | \t\t$774,667\t\t\t$773,045\t\t\t$832,657 |
| Total\tshareholders'\tequity | \t\t$\t\t82,243 | \t\t$\t\t86,893 | \t\t$\t\t86,728\t\t\t$\t\t82,797\t\t\t$\t\t78,467 | \t\t$\t\t86,728\t\t\t$\t\t82,797\t\t\t$\t\t78,467 | \t\t$\t\t86,728\t\t\t$\t\t82,797\t\t\t$\t\t78,467 |
| Common\tshare\tdata\t(in\tmillions,\texcept\tper\tshare\tamounts) |  |  |  |  |  |
| Earnings\tper\tcommon\tshare: |  |  |  |  |  |
| Basic | \t\t$\t\t\t\t\t\t9.12 | \t\t$\t\t\t\t16.53 | \t\t$\t\t\t\t12.35\t\t\t$\t\t\t\t17.55\t\t\t$\t\t\t\t16.34 | \t\t$\t\t\t\t12.35\t\t\t$\t\t\t\t17.55\t\t\t$\t\t\t\t16.34 | \t\t$\t\t\t\t12.35\t\t\t$\t\t\t\t17.55\t\t\t$\t\t\t\t16.34 |
| Diluted | \t\t$\t\t\t\t\t\t9.01 | \t\t$\t\t\t\t16.29 | \t\t$\t\t\t\t12.14\t\t\t$\t\t\t\t17.07\t\t\t$\t\t\t\t15.46 | \t\t$\t\t\t\t12.14\t\t\t$\t\t\t\t17.07\t\t\t$\t\t\t\t15.46 | \t\t$\t\t\t\t12.14\t\t\t$\t\t\t\t17.07\t\t\t$\t\t\t\t15.46 |
| Dividends\tdeclared\tper |  |  |  |  |  |
| common\tshare | \t\t$\t\t\t\t\t\t2.90 | \t\t$\t\t\t\t\t\t2.60 | \t\t$\t\t\t\t\t\t2.55\t\t\t$\t\t\t\t\t\t2.25\t\t\t$\t\t\t\t\t\t2.05 | \t\t$\t\t\t\t\t\t2.55\t\t\t$\t\t\t\t\t\t2.25\t\t\t$\t\t\t\t\t\t2.05 | \t\t$\t\t\t\t\t\t2.55\t\t\t$\t\t\t\t\t\t2.25\t\t\t$\t\t\t\t\t\t2.05 |
| Book\tvalue\tper |  |  |  |  |  |
| common\tshare | \t\t$\t\t181.00 | \t\t$\t\t182.47 | \t\t$\t\t171.03\t\t\t$\t\t163.01\t\t\t$\t\t152.48 | \t\t$\t\t171.03\t\t\t$\t\t163.01\t\t\t$\t\t152.48 | \t\t$\t\t171.03\t\t\t$\t\t163.01\t\t\t$\t\t152.48 |
| Basic\tshares | 388.9 | 414.8 | 441.6 | 451.5 | 467.4 |
| Average\tcommon\tshares: |  |  |  |  |  |
| Basic | 401.6 | 427.4 | 448.9 | 458.9 | 471.3 |
| Diluted | 409.1 | 435.1 | 458.6 | 473.2 | 499.6 |
| Selected\tdata\t(unaudited) |  |  |  |  |  |
| Return\ton\taverage\tcommon |  |  |  |  |  |
| shareholders'\tequity | 4.9% | 9.4% | 7.4% | 11.2% | 11.0% |
| Total\tstaff: |  |  |  |  |  |
| Americas | 19,100 | 18,100 | 19,000 | 17,400 | 16,600 |
| Non-Americas | 17,500 | 16,300 | 17,800 | 16,600 | 16,300 |
| Total\tstaff | 36,600 | 34,400 | 36,800 | 34,000 | 32,900 |
| AUS\tby\tasset\tclass | ($\tin\tbillions) |  |  |  |  |
| Alternative | \t\t$\t\t\t\t\t\t\t168 | \t\t$\t\t\t\t\t\t\t154 | \t\t$\t\t\t\t\t\t\t148\t\t\t$\t\t\t\t\t\t\t143\t\t\t$\t\t\t\t\t\t\t142 | \t\t$\t\t\t\t\t\t\t148\t\t\t$\t\t\t\t\t\t\t143\t\t\t$\t\t\t\t\t\t\t142 | \t\t$\t\t\t\t\t\t\t148\t\t\t$\t\t\t\t\t\t\t143\t\t\t$\t\t\t\t\t\t\t142 |
| Equity | 321 | 266 | 252 | 236 | 208 |
| Fixed\tincome | 660 | 601 | 546 | 516 | 446 |
| Long-term\tAUS | 1,149 | 1,021 | 946 | 895 | 796 |
| Liquidity\tproducts | 345 | 358 | 306 | 283 | 246 |
| Total\tAUS | \t\t$\t\t\t\t1,494 | \t\t$\t\t\t\t1,379 | \t\t$\t\t\t\t1,252\t\t\t$\t\t\t\t1,178\t\t\t$\t\t\t\t1,042 | \t\t$\t\t\t\t1,252\t\t\t$\t\t\t\t1,178\t\t\t$\t\t\t\t1,042 | \t\t$\t\t\t\t1,252\t\t\t$\t\t\t\t1,178\t\t\t$\t\t\t\t1,042 |

