December 2012 | Pillar 3 Disclosures - PDF document

DRAFT V .15 December 2012 | Pillar 3 Disclosures PILLAR 3 T he Goldman Sachs Group, Inc. PILLAR 3 DISCLOSURES December 2012 | Pillar 3 Disclosures PILLAR 3 DISCLOSURES The Goldman Sachs Group, Inc. PILLAR 3 DISCLOSURES For the period ended March 31, 2015 ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresBLE OF CONTENTS Page No. Index of Tables 1 Introduction 2 Regulatory Capital 6 Capital Structure 7 Risk - Weighted Assets 9 Credit Risk 10 Equity Exposures in the Banking Book 17 Securitization s in the Banking Book 20 Market Risk 25 Operational Risk 32 Interest Rate Sensitivity 34 Supplementary Leverage Ratio 35 Cautionary Note on Forward - Looking Statement s 37 Glossary of Risk Terms 38 Index of R eference s 41 NDEXOF TABLES Page No. Table 1 Regulatory Capital Ratios 6 Table 2 Minimum Regulatory Capital Ratios 6 Table 3 Capital Structure 7 Table 4 Risk - Weighted Assets by Exposure Category 9 Table 5 Credit Risk Wholesale Exposure s by PD Band 13 Table 6 Equity Exposures in the Banking Book 19 Table 7 Securitization Exposures and Related RWAs by Exposure Type 23 Table 8 Securitization Exposures and Related RWAs by Regulatory Capital Approach 23 Table 9 Securitization Activity - Banking Book 24 Table 1 0 Regulatory VaR 26 Table 1 1 Stressed VaR 27 Table 1 2 Incremental Risk 27 Table 1 3 Comprehensive Risk 28 Table 1 4 Daily Regulatory VaR 29 Table 1 5 Specific Risk 30 Table 1 6 Trading Book Securitization Exposures 31 Table 1 7 Supplementary Leverage Ratio Components 35 Table 1 8 Adjustment for Derivative Exposures 36 Table 19 Adjustment for Repo - style Trans a ctions 36 Table 20 Adjustment for Other Off - balance - s heet Exposures 36 ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresIntroductionOverviewThe Goldman Sachs Group, Inc. (Group Inc.) is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and highnetworth individuals.When we use the terms “Goldman Sachs,” “the firm,” “we,” “us” and “our,” we mean Group Inc., a Delaware corporation, and its consolidated subsidiaries.The Board of Governors of the Federal Reserve System (Federal Reserve Board) is the primary regulator of Group Inc., a bank holding company under the Bank Holding Company Act of 1956 (BHC Act) and a financial holding company under amendments to the BHC Act. As a bank holding company, we are subject to consolidated regulatory capital requirements which are calculatedin accordance with the revised riskbased capital and leverage regulations of the Federal Reserve Board, subject to certain transitional provisions (Revised Capital Framework)The riskbasedcapital requirements are expressed as capital ratios that compare measures of regulatory capital to riskweighted assets (RWAs). Failure to comply with these requirements could result in restrictions being imposed by ourregulators. Ourcapital levels are also subject to qualitative judgmentsby the regulators about componentsof capital, risk weightings and other factors.The Revised Capital Framework, as described below, requires new disclosuresbased on the third pillar of Basel III (Pillar 3). The purpose of Pillar 3 disclosures is to provide formationon banking institutionrisk management practices and regulatory capital ratiosThis document is designed to satisfy these requirements and should be read in conjunction with our most recent Quarterly Report on Form Q and most recent Annual Report on Form 10K. References toour “Quarterly Report on Form 10Q” are to our Quarterly Report on Form 10Q for the quarterly period ended March 31, 2015and references to our “2014 Form 10K” are to our Annual Report on Form 10K for the year ended December 31, 2014. All references toMarch 201and December 201refer to the periods ended, or the dates March 31, 201and December 31, 201, respectively, as the context requires.Capital FrameworkWe are subject to the Revised Capital FrameworkThese regulationsare largely based on the Basel Committee on Banking SupervisionBasel Committeefinal capital framework for strengthening international capital standards (Basel III) and alsoimplement certain provisions of the DoddFrank Wall Street Reform and Consumer Protection Act(DoddFrank Act)Under the Revised Capital Framework, we arean “Advanced approach” banking organizationAs of March 2015, we calculated our Common Equity Tier 1 (CET1), Tier 1 capital and Total capital ratios in accordance with (i) the Standardized approach and market risk rules setout in the Revised Capital Framework (together, the Standardized Capital Rules) and (ii) the Advanced approach and market risk rules set out in the Revised Capital Framework (together, the Basel III Advanced Rules). The lower of each ratio calculated in (i) and (ii) is the atio against which ourcompliance with minimum ratio requirements is assessed. Each of the ratios calculated in accordance with the Standardized Capital les was lower than thcalculated in accordance with the Basel III Advanced Rulesand therefore the StandardizeCapital ratios were the ratios that appliedto as of March Thecapital requirements that apply to us can change in future reportingeriodas a result of theregulatory requirementsAs of December2014, calculated our CET1, Tier 1 capital and Total capital ratiousing the Revised Capital Framework for regulatory capital, but RWAs were calculated in accordancewith(i) the Basel I Capital Accord of the Basel Committee, incorporating the market risk requirementsset out in the Revised Capital Frameworkandadjusted for certain items related to capital deductions and for the phasein of capital deductions (Hybrid Capital Rules), and (ii) the Basel III Advanced Rules. The lower of each ratio calculated in (i) and (ii) wasthe ratio against which our compliance withminimum ratio requirements s assessed.Each of the ratios calculated in accordance with the Basel III Advanced Rules was lower than thcalculated in accordance with the Hybrid Capital Rules and therefore the Basel III Advancedratios were the ratios that appliedto as of December 2014.��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresThe Standardized CET1, Tier 1 capital and otal capital ratios were 11.4%, 12.8% and 14.8%, respectively, as of March 2015These ratios reflect the applicable transitional provisionsFor additional information about our Standardized capital ratios with transitional provisions, see “Note Regulation and Capital Adequacyin Part I, Item 1 “Financial Statements” in our Quarterly Report on Form The Basel III Advanced Rulesrequire n Advanced approachbank holding companyto meeta series of qualificationrequirementson an ongoing basis, and to notify supervisors of any change to a model that would result in a material change in its RWAs for an exposure type, or when it makes any significant change to its modeling assumptions.These qualification requirements address the following areas: the bank’s governance processes and systems for maintaining adequate capital commensurate with its risk profileits internal systems for segmenting exposures and applying risk weightits quantification of risk parameters used includingits modelbased estimates of exposures; its operational risk management processes, data management and quantification systems; the data management systems that are designed to support the timely and accurate reporting of riskbased capital requirements; and thecontrol, oversight and validation mechanismsexercised by senior management and by the oard of irectorof Group Inc. (Board)Theinformation presentedin this document is calculated in accordance with the Revised Capital FrameworkwithRWAcalculated in accordance with the Basel III Advanced Rules, unless otherwise specified. Definition of RiskWeighted Assets.As of March RWAs werecalculated in accordance withboth the Basel III Advanced Rules and the StandardizedCapital RulesFor additional information about the Revised Capital Framework, including the transitional provisions related to new deductions from CET1, and the requirement to calculate RWAs in accordance withboth the Basel III Advanced Rules and the StandardizedCapital Rulesee Note 20. Regulation and Capital Adequacyin Part I, Item “Financial Statements” in our Quarterly Report on Form Q. Also see “Regulation” in Part I, Item 1 “Business” in our 201Form 10K for additional information about our regulatory capital requirements.Fair ValueThe inventory reflected on our condensed consolidated statements of financial condition as “inancial instruments owned, at fair value” and “inancial instruments sold, but not yet purchased, at fair value” as well as certain other financial assets and financial liabilities, are accounted for at fair value (i.e., markedmarket), with related gains or losses generally recognized in our condensed consolidated atements of earnings and, therefore, in capital. 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. The use of fair value to measure financial instruments is fundamental to our risk management practices and is our most critical accounting policy. The daily discipline of marking substantially all of our inventory to current market levels is an effective tool for assessing and managing risk and provides transparent and realistic insight into our financial exposures. The use of fair value is an important aspect to consider when evaluating our capital base and our capital ratiosas changes in the fair value ofour positions are reflected in the current period’s shareholdersequity, and accordingly, regulatory capital; it is also a factor used to determine the classification of positions into the banking book and trading book, as discussed further below. For additional information regarding the determination of fair value under accounting principles generally accepted in the United States (U.S. GAAP) and controls over valuation of inventory, see Note 3. Significant Accounting Policies,in Part I, Item “Financial Statements” and “Critical Accounting Policies Fair Value” in Part I, Item Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10Banking Book/Trading Book ClassificationIn order to determine the appropriate regulatory capital treatment for our exposures, positions must be first classified into either “banking book” or “trading book.” Positions are classified as banking book unless they qualify to be classified as trading book. ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresBanking book positions may be accounted for at amortized cost, fair value or in accordance withthe equity method; they are not generally held “for the purpose of shortterm resale or with the intent of benefiting from actual or expected shortterm price movements or to lock in arbitrage profits.” Banking book positions are subject to credit risk regulatory capital requirements. Credit risk represents the potential for loss due to the default or deterioration in credit quality ofa counterparty (e.g., an OTC derivatives counterparty or a borrower) or an issuer of securities or other instruments we hold. See “Credit Risk” for additional details.Trading book positions generally meet the following criteria: they are assets or liabilities that are accounted for at fair value; they are risk managed using ValueRisk (VaR) internal model; and they are positions that we hold as part of our marketmaking and underwriting businesses “for the purpose of shortterm resale or with the intent of benefiting from actual or expected shortterm price movements or to lock in arbitrage profits.” In accordance with the Revised Capital Framework, trading book positions are generally considered coveredpositions;foreign exchange and commodity positions are typically considered covered positions, whether or not they meet the other criteria for classification as trading book positions. Covered positions are subject to market risk regulatory capital requirementswhich are designed to cover the risk of loss in value of these positionsdue to changes in market conditions.See “Market Risk” for further details. Some trading book positions, such as derivatives, are also subject to counterparty credit risk regulatory capital requirements.Basis of ConsolidationThe Pillar 3 disclosures and the firm’s regulatory capital ratio calculations are prepared at the consolidated Group Inc. level. Our consolidated financial statements are prepared in accordance with U.S. GAAP and include the accounts of Group Inc. and all other entities in which we have a controlling financial interest. Intercompany transactions and balances have been eliminated. The scope of consolidation for regulatory capital purposes is substantially consistent with the U.S. GAAP consolidation. For further information about the basis of presentation of our financial statements and accounting consolidation policies, see “Note 2. Basis of Presentation” and “Note 3. Significant Accounting Policies,” in Part I,Item “Financial Statements” in our Quarterly Report on Form 10Restrictions on the Transfer of Funds or Regulatory Capital within the FirmGroup Inc. is a holding company and, therefore, utilizes dividends, distributions and other payments from its subsidiaries to fund dividend payments and other payments on its obligations, including debt obligations. Regulatory capital requirements as well as provisions of applicable law and regulations restrict Group Inc.’s ability to withdraw capital from its regulated subsidiaries.For information on restrictions on the transfer of funds within Group Inc. and its subsidiaries, see Note 20. Regulation and Capital Adequacyin Part , Item “Financial Statements” and “Risk Management and Risk Factors Liquidity Risk Management AssetLiability Management” and “Equity Capital Management and Regulatory Capital” in Part I, Item Management’s Discussionand Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10Compliance with Capital RequirementsAs of March 2015noneof Group Inc.’s consolidated subsidiaries had capital levels less than the minimum regulatory capital requirement specified in the local jurisdiction. GS Bank USA, an FDICinsured, New York Statechartered bank and a member of the Federal Reserve System, is supervised and regulated by the Federal Reserve Board, the FDIC, the New York State Department of Financial Services and the Consumer Financial Protection Bureau. GS Bank USA is an “Advanced approach” banking organization under the Revised Capital Framework. For information about GS Bank USA’s regulatory capital ratios and for further information about other regulated subsidiaries, see Note 20. Regulation and Capital Adequacyin Part , Item “Financial Statements” and “Equity Capital Management and Regulatory Capital Subsidiary Capital Requirements” in Part I, Item “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10See “Management’s Discussion and Analysis of Financial Condition and Results of Operations Equity Capital Management and Regulatory Capital” in Part I, Item 2 of our Quarterly Report on Form 10Q for information about GS Bank USA’s supplementary leverage ratio.See definition of “Trading position” in 12 CFR 217.202.��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresOther ItemsFor a detailed description of our equity capital and additional information regarding our capital planning and stress testing process, including the Comprehensive Capital Analysis and Review (CCAR), the DoddFrank Act Stress Tests (DFAST), our internally designed stress testsour internal riskbased capital assessment, our attribution of capital and contingency capital plan, see “Equity Capital Management and Regulatory Capital,” in Part I, Item “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10For an overview of our risk management framework, including board governance, processes and committee structure, see “Risk Management and Risk Factors Overview and Structure of Risk Management” in Part I, Item “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10Measures of exposures and other metrics disclosed in this report may not be based on U.S. GAAP, may not be directly comparable to measures reported in our Quarterly Report on rm 10Q or the 2014 Form 10, and may not be comparable to similar measures used by other companies. These disclosures are not required to be, and have not been, audited by our independent auditors. Our historical filings with the SEC and previous Pillar 3 and Regulatory Capital Disclosure documents are located at: www.gs.com/shareholders . ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresRegulatory CapitalThe tablebelow summarizes ourregulatorycapital ratioscalculated in accordance withthe Basel III AdvancedRules(incorporating transitional provisions)Table 1: Regulatory Capital Ratios As of $ in millions March 2015 December 2014 Common Equity Tier 1 capital $ 71,223 $ 69,830 Tier 1 capital 80,0 47 78,433 Tier 2 capital 12,21 2 12,545 Total capital $ 92,25 9 $ 90,978 Basel III Advanced Risk - Weighted Assets $ 56 4,988 $ 570,313 Common Equity Tier 1 ratio 12.6% 12.2% Tier 1 capital ratio 14.2% 13.8% Total capital ratio 16.3% 16.0% Total average adjusted assets $ 871,853 $ 868,681 Tier 1 leverage ratio 9.1 8 % 9.0 3 % The CET1 ratio is defined as CET1 divided by RWAs, the Tier 1 capital ratio is defined as Tier 1 capital divided by RWAs, and the Total capital ratio is defined as Total capital divided by RWAs. The Tier 1 leverage ratio is defined as Tier 1 capital divided by quarterly average adjusted total assets (which includeadjustments for goodwill and identifiable intangible assets, and certain investments in nonconsolidated financial institutionsThe table below presents our minimum required ratios as of March 2015 Table 2 : Minimum Regulatory Capital Ratios Minimum Ratio Common Equity Tier 1 ratio 4.5 % Tier 1 capital ratio 6.0 % Total capital ratio 1 8.0 % Tier 1 leverage ratio 4.0 % In order to meet the quantitative requirements for being “wellcapitalized” under the Federal Reserve Board’s regulations, must meet a higher required minimum otal capital ratio of 10.0%.Certain aspects of the Revised Capital Framework’s requirements phase in over time (transitional provisions). These include the introduction of capital buffers and certain deductions from regulatory capital (such as investments in nonconsolidated financial institutions). These deductions from CET1are required to be phased in ratably per year from 2014 to 2018, with residual amounts subject to risk weighting.In addition, junior subordinated debt issued to trusts is being phased out of regulatory capital.Theminimum CET1, Tier 1 and Total capital ratios at applyto will increase asthe transitional provisions phase in and capital buffersare introduced For a detailed description of regulatory capital reforms that impact us, including capital buffers, fully phasedin Basel III Advanced and Standardized apital ratios, and he supplementary leverage ratio, see “Equity Capital Management and Regulatory Capital” in Part I, Item “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 Disclosuresapital Structure The table below presents information on the components of regulatory capital in accordance withthe Basel III Advanced Rules Table 3: Capital Structure As of $ in millions March 2015 December 2014 Common stock $ 9 $ 9 Share - based awards 3,924 3,766 Additional paid - in capital 51,008 50,049 Retained earnings 81,455 78,984 Accumulated other comprehensive income / (loss) (771) (743) Stock held in treasury, at cost (59,698) (58,468) Common Shareholders' Equity $ 75,927 $ 73,597 Deduction for goodwill and identifiable intangible assets, net of deferred tax liabilities (2,887) (2,787) Deduction for investments in nonconsolidated financial institutions (1,53 5 ) (953) Other adjustments (28 2 ) (27) Common Equity Tier 1 $ 71,223 $ 69,830 Perpetual non - cumulative preferred stock 9,200 9,200 Junior subordinated debt issued to trusts 330 660 Other adjustments (7 06 ) (1,257) Tier 1 capital $ 80,0 47 $ 78,433 Qualifying subordinated debt 11,232 11,894 Junior subordinated debt issued to trusts 990 660 Other adjustments ( 10 ) (9) Tier 2 capital 12,21 2 12,545 Total capital $ 92,25 9 $ 90,978 In the table above:The deductionfor goodwill and identifiable intangible assets, net of deferred tax liabilitiesinclude goodwill of 3.65 billion as ofboth March 2015 and December 2014and identifiable intangible assets of million0% of million) and $103 million (20% of $515 million)as of March 2015 and December 2014respectivelynet of associated deferred tax liabilities of $974 million and millionas of March 2015 and December 2014, respectivelyhe deduction for identifiable intangible assets is required to phased into CET1ratably over five yearsfrom to 2018. As of March 2015 and December 2014, CET1 reflects 40% and 20% of the deduction, respectively. The balancethatis not deducted during the transitional period is riskweighted. The deductionforinvestments in nonconsolidated financial institutions represent the amount by which our investments in the capital of nonconsolidated financial institutions exceed certain prescribed thresholds. The deduction for such investments is required to be phased into CET1 ratably over five years from 2014 to 2018. As of March 2015and December 2014CET1 reflects % and of the deduction, respectively. The balance that is not deducted during the transitional period is risk weightedSee “Equity Eosures in the Banking Book”for further details.her adjustments within CET1and Tier 1capital primarily includeaccumulated other comprehensive loss, credit valuation adjustments on derivative liabilities, the overfunded portion of our defined benefit pension plan obligation net of associated deferred tax liabilitiesdisallowed deferred tax assetsandother required credit riskbased deductionsThe deductions for such items are generally required to be phased into CET1 ratably over five years from 2014 to 2018. As of March 2015 and December 2014, CET1 reflects 40% and 20% of such deductions, respectively. The balance that is not deducted from CET1 during the transitional period is generally deducted from Tier 1 capital within other adjustments. Junior subordinated debt issued to trusts is reflected in both Tier 1 capital (%) and Tier 2 capital (%) as of March 2015. Such percentageswere 50% for both Tier 1 and Tier 2 capital as of December 2014. Junior subordinated debt issued to trustis reduced by the amount of trust preferred securities we purchasedandwill be fully phased out of Tier 1 capital into Tier 2 capital by 2016, and then out ofTier 2 capital by 2022. See Note 16. LongTerm Borrowingsin Part , Item “Financial Statements” in our Quarterly Report on Form 10Q for additional information about our junior subordinated debt issued to trusts and trust preferred securities we purchased.Qualifying subordinated debt represents subordinated debt issued by Group Inc. withan original term to maturity of five years or greater. The outstanding amount of subordinated debt qualifying for Tier 2 capital is reduced, or discounted, upon reaching a remaining maturity of five years. For additional information about our subordinateddebtsee Note 16. LongTerm Borrowingsin Part Item “Financial Statements” in our Quarterly Report on Form 10��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresFor further information on the terms and conditions of our common stock, perpetual noncumulative preferred stock, junior subordinated debt issued to trusts and qualifying subordinated debt, see Note 16. LongTerm Borrowingsand Note 19. Shareholders’ Equity,in Part I, Item “Financial Statements” in our Quarterly Report on Form 10For additional information on the firm’s capital, see “Equity Capital Management and Regulatory Capital” in Part , Item “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10Q, and the following footnotes to the condensed consolidated financial statements in Part , Item “Financial Statements” in our Quarterly Report on Form 10“Note 13. Other Assetsfor a discussion on our goodwill and identifiable intangible assets;“Note 16. LongTerm Borrowings,” for a discussion on our subordinated borrowings and junior subordinated debt issued to trust; and“Note 19. Shareholders' Equity,” for detail on common equity, preferred equity and accumulated other comprehensive income / (loss).��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresRiskWeighted AssetsThe table below presents a summary of the components of RWAs calculated in accordance withthe Basel III Advanced Rules. More details on each of the material components, including a description of the methodologiesused,can be found in the remainder of this document, under the section headings indicated below.Table 4: RiskWeighted Assets by Exposure Category As of $ in millions March 2015 December 2014 Section Reference Credit Risk - Weighted Assets Wholesale Exposures $ 17 0,3 06 $ 174,164 Credit Risk Cleared Exposures 3,076 2,641 Credit Risk Retail Exposures 2,063 1,666 Credit Risk Other Assets 25,533 24,769 Credit Risk Equity Exposures 38,207 37,874 Equity Exposures in the Banking Book Securitization Exposures 10,337 9,438 Securitizations in the Banking Book Subtotal: Credit Risk - Weighted Assets subject to the 6% add - on 249,522 250,552 6% add - on 1 14,971 15,033 Credit Valuation Adjustment 56,755 62,359 Credit Risk Total Credit Risk - Weighted Assets 321,248 327,944 Market Risk Weighted Assets Regulatory VaR 13,050 10,238 Market Risk Stressed VaR 31,013 29,625 Market Risk Incremental Risk 16,725 16,950 Market Risk Comprehensive Risk 2 7,975 8,150 Market Risk Specific Risk 76,327 79,918 Market Risk Total Market Risk - Weighted Assets 145,090 144,881 Operational Risk - Weighted Assets 98,650 97,488 Operational Risk Total Risk Weighted Assets $ 56 4,988 $ 570,313 1. The Federal Reserve Board’s regulations require that a 6% addon be applied to all components of our credit RWAs other than the Credit Valuation Adjustment (CVA) component. 2. Includes standardized surcharge of 8%. See “Market Risk Market RiskWeighted Assets Comprehensive Risk” for further details.Basel III Advanced Credit RWAs as of March 2015decreased by $6.70 billion compared with December 2014,primarily due to a decrease in securities financingtransactions as a result of lower modeled exposures and adecrease in derivative exposures, includingthe CVA component, due to lower counterparty credit risk��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresCredit RiskOverview redit risk represents the potential for loss due to the default or deterioration in credit quality of counterparty(e.g., an OTC derivatives counterparty or a borrower) or an issuer of securities or other instruments hold. Ourexposure to redit risk comes mostly from client transactions in OTCderivativesand loans and lending commitments. Credit risk also comes from cash placed with banks, securities financing transactions (i.e., resale and repurchase agreements and securities borrowing and lending activities) and receivables from brokers, dealers, clearing organizations, customers and counterparties.Credit Risk Managementwhich is independent of the revenueproducing units and reports to ourchief risk officer, has primary responsibility for assessing, monitoring and managing credit risk at the firm. The Credit Policy Committee and the Firmwide Risk Committee establish and review credit policies and parameters. In addition, we hold other positions that give rise to credit risk (e.g., bonds held in our inventory and secondary bank loans). These credit risksare captured as a component of market risk measureswhich are monitored and managed by Market Risk Management, consistent with other inventory positions.also enter into derivatives to manage market risk exposureSuch derivatives also give rise to credit risk which is monitored and managed by Credit Risk Management.Policies authorized by the Firmwide Risk Committee and the Credit Policy Committeeprescribe the level of formal approval required for to assume credit exposure to a counterparty across all product areas, taking into account any applicablenetting provisions, collateral or other credit risk mitigantCredit Risk Management ProcessEffective management of credit risk requires accurate and timely information, a high level of communication and knowledge of customers, countries, industries and products. Our process for managing credit riskincludesApproving transactions and setting and communicating credit exposure limits;Monitoring compliance with established credit exposure limits;Assessing the likelihood that a counterparty will default on its payment obligations;Measuring ourcurrent and potential credit exposure and losses resulting from counterparty default;Reporting of credit exposures to senior management, the Boardand regulators;Use of credit risk mitigants, including collateral and hedging; andCommunication and collaboration with other independent control and support functions such as operations, legal and compliance.As part of the risk assessment process, Credit Risk Management performs credit reviews which include initial and ongoing analyses of our counterparties. For substantially all of our credit exposures, the core of our process is an annual counterparty credit review.A credit review is an independent analysisthe capacity and willingness of a counterparty to meet its financial obligationsresulting in an internal credit ratingThe determination of internal credit ratingsalsoincorporates assumptions with respect to the nature of and outlook for the counterparty’s industry, and the economic environment. Senior personnel within Credit Risk Management, with expertise in specific industries, inspect and approve credit reviews and internal credit ratingsOur global credit risk management systems capture credit exposure to individual counterparties and on an aggregate basis to counterparties and their subsidiaries (economic groups). These systems also provide management withcomprehensive information on our aggregate credit risk by product, internal credit rating, industry, country and region.��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresCredit Risk Measuresand imitsWe measure our credit risk based on the potential loss in an event of nonpayment by a counterparty. For derivatives and securities financing transactions, the primary measure is potential exposure, which is our estimate of the future exposure that could arise over the life of a transaction basedon market movements within a specified confidence level. Potential exposure takes into account netting and collateralarrangements. For loanand lending commitments, the primary measure is a function of the notional amount of the position. We also monitor credit risk in terms of current exposure, which is the amount presently owed to after taking into account applicable netting and collateral.We use credit limits at various levels (counterparty, economic group, industry, country) to control the size of our credit exposures. Limits for counterparties and economic groups are reviewed regularly and revised to reflect changing riskappetites for a given counterparty or group of counterparties. Limits for industriesand countries are based on ourrisk tolerance and are designed to allow for regular monitoring, review, escalationand management of credit risk concentrations.Credit ExposuresFor information on our credit exposures, including the gross fair value, netting benefits and current exposure of our derivative exposures and our securities financing transactions, see Note 7. Derivatives and Hedging Activitiesand Note . Collateralized Agreements and Financings,in Part I, Item 1 “Financial Statements” and Credit Risk Management in Part I, Item 2 “Management Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10Allowance foLosseson Loans and Lending CommitmentsFor information ourimpaired loans and loans on nonaccrual status, and allowance for losses on loans and lending commitments, see Note 9. Loans Receivablein Part Item "Financial Statementsin our Quarterly Report on Form 10redit Risk: RiskWeighted AssetsCredit RWAs are calculated based upon measures of credit exposure which are then riskweightedelow is a description of the methodology used to calculate RWAs for Wholesale exposureswhich generally includecredit exposureto corporates, sovereignor government entities other than securitization, retail or equity exposure, which are covered in later sectionsWe havebeen given permission by our regulatorsto compute risk weights for certain exposures in accordance withthe Advanced Internal RatingsBased (AIRB) approach, which utilizesinternal assessments of each counterparty’s creditworthinessWe utilize internal models to measure exposure for certain products. The Revised Capital Framework requires thatbankholding company obtain prior written agreement romits regulators before using the Internal Models Methodology IMMExposure at Default(EAD)The exposure amount for balancesheet assets, such as receivables and cash, generally based on the carryingvalue. For the calculation of EAD for offbalancesheet exposures, including commitmentsand guaranteescredit equivalent exposure amount is calculated based on the notional amount of each transactionmultiplied by a credit conversion factor designedto estimate the net additions tofunded exposurethat would be likely to occur over a oneyear horizonassuming the obligor were to default. Historical studies and empirical data are generallyused to estimate the credit conversion factor. ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresFor substantially allof the counterparty credit risk arising from OTC derivatives and securities financing transactions, we use internal models to calculate the distribution of exposure upon which the EAD calculation is based, in accordance with the IMM. The models estimate Expected Exposures(EE)at various points in the future using risk factor simulations. The model parameters are derived from historical data using the most recent threeyear period. The models also estimatethe Effective Expected Positive Exposure (EEPE) over the first year of the portfolio, which is the timeweighted average of nondecliningpositive credit exposureover the EE simulationn accordance withthe Basel III Advanced Rules, calculate two EEPEone based on stressed conditions and one based on unstressed conditions. For the tressed EEPE calculation, the model is calibrated using historical market parameters from a period of stress as identified by elevated credit spreads for ourcounterparties. othstressed and unstressed EAD arecalculated by multiplying theEEPE by a standard regulatory factor of 1.4.OurRWAs calculated in accordance withthe IMM are the greater of the RWAs based on the stressed or unstressed EEPEOurimplementation oftheIMM incorporates the impact of netting and collateral into calculationof exposure. The EAD detailed in Table below represents the exposures used in computing capital requirements and is not directly comparable to amounts presented in our condensedconsolidated statementof financial condition in our Quarterly Report on Form 10Q, due to differences in measurement methodology, counterparty netting and collateral offsets used.Advanced Internal RatingsBased ApproachRWAs are calculated by multiplying EAD by the counterparty’s riskweight. In accordance withthe AIRB approach, iskweights are a function of the counterparty’s Probability of Default (PD), Loss Given Default (LGD) andtheeffective maturity of the trade or portfolio of trades, where:PD is an estimate of the probability that an obligor will default over a oneyear horizon. For the majority of ourWholesale exposure, the PD is assignedusing aapproachwhere quantitative factors are combined with aqualitative assessment to determine internal credit rating grades. For each internal credit rating grade,over 5 years of historical empirical data is used to calculate a long run average annual PDwhich is assigned to each counterpartwith that credit rating gradeOur internal credit rating grades each have external public rating agency equivalents. The scale that we employ for internal credit ratings corresponds to those used by the major rating agencies and our internal credit ratings, while arrived at independently of public ratings, are assigned using definitions of each internal credit rating grade that are consistent with the definitions used by the major rating agencies for their equivalent credit rating grades. As a result, we are able to map default data published by the major rating agencies for obligors with public ratings to our counterparties with equivalent internal credit ratings for quantification and validation of risk parameters.LGD is anestimate of the economic loss rate if a default occurs during economic downturn conditions. For Wholesale exposures, the LGD is determined using recognized vendor models,butexposurespecific estimates of LGD are employed where the recovery prospects of an exposure are more accurately captured by an analysis incorporating information about the specific collateralstructureor type of clientThe definition of effective maturitydepends on the nature of the exposure. For OTC derivativesffective maturity is averagetime measure weighted bycredit exposure (based on EE and EEPE). For securities financing transactions, effective maturity represents the notional weighted averagenumber ofdays to maturity. For other products, the effective maturity is based on the contractual maturity. Effective aturity is floored at one year and capped at five yearsexcept where the Basel III Advanced Rules allow a maturity of less than one year to be used as long as certain criteria are met. ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresThe table below presenta distribution ofEAD, Weighted Average LGDWeighted Average , and Weighted Average Riskeight by PD bandforWholesaleexposureexcuding exposures entral ounterpartieshe tablealsoshowthe notional amount of undrawn commitments and guaranteesthat are included in the Total EAD. Table 5: Credit Risk Wholesale Exposures by PD Band $ in millions As of March 2015 PD Band Range Total EAD 1, 2 Exposure Weighted Average LGD Exposure Weighted Average PD RWA Exposure Weighted Average Risk Weight Undrawn Commitments & Guarantees 3 Undrawn Commitments & Guarantees EAD 0 to 0.05% $ 157, 559 56.7 3 % 0.02% $ 11, 105 7.0 5 % $ 9,330 $ 6,82 1 0.05% to 0.25% 152,236 58.09% 0.09% 40,173 26.39% 23,700 18,365 0.25% to 0.75% 39,898 51.31% 0.52% 30,607 76.71% 13,572 7,948 0.75% to 5.0% 18,120 49.38% 1.87% 23,223 128.16% 9,452 4,778 5.0% to 20% 20,802 47.97% 7.54% 42,117 202.47% 7,545 4,044 20% to 100% 7,701 48.89% 23.78% 21,535 279.64% 1,063 546 100% (default) 1,546 60.30% 100.00% 1,546 100.00% 452 442 Total 4 $ 397,8 62 $ 17 0,3 06 $ 6 5,114 $ 4 2,9 44 1. Includes Counterparty Credit Risk EAD of billion2. ollateral is generally factored into the EAD for OTC derivatives and securities financing transactionsusingtheIMM3. Excludes30.64billion of unfunded commitmentsand guaranteesthat are treated for regulatory capital purposes ecuritizationee Securitizationin the Banking Book. Excludes 1.25billion of EAD and $2.68billion of RWAsassociated with OTC derivatives where the counterparty is a securitization special purpose entity, and which are treated for regulatory capital purposes as securitizationsee Securitizations in the Banking Book��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresGovernance and Validation of Risk ParametersCommittees within Credit Risk Management that ultimately report to the Chief Credit Risk Officer the Credit Policy Committee oversee themethodology for determiningPD and the performance of models used for both LGD and EAD.To assess the performance of the PD parameters used, on an annual basis perform benchmarking and validationexercisewhich includes comparisons of realized annual default ratesto the expected annual default ratesfor each credit rating bandandcomparisons of the internal realized longterm average default ratesto the empiricallongterm average default rateassigned to each credit rating bandAt the time of the most recent review, for yearend 2014, as well as in previous annual periods, thePDs used for regulatory capital calculations were higher (i.e., more conservative) than our actual internal realized default rate.During the three monthsended March 2015, the total number of counterparty defaults remained low, representing less than 0.5% of all counterparties, and such defaults primarily occurred withinloans and lending commitments. Estimated losses associated with counterpartydefaults werelowercompared with the same prior yearperiod andwere not material to To assess the performance of LGD parameters used, on an annual basis perform validationexercise, including comparisons of recovery ratesfollowing counterparty defaults to the recovery ratebased on LGDparametersassigned to the corresponding exposures prior to default.While the actual realized recovery on each defaulted exposure varies due to transaction and other situationspecific factors, on average, recoverrates remain higher than those implied by the LGDparameters used in our regulatory capital calculations. The models used to determine the EAD calculated in accordance withtheIMM, as well asthose used for CVA (see “Credit Valuation Adjustment Riskeighted sets”) are subject to review and validation by our independent model validation group, which consists of quantitative professionals who are separate from model developers.This review includes:critical evaluation of the modeltheirtheoretical soundness and adequacy for intended use;Verification of the testing strategy utilized by the model developers to ensure that the modelfunction as intended; andVerification of the suitability of the calculation techniques incorporated in the modelThe performance of each IMM model is also assessed quarterly via backtesting procedures, performed by comparing the predicted and realized exposure of a set of representative trades and portfolios at certain horizons. Our models are monitored and enhanced in response to backtesting results and portfolio changesChanges to our models which would result in material change in the RWAsfor an exposure typeor significant changes in our modeling assumptionsrequire notification to our regulators. ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresCredit Risk MitigationTo reduce our credit exposureson derivatives and securities financing transactionsmay enter intomasternetting agreementsor similar arrangements (collectively, netting agreements)with counterparties that permit us to offset receivables and payables with such counterparties.A netting agreement is a contract with a counterparty that permits net settlement of multiple transactions with that counterparty, including upon the exercise of termination rights by a nondefaulting party.Upon exercise of such termination rights, all transactions governed by the netting agreement are terminated and a net settlement amount is calculatemay also reduce credit risk with counterparties by entering into agreements that enable us to receive and post cash and securities collateral with respect to our derivatives and securities financing transactions, subject to the terms of the related credit support agreements or similar arrangements (collectively, credit support agreements).An enforceable credit support agreement grants the nondefaulting party exercising termination provisionsthe right to liquidate collateral and apply the proceedsto any amounts owed.In order to assess enforceability of ourright to setoff under netting and credit support agreements, we evaluate various factincluding applicable bankruptcylaws, local statutes and regulatory provisions in the jurisdiction of the parties to the agreement.Securities collateral obtained primarily includesU.Sgovernment and federal agencyobligations and nonU.S. government and agency obligations.Our collateral is managed by an independent control function within the Operations ivision. Thisfunctionis responsible forreviewingexposure calculations, making margin callwith relevant counterparties, and ensuring subsequent settlement of collateral movementsWe monitor the fair value of the collateral on a daily basis to ensure that our credit exposures are appropriately collateralized.For additional information about our derivatives (including collateral and the impact of the amount of collateral we would have to provide in the event of a ratings downgrade)see Note 7. Derivatives and Hedging Activities,in Part I, Item I “Financial Statements” in our Quarterly Report on Form 10Q. See Note . Collateralized Agreements and Financings,in Part I, Item 1 “Financial Statements” in our Quarterly Report on Form 10Q for further information about our collateralized agreements and financings.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 itigants include: collateral provisions, guarantees,covenants, structural seniority of the bankloan claims and, for certain lending commitments, provisions inthelegal documentation that allow to adjust loan amounts, pricing, structure and other terms as market conditions change. The typeand structure of risk mitigants employed can significantly influence the degree of credit risk involved in a loanor lending commitmentWhen we do not have sufficient visibility into a counterparty’s financial strength or when we believe a counterparty requires support from its parent company, we may obtain thirdparty guarantees of the counterparty’s obligations. We may also mitigate our credit risk using credit derivatives or participation agreements.Credit Derivativesenter into credit derivativetransactions primarily to facilitate client activityand to manage the credit risk associated with marketmakingincluding to hedge counterparty exposures arising from OTC derivatives (intermediation activities)We also use credit derivatives to hedge counterparty exposure associated with investing and lending activities.Some of thesehedges qualifyas credit risk mitigantregulatory capital purposesFor these transactions, thesubstitution approach is applied, where the PD and/or LGD associated withthe credit derivative counterpartreplacetheandor LGDthe loan obligorfor capital calculations. Where the aggregate notional of credit derivatives hedging exposure to a loan obligor is less than the notional loan exposure, thesubstitution approach is only employed for the percentage of loan exposure covered by eligible credit derivatives.As of March 2015our purchased credit default swaps that were used to hedge counterparty exposure associated with investing and lending activities had a notional amount of 6.79billionof which 2.42billion were deemed to be eligible hedges for regulatory capital purposes.For further information regarding our credit derivative transactions, see Note 7. Derivatives and Hedging Activities,in Part I, Item 1 “Financial Statements” in our Quarterly Report on Form 10For information regarding credit risk concentrations, see Note 26. Credit Concentrations,in Part I, Item 1 “Financial Statements” in our Quarterly Report on Form 10 ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresWrongway iskWe 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, which is known as wrongway riskWrongway risk is commonly categorized into two typesspecific wrongway risk and general wrongway risk. We categorize exposure as pecific wrongway riskwhen our