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The Goldman Sachs Group, Inc.

2017

Annual Report

The Goldman Sachs Business Principles

Our clients interests always come fi rst.Our experience shows that if we serve our clients well, our own success will follow.

Our assets are our people, capital and reputation.If any of these is ever diminished, the last is the most diffi cult to restore. We are dedicated to complying fully with the letter and spirit of the laws, rules and ethical principles that govern us. Our continued success depends upon unswerving adherence to this standard.

Our goal is to provide superior returns to our shareholders.Profi tability is critical to achieving superior returns, building our capital, and attracting and keeping our best people. Signifi cant employee stock ownership aligns the interests of our employees and our shareholders.

We take great pride in the professional quality of our work.We have an uncompromising determination to achieve excellence in everything we undertake. Though we may be involved in a wide variety and heavy volume of activity, we would, if it came to a choice, rather be best than biggest.

We stress creativity and imagination in everything we do.While recognizing that the old way may still be the best way, we constantly strive to fi nd a better solution to a clients problems. We pride ourselves on having pioneered many of the practices and techniques that have become standard in the industry.

We make an unusual effort to identify and recruit the very best person for every job.Although our activities are measured in billions of dollars, we select our people one by one. In a service business, we know that without the best people, we cannot be the best fi rm.

We offer our people the opportunity to move ahead more rapidly than is possible at most other places.Advancement depends on merit and we have yet to fi nd the limits to the responsibility our best people are able to assume. For us to be successful, our men and women must refl ect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional; it is what we must be.

We stress teamwork in everything we do.While individual creativity is always encouraged, we have found that team effort often produces the best results. We have no room for those who put their personal interests ahead of the interests of the fi rm and its clients.

The dedication of our people to the fi rm and the intense effort they give their jobs are greater than one fi nds in most other organizations.We think that this is an important part of our success.

We consider our size an asset that we try hard to preserve.We want to be big enough to undertake the largest project that any of our clients could contemplate, yet small enough to maintain the loyalty, the intimacy and the esprit de corps that we all treasure and that contribute greatly to our success.

We constantly strive to anticipate the rapidly changing needs of our clients and to develop new services to meet those needs.We know that the world of fi nance will not stand still and that complacency can lead to extinction.

We regularly receive confi dential information as part of our normal client relationships.To breach a confi dence or to use confi dential information improperly or carelessly would be unthinkable.

Our business is highly competitive, and we aggressively seek to expand our client relationships.However, we must always be fair competitors and must never denigrate other fi rms.

Integrity and honesty are at the heart of our business.We expect our people to maintain high ethical standards in everything they do, both in their work for the fi rm and in their personal lives.

Goldman Sachs 2017 Annual Report 1

For Goldman Sachs, generally higher asset prices and tighter credit spreads were supportive of mergers and underwriting as well as investing and lending activities. At the same time, low levels of volatility served as a headwind for our market-making businesses.

The diversity of our net revenue mix was instrumental in our performance for the year, with three of our four segments producing solid revenue growth leading to an overall increase in our net revenues. In 2017, we generated net revenues of $32.1 billion, a five percent increase over 2016. During 2017, the Tax Cuts and Jobs Act (U.S. Tax Legislation) was enacted, resulting in a $4.4 billion one-time estimated income tax expense. Excluding this expense, net earnings applicable to common shareholders grew 14 percent to $8.1 billion, diluted earnings per common share of $19.76 were 21 percent higher and our return on average common shareholders equity (ROE) was 10.8 percent.1

We have delivered double-digit ROE in five out of the last six years, and for that sixth year, our ROE was 9.4 percent.2 While we may not have a contract to deliver double-digit returns in every possible circumstance, our focus and intensity, including the way we manage expenses, demonstrate the importance we attach to shareholder returns.

Inflection PointsThis past year represented several points of inflection for our business and the industry. First, we appear to be moving from an environment of generally lower economic growth to one with stronger global growth and tighter labor markets. Second, central banks are shifting away from extraordinarily accommodative monetary policies policies which have dampened market volatility to, generally, more normal approaches. And third, we may be transitioning from an intense period of increasing layers of regulation to a focus on rationalizing redundancies and assessing costs and benefits.

Against this backdrop, we are focusing our energy on earnings growth in particular, growth from consistent investments in our franchise; growth by broadening our client and product footprint; and growth through new initiatives where we have not previously competed. Through it all, we assess opportunities through a framework that responds to a clear client need, leverages the firms core competencies including risk management and advice, and provides attractive, long-term shareholder returns.

Throughout most of 2017, the global economy generally expanded, reflecting growth in both developed and emerging market economies. In the United States, the economic recovery continued into its ninth year as the labor market steadily improved. Euro area economies strengthened even as measures of inflation remained subdued. In Asia, Japan experienced solid growth, boosted by the strength of its exports, while China grew robustly, in part due to the global recovery and the success of past policy changes.

Fellow Shareholders:

1 Including this expense, net earnings applicable to common shareholders were $3.7 billion, diluted earnings per common share were $9.01 and ROE was 4.9 percent.

2 Excludes the one-time charge arising out of the U.S. Tax Legislation in 2017 and the settlement with the Residential Mortgage-Backed Securities Working Group of the U.S. Financial Fraud Enforcement Task Force in 2015.

2 Goldman Sachs 2017 Annual Report

Letter to Shareholders

To that end, in September 2017, we laid out a $5 billion net revenue growth plan over the next three years. While the plan includes contributions from each of our businesses, this is not the limit of our ambitions. Importantly, these strategic initiatives are not dependent on any improvement in the current operating environment. That said, broader economic trends, market conditions and client conviction appear to be more favorable.

In this years letter to our shareholders, we provide an overview of the progress we are making on our strategic growth initiatives across our major businesses. Underpinning these initiatives are significant investments in engineering, which are critical to driving the expansion of our client franchise. Our history of commitment to investing in technology has created a competitive advantage and is at the center of our efforts to enhance the client experience and improve operating efficiency and scale. We conclude the letter with some thoughts on the year ahead.

Lloyd C. Blankfein Chairman and Chief Executive Officer (left)

David M. Solomon President and Chief Operating Officer (right)


Our Focus on Growth

Investment BankingWe continue to have the preeminent global franchise in investment banking. In 2017, the business generated its second-highest net revenues since the firms initial public offering in 1999, driven by the deep relationships that we have built with more than 8,000 clients over many decades. We ended the year ranked first in worldwide announced and completed mergers and acquisitions (M&A), and also ranked first in worldwide equity and equity-related offerings and common stock offerings.

To grow from here, we are increasing our coverage universe by approximately 1,000 companies, focusing on both private and public companies where we have significant room to build relationships. Of the new target clients, we have begun covering over 30 percent and expect to add the remainder in the next 12 to 18 months.

To put this opportunity into perspective, our announced M&A volume market share on transaction sizes greater than $5 billion was approximately 50 percent in 2017. However, we had just over 10 percent share on transaction sizes of less than $5 billion. These transactions tend to have fewer advisors and provide substantial financing opportunities.

We are also expanding our presence in North America, deploying more senior coverage bankers in major cities like Atlanta, Dallas, Seattle and Toronto. We see this as an important opportunity to deepen our client coverage in certain cities that are increasingly important hubs of corporate activity. As a result of all of our client coverage efforts, we have seen more than 75 new mandates across a variety of industry groups.

Another reason for our confidence in Investment Bankings growth is the success we have had in debt underwriting. We identified debt underwriting as a strategic priority five years ago, and in 2017, we produced nearly $3 billion of net revenues more than double our average from 2009 to 2011.

Lastly, China continues to represent a larger portion of the global economy. Today, more than 20 percent of the Fortune Global 500 companies are Chinese. In 2017, we were ranked first in equity and equity-related offerings among international banks in the region, and we are confident our strong footprint positions us well to continue to capture opportunities created by Chinas growth.

Institutional Client ServicesInstitutional Client Services includes some of our most dynamic businesses, and we manage the resources in these businesses in the context of the operating environment. This has been particularly true in Fixed Income, Currency and Commodities Client Execution (FICC).

