2017 Annual Dodd-Frank Act Stress Test Disclosure

2017 Annual Dodd-Frank Act Company-Run Stress Test Disclosure for The Goldman Sachs Group, Inc.

Overview and Requirements

For the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) Stress Test (DFAST) conducted annually (Annual DFAST) and completed in April of each year, The Goldman Sachs Group, Inc. (referred to herein as "Group Inc.," "we," "our," "us" or "the firm") is required to conduct stress tests using a set of macroeconomic scenarios (supervisory baseline, supervisory adverse and supervisory severely adverse) developed by the Board of Governors of the Federal Reserve System (Federal Reserve Board).

In addition, as part of our capital plan submitted to the Federal Reserve Board in connection with its annual Comprehensive Capital Analysis and Review (CCAR), we are also required to assess our capital adequacy under internally developed baseline and severely adverse scenarios. Stress testing is an integral component of our internal processes to assess our capital adequacy and to ensure that the firm holds an appropriate amount of capital relative to the risks of our businesses.

We are required to calculate our 2017 Annual DFAST results reflecting certain aspects of the Federal Reserve Board's revised risk-based capital and leverage regulations, subject to certain transitional provisions (Revised Capital Framework). These regulations are largely based on the Basel Committee on Banking Supervision's final capital framework for strengthening international capital standards (Basel III) and also implement certain provisions of the Dodd-Frank Act. The risk-based capital requirements are expressed as capital ratios that compare measures of regulatory capital to risk- weighted assets (RWAs).

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The firm is required to calculate Common Equity Tier 1 (CET1), Tier 1 capital and Total capital ratios for all quarters of the planning horizon in accordance with the Standardized approach and market risk rules set out in the Revised Capital Framework (together, the Standardized Capital Rules). We are also required to calculate a Tier 1 leverage ratio for all quarters, using the Revised Capital Framework definition of Tier 1 capital in the numerator and adjusted total assets (which includes adjustments for certain capital deductions) in the denominator. The firm is also required to calculate a supplementary leverage ratio (SLR) for the first quarter of 2018 through the first quarter of 2019. The SLR compares Tier 1 capital to a measure of leverage exposure, which consists of total assets for the quarter and certain off-balance- sheet exposures (which include a measure of derivatives exposures and commitments), less certain balance sheet deductions.

The planning horizon for the 2017 Annual DFAST is the first quarter of 2017 through and including the first quarter of 2019.

Minimum Regulatory Capital Ratio Requirements

The table below presents the required minimum capital ratios for the firm over the planning horizon in the stress test. For the 2017 Annual DFAST, the firm is only subject to the SLR minimum from the first quarter of 2018 to the first quarter of 2019.

Summary of Results

The table below presents the results of the firm's calculations under the Federal Reserve Board's severely adverse scenario over the planning horizon, including the instantaneous global market shock and counterparty default scenario applied to our trading and counterparty exposures, respectively.

These results incorporate the following capital action assumptions, as prescribed by the Federal Reserve Board's DFAST rules:

• actual capital actions for the first quarter of 2017; and
• for each of the remaining quarters in the planning horizon:
• • common stock dividends equal to the quarterly average dollar amount of common stock dividends that were paid in the second quarter of 2016 through and including the first quarter of 2017; and
  • payments on any other instrument that is eligible for inclusion in the numerator of a regulatory capital ratio equal to the stated dividend, interest, or principal due on such instrument during the quarter.

Other than described above, these results do not include any requested capital actions that may be incorporated into our 2017 CCAR submission.

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Based on the Federal Reserve Board's severely adverse scenario, the most significant drivers of the firm's capital ratios over the planning horizon are:

• Trading and counterparty losses, which include the global market shock, the counterparty default scenario, and trading incremental default risk losses, are included in our net (loss)/income projections;
• Lower Pre-Provision Net Revenues (PPNR) primarily due to decreased revenues and increased operational risk losses;
• Increased provisions and other losses in our loans and lending commitments; and
• Further transition towards the fully phased in Standardized Capital Rules, as applicable.

