‘Weighty decision’ for Goldman Sachs in US

Lloyd C Blankfein, chief executive of Goldman Sachs Group Inc, said he understands the concern over the potential impact to the financial markets of any global bank pleading guilty to a crime.

“There’s concern being shown and I don’t magnify it, but I don’t minimise it either,” the 59-year-old said, in an interview after the New York-based firm’s annual shareholder meeting in Irving, Texas, yesterday.

“You hope it’s not existential, and you hope there’s not a knock-on effect to that.”

Credit Suisse Group AG is close to reaching an agreement to plead guilty and pay about $2.5 billion to the US Justice Department and regulators to resolve investigations into whether it helped Americans evade taxes, according to three people familiar with the matter.

A guilty plea would be the first by a major global bank in the US in more than two decades, the effect of which would depend on consequences of the agreement, said Blankfein.

Risk
While dealing with a firm that pleaded guilty may raise issues involving credit and reputational risk, Goldman Sachs executives are mindful of the stability of the financial system, he said.

“For us, it’s not just a question of what’s in our economic interest; we have a role in the system, and for us to not deal with someone would be a further risk to the system,” Blankfein said.

“It becomes a very weighty decision for us to cut someone off, and we wouldn’t do it lightly.”

Ukraine
Blankfein also said that while clients don't seem overly worried about the situation in Ukraine, they are concerned that tensions between the US and Russia could escalate.

“There’s interest, curiosity, concern,” he said, “about what if it gets to the next layer or the next layer or the next layer of sanctions; what are the consequences of that?

“People transact, and no one can ever understand the full integration and the full knock-on effects of pulling a thread out.”