# GOLDMAN SACHS GROUP INC (GS) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from GOLDMAN SACHS GROUP INC's 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/886982/000119312522052682/d192225d10k.htm
Accession: 0001193125-22-052682
Filing date: 2022-02-25
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/GS/
All MD&A years: /company/GS/mda/
Next year: /company/GS/mda/fy2022/ (FY 2022)

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

Introduction

The Goldman Sachs Group, Inc. (Group Inc. or parent company), a Delaware corporation, together with its consolidated subsidiaries, is a leading global financial institution that delivers a broad range of financial services across investment banking, securities, investment management and consumer banking to a large 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. We report our activities in four business segments: Investment Banking, Global Markets, Asset Management, and Consumer & Wealth Management. See “Results of Operations” for further information about our business segments.

When we use the terms “we,” “us” and “our,” we mean Group Inc. and its consolidated subsidiaries. When we use the term “our subsidiaries,” we mean the consolidated subsidiaries of Group Inc. References to “this
Form 10-K”
are to our Annual Report on
Form 10-K
for the year ended December 31, 2021. 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 2021, 2020 and 2019 refer to our years ended, or the dates, as the context requires, December 31, 2021, December 31, 2020 and December 31, 2019, respectively. Any reference to a future year refers to a year ending on December 31 of that year.

Group Inc. is a bank holding company (BHC) and a financial holding company regulated by the Board of Governors of the Federal Reserve System (FRB).

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 or statements of current conditions, but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control.

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

[[GREPCENT_TABLE]]
[["58","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

These statements may relate to, among other things, (i) our future plans and results, including our target ROE, ROTE, efficiency ratio, Common Equity Tier 1 (CET1) capital ratio and firmwide assets under supervision (AUS) inflows, and how they can be achieved, (ii) trends in or growth opportunities for our businesses, including the timing, costs, profitability, benefits and other aspects of business and strategic initiatives and their impact on our efficiency ratio, (iii) our level of future compensation expense, including as a percentage of both operating expenses and revenues net of provision for credit losses, (iv) our investment banking transaction backlog and future results, (v) our expected interest income and interest expense, (vi) our expense savings and strategic locations initiatives, (vii) expenses we may incur, including future litigation expense and expenses from investing in our consumer and transaction banking businesses, (viii) the projected growth of our deposits and other funding, asset liability management and funding strategies and related interest expense savings, (ix) our business initiatives, including transaction banking and new consumer financial products, (x) our planned 2022 benchmark debt issuances, (xi) the amount, composition and location of global core liquid assets (GCLA) we expect to hold, (xii) our credit exposures, (xiii) our expected provisions for credit losses, (xiv) the adequacy of our allowance for credit losses, (xv) the projected growth of our consumer lending and credit card businesses, (xvi) the objectives and effectiveness of our Business Continuity Planning (BCP) strategy, information security program, risk management and liquidity policies, (xvii) our resolution plan and strategy and their implications for stakeholders, (xviii) the design and effectiveness of our resolution capital and liquidity models and triggers and alerts framework, (xix) the results of stress tests, the effect of changes to regulations, and our future status, activities or reporting under banking and financial regulation, (xx) our expected tax rate, (xxi) the future state of our liquidity and regulatory capital ratios, and our prospective capital distributions (including dividends and repurchases), (xxii) our expected SCB and
G-SIB
surcharge, (xxiii) legal proceedings, governmental investigations or other contingencies, (xxiv) the asset recovery guarantee and our remediation activities related to our 1Malaysia Development Berhad (1MDB) settlements, (xxv) the replacement of IBORs and our transition to alternative risk-free reference rates, (xxvi) the impact of the coronavirus
(COVID-19)
pandemic on our business, results, financial position and liquidity, (xxvii) the effectiveness of our management of our human capital, including our diversity goals, (xxviii) our sustainability and carbon neutrality targets and goals, (xxix) our plans for our people to return to our offices, (xxx) future inflation and (xxxi) our completed, announced and prospective acquisitions, including our completed acquisition of the General Motors
co-branded
credit card portfolio and our announced acquisitions of NN Investment Partners and GreenSky, Inc. (GreenSky).

Executive Overview

We generated net earnings of $21.64 billion for 2021, significantly higher compared with $9.46 billion for 2020. Diluted earnings per common share (EPS) was $59.45 for 2021, significantly higher compared with $24.74 for 2020. Return on average common shareholders’ equity (ROE) was 23.0% for 2021, compared with 11.1% for 2020. Book value per common share was $284.39 as of December 2021, 20.4% higher compared with December 2020.

During 2020, we recorded net provisions for litigation and regulatory proceedings of $3.42 billion, which reduced diluted EPS by $9.51 and reduced ROE by 3.9 percentage points.

Net revenues were $59.34 billion for 2021, 33% higher than 2020, reflecting higher net revenues across all segments, including significant increases in Asset Management, Investment Banking and Consumer & Wealth Management. Net revenues in Asset Management primarily reflected significantly higher net revenues in Equity investments and Lending and debt investments, net revenues in Investment Banking primarily reflected significantly higher net revenues in Financial advisory and Underwriting, and net revenues in Consumer & Wealth Management reflected growth in both Wealth management and Consumer banking net revenues. Net revenues in Global Markets were slightly higher, reflecting significantly higher net revenues in Equities, partially offset by lower net revenues in Fixed Income, Currency and Commodities (FICC) compared with a strong prior year.

Provision for credit losses was $357 million for 2021, compared with $3.10 billion for 2020. 2021 included provisions related to portfolio growth (primarily in credit cards, including provisions related to the commitment to acquire the General Motors
co-branded
credit card portfolio), largely offset by reserve reductions on wholesale and consumer loans reflecting continued improvement in the broader economic environment. This followed challenging conditions in the prior year as a result of the impact of the
COVID-19
pandemic, which contributed to significant provisions in 2020.

Operating expenses were $31.94 billion for 2021, 10% higher than 2020, primarily reflecting significantly higher compensation and benefits expenses (reflecting strong performance). In addition, technology expenses and professional fees were significantly higher and transaction based expenses were higher. These increases were partially offset by significantly lower net provisions for litigation and regulatory proceedings and lower expenses related to consolidated investments (including impairments). Our efficiency ratio (total operating expenses divided by total net revenues) for 2021 was 53.8%, compared with 65.0% for 2020. In 2020, net provisions for litigation and regulatory proceedings increased our efficiency ratio by 7.6 percentage points.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","59"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

During 2021, we returned $7.49 billion of capital to common shareholders, including $5.20 billion of common share repurchases and $2.29 billion of common stock dividends. As of December 2021, our CET1 capital ratio was 14.2% under the Standardized Capital Rules and 14.9% under the Advanced Capital Rules. See Note 20 to the consolidated financial statements for further information about our capital ratios.

We announced two strategic acquisitions during 2021, the pending acquisitions of NN Investment Partners in our Asset Management business and GreenSky in our Consumer banking business. We expect these acquisitions to accelerate our strategy to drive more durable returns. The acquisition of NN Investment Partners is expected to close in the second quarter of 2022, and the acquisition of GreenSky is expected to close in the first quarter of 2022.

In the first quarter of 2022, we announced that over the medium-term (approximately 3 years), our target is to achieve (i) ROE within a range of 14% to 16%, (ii) return on average tangible common shareholders’ equity (ROTE) within a range of 15% to 17% and (iii) an efficiency ratio of approximately 60%. In addition, we announced that our target is to maintain capital ratios equal to the regulatory requirements plus a buffer of 50 to 100 basis points.

Business Environment

In 2021, the global economy continued to recover from the impact of the
COVID-19
pandemic, as the distribution of vaccines helped facilitate an increase in global economic activity. Economic activity continued to benefit from ongoing fiscal stimulus from governments and continued accommodative monetary policy from global central banks. In the second half of the year, the growth in economic activity and demand for goods and services, alongside supply chain complications, contributed to inflationary pressures. Late in the year, the surge in Omicron cases sparked renewed concerns globally, contributing to increased market volatility and increased pressures on labor supply. This may result in a negative impact on economic activity.

Despite broad improvements in the overall economy since the initial impact of the
COVID-19
pandemic, uncertainty remains on the pace of the recovery going forward, reflecting concerns about virus resurgence from the Omicron variant and other possible variants and related concerns regarding vaccine distribution, efficacy and hesitancy, as well as concerns relating to inflation, supply chain complications and geopolitical risks. See “Results of Operations — Segment Assets and Operating Results — Segment Operating Results” for further information about the operating environment for each of our business segments.

Critical Accounting Policies

Fair Value

Fair Value Hierarchy.

Trading assets and liabilities, certain investments and loans, and certain other financial assets and liabilities, are included in our consolidated balance sheets 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 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 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 liabilities may require appropriate valuation adjustments that a market participant would require to arrive at fair value for factors, such as counterparty and our credit quality, funding risk, transfer restrictions, liquidity and bid/offer spreads.

Instruments classified in level 3 of the fair value hierarchy are those which require one or more significant inputs that are not observable. Level 3 financial assets represented 1.6% as of December 2021 and 2.3% as of December 2020, of our total assets. See Notes 4 through 10 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:

[[GREPCENT_TABLE]]
[["\u2022","","Determining the appropriate valuation methodology and/or model for each type of level 3 financial instrument;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["60","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

[[GREPCENT_TABLE]]
[["\u2022","","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"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Determining appropriate valuation adjustments, including those related to illiquidity or counterparty credit quality."]]
[[/GREPCENT_TABLE]]

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

Controls Over Valuation of Financial Instruments.

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

Price Verification.

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

[[GREPCENT_TABLE]]
[["\u2022","","Trade Comparison. Analysis of trade data (both internal and external, where available) is used to determine the most relevant pricing inputs and valuations."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","External Price Comparison. Valuations and prices are compared to pricing data obtained from third parties (e.g., brokers or dealers, IHS 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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Calibration to Market Comparables. Market-based transactions are used to corroborate the valuation of positions with similar characteristics, risks and components."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Collateral Analyses. Margin calls on derivatives are analyzed to determine implied values, which are used to corroborate our valuations."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Execution of Trades. Where appropriate, market-making desks are instructed to execute trades in order to provide evidence of market-clearing levels."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Backtesting. Valuations are corroborated by comparison to values realized upon sales."]]
[[/GREPCENT_TABLE]]

See Note 4 to the consolidated financial statements for further information about fair value measurements.

Review of Net Revenues.

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

Review of Valuation Models.

Our independent model risk management group (Model Risk), 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 implementation. Models are reviewed 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.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","61"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Allowance for Credit Losses

We estimate and record an allowance for credit losses related to our loans held for investment that are accounted for at amortized cost. To determine the allowance for credit losses, we classify our loans accounted for at amortized cost into wholesale and consumer portfolios. These portfolios represent the level at which we have developed and documented our methodology to determine the allowance for credit losses. The allowance for credit losses is measured on a collective basis for loans that exhibit similar risk characteristics using a modeled approach and asset-specific basis for loans that do not share similar risk characteristics.

The allowance for credit losses takes into account the weighted average of a range of forecasts of future economic conditions over the expected life of the loans and lending commitments. The expected life of each loan or lending commitment is determined based on the contractual term adjusted for extension options or demand features, or is modeled in the case of revolving credit card loans. The forecasts include baseline, favorable and adverse economic scenarios over a three-year period. For loans with expected lives beyond three years, the model reverts to historical loss information based on a
non-linear
modeled approach. We apply judgment in weighting individual scenarios each quarter based on a variety of factors, including our internally derived economic outlook, market consensus, recent macroeconomic conditions and industry trends. The forecasted economic scenarios consider a number of risk factors relevant to the wholesale and consumer portfolios. Risk factors for wholesale loans include internal credit ratings, industry default and loss data, expected life, macroeconomic indicators (e.g., unemployment rates and GDP), the borrower’s capacity to meet its financial obligations, the borrower’s country of risk and industry, 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 installment and credit card loans include Fair Isaac Corporation (FICO) credit scores, delinquency status, loan vintage and macroeconomic indicators.

The allowance for credit losses also includes qualitative components which allow management to reflect the uncertain nature of economic forecasting, capture uncertainty regarding model inputs, and account for model imprecision and concentration risk.

Our estimate of credit losses entails judgment about collectability at the reporting dates, and there are uncertainties inherent in those judgments. The allowance for credit losses is subject to a governance process that involves review and approval by senior management within our independent risk oversight and control functions. Personnel within our independent risk oversight and control functions are responsible for forecasting the economic variables that underlie the economic scenarios that are used in the modeling of expected credit losses. While we use 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.

We also record an allowance for credit losses on lending commitments which are held for investment that are accounted for at amortized cost. 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 whether such commitments are cancellable by us.

To estimate the potential impact of an adverse macroeconomic environment on our allowance for credit losses, we, among other things, compared the expected credit losses under the weighted average forecast used in the calculation of allowance for credit losses as of December 2021 (which was primarily weighted towards the baseline economic scenario) to the expected credit losses under a 100% weighted adverse economic scenario. The adverse macroeconomic model assumes an emergence of new vaccine-resistant strains of
COVID-19
resulting in a resurgence of infections, an economic contraction, high inflation rates in the initial quarters, gradually climbing unemployment rates, decline in GDP growth rates and dislocations in the economy due to shortages in the supply of some goods and services. A 100% weighting to the adverse economic scenario would have resulted in an approximate $1.3 billion increase in our allowance for credit losses as of December 2021. This hypothetical increase does not take into consideration any potential adjustments to qualitative reserves. The forecasts of macroeconomic conditions are inherently uncertain and do not take into account any other offsetting or correlated effects. The actual credit loss in an adverse macroeconomic environment may differ significantly from this estimate. See Note 9 to the consolidated financial statements for further information about the allowance for credit losses.

[[GREPCENT_TABLE]]
[["62","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Use of Estimates

U.S. GAAP requires us to make certain estimates and assumptions. In addition to the estimates we make in connection with fair value measurements and the allowance for credit losses on loans and lending commitments held for investment and accounted for at amortized cost, the use of estimates and assumptions is also important in determining the accounting for goodwill and identifiable intangible assets, provisions for losses that may arise from litigation and regulatory proceedings (including governmental investigations), and accounting for income taxes.

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, a qualitative assessment can be made 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. Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment. Estimating the fair value of our reporting units requires judgment. Critical inputs to the fair value estimates include projected earnings and allocated equity. There is inherent uncertainty in the projected earnings. The estimated carrying 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 Note 12 to the consolidated financial statements for further information about goodwill. If we experience a prolonged or severe period of weakness in the business environment, financial markets, our performance or our common stock price, or additional increases in capital requirements, our goodwill could be impaired in the future.

Identifiable intangible assets are tested for impairment when events or changes in circumstances suggest that an asset’s or asset group’s carrying value may not be fully recoverable. Judgment is required to evaluate whether indications of potential impairment have occurred, and to test intangible assets for impairment, if required. An impairment is recognized if the estimated undiscounted cash flows relating to the asset or asset group is less than the corresponding carrying value. See Note 12 to the consolidated financial statements for further information about identifiable intangible assets.

We also estimate and provide for potential losses that may arise out of litigation and regulatory proceedings to the extent that such losses are probable and can be reasonably estimated. In addition, we estimate the upper end of the range of reasonably possible aggregate loss in excess of the related reserves for litigation and regulatory proceedings where we believe the risk of loss is more than slight. See Notes 18 and 27 to the consolidated financial statements for information about certain judicial, litigation and regulatory proceedings. Significant judgment is required in making these estimates and our final liabilities may ultimately be materially different. Our total estimated liability in respect of litigation and regulatory proceedings is determined on a

case-by-case

basis and represents an estimate of probable losses after considering, among other factors, the progress of each case, proceeding or investigation, our experience and the experience of others in similar cases, proceedings or investigations, and the opinions and views of legal counsel.

In accounting for income taxes, we recognize tax positions in the financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. As of December 2021, our net liability for unrecognized tax benefits was $1.16 billion. We use estimates to recognize current and deferred income taxes in the U.S. federal, state and local and
non-U.S.
jurisdictions in which we operate. The income tax laws in these jurisdictions are complex and can be subject to different interpretations between taxpayers and taxing authorities. Disputes may arise over these interpretations and can be settled by audit, administrative appeals or judicial proceedings. Our interpretations are reevaluated quarterly based on guidance currently available, tax examination experience and the opinions of legal counsel, among other factors. We recognize deferred taxes based on the amount that will more likely than not be realized in the future based on enacted income tax laws. As of December 2021, we had $6.32 billion of deferred tax assets with a related valuation allowance of $895 million. Our estimate for deferred taxes includes estimates for future taxable earnings, including the level and character of those earnings, and various tax planning strategies. See Note 24 to the consolidated financial statements for further information about income taxes.

Recent Accounting Developments

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

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","63"]]
[[/GREPCENT_TABLE]]

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THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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. For a discussion of our 2020 financial results compared with 2019, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on
Form 10-K
for the year ended December 31, 2020.

Financial Overview

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

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions, except per share amounts","","","2021","","","","2020","","","","2019"],["Net revenues","","","$59,339","","","","$44,560","","","","$36,546"],["Pre-tax earnings","","","$27,044","","","","$12,479","","","","$10,583"],["Net earnings","","","$21,635","","","","$ 9,459","","","","$ 8,466"],["Net earnings to common","","","$21,151","","","","$ 8,915","","","","$ 7,897"],["Diluted EPS","","","$ 59.45","","","","$ 24.74","","","","$ 21.03"],["ROE","","","23.0%","","","","11.1%","","","","10.0%"],["ROTE","","","24.3%","","","","11.8%","","","","10.6%"],["Net earnings to average assets","","","1.6%","","","","0.8%","","","","0.9%"],["Return on average shareholders\u2019 equity","","","21.3%","","","","10.3%","","","","9.4%"],["Average equity to average assets","","","7.4%","","","","8.2%","","","","9.3%"],["Dividend payout ratio","","","10.9%","","","","20.2%","","","","19.7%"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","Net earnings to common represents net earnings applicable to common shareholders, which is calculated as net earnings less preferred stock dividends."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Average equity to average assets is calculated by dividing average total shareholders\u2019 equity by average total assets."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Dividend payout ratio is calculated by dividing dividends declared per common share by diluted EPS."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","ROE is calculated by dividing net earnings to common by average monthly common shareholders\u2019 equity. Tangible common shareholders\u2019 equity is calculated as total shareholders\u2019 equity less preferred stock, goodwill and identifiable intangible assets. ROTE is calculated by dividing net earnings to common by average monthly tangible common shareholders\u2019 equity. We believe that tangible common shareholders\u2019 equity is meaningful because it is a measure that we and investors use to assess capital adequacy and that ROTE is meaningful because it measures the performance of businesses consistently, whether they were acquired or developed internally. Tangible common shareholders\u2019 equity and ROTE are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies. Return on average shareholders\u2019 equity is calculated by dividing net earnings by average monthly shareholders\u2019 equity."]]
[[/GREPCENT_TABLE]]

The table below presents our average equity and the reconciliation of average common shareholders’ equity to average tangible common shareholders’ equity.

[[GREPCENT_TABLE]]
[["","","Average for the Year Ended December"],["$ in millions","","","2021","","","","2020","","","","2019"],["Total shareholders\u2019 equity","","","$101,705","","","","$ 91,779","","","","$ 90,297"],["Preferred stock","","","(9,876",")","","","(11,203",")","","","(11,203",")"],["Common shareholders\u2019 equity","","","91,829","","","","80,576","","","","79,094"],["Goodwill","","","(4,327",")","","","(4,238",")","","","(3,965",")"],["Identifiable intangible assets","","","(536",")","","","(617",")","","","(499",")"],["Tangible common shareholders\u2019 equity","","","$ 86,966","","","","$ 75,721","","","","$ 74,630"]]
[[/GREPCENT_TABLE]]

Net Revenues

The table below presents our net revenues by line item.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020","","","","2019"],["Investment banking","","","$14,168","","","","$ 9,141","","","","$ 6,798"],["Investment management","","","8,059","","","","6,923","","","","6,189"],["Commissions and fees","","","3,619","","","","3,548","","","","2,988"],["Market making","","","15,352","","","","15,546","","","","10,157"],["Other principal transactions","","","11,671","","","","4,651","","","","6,052"],["Total non-interest revenues","","","52,869","","","","39,809","","","","32,184"],["Interest income","","","12,120","","","","13,689","","","","21,738"],["Interest expense","","","5,650","","","","8,938","","","","17,376"],["Net interest income","","","6,470","","","","4,751","","","","4,362"],["Total net revenues","","","$59,339","","","","$44,560","","","","$36,546"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","Investment banking consists of revenues (excluding net interest) from financial advisory and underwriting assignments. These activities are included in our Investment Banking segment."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Investment management consists of revenues (excluding net interest) from providing asset management services across all major asset classes to a diverse set of asset management clients (included in our Asset Management segment), as well as asset management services, wealth advisory services and certain transaction services for wealth management clients (included in our Consumer & Wealth Management segment)."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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 Global Markets and Consumer & Wealth Management segments."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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 Global Markets segment."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Other principal transactions consists of revenues (excluding net interest) from our equity investing activities, including revenues related to our consolidated investments (included in our Asset Management segment), and lending activities (included across our four segments)."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["64","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Operating Environment.

During 2021, a general recovery of the global economy, continued monetary and fiscal support from central banks and governments and accelerating vaccine distribution provided a favorable market backdrop. These factors contributed to generally higher global equity prices and tighter credit spreads compared with the end of 2020. In addition, market-making activities reflected strong client activity levels, although activity declined from a very strong prior year which reflected heightened volatility and significant market dislocations as a result of the
COVID-19
pandemic, and investment banking activity levels across mergers and acquisitions and underwriting were elevated.

If concerns about the economic outlook, including those on inflation and supply chain issues, grow or the ongoing efforts to mitigate the impact of the
COVID-19
pandemic are ineffective (including due to new variants or complications with vaccine distribution, efficacy and hesitancy), it may lead to a decline in global equity markets, a decline in investment banking activity levels, and a continued decline in market-making activity levels, and net revenues and the provision for credit losses would likely be negatively impacted. See “Segment Assets and Operating Results — Segment Operating Results” for information about the operating environment and material trends and uncertainties that may impact our results of operations.

2021 versus 2020.

Net revenues in the consolidated statements of earnings were $59.34 billion for 2021, 33% higher than 2020, reflecting significantly higher other principal transactions revenues, investment banking revenues and net interest income, and higher investment management revenues.

Non-Interest
Revenues.

Investment banking revenues in the consolidated statements of earnings were $14.17 billion for 2021, 55% higher than 2020, due to significantly higher revenues in financial advisory, reflecting a significant increase in completed mergers and acquisitions volumes, in equity underwriting, primarily driven by strong industry-wide initial public offerings activity, and in debt underwriting, primarily reflecting elevated industry-wide leveraged finance activity.

Investment management revenues in the consolidated statements of earnings were $8.06 billion for 2021, 16% higher than 2020, primarily due to higher management and other fees, reflecting the impact of higher average AUS, partially offset by higher fee waivers on money market funds. In addition, incentive fees were significantly higher, primarily driven by harvesting.

Commissions and fees in the consolidated statements of earnings were $3.62 billion for 2021, slightly higher than 2020.

Market making revenues in the consolidated statements of earnings were $15.35 billion for 2021, essentially unchanged compared with 2020, as significantly lower revenues in interest rate products and credit products were largely offset by significantly higher revenues in equity products (primarily in derivatives) and commodities, and improved results in mortgages.

Other principal transactions revenues in the consolidated statements of earnings were $11.67 billion for 2021, compared with $4.65 billion for 2020, primarily reflecting significantly higher net gains from investments in private equities and in debt instruments, partially offset by net losses from investments in public equities compared with significant net gains in 2020.