These results are not indicative of the Federal Reserve Board's calculations of the firm's regulatory capital ratios under its CCAR 2017 supervisory stress tests. The Federal Reserve Board has separately published its results for the supervisory stress test results incorporating the Annual DFAST capital actions. On June 28, 2017, the Federal Reserve Board is expected to publish its calculations for the supervisory stress test results incorporating our CCAR requested capital actions.

2017 Annual DFAST Results

Projected Capital Ratios, RWAs, Pre-Provision Net Revenues (PPNR), Losses, Net (Loss)/Income Before Taxes and Loan Losses The Goldman Sachs Group, Inc. Estimates in the Federal Reserve Board's Severely Adverse Scenario

These results are calculated using capital action assumptions required by the DFAST rules. All projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts.

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Operational Risk

Operational 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 or legal and regulatory matters.

Potential types of loss events related to internal and external operational risk include:

• Clients, products and business practices;
• Execution, delivery and process management;
• Business disruption and system failures;
• Employment practices and workplace safety;
• Damage to physical assets;
• Internal fraud; and
• External fraud.

Operational risk, including litigation-related losses, is incorporated into our 2017 Annual DFAST results with losses estimated based on the firm's historical operational risk experience, relevant internal factors, including the firmwide risk and control self- assessment, scenario analysis, recent industry matters and the assumed conditions of the Federal Reserve Board's severely adverse scenario. Operational risk losses are included within non-compensation expense projections over the planning horizon.

Liquidity Risk

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

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For purposes of the 2017 Annual DFAST, we analyzed how we would manage our balance sheet through the duration of a severe crisis and we included assumptions regarding our ability to access the secured and unsecured funding markets to generate incremental liquidity. Our 2017 Annual DFAST results took certain liquidity risks into account by projecting potential liquidity outflows due to the Federal Reserve Board's severely adverse scenario environment (e.g., draws on unfunded commitments and secured and unsecured funding roll-offs without replacement) and the impact of these outflows on our liquidity position and balance sheet. Additionally, we project increased funding costs.

Description of Our Projection Methodologies

PPNR

PPNR includes revenues and operating expenses.

Revenues. We project revenues for each of our four business segments: Investment Banking, Institutional Client Services, Investing & Lending and Investment Management.

When projecting revenues for these four segments, we utilize multiple approaches, including models based on regression analyses, management judgment and projecting the impact of re-pricing inventory due to the projected changes in asset values under the Federal Reserve Board's severely adverse scenario. We also incorporate the impact of broader industry performance during historical stressed periods to help guide management judgment regarding our future performance in the assumed stressed operating environment. The projected revenues under the Federal Reserve Board's severely adverse scenario are an aggregation of projected revenues for each of these business segments.

• Investment Banking. We provide a broad range of investment banking services to a diverse group of corporations, financial institutions, investment funds and governments. Services include strategic advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense activities, restructurings, spin-offs and risk management, and debt and equity underwriting of public offerings and private placements, including local and cross-border transactions and acquisition financing, as well as derivative transactions directly related to these activities.

• Institutional Client Services. We facilitate client transactions and make markets in fixed income, equity, currency and commodity products, primarily with institutional clients such as corporations, financial institutions, investment funds and governments. We also make markets in and clear client transactions on major stock, options and futures exchanges worldwide and provide financing, securities lending and other prime brokerage services to institutional clients.
• Investing & Lending. We invest in and originate loans to provide financing to clients. These investments and loans are typically longer-term in nature. We make investments, some of which are consolidated, directly and indirectly through funds that we manage, in debt securities and loans, public and private equity securities, infrastructure and real estate entities. We also make unsecured loans to individuals through our online platform.
• Investment Management. We provide investment management services and offer investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse set of institutional and individual clients. We also offer wealth advisory services, including portfolio management and financial counseling, and brokerage and other transaction services to high- net-worth individuals and families.

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Expenses

Operating expense projections over the planning horizon include compensation and benefits and non- compensation expenses.

Compensation and benefits includes salaries, discretionary compensation, amortization of equity awards and other items such as benefits. Discretionary compensation is significantly impacted by, among other factors, the level of net revenues, overall financial performance, prevailing labor markets, business mix, the structure of our share- based compensation programs and the external environment.

Non-compensation expenses include certain expenses that vary with levels of business activity, such as brokerage, clearing, exchange and distribution fees and market development costs. Non-compensation expenses also include expenses that relate to our global footprint and overall headcount levels. Such expenses include depreciation and amortization, occupancy, and communication and technology costs.

In addition, non-compensation expenses include any projected impairments of nonfinancial assets as well as operational risk losses, including litigation reserves (and corresponding legal fees), cyber attack associated losses and fraud losses.

Provisions and Loan Losses

Provisions and loan losses are projected over the planning horizon using a comprehensive, model- based approach. The model estimates losses based on projections of probability of default, loss given default, exposure at default, industry classification, region and ratings migration for loans receivable and lending commitments in the accrual portfolio.

Trading and Counterparty Losses

Trading and counterparty losses include mark-to- market losses, trading incremental default risk losses on positions held at fair value and changes in CVA as a result of the global market shock, as well as the impact of the counterparty default scenario. Subsequent trading incremental default risk losses over the planning horizon are also included. We use the firm's existing stress testing and risk management infrastructure to calculate the impact of the global market shock and to quantify the impact of the counterparty default scenario.

Other Losses

Other losses primarily includes projected changes over the planning horizon in the fair value of certain loans and lending commitments and associated hedges accounted for at fair value, which are not subject to the global market shock, pursuant to the Federal Reserve Board's instructions.

Balance Sheet

Balance sheet projections are based on the macroeconomic environment and incorporate input from businesses on growth assumptions and planned activity, changes to carrying values as a result of marking our inventory to market, as well as management judgment as to how the firm would manage its balance sheet, funding and liquidity over the planning horizon.

Pursuant to the Federal Reserve Board's instructions, the impact of the global market shock and the counterparty default scenario are not incorporated into the firm's balance sheet projections under the Federal Reserve Board's severely adverse scenario.

Capital and RWAs

Capital projections incorporate projected net earnings, capital deductions, other changes in equity, which includes the impact of actual capital actions from the first quarter of 2017, and assumed capital actions required by the DFAST rules. Projected RWAs reflect the impact of the macroeconomic environment; for example, changes in volatilities and credit spreads are incorporated into our calculation of projected RWAs. Additionally, projected RWAs and capital deductions are also impacted by the projected size and composition of our balance sheet over the planning horizon.

As noted above, we have calculated capital ratios under the Standardized Capital Rules, including transitional provisions where appropriate.

2017 Annual Dodd-Frank Act Stress Test Disclosure for Goldman Sachs Bank USA

DFAST rules also require Goldman Sachs Bank USA (GS Bank USA) to conduct stress tests on an annual basis.

GS Bank USA is a wholly-owned subsidiary of Group Inc. The Dodd-Frank Act requires stress test results of any subsidiary depository institution to be disclosed along with the stress test results of the bank holding company parent.

For the 2017 Annual DFAST, the required minimum capital ratios and the planning horizon for GS Bank USA are consistent with those for Group Inc.

The table below summarizes the results of GS Bank USA's 2017 Annual DFAST based on the Federal Reserve Board's severely adverse scenario.

2017 Annual DFAST Results - GS Bank USA

Actual Q4 2016 and Projected Capital Ratios through Q1 2019 under the Federal Reserve Board's Severely Adverse Scenario

In the above table, CET1, Tier 1 capital and Total capital are calculated under the Standardized Capital Rules, subject to transitional provisions. The lowest calculated ratios (minimum) from the first quarter of 2017 to the first quarter of 2019 are presented in the table. For the SLR, the lowest calculated ratio (minimum) from the first quarter of 2018 to the first quarter of 2019 is presented in the table. GS Bank USA's externally reported SLR for Q4 2016 was 7.3%.

The most significant drivers of the changes in GS Bank USA's regulatory capital ratios are planned capital actions, increased RWAs, increased provisions and other losses in our loans and loan commitments portfolios, lower PPNR over the planning horizon, primarily due to decreased revenues and increased operational risk losses, as well as trading losses from the global market shock. GS Bank USA was not required to include the counterparty default scenario in its stress test.

More information on the CCAR and DFAST stress tests, as well as the Federal Reserve Board's severely adverse scenario, is available on the Federal Reserve Board's website at http://www.federalreserve.gov.

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