FICC. In the midst of industry-wide revenues falling by roughly 50 percent from their peak in 2009, we managed FICC resources down significantly. We took these actions because the opportunities in FICC had declined. This was certainly due to secular changes, but it also reflected cyclical dynamics as well.

Today the trajectory of the global economy appears to be moving towards a firmer footing. In this context, we dont believe it is wise strategically to forgo the potential upside in this business moving forward. In fact, we have recently deployed more resources given the increasingly attractive opportunity set.

With respect to our execution and performance in 2017, our performance in FICC was weak in the context of our commitment to the business. In response, we undertook a comprehensive and detailed review to identify how we could improve.

Our franchise has historically been very focused on active investor clients, structured trades and derivatives. As a consequence, we underinvested in cash products, which led to lower penetration with certain large asset managers and banks.

To address these issues, we are broadening our bank and asset manager client coverage and are focused on growing our corporate coverage. We have also diversified



our product footprint by enhancing our cash and flow trading capabilities. And we are holding our people accountable for delivering top three client rankings.

Our efforts are showing early signs of success, as we drive market share increases across our businesses. We are confident that these efforts will manifest themselves to all of our FICC clients over time.

A key differentiator supporting our overall growth will be employing our engineering capabilities to provide clients with best execution, content and analytics. For example, we have consolidated our automated pricing and risk management of electronic trading across Equities, Rates, Currencies and Commodities into a cohesive unit to drive efficiencies for our clients and the firm.

In summary, we are executing on our strategy in FICC to invest in areas where we see the greatest opportunity to meet client needs, grow market share and, if need be, reduce capital and expenses to size the business commensurate with client activity.

Equities. In Equities, we are making a multiyear investment in people, platforms and products to grow our leading franchise in both execution and financing.

In the last few years, we have made several strategic hires to enhance our electronic execution offering, including a new chief data officer for the firm, a global head of electronic execution services and a chief technology officer of electronic trading. In 2017, we added about 100 people focused on electronic execution, including more than 70 engineers.

In terms of platforms, two years ago we acquired a high-performance trading platform from Pantor Engineering AB, which we have now rolled out to our European clients. Today, our smart router capabilities put us among the top three providers of the fastest, most comprehensive access to developed European markets.

At the end of 2017, we had an important validation of our electronic capabilities, announcing that we would become the exclusive execution provider for Bloombergs Tradebook. As a result, we are bringing on more than 1,300 new clients from which we expect a revenue run rate of over $100 million.

These and other investments support our initiative to serve quantitative-focused investors. This is an important and growing segment of the market, where we provide both execution and financing services. From these and other investments, we expect to increase our market share in electronic execution, which will benefit all of our Equities clients.

Investment ManagementOur Investment Management business remains well positioned because of our breadth of asset classes, products and distribution. In 2017, we had $42 billion in long-term fee-based (LTFB) net inflows across the platform. We have had consistent growth with about $270 billion of LTFB net inflows over the last five years, including $52 billion from acquisitions.

In Goldman Sachs Asset Management, we continue to be a top provider to companies as they increasingly outsource the management of their pension plans and other assets. Currently, we have over $110 billion in assets where we act as a chief investment officer or advisor. In 2017, we made a strategic acquisition, further adding $20 billion of LTFB assets and contributing to our scale in this business.

The same outsourcing trend is happening within many insurance companies. We manage or advise on another $190 billion from insurance clients who leverage our enhanced analytics, custom asset allocation and risk management capabilities.

In Private Wealth Management, we saw strong long-term net inflows of $17 billion in 2017, up from $12 billion in 2016. Wealth creation is expanding at a rapid clip and given the strength of our offering and brand, we have not seen the limit to the growth of this segment of the market. We currently have over 700 private wealth advisors and expect to grow our advisor population by approximately 30 percent through 2020.

In Ayco, we provide financial planning services to 400 corporate clients and 13,000 executives across corporate America. However, we currently cover only


20 percent of the Fortune 1000. At the end of 2017, we launched our digital advisory service designed for Ayco corporate client employees. This platform is live at more than 70 companies and we expect to roll this out to an additional 30 companies by the end of 2018.

Investing & LendingOur Investing & Lending businesses provide promising companies and other clients with the capital they need to grow either in the form of a loan or an equity investment. Our funded loan portfolio was $81 billion at the end of 2017, 3.5 times higher since the end of 2012.

In Private Wealth Management, we have increased our lending to our existing Private Wealth Management clients, growing our funded loans balance to about $24 billion in 2017 or a 15 percent increase year-over-year. Lending net revenues from Private Wealth Management clients increased about 30 percent compared to 2016.

Through GS Select, we are working with third-party registered investment advisors to offer securities-based loans from Goldman Sachs Bank USA to their Private Wealth Management clients. This digital platform is just getting started, but we have already signed up some of the largest independent registered investment advisors in the U.S. who serve clients with nearly $4 trillion in assets.

Institutional Lending and Financing is also an important part of our growth strategy, an opportunity set driven by our special situations group, a differentiated financing and investing business. Here, dedicated teams of experienced underwriters partner primarily with middle-market companies to finance assets, improve their capital structure or deploy capital. This business is one of the highest margin and highest return businesses in the firm.

By growing our loan portfolio, we have increased our net revenue contribution from net interest income, which makes Investing & Lending net revenues more stable and recurring. We entered 2018 with a $2 billion net interest income run rate, before considering further loan growth. And net interest income in the fourth quarter was up roughly 70 percent year-over-year.

Another important investing business is our merchant banking business, which helps to start and grow companies. Merchant banking has been a source of strong risk-adjusted return opportunities and a core part of the firms DNA and mission. Weve been in this business for over 30 years and it constitutes as powerful a franchise as any other in our firm.

Since the beginning of 2015, we generated nearly $11 billion of net revenues from our diversified portfolio of equity investments, with the largest contribution from merchant banking.

We continue to see attractive opportunities as an active investor, on behalf of both our clients and the firm, where our unique global franchise is an excellent sourcing mechanism. For example, in the past two years, we sourced over $40 billion in commitments to invest across our equity and credit merchant banking activities.

In November 2017, we announced the Cooperation Fund, partnering with the China Investment Corporation. We intend to raise $5 billion to invest mainly in American manufacturing, industrial, consumer and healthcare companies, among others, that are developing business in China, or anticipate doing so in the future.

MarcusMarcus: by Goldman Sachs (Marcus) is our digital consumer financial services platform. The foundation of this new business is rooted in addressing real consumer pain points by delivering value through products that are simple, transparent and flexible. Marcus launched with single no-fee personal loans and is evolving into a suite of products and services that we believe will move the needle for the firm over the coming years.

We are building Marcus at a point in time when consumers are moving away from brick-and-mortar branches to solutions that use technology to more seamlessly meet their needs. Goldman Sachs is uniquely positioned to be a disruptor in consumer finance we can leverage our stable balance sheet, expertise in risk management and capabilities in technology without the burden of legacy distribution, technology and businesses that could constrain our ability to offer consumers better terms.



We originated $2.3 billion of personal loans from launch through the end of 2017. As we grow our portfolio, we remain very cognizant of the credit cycle. Our credit policy and pricing are designed to build a resilient loan book, and we remain deliberate in the pacing of our growth. We also continue to grow and diversify our sources of funding through our deposits business; Marcus deposits grew by more than $5 billion in 2017, ending the year at $17.1 billion nearly double the balances we started with when we entered the business in April 2016. As of the end of 2017, Marcus was serving more than 350,000 customers across loans and deposits, with the clear potential to build relationships with millions of consumers.

While we recognize that it is early for us in the digital consumer finance space, there is a real need in the market, and the opportunities for further investment are compelling. We intend to extend our lending and savings products over time, both direct-to-consumer and through partnerships.

In addition, longer-term, we see opportunities to expand our suite of consumer offerings, and our criteria for evaluating new products will remain consistent: a large addressable market, the ability to leverage our expertise, the ability to deliver attractive shareholder returns, and importantly, the ability to deliver consumer-centric solutions.

