NEW YORK ( TheStreet) -- Goldman Sachs ( GS) has created an implementation team to prepare the bank for the phase-in of the Volcker Rule, which seeks to limit banks' ability to invest their own capital in proprietary trading and private equity funds.
Goldman Sachs CFO Harvey Schwartz said on a conference call with investors that the bank has created a "Volcker implementation team" that will help it adapt to new regulations now that the regulation has been signed into a law.
Already, Goldman Sachs has divested businesses it called "bright line proprietary trading," and meanwhile, many of the firm's biggest legacy private equity funds are in a run-off mode.
Still, as of the third quarter Goldman Sachs held nearly $60 billion in assets within its so-called Investing & Lending division, which houses branches of the bank that invest in alternative credit, private equity and hedge fund assets.
The Volcker rule seeks a 3% cap on any bank's investment in private equity and hedge funds relative to its Tier 1 capital, a regulation that would appear to handcuff Goldman Sachs. Of course there will be ways to mitigate the impact of Volcker, nevertheless, Goldman stands out as the bank most affected by the regulation.
More than any other bank, Goldman Sachs may be most exposed to the Volcker Rule. The firm's Investing & Lending unit has been the biggest driver of pre-tax profits in 2013.
In the fourth quarter, the Investing & Lending unit earned in excess of $2 billion in revenue, significantly ahead of consensus of $1.4 billion in revenue. Overall, Goldman's Investing & Lending division generated over $7 billion in net revenue, a 19% increase from 2012. The unit was Goldman's second fastest growing business by revenue in 2013.
Schwartz said that the firm is working on figuring out ways to continue investing in private equity structures in a "Volcker compliant manner." He also noted that Goldman may be able to find ways to invest in alternative assets off of its balance sheet.
When pressed by analysts, Schwartz wasn't willing to project Volcker's impact on the firm's revenues or expenses. "At this stage it is way too early to quantify any impact," he said.