Net Interest Income.

Net interest income in the consolidated statements of earnings was $6.47 billion for 2021, 36% higher than 2020, reflecting a decrease in interest expense, partially offset by a decrease in interest income. The decrease in interest expense is primarily related to other interest-bearing liabilities, deposits and long-term borrowings, each reflecting the impact of lower interest rates. The decrease in interest income primarily related to collateralized agreements and trading assets, both reflecting the impact of lower interest rates, partially offset by the impact of higher average balances for loans. See “Supplemental Financial Information — Statistical Disclosures — Distribution of Assets, Liabilities and Shareholders’ Equity” for further information about our sources of net interest income.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","65"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Provision for Credit Losses

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

The table below presents our provision for credit losses.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020","","","","2019"],["Provision for credit losses","","","$357","","","","$3,098","","","","$1,065"]]
[[/GREPCENT_TABLE]]

2021 versus 2020.

Provision for credit losses in the consolidated statements of earnings was $357 million for 2021, compared with $3.10 billion for 2020. 2021 included provisions related to portfolio growth (primarily in credit cards, including approximately $185 million of provisions related to the commitment to acquire the General Motors
co-branded
credit card portfolio), largely offset by reserve reductions on wholesale and consumer loans reflecting continued improvement in the broader economic environment. This followed challenging conditions in the prior year as a result of the
COVID-19
pandemic, which contributed to significant provisions in 2020.

Operating Expenses

Our operating expenses are primarily influenced by compensation, headcount and levels of business activity. Compensation and benefits includes salaries,
year-end
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 net of provision for credit losses, overall financial performance, prevailing labor markets, business mix, the structure of our share-based compensation programs and the external environment.

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

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020","","","","2019"],["Compensation and benefits","","","$17,719","","","","$13,309","","","","$12,353"],["Transaction based","","","4,710","","","","4,141","","","","3,513"],["Market development","","","553","","","","401","","","","739"],["Communications and technology","","","1,573","","","","1,347","","","","1,167"],["Depreciation and amortization","","","2,015","","","","1,902","","","","1,704"],["Occupancy","","","981","","","","960","","","","1,029"],["Professional fees","","","1,648","","","","1,306","","","","1,316"],["Other expenses","","","2,739","","","","5,617","","","","3,077"],["Total operating expenses","","","$31,938","","","","$28,983","","","","$24,898"],["Headcount at period-end","","","43,900","","","","40,500","","","","38,300"]]
[[/GREPCENT_TABLE]]

2021 versus 2020.

Operating expenses in the consolidated statements of earnings were $31.94 billion for 2021, 10% higher than 2020. Our efficiency ratio for 2021 was 53.8%, compared with 65.0% for 2020. In 2020, net provisions for litigation and regulatory proceedings increased our efficiency ratio by 7.6 percentage points.

The increase in operating expenses compared with 2020 primarily reflected significantly higher compensation and benefits expenses (reflecting strong performance). In addition, technology expenses and professional fees were significantly higher and transaction based expenses were higher. These increases were partially offset by significantly lower net provisions for litigation and regulatory proceedings and lower expenses related to consolidated investments (including impairments).

Net provisions for litigation and regulatory proceedings for 2021 were $534 million compared with $3.42 billion for 2020.

Charitable contributions to Goldman Sachs Gives were approximately $250 million for 2021.

As of December 2021, headcount increased 8% compared with December 2020, reflecting investments in new business initiatives and an increase in technology professionals.

Provision for Taxes

The effective income tax rate for 2021 was 20.0%, down from the full year income tax rate of 24.2% for 2020, primarily due to a decrease in provisions for
non-deductible
litigation, partially offset by a decrease in the impact of tax benefits in 2021 compared with 2020.

In March 2021, the American Rescue Plan Act of 2021 (Rescue Plan) was signed into law. The Rescue Plan is a $1.9 trillion stimulus package enacted to help address the economic and health impacts of the
COVID-19
pandemic. The Rescue Plan includes a repeal of a provision under which U.S. affiliated groups could elect a worldwide allocation of interest expense for foreign tax credit limitation purposes for one year beginning in January 2021. Additionally, beginning in 2027, the limitation on corporate tax deductions for compensation payable to the CEO, CFO and the top three highest paid employees will be expanded to include the next five highest paid employees. The legislation did not have a material impact on our 2021 annual effective tax rate and is not expected to have a material impact on our 2022 annual effective tax rate.

In April 2021, the New York State (NYS) FY 2022 budget was enacted. The legislation temporarily increased the NYS corporate income tax rate from 6.5% to 7.25% for calendar years 2021 through 2023. The legislation did not have a material impact on our 2021 annual effective tax rate and is not expected to have a material impact on our 2022 annual effective tax rate.

[[GREPCENT_TABLE]]
[["66","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The U.K. Finance Act 2021 was enacted in June 2021 and includes a six percent increase in the corporate income tax rate effective from April 2023. During 2021, U.K. deferred tax assets and liabilities were remeasured and a deferred tax benefit of approximately $100 million was recognized. The Finance (No. 2) Bill
2021-22,
issued in November 2021, includes a five percent reduction in the U.K. bank surcharge tax rate, effective from April 2023. The bank surcharge is currently applicable to certain of our U.K. subsidiaries and branches, including Goldman Sachs International (GSI) and Goldman Sachs International Bank (GSIB). Following Royal Assent, the associated impact of any change to the bank surcharge on U.K. deferred tax assets and liabilities could have a material impact on our effective tax rate, depending on the operating results for the quarter during which this legislation is enacted.

We expect our tax rate for 2022 to be between 20% and 21%, excluding the impact of income tax benefits on employee share-based awards and any potential changes in current income tax rates.

Segment Assets and Operating Results

Segment Assets.

The table below presents assets by segment.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Investment Banking","","","$ 144,157","","","","$ 116,242"],["Global Markets","","","1,082,378","","","","844,606"],["Asset Management","","","91,115","","","","95,751"],["Consumer & Wealth Management","","","146,338","","","","106,429"],["Total","","","$1,463,988","","","","$1,163,028"]]
[[/GREPCENT_TABLE]]

The allocation process for segment assets is based on the activities of these segments. The allocation of assets includes allocation of GCLA (which consists of unencumbered, highly liquid securities and cash), which is generally included within cash and cash equivalents, collateralized agreements and trading assets on our balance sheet. Due to the integrated nature of these segments, estimates and judgments are made in allocating these assets. See “Risk Management — Liquidity Risk Management” for further information about our GCLA.

Segment Operating Results.

The table below presents our segment operating results.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020","","","","2019"],["Investment Banking"],["Net revenues","","","$14,876","","","","$ 9,423","","","","$ 7,599"],["Provision for credit losses","","","(298",")","","","1,624","","","","333"],["Operating expenses","","","6,705","","","","6,134","","","","4,685"],["Pre-tax earnings","","","$ 8,469","","","","$ 1,665","","","","$ 2,581"],["Net earnings to common","","","$ 6,705","","","","$ 1,193","","","","$ 1,996"],["Average common equity","","","$10,341","","","","$11,313","","","","$11,167"],["Return on average common equity","","","64.8%","","","","10.5%","","","","17.9%"],["Global Markets"],["Net revenues","","","$22,077","","","","$21,157","","","","$14,779"],["Provision for credit losses","","","45","","","","274","","","","35"],["Operating expenses","","","12,969","","","","12,806","","","","10,851"],["Pre-tax earnings","","","$ 9,063","","","","$ 8,077","","","","$ 3,893"],["Net earnings to common","","","$ 6,973","","","","$ 5,766","","","","$ 2,729"],["Average common equity","","","$45,497","","","","$40,760","","","","$40,060"],["Return on average common equity","","","15.3%","","","","14.1%","","","","6.8%"],["Asset Management"],["Net revenues","","","$14,916","","","","$ 7,984","","","","$ 8,965"],["Provision for credit losses","","","18","","","","442","","","","274"],["Operating expenses","","","5,970","","","","5,142","","","","4,817"],["Pre-tax earnings","","","$ 8,928","","","","$ 2,400","","","","$ 3,874"],["Net earnings to common","","","$ 7,046","","","","$ 1,740","","","","$ 3,013"],["Average common equity","","","$25,195","","","","$20,491","","","","$21,575"],["Return on average common equity","","","28.0%","","","","8.5%","","","","14.0%"],["Consumer & Wealth Management"],["Net revenues","","","$ 7,470","","","","$ 5,996","","","","$ 5,203"],["Provision for credit losses","","","592","","","","758","","","","423"],["Operating expenses","","","6,294","","","","4,901","","","","4,545"],["Pre-tax earnings","","","$ 584","","","","$ 337","","","","$ 235"],["Net earnings to common","","","$ 427","","","","$ 216","","","","$ 159"],["Average common equity","","","$10,796","","","","$ 8,012","","","","$ 6,292"],["Return on average common equity","","","4.0%","","","","2.7%","","","","2.5%"],["Total net revenues","","","$59,339","","","","$44,560","","","","$36,546"],["Total provision for credit losses","","","357","","","","3,098","","","","1,065"],["Total operating expenses","","","31,938","","","","28,983","","","","24,898"],["Total pre-tax earnings","","","$27,044","","","","$12,479","","","","$10,583"],["Net earnings to common","","","$21,151","","","","$ 8,915","","","","$ 7,897"],["Average common equity","","","$91,829","","","","$80,576","","","","$79,094"],["Return on average common equity","","","23.0%","","","","11.1%","","","","10.0%"]]
[[/GREPCENT_TABLE]]

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

The allocation of common shareholders’ equity and preferred stock dividends to each segment is based on the estimated amount of equity required to support the activities of the segment under relevant regulatory capital requirements. Net earnings for each segment is calculated by applying the firmwide tax rate to each segment’s
pre-tax
earnings.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","67"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Effective January 1, 2021, the attributed equity among our segments was updated to reflect the results of our 2020 Comprehensive Capital Analysis and Review (CCAR) process. See “Capital Management and Regulatory Capital — Capital Management” for information about the impact of these updates on the allocation of attributed equity among our segments as of the beginning of the first quarter of 2021. The average common equity balances above incorporate such impact, as well as the changes in the size and composition of assets held in each of our segments that occurred during 2021. See “Capital Management and Regulatory Capital — Capital Management” for information about our 2021 CCAR process and our updated SCB, which became effective on October 1, 2021.

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.

Investment Banking

Investment Banking generates revenues from the following:

[[GREPCENT_TABLE]]
[["\u2022","","Financial advisory. Includes strategic advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense activities, restructurings and spin-offs."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Corporate lending. Includes lending to corporate clients, including through relationship lending, middle-market lending and acquisition financing. We also provide transaction banking services to certain of our corporate clients."]]
[[/GREPCENT_TABLE]]

The table below presents our Investment Banking assets.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Cash and cash equivalents","","","$ 64,437","","","","$ 34,730"],["Collateralized agreements","","","21,354","","","","20,242"],["Customer and other receivables","","","5,248","","","","2,465"],["Trading assets","","","20,338","","","","29,493"],["Investments","","","1,053","","","","1,078"],["Loans","","","29,555","","","","26,544"],["Other assets","","","2,172","","","","1,690"],["Total","","","$144,157","","","","$116,242"]]
[[/GREPCENT_TABLE]]

The table below presents our Investment Banking operating results.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020","","","","2019"],["Financial advisory","","","$ 5,653","","","","$ 3,065","","","","$ 3,197"],["Equity underwriting","","","5,011","","","","3,406","","","","1,482"],["Debt underwriting","","","3,504","","","","2,670","","","","2,119"],["Underwriting","","","8,515","","","","6,076","","","","3,601"],["Corporate lending","","","708","","","","282","","","","801"],["Net revenues","","","14,876","","","","9,423","","","","7,599"],["Provision for credit losses","","","(298",")","","","1,624","","","","333"],["Operating expenses","","","6,705","","","","6,134","","","","4,685"],["Pre-tax earnings","","","8,469","","","","1,665","","","","2,581"],["Provision for taxes","","","1,694","","","","403","","","","516"],["Net earnings","","","6,775","","","","1,262","","","","2,065"],["Preferred stock dividends","","","70","","","","69","","","","69"],["Net earnings to common","","","$ 6,705","","","","$ 1,193","","","","$ 1,996"],["Average common equity","","","$10,341","","","","$11,313","","","","$11,167"],["Return on average common equity","","","64.8%","","","","10.5%","","","","17.9%"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in billions","","","2021","","","","2020","","","","2019"],["Announced mergers and acquisitions","","","$ 1,851","","","","$ 948","","","","$ 1,350"],["Completed mergers and acquisitions","","","$ 1,581","","","","$ 1,033","","","","$ 1,270"],["Equity and equity-related offerings","","","$ 141","","","","$ 115","","","","$ 67"],["Debt offerings","","","$ 332","","","","$ 352","","","","$ 246"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","Volumes are per Dealogic."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Equity and equity-related offerings includes Rule 144A and public common stock offerings, convertible offerings and rights offerings."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Debt offerings includes non-convertible preferred stock, mortgage-backed securities, asset-backed securities and taxable municipal debt. Includes publicly registered and Rule 144A issues and excludes leveraged loans."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["68","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Operating Environment.

During 2021, Investment Banking operated in an environment characterized by strong industry-wide activity. In mergers and acquisitions, industry-wide completed and announced volumes were at high levels, reflecting supportive market conditions and strong CEO confidence. In underwriting, industry-wide activity levels reflected continued strength in equity underwriting volumes, including strong initial public offerings activity, and solid debt underwriting volumes, including elevated leveraged finance activity.

In the future, if market and economic conditions deteriorate, and industry-wide mergers and acquisitions volumes decline, or if industry-wide equity and debt underwriting volumes decline, or credit spreads related to hedges on our relationship lending portfolio tighten further, net revenues in Investment Banking would likely be negatively impacted. In addition, a deterioration in the creditworthiness of borrowers would negatively impact the provision for credit losses.

2021 versus 2020.

Net revenues in Investment Banking were $14.88 billion for 2021, 58% higher than 2020, primarily reflecting significantly higher net revenues in Financial advisory and Underwriting.

The increase in Financial advisory net revenues reflected a significant increase in completed mergers and acquisitions volumes. The increase in Underwriting net revenues was due to significantly higher net revenues in both Equity underwriting, primarily driven by strong industry-wide initial public offerings activity, and Debt underwriting, primarily reflecting elevated industry-wide leveraged finance activity. Corporate lending net revenues were significantly higher, primarily reflecting net gains from lending activities compared with net losses in the prior year, and significantly higher net interest income.

Provision for credit losses was a net benefit of $298 million for 2021, compared with net provisions of $1.62 billion for 2020, primarily due to reserve reductions in the current year reflecting continued improvement in the broader economic environment following challenging conditions in 2020 resulting from the
COVID-19
pandemic.

Operating expenses were $6.71 billion for 2021, 9% higher than 2020, due to significantly higher compensation and benefits expenses (reflecting strong performance), partially offset by significantly lower net provisions for litigation and regulatory proceedings.
Pre-tax
earnings were $8.47 billion for 2021, compared with $1.67 billion for 2020. ROE was 64.8% for 2021, compared with 10.5% for 2020 (which included the impact of net provisions for litigation and regulatory proceedings that reduced ROE by 11.5 percentage points).

As of December 2021, our investment banking transaction backlog increased significantly compared with December 2020, due to significantly higher estimated net revenues from potential financial advisory transactions and potential debt underwriting transactions (particularly from leveraged finance transactions), and higher estimated net revenues from potential equity underwriting transactions.

Our backlog represents an estimate of our net revenues from future transactions where we believe that future revenue realization is more likely than not. We believe changes in our 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. In addition, our 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.

Global Markets

Our Global Markets segment consists of:

FICC.

FICC generates revenues from intermediation and financing activities.

[[GREPCENT_TABLE]]
[["\u2022","","FICC intermediation. Includes client execution activities related to making markets in both cash and derivative instruments, as detailed below."]]
[[/GREPCENT_TABLE]]

Interest Rate Products.

Government bonds (including inflation-linked securities) across maturities, other government-backed securities, and interest rate swaps, options and other derivatives.

Credit Products.

Investment-grade and high-yield corporate securities, credit derivatives, exchange-traded funds (ETFs), 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.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","69"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Commodities.

Commodity derivatives and, to a lesser extent, physical commodities, involving crude oil and petroleum products, natural gas, agricultural, base, precious and other metals, electricity, including renewable power, environmental products and other commodity products.

For further information about market-making activities, see “Market-Making Activities” below.

[[GREPCENT_TABLE]]
[["\u2022","","FICC financing. Includes providing financing to our clients through warehouse loans backed by mortgages (including residential and commercial mortgage loans), corporate loans and consumer loans (including auto loans and private student loans). We also provide financing to clients through structured credit, asset-backed lending, and through securities purchased under agreements to resell (resale agreements)."]]
[[/GREPCENT_TABLE]]

Equities.

Equities generates revenues from intermediation and financing activities.

[[GREPCENT_TABLE]]
[["\u2022","","Equities intermediation. We make markets in equity securities and equity-related products, including ETFs, convertible securities, options, futures and OTC derivative instruments. We also structure and make markets in derivatives on indices, industry sectors, financial measures and individual company stocks. Our exchange-based market-making activities include making markets in stocks and ETFs, futures and options on major exchanges worldwide. In addition, 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. For further information about market-making activities, see \u201cMarket-Making Activities\u201d below."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Equities financing. Includes prime brokerage and other equities financing activities, including securities lending, margin lending and swaps. We earn fees by providing clearing, settlement and custody services globally. We provide services that principally involve borrowing and lending securities to cover institutional clients\u2019 short sales and borrowing securities to cover our short sales and 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. We provide financing to our clients for their securities trading activities through margin loans that are collateralized by securities, cash or other acceptable collateral. In addition, we execute swap transactions to provide our clients with exposure to securities and indices."]]
[[/GREPCENT_TABLE]]

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 (i) market-making positions, typically for a short period of time, in response to, or in anticipation of, client demand, and (ii) positions to actively manage our risk exposures that arise from these market-making activities (collectively, inventory). Our inventory is recorded in trading assets (long positions) or trading liabilities (short positions) in our consolidated balance sheets.

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) widening of credit spreads on our inventory positions.

[[GREPCENT_TABLE]]
[["70","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The table below presents our Global Markets assets.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Cash and cash equivalents","","","$ 131,390","","","","$ 86,663"],["Collateralized agreements","","","343,535","","","","212,711"],["Customer and other receivables","","","142,547","","","","110,473"],["Trading assets","","","337,040","","","","339,349"],["Investments","","","55,285","","","","52,929"],["Loans","","","60,916","","","","33,214"],["Other assets","","","11,665","","","","9,267"],["Total","","","$1,082,378","","","","$844,606"]]
[[/GREPCENT_TABLE]]

The table below presents our Global Markets operating results.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020","","","","2019"],["FICC intermediation","","","$ 8,647","","","","$ 9,991","","","","$ 6,009"],["FICC financing","","","1,937","","","","1,593","","","","1,379"],["FICC","","","10,584","","","","11,584","","","","7,388"],["Equities intermediation","","","7,574","","","","6,989","","","","4,374"],["Equities financing","","","3,919","","","","2,584","","","","3,017"],["Equities","","","11,493","","","","9,573","","","","7,391"],["Net revenues","","","22,077","","","","21,157","","","","14,779"],["Provision for credit losses","","","45","","","","274","","","","35"],["Operating expenses","","","12,969","","","","12,806","","","","10,851"],["Pre-tax earnings","","","9,063","","","","8,077","","","","3,893"],["Provision for taxes","","","1,813","","","","1,955","","","","779"],["Net earnings","","","7,250","","","","6,122","","","","3,114"],["Preferred stock dividends","","","277","","","","356","","","","385"],["Net earnings to common","","","$ 6,973","","","","$ 5,766","","","","$ 2,729"],["Average common equity","","","$45,497","","","","$40,760","","","","$40,060"],["Return on average common equity","","","15.3%","","","","14.1%","","","","6.8%"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["$ in millions","","","FICC","","","","Equities","","","","Global Markets"],["Year Ended December 2021"],["Market making","","","$ 7,584","","","","$ 7,768","","","","$15,352"],["Commissions and fees","","","\u2013","","","","3,543","","","","3,543"],["Other principal transactions","","","358","","","","56","","","","414"],["Net interest income","","","2,642","","","","126","","","","2,768"],["Total","","","$10,584","","","","$11,493","","","","$22,077"],["Year Ended December 2020"],["Market making","","","$ 8,972","","","","$ 6,574","","","","$15,546"],["Commissions and fees","","","\u2013","","","","3,347","","","","3,347"],["Other principal transactions","","","53","","","","(18",")","","","35"],["Net interest income","","","2,559","","","","(330",")","","","2,229"],["Total","","","$11,584","","","","$ 9,573","","","","$21,157"],["Year Ended December 2019"],["Market making","","","$ 5,813","","","","$ 4,344","","","","$10,157"],["Commissions and fees","","","\u2013","","","","2,900","","","","2,900"],["Other principal transactions","","","1","","","","51","","","","52"],["Net interest income","","","1,574","","","","96","","","","1,670"],["Total","","","$ 7,388","","","","$ 7,391","","","","$14,779"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","The difference between commissions and fees and those in the consolidated statements of earnings represents commissions and fees included in our Consumer & Wealth Management segment."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","See \u201cNet Revenues\u201d for information about market making revenues, commissions and fees, other principal transactions revenues and net interest income. See Note 25 to the consolidated financial statements for net interest income by segment."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The primary driver of net revenues for FICC intermediation was client activity."]]
[[/GREPCENT_TABLE]]

Operating Environment.

During 2021, Global Markets operated in an environment characterized by continued economic recovery and continued monetary and fiscal support from central banks and governments, which contributed to strong client activity levels, although activity declined from a very strong prior year which reflected heightened volatility and significant market dislocations as a result of the
COVID-19
pandemic. In addition, global equity prices were generally higher compared with the end of 2020, as the S&P 500 Index increased by 27% and the MSCI World Index increased by 17%. Market volatility continued to moderate from elevated levels last year, as the average daily VIX was 33% lower than 2020. If macroeconomic conditions lead to a continued decline in activity levels or continued decline in volatility, net revenues in Global Markets would likely be negatively impacted.

2021 versus 2020.

Net revenues in Global Markets were $22.08 billion for 2021, 4% higher than 2020.

Net revenues in FICC were $10.58 billion, 9% lower than 2020, due to lower net revenues in FICC intermediation, reflecting significantly lower net revenues in interest rate products and credit products and slightly lower net revenues in currencies, partially offset by significantly higher net revenues in mortgages and higher net revenues in commodities. Net revenues in FICC financing were significantly higher, reflecting significantly higher net revenues from mortgage lending, partially offset by significantly lower net revenues from resale agreements.

The decrease in FICC intermediation net revenues reflected strong but significantly lower client activity compared with very strong activity levels in the prior year due to high volatility amid the
COVID-19
pandemic. This was partially offset by the impact of improved market-making conditions on our inventory compared with challenging conditions in the prior year. The following provides information about our FICC intermediation net revenues by business, compared with 2020 results:

[[GREPCENT_TABLE]]
[["\u2022","","Net revenues in interest rate products primarily reflected lower client activity."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Net revenues in credit products and currencies reflected lower client activity, partially offset by the impact of improved market-making conditions on our inventory."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Net revenues in mortgages reflected the impact of improved market-making conditions on our inventory."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Net revenues in commodities primarily reflected higher client activity."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","71"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Net revenues in Equities were $11.49 billion, 20% higher than 2020, due to significantly higher net revenues in Equities financing, primarily reflecting increased activity (including higher average client balances), and higher net revenues in Equities intermediation, across both derivatives and cash products.