Our PeopleOur most important long-term competitive advantage remains our people. With that in mind, we invest heavily to attract, develop and promote extraordinary professionals who can serve our clients and drive our growth.

To that end, we are proud that we were once again recognized as one of Fortune magazines 100 Best Companies to Work For. Goldman Sachs is one of only four companies to be recognized every year that the Great Place to Work Institute has issued its list since 1984. We were also named as one of Working Mothers 100 Best Companies, which ranks companies with the best programs that support working parents, for the fifteenth consecutive year, earning us a place on the magazines Hall of Fame list.

In 2017, we hired more than 6,000 people around the world recruiting each person one by one. Our application rates continue to rise and more than eight out of 10 people who were offered a role chose to join the firm. Our recruiting strategy is centered on expanding and diversifying our applicant pool. Through the use of technology, including video interviewing and hosting online coding challenges, we increased the number of schools from which we interview intern candidates by more than 150 schools for the 2018 class, compared to 2017.

Whats more, given the growing importance of technology to our businesses, we continue to focus on hiring individuals with backgrounds in science, technology, engineering and math (STEM). Today, approximately one-quarter of the firm works in various engineering-related roles. More than one-third of our 2017 campus analyst hires majored in a STEM discipline, and that percentage will only continue to rise as we welcome our incoming 2018 class later this year.

In 2017, we selected our newest class of managing directors (MDs). Twenty-four percent of the 509 new MDs are women, while regionally, around 25 percent hail from Europe, the Middle East and Africa, 57 percent from the Americas and 18 percent from Asia. In addition, 66 percent of the new class started at the firm as analysts or associates, a reflection of our commitment to talent development and retention over the long-term.

Succession and Our Leadership BenchOne of my most important responsibilities as chairman and chief executive officer is to work with our Board of Directors on ensuring smooth and effective leadership transitions. Our firm is fortunate to have a deep pool of talent at all levels, and regardless of when the next transition is to take effect, we are well prepared. With Harvey Schwartzs announced retirement as president and co-chief operating officer (COO) of the firm, David Solomon will assume sole responsibility for these roles. I look forward to working with David to continue to build our global franchise and pursue long-term value for our shareholders.


Over his 20-year career, Harvey has held leadership roles across a broad range of the firms operations from Securities and Investment Banking, to serving as chief financial officer (CFO) and, most recently, as president and co-COO. As the global co-head of the Securities Division, Harvey was instrumental in overseeing growth in our client franchise across FICC and Equities. During the financial crisis, Harvey played an important role in the management of our risk exposures, even while we were meeting the significant needs of our clients. During Harveys tenure as CFO, he played a critical role in helping the firm adapt to significant changes in the regulatory environment. Harvey has consistently demonstrated his deep commitment to the firm and its values. His work ethic, command of complexity and client focus have defined his career, while his influence on many leaders at the firm has made an indelible impact on generations of professionals at Goldman Sachs. We thank Harvey for his exceptional service and wish him all the best in the years ahead.

Our ImpactGoldman Sachs has long embraced our responsibility to help address crucial environmental, social and economic challenges around the world, both through our core businesses and by engaging in activities that leverage our expertise to promote economic progress. As part of that mission, we seek to be active and long-term corporate citizens in the communities in which we operate. Given our position at the crossroads of the capital markets, our mission is to drive positive change in our work with clients by helping them to grow their businesses, be on a stronger financial footing, provide access to key services and contribute to economic growth.

In some cases, that means helping entrepreneurs succeed through programs such as 10,000 Women and 10,000 Small Businesses. In other cases, we are financing projects that can improve living standards within traditionally underserved communities. Our goal is to conduct philanthropy with a purpose making meaningful contributions where our skills and leadership can make a clear difference.

10,000 Small Businesses SummitAs a natural next step in our focus on small businesses, we hosted in February 2018 the 10,000 Small Businesses Summit: The Big Power of Small Business, which was the largest-ever gathering of small business owners in the U.S. Taking place in Washington, D.C., the summit convened more than 2,000 small business owners from a diverse range of industries and geographies with a select group of business leaders, industry experts and policymakers to discuss the vital role that small businesses play in the U.S. economy.

From sharing strategies and tactics for hiring, obtaining capital and optimizing growth, to discussing policy-related topics such as regulation and global competition, this unique event provided an opportunity for the alumni of 10,000 Small Businesses to come together and share ideas, discuss common challenges and elevate their collective voice. The following day, participants took that voice to Capitol Hill, where they met with representatives from their respective districts and states to advocate for policies that support the continued ability of small businesses to grow, thrive and compete.

Goldman Sachs GivesGoldman Sachs Gives is a donor-advised fund through which participating managing directors of the firm can recommend grants to qualified nonprofit organizations around the world. Since its launch in 2010, the fund has made more than $1.3 billion in grants through the end of 2017 to 6,000 organizations that further Goldman Sachs Gives mission of fostering innovative ideas, solving economic and social issues, and enabling progress in underserved communities worldwide.

As an example of our firms commitment to citizenship and community engagement, Goldman Sachs Gives continued to expand its reach in 2017, through initiatives such as the second annual Analyst Impact Fund, a competition whereby teams of analysts from the firm vied to win a Goldman Sachs Gives grant to the nonprofit of their choice. Demonstrating the teamwork, analytics and excellence that are core to the values and culture of Goldman Sachs, the analysts who participated represented a broad range of Goldman Sachs offices and divisions. The three winning teams supported nonprofit



organizations that focus on delivering online educational resources for female refugees, bail reform initiatives and the education of girls in rural India.

Additionally, in the wake of the destruction caused by Hurricanes Harvey, Irma and Maria, as well as the earthquakes in Mexico, the firm and Goldman Sachs Gives made grants exceeding $2 million to organizations providing immediate resources, short-term relief, long-term housing and small business reconstruction and recovery. Equally important, more than 1,000 volunteers across the firm donated their time to help in the immediate and ongoing recovery efforts.

Urban Investment GroupThrough our Urban Investment Group (UIG), we have realized the potential for investments in underserved urban areas. We work with local leaders and nonprofits, focusing on community development and financing for socially motivated enterprises and small businesses. While the investment strategy has evolved over the years, the mission remains the same: to make an impact in underserved areas while making a good return.

Since its inception in 2001 through the end of 2017, UIG has committed more than $6 billion to underserved U.S. communities, facilitating the creation and preservation of more than 25,000 housing units the majority of which are affordable for low- to middle-income families as well as more than 2 million square feet of community space and over 7.5 million square feet of commercial, retail and industrial facilities.

As an example, Goldman Sachs committed nearly $500 million to the Essex Crossing development on the Lower East Side of Manhattan. The project, at 1.9 million square feet, is one of the largest developments in New York City and is reactivating a site that had sat vacant for almost 50 years. Essex Crossing, which was designed with the local community, will include just over 1,000 apartments, more than half of which are reserved for low- and middle-income tenants, and 900,000 square feet of commercial and community space. Such projects have the potential to usher in a new model for urban investment, focusing on infrastructure, jobs and resources that benefit the public at large.

Looking AheadToday, conditions are highly supportive of a growing economy and interest rates are relatively low for where we are in the growth cycle. But as managers of risk, we do our best to prepare our clients and the firm for low-probability, yet highly consequential events. With the U.S. near full employment, inflation still relatively low and the end of quantitative easing, there is a greater chance that excesses can build up. In this vein, we continue to be mindful of what can go wrong, keeping a close eye on risk, particularly in the context of the credit cycle.

Cycles come and go, and, as we have seen in recent months, markets can change course at a moments notice, and often in response to factors no one can predict with any certainty.

Still, we remain optimistic and confident in our ability to grow. Our client franchise is strong and we are executing on our growth initiatives, including making investments across our businesses to expand our franchise and to grow earnings across the firm.

The hard work, commitment and collaboration of our people will remain cornerstones of our long-term success. In the process, we are confident that we can continue to generate strong relative returns and value for our shareholders.