•	The	impact	of	adopting	ASU	No.	2015-03	was	a	reduction	to	both	total assets	 and	 total	 liabilities	 of	 $398	 million	 and	 $383	 million	 as	 of December	2014	and	December	2013,	respectively.	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	about	ASU	No.	2015-03.

•	Basic	shares	represent	common	shares	outstanding	and	restricted	stock units	granted	to	employees	with	no	future	service	requirements.

# Statistical	Disclosures

# Distribution	of	Assets,	Liabilities	and	Shareholders' Equity

The tables	 below	 present	 a summary	 of	 average	 balances, interest	 and interest	rates.

| U.S. | $		66,838			$		72,132			$		50,696 | $		66,838			$		72,132			$		50,696 | $		66,838			$		72,132			$		50,696 |
| :--- | :--- | :--- | :--- |
| Non-U.S. | 42,353 | 33,342 | 24,703 |
| Total\tdeposits\twith\tbanks | 109,191 | 105,474 | 75,399 |
| U.S. | 159,829 | 177,930 | 193,512 |
| Non-U.S. | 133,156 | 129,150 | 111,168 |
| Total\tcollateralized\tagreements | 292,985 | 307,080 | 304,680 |
| U.S. | 163,344 | 147,862 | 167,727 |
| Non-U.S. | 112,299 | 102,387 | 97,152 |
| Total\tfinancial\tinstruments\towned | 275,643 | 250,249 | 264,879 |
| U.S. | 50,742 | 43,367 | 34,521 |
| Non-U.S. | 4,767 | 4,609 | 2,440 |
| Total\tloans\treceivable | 55,509 | 47,976 | 36,961 |
| U.S. | 40,642 | 37,525 | 41,022 |
| Non-U.S. | 40,314 | 32,732 | 45,235 |
| Total\tother\tinterest-earning\tassets | 80,956 | 70,257 | 86,257 |
| Total\tinterest-earning\tassets | 814,284 | 781,036 | 768,176 |
| Cash\tand\tdue\tfrom\tbanks | 11,056 | 13,985 | 13,803 |
| Other\tnon-interest-earning\tassets | 84,264 | 91,875 | 91,970 |
| Total\tassets | \t\t$909,604\t\t\t$886,896\t\t\t$873,949 | \t\t$909,604\t\t\t$886,896\t\t\t$873,949 | \t\t$909,604\t\t\t$886,896\t\t\t$873,949 |
| Liabilities |  |  |  |
| U.S. | \t\t$101,109\t\t\t$\t\t97,255\t\t\t$\t\t73,063 | \t\t$101,109\t\t\t$\t\t97,255\t\t\t$\t\t73,063 | \t\t$101,109\t\t\t$\t\t97,255\t\t\t$\t\t73,063 |
| Non-U.S. | 24,356 | 17,605 | 13,885 |
| Total\tinterest-bearing\tdeposits | 125,465 | 114,860 | 86,948 |
| U.S. | 56,614 | 52,388 | 59,885 |
| Non-U.S. | 39,029 | 31,936 | 29,777 |
| Total\tcollateralized\tfinancings | 95,643 | 84,324 | 89,662 |
| U.S. | 34,422 | 36,273 | 36,609 |
| Non-U.S. | 41,507 | 35,797 | 36,066 |
| Total\tfinancial\tinstruments\tsold, |  |  |  |
| but\tnot\tyet\tpurchased | 75,929 | 72,070 | 72,675 |
| U.S. | 38,615 | 43,684 | 42,743 |
| Non-U.S. | 13,318 | 13,656 | 14,447 |
| Total\tshort-term\tborrowings | 51,933 | 57,340 | 57,190 |
| U.S. | 199,569 | 182,808 | 172,160 |
| Non-U.S. | 15,000 | 10,488 | 8,843 |
| Total\tlong-term\tborrowings | 214,569 | 193,296 | 181,003 |
| U.S. | 135,804 | 147,177 | 156,248 |
| Non-U.S. | 60,986 | 59,852 | 62,672 |
| Total\tother\tinterest-bearing\tliabilities | 196,790 | 207,029 | 218,920 |
| Total\tinterest-bearing\tliabilities | 760,329 | 728,919 | 706,398 |
| Non-interest-bearing\tdeposits | 3,630 | 2,996 | 1,986 |
| Other\tnon-interest-bearing\tliabilities | 59,686 | 68,323 | 79,251 |
| Total\tliabilities | 823,645 | 800,238 | 787,635 |
| Shareholders'\tequity |  |  |  |
| Preferred\tstock | 11,238 | 11,304 | 10,585 |
| Common\tstock | 74,721 | 75,354 | 75,729 |
| Total\tshareholders'\tequity | 85,959 | 86,658 | 86,314 |
| Total\tliabilities\tand\tshareholders'\tequity | \t\t$909,604\t\t\t$886,896\t\t\t$873,949 | \t\t$909,604\t\t\t$886,896\t\t\t$873,949 | \t\t$909,604\t\t\t$886,896\t\t\t$873,949 |
| Percentage\tof\tinterest-earning\tassets\tand\tinterest-bearing\tliabilities |  |  |  |
| attributable\tto\tnon-U.S.\toperations |  |  |  |
| Assets | 40.88% | 38.69% | 36.54% |
| Liabilities | 25.54% | 23.23% | 23.46% |
|  | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | 197 |