Provision for credit losses was $45 million for 2021, compared with $274 million for 2020, primarily reflecting reserve reductions in the current year due to continued improvement in the broader economic environment following challenging conditions in 2020 resulting from the
COVID-19
pandemic, partially offset by portfolio growth.

Operating expenses were $12.97 billion for 2021, essentially unchanged compared with 2020, as higher compensation and benefits expenses (reflecting strong performance) and higher transaction based expenses were offset by significantly lower net provisions for litigation and regulatory proceedings.
Pre-tax
earnings were $9.06 billion, 12% higher than 2020. ROE was 15.3% for 2021, compared with 14.1% for 2020 (which included the impact of net provisions for litigation and regulatory proceedings that reduced ROE by 4.0 percentage points).

Asset Management

We manage client assets across a broad range of investment strategies and asset classes for a diverse set of institutional clients and a network of third-party distributors around the world, including equity, fixed income and alternative investments. We provide investment solutions including those managed on a fiduciary basis by our portfolio managers, as well as those managed by third-party managers. We offer our investment solutions in a variety of structures, including separately managed accounts, mutual funds, private partnerships and other commingled vehicles. These solutions begin with identifying clients’ objectives and continue through portfolio construction, ongoing asset allocation and risk management and investment realization.

In addition to managing client assets, we invest in alternative investments across a range of asset classes that seek to deliver long-term accretive risk-adjusted returns. Our investing activities, which are typically longer term, include investments in corporate equity, credit, real estate and infrastructure assets.

Asset Management generates revenues from the following:

[[GREPCENT_TABLE]]
[["\u2022","","Management and other fees. The majority of revenues in management and other fees consists of asset-based fees on client assets that we manage. For further information about AUS, see \u201cAssets Under Supervision\u201d below. The fees that we charge vary by asset class, distribution channel and the types of services provided, and are affected by investment performance, as well as asset inflows and redemptions."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Incentive fees. In certain circumstances, we also receive incentive fees based on a percentage of a fund\u2019s or a separately managed account\u2019s 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\u2019s investments over the life of the fund exceeds certain threshold returns."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Equity investments. Our alternative investing activities relate to public and private equity investments in corporate, real estate and infrastructure entities. We also make investments through consolidated investment entities (CIEs), substantially all of which are engaged in real estate investment activities."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Lending and debt investments. We invest in corporate debt and provide financing for real estate and other assets. These activities include investments in mezzanine debt, senior debt and distressed debt securities."]]
[[/GREPCENT_TABLE]]

The table below presents our Asset Management assets.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Cash and cash equivalents","","","$16,636","","","","$ 8,635"],["Collateralized agreements","","","5,227","","","","4,749"],["Customer and other receivables","","","946","","","","1,261"],["Trading assets","","","5,000","","","","6,819"],["Investments","","","32,318","","","","34,386"],["Loans","","","13,698","","","","16,558"],["Other assets","","","17,290","","","","23,343"],["Total","","","$91,115","","","","$95,751"]]
[[/GREPCENT_TABLE]]

The table below presents our Asset Management operating results.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020","","","","2019"],["Management and other fees","","","$ 2,883","","","","$ 2,785","","","","$ 2,600"],["Incentive fees","","","438","","","","287","","","","130"],["Equity investments","","","9,189","","","","4,095","","","","4,765"],["Lending and debt investments","","","2,406","","","","817","","","","1,470"],["Net revenues","","","14,916","","","","7,984","","","","8,965"],["Provision for credit losses","","","18","","","","442","","","","274"],["Operating expenses","","","5,970","","","","5,142","","","","4,817"],["Pre-tax earnings","","","8,928","","","","2,400","","","","3,874"],["Provision for taxes","","","1,785","","","","581","","","","775"],["Net earnings","","","7,143","","","","1,819","","","","3,099"],["Preferred stock dividends","","","97","","","","79","","","","86"],["Net earnings to common","","","$ 7,046","","","","$ 1,740","","","","$ 3,013"],["Average common equity","","","$25,195","","","","$20,491","","","","$21,575"],["Return on average common equity","","","28.0%","","","","8.5%","","","","14.0%"]]
[[/GREPCENT_TABLE]]

The table below presents our Equity investments net revenues by equity type and asset class.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020","","","","2019"],["Equity Type"],["Private equity","","","$ 9,266","","","","$ 2,417","","","","$ 4,288"],["Public equity","","","(77",")","","","1,678","","","","477"],["Total","","","$ 9,189","","","","$ 4,095","","","","$ 4,765"],["Asset Class"],["Real estate","","","$ 2,489","","","","$ 1,621","","","","$ 2,384"],["Corporate","","","6,700","","","","2,474","","","","2,381"],["Total","","","$ 9,189","","","","$ 4,095","","","","$ 4,765"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["72","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The table below presents details about our Lending and debt investments net revenues.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020","","","","2019"],["Fair value net gains/(losses)","","","$1,155","","","","$ (228",")","","","$ 334"],["Net interest income","","","1,251","","","","1,045","","","","1,136"],["Total","","","$2,406","","","","$ 817","","","","$1,470"]]
[[/GREPCENT_TABLE]]

Operating Environment.

During 2021, the operating environment for Asset Management improved, as global equity prices were generally higher and credit spreads tightened, amid economic recovery and continued support from central banks and governments globally. If optimism about the economic outlook declines or the ongoing efforts to mitigate the impact of the
COVID-19
pandemic are ineffective, it may lead to a decline in asset prices, widening of credit spreads, and investors transitioning to asset classes that typically generate lower fees or investors withdrawing their assets, and net revenues in Asset Management would likely be negatively impacted.

2021 versus 2020.

Net revenues in Asset Management were $14.92 billion for 2021, 87% higher than 2020, primarily reflecting significantly higher net revenues in Equity investments and Lending and debt investments.

The increase in Equity investments net revenues reflected significantly higher net gains from investments in private equities, driven by company-specific events and improved corporate performance compared with 2020, partially offset by net losses from investments in public equities compared with significant net gains in the prior year.

The increase in Lending and debt investments net revenues reflected net gains from investments in debt instruments compared with net losses in the prior year, and significantly higher net interest income.

Incentive fees were higher, primarily driven by harvesting, and Management and other fees were slightly higher, reflecting the impact of higher average assets under supervision, partially offset by higher fee waivers on money market funds.

Provision for credit losses was $18 million for 2021, compared with $442 million for 2020, primarily due to reserve reductions in the current year reflecting continued improvement in the broader economic environment following challenging conditions in 2020 resulting from the
COVID-19
pandemic.

Operating expenses were $5.97 billion for 2021, 16% higher than 2020, primarily due to significantly higher compensation and benefits expenses (reflecting strong performance), partially offset by lower expenses related to consolidated investments (including impairments).
Pre-tax
earnings were $8.93 billion for 2021, compared with $2.40 billion for 2020. ROE was 28.0% for 2021, compared with 8.5% for 2020.

Consumer & Wealth Management

Consumer & Wealth Management helps clients achieve their individual financial goals by providing a broad range of wealth advisory and banking services, including financial planning, investment management, deposit-taking and lending. Services are offered through our global network of advisors and via our digital platforms.

Wealth Management.

Wealth management provides tailored wealth advisory services to clients across the wealth spectrum. We operate globally serving individuals, families, family offices, and foundations and endowments. Our relationships are established directly or introduced through corporations that sponsor financial wellness programs for their employees.

We offer personalized financial planning inclusive of income and liability management, compensation and benefits analysis, trust and estate structuring, tax optimization, philanthropic giving, and asset protection. We also provide customized investment advisory solutions, and offer structuring and execution capabilities in security and derivative products across all major global markets. We leverage a broad, open-architecture investment platform and our global execution capabilities to help clients achieve their investment goals. In addition, we offer clients a full range of private banking services, including a variety of deposit alternatives and loans that our clients use to finance investments in both financial and nonfinancial assets, bridge cash flow timing gaps or provide liquidity and flexibility for other needs.

Wealth management generates revenues from the following:

[[GREPCENT_TABLE]]
[["\u2022","","Management and other fees. Includes fees related to managing assets, providing investing and wealth advisory solutions, providing financial planning and counseling services via Ayco Personal Financial Management, and executing brokerage transactions for wealth management clients."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Incentive fees. In certain circumstances, we also receive incentive fees from wealth management clients based on a percentage of a fund\u2019s 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\u2019s investments over the life of the fund exceeds certain threshold returns."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Private banking and lending. Includes net interest income allocated to deposit-taking and net interest income earned on lending activities for wealth management clients."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","73"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Consumer Banking.

Our Consumer banking business issues unsecured loans, through our digital platform,

Marcus by Goldman Sachs

(Marcus),

and credit cards, to finance the purchases of goods or services. We also accept deposits (including savings and time deposits) through Marcus, in Goldman Sachs Bank USA (GS Bank USA) and GSIB. Additionally, we provide investing services through

Marcus Invest

to U.S. customers.

Consumer banking revenues consist of net interest income earned on unsecured loans issued to consumers through Marcus and credit card lending activities, and net interest income attributed to consumer deposits.

The table below presents our Consumer & Wealth Management assets.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Cash and cash equivalents","","","$ 48,573","","","","$ 25,814"],["Collateralized agreements","","","14,358","","","","12,518"],["Customer and other receivables","","","11,932","","","","7,132"],["Trading assets","","","13,538","","","","17,969"],["Investments","","","63","","","","52"],["Loans","","","54,393","","","","39,799"],["Other assets","","","3,481","","","","3,145"],["Total","","","$146,338","","","","$106,429"]]
[[/GREPCENT_TABLE]]

The table below presents our Consumer & Wealth Management operating results.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020","","","","2019"],["Management and other fees","","","$ 4,691","","","","$3,889","","","","$3,475"],["Incentive fees","","","178","","","","114","","","","81"],["Private banking and lending","","","1,109","","","","780","","","","783"],["Wealth management","","","5,978","","","","4,783","","","","4,339"],["Consumer banking","","","1,492","","","","1,213","","","","864"],["Net revenues","","","7,470","","","","5,996","","","","5,203"],["Provision for credit losses","","","592","","","","758","","","","423"],["Operating expenses","","","6,294","","","","4,901","","","","4,545"],["Pre-tax earnings","","","584","","","","337","","","","235"],["Provision for taxes","","","117","","","","81","","","","47"],["Net earnings","","","467","","","","256","","","","188"],["Preferred stock dividends","","","40","","","","40","","","","29"],["Net earnings to common","","","$ 427","","","","$ 216","","","","$ 159"],["Average common equity","","","$10,796","","","","$8,012","","","","$6,292"],["Return on average common equity","","","4.0%","","","","2.7%","","","","2.5%"]]
[[/GREPCENT_TABLE]]

Operating Environment.

During 2021, improved market and economic conditions contributed to a more favorable backdrop for consumer banking and wealth management activities. Global equity prices were generally higher and, in the U.S., unemployment decreased and consumer spending increased compared with 2020, aided by optimism about the economic recovery and continued support from central banks and governments globally. If optimism about the economic outlook declines or the ongoing efforts to mitigate the impact of the
COVID-19
pandemic are ineffective, it may lead to a decline in asset prices, investors favoring asset classes that typically generate lower fees, investors withdrawing their assets and consumers withdrawing their deposits or deterioration in consumer credit, net revenues and the provision for credit losses in Consumer & Wealth Management would likely be negatively impacted.

2021 versus 2020.

Net revenues in Consumer & Wealth Management were $7.47 billion for 2021, 25% higher than 2020.

Net revenues in Wealth management were $5.98 billion, 25% higher than 2020, due to significantly higher Management and other fees, primarily reflecting the impact of higher average assets under supervision, and significantly higher net revenues in Private banking and lending, primarily reflecting higher loan balances. In addition, Incentive fees were higher, primarily due to harvesting.

Net revenues in Consumer banking were $1.49 billion, 23% higher than 2020, reflecting higher credit card and deposit balances.

Provision for credit losses was $592 million for 2021, 22% lower than 2020, primarily due to reserve reductions in the current year reflecting continued improvement in the broader economic environment following challenging conditions in 2020, partially offset by growth in credit card balances, including approximately $185 million of provisions related to the commitment to acquire the General Motors
co-branded
credit card portfolio.

Operating expenses were $6.29 billion for 2021, 28% higher than 2020, primarily reflecting significantly higher compensation and benefits expenses (reflecting strong performance).
Pre-tax
earnings were $584 million for 2021, 73% higher than 2020. ROE was 4.0% for 2021, compared with 2.7% for 2020.

[[GREPCENT_TABLE]]
[["74","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Assets Under Supervision

AUS includes our institutional clients’ assets and assets sourced through third-party distributors (both included in our Asset Management segment), as well as

high-net-worth

clients’ assets (included in our Consumer & Wealth Management segment), where we earn a fee for managing assets on a discretionary basis. This includes net assets in our mutual funds, hedge funds, credit funds, private equity funds, real estate funds, and separately managed accounts for institutional and individual investors. AUS also includes client assets invested with third-party managers, private bank deposits and advisory relationships where we earn a fee for advisory and other services, but do not have investment discretion. AUS does not include the self-directed brokerage assets of our clients.

The table below presents information about our firmwide
period-end
AUS by segment, asset class, distribution channel, region and vehicle.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in billions","","","2021","","","","2020","","","","2019"],["Segment"],["Asset Management","","","$1,719","","","","$1,530","","","","$1,298"],["Consumer & Wealth Management","","","751","","","","615","","","","561"],["Total AUS","","","$2,470","","","","$2,145","","","","$1,859"],["Asset Class"],["Alternative investments","","","$ 236","","","","$ 191","","","","$ 185"],["Equity","","","613","","","","475","","","","423"],["Fixed income","","","940","","","","896","","","","789"],["Total long-term AUS","","","1,789","","","","1,562","","","","1,397"],["Liquidity products","","","681","","","","583","","","","462"],["Total AUS","","","$2,470","","","","$2,145","","","","$1,859"],["Distribution Channel"],["Institutional","","","$ 824","","","","$ 761","","","","$ 684"],["Wealth management","","","751","","","","615","","","","561"],["Third-party distributed","","","895","","","","769","","","","614"],["Total AUS","","","$2,470","","","","$2,145","","","","$1,859"],["Region"],["Americas","","","$1,930","","","","$1,656","","","","$1,408"],["EMEA","","","354","","","","318","","","","279"],["Asia","","","186","","","","171","","","","172"],["Total AUS","","","$2,470","","","","$2,145","","","","$1,859"],["Vehicle"],["Separate accounts","","","$1,347","","","","$1,186","","","","$1,069"],["Public funds","","","811","","","","707","","","","603"],["Private funds and other","","","312","","","","252","","","","187"],["Total AUS","","","$2,470","","","","$2,145","","","","$1,859"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","Liquidity products includes money market funds and private bank deposits."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","EMEA represents Europe, Middle East and Africa."]]
[[/GREPCENT_TABLE]]

The table below presents changes in our AUS.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in billions","","","2021","","","","2020","","","","2019"],["Asset Management"],["Beginning balance","","","$1,530","","","","$1,298","","","","$1,087"],["Net inflows/(outflows):"],["Alternative investments","","","15","","","","(3",")","","","2"],["Equity","","","5","","","","(12",")","","","34"],["Fixed income","","","54","","","","53","","","","35"],["Total long-term AUS net inflows/(outflows)","","","74","","","","38","","","","71"],["Liquidity products","","","76","","","","107","","","","52"],["Total AUS net inflows/(outflows)","","","150","","","","145","","","","123"],["Net market appreciation/(depreciation)","","","39","","","","87","","","","88"],["Ending balance","","","$1,719","","","","$1,530","","","","$1,298"],["Consumer & Wealth Management"],["Beginning balance","","","$ 615","","","","$ 561","","","","$ 455"],["Net inflows/(outflows):"],["Alternative investments","","","18","","","","2","","","","9"],["Equity","","","36","","","","8","","","","11"],["Fixed income","","","2","","","","(6",")","","","17"],["Total long-term AUS net inflows/(outflows)","","","56","","","","4","","","","37"],["Liquidity products","","","22","","","","14","","","","13"],["Total AUS net inflows/(outflows)","","","78","","","","18","","","","50"],["Net market appreciation/(depreciation)","","","58","","","","36","","","","56"],["Ending balance","","","$ 751","","","","$ 615","","","","$ 561"],["Firmwide"],["Beginning balance","","","$2,145","","","","$1,859","","","","$1,542"],["Net inflows/(outflows):"],["Alternative investments","","","33","","","","(1",")","","","11"],["Equity","","","41","","","","(4",")","","","45"],["Fixed income","","","56","","","","47","","","","52"],["Total long-term AUS net inflows/(outflows)","","","130","","","","42","","","","108"],["Liquidity products","","","98","","","","121","","","","65"],["Total AUS net inflows/(outflows)","","","228","","","","163","","","","173"],["Net market appreciation/(depreciation)","","","97","","","","123","","","","144"],["Ending balance","","","$2,470","","","","$2,145","","","","$1,859"]]
[[/GREPCENT_TABLE]]

In the table above, total AUS net inflows/(outflows) for 2019 included $71 billion of inflows (substantially all in equity and fixed income assets) in connection with the acquisitions of Standard & Poor’s Investment Advisory Services (SPIAS), GS Personal Financial Management and Rocaton Investment Advisors (Rocaton). SPIAS and Rocaton were included in the Asset Management segment and GS Personal Financial Management was included in the Consumer & Wealth Management segment.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","75"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The table below presents information about our average monthly firmwide AUS by segment and asset class.

[[GREPCENT_TABLE]]
[["","","Average for the Year Ended December"],["$ in billions","","","2021","","","","2020","","","","2019"],["Segment"],["Asset Management","","","$1,628","","","","$1,429","","","","$1,182"],["Consumer & Wealth Management","","","674","","","","565","","","","505"],["Total AUS","","","$2,302","","","","$1,994","","","","$1,687"],["Asset Class"],["Alternative investments","","","$ 211","","","","$ 183","","","","$ 176"],["Equity","","","547","","","","409","","","","364"],["Fixed income","","","919","","","","829","","","","746"],["Total long-term AUS","","","1,677","","","","1,421","","","","1,286"],["Liquidity products","","","625","","","","573","","","","401"],["Total AUS","","","$2,302","","","","$1,994","","","","$1,687"]]
[[/GREPCENT_TABLE]]

In addition to our AUS, we have discretion over alternative investments where we currently do not earn management fees

(non-fee-earning

alternative assets).

We earn management fees on client assets that we manage and also 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. These incentive fees are recognized when it is probable that a significant reversal of such fees will not occur. Our estimated unrecognized incentive fees were $3.39 billion as of December 2021 and $1.79 billion as of December 2020. Such amounts are based on the completion of the funds’ financial statements, which is generally one quarter in arrears. These fees will be recognized, assuming no decline in fair value, if and when it is probable that a significant reversal of such fees will not occur, which is generally when such fees are no longer subject to fluctuations in the market value of the assets.

Our firmwide management and other fees were $7.57 billion for 2021, $6.67 billion for 2020 and $6.08 billion for 2019. In the first quarter of 2022, we announced that our target is to achieve management and other fees of more than $10 billion (including more than $2 billion from alternative AUS) in 2024.

The table below presents our average effective management fee (which excludes
non-asset-based
fees) earned on our firmwide AUS.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["Effective fees (bps)","","","2021","","","","2020","","","","2019"],["Asset Class"],["Alternative investments","","","63","","","","61","","","","61"],["Equity","","","60","","","","58","","","","61"],["Fixed income","","","17","","","","18","","","","19"],["Liquidity products","","","5","","","","14","","","","16"],["Total average effective fee","","","29","","","","29","","","","32"]]
[[/GREPCENT_TABLE]]

The table below presents details about our monthly average AUS for alternative investments and the average effective management fee we earned on such assets.

[[GREPCENT_TABLE]]
[["$ in billions","","","Direct Strategies","","","","Fund of Funds","","","","Total"],["Year Ended December 2021"],["Average AUS"],["Corporate equity","","","$ 20","","","","$59","","","","$ 79"],["Credit","","","19","","","","1","","","","20"],["Real estate","","","8","","","","7","","","","15"],["Hedge funds and other","","","51","","","","11","","","","62"],["Funds and discretionary accounts","","","$ 98","","","","$78","","","","$176"],["Advisory accounts","","","","","","","","","","","35"],["Total average AUS for alternative investments","","","","","","","","","","","$211"],["Effective Fees (bps)"],["Corporate equity","","","117","","","","57","","","","72"],["Credit","","","102","","","","54","","","","98"],["Real estate","","","93","","","","56","","","","76"],["Hedge funds and other","","","61","","","","66","","","","62"],["Funds and discretionary accounts","","","83","","","","58","","","","72"],["Advisory accounts","","","","","","","","","","","17"],["Total average effective fee","","","","","","","","","","","63"],["Year Ended December 2020"],["Average AUS"],["Corporate equity","","","$ 15","","","","$58","","","","$ 73"],["Credit","","","13","","","","2","","","","15"],["Real estate","","","7","","","","6","","","","13"],["Hedge funds and other","","","44","","","","10","","","","54"],["Funds and discretionary accounts","","","$ 79","","","","$76","","","","$155"],["Advisory accounts","","","","","","","","","","","28"],["Total average AUS for alternative investments","","","","","","","","","","","$183"],["Effective Fees (bps)"],["Corporate equity","","","131","","","","57","","","","73"],["Credit","","","95","","","","53","","","","89"],["Real estate","","","87","","","","63","","","","75"],["Hedge funds and other","","","59","","","","65","","","","60"],["Funds and discretionary accounts","","","81","","","","59","","","","70"],["Advisory accounts","","","","","","","","","","","13"],["Total average effective fee","","","","","","","","","","","61"],["Year Ended December 2019"],["Average AUS"],["Corporate equity","","","$ 16","","","","$51","","","","$ 67"],["Credit","","","10","","","","2","","","","12"],["Real estate","","","6","","","","4","","","","10"],["Hedge funds and other","","","47","","","","11","","","","58"],["Funds and discretionary accounts","","","$ 79","","","","$68","","","","$147"],["Advisory accounts","","","","","","","","","","","29"],["Total average AUS for alternative investments","","","","","","","","","","","$176"],["Effective Fees (bps)"],["Corporate equity","","","134","","","","52","","","","73"],["Credit","","","108","","","","48","","","","99"],["Real estate","","","88","","","","59","","","","76"],["Hedge funds and other","","","61","","","","61","","","","61"],["Funds and discretionary accounts","","","84","","","","54","","","","70"],["Advisory accounts","","","","","","","","","","","13"],["Total average effective fee","","","","","","","","","","","61"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["76","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The table below presents information about our
period-end
AUS for alternative investments,

non-fee-earning

alternative investments and total alternative investments.