Lloyd C. Blankfein Chairman and Chief Executive Officer

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017 Commission File Number: 001-14965

The Goldman Sachs Group, Inc.(Exact name of registrant as specified in its charter)

Delaware 13-4019460(State or other jurisdiction of

incorporation or organization)(I.R.S. Employer

Identification No.)

200 West Street 10282New York, N.Y.

(Address of principal executive offices)(Zip Code)

(212) 902-1000(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:Title of each class: Name of each exchange on which registered:

Common stock, par value $.01 per share New York Stock ExchangeDepositary Shares, Each Representing 1/1,000th Interest in a Share of Floating RateNon-Cumulative Preferred Stock, Series A New York Stock ExchangeDepositary Shares, Each Representing 1/1,000th Interest in a Share of 6.20%Non-Cumulative Preferred Stock, Series B New York Stock ExchangeDepositary Shares, Each Representing 1/1,000th Interest in a Share of Floating RateNon-Cumulative Preferred Stock, Series C New York Stock ExchangeDepositary Shares, Each Representing 1/1,000th Interest in a Share of Floating RateNon-Cumulative Preferred Stock, Series D New York Stock ExchangeDepositary Shares, Each Representing 1/1,000th Interest in a Share of 5.50%Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series J New York Stock ExchangeDepositary Shares, Each Representing 1/1,000th Interest in a Share of 6.375%Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K New York Stock ExchangeDepository Shares, Each Representing 1/1,000th Interest in a Share of 6.30%Non-Cumulative Preferred Stock, Series N New York Stock ExchangeSee Exhibit 99.2 for debt and trust securities registered under Section 12(b) of the Act

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes No

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

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

Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Emerging growth company

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

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

As of June 30, 2017, the aggregate market value of the common stock of the registrant held by non-affiliates of the registrant was approximately$84.9 billion.

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

Documents incorporated by reference: Portions of The Goldman Sachs Group, Inc.s Proxy Statement for its 2018 Annual Meeting ofShareholders are incorporated by reference in the Annual Report on Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14.

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIESANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017

INDEX

Form 10-K Item Number Page No.

PART I 1

Item 1

Business 1

Introduction 1

Our Business Segments and Segment Operating Results 1

Investment Banking 2

Institutional Client Services 2

Investing & Lending 4

Investment Management 4

Business Continuity and Information Security 5

Employees 5

Competition 6

Regulation 7

Available Information 21

Cautionary Statement Pursuant to the U.S. Private SecuritiesLitigation Reform Act of 1995 22

Item 1A

Risk Factors 23

Item 1B

Unresolved Staff Comments 42

Item 2

Properties 42

Item 3

Legal Proceedings 43

Item 4

Mine Safety Disclosures 43

Executive Officers of The Goldman Sachs Group, Inc. 43

PART II 44

Item 5

Market for Registrants Common Equity, Related StockholderMatters and Issuer Purchases of Equity Securities 44

Item 6

Selected Financial Data 44

Page No.

Item 7

Managements Discussion and Analysis of Financial Conditionand Results of Operations 45

Introduction 45

Executive Overview 46

Business Environment 47

Critical Accounting Policies 48

Recent Accounting Developments 50

Use of Estimates 50

Results of Operations 51

Balance Sheet and Funding Sources 64

Equity Capital Management and Regulatory Capital 69

Regulatory Matters and Developments 75

Off-Balance-Sheet Arrangements and Contractual Obligations 75

Risk Management 77

Overview and Structure of Risk Management 77

Liquidity Risk Management 82

Market Risk Management 89

Credit Risk Management 94

Operational Risk Management 99

Model Risk Management 101

Item 7A

Quantitative and Qualitative Disclosures About Market Risk 101

Goldman Sachs 2017 Form 10-K

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

INDEX

Page No.

Item 8

Financial Statements and Supplementary Data 102

Managements Report on Internal Control over FinancialReporting 102

Report of Independent Registered Public Accounting Firm 103

Consolidated Financial Statements 104

Consolidated Statements of Earnings 104

Consolidated Statements of Comprehensive Income 105

Consolidated Statements of Financial Condition 106

Consolidated Statements of Changes in Shareholders Equity 107

Consolidated Statements of Cash Flows 108

Notes to Consolidated Financial Statements 109

Note 1. Description of Business 109

Note 2. Basis of Presentation 109

Note 3. Significant Accounting Policies 110

Note 4. Financial Instruments Owned and FinancialInstruments Sold, But Not Yet Purchased 117

Note 5. Fair Value Measurements 118

Note 6. Cash Instruments 119

Note 7. Derivatives and Hedging Activities 125

Note 8. Fair Value Option 136

Note 9. Loans Receivable 142

Note 10. Collateralized Agreements and Financings 146

Note 11. Securitization Activities 150

Note 12. Variable Interest Entities 152

Note 13. Other Assets 155

Note 14. Deposits 158

Note 15. Short-Term Borrowings 159

Note 16. Long-Term Borrowings 159

Note 17. Other Liabilities and Accrued Expenses 162

Note 18. Commitments, Contingencies and Guarantees 162

Note 19. Shareholders Equity 166

Note 20. Regulation and Capital Adequacy 169

Note 21. Earnings Per Common Share 178

Note 22. Transactions with Affiliated Funds 178

Note 23. Interest Income and Interest Expense 179

Page No.

Note 24. Income Taxes 179

Note 25. Business Segments 182

Note 26. Credit Concentrations 184

Note 27. Legal Proceedings 185

Note 28. Employee Benefit Plans 191

Note 29. Employee Incentive Plans 192

Note 30. Parent Company 194

Supplemental Financial Information 196

Quarterly Results 196

Common Stock Price Range 196

Common Stock Performance 196

Selected Financial Data 197

Statistical Disclosures 197

Item 9

Changes in and Disagreements with Accountants on Accountingand Financial Disclosure 203

Item 9A

Controls and Procedures 203

Item 9B

Other Information 203

PART III 203

Item 10

Directors, Executive Officers and Corporate Governance 203

Item 11

Executive Compensation 203

Item 12

Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters 204

Item 13

Certain Relationships and Related Transactions, and DirectorIndependence 204

Item 14

Principal Accounting Fees and Services 204

PART IV 205

Item 15

Exhibits, Financial Statement Schedules 205

SIGNATURES 210

Goldman Sachs 2017 Form 10-K


PART IItem 1. BusinessIntroduction

Goldman Sachs is a leading global investment banking,securities and investment management firm that provides awide range of financial services to a substantial anddiversified client base that includes corporations, financialinstitutions, governments and individuals.

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

References to this Form 10-K are to our Annual Reporton Form 10-K for the year ended December 31, 2017. Allreferences to 2017, 2016 and 2015 refer to our years ended,or the dates, as the context requires, December 31, 2017,December 31, 2016 and December 31, 2015, respectively.

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

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

Our Business Segments and SegmentOperating Results

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

The chart below presents our four business segments.

Firmwide

InvestmentBanking

InstitutionalClient

Services

Investing &Lending

InvestmentManagement

Managementand Other Fees

Incentive Fees

TransactionRevenues

EquitySecurities

DebtSecurities and

Loans

Fixed Income,Currency andCommodities

Client Execution

Equities

EquitiesClient

Execution

Commissionsand Fees

SecuritiesServices

FinancialAdvisory

Underwriting

EquityUnderwriting

DebtUnderwriting

The table below presents our segment operating results.

Year Ended December % of 2017Net

Revenues$ in millions 2017 2016 2015

Investment BankingNet revenues $ 7,371 $ 6,273 $ 7,027 23%Operating expenses 3,526 3,437 3,713Pre-tax earnings $ 3,845 $ 2,836 $ 3,314

Institutional Client ServicesNet revenues $11,902 $14,467 $15,151 37%Operating expenses 9,692 9,713 13,938Pre-tax earnings $ 2,210 $ 4,754 $ 1,213

Investing & LendingNet revenues $ 6,581 $ 4,080 $ 5,436 21%Operating expenses 2,796 2,386 2,402Pre-tax earnings $ 3,785 $ 1,694 $ 3,034

Investment ManagementNet revenues $ 6,219 $ 5,788 $ 6,206 19%Operating expenses 4,800 4,654 4,841Pre-tax earnings $ 1,419 $ 1,134 $ 1,365

Total net revenues $32,073 $30,608 $33,820Total operating expenses 20,941 20,304 25,042Total pre-tax earnings $11,132 $10,304 $ 8,778

Goldman Sachs 2017 Form 10-K 1


In the table above:

Financial information related to our business segmentsfor 2017, 2016 and 2015 is included in ManagementsDiscussion and Analysis of Financial Condition andResults of Operations and Financial Statements andSupplementary Data, which are in Part II, Items 7 and 8,respectively, of this Form 10-K. See Note 25 to theconsolidated financial statements in Part II, Item 8 of thisForm 10-K for a summary of our total net revenues,pre-tax earnings and net earnings by geographic region.