•	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. See	 the	 notes	 to	 the	 consolidated	 financial	 statements	 for	 further information	about	such	assets	and	liabilities.

•	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.

•	In	December	2016,	 the	firm	reclassified	amounts	related	 to	cash	and securities	 segregated	 for	 regulatory	 and	 other	 purposes	 that	 were previously	included	in	total	other	interest-earning	assets	to	total	deposits with	 banks,	 total	 collateralized	 agreements,	 and	 total	 financial instruments	owned.	The	firm	also	reclassified	amounts	related	to	cash segregated	 for	 regulatory	 and	 other	 purposes	 that	 were	 previously included	 in	 other	non-interest-earning	 assets	 to	 cash	 and	 due	 from banks.	Previously	reported	amounts	have	been	conformed	to	the	current presentation.	 See	 Note	 3	 to	 the	 consolidated	 financial	 statements	 for further	information	about	this	reclassification.

# Changes	in	Net	Interest	Income,	Volume	and	Rate	Analysis

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

| $	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,\tbut |  |  |  |
| not\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 |
|  | Goldman\tSachs\t2017\tForm\t10-K | Goldman\tSachs\t2017\tForm\t10-K | 199 |

|  |  |  | Net |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | \tVolume | Rate | Change |
| Interest-earning\tassets |  |  |  |
| U.S. | \t $\t114 | \t$\t\t\t125 | \t$\t\t\t239 |
| Non-U.S. | 18 | (46) | (28) |
| Total\tdeposits\twith\tbanks | 132 | 79 | 211 |
| U.S. | (32) | 762 | 730 |
| Non-U.S. | 46 | (102) | (56) |
| Total\tcollateralized\tagreements | 14 | 660 | 674 |
| U.S. | (505) | 184 | (321) |
| Non-U.S. | 86 | (183) | (97) |
| Total\tfinancial\tinstruments\towned | (419) | 1 | (418) |
| U.S. | 330 | 189 | 519 |
| Non-U.S. | 105 | 28 | 133 |
| Total\tloans\treceivable | 435 | 217 | 652 |
| U.S. | (85) | 245 | 160 |
| Non-U.S. | (133) | 93 | (40) |
| Total\tother\tinterest-earning\tassets | (218) | 338 | 120 |
| Change\tin\tinterest\tincome | (56) | 1,295 | 1,239 |
| Interest-bearing\tliabilities |  |  |  |
| U.S. | 194 | 232 | 426 |
| Non-U.S. | 21 | 23 | 44 |
| Total\tinterest-bearing\tdeposits | 215 | 255 | 470 |
| U.S. | (47) | 151 | 104 |
| Non-U.S. | 8 | – | 8 |
| Total\tcollateralized\tfinancings | (39) | 151 | 112 |
| U.S. | (6) | (31) | (37) |
| Non-U.S. | (5) | (26) | (31) |
| Total\tfinancial\tinstruments\tsold,\tbut |  |  |  |
| not\tyet\tpurchased | (11) | (57) | (68) |
| U.S. | 9 | (9) | – |
| Non-U.S. | (3) | 20 | 17 |
| Total\tshort-term\tborrowings | 6 | 11 | 17 |
| U.S. | 243 | 210 | 453 |
| Non-U.S. | 11 | (100) | (89) |
| Total\tlong-term\tborrowings | 254 | 110 | 364 |
| U.S. | 41 | 679 | 720 |
| Non-U.S. | (24) | 125 | 101 |
| Total\tother\tinterest-bearing\tliabilities | 17 | 804 | 821 |
| Change\tin\tinterest\texpense | 442 | 1,274 | 1,716 |
| Change\tin\tnet\tinterest\tincome | \t$(498) | \t$\t\t\t\t\t21 | \t$\t\t(477) |