[[GREPCENT_TABLE]]
[["$ in billions","","","AUS","","","","Non-fee-earning alternative assets","","","","Total alternative assets"],["As of December 2021"],["Corporate equity","","","$ 87","","","","$ 79","","","","$166"],["Credit","","","25","","","","69","","","","94"],["Real estate","","","16","","","","39","","","","55"],["Hedge funds and other","","","70","","","","2","","","","72"],["Funds and discretionary accounts","","","198","","","","189","","","","387"],["Advisory accounts","","","38","","","","1","","","","39"],["Total alternative investments","","","$236","","","","$190","","","","$426"],["As of December 2020"],["Corporate equity","","","$ 74","","","","$ 51","","","","$125"],["Credit","","","18","","","","72","","","","90"],["Real estate","","","13","","","","43","","","","56"],["Hedge funds and other","","","56","","","","2","","","","58"],["Funds and discretionary accounts","","","161","","","","168","","","","329"],["Advisory accounts","","","30","","","","1","","","","31"],["Total alternative investments","","","$191","","","","$169","","","","$360"],["As of December 2019"],["Corporate equity","","","$ 76","","","","$ 38","","","","$114"],["Credit","","","14","","","","51","","","","65"],["Real estate","","","8","","","","43","","","","51"],["Hedge funds and other","","","58","","","","2","","","","60"],["Funds and discretionary accounts","","","156","","","","134","","","","290"],["Advisory accounts","","","29","","","","\u2013","","","","29"],["Total alternative investments","","","$185","","","","$134","","","","$319"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","Corporate equity primarily includes private equity."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Total alternative investments included uncalled capital that is available for future investing of $42 billion as of December 2021, $44 billion as of December 2020 and $32 billion as of December 2019."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Non-fee-earning alternative investments primarily includes investments that we hold on our balance sheet, our unfunded commitments, unfunded commitments of our clients (where we do not charge fees on commitments), credit facilities collateralized by fund assets and employee funds. Our calculation of non-fee-earning alternative investments may not be comparable to similar calculations used by other companies."]]
[[/GREPCENT_TABLE]]

In the beginning of 2020, we announced a strategic objective of growing our third-party alternatives business, and established a target of achieving gross inflows of $150 billion for alternative investments by the end of 2024. In the first quarter of 2022, we increased that target to $225 billion by the end of 2024.

The table below presents information about third-party commitments raised in our alternatives business during 2020 and 2021.

[[GREPCENT_TABLE]]
[["$ in billions","","","As of December 2021"],["Included in AUS","","","$ 64"],["Included in non-fee-earning alternative assets","","","43"],["Third-party commitments raised","","","$107"]]
[[/GREPCENT_TABLE]]

In the table above, commitments included in

non-fee-earning

alternative investments included approximately $29 billion which will begin to earn fees (and become AUS), if and when the commitments are drawn and assets are invested.

The table below presents information about alternative investments in our Asset Management segment that we hold on our balance sheet.

[[GREPCENT_TABLE]]
[["$ in billions","","","Loans","","","","Debt securities","","","","Equity securities","","","","CIE investments and other","","","","Total"],["As of December 2021"],["Corporate equity","","","$ \u2013","","","","$ \u2013","","","","$15","","","","$ \u2013","","","","$15"],["Credit","","","7","","","","11","","","","\u2013","","","","\u2013","","","","18"],["Real estate","","","7","","","","2","","","","4","","","","14","","","","27"],["Other","","","\u2013","","","","\u2013","","","","\u2013","","","","1","","","","1"],["Total","","","$14","","","","$13","","","","$19","","","","$15","","","","$61"],["As of December 2020"],["Corporate equity","","","$ \u2013","","","","$ \u2013","","","","$16","","","","$ \u2013","","","","$16"],["Credit","","","8","","","","11","","","","\u2013","","","","\u2013","","","","19"],["Real estate","","","9","","","","2","","","","4","","","","19","","","","34"],["Other","","","\u2013","","","","\u2013","","","","\u2013","","","","1","","","","1"],["Total","","","$17","","","","$13","","","","$20","","","","$20","","","","$70"],["As of December 2019"],["Corporate equity","","","$ \u2013","","","","$ \u2013","","","","$17","","","","$ \u2013","","","","$17"],["Credit","","","8","","","","12","","","","\u2013","","","","\u2013","","","","20"],["Real estate","","","9","","","","2","","","","5","","","","17","","","","33"],["Other","","","\u2013","","","","\u2013","","","","\u2013","","","","1","","","","1"],["Total","","","$17","","","","$14","","","","$22","","","","$18","","","","$71"]]
[[/GREPCENT_TABLE]]

Loans and Debt Securities.

The table below presents the concentration of loans and debt securities within our alternative investments by accounting classification, region and industry.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in billions","","","2021","","","","2020"],["Loans","","","$14","","","","$ 17"],["Debt securities","","","13","","","","13"],["Total","","","$27","","","","$ 30"],["Accounting Classification"],["Debt securities at fair value","","","48%","","","","44%"],["Loans at amortized cost","","","40%","","","","43%"],["Loans at fair value","","","12%","","","","13%"],["Total","","","100%","","","","100%"],["Region"],["Americas","","","44%","","","","45%"],["EMEA","","","34%","","","","33%"],["Asia","","","22%","","","","22%"],["Total","","","100%","","","","100%"],["Industry"],["Consumers","","","4%","","","","5%"],["Financial Institutions","","","8%","","","","7%"],["Healthcare","","","11%","","","","9%"],["Industrials","","","14%","","","","15%"],["Natural Resources & Utilities","","","3%","","","","4%"],["Real Estate","","","33%","","","","36%"],["Technology, Media & Telecommunications","","","17%","","","","14%"],["Other","","","10%","","","","10%"],["Total","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","77"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Equity Securities.

The table below presents the concentration of equity securities within our alternative investments by region and industry.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in billions","","","2021","","","","2020"],["Equity securities","","","$19","","","","$20"],["Region"],["Americas","","","57%","","","","51%"],["EMEA","","","23%","","","","18%"],["Asia","","","20%","","","","31%"],["Total","","","100%","","","","100%"],["Industry"],["Consumers","","","6%","","","","2%"],["Financial Institutions","","","11%","","","","25%"],["Healthcare","","","11%","","","","8%"],["Industrials","","","7%","","","","5%"],["Natural Resources & Utilities","","","10%","","","","7%"],["Real Estate","","","22%","","","","18%"],["Technology, Media & Telecommunications","","","30%","","","","31%"],["Other","","","3%","","","","4%"],["Total","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","Equity securities included $15 billion as of December 2021 and $17 billion as of December 2020 of private equity positions, and $4 billion as of December 2021 and $3 billion as of December 2020 of public equity positions that converted from private equity upon the initial public offerings of the underlying companies."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The concentrations for real estate equity securities as of December 2021 were 5% for multifamily (3% as of December 2020), 5% for office (3% as of December 2020), 6% for mixed use (5% as of December 2020) and 6% for other real estate equity securities (7% as of December 2020)."]]
[[/GREPCENT_TABLE]]

The table below presents the concentration of equity securities within our alternative investments by vintage.

[[GREPCENT_TABLE]]
[["","","","Vintage"],["As of December 2021"],["2014 or earlier","","","21%"],["2015 - 2017","","","31%"],["2018 - thereafter","","","48%"],["Total","","","100%"],["As of December 2020"],["2013 or earlier","","","33%"],["2014 - 2016","","","34%"],["2017 - thereafter","","","33%"],["Total","","","100%"]]
[[/GREPCENT_TABLE]]

As we continue to grow our third-party alternatives business, we remain focused on our strategic objective to reduce the capital intensity of the Asset Management segment by reducing our
on-balance
sheet equity investments.

The table below presents the rollforward of our equity securities within our alternative investments from the beginning of 2020 through the end of 2021.

[[GREPCENT_TABLE]]
[["$ in billions","","","Total Equity"],["Beginning balance","","","$ 22"],["Additions","","","6"],["Dispositions","","","(18",")"],["Mark-ups","","","9"],["Ending balance","","","$ 19"]]
[[/GREPCENT_TABLE]]

CIE Investments and Other.

CIE investments and other included assets held by CIEs of $14 billion as of December 2021 and $19 billion as of December 2020, which were funded with liabilities of approximately $7 billion as of December 2021 and $10 billion as of December 2020. Substantially all such liabilities were nonrecourse, thereby reducing our equity at risk.

The table below presents the concentration of CIE assets, net of financings, within our alternative investments by region and asset class.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in billions","","","2021","","","","2020"],["CIE assets, net of financings","","","$7","","","","$9"],["Region"],["Americas","","","63%","","","","63%"],["EMEA","","","25%","","","","22%"],["Asia","","","12%","","","","15%"],["Total","","","100%","","","","100%"],["Asset Class"],["Hospitality","","","4%","","","","4%"],["Industrials","","","10%","","","","10%"],["Multifamily","","","23%","","","","23%"],["Office","","","24%","","","","28%"],["Retail","","","5%","","","","6%"],["Senior Housing","","","16%","","","","13%"],["Student Housing","","","6%","","","","7%"],["Other","","","12%","","","","9%"],["Total","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

The table below presents the concentration of CIE assets, net of financings, within our alternative investments by vintage.

[[GREPCENT_TABLE]]
[["","","Vintage"],["As of December 2021"],["2014 or earlier","","","2%"],["2015 - 2017","","","29%"],["2018 - thereafter","","","69%"],["Total","","","100%"],["As of December 2020"],["2013 or earlier","","","1%"],["2014 - 2016","","","17%"],["2017 - thereafter","","","82%"],["Total","","","100%"]]
[[/GREPCENT_TABLE]]

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.

[[GREPCENT_TABLE]]
[["78","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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 capital we hold and (iii) our funding profile, among other factors. See “Capital Management and Regulatory Capital — Capital Management” for information about our 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:

[[GREPCENT_TABLE]]
[["\u2022","","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;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","To allow Treasury and our independent risk oversight and control functions to objectively evaluate balance sheet limit requests from our revenue-producing units in the context of our overall balance sheet constraints, including our liability profile and capital levels, and key metrics; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","To inform the target amount, tenor and type of funding to raise, based on our projected assets and contractual maturities."]]
[[/GREPCENT_TABLE]]

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

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

Balance Sheet Limits.

The Firmwide Asset Liability Committee and the Risk Governance Committee have the responsibility to review and approve balance sheet limits. These limits are set at levels which are close to actual operating levels, rather than at levels which reflect our maximum risk appetite, in order to ensure prompt escalation and discussion among our revenue-producing units, Treasury and our independent risk oversight and control functions on a routine basis. Requests for changes in limits are evaluated after giving consideration to their impact on our key metrics. Compliance with limits is monitored by our revenue-producing units and Treasury, as well as our independent risk oversight and control functions.

Monitoring of Key Metrics.

We monitor key balance sheet metrics both by business and on a consolidated basis, including asset and liability size and composition, limit utilization and risk measures. We attribute 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 CCAR and U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act Stress Tests (DFAST), as well as our resolution and recovery planning. See “Capital Management and Regulatory Capital — Capital Management” for further information about these scenario analyses. These scenarios cover short- 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 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.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","79"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Balance Sheet Analysis and Metrics

As of December 2021, total assets in our consolidated balance sheets were $1.46 trillion, an increase of $300.96 billion from December 2020, primarily reflecting increases in collateralized agreements of $134.25 billion (primarily reflecting the impact of our and our clients’ activities), cash and cash equivalents of $105.19 billion (primarily reflecting our activity), loans of $42.45 billion (reflecting increases across the portfolio), and customer and other receivables of $39.34 billion (primarily reflecting client activity).

As of December 2021, total liabilities in our consolidated balance sheets were $1.35 trillion, an increase of $286.97 billion from December 2020, primarily reflecting increases in deposits of $104.27 billion (reflecting increases across channels), customer and other payables of $61.27 billion (primarily reflecting client activity), collateralized financings of $56.99 billion (primarily reflecting the impact of our and our clients’ activities), unsecured borrowings of $34.70 billion (primarily driven by new issuances partially offset by maturities), and trading liabilities of $27.70 billion (primarily reflecting the impact of our and our clients’ activities in government obligations, and corporate and other debt obligations, partially offset by the impact of interest rates, currency and commodity price movements on derivative instruments).

Our total securities sold under agreements to repurchase (repurchase agreements), accounted for as collateralized financings, were $165.88 billion as of December 2021 and $126.57 billion as of December 2020, which were 3% higher as of December 2021 and 24% higher as of December 2020 than the average daily amount of repurchase agreements over the respective quarters, and 14% higher as of December 2021 and 31% higher as of December 2020 than the average daily amount of repurchase agreements over the respective years. As of December 2021, the increase in our repurchase agreements relative to the average daily amount of repurchase agreements during the quarter and year resulted from higher levels of our and our clients’ activities at the end of the period.

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

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

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Total assets","","","$1,463,988","","","","$1,163,028"],["Unsecured long-term borrowings","","","$ 254,092","","","","$ 213,481"],["Total shareholders\u2019 equity","","","$ 109,926","","","","$ 95,932"],["Leverage ratio","","","13.3x","","","","12.1x"],["Debt-to-equity ratio","","","2.3x","","","","2.2x"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","The leverage ratio equals total assets divided by total shareholders\u2019 equity and measures the proportion of equity and debt we use to finance assets. This ratio is different from the leverage ratios included in Note 20 to the consolidated financial statements."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The debt-to-equity ratio equals unsecured long-term borrowings divided by total shareholders\u2019 equity."]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions, except per share amounts","","","2021","","","","2020"],["Total shareholders\u2019 equity","","","$109,926","","","","$ 95,932"],["Preferred stock","","","(10,703",")","","","(11,203",")"],["Common shareholders\u2019 equity","","","99,223","","","","84,729"],["Goodwill","","","(4,285",")","","","(4,332",")"],["Identifiable intangible assets","","","(418",")","","","(630",")"],["Tangible common shareholders\u2019 equity","","","$ 94,520","","","","$ 79,767"],["Book value per common share","","","$ 284.39","","","","$ 236.15"],["Tangible book value per common share","","","$ 270.91","","","","$ 222.32"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","Tangible common shareholders\u2019 equity is calculated as total shareholders\u2019 equity less preferred stock, goodwill and identifiable intangible assets. We believe that tangible common shareholders\u2019 equity is meaningful because it is a measure that we and investors use to assess capital adequacy. Tangible common shareholders\u2019 equity is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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 and not subject to performance or market conditions (collectively, basic shares) of 348.9 million as of December 2021 and 358.8 million as of December 2020. We believe that tangible book value per common share (tangible common shareholders\u2019 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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["80","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Funding Sources

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

The table below presents information about our funding sources.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Deposits","","","$ 364,227","","","","36%","","","","$259,962","","","","33%"],["Collateralized financings","","","230,932","","","","23%","","","","173,947","","","","22%"],["Unsecured short-term borrowings","","","46,955","","","","5%","","","","52,870","","","","6%"],["Unsecured long-term borrowings","","","254,092","","","","25%","","","","213,481","","","","27%"],["Total shareholders\u2019 equity","","","109,926","","","","11%","","","","95,932","","","","12%"],["Total","","","$1,006,132","","","","100%","","","","$796,192","","","","100%"]]
[[/GREPCENT_TABLE]]

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

Deposits.

Our deposits provide us with a diversified source of funding and reduce our reliance on wholesale funding. We raise deposits, including savings, demand and time deposits, from private bank clients, consumers, transaction banking clients, other institutional clients, and through internal and third-party broker-dealers. Substantially all of our deposits are raised through GS Bank USA and GSIB. See Note 13 to the consolidated financial statements for further information about our deposits, including a maturity profile of our time deposits.

Secured Funding.

We fund a significant amount of inventory and a portion of investments on a secured basis. Secured funding includes collateralized financings in the consolidated balance sheets. See Note 11 to the consolidated financial statements for further information about our collateralized financings, including its maturity profile. We may also pledge our inventory and investments as collateral for securities borrowed under a securities lending agreement. We also use our own inventory and investments 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 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.

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.

We also raise financing through other types of collateralized financings, such as secured loans and notes. GS Bank USA has access to funding from the Federal Home Loan Bank. Our outstanding borrowings against the Federal Home Loan Bank were $100 million as of December 2021 and we had no outstanding borrowings as of December 2020. Additionally, we have access to funding through the Federal Reserve discount window. However, we do not rely on this funding in our liquidity planning and stress testing.

Unsecured Short-Term Borrowings.

A significant portion of our unsecured short-term borrowings was originally long-term debt that is scheduled to mature within one year of the reporting date. We use unsecured short-term borrowings, including U.S. and
non-U.S.
hybrid financial instruments and commercial paper, to finance liquid assets and for other cash management purposes. In accordance with regulatory requirements, Group Inc. does not issue debt with an original maturity of less than one year, other than to its subsidiaries. See Note 14 to the consolidated financial statements for further information about our unsecured short-term borrowings.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","81"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Unsecured Long-Term Borrowings.

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

The table below presents our quarterly unsecured long-term borrowings maturity profile.

[[GREPCENT_TABLE]]
[["$ in millions","","","First Quarter","","","","Second Quarter","","","","Third Quarter","","","","Fourth Quarter","","","","Total"],["As of December 2021"],["2023","","","$15,373","","","","$7,271","","","","$8,939","","","","$11,628","","","","$ 43,211"],["2024","","","$ 8,622","","","","$8,948","","","","$8,869","","","","$ 7,297","","","","33,736"],["2025","","","$ 6,855","","","","$9,732","","","","$5,671","","","","$ 6,545","","","","28,803"],["2026","","","$ 6,174","","","","$3,773","","","","$3,485","","","","$ 8,725","","","","22,157"],["2027 - thereafter","","","","","","","","","","","","","","","","","","","126,185"],["Total","","","","","","","","","","","","","","","","","","","$254,092"]]
[[/GREPCENT_TABLE]]

The weighted average maturity of our unsecured long-term borrowings as of December 2021 was approximately seven years. To mitigate refinancing risk, we seek to limit the principal amount of debt maturing over the course of any monthly, quarterly or annual time horizon. We enter into interest rate swaps to convert a portion of our unsecured long-term borrowings into floating-rate obligations to manage our exposure to interest rates. See Note 14 to the consolidated financial statements for further information about our unsecured long-term borrowings. We issued approximately $60 billion of benchmark debt during 2021 to support the growth in our total assets amid client demand and attractive return opportunities. We intend to issue significantly less benchmark debt in 2022 compared to our benchmark debt issuance in 2021, though actual issuances may differ due to business needs and market opportunities.

Shareholders’ Equity.

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

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.

Capital Management

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

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

We principally manage the level and composition of our capital through issuances and repurchases of our common stock.

We may issue, redeem 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 such redemptions or repurchases, we must receive approval from the FRB. See Notes 14 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, operational risk and liquidity risk, as well as our ability to generate revenues.

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 stress tests incorporate our internally designed stress scenarios, including our internally developed severely adverse scenario, and those required by the FRB, 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 CCAR rules, we submit an annual 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.

[[GREPCENT_TABLE]]
[["82","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The FRB evaluates us based, in part, on whether we have the capital necessary to continue operating under the baseline and severely adverse scenarios provided by the FRB and those developed internally. This evaluation also takes into account our process for identifying risk, our controls and governance for capital planning, and our guidelines for making capital planning decisions. In addition, the FRB evaluates our plan to make capital distributions (i.e., dividend payments and repurchases or redemptions of stock, subordinated debt or other capital securities) and issue capital, across the range of macroeconomic scenarios and firm-specific assumptions. The FRB determines the SCB applicable to us based on its own annual stress test. The SCB under the Standardized approach is calculated as (i) the difference between our starting and minimum projected CET1 capital ratios under the supervisory severely adverse scenario and (ii) our planned common stock dividends for each of the fourth through seventh quarters of the planning horizon, expressed as a percentage of risk-weighted assets (RWAs).

We submitted our 2021 CCAR capital plan in April 2021 and published a summary of our annual DFAST results in June 2021. See “Business — Available Information” in Part I, Item 1 of this
Form 10-K.
Based on our 2021 CCAR submission, the FRB reduced our SCB from 6.6% to 6.4%, resulting in a Standardized CET1 capital ratio requirement of 13.4% for the period from October 1, 2021 through September 30, 2022. See “Share Repurchase Program” for further information about common stock repurchases and dividends.

GS Bank USA has its own capital planning process and, starting in 2022, will be required to submit its annual stress test results to the FRB. GSI, GSIB and Goldman Sachs Bank Europe SE (GSBE) also have their own capital planning and stress testing processes, which incorporate internally designed stress tests developed in accordance with the guidelines of their respective regulators.

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 on our internal assessment of risks, which incorporates an attribution of our relevant regulatory capital requirements. These regulatory capital requirements are allocated using our attributed equity framework, which takes into consideration our most binding capital constraints. Our most binding capital constraint is based on the results of the FRB’s annual stress test, which includes the Standardized risk-based capital and leverage ratios.

We review and make any necessary adjustments to our attributed equity in January each year, to reflect, among other things, the results of our latest CCAR process, as well as projected changes in our balance sheet. On January 1, 2021, our allocation of attributed equity changed (relative to the allocation as of December 2020) as follows: attributed equity increased by approximately $3.7 billion for Asset Management and approximately $0.7 billion for Consumer & Wealth Management, while attributed equity decreased by approximately $2.3 billion for Global Markets and approximately $2.1 billion for Investment Banking. On January 1, 2022, our allocation of attributed equity changed (relative to the allocation as of December 2021) as follows: attributed equity increased by approximately $1.0 billion for Consumer & Wealth Management and approximately $0.5 billion for Investment Banking, while attributed equity decreased by approximately $0.8 billion for Global Markets and approximately $0.7 billion for Asset Management. See “Segment Assets and Operating Results — Segment Operating Results” for information about our average quarterly attributed equity by segment.

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
and accelerated share repurchases), 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.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","83"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

In the third quarter of 2021, the Board of Directors of Group Inc. (Board) approved an increase in our common stock dividend from $1.25 to $2.00 per share. During the fourth quarter of 2021, we returned a total of $1.20 billion to shareholders, including common stock repurchases of $500 million and approximately $700 million in common stock dividends. We currently expect our common stock repurchases in the first quarter of 2022 to be at or around the levels of common stock repurchases in the fourth quarter of 2021. Consistent with our capital management philosophy, we will continue prioritizing deployment of capital for our clients where returns are attractive and return any excess capital to shareholders through dividends and share repurchases.

As of December 2021, the remaining share authorization under our existing repurchase program was 34.4 million shares. See “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in Part II, Item 5 of this
Form 10-K
and Note 19 to the consolidated financial statements for further information about our share repurchase program, and see above for information about our capital planning and stress testing process.

Resolution Capital Models.

In connection with our resolution planning efforts, we have established a Resolution Capital Adequacy and Positioning framework, which is designed to ensure that our major subsidiaries (GS Bank USA, Goldman Sachs & Co. LLC (GS&Co.), GSI, GSIB, GSBE, 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 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, GSIB and GSBE have also been assigned long- and short-term issuer ratings, as well as ratings on their long- and short-term bank deposits. In addition, credit rating agencies have assigned ratings to debt obligations of certain other subsidiaries of Group Inc.

The level and composition of our 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, GSBE, GS&Co. and GSI.

Consolidated Regulatory Capital

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

The capital requirements calculated under the Capital Framework include the capital conservation buffer requirements, which are comprised of a 2.5% buffer (under the Advanced Capital Rules), the SCB (under the Standardized Capital Rules), a countercyclical capital buffer (under both Capital Rules) and the
G-SIB
surcharge (under both Capital Rules). Our
G-SIB
surcharge is 2.5% for 2021 and 2022 and 3.0% for 2023. Based on financial data for 2021, we are above the threshold for the 3.5%
G-SIB
surcharge. The earliest this surcharge could be effective is January 2024. The
G-SIB
surcharge and countercyclical capital buffer in the future may differ due to additional guidance from our regulators and/or positional changes, and our SCB is likely to change from year to year based on the results of the annual supervisory stress tests. Our target is to maintain capital ratios equal to the regulatory requirements plus a buffer of 50 to 100 basis points.

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

Total Loss-Absorbing Capacity (TLAC)

We are also subject to the FRB’s TLAC and related requirements. Failure to comply with the TLAC and related requirements would result in restrictions being imposed by the FRB and could limit our ability to repurchase shares, pay dividends and make certain discretionary compensation payments.