Operating expenses included $3.37 billion recorded inInstitutional Client Services in 2015 related to thesettlement agreement with the Residential Mortgage-Backed Securities Working Group of the U.S. FinancialFraud Enforcement Task Force. See Note 27 to theconsolidated financial statements in Part II, Item 8 of ourAnnual Report on Form 10-K for the year endedDecember 31, 2015 for further information.

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

Investment BankingInvestment Banking serves public and private sector clientsaround the world. We provide financial advisory servicesand help companies raise capital to strengthen and growtheir businesses. We seek to develop and maintain long-term relationships with a diverse global group ofinstitutional clients, including governments, states andmunicipalities. Our goal is to deliver to our institutionalclients the entire resources of the firm in a seamless fashion,with investment banking serving as the main initial point ofcontact with Goldman Sachs.

Financial Advisory. Financial Advisory includes strategicadvisory assignments with respect to mergers andacquisitions, divestitures, corporate defense activities,restructurings, spin-offs and risk management. Inparticular, we help clients execute large, complextransactions for which we provide multiple services,including cross-border structuring expertise. FinancialAdvisory also includes revenues from derivativetransactions directly related to these client advisoryassignments. We also assist our clients in managing theirasset and liability exposures and their capital.

Underwriting. The other core activity of InvestmentBanking is helping companies raise capital to fund theirbusinesses. As a financial intermediary, our job is to matchthe capital of our investing clients, who aim to grow thesavings of millions of people, with the needs of our publicand private sector clients, who need financing to generategrowth, create jobs and deliver products and services. Ourunderwriting activities include public offerings and privateplacements, including local and cross-border transactionsand acquisition financing, of a wide range of securities andother financial instruments, including loans. Underwritingalso includes revenues from derivative transactions enteredinto with public and private sector clients in connectionwith our underwriting activities.

Equity Underwriting. We underwrite common andpreferred stock and convertible and exchangeablesecurities. We regularly receive mandates for large, complextransactions and have held a leading position in worldwidepublic common stock offerings and worldwide initial publicofferings for many years.

Debt Underwriting. We underwrite and originate varioustypes of debt instruments, including investment-grade andhigh-yield debt, bank loans and bridge loans, including inconnection with acquisition financing, and emerging- andgrowth-market debt, which may be issued by, amongothers, corporate, sovereign, municipal and agency issuers.In addition, we underwrite and originate structuredsecurities, which include mortgage-related securities andother asset-backed securities.

Institutional Client ServicesInstitutional Client Services serves our clients who come tous to buy and sell financial products, raise funding andmanage risk. We do this by acting as a market maker andoffering market expertise on a global basis. InstitutionalClient Services makes markets and facilitates clienttransactions in fixed income, equity, currency andcommodity products. In addition, we make markets in andclear client transactions on major stock, options and futuresexchanges worldwide.

As a market maker, we provide prices to clients globallyacross thousands of products in all major asset classes andmarkets. At times we take the other side of transactionsourselves if a buyer or seller is not readily available and atother times we connect our clients to other parties whowant to transact. Our willingness to make markets, commitcapital and take risk in a broad range of products is crucialto our client relationships. Market makers provide liquidityand play a critical role in price discovery, which contributesto the overall efficiency of the capital markets.

2 Goldman Sachs 2017 Form 10-K


Our clients are primarily institutions that are professionalmarket participants, including investment entities whoseultimate clients include individual investors investing fortheir retirement, buying insurance or putting aside surpluscash in a deposit account.

Through our global sales force, we maintain relationshipswith our clients, receiving orders and distributinginvestment research, trading ideas, market information andanalysis. Much of this connectivity between us and ourclients is maintained on technology platforms and operatesglobally wherever and whenever markets are open fortrading.

Institutional Client Services and our other businesses aresupported by our Global Investment Research division,which, as of December 2017, provided fundamentalresearch on approximately 3,000 companies worldwideand more than 40 national economies, as well as onindustries, currencies and commodities.

Institutional Client Services generates revenues in thefollowing ways:

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

In less liquid markets (such as mid-cap corporatebonds, growth market currencies or certainnon-agency mortgage-backed securities), we executetransactions for our clients for spreads and fees thatare generally somewhat larger than those charged inmore liquid markets;

We also structure and execute transactions involvingcustomized or tailor-made products that address ourclients risk exposures, investment objectives or othercomplex needs (such as a jet fuel hedge for an airline);

We provide financing to our clients for their securitiestrading activities, as well as securities lending andother prime brokerage services; and

In connection with our market-making activities, wemaintain inventory, typically for a short period oftime, in response to, or in anticipation of, clientdemand. We also hold inventory to actively manageour risk exposures that arise from these market-making activities. We carry our inventory at fair valuewith changes in valuation reflected in net revenues.

Institutional Client Services activities are organized by assetclass and include both cash and derivativeinstruments. Cash refers to trading the underlyinginstrument (such as a stock, bond or barrel of oil).Derivative refers to instruments that derive their valuefrom underlying asset prices, indices, reference rates andother inputs, or a combination of these factors (such as anoption, which is the right or obligation to buy or sell acertain bond or stock index on a specified date in the futureat a certain price, or an interest rate swap, which is theagreement to convert a fixed rate of interest into a floatingrate or vice versa).

Fixed Income, Currency and Commodities ClientExecution. Includes client execution activities related tomaking markets in both cash and derivative instruments forinterest rate products, credit products, mortgages,currencies and commodities.

Interest Rate Products. Government bonds (includinginflation-linked securities) across maturities, othergovernment-backed securities, repurchase agreements,and interest rate swaps, options and other derivatives.

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

Mortgages. Commercial mortgage-related securities,loans and derivatives, residential mortgage-relatedsecurities, loans and derivatives (including U.S.government agency-issued collateralized mortgageobligations and other securities and loans), and otherasset-backed securities, loans and derivatives.

Currencies. Currency options, spot/forwards and otherderivatives on G-10 currencies and emerging-marketproducts.

Commodities. Commodity derivatives and, to a lesserextent, physical commodities, involving crude oil andpetroleum products, natural gas, base, precious and othermetals, electricity, coal, agricultural and othercommodity products.



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

Equities Client Execution. We make markets in equitysecurities and equity-related products, including exchange-traded funds, convertible securities, options, futures andover-the-counter (OTC) derivative instruments, on a globalbasis. As a principal, we facilitate client transactions byproviding liquidity to our clients, including with largeblocks of stocks or derivatives, requiring the commitmentof our capital.

We also structure and make markets in derivatives onindices, industry groups, financial measures and individualcompany stocks. We develop strategies and provideinformation about portfolio hedging and restructuring andasset allocation transactions for our clients. We also workwith our clients to create specially tailored instruments toenable sophisticated investors to establish or liquidateinvestment positions or undertake hedging strategies. Weare one of the leading participants in the trading anddevelopment of equity derivative instruments.

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

Commissions and Fees. We generate commissions andfees from executing and clearing institutional clienttransactions on major stock, options and futures exchangesworldwide, as well as OTC transactions. We provide ourclients with access to a broad spectrum of equity executionservices, including electronic low-touch access and morecomplex high-touch execution through both traditionaland electronic platforms.

Securities Services. Includes financing, securities lendingand other prime brokerage services.