The	table	below	presents	a	summary	of	the	firm's	interest-bearing	deposits.

|  |  | Year	Ended	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Average\tbalances |  |  |  |
| U.S. |  |  |  |
| Savings\tand\tdemand | \t\t$\t\t68,819 | \t$\t\t59,357 | \t$44,486 |
| Time | 32,290 | 37,898 | 28,577 |
| Total\tU.S. | 101,109 | 97,255 | 73,063 |
| Non-U.S. |  |  |  |
| Demand | 8,443 | 8,041 | 5,703 |
| Time | 15,913 | 9,564 | 8,182 |
| Total\tNon-U.S. | 24,356 | 17,605 | 13,885 |
| Total | \t\t$125,465 | \t$114,860 | \t$86,948 |
| Average\tinterest\trates |  |  |  |
| U.S. |  |  |  |
| Savings\tand\tdemand | 0.98% | 0.56% | 0.27% |
| Time | 1.64% | 1.18% | 0.83% |
| Total\tU.S. | 1.19% | 0.80% | 0.48% |
| Non-U.S. |  |  |  |
| Demand | 0.68% | 0.29% | 0.19% |
| Time | 0.75% | 0.78% | 0.53% |
| Total\tNon-U.S. | 0.72% | 0.56% | 0.39% |
| Total | 1.10% | 0.76% | 0.47% |

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	 2017,	 deposits	 in	 U.S.	 and	non-U.S.	 offices	 include $2.81	billion	and	$11.66	billion,	respectively,	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	2017 |
| :--- | :--- |
| 3\tmonths\tor\tless | $\t\t\t212 |
| 3\tto\t6\tmonths | 515 |
| 6\tto\t12\tmonths | 971 |
| Greater\tthan\t12\tmonths | 1,113 |
| Total | $2,811 |

# Short-Term	and	Other	Borrowed	Funds

The	table	below	presents	a	summary	of	the	firm's	securities	loaned	and securities	sold	under	agreements	to	repurchase,	and	short-term	borrowings.

|  |  | As	of	December |  |
| :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 |
| Securities\tloaned\tand\tsecurities\tsold\tunder\tagreements\tto\trepurchase |  |  |  |
| Amounts\toutstanding\tat\tyear-end | $\t\t99,511 | $79,340 | $89,683 |
| Average\toutstanding\tduring\tthe\tyear | $\t\t95,643 | $84,324 | $89,662 |
| Maximum\tmonth-end\toutstanding | $103,359 | $89,142 | $97,466 |
| Weighted\taverage\tinterest\trate |  |  |  |
| During\tthe\tyear | 0.90% | 0.52% | 0.37% |
| At\tyear-end | 1.16% | 0.44% | 0.39% |
| Short-term\tborrowings |  |  |  |
| Amounts\toutstanding\tat\tyear-end | $\t\t61,818 | $52,383 | $57,020 |
| Average\toutstanding\tduring\tthe\tyear | $\t\t51,933 | $57,340 | $57,190 |
| Maximum\tmonth-end\toutstanding | $\t\t61,818 | $61,840 | $60,522 |
| Weighted\taverage\tinterest\trate |  |  |  |
| During\tthe\tyear | 1.34% | 0.78% | 0.75% |
| At\tyear-end | 1.22% | 0.94% | 0.80% |

•	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.

•	Amounts outstanding at	year-end for	 short-term	 borrowings includes short-term secured financings	 of	 $14.90	 billion,	 $13.12	 billion and $14.23 billion as of December 2017, December 2016 and December	2015,	respectively.

•	The	 weighted	 average interest	 rates	 for these	 borrowings include the effect	of	hedging	activities.