[[GREPCENT_TABLE]]
[["84","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The table below presents TLAC and external long-term debt requirements.

[[GREPCENT_TABLE]]
[["","","As of December"],["","","","2021","","","","2020"],["TLAC to RWAs","","","21.5%","","","","22.0%"],["TLAC to leverage exposure","","","9.5%","","","","9.5%"],["External long-term debt to RWAs","","","8.5%","","","","8.5%"],["External long-term debt to leverage exposure","","","4.5%","","","","4.5%"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","As of both December 2021 and December 2020, the TLAC to RWAs requirement included (i) the 18% minimum, (ii) the 2.5% buffer, (iii) the countercyclical capital buffer, which the FRB has set to zero percent and (iv) the G-SIB surcharge (Method 1). The G-SIB surcharge (Method 1) was 1.0% as of December 2021 and 1.5% as of December 2020."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The TLAC to leverage exposure requirement includes (i) the 7.5% minimum and (ii) the 2.0% leverage exposure buffer."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The external long-term debt to RWAs requirement includes (i) the 6% minimum and (ii) the 2.5% G-SIB surcharge (Method 2)."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The external long-term debt to total leverage exposure is the 4.5% minimum."]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","For the Three Months Ended or as of December"],["$ in millions","","","2021","","","","2020"],["TLAC","","","$ 297,765","","","","$ 242,730"],["External long-term debt","","","$ 174,500","","","","$ 139,200"],["RWAs","","","$ 676,863","","","","$ 609,750"],["Leverage exposure","","","$1,910,521","","","","$1,332,937"],["TLAC to RWAs","","","44.0%","","","","39.8%"],["TLAC to leverage exposure","","","15.6%","","","","18.2%"],["External long-term debt to RWAs","","","25.8%","","","","22.8%"],["External long-term debt to leverage exposure","","","9.1%","","","","10.4%"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","TLAC includes common and preferred stock, and eligible long-term debt issued by Group Inc. Eligible long-term debt represents unsecured debt, which has a remaining maturity of at least one year and satisfies additional requirements."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","External long-term debt consists of eligible long-term debt subject to a haircut if it is due to be paid between one and two years."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","RWAs represent Standardized RWAs as of December 2021 and Advanced RWAs as of December 2020. In accordance with the TLAC rules, the higher of Advanced or Standardized RWAs are used in the calculation of TLAC and external long-term debt ratios and applicable requirements."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Leverage exposure consists of average adjusted total assets and certain off-balance sheet exposures. Leverage exposure for the three months ended December 2020 excluded average holdings of U.S. Treasury securities and average deposits at the Federal Reserve as permitted by the FRB under a temporary amendment. This temporary amendment had the effect of increasing the TLAC to leverage exposure ratio and the external long-term debt to leverage ratio. The impact of this temporary amendment was an increase to the TLAC to leverage exposure ratio of 2.4 percentage points and the external long-term debt to leverage exposure ratio of 1.3 percentage points for the three months ended December 2020. The amendment permitting this exclusion expired on April 1, 2021."]]
[[/GREPCENT_TABLE]]

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

Subsidiary Capital Requirements

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

Bank Subsidiaries.

GS Bank USA is our primary U.S. banking subsidiary and GSIB and GSBE are our primary
non-U.S.
banking subsidiaries. These entities are subject to regulatory capital requirements. See Note 20 to the consolidated financial statements for further information about the regulatory capital requirements of our bank subsidiaries.

U.S. Regulated Broker-Dealer Subsidiaries.

GS&Co. is our primary U.S. regulated broker-dealer subsidiary and is subject to regulatory capital requirements, including those imposed by the SEC and the Financial Industry Regulatory Authority, Inc. In addition, GS&Co. is a registered futures commission merchant and a registered swap dealer with the CFTC, and therefore is subject to regulatory capital requirements imposed by the CFTC, the Chicago Mercantile Exchange and the National Futures Association. Beginning in the fourth quarter of 2021, GS&Co. also became a registered security-based swap dealer with the SEC, and therefore became subject to capital requirements for security-based swap dealers which became effective in October 2021.
Rule 15c3-1
of the SEC and Rules 1.17 and Part 23 Subpart E 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
of the SEC.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","85"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

GS&Co. had regulatory net capital, as defined by
Rule 15c3-1,
of $22.18 billion as of December 2021 and $22.38 billion as of December 2020, which exceeded the amount required by $17.74 billion as of December 2021 and $18.45 billion as of December 2020. In addition to its alternative minimum net capital requirements, GS&Co. is also required to hold tentative net capital in excess of $5 billion and net capital in excess of $1 billion in accordance with
Rule 15c3-1.
GS&Co. is also required to notify the SEC in the event that its tentative net capital is less than $6 billion. As of both December 2021 and December 2020, GS&Co. had tentative net capital and net capital in excess of both the minimum and the notification requirements.

Non-U.S.
Regulated Broker-Dealer Subsidiaries.

Our principal
non-U.S.
regulated broker-dealer subsidiaries include GSI and GSJCL.

GSI, our U.K. broker-dealer, is regulated by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

GSI is subject to the U.K. capital framework, which is predominantly aligned with the E.U. capital framework prescribed in the amended E.U. Capital Requirements Directive (CRD) and the E.U. Capital Requirements Regulation (CRR). These capital regulations are largely based on the Basel Committee on Banking Supervision’s (Basel Committee) capital framework for strengthening international capital standards (Basel III).

The table below presents GSI’s risk-based capital requirements.

[[GREPCENT_TABLE]]
[["","","As of December"],["","","","2021","","","","2020"],["Risk-based capital requirements"],["CET1 capital ratio","","","8.1%","","","","8.1%"],["Tier 1 capital ratio","","","9.9%","","","","10.0%"],["Total capital ratio","","","12.4%","","","","12.5%"]]
[[/GREPCENT_TABLE]]

In the table above, the risk-based capital requirements incorporate capital guidance received from the PRA and could change in the future.

The table below presents information about GSI’s risk-based capital ratios.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Risk-based capital and risk-weighted assets"],["CET1 capital","","","$ 28,810","","","","$ 26,962"],["Tier 1 capital","","","$ 37,110","","","","$ 35,262"],["Tier 2 capital","","","$ 5,377","","","","$ 5,377"],["Total capital","","","$ 42,487","","","","$ 40,639"],["RWAs","","","$269,762","","","","$252,355"],["Risk-based capital ratios"],["CET1 capital ratio","","","10.7%","","","","10.7%"],["Tier 1 capital ratio","","","13.8%","","","","14.0%"],["Total capital ratio","","","15.7%","","","","16.1%"]]
[[/GREPCENT_TABLE]]

In the table above, the risk-based capital ratios as of December 2021 reflected GSI’s profits after foreseeable charges for the three months ended December 2021 (which will not be finalized until verification by GSI’s external auditors and approval by GSI’s Board of Directors for inclusion in risk-based capital). These profits contributed approximately 16 basis points to the CET1 capital ratio.

GSI is also subject to the leverage ratio framework established by the PRA. This framework sets the minimum leverage ratio requirement at 3.25% that will apply to GSI from January 1, 2023. GSI had a leverage ratio of 4.2% as of December 2021 and 4.7% as of December 2020. The leverage ratio as of December 2021 reflected GSI’s profits after foreseeable charges for the three months ended December 2021 (which will not be finalized until verification by GSI’s external auditors and approval by GSI’s Board of Directors for inclusion in risk-based capital). These profits contributed approximately 7 basis points to the leverage ratio.

GSI is a registered swap dealer with the CFTC and, beginning in the fourth quarter of 2021, also became a registered security-based swap dealer with the SEC. As of December 2021, GSI was subject to and in compliance with applicable capital requirements for swap dealers and security-based swap dealers.

GSI is also subject to a minimum requirement for own funds and eligible liabilities issued to affiliates. This requirement is subject to a transitional period which began to phase in from January 2019 and became fully effective beginning in January 2022. As of both December 2021 and December 2020, GSI was in compliance with this requirement.

GSJCL, our Japanese broker-dealer, is regulated by Japan’s Financial Services Agency. GSJCL and certain other
non-U.S.
subsidiaries are also subject to capital requirements promulgated by authorities of the countries in which they operate. As of both December 2021 and December 2020, these subsidiaries were in compliance with their local capital requirements.

[[GREPCENT_TABLE]]
[["86","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Regulatory and Other Matters

Regulatory Matters

Our businesses are subject to extensive regulation and supervision worldwide. Regulations 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.

Other Matters

Replacement of Interbank Offered Rates (IBORs), including LIBOR.

On January 1, 2022, the publication of all EUR, CHF, JPY and GBP LIBOR
(non-USD
LIBOR) settings along with certain USD LIBOR settings ceased. The publication of the most commonly used USD LIBOR settings will cease after June 2023. The FCA has allowed the publication and use of synthetic rates for certain GBP and JPY LIBOR settings in legacy GBP or JPY LIBOR-based derivative contracts through December 2022. The U.S. federal banking agencies’ guidance strongly encourages banking organizations to cease using USD LIBOR.

The International Swaps and Derivatives Association (ISDA) 2020 IBOR Fallbacks Protocol (IBOR Protocol) has provided derivatives market participants with amended fallbacks for legacy and new derivative contracts to mitigate legal or economic uncertainty. Both counterparties have to adhere to the IBOR Protocol or engage in bilateral amendments for the terms to be effective for derivative contracts. ISDA confirmed that the FCA’s formal announcement in March 2021 fixed the spread adjustment for all LIBOR rates and that fallbacks will automatically occur for outstanding derivative contracts that incorporate the relevant terms. In April 2021, the State of New York approved legislation intended to minimize legal and economic uncertainty for contracts that are governed by New York law and have no fallback provisions or have fallback provisions that are based on USD LIBOR by providing a statutory framework to replace USD LIBOR with a benchmark rate based on the Secured Overnight Financing Rate (SOFR).

We have facilitated an orderly transition from
non-USD
LIBORs to alternative risk-free reference rates for us and our clients and continue to make progress on our transition program as it relates to USD LIBOR.

Our
non-USD
LIBOR risk exposure was substantially all in connection with derivative contracts. As of December 2021, substantially all of our
non-USD
LIBOR-based derivative contracts were with central clearing counterparties or exchanges which had incorporated fallbacks consistent with the IBOR Protocol in their rulebooks or were under bilateral agreements subject to the IBOR Protocol. The remainder were converted to synthetic rates as permitted by the FCA. The notional amount of derivatives converted to synthetic rates was not material.

Our risk exposure to USD LIBOR is primarily in connection with our derivative contracts and to a lesser extent our unsecured debt, preferred stock and loan portfolio. As of December 2021, the notional amount of our USD LIBOR-based derivative contracts was approximately $10.0 trillion, of which approximately $5.5 trillion will mature after June 2023 based on their contractual terms. A majority of such derivative contracts are with counterparties under bilateral agreements subject to the IBOR Protocol, or with central clearing counterparties or exchanges which have incorporated fallbacks consistent with the IBOR Protocol in their rulebooks and have announced that they plan to convert USD LIBOR contracts to alternative risk-free reference rates. Our benchmark unsecured debt and preferred stock with USD LIBOR exposure was approximately $34.5 billion as of December 2021, of which $29.4 billion will contractually mature after June 2023 or is perpetual and has no stated maturity date. A large portion of such debt and preferred stock represents our

fixed-to-floating

rate instruments, currently in the fixed-rate period, with call options before the LIBOR exposure begins. We continue to monitor industry and legislative developments as they relate to unsecured debt and preferred stock and will take actions designed to facilitate an orderly transition. In addition, we are also engaging with our clients in order to remediate our loan agreements through bilateral amendments.

We have also issued debt and deposits linked to SOFR and Sterling Overnight Index Average (SONIA) and executed SOFR- and SONIA-based derivative contracts to make markets and facilitate client activities. When appropriate, we continue to execute transactions in the market to reduce our USD LIBOR exposures arising from hedges to our fixed-rate debt issuances and replace them with alternative risk-free reference rate exposures.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","87"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Our LIBOR transition program continues to make progress with a focus on:

[[GREPCENT_TABLE]]
[["\u2022","","Evaluating and monitoring the impacts of USD LIBOR settings across our businesses, including transactions and products;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Ensuring that legacy financial instruments and contracts that continue to be impacted by the transition already contain appropriate fallback language or are being amended, either through bilateral negotiation or using industry-wide tools, such as protocols;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Enhancements to infrastructure (for example, models and systems) to prepare for a smooth transition from USD LIBOR to alternative risk-free reference rates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Ensuring operational readiness to offer and support various alternative risk-free reference rate products;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Active participation in central bank and sector working groups, including responding to industry consultations; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Client education and communication."]]
[[/GREPCENT_TABLE]]

Impact of
COVID-19
Pandemic.

Infection rates in many parts of the world spiked toward the end of 2021 and into early 2022, as the highly transmissible Omicron variant emerged in the fourth quarter and spread rapidly, while the Delta variant also remained a concern. The surge of infections has led to a renewed emphasis globally on safety measures and restrictions, as well as a greater sense of urgency regarding the distribution of vaccines and vaccine boosters, and has created a greater degree of uncertainty regarding the prospects for economic growth in 2022.

We have continued to successfully execute on our BCP strategy since initially activating it in the first quarter of 2020 in response to the emergence of the
COVID-19
pandemic. Our priority has been to safeguard our employees and to seek to ensure continuity of business operations on behalf of our clients. Our business continuity response to the
COVID-19
pandemic is managed by a central team, which is led by our chief administrative officer and chief medical officer, and includes senior management within Risk and the chief operating officers across all regions and businesses. We remain focused on ensuring that our employees are able to safely work from our offices, where circumstances permit. During 2021, we made substantial progress in facilitating the safe return of employees to our offices and employees in a number of our locations around the world returned to the office to varying degrees. Given that the situation regarding
COVID-19
is fluid and varies geographically, our approach to transitioning back to the office is flexible and evolves as the specific conditions and requirements of each location change. For instance, in light of the rapid spread of the Omicron variant late in 2021, we took the step of having the vast majority of employees in the U.S., the U.K. and in some of our other locations work remotely at the outset of 2022.

Our systems and infrastructure have been robust throughout the
COVID-19
pandemic, enabling us to conduct our activities without disruption. Communication throughout our organization has remained active during the pandemic and our risk management processes have continued to operate in a rigorous and disciplined manner.

We maintained high liquidity levels during 2021, as our GCLA averaged $335 billion for the year. We have continued to access our traditional funding sources in the normal course and service our debt and other obligations on a timely basis. See “Balance Sheet and Funding Sources” and “Risk Management — Liquidity Risk Management” for further information.

Accounting estimates, particularly those made in connection with determining the allowance for credit losses and the fair value of certain level 3 assets, are sensitive to assumptions regarding future economic conditions. Predicting the trajectory of the economic recovery is highly judgmental given the uncertainty as to how the pandemic will evolve, as it will largely depend on the duration of the Omicron wave, the possible emergence of other variants and further progress in the distribution of vaccines and vaccine boosters.

[[GREPCENT_TABLE]]
[["88","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

In general, the market backdrop continued to be constructive during 2021 and activity levels remained solid. Volatility increased toward the end of the year as a result of the spike in infections, while accelerating inflation, driven by supply chain disruptions and labor shortages, and more moderated growth expectations, were key macroeconomic considerations heading into 2022. We continued to deploy our balance sheet to intermediate risk and to support the needs of clients. We have maintained our proactive approach to managing market risk levels, which entails ongoing review and monitoring of exposures and focusing on ways to mitigate risk. As the economic recovery progressed in 2021, credit risk continued to abate from the low point of the pandemic. However, we continue to closely monitor those industries that have been most severely challenged by the pandemic.

While the global economy continued on the path to recovery during 2021, it is vulnerable to the risk that the Omicron variant, or other possible variants, could impede the recovery going forward by precipitating adverse economic consequences, such as a softening in consumer and business confidence and spending, a worsening of supply chain constraints, and an intensification of inflationary pressures. If the future effects of the pandemic were to lead to a sustained period of economic weakness, our businesses would be negatively impacted. This would have a negative impact on factors that are important to our operating performance, such as the level of client activity, creditworthiness of counterparties and borrowers, and the amount of our AUS. We will continue to closely monitor the rollout of vaccines across regions, as well as the impact of new variants of the virus, and will take further actions, as necessary, in order to best serve the interests of our employees, clients and counterparties. For further information about the risks associated with the
COVID-19
pandemic, see “Risk Factors” in Part I, Item 1A of this
Form 10-K.

Off-Balance
Sheet Arrangements

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

[[GREPCENT_TABLE]]
[["\u2022","","Purchasing or retaining residual and other interests in special purpose entities, such as mortgage-backed and other asset-backed securitization vehicles;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Holding senior and subordinated debt, interests in limited and general partnerships, and preferred and common stock in other nonconsolidated vehicles;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Entering into interest rate, foreign currency, equity, commodity and credit derivatives, including total return swaps; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Providing guarantees, indemnifications, commitments, letters of credit and representations and warranties."]]
[[/GREPCENT_TABLE]]

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; and provide investors with credit-linked and asset-repackaged notes.

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.

[[GREPCENT_TABLE]]
[["Off-Balance Sheet Arrangement","","","","Disclosure in Form 10-K"],["Variable interests and other obligations, including contingent obligations, arising from variable interests in nonconsolidated variable interest entities (VIEs)","","","","See Note 17 to the consolidated financial statements."],["Guarantees, and lending and other commitments","","","","See Note 18 to the consolidated financial statements."],["Derivatives","","","","See \u201cRisk Management \u2014 Credit Risk Management \u2014 Credit Exposures \u2014 OTC Derivatives\u201d and Notes 4, 5, 7 and 18 to the consolidated financial statements."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","89"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Risk Management

Risks are inherent in our businesses and include liquidity, market, credit, operational, model, legal, compliance, conduct, regulatory and reputational risks. 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 risk management processes, see “Overview and Structure of Risk Management,” and for information about our areas of risk, see “Liquidity Risk Management,” “Market Risk Management,” “Credit Risk Management,” “Operational Risk Management” and “Model Risk Management” and “Risk Factors” in Part I, Item 1A of this
Form 10-K.

Overview and Structure of Risk Management

Overview

We believe that effective risk management is critical to our success. Accordingly, we have established an enterprise risk management framework that employs a comprehensive, integrated approach to risk management, and is designed to enable comprehensive risk management processes through which we identify, assess, monitor and manage the risks we assume in conducting our activities. Our risk management structure is built around three core components: governance, processes and people.

Governance.

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

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

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

Our revenue-producing units, as well as Treasury, Engineering, Human Capital Management, Operations, and Corporate and Workplace Solutions, are considered our first line of defense. They are accountable for the outcomes of our risk-generating activities, as well as for assessing and managing those risks within our risk appetite.

Our independent risk oversight and control functions are considered our second line of defense and provide independent assessment, oversight and challenge of the risks taken by our first line of defense, as well as lead and participate in risk committees. Independent risk oversight and control functions include Compliance, Conflicts Resolution, Controllers, Legal, Risk and Tax.

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

[[GREPCENT_TABLE]]
[["90","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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

Processes.

We maintain various processes that are critical components of our risk management framework, including (i) risk identification and assessment, (ii) risk appetite, limit and threshold setting, (iii) risk reporting and monitoring, and (iv) risk decision-making.

[[GREPCENT_TABLE]]
[["\u2022","","Risk Identification and Assessment. We believe that the identification and assessment of our risks is a critical step in providing our Board and senior management transparency and insight into the range and materiality of our risks. We have a comprehensive data collection process, including firmwide policies and procedures that require all employees to report and escalate risk events. Our approach for risk identification and assessment is comprehensive across all risk types, is dynamic and forward-looking to reflect and adapt to our changing risk profile and business environment, leverages subject matter expertise, and allows for prioritization of our most critical risks."]]
[[/GREPCENT_TABLE]]

To effectively assess 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.

An important part of our risk management process is firmwide stress testing. 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. Firmwide stress tests are performed on a regular basis and are designed to ensure a comprehensive analysis of our vulnerabilities and idiosyncratic risks combining financial and nonfinancial risks, including, but not limited to, credit, market, liquidity and funding, operational and compliance, strategic, systemic and emerging risks into a single combined scenario. We also perform ad hoc stress tests in anticipation of market events or conditions. Stress tests are also used to assess capital adequacy as part of our capital planning and stress testing process. See “Capital Management and Regulatory Capital — Capital Management” for further information.

[[GREPCENT_TABLE]]
[["\u2022","","Risk Appetite, Limit and Threshold Setting. We apply a rigorous framework of limits and thresholds to control and monitor risk across transactions, products, businesses and markets. The Board, directly or indirectly through its Risk Committee, approves limits and thresholds included in our risk appetite statement at firmwide, business and product levels. In addition, the Firmwide Enterprise Risk Committee is responsible for approving our risk limits framework, subject to the overall limits approved by the Risk Committee of the Board, and monitoring these limits."]]
[[/GREPCENT_TABLE]]

The Risk Governance Committee is responsible for approving limits at firmwide, business and product levels. Certain limits may be set at levels that will require periodic adjustment, rather than at levels that reflect our maximum risk appetite. This fosters an ongoing dialogue about risk among our first and second lines of defense, committees and senior management, as well as rapid escalation of
risk-related
matters. Additionally, through delegated authority from the Risk Governance Committee, Market Risk sets limits at certain product and desk levels, and Credit Risk sets limits for individual counterparties, counterparties and their subsidiaries, industries and countries. Limits are reviewed regularly and amended on a permanent or temporary basis to reflect changing market conditions, business conditions or risk tolerance.

[[GREPCENT_TABLE]]
[["\u2022","","Risk Reporting and Monitoring. 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 provide us with complete, accurate and timely information. Our risk reporting and monitoring processes are designed to take into account information about both existing and emerging risks, thereby enabling our risk committees and senior management to perform their responsibilities with the appropriate level of insight into risk exposures. Furthermore, our limit and threshold breach processes provide means for timely escalation. We evaluate changes in our risk profile and our businesses, including changes in business mix or jurisdictions in which we operate, by monitoring risk factors at a firmwide level."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","91"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

[[GREPCENT_TABLE]]
[["\u2022","","Risk Decision-Making. 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 committees that meet regularly and serve as an important means to facilitate and foster ongoing discussions to manage and mitigate risks."]]
[[/GREPCENT_TABLE]]

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

People.

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

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

Structure

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

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

The chart below presents an overview of our risk management governance structure.

Management Committee.

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

[[GREPCENT_TABLE]]
[["92","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Firmwide Enterprise Risk Committee.

