Fourth Quarter 2021 Pillar 3 Disclosures

THE GOLDMAN SACHS GROUP, INC.

Pillar 3 Disclosures

Introduction

Overview

The Goldman Sachs Group, Inc. (Group Inc. or parent company), a Delaware corporation, together with its consolidated subsidiaries (collectively, the firm), is a leading global financial institution that delivers a broad range of financial services across investment banking, securities, investment management and consumer banking to a large and diversified client base that includes corporations, financial institutions, governments and individuals.

The Board of Governors of the Federal Reserve System (FRB) is the primary regulator of Group Inc., a bank holding company (BHC) under the U.S. Bank Holding Company Act of 1956 and a financial holding company under amendments to this Act. The firm is subject to consolidated regulatory capital requirements which are calculated in accordance with the regulations of the FRB (Capital Framework).

The capital requirements are expressed as risk-based capital and leverage ratios that compare measures of regulatory capital to risk-weighted assets (RWAs), average assets and off-balance sheet exposures. Failure to comply with these capital requirements would result in restrictions being imposed by the firm's regulators and could limit the firm's ability to repurchase shares, pay dividends and make certain discretionary compensation payments. The firm's capital levels are also subject to qualitative judgments by the regulators about components of capital, risk weightings and other factors.

The Capital Framework, as described below, requires disclosures based on the third pillar of Basel III (Pillar 3). The purpose of Pillar 3 disclosures is to provide information about banking institutions' risk management practices and regulatory capital ratios. This document is designed to satisfy these requirements and should be read in conjunction with the firm's most recent Annual Report on Form 10-K and FFIEC 101 Report, "Regulatory Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework." References to the "2021 Form 10-K" are to the firm's Annual Report on Form 10-K for the year ended December 31, 2021. All references to December 2021 and December 2020 refer to the periods ended, or the dates, as the context requires, December 31, 2021 and December 31, 2020, respectively. References to the FFIEC 101 Report refer to the firm's report filed for the period ended December 31, 2021, available on the National Information Center's website located at www.ffiec.gov.

Capital Framework

The regulations under the Capital Framework are largely based on the Basel Committee on Banking Supervision's (Basel Committee) capital framework for strengthening international capital standards (Basel III) and also implement certain provisions of the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Under the Capital Framework, the firm is an "Advanced approach" banking organization and has been designated as a global systemically important bank (G-SIB).

The Capital Framework includes the minimum risk-based capital and the capital conservation buffer requirements. The buffer must consist entirely of capital that qualifies as Common Equity Tier 1 (CET1) capital.

The firm calculates its CET1 capital, Tier 1 capital and Total capital ratios in accordance with both the Standardized and Advanced Capital Rules. Each of the ratios calculated under the Standardized and Advanced Capital Rules must meet its respective capital requirements.

Under the Capital Framework, the firm is also subject to leverage requirements which consist of a minimum Tier 1 leverage ratio and a minimum supplementary leverage ratio (SLR), as well as the SLR buffer.

As of December 2021, the firm's Standardized ratios were 14.2% for CET1 capital, 15.8% for Tier 1 capital and 17.9% for Total capital. See Note 20 "Regulation and Capital Adequacy" in Part II, Item 8 "Financial Statements and Supplementary Data" in the 2021 Form 10-K for further information about the firm's Standardized capital ratios and ratio requirements.

The Advanced Capital Rules require an Advanced approach BHC to meet a series of qualification requirements on an ongoing basis. They also require notification to supervisors of any change to a model that results in a material change in its RWAs, or of any significant change to its modeling assumptions. These qualification requirements address the following areas: the bank's governance processes and systems for maintaining adequate capital commensurate with its risk profile; its internal systems for segmenting exposures and applying risk weights; its quantification of risk parameters used, including its model-based estimates of exposures; its operational risk management processes, data management and quantification systems; the data management systems that are designed to support the timely and accurate reporting of risk-based capital requirements; and the control, oversight and validation mechanisms exercised by senior management and by the Board of Directors of Group Inc. (Board).

