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Goldman Sachs May Owe $2.21 Billion If Rating Falls Two Levels

Thursday, 10 May 2012 01:00 PM

Goldman Sachs Group Inc., one of the five U.S. banks with the biggest positions in over-the-counter derivatives, may owe counterparties $2.21 billion if its credit rating falls two levels.

Counterparties could demand the money in collateral and termination payments, the New York-based bank said in a quarterly filing today. A one-level reduction would require $1.33 billion in payments, according to the filing.

Goldman Sachs, the fifth-biggest U.S. bank by assets, is under review by Moody’s Investors Service for a possible two- level downgrade to A3 from A1. The credit rater said in February it was examining ratings of 17 banks and securities firms with global capital-market operations. Morgan Stanley, Credit Suisse Group AG and UBS AG may be cut three levels, Moody’s said.

As of Dec. 31, a two-level cut would have obliged Goldman Sachs to pay $2.18 billion in collateral and terminations, the firm reported in February. A one-level reduction would have required $1.3 billion as of December, the firm reported.

Goldman Sachs was among five companies that accounted for 96 percent of the total U.S. banking industry’s notional holdings in derivatives and 86 percent of net current credit exposure in derivatives as of December, according to the Office of the Comptroller of the Currency.

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Thursday, 10 May 2012 01:00 PM
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