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

[[GREPCENT_TABLE]]
[["\u2022","","Firmwide Risk Council. The Firmwide Risk Council is responsible for the ongoing monitoring of relevant financial risks and related risk limits at the firmwide, business and product levels. This council is co-chaired by the chairs of the Firmwide Enterprise Risk Committee."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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 controller and chief accounting officer, and our chief administrative officer, who are appointed as chairs by the chairs of the Firmwide Enterprise Risk Committee."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Firmwide Operational Risk and Resilience Committee. The Firmwide Operational Risk and Resilience Committee is responsible for overseeing operational risk, and for ensuring our business and operational resilience. To assist the Firmwide Operational Risk and Resilience Committee in carrying out its mandate, other risk committees with dedicated oversight for technology-related risks, including cyber security matters, report into the Firmwide Operational Risk and Resilience Committee. This committee is co-chaired by our chief administrative officer and the head of Operational Risk, who are appointed as chairs by the chairs of the Firmwide Enterprise Risk Committee."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Firmwide Conduct Committee. The Firmwide Conduct Committee is responsible for the ongoing approval and monitoring of the frameworks and policies which govern our conduct risks. Conduct risk is the risk that our people fail to act in a manner consistent with our Business Principles and related core values, policies or codes, or applicable laws or regulations, thereby falling short in fulfilling their responsibilities to us, our clients, colleagues, other market participants or the broader community. This committee is chaired by our chief legal officer, who is appointed as chair by the chairs of the Firmwide Enterprise Risk Committee."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Risk Governance Committee. The Risk Governance Committee (through delegated authority from the Firmwide Enterprise Risk Committee) is responsible for the ongoing approval and monitoring of risk frameworks, policies and parameters related to our core risk management processes, as well as limits, at firmwide, business and product levels. In addition, this committee reviews the results of stress tests and scenario analyses. To assist the Risk Governance Committee in carrying out its mandate, a number of other risk committees with dedicated oversight for stress testing, model risks and Volcker Rule compliance report into the Risk Governance Committee. This committee is chaired by our chief risk officer, who is appointed as chair by the chairs of the Firmwide Enterprise Risk Committee."]]
[[/GREPCENT_TABLE]]

Firmwide Client and Business Standards Committee.

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

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","93"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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

[[GREPCENT_TABLE]]
[["\u2022","","Firmwide Reputational Risk Committee. The Firmwide Reputational Risk Committee is responsible for assessing reputational risks arising from transactions that have been identified as having potential heightened reputational risk pursuant to the criteria established by the Firmwide Reputational Risk Committee and as determined by committee leadership. This committee is chaired by our president and chief operating officer, who is appointed as chair by the chief executive officer, and the vice-chairs are our chief legal officer and the former chair of Conflicts Resolution (now a senior advisor to the firm), who are appointed as vice-chairs by the chair of the Firmwide Reputational Risk Committee. This committee periodically provides updates to, and receives guidance from, the Public Responsibilities Committee of the Board."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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 our chief compliance officer, and a co-head of EMEA FICC sales, who are appointed as chairs by the chair of the Firmwide Client and Business Standards Committee."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Firmwide Investment Policy Committee. The Firmwide Investment Policy Committee periodically reviews our investing and lending activities on a portfolio basis, including review of risk management and controls, and sets business standards and policies for these types of investments. This committee is co-chaired by a co-head of our Asset Management Division, a co-head of our Global Markets Division and our chief risk officer, who are appointed as chairs by our president and chief operating officer and our chief financial officer."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Firmwide Capital Committee. The Firmwide Capital Committee provides approval and oversight of debt-related transactions, including principal commitments of our capital. This committee aims to ensure that business, reputational and suitability standards for underwritings and capital commitments are maintained on a global basis. This committee is co-chaired by the head of Credit Risk and the head of Americas Leveraged Finance, who are appointed as chairs by the chairs of the Firmwide Enterprise Risk Committee."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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 chief underwriting officer for EMEA, the chief equity underwriting officer for the Americas, a co-chairman of the Global Financial Institutions Group and a co-head of the Industrials Group in our Investment Banking Division, who are appointed as chairs by the chair of the Firmwide Client and Business Standards Committee."]]
[[/GREPCENT_TABLE]]

Firmwide Asset Liability Committee.

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

Conflicts Management

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

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

[[GREPCENT_TABLE]]
[["94","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

As a general matter, Conflicts Resolution reviews financing and advisory assignments in Investment Banking and certain of our investing, lending and other activities. In addition, we have various transaction oversight committees, such as the Firmwide Capital, Commitments and Suitability Committees and other committees that also review new underwritings, loans, investments and structured products. These groups and committees work with internal and external counsel and Compliance to evaluate and address any actual or potential conflicts. The head of Conflicts Resolution reports to our chief legal officer, who reports to our chief executive officer.

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

Climate Risk Management

We categorize climate risk into physical risk and transition risk. Physical risk is the risk that asset values may decline or operations may be disrupted as a result of changes in the climate, while transition risk is the risk that asset values may decline because of changes in climate policies or changes in the underlying economy due to decarbonization.

As a global financial institution, climate-related risks manifest in different ways across our businesses and we have continued to make significant enhancements to our climate risk management framework, including steps to further integrate climate into our broader risk management processes. We have integrated oversight of climate-related risks into our risk management governance structure, from senior management to our Board and its committees, including the Risk and Public Responsibilities Committees. The Risk Committee of the Board oversees firmwide financial and nonfinancial risks, which include climate risk, and, as part of its oversight, receives updates on our risk management approach to climate risk, including our approaches towards scenario analysis and integration into existing risk management processes. The Public Responsibilities Committee of the Board assists the Board in its oversight of our firmwide sustainability strategy and sustainability issues affecting us, including with respect to climate change. As part of its oversight, the Public Responsibilities Committee receives periodic updates on our sustainability strategy, and also periodically reviews our governance and related policies and processes for sustainability and climate change-related risks. Senior management within Risk is responsible for the development of our climate risk program.

We have begun incorporating climate risk into our credit evaluation and underwriting processes for select industries. Climate risk factors are now evaluated as part of transaction due diligence for select loan commitments.

See “Business — Sustainability” in Part I, Item 1 and “Risk Factors” in Part I, Item 1A of this
Form 10-K
for information about our sustainability initiatives, including in relation to climate transition.

Compliance Risk Management

Compliance risk is the risk of legal or regulatory sanctions, material financial loss or damage to our reputation arising from our failure to comply with the requirements of applicable laws, rules and regulations, and our internal policies and procedures. Compliance risk is inherent in all activities through which we conduct our businesses. Our Compliance Risk Management Program, administered by Compliance, assesses our compliance, regulatory and reputational risk; monitors for compliance with new or amended laws, rules and regulations; designs and implements controls, policies, procedures and training; conducts independent testing; investigates, surveils and monitors for compliance risks and breaches; and leads our responses to regulatory examinations, audits and inquiries. We monitor and review business practices to assess whether they meet or exceed minimum regulatory and legal standards in all markets and jurisdictions in which we conduct business.

Capital Risk Management

Capital risk is the risk that our capital is insufficient to support our business activities under normal and stressed market conditions or we face capital reductions or RWA increases, including from new or revised rules or changes in interpretations of existing rules, and are therefore unable to meet our internal capital targets or external regulatory capital requirements. Capital adequacy is of critical importance to us. Accordingly, we have in place a comprehensive capital management policy that provides a framework, defines objectives and establishes guidelines to maintain an appropriate level and composition of capital in both

business-as-usual

and stressed conditions. Our capital management framework is designed to provide us with the information needed to comprehensively manage risk, and develop and apply projected stress scenarios that capture idiosyncratic vulnerabilities with a goal of holding sufficient capital to remain adequately capitalized even after experiencing a severe stress event. See “Capital Management and Regulatory Capital” for further information about our capital management process.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","95"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

We have established a comprehensive governance structure to manage and oversee our

day-to-day

capital management activities and compliance with capital rules and related policies. Our capital management activities are overseen by the Board and its committees. The Board is responsible for approving our annual capital plan and the Risk Committee of the Board approves our capital management policy. In addition, committees and members of senior management are responsible for the ongoing monitoring of our capital adequacy and evaluate current and future regulatory capital requirements, review the results of our capital planning and stress tests processes, and the results of our capital models, review our contingency capital plan, key capital adequacy metrics, including regulatory capital ratios, as well as capital plan metrics, such as the payout ratio, outcomes and findings of calculation testing, and monitor capital risk limits and breaches.

Our process for managing capital risk also includes independent review functions in Risk that, among other things, assess regulatory capital policies and related interpretations, escalate certain interpretations to senior management and/or the appropriate risk committee, and perform calculation testing to corroborate alignment with applicable capital rules.

Liquidity Risk Management

Overview

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

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

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

Liquidity Risk Management Principles

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

GCLA.

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

Our GCLA reflects the following principles:

[[GREPCENT_TABLE]]
[["\u2022","","The first days or weeks of a liquidity crisis are the most critical to a company\u2019s survival;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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 funding 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."]]
[[/GREPCENT_TABLE]]

We maintain our GCLA across Group Inc., Goldman Sachs Funding LLC (Funding IHC) and Group Inc.’s major broker-dealer and bank subsidiaries, asset types and clearing agents to provide us with sufficient operating liquidity to ensure timely settlement in all major markets, even in a difficult funding environment. In addition to the GCLA, we maintain cash balances and securities in several of our other entities, primarily for use in specific currencies, entities or jurisdictions where we do not have immediate access to parent company liquidity.

[[GREPCENT_TABLE]]
[["96","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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:

[[GREPCENT_TABLE]]
[["\u2022","","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 \u201cBalance Sheet and Funding Sources \u2014 Funding Sources\u201d for further information;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Actively managing and monitoring our asset base, with particular focus on the liquidity, holding period and 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 \u201cBalance Sheet and Funding Sources \u2014 Balance Sheet Management\u201d for further information about our balance sheet management process and \u201c\u2014 Funding Sources \u2014 Secured Funding\u201d for further information about asset classes that may be harder to fund on a secured basis; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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."]]
[[/GREPCENT_TABLE]]

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

Subsidiary Funding Policies

The majority of our unsecured funding is raised by Group Inc., which provides 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 2021, Group Inc. had $38.08 billion of equity and subordinated indebtedness invested in GS&Co., its principal U.S. registered broker-dealer; $44.44 billion invested in GSI, a regulated U.K. broker-dealer; $2.50 billion invested in GSJCL, a regulated Japanese broker-dealer; $46.17 billion invested in GS Bank USA, a regulated New York State-chartered bank; and $4.28 billion invested in GSIB, a regulated U.K. bank. Group Inc. also provides financing, directly or indirectly, in the form of: $95.74 billion of unsubordinated loans (including secured loans of $41.91 billion) and $17.68 billion of collateral and cash deposits to these entities as of December 2021. In addition, as of December 2021, Group Inc. had significant amounts of capital invested in and loans to its other regulated subsidiaries.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","97"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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 and their responsibilities, which include fostering effective coordination, control and distribution of information, implementing liquidity maintenance activities and managing internal and external communication, all of which are critical in the management of a crisis or period of market stress.

Stress Tests

In order to determine the appropriate size of our GCLA, we model liquidity outflows over a range of scenarios and time horizons. One of our primary internal liquidity risk models, referred to as the Modeled Liquidity Outflow, quantifies our liquidity risks over a
30-day
stress scenario. We also consider other factors, including, but not limited to, an assessment of our potential intraday liquidity needs through an additional internal liquidity risk model, referred to as the Intraday Liquidity Model, the results of our long-term stress testing models, our resolution liquidity models and other applicable regulatory requirements and a qualitative assessment of our condition, as well as the financial markets. The results of the Modeled Liquidity Outflow, the Intraday Liquidity Model, the long-term stress testing models and the resolution liquidity models are reported to senior management on a regular basis. We also perform firmwide stress tests. See “Overview and Structure of Risk Management” for information about firmwide stress tests.

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:

[[GREPCENT_TABLE]]
[["\u2022","","Severely challenged market environments, which includes low consumer and corporate confidence, financial and political instability, and adverse changes in market values, including potential declines in equity markets and widening of credit spreads; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","A firm-specific crisis potentially triggered by material losses, reputational damage, litigation and/or a ratings downgrade."]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["\u2022","","Liquidity needs over a 30-day scenario;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","A two-notch downgrade of our long-term senior unsecured credit ratings;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Changing conditions in funding markets, which limit our access to unsecured and secured funding;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","A combination of contractual outflows and contingent outflows arising from both our on- and off-balance sheet arrangements. Contractual outflows include, among other things, upcoming maturities of unsecured debt, term deposits and secured funding. Contingent outflows include, among other things, the withdrawal of customer credit balances in our prime brokerage business, increase in variation margin requirements due to adverse changes in the value of our exchange-traded and OTC-cleared derivatives, draws on unfunded commitments and withdrawals of deposits that have no contractual maturity. See notes to the consolidated financial statements for further information about contractual outflows, including Note 11 for collateralized financings, Note 13 for deposits, Note 14 for unsecured long-term borrowings and Note 15 for operating lease payments, and \u201cOff-Balance Sheet Arrangements\u201d for further information about our various types of off-balance sheet arrangements."]]
[[/GREPCENT_TABLE]]

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.

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.

[[GREPCENT_TABLE]]
[["98","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Resolution Liquidity Models.

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

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.

Limits

We use liquidity risk 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. See “Overview and Structure of Risk Management” for information about the limit approval process.

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

GCLA and Unencumbered Metrics

GCLA.

Based on the results of our internal liquidity risk models, described above, as well as our consideration of other factors, including, but not limited to, a qualitative assessment of our condition, as well as the financial markets, we believe our liquidity position as of both December 2021 and December 2020 was appropriate. We strictly limit our GCLA to a narrowly defined list of securities and cash because they are highly liquid, even in a difficult funding environment. We do not include other potential sources of excess liquidity in our GCLA, such as less liquid unencumbered securities or committed credit facilities.

The table below presents information about our GCLA.

[[GREPCENT_TABLE]]
[["","","Average for the"],["","","Three Months Ended December","","","","","","Year Ended December"],["$ in millions","","2021","","","2020","","","","","","2021","","","2020"],["Denomination"],["U.S. dollar","","","$230,720","","","","$190,735","","","","","","","","$217,797","","","","$181,949"],["Non-U.S. dollar","","","122,401","","","","107,106","","","","","","","","116,723","","","","101,182"],["Total","","","$353,121","","","","$297,841","","","","","","","","$334,520","","","","$283,131"],["Asset Class"],["Overnight cash deposits","","","$188,223","","","","$108,345","","","","","","","","$173,000","","","","$100,489"],["U.S. government obligations","","","107,898","","","","125,060","","","","","","","","108,260","","","","113,531"],["U.S. agency obligations","","","13,154","","","","7,059","","","","","","","","10,183","","","","12,017"],["Non-U.S. government obligations","","","43,846","","","","57,377","","","","","","","","43,077","","","","57,094"],["Total","","","$353,121","","","","$297,841","","","","","","","","$334,520","","","","$283,131"],["Entity Type"],["Group Inc. and Funding IHC","","","$ 54,489","","","","$ 36,737","","","","","","","","$ 53,205","","","","$ 41,705"],["Major broker-dealer subsidiaries","","","107,279","","","","100,891","","","","","","","","104,326","","","","99,798"],["Major bank subsidiaries","","","191,353","","","","160,213","","","","","","","","176,989","","","","141,628"],["Total","","","$353,121","","","","$297,841","","","","","","","","$334,520","","","","$283,131"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The 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."]]
[[/GREPCENT_TABLE]]

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 requirement for Group Inc., as well as a standalone requirement for each of our major broker-dealer and bank subsidiaries. Funding IHC is required to provide the necessary liquidity to Group Inc. during the ordinary course of business, and is also obligated to provide capital and liquidity support to major subsidiaries in the event of our material financial distress or failure. Liquidity held directly in each of our major broker-dealer and bank subsidiaries is intended for use only by that subsidiary to meet its liquidity requirements and is assumed not to be available to Group Inc. or Funding IHC unless (i) legally provided for and (ii) there are no additional regulatory, tax or other restrictions. In addition, the Modeled Liquidity Outflow and Intraday Liquidity Model also incorporate a broader assessment of standalone liquidity requirements for other subsidiaries and we hold a portion of our GCLA directly at Group Inc. or Funding IHC to support such requirements.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","99"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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 $271.65 billion for the three months ended December 2021, $214.06 billion for the three months ended December 2020, $249.32 billion for the year ended December 2021 and $207.60 billion for the year ended December 2020. We do not consider these assets liquid enough to be eligible for our GCLA.

Liquidity Regulatory Framework

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

The table below presents information about our average daily LCR.

[[GREPCENT_TABLE]]
[["","","Average for the Three Months Ended"],["$ in millions","","","December 2021","","","","September 2021","","","","December 2020"],["Total HQLA","","","$342,047","","","","$344,351","","","","$291,393"],["Eligible HQLA","","","$248,570","","","","$249,915","","","","$212,614"],["Net cash outflows","","","$203,623","","","","$196,664","","","","$166,551"],["LCR","","","122%","","","","127%","","","","128%"]]
[[/GREPCENT_TABLE]]

In October 2020, the U.S. federal bank regulatory agencies issued a final rule that established a net stable funding ratio (NSFR) requirement for large U.S. banking organizations. This rule became effective on July 1, 2021 and requires banking organizations to ensure they have access to stable funding over a
one-year
time horizon. The rule also requires disclosure of the ratio on a semi-annual basis and a description of the banking organization’s stable funding sources beginning in 2023. Our NSFR as of December 2021 exceeded the minimum requirement.

The following provides information about our subsidiary liquidity regulatory requirements:

[[GREPCENT_TABLE]]
[["\u2022","","GS Bank USA. GS Bank USA is subject to a minimum LCR of 100% under the LCR rule approved by the U.S. federal bank regulatory agencies. As of December 2021, GS Bank USA\u2019s LCR exceeded the minimum requirement. The NSFR requirement described above also applies to GS Bank USA. As of December 2021, GS Bank USA\u2019s NSFR exceeded the minimum requirement."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","GSI and GSIB. GSI and GSIB are subject to a minimum LCR of 100% under the LCR rule approved by the U.K. regulatory authorities. GSI\u2019s and GSIB\u2019s average monthly LCR for the trailing twelve-month period ended December 2021 exceeded the minimum requirement. GSI and GSIB are subject to the applicable NSFR requirement in the U.K., which became effective in January 2022. As of December 2021, both GSI\u2019s and GSIB\u2019s NSFR exceeded the minimum requirement."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","GSBE. GSBE is subject to a minimum LCR of 100% under the LCR rule approved by the European Parliament and Council. GSBE\u2019s average monthly LCR for the trailing twelve-month period ended December 2021 exceeded the minimum requirement. GSBE is subject to the applicable NSFR requirement in the E.U., which became effective in June 2021. As of December 2021, GSBE\u2019s NSFR exceeded the minimum requirement."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Other Subsidiaries. We monitor local regulatory liquidity requirements of our subsidiaries to ensure compliance. For many of our subsidiaries, these requirements either have changed or are likely to change in the future due to the implementation of the Basel Committee\u2019s framework for liquidity risk measurement, standards and monitoring, as well as other regulatory developments."]]
[[/GREPCENT_TABLE]]

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

Credit Ratings

We rely on the short- 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.

[[GREPCENT_TABLE]]
[["100","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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

[[GREPCENT_TABLE]]
[["","","As of December 2021"],["","","","DBRS","","","","Fitch","","","","Moody\u2019s","","","","R&I","","","","S&P"],["Short-term debt","","","R-1 (middle)","","","","F1","","","","P-1","","","","a-1","","","","A-2"],["Long-term debt","","","A (high)","","","","A","","","","A2","","","","A","","","","BBB+"],["Subordinated debt","","","A","","","","BBB+","","","","Baa2","","","","A-","","","","BBB"],["Trust preferred","","","A","","","","BBB-","","","","Baa3","","","","N/A","","","","BB+"],["Preferred stock","","","BBB (high)","","","","BBB-","","","","Ba1","","","","N/A","","","","BB+"],["Ratings outlook","","","Stable","","","","Stable","","","","Stable","","","","Stable","","","","Stable"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","The ratings and outlook are by DBRS, Inc. (DBRS), Fitch, Inc. (Fitch), Moody\u2019s Investors Service (Moody\u2019s), Rating and Investment Information, Inc. (R&I), and Standard & Poor\u2019s Ratings Services (S&P)."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The ratings for trust preferred relate to the guaranteed preferred beneficial interests issued by Goldman Sachs Capital I."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The DBRS, Fitch, Moody\u2019s and S&P ratings for preferred stock include the APEX issued by Goldman Sachs Capital II and Goldman Sachs Capital III."]]
[[/GREPCENT_TABLE]]

The table below presents the unsecured credit ratings and outlook of GS Bank USA, GSIB, GSBE, GS&Co. and GSI.

[[GREPCENT_TABLE]]
[["","","As of December 2021"],["","","","Fitch","","","","Moody\u2019s","","","","S&P"],["GS Bank USA"],["Short-term debt","","","F1","","","","P-1","","","","A-1"],["Long-term debt","","","A+","","","","A1","","","","A+"],["Short-term bank deposits","","","F1+","","","","P-1","","","","N/A"],["Long-term bank deposits","","","AA-","","","","A1","","","","N/A"],["Ratings outlook","","","Stable","","","","Stable","","","","Stable"],["GSIB"],["Short-term debt","","","F1","","","","P-1","","","","A-1"],["Long-term debt","","","A+","","","","A1","","","","A+"],["Short-term bank deposits","","","F1","","","","P-1","","","","N/A"],["Long-term bank deposits","","","A+","","","","A1","","","","N/A"],["Ratings outlook","","","Stable","","","","Stable","","","","Stable"],["GSBE"],["Short-term debt","","","F1","","","","P-1","","","","A-1"],["Long-term debt","","","A","","","","A1","","","","A+"],["Short-term bank deposits","","","N/A","","","","P-1","","","","N/A"],["Long-term bank deposits","","","N/A","","","","A1","","","","N/A"],["Ratings outlook","","","Stable","","","","Stable","","","","Stable"],["GS&Co."],["Short-term debt","","","F1","","","","N/A","","","","A-1"],["Long-term debt","","","A+","","","","N/A","","","","A+"],["Ratings outlook","","","Stable","","","","N/A","","","","Stable"],["GSI"],["Short-term debt","","","F1","","","","P-1","","","","A-1"],["Long-term debt","","","A+","","","","A1","","","","A+"],["Ratings outlook","","","Stable","","","","Stable","","","","Stable"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["\u2022","","Our liquidity, market, credit and operational risk management practices;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Our level and variability of earnings;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Our capital base;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Our franchise, reputation and management;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Our corporate governance; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The external operating and economic environment, including, in some cases, the assumed level of government support or other systemic considerations, such as potential resolution."]]
[[/GREPCENT_TABLE]]

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-
or
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.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","101"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Year Ended December 2021.

Our cash and cash equivalents increased by $105.19 billion to $261.04 billion at the end of 2021, primarily due to net cash provided by financing activities, partially offset by net cash used for investing activities. The net cash provided by financing activities primarily reflected an increase in net deposits, reflecting increases across channels, and net issuances of unsecured long-term borrowings. The net cash used for investing activities primarily reflected purchases of investments and an increase in net lending activities, partially offset by sales and paydowns of investments.

Year Ended December 2020.

Our cash and cash equivalents increased by $22.30 billion to $155.84 billion at the end of 2020, primarily due to net cash provided by financing activities, partially offset by net cash used for investing activities and operating activities. The net cash provided by financing activities primarily reflected an increase in net deposits, reflecting increases in consumer, transaction banking and private bank deposits. The net cash used for investing activities primarily reflected an increase in net purchases of investments, reflecting an increase in U.S. government obligations accounted for as

available-for-sale

and an increase in net lending activities. The net cash used for operating activities primarily reflected an increase in trading assets, net customer and other receivables and payables, and collateralized transactions (an increase in collateralized agreements, partially offset by an increase in collateralized financings), partially offset by an increase in trading liabilities as a result of our and our clients’ activities.

For an analysis of cash flows for the year ended December 2019, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on
Form 10-K
for the year ended December 31, 2020.