Financing Services. We provide financing to our clientsfor their securities trading activities through margin loansthat are collateralized by securities, cash or otheracceptable collateral. We earn a spread equal to thedifference between the amount we pay for funds and theamount we receive from our client.

Securities Lending Services. We provide services thatprincipally involve borrowing and lending securities tocover institutional clients short sales and borrowingsecurities to cover our short sales and otherwise to makedeliveries into the market. In addition, we are an activeparticipant in broker-to-broker securities lending andthird-party agency lending activities.

Other Prime Brokerage Services. We earn fees byproviding clearing, settlement and custody servicesglobally. In addition, we provide our hedge fund andother clients with a technology platform and reportingwhich enables them to monitor their security portfoliosand manage risk exposures.

Investing & LendingOur investing and lending activities, which are typicallylonger-term, include our investing and relationship lendingactivities across various asset classes, primarily debtsecurities and loans, public and private equity securities,infrastructure and real estate. These activities includemaking investments, some of which are consolidated,through our merchant banking business and our specialsituations group. Some of these investments are madeindirectly through funds that we manage. We also providefinancing to corporate clients and individuals, includingbank loans, personal loans and mortgages.

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

Debt Securities and Loans. We make corporate, realestate, infrastructure and other debt investments. Inaddition, we provide credit to clients through loan facilitiesand through secured loans, including secured loans to retailclients through our digital platform, Goldman SachsPrivate Bank Select (GS Select). We also make unsecuredloans to and accept deposits from retail clients through ourdigital platform, Marcus: by Goldman Sachs (Marcus).

Investment ManagementInvestment Management provides investment and wealthadvisory services to help clients preserve and grow theirfinancial assets. Our clients include institutions andhigh-net-worth individuals, as well as retail investors whoprimarily access our products through a network of third-party distributors around the world.

We manage client assets across a broad range of assetclasses and investment strategies, including equity, fixedincome and alternative investments. Alternativeinvestments primarily includes hedge funds, credit funds,private equity, real estate, currencies, commodities, andasset allocation strategies. Our investment offerings includethose managed on a fiduciary basis by our portfoliomanagers as well as strategies managed by third-partymanagers. We offer our investments in a variety ofstructures, including separately managed accounts, mutualfunds, private partnerships, and other commingled vehicles.



We also provide customized investment advisory solutionsdesigned to address our clients investment needs. Thesesolutions begin with identifying clients objectives andcontinue through portfolio construction, ongoing assetallocation and risk management and investment realization.We draw from a variety of third-party managers as well asour proprietary offerings to implement solutions for clients.

We supplement our investment advisory solutions forhigh-net-worth clients with wealth advisory services thatinclude income and liability management, trust and estateplanning, philanthropic giving and tax planning. We alsouse our global securities and derivatives market-makingcapabilities to address clients specific investment needs.

Management and Other Fees. The majority of revenuesin management and other fees is comprised of asset-basedfees on client assets. The fees that we charge vary by assetclass and distribution channel and are affected byinvestment performance as well as asset inflows andredemptions. Other fees we receive primarily includefinancial planning and counseling fees generated throughour wealth advisory services provided by our subsidiary,The Ayco Company, L.P.

Assets under supervision include client assets where we earna fee for managing assets on a discretionary basis. Thisincludes net assets in our mutual funds, hedge funds, creditfunds and private equity funds (including real estate funds),and separately managed accounts for institutional andindividual investors. Assets under supervision also includeclient assets invested with third-party managers, bankdeposits and advisory relationships where we earn a fee foradvisory and other services, but do not have investmentdiscretion. Assets under supervision do not include the self-directed brokerage assets of our clients. Long-term assetsunder supervision represent assets under supervisionexcluding liquidity products. Liquidity products representmoney market and bank deposit assets.

Incentive Fees. In certain circumstances, we are alsoentitled to receive incentive fees based on a percentage of afunds or a separately managed accounts return, or whenthe return exceeds a specified benchmark or otherperformance targets. Such fees include overrides, whichconsist of the increased share of the income and gainsderived primarily from our private equity and credit fundswhen the return on a funds investments over the life of thefund exceeds certain threshold returns.

Transaction Revenues. We receive commissions and netspreads for facilitating transactional activity inhigh-net-worth client accounts. In addition, we earn netinterest income primarily associated with client depositsand margin lending activity undertaken by such clients.

Business Continuity and InformationSecurity

Business continuity and information security, includingcyber security, are high priorities for Goldman Sachs. Theirimportance has been highlighted by numerous highlypublicized events in recent years, including (i) cyber attacksagainst financial institutions, governmental agencies, largeconsumer-based companies and other organizations thatresulted in the unauthorized disclosure of personalinformation of clients and customers and other sensitive orconfidential information, the theft and destruction ofcorporate information and requests for ransom payments,and (ii) extreme weather events.

Our Business Continuity & Technology Resilience Programhas been developed to provide reasonable assurance ofbusiness continuity in the event of disruptions at our criticalfacilities or systems and to comply with regulatoryrequirements, including those of FINRA. Because we are aBHC, our Business Continuity & Technology ResilienceProgram is also subject to review by the FRB. The keyelements of the program are crisis management, businesscontinuity, technology resilience, business recovery,assurance and verification, and process improvement. Inthe area of information security, we have developed andimplemented a framework of principles, policies andtechnology designed to protect the information provided tous by our clients and our own information from cyberattacks and other misappropriation, corruption or loss.Safeguards are designed to maintain the confidentiality,integrity and availability of information.

Employees

Management believes that a major strength and principalreason for the success of Goldman Sachs is the quality anddedication of our people and the shared sense of being partof a team. We strive to maintain a work environment thatfosters professionalism, excellence, diversity, cooperationamong our employees worldwide and high standards ofbusiness ethics.



Instilling the Goldman Sachs culture in all employees is acontinuous process, in which training plays an importantpart. All employees are offered the opportunity to participatein education and periodic seminars that we sponsor atvarious locations throughout the world. Another importantpart of instilling the Goldman Sachs culture is our employeereview process. Employees are reviewed by supervisors,co-workers and employees they supervise in a 360-degreereview process that is integral to our team approach, andincludes an evaluation of an employees performance withrespect to risk management, compliance and diversity. As ofDecember 2017, we had 36,600 total staff.

Competition

The financial services industry and all of our businesses areintensely competitive, and we expect them to remain so.Our competitors are other entities that provide investmentbanking, securities and investment management servicesand retail lending and deposit-taking products, as well asthose entities that make investments in securities,commodities, derivatives, real estate, loans and otherfinancial assets. These entities include brokers and dealers,investment banking firms, commercial banks, insurancecompanies, investment advisers, mutual funds, hedge funds,private equity funds, merchant banks, consumer financecompanies and financial technology and other internet-based companies. We compete with some entities globallyand with others on a regional, product or niche basis. Ourcompetition is based on a number of factors, includingtransaction execution, products and services, innovation,reputation and price.

There has been substantial consolidation and convergenceamong companies in the financial services industry.Moreover, we have faced, and expect to continue to face,pressure to retain market share by committing capital tobusinesses or transactions on terms that offer returns thatmay not be commensurate with their risks. In particular,corporate clients seek such commitments (such asagreements to participate in their loan facilities) fromfinancial services firms in connection with investmentbanking and other assignments.

Consolidation and convergence have significantly increasedthe capital base and geographic reach of some of ourcompetitors, and have also hastened the globalization of thesecurities and other financial services markets. As a result,we have had to commit capital to support our internationaloperations and to execute large global transactions. To takeadvantage of some of our most significant opportunities,we will have to compete successfully with financialinstitutions that are larger and have more capital and thatmay have a stronger local presence and longer operatinghistory outside the U.S.

We also compete with smaller institutions that offer moretargeted services, such as independent advisory firms. Someclients may perceive these firms to be less susceptible topotential conflicts of interest than we are, and, as describedbelow, our ability to effectively compete with them could beaffected by regulations and limitations on activities thatapply to us but may not apply to them.