THE GOLDMAN SACHS GROUP, INC.

Pillar 3 Disclosures

The information presented in this document is calculated in accordance with the Capital Framework, with RWAs calculated in accordance with the Advanced Capital Rules, unless otherwise specified.

Definition of RWAs. As of December 2021, RWAs were calculated in accordance with both the Standardized and Advanced Capital Rules.

See Note 20 "Regulation and Capital Adequacy" in Part II, Item 8 "Financial Statements and Supplementary Data" in the 2021 Form 10-K for further information about the Capital Framework and the requirement to calculate RWAs in accordance with both the Standardized and Advanced Capital Rules. Also, see "Regulation" in Part I, Item 1 "Business" in the 2021 Form 10-K for further information about regulatory capital requirements.

Basis of Consolidation

The Pillar 3 disclosures and the firm's regulatory capital ratio calculations are prepared at the consolidated Group Inc. level. The firm's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and include the accounts of Group Inc. and all other entities in which the firm has a controlling financial interest. Intercompany transactions and balances have been eliminated. The scope of consolidation for regulatory capital purposes is substantially consistent with the firm's U.S. GAAP consolidation.

See Note 2 "Basis of Presentation" and Note 3 "Significant Accounting Policies" in Part II, Item 8 "Financial Statements and Supplementary Data" in the 2021 Form 10-K for further information about the basis of presentation of the firm's financial statements and policies on consolidation accounting.

Fair Value

Trading assets and liabilities, certain investments and loans, and certain other financial assets and liabilities, are included in the firm's consolidated balance sheets at fair value (i.e., marked-to-market), with related gains or losses generally recognized in the consolidated statements of earnings and, therefore, in capital. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The use of fair value to measure financial instruments is fundamental to the firm's risk management practices and is the most critical accounting policy. The daily discipline of marking substantially all of the firm's inventory to current market levels is an effective tool for assessing and managing risk and provides transparent and realistic insight into the firm's inventory exposures. The use of fair value is an important aspect to consider when evaluating the firm's capital base and capital ratios, as changes in the fair value of the firm's positions are reflected in the current period's shareholders' equity, and accordingly, regulatory capital; it is also a factor used to determine the classification of positions into the banking book and trading book, as discussed further below.

See Note 3 "Significant Accounting Policies" in Part II, Item 8 "Financial Statements and Supplementary Data" and "Critical Accounting Policies - Fair Value" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10-K for further information about the determination of fair value under U.S. GAAP and controls over valuation of financial instruments.

Banking Book/Trading Book Classification

In order to determine the appropriate regulatory capital treatment for the firm's exposures, positions must be first classified as either banking book or trading book. Positions are classified as banking book unless they qualify to be classified as trading book.

Banking book positions are not generally held for the purpose of short-term resale or with the intent of benefiting from actual or expected short-term price movements or to lock in arbitrage profits. They may be accounted for at amortized cost, fair value or in accordance with the equity method. Banking book positions are subject to credit risk regulatory capital requirements. Credit risk represents the potential for loss due to the default or deterioration in credit quality of a counterparty (e.g., an over-the-counter (OTC) derivatives counterparty or a borrower) or an issuer of securities or other instruments the firm holds. See "Credit Risk" for further information.

THE GOLDMAN SACHS GROUP, INC.

Pillar 3 Disclosures

Trading book positions generally meet the following criteria: they are assets or liabilities that are accounted for at fair value; they are risk managed using a Value-at-Risk (VaR) internal model; and they are positions that the firm holds, generally as part of the market-making and underwriting businesses, for the purpose of short-term resale or with the intent of benefiting from actual or expected short-term price movements or to lock in arbitrage profits. In accordance with the Capital Framework, trading book positions are generally considered covered positions. Foreign exchange and commodity positions are also typically considered covered positions, whether or not they meet the other criteria for classification as trading book positions. Covered positions are subject to market risk regulatory capital requirements which are designed to cover the risk of loss in value of these positions due to changes in market conditions. See "Market Risk" for further information. Certain trading book positions, such as derivatives, are also subject to counterparty credit risk regulatory capital requirements.

