Goldman Sachs wants to be in the transparency game.
They’ve just released a 63-page report that explains how they’ll reveal how much of their revenue comes from the firm’s own trading and investing, but also other new methods like client matrixes to make sure they don’t dupe their customers.
Lloyd Blankfein revealed the findings of the review, which was launched by the firm’s internal Business Standards Committee after the Abacus charges, to almost 500 Goldman partners yesterday in Connecticut, the Wall Street Journal reports.
Blankfein told his soldiers:
Our history of good performance through the crisis became a liability as people wondered how we performed so well and whether we’d received favourable treatment from well-placed alumni. This was not only a poor place to be, it was a dangerous place to be.
It is not an initiative to get back to where we were, but an initiative to elevate the standards of the firm. You should take any breach of these standards very seriously. This firm has one reputation: yours.
Here’s are the main details of the report:
- The new procedure begins with Goldman’s Q4 results, which will be released later this month.
- There are 39 changes set to be adopted.
- The changes don’t include an overhaul of its operations or management, “as some of the company’s harshest critics demanded.”
- Blankfein’s future isn’t discussed.
- There are new procedures to ensure Goldman doesn’t take advantage of clients, “even accidentally.”
- Clients will be put into a “matrix” to define their level of “sophistication,” which will then determine which types of transactions are most “suitable” for that client. Importantly, those who want to neglect those limits will need special approval from the bank.
- Regulators were informed of the findings.
- Traders and brokers will be barred for 30 days from writing anything “expressing a view” about a deal or client for which Goldman is the underwriter. However they’ll still will be allowed to “communicate orally” about the firm’s deals.
- From now on, structured-finance deals like Abacus will be assembled by the investment bankers, not traders.
- Goldman will now report revenue in four business groups rather than three.
- Revenue from trading done on behalf of clients will be separated from revenue generated by Goldman’s own holdings.
- The bank will publish a new and simplified balance sheet, in addition to the balance sheet it already files to meet accounting standards: “The new format will classify the firm’s assets by business unit, including cash and liquid securities, and Goldman’s funding of hedge funds and derivatives clients,” the WSJ said.
- It will take 15 to 18 months to implement the changes
The committee, which was headed up by vice-chairman and top Asia man Michael Evans has reportedly had 17 meetings with 130 partners and managing directors since the review began, and apparently there was some seriously heated debate about how to change the “culture” of the firm.
Hundreds of clients also had their say.