A number of our businesses are subject to intense pricecompetition. Efforts by our competitors to gain marketshare have resulted in pricing pressure in our investmentbanking and client execution businesses and could result inpricing pressure in other of our businesses. For example, theincreasing volume of trades executed electronically,through the internet and through alternative tradingsystems, has increased the pressure on trading commissions,in that commissions for electronic trading are generallylower than for non-electronic trading. It appears that thistrend toward low-commission trading will continue. Pricecompetition has also led to compression in the differencebetween the price at which a market participant is willing tosell an instrument and the price at which another marketparticipant is willing to buy it (i.e., bid/offer spread), whichhas affected our market-making businesses. In addition, webelieve that we will continue to experience competitivepressures in these and other areas in the future as some ofour competitors seek to obtain market share by furtherreducing prices, and as we enter into or expand ourpresence in markets that may rely more heavily onelectronic trading and execution.

We also compete on the basis of the types of financialproducts that we and our competitors offer. In somecircumstances, our competitors may offer financialproducts that we do not offer and our clients may prefer.

The provisions of the U.S. Dodd-Frank Wall Street Reformand Consumer Protection Act (Dodd-Frank Act), therequirements promulgated by the Basel Committee onBanking Supervision (Basel Committee) and other financialregulation could affect our competitive position to theextent that limitations on activities, increased fees andcompliance costs or other regulatory requirements do notapply, or do not apply equally, to all of our competitors orare not implemented uniformly across differentjurisdictions. For example, the provisions of the Dodd-Frank Act that prohibit proprietary trading and restrictinvestments in certain hedge and private equity fundsdifferentiate between U.S.-based and non-U.S.-basedbanking organizations and give non-U.S.-based bankingorganizations greater flexibility to trade outside of the U.S.and to form and invest in funds outside the U.S.



Likewise, the obligations with respect to derivativetransactions under Title VII of the Dodd-Frank Act depend,in part, on the location of the counterparties to thetransaction. The impact of the Dodd-Frank Act and otherregulatory developments on our competitive position willdepend to a large extent on the manner in which therequired rulemaking and regulatory guidance evolve, theextent of international convergence, and the developmentof market practice and structures under the new regulatoryregimes as described further in Regulation below.

We also face intense competition in attracting and retainingqualified employees. Our ability to continue to competeeffectively will depend upon our ability to attract newemployees, retain and motivate our existing employees andto continue to compensate employees competitively amidintense public and regulatory scrutiny on the compensationpractices of large financial institutions. Our pay practicesand those of certain of our competitors are subject toreview by, and the standards of, the FRB and otherregulators inside and outside the U.S., including thePrudential Regulation Authority (PRA) and the FinancialConduct Authority (FCA) in the U.K. We also compete foremployees with institutions whose pay practices are notsubject to regulatory oversight. See Regulation Compensation Practices below and Risk Factors Ourbusinesses may be adversely affected if we are unable to hireand retain qualified employees in Part I, Item 1A of thisForm 10-K for further information about the regulation ofour compensation practices.

Regulation

As a participant in the global financial services industry, weare subject to extensive regulation and supervisionworldwide. The Dodd-Frank Act, and the rules thereunder,significantly altered the U.S. financial regulatory regimewithin which we operate and the new Markets in FinancialInstruments Regulation and Markets in FinancialInstruments Directive (collectively, MiFID II) havesignificantly revised the regulatory regime for our Europeanoperations. The capital, liquidity and leverage ratios basedon the Basel Committees final capital framework forstrengthening international capital standards (Basel III), asimplemented by the FRB, the PRA and FCA and othernational regulators, have also had a significant impact onour businesses. The Basel Committee is the primary globalstandard setter for prudential bank regulation, and itsmember jurisdictions implement regulations based on itsstandards and guidelines.

The Basel Committees standards are not effective in anyjurisdiction until rules implementing such standards havebeen implemented by the relevant regulators in suchjurisdiction.

The implications of such regulations for our businessescontinue to depend to a large extent on theirimplementation by the relevant regulators globally, as wellas the development of market practices and structuresunder the regime established by such regulations.

Other reforms have been adopted or are being consideredby regulators and policy makers worldwide, as describedfurther throughout this section. Recent developments haveadded additional uncertainty to the implementation, scopeand timing of regulatory reforms. Such developments alsoinclude potential deregulation in some areas. InFebruary 2017, the President of the U.S. issued an executiveorder identifying core principles for the administrationsfinancial services regulatory policy and directing theSecretary of the Treasury, in consultation with the heads ofother financial regulatory agencies, to evaluate how thecurrent regulatory framework promotes or inhibits theprinciples and what actions have been, and are being, takento promote the principles. In response to the executiveorder, the U.S. Department of the Treasury issued during2017 the first three of four reports recommending a numberof comprehensive changes in the current regulatory systemfor U.S. depository institutions, the U.S. capital marketsand the U.S. asset management and insurance industries. Inaddition, in February 2018, the U.S. Department of theTreasury issued a report that recommends reforming theorderly liquidation authority (OLA) under the Dodd-FrankAct and amending the U.S. Bankruptcy Code to make abankruptcy proceeding a more effective resolution methodfor large financial institutions.

Goldman Sachs International (GSI) and Goldman SachsInternational Bank (GSIB), our principal E.U. operatingsubsidiaries, are incorporated and headquartered in theU.K. and, as such, are subject to E.U. legal and regulatoryrequirements, based on directly binding regulations of theE.U. and the implementation of E.U. directives by the U.K.Both currently benefit from non-discriminatory access toE.U. clients and infrastructure based on E.U. treaties andE.U. legislation, including cross-border passportingarrangements and specific arrangements for theestablishment of E.U. branches. As a result of the U.K.snotification to the European Council of its decision to leavethe E.U. (Brexit), there is considerable uncertainty as to theregulatory regime that will be applicable in the U.K. and theregulatory framework that will govern transactions andbusiness undertaken by our U.K. subsidiaries in theremaining E.U. countries.



Banking Supervision and RegulationGroup Inc. is a BHC under the U.S. Bank HoldingCompany Act of 1956 (BHC Act) and an FHC underamendments to the BHC Act effected by the U.S. Gramm-Leach-Bliley Act of 1999 (GLB Act), and is subject tosupervision and examination by the FRB, as our primaryregulator. In August 2017, the FRB proposed a new ratingsystem for large financial institutions, such as us, which isintended to align with the FRBs existing supervisoryprogram for large financial institutions and which wouldinclude component ratings for capital planning, liquidityrisk management, and governance and controls. InAugust 2017 and January 2018, the FRB proposed relatedguidance for the governance and controls component.These proposals reflect the FRBs focus on compliance withlaws and regulations related to consumer protection in itsevaluations of large financial institutions.

Certain of our subsidiaries are regulated by the banking andsecurities regulatory authorities of the countries in whichthey operate.

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

Our principal U.S. bank subsidiary, GS Bank USA, issupervised and regulated by the FRB, the FDIC, the NewYork State Department of Financial Services (NYDFS) andthe U.S. Consumer Financial Protection Bureau. A numberof our activities are conducted partially or entirely throughGS Bank USA and its subsidiaries, including: origination ofbank loans; personal loans and mortgages; interest rate,credit, currency and other derivatives; leveraged finance;deposit-taking; and agency lending. Our retail-orientedactivities are subject to extensive regulation and supervisionby federal and state regulators with regard to consumerprotection laws, including laws relating to fair lending andother practices in connection with marketing and providingretail financial products.

GSI, our regulated U.K. broker-dealer subsidiary, which is adesignated investment firm, and GSIB, our regulated U.K.bank and principal non-U.S. bank subsidiary, are regulatedby the PRA and the FCA. GSI provides broker-dealerservices in and from the U.K., and GSIB acts as a primarydealer for European government bonds and is involved inmarket making in European government bonds, lending(including securities lending) and deposit-taking activities.

Capital, Leverage and Liquidity Requirements. Thefirm and GS Bank USA are subject to consolidatedregulatory capital and leverage requirements set forth bythe FRB. GSI and GSIB are subject to capital requirementsprescribed in the E.U. Capital Requirements Regulation(CRR) and the E.U. Fourth Capital Requirements Directive(CRD IV).