Market Risk Management

Overview

Market risk is the risk of loss in the value of our inventory, investments, loans and other financial assets and liabilities accounted for at fair value due to changes in market conditions. We hold such positions primarily for market making for our clients and for our investing and financing activities, and therefore, these positions change based on client demands and our investment opportunities. Since these positions are accounted for at fair value, they fluctuate on a daily basis, with the related gains and losses included in the consolidated statements of earnings. We employ a variety of risk measures, each described in the respective sections below, to monitor market risk. Categories of market risk include the following:

[[GREPCENT_TABLE]]
[["\u2022","","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;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Equity price risk: results from exposures to changes in prices and volatilities of individual equities, baskets of equities and equity indices;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Currency rate risk: results from exposures to changes in spot prices, forward prices and volatilities of currency rates; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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."]]
[[/GREPCENT_TABLE]]

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

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

Market Risk Management Process

Our process for managing market risk includes the critical components of our risk management framework described in the “Overview and Structure of Risk Management,” as well as the following:

[[GREPCENT_TABLE]]
[["\u2022","","Monitoring compliance with established market risk limits and reporting our exposures;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Diversifying exposures;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Controlling position sizes; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Evaluating mitigants, such as economic hedges in related securities or derivatives."]]
[[/GREPCENT_TABLE]]

Our market risk management systems enable us to perform an independent calculation of

Value-at-Risk

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

[[GREPCENT_TABLE]]
[["102","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Risk Measures

We produce risk measures and monitor 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- and long-term time horizons. Our primary risk measures are VaR, which is used for shorter-term periods, and stress tests. Our risk reports detail key risks, drivers and changes for each desk and business, and are distributed daily to senior management of both our revenue-producing units and our independent risk oversight and control functions.

Value-at-Risk.

VaR is the potential loss in value due to adverse market movements over a defined time horizon with a specified confidence level. For assets and liabilities included in VaR, see “Financial Statement Linkages to Market Risk Measures.” We typically employ a
one-day
time horizon with a 95% confidence level. We use a single VaR model, which captures risks, including interest rates, equity prices, currency rates and commodity prices. As such, VaR facilitates comparison across portfolios of different risk characteristics. VaR also captures the diversification of aggregated risk at the firmwide level.

We are aware of the inherent limitations to VaR and therefore use a variety of risk measures in our market risk management process. Inherent limitations to VaR include:

[[GREPCENT_TABLE]]
[["\u2022","","VaR does not estimate potential losses over longer time horizons where moves may be extreme;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","VaR does not take account of the relative liquidity of different risk positions; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Previous moves in market risk factors may not produce accurate predictions of all future market moves."]]
[[/GREPCENT_TABLE]]

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

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

Our VaR measure does not include:

[[GREPCENT_TABLE]]
[["\u2022","","Positions that are best measured and monitored using sensitivity measures; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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."]]
[[/GREPCENT_TABLE]]

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 firmwide stress tests, sensitivity analysis and scenario analysis. The results of our various stress tests are analyzed together for risk management purposes. See “Overview and Structure of Risk Management” for information about firmwide stress tests.

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 positions, as well as the corresponding debt, equity and currency exposures associated with our
non-sovereign
positions that may be impacted by the sovereign distress. When conducting scenario analysis, we often 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.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","103"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Unlike VaR measures, which have an implied probability because they are calculated at a specified confidence level, there may not be an implied probability that our stress testing scenarios will occur. Instead, stress testing is 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).

Limits

We use market risk limits at various levels to manage the size of our market exposures. These limits are set based on VaR and on a range of stress tests relevant to our exposures. See “Overview and Structure of Risk Management” for information about the limit approval process.

Market Risk is responsible for monitoring these limits, and identifying and escalating to senior management and/or the appropriate risk committee, on a timely basis, instances where limits have been exceeded (e.g., due to positional changes or changes in market conditions, such as increased volatilities or changes in correlations). Such instances are remediated by a reduction in the positions we hold and/or a temporary or permanent increase to the limit, if warranted.

Metrics

We analyze VaR at the firmwide level and a variety of more detailed levels, including by risk category, business and region. 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 our average daily VaR.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020"],["Categories"],["Interest rates","","","$ 60","","","","$ 71"],["Equity prices","","","43","","","","55"],["Currency rates","","","13","","","","23"],["Commodity prices","","","25","","","","20"],["Diversification effect","","","(55",")","","","(75",")"],["Total","","","$ 86","","","","$ 94"]]
[[/GREPCENT_TABLE]]

Our average daily VaR decreased to $86 million in 2021 from $94 million in 2020, due to lower levels of volatility, partially offset by increased exposures. The total decrease of $8 million was driven by decreases in the equity prices, interest rates and currency rates categories, partially offset by a decrease in the diversification effect and an increase in the commodity prices category.

The table below presents our
period-end
VaR.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Categories"],["Interest rates","","","$ 69","","","","$ 60"],["Equity prices","","","31","","","","50"],["Currency rates","","","19","","","","11"],["Commodity prices","","","30","","","","16"],["Diversification effect","","","(58",")","","","(46",")"],["Total","","","$ 91","","","","$ 91"]]
[[/GREPCENT_TABLE]]

Our
period-end
VaR was $91 million as of December 2021, unchanged compared with December 2020, reflecting increased exposures, offset by lower levels of volatility. This was driven by increases in the commodity prices, interest rates and currency rates categories, offset by a decrease in the equity prices category and an increase in the diversification effect.

During 2021, the firmwide VaR risk limit was not exceeded, raised or reduced, and there were no permanent or temporary changes to the firmwide VaR risk limit. During 2020, the firmwide VaR risk limit was exceeded on 16 occasions (all of which occurred during the first half of 2020), primarily due to higher levels of volatility. There were no permanent changes to the firmwide VaR risk limit during this period. However, there were temporary increases to the firmwide VaR risk limit as a result of the market environment in 2020.

The table below presents our high and low VaR.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["","","2021","","","","","2020"],["$ in millions","","","High","","","","Low","","","","","","High","","","","Low"],["Categories"],["Interest rates","","","$ 74","","","","$49","","","","","","$120","","","","$46"],["Equity prices","","","$ 71","","","","$30","","","","","","$116","","","","$23"],["Currency rates","","","$ 20","","","","$ 8","","","","","","$ 53","","","","$ 8"],["Commodity prices","","","$ 45","","","","$14","","","","","","$ 54","","","","$ 9"],["Firmwide"],["VaR","","","$105","","","","$69","","","","","","$195","","","","$58"]]
[[/GREPCENT_TABLE]]

The chart below presents our daily VaR for 2021.

[[GREPCENT_TABLE]]
[["104","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The table below presents, by number of business days, the frequency distribution of our daily net revenues for positions included in VaR.

[[GREPCENT_TABLE]]
[["","","Year Ended December"],["$ in millions","","","2021","","","","2020"],["$100","","","53","","","","50"],["$75 - $100","","","45","","","","37"],["$50 - $75","","","42","","","","48"],["$25 - $50","","","33","","","","51"],["$0 - $25","","","45","","","","43"],["$(25) - $0","","","24","","","","11"],["$(50) - $(25)","","","6","","","","8"],["$(75) - $(50)","","","2","","","","3"],["$(100) - $(75)","","","1","","","","2"],["$(100)","","","1","","","","\u2013"],["Total","","","252","","","","253"]]
[[/GREPCENT_TABLE]]

Daily net revenues for positions included in VaR are compared with VaR calculated as of the end of the prior business day. Net losses incurred on a single day for such positions exceeded our 95%
one-day
VaR (i.e., a VaR exception) on one occasion during 2021 and on two occasions during 2020.

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

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Equity","","","$1,953","","","","$1,854"],["Debt","","","2,244","","","","2,516"],["Total","","","$4,197","","","","$4,370"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Funded equity and debt positions are included in our consolidated balance sheets in investments and loans. See Note 8 to the consolidated financial statements for further information about investments and Note 9 to the consolidated financial statements for further information about loans."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","These measures do not reflect the diversification effect across asset categories or across other market risk measures."]]
[[/GREPCENT_TABLE]]

Credit and Funding Spread Sensitivity on Derivatives and Financial Liabilities.

VaR excludes the impact of changes in counterparty credit spreads, our own credit spreads and unsecured funding 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) and unsecured funding spreads on derivatives (including hedges) was a loss of $1 million as of December 2021 and $3 million as of December 2020. 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 $33 million as of December 2021 and $22 million as of December 2020. 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 accounted for at amortized cost were $139.93 billion as of December 2021 and $99.69 billion as of December 2020, substantially all of which had floating interest rates. The estimated sensitivity to a 100 basis point increase in interest rates on such loans was $1.07 billion as of December 2021 and $737 million as of December 2020 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 accounted for at amortized cost.

Other Market Risk Considerations

We make investments in securities that are accounted for as

available-for-sale,

held-to-maturity

or under the equity method which are included in investments in the consolidated balance sheets. See Note 8 to the consolidated financial statements for further information.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","105"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Direct investments in real estate are accounted for at cost less accumulated depreciation. See Note 12 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 balance sheets 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 assets and liabilities in our consolidated balance sheets and the market risk measures used to assess those assets and liabilities.

[[GREPCENT_TABLE]]
[["Assets or Liabilities","","Market Risk Measures"],["Collateralized agreements, at fair value","","VaR"],["Customer and other receivables, at fair value","","10% Sensitivity Measures"],["Trading assets","","VaR Credit Spread Sensitivity"],["Investments, at fair value","","VaR 10% Sensitivity Measures"],["Loans","","VaR 10% Sensitivity Measures Interest Rate Sensitivity"],["Deposits, at fair value","","VaR Credit Spread Sensitivity"],["Collateralized financings, at fair value","","VaR"],["Trading liabilities","","VaR Credit Spread Sensitivity"],["Unsecured borrowings, at fair value","","VaR Credit Spread Sensitivity"]]
[[/GREPCENT_TABLE]]

Credit Risk Management

Overview

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

Credit Risk, which is independent of our revenue-producing units and reports to our chief risk officer, has primary responsibility for assessing, monitoring and managing our credit risk through firmwide oversight across our global businesses. In addition, we hold other positions that give rise to credit risk (e.g., bonds and secondary bank loans). These credit risks are captured as a component of market risk measures, which are monitored and managed by Market Risk. 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.

Credit Risk Management Process

Our process for managing credit risk includes the critical components of our risk management framework described in the “Overview and Structure of Risk Management,” as well as the following:

[[GREPCENT_TABLE]]
[["\u2022","","Monitoring compliance with established credit risk limits and reporting our credit exposures and credit concentrations;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Establishing or approving underwriting standards;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Assessing the likelihood that a counterparty will default on its payment obligations;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Measuring our current and potential credit exposure and losses resulting from a counterparty default;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Using credit risk mitigants, including collateral and hedging; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Maximizing recovery through active workout and restructuring of claims."]]
[[/GREPCENT_TABLE]]

We also perform 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, with expertise in specific industries, inspect and approve credit reviews and internal credit ratings.

Our risk assessment process may also include, where applicable, reviewing certain key metrics, including, but not limited to, delinquency status, collateral values, FICO credit scores and other risk factors.

[[GREPCENT_TABLE]]
[["106","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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

Risk Measures

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.

Stress Tests

We conduct 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 cover a wide range of moderate and more extreme market movements, including 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, stress testing does not generally assume a probability of these events occurring. We also perform firmwide stress tests. See “Overview and Structure of Risk Management” for information about firmwide stress tests.

To supplement these regular stress tests, as described above, we also conduct tailored stress tests on an ad hoc basis in response to specific market events that we deem significant. 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.

Limits

We use credit risk limits at various levels, as well as underwriting standards to manage the size and nature of our credit exposures. Limits for industries and countries are based on our risk appetite and are designed to allow for regular monitoring, review, escalation and management of credit risk concentrations. See “Overview and Structure of Risk Management” for information about the limit approval process.

Credit Risk is responsible for monitoring these limits, and identifying and escalating to senior management and/or the appropriate risk committee, on a timely basis, instances where limits have been exceeded.

Risk Mitigants

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

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

When we do not have sufficient visibility into a counterparty’s financial strength or when we believe a counterparty requires support from its parent, we may obtain third-party guarantees of the counterparty’s obligations. We may also mitigate our credit risk using credit derivatives or participation agreements.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","107"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Credit Exposures

As of December 2021, our aggregate credit exposure increased as compared with December 2020, primarily reflecting increases in cash deposits with central banks and 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) decreased as compared with December 2020, primarily reflecting an increase in investment-grade credit exposure related to cash deposits with central banks. 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 from unrestricted cash and cash equivalents, and the concentration by industry, region and internally determined public rating agency equivalents.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Cash and Cash Equivalents","","","$236,168","","","","$131,324"],["Industry"],["Financial Institutions","","","5%","","","","11%"],["Sovereign","","","95%","","","","89%"],["Total","","","100%","","","","100%"],["Region"],["Americas","","","55%","","","","45%"],["EMEA","","","36%","","","","41%"],["Asia","","","9%","","","","14%"],["Total","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["AAA","","","64%","","","","44%"],["AA","","","24%","","","","38%"],["A","","","11%","","","","17%"],["BBB","","","1%","","","","1%"],["Total","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

The table above excludes cash segregated for regulatory and other purposes of $24.87 billion as of December 2021 and $24.52 billion as of December 2020.

OTC Derivatives.

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

We generally enter into OTC derivatives transactions under bilateral collateral arrangements that require the daily exchange of collateral. As credit risk is an essential component of fair value, we include a credit valuation adjustment (CVA) in the fair value of derivatives to reflect counterparty credit risk, as described in Note 7 to the consolidated financial statements. CVA is a function of the present value of expected exposure, the probability of counterparty default and the assumed recovery upon default.

The table below presents our net credit exposure from OTC derivatives and the concentration by industry and region.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["OTC derivative assets","","","$ 58,637","","","","$ 64,850"],["Collateral (not netted under U.S. GAAP)","","","(17,245",")","","","(18,990",")"],["Net credit exposure","","","$ 41,392","","","","$ 45,860"],["Industry"],["Consumer & Retail","","","2%","","","","4%"],["Diversified Industrials","","","10%","","","","23%"],["Financial Institutions","","","15%","","","","12%"],["Funds","","","13%","","","","12%"],["Healthcare","","","1%","","","","2%"],["Municipalities & Nonprofit","","","5%","","","","6%"],["Natural Resources & Utilities","","","33%","","","","11%"],["Sovereign","","","8%","","","","14%"],["Technology, Media & Telecommunications","","","8%","","","","12%"],["Other (including Special Purpose Vehicles)","","","5%","","","","4%"],["Total","","","100%","","","","100%"],["Region"],["Americas","","","53%","","","","62%"],["EMEA","","","37%","","","","30%"],["Asia","","","10%","","","","8%"],["Total","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

Our credit exposure (before any potential recoveries) to OTC derivative counterparties that defaulted during 2021 remained low, representing less than 2% of our total credit exposure from OTC derivatives.

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","OTC derivative assets, included in the consolidated balance sheets, are reported on a net-by-counterparty basis (i.e., the net receivable for a given counterparty) when a legal right of setoff exists under an enforceable netting agreement (counterparty netting) and are accounted for at fair value, net of cash collateral received under enforceable credit support agreements (cash collateral netting)."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Collateral represents cash collateral and the fair value of securities collateral, primarily U.S. and non-U.S. government and agency obligations, received under credit support agreements, that we consider when determining credit risk, but such collateral is not eligible for netting under U.S. GAAP."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["108","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The table below presents the distribution of our net credit exposure from OTC derivatives by tenor.

[[GREPCENT_TABLE]]
[["$ in millions","","","Investment- Grade","","","","Non-Investment- Grade / Unrated","","","","Total"],["As of December 2021"],["Less than 1 year","","","$ 27,668","","","","$ 11,203","","","","$ 38,871"],["1 - 5 years","","","21,746","","","","9,515","","","","31,261"],["Greater than 5 years","","","64,670","","","","6,590","","","","71,260"],["Total","","","114,084","","","","27,308","","","","141,392"],["Netting","","","(89,244",")","","","(10,756",")","","","(100,000",")"],["Net credit exposure","","","$ 24,840","","","","$ 16,552","","","","$ 41,392"],["As of December 2020"],["Less than 1 year","","","$ 22,332","","","","$ 12,507","","","","$ 34,839"],["1 - 5 years","","","23,927","","","","16,486","","","","40,413"],["Greater than 5 years","","","77,653","","","","8,958","","","","86,611"],["Total","","","123,912","","","","37,951","","","","161,863"],["Netting","","","(101,691",")","","","(14,312",")","","","(116,003",")"],["Net credit exposure","","","$ 22,221","","","","$ 23,639","","","","$ 45,860"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","Tenor is based on remaining contractual maturity."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Netting includes counterparty netting across tenor categories and collateral that we consider when determining credit risk (including collateral that is not eligible for netting under U.S. GAAP). Counterparty netting within the same tenor category is included within such tenor category."]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","Investment-Grade"],["$ in millions","","","AAA","","","","AA","","","","A","","","","BBB","","","","Total"],["As of December 2021"],["Less than 1 year","","","$ 1,017","","","","$ 4,926","","","","$ 12,481","","","","$ 9,244","","","","$ 27,668"],["1 - 5 years","","","1,150","","","","3,071","","","","8,298","","","","9,227","","","","21,746"],["Greater than 5 years","","","13,777","","","","5,421","","","","23,867","","","","21,605","","","","64,670"],["Total","","","15,944","","","","13,418","","","","44,646","","","","40,076","","","","114,084"],["Netting","","","(13,535",")","","","(9,501",")","","","(36,005",")","","","(30,203",")","","","(89,244",")"],["Net credit exposure","","","$ 2,409","","","","$ 3,917","","","","$ 8,641","","","","$ 9,873","","","","$ 24,840"],["As of December 2020"],["Less than 1 year","","","$ 532","","","","$ 4,146","","","","$ 11,440","","","","$ 6,214","","","","$ 22,332"],["1 - 5 years","","","1,069","","","","4,189","","","","10,976","","","","7,693","","","","23,927"],["Greater than 5 years","","","16,550","","","","7,403","","","","28,410","","","","25,290","","","","77,653"],["Total","","","18,151","","","","15,738","","","","50,826","","","","39,197","","","","123,912"],["Netting","","","(14,364",")","","","(11,230",")","","","(44,529",")","","","(31,568",")","","","(101,691",")"],["Net credit exposure","","","$ 3,787","","","","$ 4,508","","","","$ 6,297","","","","$ 7,629","","","","$ 22,221"],["","","","Non-Investment-Grade / Unrated"],["$ in millions","","","","","","","","","","","BB or lower","","","","Unrated","","","","Total"],["As of December 2021"],["Less than 1 year","","","","","","","","","","","$ 10,446","","","","$ 757","","","","$ 11,203"],["1 - 5 years","","","","","","","","","","","9,210","","","","305","","","","9,515"],["Greater than 5 years","","","","","","","","","","","6,320","","","","270","","","","6,590"],["Total","","","","","","","","","","","25,976","","","","1,332","","","","27,308"],["Netting","","","","","","","","","","","(10,683",")","","","(73",")","","","(10,756",")"],["Net credit exposure","","","","","","","","","","","$ 15,293","","","","$ 1,259","","","","$ 16,552"],["As of December 2020"],["Less than 1 year","","","","","","","","","","","$ 11,541","","","","$ 966","","","","$ 12,507"],["1 - 5 years","","","","","","","","","","","16,274","","","","212","","","","16,486"],["Greater than 5 years","","","","","","","","","","","8,844","","","","114","","","","8,958"],["Total","","","","","","","","","","","36,659","","","","1,292","","","","37,951"],["Netting","","","","","","","","","","","(14,114",")","","","(198",")","","","(14,312",")"],["Net credit exposure","","","","","","","","","","","$ 22,545","","","","$ 1,094","","","","$ 23,639"]]
[[/GREPCENT_TABLE]]

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.

The table below presents our loans and lending commitments.

[[GREPCENT_TABLE]]
[["$ in millions","","","Loans","","","","Lending Commitments","","","","Total"],["As of December 2021"],["Corporate","","","$ 55,927","","","","$155,930","","","","$211,857"],["Wealth management","","","43,998","","","","4,094","","","","48,092"],["Commercial real estate","","","25,883","","","","5,813","","","","31,696"],["Residential real estate","","","15,913","","","","3,396","","","","19,309"],["Consumer:"],["Installment","","","3,672","","","","9","","","","3,681"],["Credit cards","","","8,212","","","","35,932","","","","44,144"],["Other","","","8,530","","","","6,378","","","","14,908"],["Total","","","$162,135","","","","$211,552","","","","$373,687"],["Allowance for loan losses","","","$ (3,573",")","","","$ (776",")","","","$ (4,349",")"],["As of December 2020"],["Corporate","","","$ 48,659","","","","$135,818","","","","$184,477"],["Wealth management","","","33,023","","","","3,103","","","","36,126"],["Commercial real estate","","","20,290","","","","4,268","","","","24,558"],["Residential real estate","","","5,750","","","","1,900","","","","7,650"],["Consumer:"],["Installment","","","3,823","","","","4","","","","3,827"],["Credit cards","","","4,270","","","","21,640","","","","25,910"],["Other","","","4,174","","","","4,842","","","","9,016"],["Total","","","$119,989","","","","$171,575","","","","$291,564"],["Allowance for loan losses","","","$ (3,874",")","","","$ (557",")","","","$ (4,431",")"]]
[[/GREPCENT_TABLE]]

See Note 9 to the consolidated financial statements for information about net charge-offs on wholesale and consumer loans, as well as past due and nonaccrual loans accounted for at amortized cost.

Corporate.

Corporate loans and lending commitments include term loans, revolving lines of credit, letter of credit facilities and bridge loans, and are principally used for operating 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.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","109"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The table below presents our credit exposure from corporate loans and lending commitments, and the concentration by industry, region, internally determined public rating agency equivalents and other credit metrics.

[[GREPCENT_TABLE]]
[["$ in millions","","","Loans","","","","Lending Commitments","","","","Total"],["As of December 2021"],["Corporate","","","$55,927","","","","$155,930","","","","$211,857"],["Industry"],["Consumer & Retail","","","8%","","","","13%","","","","12%"],["Diversified Industrials","","","13%","","","","16%","","","","15%"],["Financial Institutions","","","8%","","","","7%","","","","7%"],["Funds","","","21%","","","","4%","","","","8%"],["Healthcare","","","7%","","","","9%","","","","9%"],["Natural Resources & Utilities","","","9%","","","","17%","","","","14%"],["Real Estate","","","8%","","","","5%","","","","6%"],["Technology, Media & Telecommunications","","","18%","","","","24%","","","","23%"],["Other (including Special Purpose Vehicles)","","","8%","","","","5%","","","","6%"],["Total","","","100%","","","","100%","","","","100%"],["Region"],["Americas","","","54%","","","","76%","","","","70%"],["EMEA","","","38%","","","","21%","","","","26%"],["Asia","","","8%","","","","3%","","","","4%"],["Total","","","100%","","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["AAA","","","\u2013","","","","1%","","","","1%"],["AA","","","1%","","","","5%","","","","3%"],["A","","","5%","","","","16%","","","","13%"],["BBB","","","22%","","","","38%","","","","34%"],["BB or lower","","","72%","","","","40%","","","","49%"],["Total","","","100%","","","","100%","","","","100%"],["As of December 2020"],["Corporate","","","$48,659","","","","$135,818","","","","$184,477"],["Industry"],["Consumer & Retail","","","7%","","","","14%","","","","12%"],["Diversified Industrials","","","17%","","","","17%","","","","17%"],["Financial Institutions","","","10%","","","","6%","","","","7%"],["Funds","","","13%","","","","3%","","","","6%"],["Healthcare","","","7%","","","","12%","","","","11%"],["Natural Resources & Utilities","","","12%","","","","18%","","","","16%"],["Real Estate","","","8%","","","","6%","","","","6%"],["Technology, Media & Telecommunications","","","17%","","","","19%","","","","19%"],["Other (including Special Purpose Vehicles)","","","9%","","","","5%","","","","6%"],["Total","","","100%","","","","100%","","","","100%"],["Region"],["Americas","","","60%","","","","70%","","","","67%"],["EMEA","","","31%","","","","28%","","","","29%"],["Asia","","","9%","","","","2%","","","","4%"],["Total","","","100%","","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["AAA","","","\u2013","","","","1%","","","","1%"],["AA","","","\u2013","","","","5%","","","","4%"],["A","","","6%","","","","19%","","","","15%"],["BBB","","","13%","","","","36%","","","","30%"],["BB or lower","","","80%","","","","38%","","","","49%"],["Other metrics/unrated","","","1%","","","","1%","","","","1%"],["Total","","","100%","","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

In the table above, credit exposure excludes $4.14 billion as of December 2021 and $3.20 billion as of December 2020 relating to issued letters of credit which are classified as guarantees in our consolidated financial statements. See Note 18 to the consolidated financial statements for further information about guarantees.