Restrictions on the Transfer of Funds or Regulatory Capital within the Firm

Group Inc. is a holding company and, therefore, utilizes dividends, distributions and other payments from its subsidiaries to fund dividend payments and other payments on its obligations, including debt obligations. Regulatory capital requirements, as well as other provisions of applicable law and regulations, restrict Group Inc.'s ability to withdraw capital from its regulated subsidiaries.

See Note 20 "Regulation and Capital Adequacy" in Part II, Item 8 "Financial Statements and Supplementary Data" and "Risk Management - Liquidity Risk Management" and "Capital Management and Regulatory Capital" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10-K for information about restrictions on the transfer of funds between Group Inc. and its subsidiaries.

Compliance with Capital Requirements

As of December 2021, none of Group Inc.'s consolidated subsidiaries that are subject to minimum regulatory capital requirements in a local jurisdiction had capital levels less than such requirements.

Goldman Sachs Bank USA (GS Bank USA), the firm's primary U.S. bank subsidiary, is an FDIC-insured, New York State-chartered bank and a member of the Federal Reserve System, is supervised and regulated by the FRB, the FDIC, the New York State Department of Financial Services and the Consumer Financial Protection Bureau, and is subject to regulatory capital requirements that are calculated under the Capital Framework. GS Bank USA is an Advanced approach banking organization under the Capital Framework.

See Note 20 "Regulation and Capital Adequacy" in Part II, Item 8 "Financial Statements and Supplementary Data" and "Capital Management and Regulatory Capital - Subsidiary Capital Requirements" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10-K for information about GS Bank USA's regulatory capital and leverage ratios as well as other regulated subsidiaries. Reflecting the full impact of Current Expected Credit Losses (CECL) as of December 2021, GS Bank USA's Advanced ratios would have been 18.8% for both CET1 capital and Tier 1 capital, and 21.1% for Total capital, and the Standardized ratios would have been 13.4% for both CET1 capital and Tier 1 capital, and 15.7% for Total capital.

Other Items

See "Capital Management and Regulatory Capital" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10-K for a detailed description of the firm's equity capital, and further information about the firm's capital planning and stress testing process, including the Comprehensive Capital Analysis and Review, the Dodd-Frank Act Stress Tests, the internally designed stress tests, the internal capital adequacy assessment, and the attribution of capital and contingency capital plan.

See "Risk Management - Overview and Structure of Risk Management" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10-K for further information about the firm's risk management framework, including Board governance, processes and committee structure.

Measures of exposures and other metrics disclosed in this report and the FFIEC 101 Report may not be based on U.S. GAAP, may not be directly comparable to measures reported in the 2021 Form 10-K and may not all be comparable to similar measures used by other companies. These disclosures are not required to be, and have not been, audited by the firm's independent auditors. The firm's historical filings with the SEC and previous Pillar 3 and Regulatory Capital

Disclosure documents are located at: www.goldmansachs.com/investor-relations.

THE GOLDMAN SACHS GROUP, INC.

Pillar 3 Disclosures

Regulatory Capital

The table below presents the risk-based capital and leverage requirements as of both December 2021 and December 2020 in accordance with the Advanced Capital Rules.

In the table above:

• The CET1 capital ratio requirement includes a minimum of 4.5%, the Tier 1 capital ratio requirement includes a minimum of 6.0% and the Total capital ratio requirement includes a minimum of 8.0%. These requirements also include the capital conservation buffer requirements, consisting of a buffer of 2.5%, the G-SIB surcharge of 2.5% (Method 2) and the countercyclical capital buffer, which the FRB has set to zero percent.
• The G-SIB surcharge is updated annually based on financial data from the prior year and is generally applicable for the following year. The G-SIB surcharge is calculated using two methodologies, the higher of which is reflected in the firm's risk-based capital requirements. The first calculation (Method 1) is based on the Basel Committee's methodology which, among other factors, relies upon measures of the size, activity and complexity of each G-SIB. The second calculation (Method 2) uses similar inputs, but includes a measure of reliance on short- term wholesale funding.
• The Tier 1 leverage ratio requirement is a minimum of 4%. The SLR requirement of 5% includes a minimum of 3% and a 2% buffer applicable to G-SIBs.