# Loan	Portfolio

The	table	below	presents	a	summary	of	the	firm's	loans	receivable.

|  |  | As	of	December | As	of	December |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | 2016 | 2015 | 2014 | 2013 |
| U.S. |  |  |  |  |  |
| Corporate\tloans | \t\t$28,622 | \t\t$23,821\t\t\t$19,909\t\t\t$14,020\t\t\t$\t\t6,910 | \t\t$23,821\t\t\t$19,909\t\t\t$14,020\t\t\t$\t\t6,910 | \t\t$23,821\t\t\t$19,909\t\t\t$14,020\t\t\t$\t\t6,910 | \t\t$23,821\t\t\t$19,909\t\t\t$14,020\t\t\t$\t\t6,910 |
| Loans\tto\tPWM\tclients | 14,489 | 12,386 | 12,824 | 10,989 | 6,545 |
| Loans\tbacked\tby: |  |  |  |  |  |
| Commercial\treal\testate | 6,150 | 2,813 | 3,186 | 1,876 | 727 |
| Residential\treal\testate | 6,176 | 3,777 | 2,187 | 311 | – |
| Marcus\tloans | 1,912 | 208 | – | – | – |
| Other\tloans | 3,233 | 2,664 | 3,495 | 821 | – |
| Total\tU.S. | 60,582 | 45,669 | 41,601 | 28,017 | 14,182 |
| Non-U.S. |  |  |  |  |  |
| Corporate\tloans | 2,127 | 1,016 | 831 | 290 | 131 |
| Loans\tto\tPWM\tclients\nLoans\tbacked\tby: | 2,102 | 1,442 | 1,137 | 300 | 13 |
| Commercial\treal\testate | 1,837 | 1,948 | 2,085 | 549 | 708 |
| Residential\treal\testate | 58 | 88 | 129 | 10 | – |
| Other\tloans | 30 | 18 | 38 | – | – |
| Total\tnon-U.S. | 6,154 | 4,512 | 4,220 | 1,149 | 852 |
| Total\tloans\treceivable,\ngross | 66,736 | 50,181 | 45,821 | 29,166 | 15,034 |
| Allowance\tfor\tloan\tlosses |  |  |  |  |  |
| U.S. | 604 | 476 | 381 | 205 | 115 |
| Non-U.S. | 199 | 33 | 33 | 23 | 24 |
| Total\tallowance\tfor\tloan |  |  |  |  |  |
| losses | 803 | 509 | 414 | 228 | 139 |
| Total\tloans\treceivable | \t\t$65,933 | \t\t$49,672\t\t\t$45,407\t\t\t$28,938\t\t\t$14,895 | \t\t$49,672\t\t\t$45,407\t\t\t$28,938\t\t\t$14,895 | \t\t$49,672\t\t\t$45,407\t\t\t$28,938\t\t\t$14,895 | \t\t$49,672\t\t\t$45,407\t\t\t$28,938\t\t\t$14,895 |

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.

|  |  | As	of	December | As	of	December |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | 2017 | \t 2016 | \t 2015 | \t 2014 | \t 2013 |
| Allowance\tfor\tloan\tlosses |  |  |  |  |  |
| Beginning\tbalance | \t$\t509 | \t$414 | \t$228 | \t$139 | \t$\t\t24 |
| Charge-offs | (203) | (8) | (1) | (3) | – |
| Provision | 574 | 138 | 187 | 92 | 115 |
| Other | (77) | (35) | – | – | – |
| Ending\tbalance | \t$\t803 | \t$509 | \t$414 | \t$228 | \t$139 |

•	Allowance	for	loan	losses	primarily	related	to	corporate	loans	and	loans extended	to	PWM	clients	that	were	held	in	entities	located	in	the	U.S.

•	Substantially	 all	 charge-offs	 were related to corporate loans held in entities	located	in	the	U.S.

# Maturities	and	Sensitivity	to	Changes	in	Interest	Rates

The	table	below	presents	the	firm's	gross	loans	receivable	by	tenor	and	a distribution	of	such	loans	receivable	between	fixed	and	floating	interest rates.