Wealth Management.

Wealth management loans and lending commitments are extended to private bank clients, including wealth management and other clients. These loans are used to finance investments in both financial and nonfinancial assets, bridge cash flow timing gaps or provide liquidity for other needs. Substantially all of such loans are secured by securities, residential real estate, commercial real estate or other assets.

The table below presents our credit exposure from wealth management loans and lending commitments, and the concentration by region, internally determined public rating agency equivalents and other credit metrics.

[[GREPCENT_TABLE]]
[["$ in millions","","","Loans","","","","Lending Commitments","","","","Total"],["As of December 2021"],["Wealth Management","","","$43,998","","","","$4,094","","","","$48,092"],["Region"],["Americas","","","87%","","","","98%","","","","88%"],["EMEA","","","10%","","","","2%","","","","9%"],["Asia","","","3%","","","","\u2013","","","","3%"],["Total","","","100%","","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["Investment-grade","","","72%","","","","67%","","","","71%"],["Non-investment-grade","","","13%","","","","19%","","","","14%"],["Other metrics/unrated","","","15%","","","","14%","","","","15%"],["Total","","","100%","","","","100%","","","","100%"],["As of December 2020"],["Wealth Management","","","$33,023","","","","$3,103","","","","$36,126"],["Region"],["Americas","","","88%","","","","99%","","","","89%"],["EMEA","","","10%","","","","1%","","","","9%"],["Asia","","","2%","","","","\u2013","","","","2%"],["Total","","","100%","","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["Investment-grade","","","67%","","","","58%","","","","66%"],["Non-investment-grade","","","16%","","","","21%","","","","17%"],["Other metrics/unrated","","","17%","","","","21%","","","","17%"],["Total","","","100%","","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

In the table above, other metrics/unrated loans primarily include loans backed by residential real estate. Our risk assessment process for such loans include reviewing certain key metrics, such as

loan-to-value

ratio and delinquency status.

[[GREPCENT_TABLE]]
[["110","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Commercial Real Estate.

Commercial real estate loans and lending commitments include originated loans and lending commitments (other than those extended to private bank clients) that are directly or indirectly secured by hotels, retail stores, multifamily housing complexes and commercial and industrial properties. Commercial real estate loans and lending commitments also includes loans and lending commitments extended to clients who warehouse assets that are directly or indirectly backed by commercial real estate. In addition, commercial real estate includes loans purchased by us.

The table below presents our credit exposure from commercial real estate loans and lending commitments, and the concentration by region, internally determined public rating agency equivalents and other credit metrics.

[[GREPCENT_TABLE]]
[["$ in millions","","","Loans","","","","Lending Commitments","","","","Total"],["As of December 2021"],["Commercial Real Estate","","","$25,883","","","","$5,813","","","","$31,696"],["Region"],["Americas","","","80%","","","","75%","","","","79%"],["EMEA","","","15%","","","","11%","","","","14%"],["Asia","","","5%","","","","14%","","","","7%"],["Total","","","100%","","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["Investment-grade","","","15%","","","","10%","","","","14%"],["Non-investment-grade","","","83%","","","","90%","","","","85%"],["Other metrics/unrated","","","2%","","","","\u2013","","","","1%"],["Total","","","100%","","","","100%","","","","100%"],["As of December 2020"],["Commercial Real Estate","","","$20,290","","","","$4,268","","","","$24,558"],["Region"],["Americas","","","71%","","","","65%","","","","70%"],["EMEA","","","19%","","","","10%","","","","18%"],["Asia","","","10%","","","","25%","","","","12%"],["Total","","","100%","","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["Investment-grade","","","9%","","","","13%","","","","10%"],["Non-investment-grade","","","86%","","","","87%","","","","86%"],["Other metrics/unrated","","","5%","","","","\u2013","","","","4%"],["Total","","","100%","","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

In the table above, credit exposure includes loans and lending commitments of $11.65 billion as of December 2021 and $7.88 billion as of December 2020 which are extended to clients who warehouse assets that are directly or indirectly backed by commercial real estate.

In addition, we also have credit exposure to certain commercial real estate loans held for securitization of $922 million as of December 2021 and $503 million as of December 2020. Such loans are included in trading assets in our consolidated balance sheets.

Residential Real Estate.

Residential real estate loans and lending commitments are extended to clients (other than those extended to private bank clients) who warehouse assets that are directly or indirectly secured by residential real estate and also includes loans purchased by us.

The table below presents our credit exposure from residential real estate loans and lending commitments, and the concentration by region, internally determined public rating agency equivalents and other credit metrics.

[[GREPCENT_TABLE]]
[["$ in millions","","","Loans","","","","Lending Commitments","","","","Total"],["As of December 2021"],["Residential Real Estate","","","$15,913","","","","$3,396","","","","$19,309"],["Region"],["Americas","","","95%","","","","79%","","","","92%"],["EMEA","","","2%","","","","19%","","","","5%"],["Asia","","","3%","","","","2%","","","","3%"],["Total","","","100%","","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["Investment-grade","","","7%","","","","24%","","","","10%"],["Non-investment-grade","","","87%","","","","74%","","","","84%"],["Other metrics/unrated","","","6%","","","","2%","","","","6%"],["Total","","","100%","","","","100%","","","","100%"],["As of December 2020"],["Residential Real Estate","","","$ 5,750","","","","$1,900","","","","$ 7,650"],["Region"],["Americas","","","88%","","","","98%","","","","91%"],["EMEA","","","9%","","","","2%","","","","7%"],["Asia","","","3%","","","","\u2013","","","","2%"],["Total","","","100%","","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["Investment-grade","","","11%","","","","2%","","","","9%"],["Non-investment-grade","","","67%","","","","93%","","","","73%"],["Other metrics/unrated","","","22%","","","","5%","","","","18%"],["Total","","","100%","","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","Credit exposure includes loans and lending commitments of $16.89 billion as of December 2021 and $5.71 billion as of December 2020 which are extended to clients who warehouse assets that are directly or indirectly secured by residential real estate."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Other metrics/unrated primarily includes loans purchased by us. Our risk assessment process for such loans includes reviewing certain key metrics, such as loan-to-value ratio, delinquency status, collateral values, expected cash flows and other risk factors."]]
[[/GREPCENT_TABLE]]

In addition, we also have exposure to residential real estate loans held for securitization of $11.57 billion as of December 2021 and $5.57 billion as of December 2020. Such loans are included in trading assets in our consolidated balance sheets.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","111"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Installment and Credit Card Lending.

We originate unsecured installment loans and credit card loans (pursuant to revolving lines of credit) to consumers in the Americas. The credit card lines are cancellable by us and therefore do not result in credit exposure.

The table below presents our credit exposure from originated installment and credit card funded loans, and the concentration by the ten most concentrated U.S. states.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Installment","","","$3,672","","","","$3,823"],["California","","","11%","","","","11%"],["Texas","","","9%","","","","9%"],["Florida","","","7%","","","","7%"],["New York","","","7%","","","","7%"],["Illinois","","","4%","","","","4%"],["New Jersey","","","4%","","","","4%"],["Pennsylvania","","","4%","","","","4%"],["Georgia","","","3%","","","","3%"],["Ohio","","","3%","","","","3%"],["Virginia","","","3%","","","","3%"],["Other","","","45%","","","","45%"],["Total","","","100%","","","","100%"],["Credit Cards","","","$8,212","","","","$4,270"],["California","","","18%","","","","19%"],["Texas","","","9%","","","","9%"],["New York","","","8%","","","","8%"],["Florida","","","8%","","","","8%"],["New Jersey","","","4%","","","","4%"],["Illinois","","","4%","","","","4%"],["Pennsylvania","","","3%","","","","3%"],["Georgia","","","3%","","","","3%"],["Ohio","","","3%","","","","3%"],["Virginia","","","2%","","","","3%"],["Other","","","38%","","","","36%"],["Total","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

See Note 9 to the consolidated financial statements for further information about the credit quality indicators of installment and credit card loans.

Other.

Other loans and lending commitments are extended to clients who warehouse assets that are directly or indirectly secured by consumer loans, including auto loans and private student loans, and other assets. Other loans also includes unsecured consumer and credit card loans purchased by us.

The table below presents our credit exposure from other loans and lending commitments, and the concentration by region, internally determined public rating agency equivalents and other credit metrics.

[[GREPCENT_TABLE]]
[["$ in millions","","","Loans","","","","Lending Commitments","","","","Total"],["As of December 2021"],["Other","","","$8,530","","","","$6,378","","","","$14,908"],["Region"],["Americas","","","84%","","","","98%","","","","90%"],["EMEA","","","15%","","","","\u2013","","","","9%"],["Asia","","","1%","","","","2%","","","","1%"],["Total","","","100%","","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["Investment-grade","","","34%","","","","90%","","","","58%"],["Non-investment-grade","","","37%","","","","9%","","","","25%"],["Other metrics/unrated","","","29%","","","","1%","","","","17%"],["Total","","","100%","","","","100%","","","","100%"],["As of December 2020"],["Other","","","$4,174","","","","$4,842","","","","$ 9,016"],["Region"],["Americas","","","81%","","","","98%","","","","90%"],["EMEA","","","17%","","","","\u2013","","","","8%"],["Asia","","","2%","","","","2%","","","","2%"],["Total","","","100%","","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["Investment-grade","","","44%","","","","94%","","","","71%"],["Non-investment-grade","","","23%","","","","6%","","","","14%"],["Other metrics/unrated","","","33%","","","","\u2013","","","","15%"],["Total","","","100%","","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

In the table above:

[[GREPCENT_TABLE]]
[["\u2022","","Credit exposure includes loans and lending commitments extended to clients who warehouse assets of $11.09 billion as of December 2021 and $7.28 billion as of December 2020."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Other metrics/unrated primarily includes consumer and credit card loans purchased by us. Our risk assessment process for such loans includes reviewing certain key metrics, such as expected cash flows, delinquency status and other risk factors."]]
[[/GREPCENT_TABLE]]

In addition, we also have exposure to other loans held for securitization of $467 million as of December 2021 and $420 million as of December 2020. Such loans are included in trading assets in our consolidated balance sheets.

Credit Hedges.

To mitigate the credit risk associated with our lending activities, we obtain credit protection on certain loans and lending commitments through credit default swaps, both single-name and index-based contracts, and through the issuance of credit-linked notes.

[[GREPCENT_TABLE]]
[["112","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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 for these transactions primarily includes U.S. and
non-U.S.
government and agency obligations.

The table below presents our credit exposure from securities financing transactions and the concentration by industry, region and internally determined public rating agency equivalents.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Securities Financing Transactions","","","$34,505","","","","$30,190"],["Industry"],["Financial Institutions","","","34%","","","","39%"],["Funds","","","23%","","","","24%"],["Municipalities & Nonprofit","","","5%","","","","5%"],["Sovereign","","","35%","","","","30%"],["Other (including Special Purpose Vehicles)","","","3%","","","","2%"],["Total","","","100%","","","","100%"],["Region"],["Americas","","","36%","","","","33%"],["EMEA","","","44%","","","","46%"],["Asia","","","20%","","","","21%"],["Total","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["AAA","","","19%","","","","15%"],["AA","","","28%","","","","28%"],["A","","","33%","","","","40%"],["BBB","","","9%","","","","10%"],["BB or lower","","","11%","","","","5%"],["Unrated","","","\u2013","","","","2%"],["Total","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

The table above reflects both netting agreements and collateral that we consider when determining credit risk.

Other Credit Exposures.

We are exposed to credit risk from our receivables from brokers, dealers and clearing organizations and customers and counterparties. Receivables from brokers, dealers and clearing organizations primarily consist of initial margin placed with clearing organizations and receivables related to sales of securities which have traded, but not yet settled. These receivables generally have minimal credit risk due to the low probability of clearing organization default and the short-term nature of receivables related to securities settlements. Receivables from customers and counterparties generally consist of collateralized receivables related to customer securities transactions and generally have minimal credit risk due to both the value of the collateral received and the short-term nature of these receivables.

The table below presents our other credit exposures and the concentration by industry, region and internally determined public rating agency equivalents.

[[GREPCENT_TABLE]]
[["","","As of December"],["$ in millions","","","2021","","","","2020"],["Other Credit Exposures","","","$61,187","","","","$56,429"],["Industry"],["Financial Institutions","","","86%","","","","85%"],["Funds","","","9%","","","","9%"],["Other (including Special Purpose Vehicles)","","","5%","","","","6%"],["Total","","","100%","","","","100%"],["Region"],["Americas","","","50%","","","","54%"],["EMEA","","","43%","","","","35%"],["Asia","","","7%","","","","11%"],["Total","","","100%","","","","100%"],["Credit Quality (Credit Rating Equivalent)"],["AAA","","","4%","","","","5%"],["AA","","","47%","","","","48%"],["A","","","29%","","","","27%"],["BBB","","","6%","","","","8%"],["BB or lower","","","13%","","","","11%"],["Unrated","","","1%","","","","1%"],["Total","","","100%","","","","100%"]]
[[/GREPCENT_TABLE]]

The table above reflects collateral that we consider when determining credit risk.

Selected Exposures

We have credit and market exposures, as described below, that have had heightened focus given 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 positions due to changes in market prices.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","113"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Country Exposures.

High external funding needs and inconsistent monetary policy have led to significant depreciation of the Turkish Lira, prompting concerns about foreign exchange reserves and economic instability. As of December 2021, our total credit exposure to Turkey was $1.39 billion, which was to
non-sovereign
counterparties or borrowers. Such exposure consisted of $663 million related to OTC derivatives, $160 million related to loans and lending commitments and $567 million related to secured receivables. After taking into consideration the benefit of hedges and Turkish corporate and sovereign collateral, and other risk mitigants provided by Turkish counterparties, our net credit exposure was $290 million. In addition, our total market exposure to Turkey as of December 2021 was $105 million, primarily to
non-sovereign
issuers or underliers. Such exposure consisted of $179 million related to debt, $(156) million related to credit derivatives and $82 million related to equities.

The potential for further sanctions on Russia has led to concerns about its economic and financial stability. As of December 2021, our total credit exposure to Russia was $650 million, substantially all of which was to
non-sovereign
counterparties or borrowers. Such exposure consisted of $134 million related to OTC derivatives, $177 million related to loans and lending commitments and $339 million related to secured receivables. After taking into consideration the benefit of Russian corporate and sovereign collateral, and other risk mitigants provided by Russian counterparties, our net credit exposure was $293 million. In addition, our total market exposure to Russia as of December 2021 was $414 million, primarily to
non-sovereign
issuers or underliers. Such exposure consisted of $258 million related to debt, $(531) million related to credit derivatives and $687 million related to equities.

Liquidity pressures prompted the Argentine government to default and restructure local and foreign obligations in 2020. Economic challenges persist and the country still needs to secure new financial terms with the IMF. As of December 2021, our total credit exposure to Argentina was $102 million, which was to
non-sovereign
counterparties or borrowers, and was primarily related to loans and lending commitments. In addition, our total market exposure to Argentina as of December 2021 was $91 million, primarily to sovereign issuers or underliers. Such exposure consisted of $70 million related to debt, $(14) million related to credit derivatives and $35 million related to equities.

Escalating geopolitical conflict has led to concerns about Ukraine’s political and financial stability. As of December 2021, our total credit exposure to Ukraine was not material. Our total market exposure to Ukraine as of December 2021 was $236 million, primarily to sovereign issuers or underliers. Such exposure consisted of $164 million related to debt, $30 million related to credit derivatives and $42 million related to equities.

Lebanon’s sovereign debt default and sharp currency depreciation have led to concerns about its financial and political stability. As of December 2021, our total credit and market exposure to Lebanon was not material.

Zambia’s sovereign debt default and liquidity pressures aggravated by the
COVID-19
pandemic have led to concerns about the country’s financial stability. As of December 2021, our total credit and market exposure to Zambia was not material.

Venezuela has delayed payments on its sovereign debt and is experiencing deep economic and social crises. As of December 2021, our total credit and market exposure to Venezuela was not material.

Escalating political unrest in Ethiopia has led to concerns about the country’s political, economic and financial stability. As of December 2021, our total credit and market exposure to Ethiopia 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. See “Stress Tests” for information about stress tests that are designed to estimate the direct and indirect impact of events involving the above countries.

Operational Risk Management

Overview

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:

[[GREPCENT_TABLE]]
[["\u2022","","Execution, delivery and process management;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Business disruption and system failures;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Employment practices and workplace safety;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Clients, products and business practices;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Damage to physical assets;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Internal fraud; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","External fraud."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["114","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Operational Risk, which is independent of our revenue-producing units and reports to our chief risk officer, has primary responsibility for developing and implementing a formalized framework for assessing, monitoring and managing operational risk with the goal of maintaining our exposure to operational risk at levels that are within our risk appetite.

Operational Risk Management Process

Our process for managing operational risk includes the critical components of our risk management framework described in the “Overview and Structure of Risk Management,” including a comprehensive data collection process, as well as firmwide policies and procedures, for operational risk events.

We combine
top-down
and
bottom-up
approaches to manage and measure operational risk. From a
top-down
perspective, our senior management assesses firmwide and business-level operational risk profiles. From a
bottom-up
perspective, our first and second lines of defense are responsible for risk identification and risk management on a

day-to-day

basis, including escalating operational risks and risk events to senior management.

We maintain a comprehensive control framework designed to provide a well-controlled environment to minimize operational risks. The Firmwide Operational Risk and Resilience Committee is responsible for overseeing operational risk, and for ensuring our business and operational resilience.

Our operational risk management framework is 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.

We have established policies that require all employees to report and escalate operational risk events. When operational risk events are identified, our policies require that the events be documented and analyzed to determine whether changes are required in our systems and/or processes to further mitigate the risk of future events.

We use operational risk management applications to capture, analyze, aggregate and report operational risk event data and key metrics. One of our key risk identification and assessment tools is an operational risk and control self-assessment process, which is performed by our managers. This process consists of the identification and rating of operational risks, on a forward-looking basis, and the related controls. The results from this process are analyzed to evaluate operational risk exposures and identify businesses, activities or products with heightened levels of operational risk.

Risk Measurement

We measure our operational risk exposure using both statistical modeling and scenario analyses, which involve qualitative and quantitative assessments of internal and external operational risk event data and internal control factors for each of our businesses. Operational risk measurement also incorporates an assessment of business environment factors, including:

[[GREPCENT_TABLE]]
[["\u2022","","Evaluations of the complexity of our business activities;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The degree of automation in our processes;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","New activity information;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The legal and regulatory environment; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","Changes in the markets for our products and services, including the diversity and sophistication of our customers and counterparties."]]
[[/GREPCENT_TABLE]]

The results from these scenario analyses are used to monitor changes in operational risk and to determine business lines that may have heightened exposure to operational risk. These analyses are used in the determination of the appropriate level of operational risk capital to hold. We also perform firmwide stress tests. See “Overview and Structure of Risk Management” for information about firmwide stress tests.

Types of Operational Risks

Increased reliance on technology and third-party relationships has resulted in increased operational risks, such as information and cyber security risk, third-party risk and business resilience risk. We manage those risks as follows:

Information and Cyber Security Risk.

Information and cyber security risk is the risk of compromising the confidentiality, integrity or availability of our data and systems, leading to an adverse impact to us, our reputation, our clients and/or the broader financial system. We seek to minimize the occurrence and impact of unauthorized access, disruption or use of information and/or information systems. We deploy and operate preventive and detective controls and processes to mitigate emerging and evolving information security and cyber security threats, including monitoring our network for known vulnerabilities and signs of unauthorized attempts to access our data and systems. There is increased information risk through diversification of our data across external service providers, including use of a variety of cloud-provided or -hosted services and applications. See “Risk Factors” in Part I, Item 1A of this
Form 10-K
for further information about information and cyber security risk.

[[GREPCENT_TABLE]]
[["Goldman Sachs 2021 Form 10-K","","115"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Third-Party Risk.

Third-party risk, including vendor risk, is the risk of an adverse impact due to reliance on third parties performing services or activities on our behalf. These risks may include legal, regulatory, information security, reputational, operational or any other risks inherent in engaging a third party. We identify, manage and report key third-party risks and conduct due diligence across multiple risk domains, including information security and cyber security, resilience and additional third-party dependencies. The Third-Party Risk Program monitors, reviews and reassesses third-party risks on an ongoing basis. See “Risk Factors” in Part I, Item 1A of this
Form 10-K
for further information about third-party risk.

Business Resilience Risk.

Business resilience risk is the risk of disruption to our critical processes. We monitor threats and assess risks and seek to ensure our state of readiness in the event of a significant operational disruption to the normal operations of our critical functions or their dependencies, such as critical facilities, systems, third parties, data and/or personnel. We approach BCP through the lens of business and operational resilience. The resilience framework defines the fundamental principles for BCP and crisis management to ensure that critical functions can continue to operate in the event of a disruption. The business continuity program is comprehensive, consistent firmwide and

up-to-date,

incorporating new information, techniques and technologies as and when they become available, and our resilience recovery plans incorporate and test specific and measurable recovery time objectives in accordance with local market best practices and regulatory requirements, and under specific scenarios. See “Regulatory and Other Matters — Other Matters” for information about the impact of the
COVID-19
pandemic. See “Business — Business Continuity and Information Security” in Part I, Item 1 of this
Form 10-K
for further information about business continuity.

Model Risk Management

Overview

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 liabilities, to monitor and manage our risk, and to measure and monitor our regulatory capital.

Model Risk, which is independent of our revenue-producing units, model developers, model owners and model users, and reports to our chief risk officer, has primary responsibility for assessing, monitoring and managing our model risk through firmwide oversight across our global businesses, and provides periodic updates to senior management, risk committees and the Risk Committee of the Board.

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 Review and Validation Process

Model Risk 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.

We regularly refine and enhance our models to reflect changes in market or economic conditions and our business mix. All models are reviewed on an annual basis, and new models or significant changes to existing models and their assumptions are approved 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:

[[GREPCENT_TABLE]]
[["\u2022","","The model\u2019s conceptual soundness, including the reasonableness of model assumptions, and suitability for intended use;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The testing strategy utilized by the model developers to ensure that the models function as intended;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The suitability of the calculation techniques incorporated in the model;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The model\u2019s accuracy in reflecting the characteristics of the related product and its significant risks;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The model\u2019s consistency with models for similar products; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","","The model\u2019s sensitivity to input parameters and assumptions."]]
[[/GREPCENT_TABLE]]

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.

[[GREPCENT_TABLE]]
[["116","","Goldman Sachs 2021 Form 10-K"]]
[[/GREPCENT_TABLE]]

Table of Contents

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES