Goldman Sachs Group Inc. (GS) said it could survive a global market shock that would send stocks down almost 40 percent and produce $20 billion in trading losses for the firm.
Goldman Sachs would maintain a Tier 1 common ratio of at least 8.9 percent during the shock, above the 5 percent minimum, the New York-based firm said in a disclosure of its company-run stress test. The test included the assumption of a "reputational event" specific to Goldman Sachs that would reduce its revenue over the nine-quarter length of the exam.
The biggest U.S. banks must conduct so-called mid-cycle stress tests using their own scenarios and disclose a summary of the results. Goldman Sach's performance in its own test topped that in the Federal Reserve's version in March, in which it had a minimum Tier 1 common ratio of 5.8 percent. The Fed's test had different assumptions and covered a different time period.
Goldman Sachs projected it would have a $6.2 billion net loss over the nine quarters from April 2013 to June 2015 in a "severely adverse scenario." The bank would have $15.5 billion of pre-provision net revenue in the period, overwhelmed by $20 billion in trading and counterparty losses, $1.1 billion in other losses and a $600 million provision for loan losses.