|  | Maturities	and	Sensitivity	to	Changes<br>in	Interest	Rates	as	of	December	2017 | Maturities	and	Sensitivity	to	Changes<br>in	Interest	Rates	as	of	December	2017 | Maturities	and	Sensitivity	to	Changes<br>in	Interest	Rates	as	of	December	2017 | Maturities	and	Sensitivity	to	Changes<br>in	Interest	Rates	as	of	December	2017 |
| :--- | :--- | :--- | :--- | :--- |
| $\tin\tmillions | Less\nthan\n1\tyear | 1\t-\t5\nyears | Greater\nthan\t5\nyears | Total |
| U.S. |  |  |  |  |
| Corporate\tloans | \t\t$\t\t1,988 | \t$21,957 | \t$4,677 | \t$28,622 |
| Loans\tto\tPWM\tclients | 11,324 | 3,165 | – | 14,489 |
| Loans\tbacked\tby: |  |  |  |  |
| Commercial\treal\testate | 209 | 5,643 | 298 | 6,150 |
| Residential\treal\testate | 388 | 2,085 | 3,703 | 6,176 |
| Marcus\tloans | 2 | 1,746 | 164 | 1,912 |
| Other\tloans | 933 | 1,495 | 805 | 3,233 |
| Total\tU.S. | 14,844 | 36,091 | 9,647 | 60,582 |
| Non-U.S. |  |  |  |  |
| Corporate\tloans | 198 | 1,675 | 254 | 2,127 |
| Loans\tto\tPWM\tclients | 2,078 | 24 | – | 2,102 |
| Loans\tbacked\tby: |  |  |  |  |
| Commercial\treal\testate | 369 | 1,400 | 68 | 1,837 |
| Residential\treal\testate | 9 | 49 | – | 58 |
| Other\tloans | 2 | 8 | 20 | 30 |
| Total\tnon-U.S. | 2,656 | 3,156 | 342 | 6,154 |
| Total\tloans\treceivable,\tgross | \t\t$17,500 | \t$39,247 | \t$9,989 | \t$66,736 |
| Loans\tat\tfixed\tinterest\trates | \t\t$\t\t\t\t\t181 | \t$\t\t2,979 | \t$3,569 | \t$\t\t6,729 |
| Loans\tat\tvariable\tinterest\trates | 17,319 | 36,268 | 6,420 | 60,007 |
| Total | \t\t$17,500 | \t$39,247 | \t$9,989 | \t$66,736 |

# 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	and include cash,	receivables,	collateralized	agreements	and	cash	financial	instruments, but	exclude	derivative	instruments.