counterparty and the issuer of the reference asset of the transactionare the same entity or areaffiliateif thecollateral supporting a transactionis issuedby the counterpartyor affiliateGeneral wrongway risk arises when there is a significant positive correlation between the probability of default of counterpartand general market risk factorsaffecting the exposure to that counterpartyWe haveprocedures in place to actively monitor and control specific and general wrongway risk, beginning at the inception of a transactionand continuing through itslife, including assessingthelevel of risthrough stress testsensure that material wrongway risk is mitigated using collateral agreementsincreases to initial marginwhere appropriateCredit Valuation Adjustment Riskeighted setsRWAs for CVA address the risk of losses related tochangein counterparty credit risk arising from OTC derivatives. calculate RWAs for CVA primarily using the Advanced CVA approach setout in the Revised Capital Frameworkwhich permits the use of regulatorapproved VaR modelsConsistent with ourRegulatory VaR calculationsee Market Riskfor further details, the CVA RWAs are calculated at a 99% confidence levelover a 10day time horizon. The CVA RWAs also include a tressed CVA component, which is also calculated at a 99% confidence level ovr a 10day horizonusing both a stressed VaR period and stressed EEs.The CVA VaR model estimates the impact on ourcredit valuation adjustments of changesto our counterparties’ credit spreadsIt reflects eligible CVA hedges (as defined in the Revised Capital Framework), but it excludes those hedges that, although used for riskmanagement purposes, are ineligible for inclusion in the regulatory CVA VaR model. Examples of such hedges are interest rate hedges, or those that do not reference the specific exposures they are intended to mitigate, but are nevertheless highly correlated to the underlying credit risk.Other Creditiskeighted setsCredit RWAs (as summarized in Table 4 above) also includethe following componentsCleared Transactions. RWAs for cleared transactionsand default fund contributions(defined as payments made by clearing members to entral clearing agenciespursuant tomutualized loss arrangements)are calculated based onspecific rules within the Revised Capital Frameworkmajorityof ourexposureon centrally cleared transationsare tocounterpartiesthat areconsidered to be Qualifying Central Counterparties in accordance withthe Revised Capital FrameworkSuch xposures arisfrom OTC derivatives, exchangetraded derivatives, securitiesfinancing transactions and long settlement transactions and are required to be riskweighted at either 2% or 4% based on the specifiedcriteria.Retail Exposures. We havean immaterial level oetail exposures (defined as residential mortgage exposurequalifying revolving exposure, or other retail exposurethat are managed as part of a segment of exposures with homogeneous risk characteristics, noton an individual exposure basisThe PD and LGD parameters for Retail exposures are determined based on the risk characteristics of each homogeneous pool Other Assets.Other assets primarily include property, leaseholdimprovements and equipment, deferred tax assetsand assets for which there is no defined capital methodology or that are not material. RWAs for other assets are generally based on the carryingvalueplus a percentageof thenotional amount of offbalancesheet exposures, and are typically riskweighted at 100%.��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresEquity Exposures in the Banking BookOverviewmakedirectinvestmentsin public and private equity securities;we also make investments, boththrough funds that we manage(some of which are consolidated)and through funds that are managed by third parties,in debt securities and loans, public and privateequity securitiesand real estateentitiesThese investments are typically longerterm in nature andare primarily held for capital appreciation purposes; they are therefore classifiedfor regulatory capital purposes as banking book equity investmentsalso make commitments to invest, primarily in private equity, real estate and other assets;such commitments are made both directly andprimarilythrough funds that raise and manage.For more information related to our equity investments and investment commitments, see Note 6. Cash InstrumentsNote 1. Other Assets,with respect to information regardinginvestments accounted for as equity method investments; Note 18. Commitments, Contingencies and Guarantees,for information on our equity investment commitments; and Note 22. Transactions with Affiliated Funds,for a description of transactions with affiliated fundsin Part I, Item 1 “Financial Statements” in our Quarterly Report on Form 10Risk ManagementOurequity investments and investment commitments are subject to comprehensive risk management processes through which we assess investmentopportunities, and monitor, evaluate and manage the risksassociated with such investments.Risk management governancestarts with the Board, which plays an important role in reviewing and approving risk management policies and practices, both directly and through its committees.Prior to making an investment, or entering into an investment commitment, opportunitiesaresubject to rigorous due diligencereview and, where appropriate,approval by therelevant investment, capital and/or risk committeeSuch committees are either specific to the relevant division of the firmor they arefirmwide committees such as the Firmwide Investment Policy Committee. The committees consider, among other matters, the risks and rewards of the opportunity, as well as factors such as balance sheet usage and risk measures such as stress tests.On an ongoing basis, ourequity exposures are reviewed by senior management, including the Firmwide Risk Committee and Finance Committee.Other critical components of our risk management processes and procedures include setting limits (such as balance sheet limits) and our discipline of marking substantially all of our equity investments to current market levels, verified by our independent control and support functionOurequity exposures are included inthe scope ofour stress test, which are conducted on a regular basis as part of ourroutine risk management process and on an ad hoc basis in response tomarket events or concerns. We use stress testto examinetherisks of specific equity investments as well as the potential impactof significant risk exposures across the firm. We use a variety of scenarios to calculate the potential loss from a wide range of market moves on ourequity investmentsValuation and Accounting PoliciesSubstantiallyallof ourequity investments are included in inancial nstruments ownedat air alueourcondensed consolidated statementof financial conditionFor further information on our accounting and valuation policies applicable to equity investments, see the following sections in our Quarterly Report on Form 10Q, in Part I, Item 1 “Financial Statements.”Note 3. Significant Accounting Policiesfor a discussion of ourpolicies on consolidation, equitymethod investmentsand investment fundsNote 4. Financial Instruments Ownedat Fair Value and Financial Instruments Sold, But Not Yet Purchased, at Fair Value,for a description of ourpolicies for recognizinggains and losses through earnings; andNote 6. Cash Instrumentsfor a description of types of cash instruments included in each level of the fair value hierarchy and the valuation techniques and significant inputs used to determine their fair values, including for private equity investments and investments in real estate entities ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresRegulatory Capital MeasurementMany of ourequity exposures are investments in funds that are required to be treatedas “financial institutions” for the purposes of the deduction from capitalfor investments in the capital of nonconsolidated financial institutions. If an equity investment in a nonconsolidated financial institution is 10% or more of that institution’s common equity (or equivalent), then it is regarded as “significantWe arerequired to deductfrom our CET1 any excess of the aggregate of oursignificant investmentsin e common stock of nonconsolidated financial institutionsthat exceed10% of a measure of ourcapital, and all noncommon significant investments must deducted from Tier 1or Tier 2capitalusing the corresponding deduction approachn accordance withthe transitional provisions, as of March , we must deduct % of this excess (the percentage of the excess that must be deducted will increase in the future) and the remainder of the aggregate of our significant investments is risk weighted at 100%. Balances that are deducted from capital are not included in ablebelow.The computation of RWAs for banking book equity investmentsthat are not deducted from capitalis based upon either the Simple Modified LookThrough Approach(SMLTA)or the Simple Risk Weight Approach (SRWA)quity exposures investment funds that do not have material leverage are riskweighted based upon theSMLTAwhere riskweights are determined based on the highest riskweights that would apply to the types ofinvestments that the fund is permitted to holdunder the terms of its prospectusAn equity investment in an investment fund is consideredapplicable for treatment in accordance withthe lookthrough approach if the investment fund has no material liabilities and the assets of the fund are substantiallyall“financial assetsDirect equity investments and equity investments in leveragedinvestment funds are riskweighted in accordance withthe SRWA in accordance with the table below.Risk weights are applied to the “adjusted carrying value” of the equity exposure. For onbalancesheet positions, the adjusted carrying value is the same as the balance sheet carrying value. For our unfunded equity investment commitments, the adjusted carrying value is a percentage of the notional amount, based upon the estimated funding of the commitment during economic downturn conditionsAlthough the SRWA assigns specific risk weights to different types of equity exposures as set out above, the regulations allow for nonsignificant equity exposuresto be riskweighted at 100%o the extent they do not exceed in the aggregate 10% of ourTier 1 plus Tier 2 capital, withthe remaining portion then riskweighted as appropriate in accordance withthe SRWA. Generally, those equity exposures that would attract the lowest risk weights under SRWA are required to be treated nonsignificant equity exposures, before inclusion of any equity exposures that would otherwise attract higher risk weightsunder SRWA Risk Weight Investment Category 100% Community development equity exposures Significant common stock investments in financial institutions which are not deducted from capital under transitional provisions (risk weight will increase to 250% once transitional provisions expire in 2018) Nonsignificant equity exposures to the extent that the aggregate adjusted carrying value of the exposures does not exceed 10% of Tier 1 capital plus Tier 2 capital 300% A publicly traded equity exposure (other than an equity exposure that receives a 600% risk weight) 400% private equity exposure (other than an equity exposure that receives a 600% risk weight) 600% An equity exposure to an investment firm that ( would meet the definition of a traditional securitization but for the fact that the investment firm can exercise control over the size and composition of their assets, liabilities, and offbalancesheet exposures, and ( ) has greater than immaterial leverage ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresThe table below presentthe adjusted carrying values and RWAs for our equity exposures in the banking book.Table 6: Equity Exposures in the Banking Book The adjusted carrying value of the equity exposures includes 1.80billionrepresenting a percentage of our unfunded commitment exposure.2. epresents significant equity investments that are subject to riskweighting, and excludes theitems deducted from capital.3. Ourpublicly traded and a portion of our private equity exposures are being riskweighted under the nonsignificant equity exposures riskweight.4. Adjusted carrying value consists of 3.52billion of publicly traded and 20.60billion of private equity exposures. $ in millions As of March 2015 Adjusted Carrying Value 1 Risk Weight % RWA Community development equity exposures $ 1 , 204 100% $ 1,204 Simple Risk Weight Approach (SRWA) Significant investments in nonconsolidated financial institutions (transitional provisions) 2 8,906 100% 8,906 Non - significant equity exposures 9,226 100% 9,226 Publicly traded equity expo sures 3 300% Private equity exposures 3 3,590 400% 14,360 Equity exposures in leveraged investment funds 381 600% 2,28 6 Total SRWA $ 2 3,30 7 $ 35,9 82 Simple Modified Look - Through Approach (SMLTA) Equity Exposures to Investment Funds 811 2,225 Total SMLTA $ 811 $ 2, 22 5 Total $ 24,11 8 4 $ 38, 207 ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresSecuritizations in the Banking BookOverviewThe Revised Capital Framework defines certain activities as securitization transactions which attract capital requirements in accordance withthe Securitization Frameworkportion ofourpositions that meet the regulatory definition of a securitization are in our trading book and capital requirements for thosetionare calculated in accordance withthe market risk capital rules (see “Market RiskSpecific Risk Securitization Positions”). However, also have certain banking book positions that meet the regulatory definition of a securitization.n accordance withthe Revised Capital Framework, the regulatory definition of a securitization includethe following criteria:All or a portion of the credit risk of one or more underlying exposures is transferred to one or more third partiesThe credit risk associated with the underlying exposures has been separated into at least two tranches reflecting different levels of seniorityPerformance of the securitization exposures depends upon the performance of the underlying exposures; andAll or substantially all of the underlying exposures are financial exposures.The regulations also distinguish between traditional and synthetic securitizations, the primary difference being that a traditional securitization involves thetransfer of assetfroma bank’s balance sheet into a securitization vehicle, whereas a synthetic securitizationinvolves the transfer of credit risk through credit derivatives or guarantees.There are also specific rules for resecuritization exposures (a resecuritization exposure is one which involves the securitization of assets, one or more of which has already been securitized). As of March 2015we did not have any material banking book securitization exposures that met the definition of a resecuritization.We have described below banking book activitiesthat meet thregulatory definition of a securitization. It is important to note that the scope of banking book securitizations for regulatory purposesis not comparable to the population of securitization activity reported in Note . Securitization Activities,in Part I, Item 1 “Financial Statements” in our Quarterly Report on Form 10Credit Protection (Synthetic Securitizations).Some of the credit protection that we havepurchased meets the definition of a “synthetic securitization” in accordance withthe Revised Capital Framework. The positions on which we have purchased protection are therefore treated for regulatory capital purposes in accordance withthe Securitization Framework. he most material of these synthetic securitizationtransactionour hedge counterparty provides with credit loss protection on certain approved loan commitments (primarily investmentgrade commercial lending commitments). The notional amount of such loan commitments was 26.61billion as ofMarch 2015The credit loss protection on loan commitments provided by our hedge counterpartyis generally limited to 95% of the first loss realize on such commitments, up to a maximum of approximately $million. In addition, subject to the satisfaction of certain conditions, upon the firm’s request, our hedge counterparty will provide protection for 70% of additional losses on such commitments, up to a maximum of 1.13billion, of which $768 millionof protection had been provided as of March 2015Thprotection has beenfully cash collateralizedby our hedge counterpartWarehouse Financing and Lendingprovide financing to clients who warehouse financial assets. These arrangements are secured by the warehoused assets, primarily consisting of corporateloans and commercial mortgage loans. also provide financing to nonoperating companies on an overcollateralized basis.��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresOTC Derivatives facing Securitization Special Purpose Entities (SSPEs).We haveOTC derivatives primarily credit derivativeswith counterparties that meet the definition of an SSPE. An SSPEis an entity organized for thespecific purpose of holding the assets underlying a securitization, whoseactivities arelimited to holding such assets, andwhosestructure is intended to isolate the underlying assets from the credit risk of the seller who originally sold themto the SSPEAn OTC derivative with an SSPE counterpartattracts counterparty credit risk capital requirements in accordance withthe Securitization Framework. All of ourderivatives that fall into this category areconsidered to be covered positionsin accordance withthe Federal Reserve Board’s final rules, and as such theyare also subject to market risk regulatory capital requirements(see “Market Risk”)Other. e havecertain other banking book securitization activities such as holding securities issued by securitization vehicles.Risk ManagementBy engaging in the banking book securitization activities noted abovewe areprimarily exposed to credit risk and to the performance of the underlying assets.We mitigate the credit risk arising on our banking book securitization activitiesprimarily through the purchase of credit protection and through obtainingcollateralpredominantly in the form of cash, securities loansThese positions are incorporated into our overall risk management financial instrumentsAccounting / Valuation PoliciesFor information on accounting and valuation policies applicable to these positionssee Note 3. Significant Accounting Policies,and related footnotes in Part I, Item 1 “Financial Statements” in our Quarterly Report on Form 10Calculation of RiskWeighted AssetsRWAs for nking booksecuritization exposure(including counterparty credit risk exposures that are from trading book derivative positions)are calculated throughapplication of a hierarchy of approaches described below.Deduction.A bank is required to deduct from CET1 any aftertax gainsale resulting from the sale of loans for the purpose of traditional securitization, unless the banking organization’sequity capital has increased as a consequence of having received cash in connection with the securitizationAs of March 2015we did not have any deductions of this nature.Supervisory Formula Approach (SFA).If a bank is in a position to obtain or calculateon an ongoing basis(using data no more than 91 days old)all of the parameters needed to perform the SFAcalculation, thenit must use this methodology to calculate thecapitalrequirements for a securitization position. n accordance withthe SFA, RWAs arebased on the capitalrequirements that would apply tothe underlying assets ifthey wereheld directly on our balance sh; this is then adjusted to take account ofthe degree of subordination (i.e., loss absorbance by junior tranches) of a given tranche. The capital requirements that would apply in accordance withthe Basel III Advanced ules to the underlying assets mustbe calculatedseparately for each asset, unless the underlying assets are a homogenous pool of retail exposuresin which case the calculation can be done for the overall pool. The parameters required in order to calculate RWAs in accordance withthe SFA are set out below: Amount of underlying exposure (UE) The EAD of a underlying exposures within the pool Tranche Percentage (TP) Ratio of the amount of the bank’s securitization exposure to the amount of the tranche that contains the securitization exposure. Capital requirement on underlying exposures (Kirb) The AIRB capital requirement if the underlying exposureswere held directly on balance sheet. This requires an assignment of PD and LGD to the underlying exposures. It is calculated as the ratio of i) the sum of the riskbased capital requirements for the underlying exposures plus the expected credit losses of the underlying exposures; to ii) UE. Credit Enhancement Level (L) Ratio of the amount of all securitization exposure subordinated to the tranche that contains the bank’s securitization exposure to UE Thickness of Tranche (T) Ratio of the amount of the tranche that contains the bank ’s securitization exposure to UE N Effective number of exposures in the underlying pool EWALGD Exposure weighted average loss given default of the underlying pool Based on the above inputsthe SFA uses a prescribed regulatoryformula to calculate the capital requirement. It results in a 1250% risk weight for portions of the tranche with subordination level below the Kirb threshold (see definition in the table above) and applies progressively lower RWAs to more senior tranches above the Kirb threshold, subject to a minimumriskweightof 20%��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresSimplified Supervisory Formula Approach (SSFA). The SSFA is allowed only if the information needed to performthe SFA is not available, and only if the data used in the calculationis no morethan 91 calendar daysoldConsistent with the SFA, the SSFA is based on the capital requirements that would apply tothe underlying pool of assets if they were held directly on the balance sheet; this is thenadjustedto take accountthe degree of subordination of a given tranche, and the levelof delinquent exposures in the poolA key difference, however, is that the capital requirementapplicable to the assets in the securitization pool are calculated using the StandardizedCapital Rules, rather than the Basel III Advanced RulesThe SSFAmirrors the SFA in that the capital requirements are lower for senior securitization exposures andhigher for more junior onesThe parameters required in order to calculate RWAs in accordance withtheSSFA areset out below Weighted average capital requirement on underlying exposures (Kg) Weighted average capital requirement of the underlying pool based on the StandardizedCapital Rules Severe delinquency and non - performance (W) Ratio of delinquent exposures in the underlying pool Attachment point (A) Represents the threshold at which credit losses will first be allocated to the exposure Detachment point (D) Represents the threshold at which credit losses of principal allocated to the exposure would result in a total loss of principal Securitization Surcharge (P) Supervisory calibration parameter (0.5 for securitizations and 1.5 for resecuritizations). This parameter results in a capital requirement that ould be 50% or 150% higher thanassets held directly on balance sheet Similar to the SFA, the SSFA results in1,250% riskweight for portions of the tranche with a subordination level below the Kg threshold, and applies progressively lower RWAsto more senior tranches above the Kg threshold, subjecta minimumriskweight of 20%250% Risk WeightIf the securitization is neitherdeductedfrom regulatory capital,norqualifiesfor either SFA or SSFA, a 1250% riskweight is applied. exception to the hierarchyof approaches described above is for securitizationsthat are noncredit OTC derivatives that have a first priority claim on the cash flows from the underlying exposures.Subject to supervisory approval, the RWAs for suchsecuritizationsmaybe equal to the exposure amountExposure AmountThe definition of “exposure amountthat is used for regulatory purposes for banking book securitizations is set out below Exposure Amount by product - Banking Book On BalanceSheet Loans and Securities: arrying value (either fair value or cost) Off BalanceSheet Unfunded commitments: t he notional amount for unfunded commitments adjusted by the appropriate credit conversion factor Credit derivatives: the notional amount for credit derivatives adjusted for applicable collateral after applying theappropriate haircuts Other derivatives: mbased EEPE is used fOTC derivative contracts (except for credit derivatives) ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresThe table below presents theexposure amountand related RWAsof our banking book securitizations, including balancesheet (retained or purchased) and offbalancesheetexposuresbroken out between traditional and synthetic securitizationsby underlying exposure type. Exposureamounts below represent the associated EAD as calculated and defined by the regulatory rulesand are not comparable to securitization measures reported in Note 1Securitization Activities,in Part I, Item 1 “Financial Statements” in our Quarterly Report on Form 10Table 7: SecuritizationExposures and Related RWAs byExposureTypeRepresents counterparty creditrisk charges on trading book OTC derivative transactionsthatfacsecuritization SPEs. See “Market Risk Specific Risk Securitization Positions” for more information on our trading book exposures.The table below presentthe aggregate amount of our banking book securitization exposures further categorized by riskbased capital approach and riskweight bands. Exposure amounts below represent the associated EAD, as calculated and defined by the regulatory rules.Table 8: Securitization Exposures and Related RWAs by Regulatory Capital Approach $ in millions As of March 2015 Exposure Amount (EAD) On - balance - sheet Off - balance - sheet RWA Traditional Traditional Synthetic Total EAD Residential mortgages $ 17 $ - $ - $ 17 $ 23 Commercial mortgages 1,679 236 - 1,915 976 Corporates 673 1, 165 17, 6 89 19, 52 7 5,08 6 Asset - backed and other 2, 241 2, 373 - 4,6 14 1, 576 OTC Derivatives facing SSPEs 1 - - 1,253 1,253 2,676 Total $ 4,610 $ 3, 774 $ 1 8,94 2 $ 27,32 6 $ 10,33 7 $ in millions As of March 2015 Supervisory Formula Approach (SFA) Simplified Supervisory Formula Approach (SSFA) 1,250 percent risk weight Total Exposure Amount RWAs Exposure Amount RWAs Exposure Amount RWAs Exposure Amount RWAs 0% - 25% $ 17,57 4 $ 3,5 09 $ 6,7 89 $ 1,3 60 $ - $ - $ 24,36 3 $ 4,8 69 26% - 100% 41 24 1, 751 1, 234 - - 1, 792 1, 25 8 101% - 250% 2 8 34 601 1,09 9 - - 6 29 1,13 3 251% - 650% 76 22 8 334 1,416 - - 410 1,644 651% - 1,250% 47 4 69 33 313 52 651 132 1,43 3 Total $ 17,76 6 $ 4,26 4 $ 9,50 8 $ 5,42 2 $ 52 $ 651 $ 27,32 6 $ 10,33 7 ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 Disclosuresaccount for a securitization as a sale when we haverelinquished control over the transferred assets. Prior to securitization, account for assets pending transfer at fair value and therefore not typically recognize significant gains or losses upon the transfer of assets.The table below provides theprincipal amountof positions that held in our banking book that have been securitized in the current year, whether or not we have retained a position, by exposure typeThere has been no material new activity in relation to our synthetic securitization hedge transactions in for the three monthsended March 2015The principal amount is presented for the purpose of providing information about the size of our banking book securitization activitieshis amount is not representative of ourrisk of loss.Table 9: Securitization Activity Banking Book $ in millions Three Months Ended March 2015 Commercial mortgages $ 1, 147 Total Activity $ 1, 147 ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresMarket RiskOverviewMarket risk is the risk of loss in the value of our inventory, as well as certain other financial assets and financial liabilities, due to changes in market conditions.Categoriesmarketriskincludethefollowing:Interestraterisk:resultsfromexposureschangesthelevel,slopeandcurvatureyieldcurves,thevolatilitiesinterestrates,mortgageprepaymentspeedsandcreditspreads;Equitypricerisk:resultsfromexposureschangespricesandvolatilitiesindividualequities,basketsequitiesandequityindices;Currencyraterisk:resultsfromexposureschangesspotprices,forwardpricesandvolatilitiescurrencyrates; andCommodity price risk: results from exposures to changes in spot prices, forward prices and volatilities of commodities, such as crude oil, petroleum products, natural gas, electricity, and precious and base metals.Market Risk Management ProcessWe manage our market risk by diversifying exposures, controlling position sizes and establishing economic hedges in related securities or derivatives. This requiresAccurate and timely exposure information incorporating multiple risk metrics;A dynamic limit setting framework; andConstant communication among revenueproducing units, risk managers and senior management.Market Risk Management, which is independent of the revenueproducing units and reports to our chief risk officer, has primary responsibility for assessing, monitoring and managing market risk at the firm. We monitor and control risks through strong firmwide oversight and independent control and support functions across our global businesses.Managers in revenueproducing units are accountable for managing risk within prescribed limits. These managers have indepth knowledge of their positions, markets and the instruments available to hedge their exposures.Mangers in revenueproducing units and Market Risk Management discuss market information, positions and estimated risk and loss scenarios on an ongoing basis.Market Risk Management produces risk measures and monitors them against market risk limits set by our risk committees. These measures reflect an extensive range of scenarios and the results are aggregated at trading desk, business and firmwide levels.For additional information regarding our market risk measuresand risk limits, see “Risk Management and Risk Factors Market Risk Management,” in Part I, Item “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Quarterly Report on Form 10Market Riskeighted setsur covered positions are subject to market risk capital requirements which aredesigned to cover the risk of loss in value of these positions duechanges in market conditions. These capital requirements aredetermined either by applying prescribedrisk weighting factors, or they are based on internal models which are subject to arious qualitative and quantitative parameters. The market risk regulatory capital rules require that a bank holding company obtain prior written agreementfromits regulators before using any internal model to calculate its riskbased capital requirementfor covered positionsRWAs for market risk under the market risk regulatory capitalrules are calculatedusing the following internal models: ValueRisk (VaR), Stressed VaR (SVaR), Incremental risk and Comprehensive risk (which also includes a surcharge). In addition, the Specific risk measure is also used to calculateRWAs for market risk, under the standardized measurement method, for certain securitized and nonsecuritized covered positions by applying riskweighting factors predetermined by regulators, to positions after applicable netting is performed. As defined in the Federal Reserve Board’s regulations, RWAs for market risk are the sum of each of these measures multiplied by 12.5. An overview of each of these measures is provided below. ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresRegulatoryVaRVaR is the potential loss in value ofinventory positions, as well as certain other financial assets and financial liabilities,due to adverse market movements over a defined time horizon with a specified confidence level. TheVaRmodelcapturesrisksincludinginterestrates,equityprices,currencyratesandcommodityprices.such,VaRfacilitatescomparisonacrossportfoliosdifferentriskcharacteristics.VaRalsocapturesthediversificationaggregatedriskthefirmwidelevel.or both risk managementpurposes(positions subject to VaR limits) and regulatory capital calculationsfor covered positions)we use a single VaR modelHowever,VaR used for regulatory capital requirements (egulatory VaRdifferfrom risk management VaR due to different time horizons and confidence levels (10day and 99% for egulatory VaR vs. oneday and 95% for risk management VaR), as well as differences in the scope of positions on which VaR is calculated.In addition, the daily trading net revenuesused to determine risk managementVaR exceptions(i.e.comparing the daily trading net revenues to the VaR measure calculated as of the prior business day) include intraday activity, whereas the Federal Reserve Board’s regulatory capital regulations require that intraday activity beexcluded from daily trading net revenues whencalculatinggulatory VaR exceptionsIntraday activityincludesbid/offer net revenues, which are more likely than not to be positive. accordancewiththemarketriskregulatorycapitalrequirements,evaluatetheaccuracyourVaRmodelthroughdailybacktesting.TheresultsthebacktestingdeterminethesizetheVaRmultiplierusedcomputeRWAs.Thetablebelowpresentsriskcategoryourperiodend,high,lowandmeantheaveragedailyRegulatoryVaR for the period endVaR as of March 2015Average,perthemarketriskregulatorycapitalrequirements,determinedbasedtheaveragedailyRegulatoryVaRovertheprecedingbusinessdays. Table 10: Regulatory VaR As of March 2015 $ in millions Group, Inc. Regulatory VaR $ 348 VaR x Multiplier 1,044 1 RWAs $ 13,050 As of March 2015 Three Months Ended March 2015 High Low Mean Group, Inc. $ 348 $ 348 $ 274 $ 317 Interest rates 221 221 181 202 Equity prices 94 94 82 88 Currency rates 156 156 137 149 Commodity prices 133 137 111 129 Diversification effect 2 $ (256) $ (25 1 ) Regulatory VaR is subject to a regulatory multiplier that is set at a minimum of three (which is the multiplier used in this table) and can be increased up to four, depending upon the number of backtesting exceptions. See “Regulatory VaR Backtesting Results.” This result is further multiplied by 12.5 to convert into RWAs. Diversification effect in the table above represents the difference between total VaR and the sum of the VaRs for the four risk categories. This effect arises because the four market riskcategories are not perfectly correlated. ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresStressed VaR.SVaR is the potential loss in value of inventory positions during a period of significant market stress. SVaR is calculated at a 99% confidence level over a day horizon using market data inputs from a continuous month period of stress. We identify the stressed period by comparing VaR using market data inputs from different historical periods. Thetablebelowpresentperiodend,high,lowandmeantheaverageweeklySVaRfor the three monthsended March 2015Average,perthemarketriskregulatorycapitalrequirements,determinedbasedtheaverageweeklyamountfortheprecedingweeks.Table 11: Stressed VaR As of March 2015 Three Months Ended March 2015 $ in millions Group, Inc. High Low Mean SVaR $ 827 $ 827 $ 778 $ 809 SVaR x Multiplier 2,481 1 RWAs $ 31,013 SVaR is subject to the same regulatory multiplier used for Regulatory VaR and is further multiplied by 12.5 to convert into RWAs.Incremental Risk.Incremental risk is the potential loss valuenonsecuritizedinventorypositionsduethedefaultcreditmigrationissuersfinancialinstrumentsoveroneyeartimehorizon.requiredthemarketriskregulatorycapitalrulesthismeasurecalculated99.9%confidenceleveloveroneyeartimehorizon.usesmultifactormodelassumingconstantlevelrisk.Whenassessingtherisk,takeintoaccountmarketandissuerspecificconcentration,creditquality,liquidityhorizonsandcorrelation of defaultandmigration risk.The liquidityhorizoncalculatedbasedupon thesize ofexposures and thespeedwhichcanreduceriskhedgingunwindingpositions,givenourexperienceduringhistoricalstressperiod,andsubjecttheprescribedregulatoryminimum.Thetablebelowpresentperiodend,high,lowandmeanthemaximumtheaverageweeklyIncrementalriskmeasurethepointtimemeasure.Average,perthemarketriskregulatorycapitalrequirements,determinedbasedtheaverageweeklyamount overtheprecedingweeks. Table 12: Incremental iskIn order to convert the results of Incremental risk into RWAs, it is multiplied by 12.5. As of March 2015 Three Months Ended March 2015 $ in millions Group, Inc. High Low Mean Incremental Risk $ 1,338 1 $ 1,449 $ 1,278 $ 1,346 RWAs $ 16,725 ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresComprehensive Risk.Comprehensiveriskthepotentiallossvalue,duepriceriskanddefaults,withinourcreditcorrelationpositions.creditcorrelationpositiondefinedsecuritizationpositionforwhichallsubstantiallyallthevaluetheunderlyingexposuresbasedthecreditqualitysinglecompanyforwhichtwoway marketexists,indicesbasedon such exposuresforwhichtwowaymarketexists,hedgesthesepositions(whicharetypicallynotsecuritizationpositions).requiredthemarketriskregulatorycapitalrequirements,Comprehensiveriskcomprisesmodelbasedmeasureandsurchargebasedthestandardizedmeasurementmethod.Themodelbasmeasurecalculated99.9%confidenceleveloveroneyeartimehorizonapplyingconstantlevelrisk.Themodelcomprehensivelycoverspricerisksincludingnonlinearpriceeffectsandtakesintoaccountcontractualstructurecashflows,theeffectmultipledefaults,creditspreadrisk,volatilityimpliedcorrelation,recoveryratevolatilityandbasisrisk.Theliquidityhorizonbaseduponourexperienceduringhistoricalstressperiod,subjecttheprescribedregulatoryminimum.Thesurchargethestandardizedspecificriskaddon.Fordetailthecalculationtheaddforsecuritizationpositions,see“SpecificRiskSecuritizationPositions”below,andfordetailthecalculationtheaddforhedgessee“SpecificRiskOtherSpecificRiskPositionsbelow. As of March 2015hadcreditcorrelationpositions,subjecttheComprehensiveriskmeasure,withfairvaluemillion netassetsand$203million netliabilitiesThe table below presentour periodend, high, low and mean of the maximum of the average weeklyComprehensive risk measure or the pointtime measure, inclusive of both modeled and nonmodeled componentsfor the three monthsended March 2015. Average, per the market risk regulatory capital requirements, is determined based on the average weekly amount for the preceding 12 weeks.Table 13: Comprehensive Risk As of March 2015 Three Months Ended March 2015 $ in millions Group, Inc. High Low Mean Comprehensive Risk $ 638 1,2 $ 670 $ 622 $ 636 RWAs $ 7,975 In order to convert the Comprehensive risk measure into RWAs, it is multiplied by 12.5. These results include a surcharge of0.28billionon credit correlation positions.ModelReviewandValidationThemodelsdiscussedabove,whichareuseddetermineRegulatoryVaR,SVaR,IncrementalriskandComprehensiverisk,aresubjectreviewandvalidationourindependentmodelvalidationgroup,whichconsistsquantitativeprofessionalswhoareseparatefrommodeldevelopers.Thisreviewincludes:criticalevaluationthemodel,theoreticalsoundnessandadequacyforintendeduse;Verificationthetestingstrategyutilizedthemodeldevelopersensurethatthemodelfunctions as intended;andVerificationof thesuitabilitythecalculationtechniquesincorporatedthemodel.Thesemodels are regularly reviewed and enhanced in order to incorporate changes in the composition of covered positions, as well as variations in market conditions. Prior to implementing significantchangesourassumptionsand/ormodels,performmodelvalidationandtestruns.Significant changes to our models are reviewed with ourchief risk officer and chief financial officer, and approved by the Firmwide Risk Committee.��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresRegulatoryVaRBacktestingResultsrequiredthemarketriskregulatorycapitalrequirements,we validatetheaccuracyof ourRegulatoryVaR modelsbacktestingtheoutputsuchmodelsagainstthedailypositionallossresults.Theactualnumberexceptions(thatis,thenumberbusinessdaysforwhichthepositional lossesexceedthecorrespondingonedayRegulatoryVaR)overthemostrecentbusinessdaysuseddeterminethesizetheVaR multiplier,whichcould increasefromminimumthree maximumof four, depending onthenumberexceptions.definedthemarketriskregulatorycapitalrequirements,positionalnetrevenuesforanygivendayrepresenttheimpactthatday’spricevariationthevaluepositionsheldtheclosebusinessthepreviousday.consequence,theseresultsexcludecertainrevenuesassociatedwithmarketmakingbusinesses,suchbid/offernetrevenues,whichtheirnaturearemorelikelythannotpositive.addition,positionalnetrevenuesusedourRegulatoryVaRbacktestingrelateonlypositionswhichareincludedRegulatoryVaRand,notedabove,differfrompositions includedourriskmanagementVaR. ThismeasurepositionalnetrevenuesusedevaluatetheperformancetheRegulatoryVaRmodelandnotcomparableouractualdailytradingnetrevenuesee “Market Risk Management” in Part I, Item 2 “Management Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form Our positional losses observed on a single day did not exceed our 99% oneday egulatory VaRduring the three months ended March 2015Our positional losses observed on a single day exceeded our 99% oneday Regulatory VaR on three occasions during the past 12 monthsThere wasno change in the VaR multiplierused to calculate Market RWAsNote that, although a oneday time horizon is usedfor backtesting purposes, a 10day time horizon is used, as described earlier, to determine RWAs associated with Regulatory VaR.The table below presents our 99% oneday Regulatory VaR during the previous 12 months StressTestingStresstestingis methodof determiningthe effect on thefirmvarioushypotheticalstressscenarios.usestresstestingexaminerisksspecificportfolioswellthepotentialimpactsignificantriskexposuresacrossthefirm.usevarietystresstestingtechniquescalculatethepotentiallossfromwiderangemarketmovesourportfolios, including sensitivityanalysis, scenarioanalysis andfirmwidestresstests.For a detailed description of our stress testing practices, see “Risk Management and Risk Factors Market Risk Management Stress Testing” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10 Table 1 4 : Daily Regulatory VaR ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresSpecificRiskSpecificrisktherisklosspositionthatcouldresultfromfactorsotherthanbroadmarketmovementsandincludeseventrisk,defaultriskandidiosyncraticrisk.Thespecificriskaddapplicableforbothsecuritizationpositionsandforcertainnonsecuritizeddebtandequitypositions,supplementthemodelbasedmeasures.Themarketriskregulatorycapitalrequirementsintroducednew standards to assess creditworthiness,in response to DoddFrank Act mandatthat the U.S. federal bank regulatory agenciesremove references to, and prohibit relianceon,externalcreditratingsfromregulationsandsupervisoryguidanceandreplacethemwithappropriatealternativestandardscreditworthiness.Thesealternativemeasurescreditworthiness,whichareuseddetermineappropriateriskweightingfactorswithinthespecificriskcomponentthemarketriskmeasure,areincorporatedthetablebelow. This tablepresentstheRWAsournonmodelbasedspecificriskmeasuresecuritization(excluding credit correlation positions captured by the Comprehensive risk measureandnonsecuritizationpositions.Table 15: Specific Risk $ in millions As of March 2015 Securitization positions $ 44, 235 Other specific risk positions 32,09 2 Total Specific Risk RWAs $ 76, 327 SecuritizationPositions.The“SecuritizationFramework”sectiontherulesusedcalculatetheRWAsforanycovered position that has been identified as a securitization or resecuritization (fordetailed descriptions of the regulatory definition of a securitization and of the hierarchy of approaches used within the Securitization Framework to calculate regulatory capitalrequirements, see “Securitizationin the Banking BookProducts covered e regulatorydefinition of a securitization include mortgagebacked securities (MBS) and other assetbacked securities (ABS), derivatives referencing MBS or ABS, or derivatives referencing indices ofMBSABS,whichareheldinventory.Thepopulationincludespositionspurchasedthesecondarymarket,wellretainedinterestssecuritizationstructuressponsor.Consistentwiththerules,thisnotablyexcludesmortgagebackedpassthroughsecuritiesguaranteedgovernmentsponsoredentities(forexample,FederalNationalMortgageAssociation).The RWAs for trading book securitization positions are calculated by multiplying the exposure amount by the specific riskweighting factors assigned and then multiplying by 12.5. The exposure amount is defined asthe carrying value for securities, or the market value of the effective notional of the instrument or indices underlying derivative positions. The securitization capital requirements are the greater of the capital requirements on the net long or short exposure (incorporating applicable netting), and are capped at the maximum loss that could be incurred on any given transaction.��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresThetable below presentsouraggregatebalancesheetandoffbalancesheettradingbooksecuritizationexposures(excludingcreditcorrelationpositionscapturedtheComprehensiveriskmeasure)underlyingexposuretype.Amounts belowreflectsecuritizationexposures,as definedforregulatorycapitalpurposes andarenotcomparablesecuritizationmeasuresreportedin Note 1Securitization Activities,in Part I, Item 1 “Financial Statements” in our Quarterly Report on Form 10Table 16: Trading Book Securitization Exposures $ in millions As of March 2015 Residential mortgages $ 3,580 Commercial mortgages 2,241 Corporates 1 915 Asset - backed and other 1,721 Total Securitization Exposures 2 $ 8,457 Reflects corporate collateralized debt and loan obligations.Includes securities with a fair value of $6.55billion.Securitization positions, including resecuritizations, are incorporated into our overall risk management approach for financial instruments. For a detailed discussion of our risk management process and practices, see “Risk Management and Risk Factors Market Risk Management” and “Risk Management and Risk Factors Credit Risk Management” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10OtherSpecific Risk Positions.The standard specific risk addon for debt positions ranges from 0.25% to 12%, other than for certain sovereign and supranational positions which have a 0% addon. The addon for sovereigns, public sector entities and depository institutions is based on the Organization for Economic Cooperation and Development country risk classifications of the sovereign and the remaining contractual maturity of the position. The addon for corporate entities that have issued public financial instruments is based on internal assessments of creditworthiness and the remaining contractual maturity of the position. All other types of debt positions are subject to an 8% addon. The standard specific risk addon for equity positions will generally be 8%but this could decrease to 2% for welldiversified portfolios of equities, certain indices, and certain futuresrelated arbitrage strategies. The standard specific risk RWAs for debt and equity positions are calculated by multiplying the exposure amount by the appropriate standard specific risk addon, and then multiplying by 12.5. The exposure amount is defined as the carrying value for securities and loans, or the market value of the effective notional of the instrument or indices underlyingderivative positions. The specific risk capital requirements are capped at the maximum loss that could be incurred on any given transaction. ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresOperational RiskOverviewOperational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Our exposure to operational risk arises from routine processing errors as well as extraordinary incidents, such as major systems failures. Potential types of loss events related to internal and external operational risk include: Clients, products and business practices; Execution, delivery and process management;Business disruption and system failures; Employment practices and workplace safety;Damage to physical assets;Internal fraud; andExternal fraud.maintain a comprehensive control framework designed to provide a wellcontrolled environment to minimize operational risks. The Firmwide Operational Risk Committee, along with the support of regional or entityspecific working groups or committees, provides oversight of the ongoing development and implementation of our operational risk policies and framework. perational Risk Management is a risk management function independent of our revenueproducing units, reports to ourchief risk officer, and is responsible for developing and implementing policies, methodologies and a formalized framework for operational risk management with the goal of minimizing our exposure to operational risk.Operational Risk Management ProcessManaging operational risk requirestimely and accurate information as well as a strong control culture. We seek to manage our operational risk through:The training, supervision and development of our people; The active participation of senior management in identifying and mitigating key operational risks across the firm;Independent control and support functions that monitor operational risk on a daily basis andimplementation ofextensive policies and proceduresand controls designed to prevent the occurrence of operational risk events;Proactive communication between our revenueproducing units and our independent control and support functions; andnetwork of systems throughout the firm to facilitate the collection of data used to analyze and assess our operational risk exposure.We combine topdown and bottomup approaches to manage and measure operational risk. From a topdown perspective, oursenior management assesses firmwide and business level operational risk profiles. Froma bottomup perspective, revenueproducing units and independent control and support functions are responsible for risk management on a dayday basis, including identifying, mitigating, and escalating operational risks to senior management. Our operational risk framework is in part designed to comply with the operational risk measurement rules underthe Revised Capital Frameworkand has evolved based on the changing needs of our businesses and regulatory guidance. Our framework comprises the following practices: Risk identification and reporting; Risk measurement; and Risk monitoring. Internal Audit performs aindependentreview of our operational risk framework, including our key controls, processes and applications, on an annual basis to assethe effectiveness of our frameworkRisk Identification and ReportingThe core of our operational risk management framework is risk identification and reporting. We have a comprehensive data collection process, including firmwide policies and procedures, for operational risk events. We have established policies that require managers in our revenueproducing units and our independent control and support functions to escalate operational risk events. When operational risk events are identified, our policies require that the events be documented and analyzed to determine whether changes are required in oursystems and/or processes to further mitigate the risk of future events.��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresIn addition, our firmwide systems capture internal operational risk event data, key metrics such as transaction volumes, and statistical information such as performance trends. We use an internallydeveloped operational risk management application to aggregate and organize this information. Managers from both revenueproducing units and independent control and support functions analyze the information to evaluate operational risk exposures and identify businesses, activities or products with heightened levels of operational risk. We also provide periodic operational risk reports to senior management, risk committees and the Board.Risk MeasurementWe measure ouroperational risk exposure over a twelvemonth time horizon using both statistical modeling and scenario analyses, which involve qualitative assessments of the potential frequency and extent of potential operational risk losses, for each of ourbusinesses.Operational risk measurement incorporates qualitative and quantitative assessments of factors including:Internal and external operational risk event data; Assessments of ourinternal controls;Evaluations of the complexity of ourbusiness activities; he degree of and potential for automation in ourprocesses;New product information;The legal and regulatory environment;Changes in the markets for ourproducts and services, including the diversity and sophistication of ourcustomers and counterparties;andThe liquidity of the capital markets and the reliability of the infrastructure that supports the capital markets. The results from these scenario analyses are used to monitor changes in operational risk and to determine business lines that may have heightened exposure to operational risk. These analyses ultimately are used in the determination of the appropriate levelof operational risk capital to hold.Regulatory Capital Measurement We havebeen given permission by our supervisors to compute perational RWAs accordance with theAdvanced Measurement Approach (AMA)of the Revised Capital Framework.In accordancewiththe AMA, we employ a ScenarioBased Approach (SBA) model that incorporates qualitative and quantitative data elements. Scenario analysis is conducted across a matrix of businesses and centralized corporate functions throughout the firm and across their applicableoperational risk categories: clients, products and business practices;execution, delivery and process management; business disruption and system failures; employment practices and workplace safety; damage to physical assets; internal fraud; andexternal fraud. Each intersection of a business or corporate function and a risk category is referred to as a risk class. For each risk class, internal loss data, external data, Business Environment and Internal Control Factors and judgment are used todevelop and substantiateestimates of the likelyfrequency and severity of operational risk losses over a twelvemonth time horizon. These estimates are used as inputs to produce two separate distributions (one for frequency, one for severity) which are hen combined for each risk class. The results for all risk classes are aggregatedtaking into consideration the possibility of correlations between them. The SBA model calculates operational risk capital requirements for the firm at the 99.9percentile confidence level. or a subset of risksin ouroperational risk capital determinationwe incorporate insurance as a risk transfer mechanismcontinue to seek opportunities to use compliant insurance, where appropriate.Risk MonitoringWe evaluate changes in the operational risk profile ofthe firm andourbusinesses, including changes in business mix or jurisdictions in which operate, by monitoring the factorsnoted aboveat a firmwide level. We haveboth preventiveand detectiveinternal controls, which are designed to reduce the frequency and severity of operational risk losses and the probability of operational risk events. We monitor the results of assessments and independent internal audits of these internal controls. Model Review and ValidationThe SBA model discussed above is subject to review and validation by our independent model validation group, which consists of quantitatprofessionals whoare separate from model developers. This review includes:critical evaluation of the model, its theoreticalsoundness and adequacy for intended use; Verification of the testing strategy utilized by the model developers to ensure that the model functions as intended; andVerification of the suitability of the calculation techniques incorporated in the model.��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresInterest Rate SensitivityInterest Rate Risk in the Trading BookOurexposure to interest rate risk on our trading book positionsarises primarily from inventory held to support client marketmaking activities. Our inventory is accounted for at fair valueandherefore our inventory balances fluctuate not only due to changes in inventory levels driven by client demand, but also because of changes in inventory prices. For additional information regarding interest rate risk as a component of Market risksee “Risk Management and Risk Factors Market Risk Management” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10Interest Rate Risk in the Banking BookOurbanking book positions are primarily floating rate or the interest rate risk is hedged. These positionsare principally funded with floating rate liabilities. Consequently, our banking book activities have immaterialexposure to movements in interest rates.For information regarding ssetliability managementsee Risk Management and Risk Factors Liquidity Risk Management” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10Common Equity and FixedRate Liabilitiesalso monitorthe implied interest rate sensitivity of our capital base.Although our banking book and trading book assets are principally fundedby floating rate liabilities, they are also partially funded by ourcommon equityand, to some degree, by fixedrate liabilities. Because neither common equitynor fixedrate liabilitiesgive rise to increased interest expense when rates rise, anenvironmentin which interest rates are rising will tend to have a positive effect on netrevenuesWe run a hypothetical scenarioon a quarterly basiswhichwe assess the impact of an instantaneousrise in interest rates of100 basis points and assume that thesize and composition of ourbalance sheet remains constantAs of March 2015, we estimate that this rise in interest rates could result in a positive impact of approximately $billionto our net revenues over a oneyear period. This hypothetical scenario does not reflectour expectations regarding the movement of interest rates in the near termthermore, the levelof clientand other market activity is generally the primary driver of our netrevenues, and changes to such activity levels as a consequence of a rise in interest rates are not reflected inthis hypothetical scenario.We have not estimated the effect of a 100 basis point decrease in interest rates, since we do not consider such a reduction to be realistic��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresSupplementary Leverage RatioThe Revised Capital Framework introduces a supplementary leverage ratio for Advanced approachbanking organizations. Under amendments to the RevisedCapital Framework, the U.S. federal bank regulatoryagencies approved a final rule that implements thesupplementary leverage ratio aligned with the definition ofleverage established by the Basel Committee. Thesupplementary leverage ratio compares Tier 1 capital to ameasure of leverage exposure, defined as the sum of ourquarterly average assets less certain deductions plus certainoffbalancesheet exposures, including a measure ofderivatives exposures and commitments. The RevisedCapital Framework requires a minimum supplementaryleverage ratio of 5.0% (comprised of the minimumrequirement of 3.0% and a 2.0% buffer) for U.S. banksdeemed to be Global SystemicallyImportant BanksSIBs, effective on January 1, 2018. As of March 2015, our supplementaryleverage ratio on a fully phasedin basis was 5.. For additional information on our supplementary leverage ratio on a fully phasedin basis, see “Equity Capital Management and RegulatoryCapitalSupplementary Leverage Ratio,” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10The table below presents our supplementaryleverage ratio using transitional Tier 1 capital. For additional detail on our transitional Tier 1 capitalsee “Regulatory CapitalAlso presented in the table arethe components of our total leverage exosurethesecomponents arequarterly averages. Tables 18, 19 and 20 show the components of the adjustments for derivative exposures, repostyle transactions and other offbalancesheet exposures, respectivelyTable 17: Supplementary Leverage Ratio Components $ in millions Three Month s Ended March 2015 Average consolidated assets 1 $ 876,748 A mounts deducted from Tier 1 capital (4,895) Total average a djusted assets 871,853 Adjustment for: Derivative exposures 461,207 Repo - style transactions 49,217 Other off - balance - sheet exposures 62,189 Total leverage exposure 1,444,466 Tier 1 capital 80,047 S upplementary leverage ratio using transitional Tier 1 capital $ 5.5% 1. Represents quarterly average total assets, which are a component of the calculation of the supplementary leverage ratio. Total consolidated assets were $865 billion as reported in our Quarterly Report on Form 10��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresThe table below presents the components of total derivative exposureand a reconciliation to “adjustment for derivative exposures” shown in Table 17.Table 1Adjustment for Derivative Exposures $ in millions Three Month s Ended March 2015 On - balance - sheet average derivative receivable s $ 68,671 Add - on for derivative PFE and gross - up for certain cash collateral 1 3 75,851 Effective notional principal amount of sold credit protection 1,163,229 Effective notional principal amount offsets and PFE adjustments for sold credit protection (1,077,87 3 ) Total derivative exposures 529,878 On - b alance - sheet average d erivative r eceivable s (68,671) Adjustment for d erivative e xposures $ 461,207 Addon amounts for derivative potential future exposure (PFE) are calculatedin accordance with the notionalbased Current Exposure Methodology (CEM).Excludes CCP legof clientcleared transactions.The table below presents the gross and net exposure for repostyle transactionsand a reconciliation to “adjustment for repostyle transactionsshown in Table 17.Table 1Adjustment for Repostyle Transactions $ in millions Three Month s Ended March 2015 Gross e xposure for r epo - style transactions 1 $ 372,333 Amounts netted under netting agreements (24,998) Total Exposure for r epo - style transactions 347,335 On - balance - sheet average repo - style transactions (298,118) Adjustment for repo - style transactions $ 49,217 ncludes balancesheet average repostyle transactionscounterparty credit risk on repostyle transactions and exposure for repostyle transactions where the firm acts as an agentThe table below presents the other offbalancesheet components of total leverage exposure.Table Adjustment for Other Offbalanceheet Exposures $ in millions Three Month s Ended March 2015 Gross notional off - balance - sheet exposures $ 146,266 Adjustment for conversion to credit equivalent amounts 1 (84,077) Adjustment for o ff - balance - sheet exposures $ 62,189 Credit equivalent amounts calculated using conversion factors in accordance with the Standardized capital rulesThis supplementary leverage ratio is based on our current interpretation and understanding of the U.S. federal bank regulatory agencies’ final rule and may evolve as we discuss its interpretation and application with our regulators. ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresCautionary Note on ForwardLooking Statementhaveincludedincorporatedreferencethesedisclosures,andfromtimetimeourmanagementmaymake,statementsthatmayconstitute“forwardlookingstatements”within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.Forwardlookingstatementsarenothistoricalfacts,butinsteadrepresentonlyourbeliefsregardingfutureevents,manywhich,theirnature,areinherentlyuncertainandoutsideourcontrol.Thesestatementsincludestatementsotherthanhistoricalinformationstatementscurrentconditionandmayrelateourfutureplansandobjectivesandresults,amongotherthings,andmayalsoinclude statements abouttheeffectchanges tothe capitalandleveragerulesapplicablebankholdingcompanies,theimpacttheDoddFrankActourbusinessesandoperations,wellstatementsabouttheobjectivesandeffectivenessourriskmanagementandliquiditypolicies,statementsabouttrendsgrowthopportunitiesforourbusinesses,andstatementsabout ourfuturestatus, activitiesreportingunderU.S.nonU.S.bankingandfinancialregulation.We have provided in this report information regarding interest rate sensitivityCertainstatements with respect to potential net revenue impact from ahypothetical change ininterest rates on our banking book and trading book assets and common equity and fixedrate liabilities are forwardlooking statements that are based on thecurrent composition of our balance sheetand do not addressany adverse impacts on our businesses that could be caused by a change in interest rateshe estimated impact to our net revenuesnot reflect our expectations regarding movement of interest rates in the near termor any estimated business revenuethat might be generated in a changing interest rate environment We have provided in this report information regarding oursupplementary leverage ratio on a fully phasedin basis. Thestatements with respect to this ratio are forwardlookingstatements, based on our current interpretation, expectationsand understandings of the relevant regulatory rulesand guidance, and reflect significant assumptionsconcerning the treatment of various assets and liabilitiesand tmanner in which the ratio is calculated. As aresult, the methods used to calculate this ratio maydiffer, possibly materially, from that used incalculating the firm’s ratio for any future disclosures. Theultimate method of calculating the ratio will depend on,among other things, implementation guidance from the U.S. federal bank regulatoryagencies and the development of market practices andstandards.It is possible that ouractuaresultsandfinancialconditionmaydiffer,possiblymaterially,fromtheanticipatedresultsandfinancialconditionindicatedtheseforwardlookingstatements.Importantfactorsthatcouldcauseouractualresultsandfinancialconditiondifferfromthoseindicatedtheforwardlookingstatementsinclude,amongothers, those discussed under “Risk Factors” in Part I, Item 1A the 2014Form��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresGlossay of Risk Termsdvanced nternal atingsased (AIRB)he AIRB approachof the Revised Capital Framework provides a methodology for bankssubject to supervisory approvalto use various risk parameters to determinethe EAD and riskweights for regulatory capital calculations. Other risk parameters used in the determination of risk weights are eachcounterparty’s Probability of Default (PD), Loss Given Default (LGD) and the effective maturity of the trade or portfolio of trades.dvanced easurement pproach (AMA)The AMA of the Revised Capital Framework provides a methodology for bank to estimate capital requirements for Operational Risk, subject to meeting a range of qualitative and quantitative data requirements, and to supervisory approval. The AMA establishes requirements for a bank’s operational risk management processes, data and assessment systems, and quantification systems.Central Counterparty (CCP). A counterparty such as a clearing house that facilitates trades between counterpartiesComprehensiveRisk.Thepotentiallossvalue,duepriceriskanddefaults,withinourcreditcorrelationpositions.Comprehensiveriskcomprisesmodeledmeasurewhichcalculated99.9%confidenceleveloveroneyeartimehorizonplussurchargewhichthestandardizedspecificriskaddon.CreditCorrelationPositionsecuritizationpositionforwhichallsubstantiallyallthevaluetheunderlyingexposuresbasedthecreditqualitysinglecompanyforwhichtwowaymarketexists,indicesbasedsuchexposuresforwhichtwowaymarketexists,hedgesthesepositions(whicharetypicallynotsecuritizationpositions).CreditRisk.Thepotentialforlossduethedefaultdeteriorationcreditqualitycounterparty(e.g.,OTC derivativescounterpartyborrower)issuersecuritiesotherinstrumentswe hold. Current Exposure Methodology(CEM)alculation used to measurederivative current and potential future exposure. The potential future exposure is calculated using static conversion factors applied to gross notional balancesand incorporatepartial netting. The conversion factors are based on broad product type, and for some products on maturity bucket. Default. A default is considered to have occurred when either or both of the two following events have taken place: (i) consider that the obligor is unlikely to pay its credit obligations to us in full; or (ii) the obligor has defaulted on a payment and/or is past due more than 90 days on any material Wholesale credit obligation180 days on residential mortgage obligations or 120 days on other retail obligationsDefaultRisk.Therisklosspositionthatcouldresultfrom failure obligormaketimelypayments principalinterestdebtobligation,andtherisklossthatcouldresultfrombankruptcy,insolvency,similarproceedings.Effective Expected Positive Exposure(EEPE)The timeweighted average of nondeclining positive credit exposure over the EE simulationEEPE is used in accordance withthe IMM as the exposure measure that is then risk weighted to determine counterparty risk capital requirements.EventRisk.Therisklossequityhybridequitypositionsresultfinancialevent,suchtheannouncementoccurrencecompanymerger,acquisition,spinoff,dissolution.Expected Exposure (EE)The expected value of the probability distribution of nonnegative credit risk exposures to a counterparty at any specified future date before the maturity date of the longest term transaction in a netting set. ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresExposure at Default (EAD)Theexposure amount that is risk weighted for regulatory capital calculations. or onbalancesheet assets, such as receivables and cashEAD generally based on the balance sheet value. For the calculation of EAD for offbalancesheet exposures, including commitments and guarantees, aequivalent exposure amount is calculated based on thenotional amount of each transaction multiplied by a credit conversion factor designed to estimate the net additions to funded exposures that would be likely to occur over a oneyear horizon, assuming theobligor were to default. Forsubstantially allof the counterparty credit risk arising from OTC derivatives and securities financing transactions, internal models calculate the distribution of exposure upon with the EAD calculation is based.lobal Systemically Important Banks (GSIBOf the 75 largest global banks as measured by the SLR exposure measure, those banks that are deemed to be systemically important by the Basel Committee. Banks are measured by size, interconnectedness, complexity, substitutability, and crossjurisdictional activity. GSIBs are subject to more stringentsupervisory and regulatory requirements, including higher minimum riskbased capital requirements and higher minimum supplementary leverage ratiorequirements, among others.IdiosyncraticRisk.Therisklossthevaluepositionthatarisesfromchangesriskfactorsuniquethatposition.IncrementalRisk.Thepotentiallossvaluenonsecuritizedinventorypositionsduethedefaultcreditmigrationissuersfinancialinstruments over oneyeartimehorizon.Thismeasurecalculated99.9%confidenceleveloveryear time horizonusingmultifactormodel.nternal odels ethodology(IMM)The IMM of the Revised Capital Framework establishes a methodology for banks to use their internal models to estimate exposurearising from OTC derivatives, securities financing transactions, and eligible marginloans, subject to qualitative and quantitative requirements and supervisory approvaloss iven efault (LGD)An estimate of the economic loss rate if a default occurs during economic downturn conditions.MarketRisk.Theriskof loss thevalueourinventory, as well as certain other financial assets and financial liabilities,duechangesmarketconditionsOperationalRisk.Therisklossresultingfrominadequatefailedinternalprocesses,peopleandsystems orfromexternalevents. robability of efault (PD)Estimate of the probability that an obligor will default over a oneyear horizon. RegulatoryValueRisk(VaR).Thepotentiallossvaluecoveredpositionsdueadversemarketmovementsoverdaytimehorizonwith99%confidencelevel.RegulatoryVaRBacktesting.ComparisondailypositionallossresultstheRegulatoryVaRmeasurecalculatedthepriorbusinessday.ResecuritizationPosition.Representsoffbalancesheettransactionwhichonemoretheunderlyingexposuressecuritizationpositionexposurethatdirectlyindirectlyreferencessecuritizationexposure.RetailExposureesidential mortgage exposures, qualifying revolvingexposures, orother retail exposuresthat are managed as part of a segment of exposures with homogeneous risk characteristics, not on an individual exposure basis.SecuritizationPosition.Representsoffbalancesheettransactionwhichallportionthecreditriskonemoreunderlyingexposures transferredonemorethirdparties;thecreditriskassociatedwiththeunderlyingexposureshasbeenseparatedintoleasttwotranches,reflectingdifferentlevelsseniority; the performance of the securitization exposuresdependentupontheperformancetheunderlyingexposures;allsubstantiallyalltheunderlyingexposuresarefinancialexposures;andtheunderlyingexposureownershipsubjectcertainownershipcriteriaprescribedtheregulatoryrules. ��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 DisclosuresSimplified Supervisory Formula Approach (SSFA). Calculation method used in the Securitization Frameworkunder which RWAs are based on the capital requirements that would apply to the underlying pool of assets if they were held directly on the balance sheet; this is then adjusted to take account for the degree of subordination of a given tranche. The capitalrequirement applicable to the assets in the securitization pool are calculated using the general riskbased requirements (i.e. the StandardizedCapital Rules), rather than the Basel III Advanced Rules. The SSFA is allowed only if the information needed touse the SFA is not available, and only if the data used in the calculation is no more than 91 calendar days old.SpecificRisk.Therisklosspositionthatcouldresultfromfactorsotherthanbroadmarketmovementsandincludeseventrisk,defaultriskandidiosyncratic risk. The specific risk addon is applicable for both securitization positions and for certain nonsecuritized debt and equity positions, to supplement the modelbased measures.StressTesting.Stresstestingmethoddeterminingtheeffectthefirmvarioushypotheticalstressscenarios.StressedVaR(SVaR).Thepotentiallossvalueinventorypositionsduringperiodsignificantmarketstress.SVaRcalculatedconfidenceleveloverdayhorizonusingmarketdatainputsfromcontinuousmonthperiodstress.Supervisory Formula Approach (SFA)Calculation methodology usedthe Securitization Framework under whichRWAs are based onthe capital requirements that would apply to the underlying pool of assets if they were held directly on our balance sheet; this is then adjusted to take account of the degree of subordination (i.e. loss absorbance by junior tranches) of a given tranche.Synthetic SecuritizationDefined in the Revised Capital Frameworka transaction in which all or some of the following criteria are met; all or a portion of the credit risk of the underlying exposures is transferred to a third party through the use of credit derivatives or guarantees; credit risk associated with the underlying exposures has been separated into at least two tranches reflecting different levels of seniority;the performance of the securitization exposures dependon the performance of the underlying exposures; and, all substantiallyall of the underlying exposures are financial exposures.Traditional SecuritizationDefined in the Revised Capital Framework as a transaction which meets various criteria including that all or a portion of the credit risk of underlying exposures is transferred to a third party other than through the use of credit derivatives or guarantees; the credit risk associated with the underlying exposures has been separated into at least two tranches reflectindifferent levels of seniority;the performance of the securitization exposures dependon the performance of the underlying exposures; and, all or substantially all of the underlying exposures are financial exposures.ValueRisk(VaR).Thepotentiallossvalueinventorypositions, as well as certain other financial assets and financial liabilities,dueadversemarketmovementsoverdefinedtimehorizonwithspecifiedconfidencelevel.RiskmanagementVaRcalculatedconfidenceleveloveronedayhorizon. Wholesale ExposureA term used in the Revised Capital Framework to refer collectively to credit exposures to companies, sovereigns or government entities (other than securitization, retail or equity exposures).��March 2015| Pillar 3 Disclosures ��THE GOLDMAN SACHS GROUP, INC.Pillar 3 Disclosures Index of References Category Description Pillar 3 Reportpage reference March 201 5 Form 10 page reference Scope of Application Basis of Consolidation 4 8 Restrictions on the Transfer of Funds or Regulatory Capital Within the Firm 4 83 Capital Structure Terms and Conditions of Capital Instruments 8 65 - 66, 73 - 74 Capital Components 7 78 - 79 Capital Adequacy Capital Management 5 122 - 128 Basel III Advanced Transitional Capital Ratios 6 78 - 79 Basel III Advanced Transitional Risk - Weighted Assets 9 80 Credit Risk: GeneralDisclosures Credit Risk Management Overview and Credit Risk Management Process 10 152 - 153 Impaired Loans and Loans on Non - Accrual Status, and Allowance for Losses on Loans and Lending Commitments 11 48 - 49 Credit Risk: Internal Ratings Based Approach and Counterparty Credit Risk Parameter Definition, Estimation Methods, and Governance and Validation of Risk Parameters 12, 14 - Credit Risk Wholesale Exposures by PD Band 13 - Credit Risk Exposures including Derivative and Securities Financing Transaction Exposures 11, 13 27, 49 - 53 , 154 - 159 Credit Derivatives 15 37 - 38 Credit Risk Mitigation Counterparty Netting and Collateral Management 15 11, 154 Investing & Lending Exposures Covered by Credit Derivatives 15 - Securitizations in the Banking Book Overview, Activity and Objectives 20 - 21 - Securitization Exposures and Risk - Weighted Assets 23 - Current Year Securitization Activity 24 - Market Risk Market Risk Management Overview 25 146 Regulatory VaR, Stressed VaR, Incremental Risk, and Comprehensive Risk 26 - 28 77, 80 Model Review and Validation 28 148 Regulatory VaR Backtesting Results 29 77 Stress Testing 29 147 - 148 Operational Risk Operational Risk Management Overview 32 160 Advanced Measurement Approach 33 77 Model Review and Validation 33 - Equity Exposures in the Banking Book Overview and Risk Management 17 - Equity Exposures by Risk Weight 19 - Interest Rate Risk in the Banking Book Interest Rate Sensitivity 34 - Net Revenue Sensitivity to Rate Shocks 34 - Liquidity Risk Management Liquidity Risk - 139 - 145 Supplementary Leverage Ratio Supplementary Leverage Ratio 35 - 36 125 - 126 ��March 2015| Pillar 3 Disclosures December 2012 | Pillar 3 Disclosures PILLAR 3 DISCLOSURES T he Goldman Sachs Group, Inc. PILLAR 3 DISCLOSURES December 2012 | Pillar 3 Disclosures PILLAR 3 DISCLOSURES The Goldman Sachs Group, Inc. PILLAR 3 DISCLOSURES For the period ended March 31, 2015