Goldman Sachs (NYSE:GS) is one of the five U.S. banks with the largest positions in over-the-counter derivatives. The fifth-biggest U.S. bank may owe counterparties $2.21 billion if its credit rating falls two levels.
According to a quarterly filing today, counterparties could demand the money in collateral and termination payments. Goldman’s filing also stated that a one-level reduction would require $1.88 billion in payments.
Goldman Sachs is under review by Moody’s Investors Service for a possible two-level downgrade to A3 from A1. In February, the credit rater said it was examining ratings of 17 banks and securities firms with global capital-market operations. Moody’s announced that Morgan Stanley (NYSE:MS), Credit Suisse Group AG (NYSE:CS), and UBS AG (NYSE:UBS) could be cut three levels.
As for Goldman Sachs, Moody’s reported in February that a two-level cut would have obliged the bank to pay $2.18 billion in collateral and terminations, while a one-level reduction would have required $1.3 billion as of December.
According to the Office of the Comptroller of the Currency, 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.
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