| $	in	millions | Banks			Governments | Banks			Governments | Other | Total			 Commitments |
| :--- | :--- | :--- | :--- | :--- |
| As\tof\tDecember\t2017 |  |  |  |  |
| Cayman\tIslands | \t\t$\t\t\t\t\t\t\t\t\t6 | $\t\t\t\t\t\t\t\t\t– | \t\t$34,624\t\t\t$34,630 | $\t\t4,940 |
| Germany | \t\t$\t\t4,241 | $22,765 | \t\t$\t\t6,916\t\t\t$33,922 | $\t\t7,015 |
| France | \t\t$\t\t3,569 | $\t\t1,574 | \t\t$19,048\t\t\t$24,191 | $14,549 |
| Canada | \t\t$\t\t2,562 | $\t\t\t\t\t311 | \t\t$17,358\t\t\t$20,231 | $\t\t2,388 |
| Japan | \t\t$\t\t8,827 | $\t\t\t\t\t\t\t69 | \t\t$\t\t7,220\t\t\t$16,116 | $18,079 |
| Ireland | \t\t$\t\t\t\t\t143 | $\t\t\t\t\t\t\t65 | \t\t$11,490\t\t\t$11,698 | $\t\t\t\t\t895 |
| China | \t\t$\t\t2,550 | $\t\t\t\t\t687 | \t\t$\t\t7,838\t\t\t$11,075 | $\t\t\t\t\t\t\t\t\t– |
| Italy | \t\t$\t\t2,306 | $\t\t3,986 | \t\t$\t\t2,586\t\t\t$\t\t8,878 | $\t\t1,649 |
| U.K. | \t\t$\t\t1,300 | $\t\t\t\t\t\t\t\t\t– | \t\t$\t\t7,480\t\t\t$\t\t8,780 | $14,966 |
| Singapore | \t\t$\t\t\t\t\t372 | $\t\t5,462 | \t\t$\t\t1,873\t\t\t$\t\t7,707 | $\t\t\t\t\t\t\t48 |
| Luxembourg | \t\t$\t\t\t\t\t\t\t59 | $\t\t\t\t\t324 | \t\t$\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\t\t\t3 | $\t\t\t\t\t\t\t\t\t– | \t\t$34,756\t\t\t$34,759 | $\t\t2,519 |
| France | \t\t$\t\t6,333 | $\t\t1,858 | \t\t$18,576\t\t\t$26,767 | $\t\t9,598 |
| Germany | \t\t$\t\t3,183 | $14,061 | \t\t$\t\t9,250\t\t\t$26,494 | $\t\t7,281 |
| Japan | \t\t$\t\t9,860 | $\t\t\t\t\t721 | \t\t$\t\t6,310\t\t\t$16,891 | $\t\t7,476 |
| Italy | \t\t$\t\t3,220 | $\t\t3,211 | \t\t$\t\t1,608\t\t\t$\t\t8,039 | $\t\t1,228 |
| Canada | \t\t$\t\t\t\t\t814 | $\t\t\t\t\t333 | \t\t$\t\t6,164\t\t\t$\t\t7,311 | $\t\t1,279 |
| China | \t\t$\t\t1,189 | $\t\t\t\t\t158 | \t\t$\t\t5,662\t\t\t$\t\t7,009 | $\t\t\t\t\t\t\t\t\t– |
| Singapore | \t\t$\t\t\t\t\t190 | $\t\t6,165 | \t\t$\t\t\t\t\t505\t\t\t$\t\t6,860 | $\t\t\t\t\t\t\t97 |
| South\tKorea | \t\t$\t\t\t\t\t107 | $\t\t3,563 | \t\t$\t\t2,847\t\t\t$\t\t6,517 | $\t\t\t\t\t\t\t\t\t4 |
| As\tof\tDecember\t2015 |  |  |  |  |
| Cayman\tIslands | \t\t$\t\t\t\t\t\t\t\t\t1 | $\t\t\t\t\t\t\t\t\t– | \t\t$39,602\t\t\t$39,603 | $\t\t3,046 |
| France | \t\t$\t\t5,596 | $\t\t2,904 | \t\t$23,853\t\t\t$32,353 | $\t\t4,795 |
| Japan | \t\t$10,254 | $\t\t\t\t\t297 | \t\t$11,648\t\t\t$22,199 | $\t\t9,684 |
| Germany | \t\t$\t\t4,080 | $\t\t7,969 | \t\t$\t\t8,497\t\t\t$20,546 | $\t\t5,008 |
| Italy | \t\t$\t\t4,326 | $\t\t3,691 | \t\t$\t\t2,647\t\t\t$10,664 | $\t\t2,634 |
| Canada | \t\t$\t\t1,173 | $\t\t\t\t\t310 | \t\t$\t\t8,642\t\t\t$10,125 | $\t\t1,404 |
| U.K. | \t\t$\t\t2,170 | $\t\t\t\t\t\t\t42 | \t\t$\t\t7,138\t\t\t$\t\t9,350 | $15,075 |
| China | \t\t$\t\t2,189 | $\t\t\t\t\t424 | \t\t$\t\t6,068\t\t\t$\t\t8,681 | $\t\t\t\t\t111 |
| Singapore | \t\t$\t\t\t\t\t192 | $\t\t7,462 | \t\t$\t\t\t\t\t502\t\t\t$\t\t8,156 | $\t\t\t\t\t\t\t14 |
| South\tKorea | \t\t$\t\t\t\t\t\t\t79 | $\t\t5,545 | \t\t$\t\t1,914\t\t\t$\t\t7,538 | $\t\t\t\t\t\t\t\t\t2 |

•	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	consist	of	commitments	to	extend	credit and	forward	starting	collateralized	agreements.

•	Beginning in	 December	 2016, collateralized agreements	 with agency lenders	are	presented	based	on	the	country	of	the	underlying	counterparty rather than the country of the agency lender. Amounts as of December	2015	have	been	conformed	to	the	current	presentation.

# 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,	2017	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.

# PART	III

# Item	10.				Directors,	Executive	Officers	and Corporate	Governance

Information	relating	to	our	executive	officers	is	included	on	page	43	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	 2018	Annual Meeting	of	Shareholders,	which	will	be	filed	within	120	days	of	the	end	of 2017	 (2018	 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	 2018	 Proxy Statement	and	is	incorporated	in	this	Form	10-K	by	reference.

# Item	9B.				Other	Information

# 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	2018	Proxy	Statement	and	is	incorporated in	this	Form	10-K	by	reference.

The following table provides information as of	 December 31, 2017 regarding	securities	to	be	issued	on	exercise	of	outstanding	stock	options or	 pursuant to	 outstanding restricted	 stock	 units (RSUs)	 and	 securities remaining	available	for	issuance	under	our	equity	compensation	plans	that were	in	effect	during	2017.

| 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 | 20,415,763 | $78.78 | 72,968,247 |
| Equity\tcompensation\tplans\tnot |  |  |  |
| approved\tby\tsecurity\tholders | – | – | – |
| Total | 20,415,763 |  | 72,968,247 |

•	Securities to	 be Issued	 Upon	 Exercise	 of	 Outstanding	 Options and Rights includes: (i)	 2,101,639	 shares	 of	 common	 stock that	 may	 be issued	upon	exercise	of	outstanding	options	and	(ii)	18,314,124	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.