See "Regulation" in Part I, Item 1 "Business" in the 2021 Form 10-K and "Regulatory and Other Matters" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10-K for further information about regulatory capital reforms that impacts the firm.

The table below presents information about risk-based capital and leverage ratios, calculated in accordance with the Advanced Capital Rules.

Table 2: Risk-Based Capital and Leverage Ratios

In the table above:

• CET1 capital ratio is calculated as CET1 capital divided by RWAs, the Tier 1 capital ratio is calculated as Tier 1 capital divided by RWAs, and the Total capital ratio is calculated as Total capital divided by RWAs.
• Tier 1 leverage ratio is calculated as Tier 1 capital divided by average adjusted total assets for the quarter (which includes adjustments for goodwill and identifiable intangible assets, and certain investments in nonconsolidated financial institutions, as well as the impact of CECL transition).
• SLR is calculated as Tier 1 capital divided by total leverage exposure (which includes average adjusted total assets for the quarter and monthly average of certain off-balance sheet exposures). As of December 2020, total leverage exposure excluded average holdings of U.S. Treasury securities and average deposits at the Federal Reserve as permitted by the FRB. Effective April 1, 2021, the amendment permitting this exclusion expired. See the FFIEC 101 Report for further information about the firm's SLR.

THE GOLDMAN SACHS GROUP, INC.

Pillar 3 Disclosures

• As permitted by the FRB, the firm elected to temporarily delay the estimated effects of adopting CECL on regulatory capital until January 2022 and to subsequently phase-in the effects through January 2025. In addition, the firm elected to increase regulatory capital by 25% of the increase in the allowance for credit losses since January 1, 2020, as permitted by the rules issued by the FRB. The impact of this increase will also be phased in over the three-year transition period. Reflecting the full impact of CECL as of December 2021, the firm's Advanced ratios would have been 14.7% for CET1 capital, 16.3% for Tier 1 capital and 18.4% for Total capital. The firm's Standardized ratios would have been 14.1% for CET1 capital, 15.6% for Tier 1 capital and 18.0% for Total capital.

Capital Structure

The table below presents information about risk-based capital in accordance with the Advanced Capital Rules.

Table 3: Capital Structure

In the table above:

• Impact of CECL transition represents the impact of adoption as of January 1, 2020 and the impact of increasing regulatory capital by 25% of the increase in the allowance for credit losses since January 1, 2020. Other adjustments within Tier 2 capital also reflects the impact of these adjustments.

• Deduction for goodwill was net of deferred tax liabilities of $675 million as of December 2021 and $680 million as of December 2020.
• Deduction for identifiable intangible assets was net of deferred tax liabilities of $17 million as of December 2021 and $29 million as of December 2020.
• Deduction for investments in covered funds represents the firm's aggregate investments in applicable covered funds, excluding investments that are subject to an extended conformance period. See Note 8 "Investments" in Part II, Item 8 "Financial Statements and Supplementary Data" in the 2021 Form 10-K for further information about the Volcker Rule.
• Other adjustments within CET1 capital and Tier 1 capital primarily include credit valuation adjustments on derivative liabilities, the overfunded portion of the firm's defined benefit pension plan obligation net of associated deferred tax liabilities, disallowed deferred tax assets, debt valuation adjustments and other required credit risk-based deductions. Other adjustments within Tier 2 capital include eligible credit reserves.
• Qualifying subordinated debt is subordinated debt issued by Group Inc. with an original maturity of five years or greater. The outstanding amount of subordinated debt qualifying for Tier 2 capital is reduced upon reaching a remaining maturity of five years.
• Junior subordinated debt is debt issued to a Trust. As of December 2021, 10% of this debt was included in Tier 2 capital and 90% was phased out of regulatory capital. As of December 2020, 20% of this debt was included in Tier 2 capital and 80% was phased out of regulatory capital. Junior subordinated debt is reduced by the amount of Trust Preferred securities purchased by the firm and was fully phased out of Tier 2 capital beginning in January 2022.

