UBS Group AG 6-K, filed Mar 5, 2021
UBS Group AG (UBS)
About this 6-K
UBS Group AG filed this 6-K on March 5, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Date: March 5, 2021
UBS Group AG
Commission File Number: 1-36764
UBS AG
Commission File Number: 1-15060
(Registrants' Name)
Bahnhofstrasse 45, Zurich, Switzerland and
Aeschenvorstadt 1, Basel, Switzerland
(Address of principal executive offices)
Indicate by check mark whether the registrants file or will file annual reports under cover of Form 20‑F or Form 40-F.
Form 20-F x Form 40-F o
This Form 6-K consists of the 31 December 2020 Pillar 3 report of UBS Group and significant regulated subsidiaries and sub-groups, which appears immediately following this page.
31 December 2020 Pillar 3 report
UBS Group and significant regulated subsidiaries and sub-groups
Termsused in this report, unless the context requires otherwise
| “UBS,”<br> “UBS Group,” “UBS Group AG consolidated,” “Group,”<br> “the Group,” “we,” “us” and “our” | UBS Group AG<br> and its consolidated subsidiaries | |
|---|---|---|
| “UBS AG<br> consolidated” | UBS AG and its<br> consolidated subsidiaries | |
| “UBS Group AG”<br> and “UBS Group AG standalone” | UBS Group AG on<br> a standalone basis | |
| “UBS AG” and<br> “UBS AG standalone” | UBS AG on a<br> standalone basis | |
| “UBS<br> Switzerland AG” and “UBS Switzerland AG standalone” | UBS Switzerland<br> AG on a standalone basis | |
| “UBS Europe SE<br> consolidated” | UBS Europe SE<br> and its consolidated subsidiaries | |
| “UBS Americas<br> Holding LLC” and<br><br> <br>“UBS Americas<br> Holding LLC consolidated” | UBS Americas<br> Holding LLC and its consolidated subsidiaries | |
| Table of contents | ||
| --- | --- | --- |
| Introduction and basis for preparation | ||
| UBS Group | ||
| 18 | Section<br> 1 | Key metrics |
| 21 | Section<br> 2 | Overview of risk-weighted<br> assets |
| 23 | Section<br> 3 | Linkage between financial<br> statements and regulatory exposures |
| 26 | Section<br> 4 | Credit risk |
| 58 | Section<br> 5 | Counterparty credit risk |
| 69 | Section<br> 6 | Comparison of A-IRB approach<br> and standardized approach for credit risk |
| 74 | Section<br> 7 | Securitizations |
| 77 | Section<br> 8 | Market risk |
| 87 | Section<br> 9 | Operational risk |
| 88 | Section<br> 10 | Interest rate risk in the<br> banking book |
| 92 | Section<br> 11 | Going and gone concern<br> requirements and eligible capital |
| 101 | Section<br> 12 | Total loss-absorbing capacity |
| 103 | Section<br> 13 | Leverage ratio |
| 106 | Section<br> 14 | Liquidity coverage ratio |
| 109 | Section<br> 15 | Remuneration |
| 110 | Section<br> 16 | Requirements for global<br> systemically important banks and related indicators |
| Significant regulated subsidiaries and sub-groups | ||
| 112 | Section<br> 1 | Introduction |
| 112 | Section<br> 2 | UBS AG standalone |
| 117 | Section<br> 3 | UBS Switzerland AG standalone |
| 124 | Section<br> 4 | UBS Europe SE consolidated |
| 125 | Section<br> 5 | UBS Americas Holding LLC<br> consolidated |
Contacts
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Office of the Group CompanySecretary
The Group Company Secretary receives inquiries regarding compensation and related issues addressed to members of the Board of Directors.
UBS Group AG, Office of the
Group Company Secretary
P.O. Box, CH-8098 Zurich, Switzerland
sh-company-secretary@ubs.com
Zurich +41-44-235 6652
Shareholder Services
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a unit of the Group Company Secretary Office, is responsible
for the registration of UBS Group AG registered shares.
UBS Group AG, Shareholder Services
P.O. Box, CH-8098 Zurich, Switzerland
sh-shareholder-services@ubs.com
Zurich +41-44-235 6652
US Transfer Agent
For global registered share-related
inquiries in the US.
Computershare Trust Company NA
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Imprint
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Language: English
© UBS 2021. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
Introduction and basis for preparation
Scope of BaselIII Pillar 3 disclosures
The Basel Committee on Banking Supervision (the BCBS) Basel III capital adequacy framework consists of three complementary pillars. Pillar 1 provides a framework for measuring minimum capital requirements for the credit, market, operational and non-counterparty-related risks faced by banks. Pillar 2 addresses the principles of the supervisory review process, emphasizing the need for a qualitative approach to supervising banks. Pillar 3 requires banks to publish a range of disclosures, mainly covering risk, capital, leverage, liquidity and remuneration.