•	The	Weighted	Average	Exercise	Price	of	Outstanding	Options	relates only to the options described above.	 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 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	 2018	 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 2018	Proxy	Statement	and	is	incorporated	in	this	Form	10-K	by	reference.

# PART	IV

# 	 Exhibits,	 Financial	 Statement

# Schedules

# (a)	Documents	filed	as	part	of	this	Report:

# 1.	Consolidated	Financial	Statements

The consolidated	 financial	 statements	 required to be filed in this Form	10-K	are	included	in	Part	II,	Item	8	hereof.

# 2.	Exhibits

				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).

				4.4 Senior	Debt	Indenture,	dated	as	of	December	4,	2007,	among GS	Finance	Corp.,	as	issuer,	The	Goldman	Sachs	Group,	Inc., as	 guarantor,	 and	 The	 Bank	 of	 New	 York,	 as	 trustee (incorporated	by	reference	to	Exhibit	4.69	to	the	Registrant's Post-Effective	 Amendment	 No. 10 to	 Form	S-3,	 filed	 on December	4,	2007).

				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 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).

				4.10 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.

		10.1 The	Goldman	Sachs	Amended	and	Restated	Stock	Incentive Plan	 (2015)	 (incorporated	 by	 reference	 to	 Annex	 B	 to	 the Registrant's	 Definitive	 Proxy	 Statement	 on	 Schedule	 14A, filed	on	April	10,	2015).	†

		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)).	†

		10.4 Form	 of	 Agreement	 Relating	 to	 Noncompetition	and	 Other Covenants	(incorporated	by	reference	to	Exhibit	10.20	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).

		10.10 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).

		10.17 Form	 of	Non-Employee	 Director	 Option	Award	Agreement (incorporated	by	reference	to	Exhibit	10.34	to	the	Registrant's Annual	 Report	 on	Form 	 10-K for	 the	 fiscal	 year	 ended December	31,	2009).	†

		10.19 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).

		10.20 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).

		10.21 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).	†

		10.22 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).	† 		10.23 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).	†

		10.24 Description	 of	 PMD	 Retiree	 Medical	Program (incorporated by	 reference	 to	 Exhibit	 10.2	 to	 the	 Registrant's	 Quarterly Report on	Form 10-Q for the period ended February	29,	2008).	†

		10.26 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).

		10.28 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).	†

		10.29 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	 (Base	 and/or Supplemental)	(pre-2015)	 (incorporated	 by	 reference	 to Exhibit	10.38	to	the	Registrant's	Annual	Report	on	Form	10-K for	the	fiscal	year	ended	December	31,	2014).	†

		10.35 Form of	Year-End	 Short-Term	 Restricted	 Stock	 Award Agreement	(pre-2015) (incorporated by reference to Exhibit	10.42	to	the	Registrant's	Annual	Report	on	Form	10-K for	the	fiscal	year	ended	December	31,	2014).	†

		10.36 Form	of	Fixed	Allowance	RSU	Award	 Agreement	(pre-2015) (incorporated	by	reference	to	Exhibit	10.43	to	the	Registrant's Annual	 Report	 on	Form 10-K for	 the	 fiscal	 year	 ended December	31,	2014).	†

		10.42 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).

		10.43 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).	†

		10.44 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).	†

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).

Interactive	data	files	pursuant	to	Rule	405	of	Regulation	S-T: (i)	the	Consolidated	Statements	of	Earnings	for	the	years	ended December 31, 2017, December 31, 2016 and December 31, 2015,	 (ii)	 the	 Consolidated	 Statements	 of Comprehensive	Income	for	the	years	ended	December	31,	2017, December 31, 2016	 and	 December 31, 2015,	 (iii)	 the Consolidated	 Statements	 of	 Financial	 Condition	 as	 of December 31, 2017	 and	 December 31, 2016,	 (iv)	 the Consolidated	Statements	of	Changes	in	Shareholders'	Equity	for the	years	ended	December	31,	2017,	December	31,	2016	and December	31,	2015,	(v)	the	Consolidated	Statements	of	Cash Flows for the years ended December 31, 2017, December	31,	2016	and	December	31,	2015,	and	(vi)	the	notes to	the	Consolidated	Financial	Statements.

† This	exhibit	is	a	management	contract	or	a	compensatory	plan	or	arrangement.

# SIGNATURES



Question: what was the change in level 3 financial assets from 2016 to 2017 in millions?
Calculation:    level_3_financial_assets_change = 19201 - 23280
 answer = level_3_financial_assets_change 
Answer: -4079