Under the FRBs capital adequacy requirements, the firmand GS Bank USA must meet specific regulatory capitalrequirements that involve quantitative measures of assets,liabilities and certain off-balance-sheet items. Thesufficiency of our capital levels is also subject to qualitativejudgments by regulators. The firm and GS Bank USA arealso subject to liquidity requirements established by theU.S. federal bank regulatory agencies, and GSI and GSIBare subject to similar requirements established by U.K.regulatory authorities.

Capital Ratios. We are subject to the FRBs risk-basedcapital and leverage regulations, subject to certaintransitional provisions (Capital Framework). The CapitalFramework is largely based on Basel III and alsoimplements certain provisions of the Dodd-Frank Act.Under the Capital Framework, we are an Advancedapproach banking organization and have been designatedas a global systemically important bank (G-SIB).

The Capital Framework provides for an additional capitalratio requirement that phases in over time and consists ofthree components: (i) for capital conservation (capitalconservation buffer), (ii) as a consequence of ourdesignation as a G-SIB (G-SIB buffer) and (iii) forcountercyclicality (countercyclical capital buffer). Theadditional capital ratio requirement must be satisfiedentirely with capital that qualifies as Common EquityTier 1 (CET1).



The capital conservation buffer began to phase in onJanuary 1, 2016 and will continue to do so in increments of0.625% per year until it reaches 2.5% of risk-weightedassets (RWAs) on January 1, 2019. The G-SIB buffer alsobegan to phase in on January 1, 2016 and will continue todo so through January 1, 2019.

The countercyclical capital buffer, of up to 2.5%, isdesigned to counteract systemic vulnerabilities and appliesonly to Advanced approach banking organizations. Thecountercyclical capital buffer is currently set at zeropercent. Several other national supervisors have also startedto require countercyclical capital buffers. The G-SIB andcountercyclical capital buffers applicable to us couldchange in the future and, as a result, the minimum capitalratios to which we are subject could change.

GS Bank USA also computes its capital ratios in accordancewith the Capital Framework as an Advanced approachbanking organization.

The Basel Committee has published final guidelines forcalculating incremental capital ratio requirements forbanking institutions that are systemically significant from adomestic but not global perspective (D-SIBs). If theseguidelines are implemented by national regulators, they willapply to, among others, certain subsidiaries of G-SIBs.These guidelines are in addition to the framework forG-SIBs, but are more principles-based. CRD IV and theCRR provide that institutions that are systemicallyimportant at the E.U. or member state level, known as othersystemically important institutions (O-SIIs), may be subjectto additional capital ratio requirements of up to 2% ofCET1, according to their degree of systemic importance(O-SII buffers). O-SIIs are identified annually, along withtheir applicable buffers. The PRA has identified GoldmanSachs Group UK Limited (GSG UK), the parent company ofGSI and GSIB, as an O-SII. GSG UKs O-SII buffer iscurrently set at zero percent.

In January 2016, the Basel Committee finalized a revisedframework for calculating minimum capital requirementsfor market risk, which is expected to increase market riskcapital requirements for most banking organizations. InDecember 2017, the Basel Committee extended theimplementation date for the revised market risk frameworkuntil January 1, 2022, noting that the extension wouldallow for a review of the calibration of the framework.

In December 2017, the Basel Committee also publishedstandards that it described as the finalization of the Basel IIIpost-crisis regulatory reforms. These standards introducean aggregate output floor comparing capital requirementsunder the Basel Committees standardized and internallymodeled approaches, and they also revise the BaselCommittees standardized and model-based approaches forcredit risk, provide a new standardized approach foroperational risk capital and revise the frameworks forcredit valuation adjustment risk and the leverage ratio. TheBasel Committee has proposed that national regulatorsimplement these standards effective on January 1, 2022,with the output floor being phased in throughJanuary 1, 2027.

The U.S. federal bank regulatory agencies have notproposed rules implementing the December 2017 standardsor the revisions to the Basel Committees market riskframework for U.S. banking organizations. InNovember 2016, the European Commission proposedamendments to the CRR to implement the revisions to themarket risk framework for certain E.U. financialinstitutions, which would be effective two years after theamendments are incorporated into the CRR.

The Basel Committee has also:

Finalized a revised standard approach for calculatingRWAs for counterparty credit risk on derivativesexposures (Standardized Approach for measuringCounterparty Credit Risk exposures, known asSA-CCR);

Published an updated framework for the regulatorycapital treatment of securitization exposures(Securitization Framework);

Published guidelines for measuring and controlling largeexposures (Supervisory Framework for measuring andcontrolling Large Exposures); and

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

See Managements Discussion and Analysis of FinancialCondition and Results of Operations Equity CapitalManagement and Regulatory Capital in Part II, Item 7 ofthis Form 10-K and Note 20 to the consolidated financialstatements in Part II, Item 8 of this Form 10-K forinformation about our, GS Bank USAs and GSIs capitalratios and minimum required ratios.



As described in Other Restrictions below, inSeptember 2016, the FRB issued a proposed rule thatwould, among other things, require FHCs to holdadditional capital in connection with covered physicalcommodity activities.

Leverage Ratios. Under the Capital Framework, the firmand GS Bank USA are subject to Tier 1 leveragerequirements established by the FRB. The CapitalFramework also introduced a supplementary leverage ratiofor Advanced approach banking organizations whichbecame effective January 1, 2018 and implements theBasel III leverage ratio framework.

In November 2016, the European Commission proposedamendments to the CRR to implement a 3% minimumleverage ratio requirement for certain E.U. financialinstitutions, including GSI and GSIB, which wouldimplement the Basel III leverage ratio framework.

See Managements Discussion and Analysis of FinancialCondition and Results of Operations Equity CapitalManagement and Regulatory Capital in Part II, Item 7 ofthis Form 10-K and Note 20 to the consolidated financialstatements in Part II, Item 8 of this Form 10-K forinformation about the firms and GS Bank USAs Tier 1leverage ratios and supplementary leverage ratios, andGSIs leverage ratio.

Liquidity Ratios. The Basel Committees internationalframework for liquidity risk measurement, standards andmonitoring requires banking organizations to measure theirliquidity against two specific liquidity tests.

The Liquidity Coverage Ratio (LCR) issued by the U.S.federal bank regulatory agencies and applicable to both thefirm and GS Bank USA is generally consistent with the BaselCommittees framework and is designed to ensure that abanking organization maintains an adequate level ofunencumbered high-quality liquid assets equal to or greaterthan the expected net cash outflows under an acute short-term liquidity stress scenario. We disclose, on a quarterlybasis, our average daily LCR over the quarter. SeeAvailable Information below.

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

The Basel Committees net stable funding ratio (NSFR) isdesigned to promote medium- and long-term stable fundingof the assets and off-balance-sheet activities of bankingorganizations over a one-year time horizon. The NSFRframework requires banking organizations to maintain aminimum NSFR of 100%.

In May 2016, the U.S. federal bank regulatory agenciesissued a proposed rule that would implement an NSFR forlarge U.S. banking organizations, including the firm and GSBank USA. The proposal would require bankingorganizations to ensure they have stable funding over aone-year time horizon. In November 2016, the EuropeanCommission proposed amendments to the CRR toimplement the NSFR for certain E.U. financial institutions,which would be effective two years after it is incorporatedinto the CRR. Neither the U.S. federal bank regulatoryagencies nor the European Commission have released afinal rule.

The enhanced prudential standards implemented by theFRB under the Dodd-Frank Act require BHCs, includingGroup Inc., with $50 billion or more in total consolidatedassets (covered BHCs) to comply with enhanced liquidityand overall risk management standards, including a level ofhighly liquid assets based on projected funding needs for30 days, and increased involvement by boards of directorsin liquidity and overall risk management. Although theliquidity requirement under these rules has some similaritiesto the LCR, it is a separate requirement.

See Managements Discussion and Analysis of FinancialCondition and Results of Operations RiskManagement Overview and Structure of RiskManagement and Liquidity Risk Management inPart II, Item 7 of this Fo