This report provides Pillar 3 disclosures for the UBS Group and prudential key figures and regulatory information for UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated in the respective sections under “Significant regulated subsidiaries and sub-groups.”
As UBS is considered a systemically relevant bank (an SRB) under Swiss banking law, UBS Group AG and UBS AG are required to comply with regulations based on the Basel III framework as applicable to Swiss SRBs on a consolidated basis. Capital and other regulatory information as of 31 December 2020 for UBS Group AG consolidated is provided in the “Capital, liquidity and funding, and balance sheet” section of our Annual Report 2020 and for UBS AG consolidated in the “Capital, liquidity and funding, and balance sheet” section of the combined UBS Group AG and UBS AG Annual Report 2020, available under “Annual reporting” at ubs.com/investors.
Local regulators may also require the publication of Pillar 3 information at a subsidiary or sub-group level. Where applicable, these local disclosures are provided under “Holding company and significant regulated subsidiaries and sub-groups” at ubs.com/investors.
COVID-19 regulatory measures
COVID-19 temporary regulatory measures in Switzerland
In March 2020, the Swiss Federal Council adopted provisional emergency legislation to support small and medium-sized Swiss companies suffering from substantial reductions in revenue due to the COVID-19 pandemic.
In December 2020, the Swiss Parliament approved the COVID-19 Joint and Several Guarantee Act, which became effective on 19 December 2020. This Act codified the measures adopted under emergency legislation into ordinary law and provides for regulation of the loan programs and guarantees over their life cycle. The new Act extends the standard amortization period of loans from five to eight years.
Under the aforementioned legislation, and until 31 July 2020, affected companies were able to apply through their banks for emergency loans, amounting to a maximum of 10% of their annual turnover, with a ceiling of CHF 20 million. As of that date, we had committed CHF 2.7 billion of loans up to CHF 0.5 million, which are 100% guaranteed by the Swiss government, and CHF 0.6 billion of loans between CHF 0.5 million and CHF 20 million, which are 85% government-guaranteed. As of 31 December 2020, the total committed loans amounted to CHF 3.0 billion (31 July 2020: CHF 3.3 billion), of which CHF 1.8 billion was drawn. We intend to donate any economic profits from this program to COVID-19 relief efforts, although no such profits were made in 2020.
Furthermore, the Swiss Federal Council deactivated the countercyclical buffer on residential real estate loans in March 2020 until further notice, at the request of the Swiss National Bank (the SNB), to support the lending capacity of banks. This led to a reduction of 29 basis points of UBS’s common equity tier 1 (CET1) capital requirement as of 31 December 2020, with no impact on UBS’s capital ratios.
Banks that have model-based market risk RWA calculations, such as UBS, experienced an increased number of backtesting exceptions, driven by the higher volatility levels in the markets throughout 2020. These exceptions could ultimately result in higher bank-specific minimum capital requirements. To prevent procyclicality in capital requirements, the Swiss Financial Market Supervisory Authority (FINMA) introduced a temporary exemption, freezing the number of backtesting exceptions from 1 February 2020 until 1 July 2020, and subsequently introduced this exemption into supervisory practice: the exemption therefore continued to apply beyond 1 July 2020, subject to future withdrawal by the regulator. For UBS, the number of negative backtesting exceptions within a 250-business-day window increased from 0 to 3 by the end of 2020. The resulting FINMA VaR multiplier for market risk RWA remained unchanged at 3 as of 31 December 2020; UBS did not benefit from the exemption in 2020.
In addition, FINMA permitted banks to temporarily exclude central bank sight deposits from the leverage ratio denominator (the LRD) for the purpose of calculating going concern ratios. This exemption applied until 1 January 2021. Applicable dividends or similar distributions approved by shareholders after 25 March 2020 reduced the relief by the LRD equivalent of the capital distribution. As of 31 December 2020, these exclusions resulted in a temporary reduction of our LRD for going concern requirement purposes of USD 93 billion. Given our existing buffers to capital requirements and the temporary nature of this measure, this had no impact on our capacity to provide funding to our clients or the Swiss economy.