See Note 14 "Unsecured Borrowings" and Note 19 "Shareholders' Equity" in Part II, Item 8 "Financial Statements and Supplementary Data" in the 2021 Form 10-K for further information about the terms and conditions of the common stock, perpetual non-cumulative preferred stock, junior subordinated debt issued to trusts and qualifying subordinated debt.

THE GOLDMAN SACHS GROUP, INC.

Pillar 3 Disclosures

See "Capital Management and Regulatory Capital" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10- K, and the following footnotes to the consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" in the 2021 Form 10-K for further information about the firm's capital:

• Note 12 "Other Assets" for information about the firm's goodwill and identifiable intangible assets;
• Note 14 "Unsecured Borrowings" for information about the firm's qualifying subordinated debt, junior subordinated debt and Trust Preferred securities; and
• Note 19 "Shareholders' Equity" for information about common equity, preferred equity and accumulated other comprehensive income/(loss).

Total Loss-Absorbing Capacity (TLAC)

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

See "Capital Management and Regulatory Capital" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10-K for further information about TLAC and related requirements.

Risk-Weighted Assets

The table below presents information about RWAs calculated in accordance with the Advanced Capital Rules.

Table 4: RWAs by Exposure Category

Further information about each of the material components in the table above, including a description of the methodologies used, can be found in the remainder of this document, under the section references indicated above.

Total Credit RWAs as of December 2021 increased by $25.79 billion compared with December 2020, primarily reflecting an increase in commitments, guarantees and loans (principally due to increased lending activity). This increase was partially offset by a decrease in equity investments (principally due to the sale of equity positions). Total Market RWAs as of December 2021 increased by $7.79 billion compared with December 2020, primarily reflecting an increase in stressed VaR (principally due to increased exposures to interest rates). Total Operational RWAs as of December 2021 increased by $4.60 billion compared with December 2020, primarily associated with litigation and regulatory proceedings.

THE GOLDMAN SACHS GROUP, INC.

Pillar 3 Disclosures

Credit Risk

Overview

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

Credit Risk, which is independent of the firm's revenue- producing units and reports to the chief risk officer, has primary responsibility for assessing, monitoring and managing credit risk through firmwide oversight across the firm's global businesses. In addition, the firm holds other positions that give rise to credit risk (e.g., bonds and secondary bank loans). These credit risks are captured as a component of market risk measures, which are monitored and managed by Market Risk. The firm also enters into derivatives to manage market risk exposures. Such derivatives also give rise to credit risk, which is monitored and managed by Credit Risk.

Credit Risk Management Process

The firm's process for managing credit risk includes the critical components of the risk management framework described in "Risk Management - Overview and Structure of Risk Management" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10-K, as well as the following:

• Monitoring compliance with established credit risk limits and reporting the firm's credit exposures and credit concentrations;
• Establishing or approving underwriting standards;
• Assessing the likelihood that a counterparty will default on its payment obligations;
• Measuring the firm's current and potential credit exposure and losses resulting from a counterparty default;
• Using credit risk mitigants, including collateral and hedging; and
• Maximizing recovery through active workout and restructuring of claims.

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

The firm's risk assessment process may also include, where applicable, reviewing certain key metrics, including, but not limited to, delinquency status, collateral values, Fair Isaac Corporation credit scores and other risk factors.

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

Risk Measures

The firm measures credit risk based on the potential loss in the event of non-payment by a counterparty using current and potential exposure. For derivatives and securities financing transactions, current exposure represents the amount presently owed to the firm after taking into account applicable netting and collateral arrangements, while potential exposure represents the estimate of the future exposure that could arise over the life of a transaction based on market movements within a specified confidence level. Potential exposure also takes into account netting and collateral arrangements. For loans and lending commitments, the primary measure is a function of the notional amount of the position.

Limits

The firm uses credit risk limits at various levels, as well as underwriting standards to manage the size and nature of its credit exposures. Limits for industries and countries are based on the firm's risk appetite and are designed to allow for regular monitoring, review, escalation and management of credit risk concentrations. See "Risk Management - Overview and Structure of Risk Management" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10-K for information about the firm's limit approval process.

THE GOLDMAN SACHS GROUP, INC.

Pillar 3 Disclosures

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

Credit Exposures

See Note 7 "Derivatives and Hedging Activities" and Note 11 "Collateralized Agreements and Financings" in Part II, Item 8 "Financial Statements and Supplementary Data" and "Risk Management - Credit Risk Management" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10-K for information about the firm's credit exposures, including the gross fair value, netting benefits and current exposure of its derivative exposures and securities financing transactions.

See "Risk Management - Credit Risk Management" in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Form 10-K for information about the firm's credit exposures to counterparties that defaulted.

Allowance for Credit Losses

See Note 9 "Loans" in Part II, Item 8 "Financial Statements and Supplementary Data" in the 2021 Form 10-K for information about the firm's past due loans, loans on nonaccrual status, and allowance for credit losses.

Credit RWAs

Credit RWAs are calculated based on measures of credit exposure, which are then risk weighted. Wholesale exposures generally include credit exposures to corporates, sovereigns or government entities (other than securitization, retail or equity exposures). Retail exposures are composed of residential mortgage exposures, qualifying revolving exposures, or other retail exposures, that are managed as part of a segment with homogeneous risk characteristics, not on an individual exposure basis. Certain loans to individuals, including some loans backed by residential real estate, are categorized as wholesale, rather than retail, exposures under the Capital Framework, as the associated credit risk is assessed on an individual basis and not as part of a portfolio of exposures. The firm computes risk weights for certain exposures in accordance with the Advanced Internal Ratings- Based (AIRB) approach, which utilizes internal assessments of each counterparty's creditworthiness. In addition, the firm utilizes internal models to measure exposures for derivatives and securities financing products using the Internal Models Methodology (IMM).

Exposure at Default (EAD). For on-balance sheet wholesale exposures, such as receivables and cash, the EAD is generally based on the carrying value. For the calculation of EAD for off-balance sheet exposures, including commitments and guarantees, a credit equivalent exposure amount is calculated based on the notional amount of each transaction multiplied by a credit conversion factor designed to estimate the net additions to funded exposures that would be likely to occur over a one-year horizon, assuming the obligor were to default. Historical studies and empirical data are generally used to estimate the credit conversion factor.

For on-balance sheet retail exposures, the EAD is generally based on the carrying value. For off-balance sheet retail exposures, EAD is the firm's best estimate of net additions to funded exposures that would be likely to occur over a one- year horizon assuming the retail exposures in the segment were to default.

For substantially all of the counterparty credit risk arising from OTC derivatives, exchange-traded derivatives and securities financing transactions, the firm uses internal models to calculate the distribution of exposure upon which the EAD calculation is based, in accordance with the IMM. The models estimate Expected Exposures (EE) at various points in the future using risk factor simulations. As defined in the Capital Framework, EE is the expected value of the probability distribution of non-negative credit risk exposures to a counterparty at any specified future date before the maturity date of the longest term transaction in a netting set. The model parameters are derived from historical and implied market data using the most recent three-year period, as well as a stressed three-year period. The models also estimate the Effective Expected Positive Exposure (EEPE) over the first year of the portfolio, which is the time-weighted average of non-declining positive credit exposure over the EE simulation. In accordance with the Advanced Capital Rules, the firm calculates two EEPEs: one based on stressed conditions and one based on unstressed conditions. For the stressed EEPE calculation, the model is re-calibrated using historical market parameters from a period of stress as identified by elevated credit spreads for the firm's counterparties. Both stressed and unstressed EAD are calculated by multiplying the EEPE by a standard regulatory factor of 1.4. The firm's RWAs calculated in accordance with the IMM are the greater of the RWAs based on the stressed or unstressed EEPE.