› Refer to the “Going and gone concern requirements and eligiblecapital” section of this report for more information about the effects of thetemporary exemption granted by FINMA in connection with COVID-19
COVID-19 temporary regulatory measures outside Switzerland
Regulators in key jurisdictions outside of Switzerland have taken measures intended to encourage banks to take an accommodative stance when dealing with customers facing financial stress, and also to support liquidity in markets. These measures include temporary relaxation of capital buffer and Pillar 2 capital requirements, temporary modifications to the LRD and the establishment of special lending or financing facilities.
The BCBS has delayed the implementation deadline of Basel III rules by one year, to 1 January 2023. The accompanying transitional arrangement for the output floor has also been extended by one year, to 1 January 2028. Separately, the BCBS and the International Organization of Securities Commissions (IOSCO) have extended the final implementation phase of the framework for margin requirements for non-centrally cleared derivatives by one year, to 1 September 2022.
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In May 2020, the Federal Reserve made a temporary change to permit the exclusion of US Treasury securities and deposits at Federal Reserve Banks from the calculation of the supplementary leverage ratio for bank holding companies (BHCs) and intermediate holding companies (IHCs), including UBS Americas Holding LLC. This temporary change will be in effect until 31 March 2021.
The EU and the European Central Bank (the ECB) have also communicated a series of regulatory measures to stabilize the economy in Europe. None of those measures had a significant impact on UBS Group during 2020.
Capital returns
The second tranche of the 2019 dividend (USD 0.365 per share) was paid on 27 November 2020 following shareholder approval at an extraordinary general meeting on 19 November 2020.
For 2020, the Board of Directors intends to propose an ordinary dividend per share of USD 0.37 for the 2020 financial year, to be approved at the general meeting of shareholders in April 2021.
In the first quarter of 2020, before the introduction of COVID-related share repurchase restrictions, we repurchased CHF 350 million (USD 364 million) of our shares. In the first quarter of 2021, we repurchased the remaining CHF 100 million of our 2018–2021 program, which is now complete and closed.
Furthermore, we have established a USD 2.0 billion capital reserve for potential share repurchases during the second half of 2020. On 11 February 2021, we launched a new three-year program of up to CHF 4 billion, of which up to USD 1 billion is in the process of being executed by the end of the first quarter of 2021.
International action regarding capital distributions
During 2020, regulators in several jurisdictions implemented measures restricting bank capital distributions and share repurchase programs. These measures were intended to maintain capital resilience and lending capacity following the outbreak of the COVID-19 pandemic. As at 31 December 2020, no such measures were in place in Switzerland.
In June 2020, the European Systemic Risk Board issued a recommendation to prevent EU financial institutions from making capital distributions and running share repurchase programs, which was extended in July 2020 until 1 January 2021. In December 2020, the ECB announced that EU banks under its supervision, including UBS Europe SE, should exercise extreme prudence with regard to dividends and share repurchases from 1 January until 30 September 2021.
In the US, the Federal Reserve Board (the FRB) has taken several actions, including a prohibition on increasing dividends and share repurchases, which started in the third quarter of 2020, keeping these restrictions largely unchanged throughout the fourth quarter. As a result, UBS Americas Holding LLC was restricted from distributing cash dividends on common equity in excess of the firm’s average net income over the four preceding quarters. In December, the FRB announced that it would continue capital distribution constraints for supervised firms for the first quarter of 2021 and would review the need to renew such constraints at a later date.
UBS continues to monitor policy developments regarding distributions.
Significant regulatory and disclosure requirements and changeseffective in or from 2020
Significant BCBS and FINMA capital adequacy, liquidity and funding, and related disclosure requirements
This Pillar 3 report has been prepared in accordance with FINMA Pillar 3 disclosure requirements (FINMA Circular 2016/1 “Disclosure – banks”) as revised on 31 October 2019, the underlying BCBS guidance “Revised Pillar 3 disclosure requirements” issued in January 2015, the “Frequently asked questions on the revised Pillar 3 disclosure requirements” issued in August 2016, the “Pillar 3 disclosure requirements – consolidated and enhanced framework” issued in March 2017 and the subsequent “Technical Amendment – Pillar 3 disclosure requirements – regulatory treatment of accounting provisions” issued in August 2018.
Changes to Pillar 1 requirements
Revised FINMA circular on credit risk
Effective 1 January 2020, we have adopted the standardized approach for counterparty credit risk (SA-CCR). SA-CCR is a comprehensive, non-modeled approach for measuring counterparty credit risk associated with over-the-counter derivatives, exchange-traded derivatives and long settlement transactions that replaces the current exposure method (CEM).
The implementation impact from SA-CCR on risk-weighted assets was USD 1.8 billion, which was fully absorbed during the first quarter of 2020.
We also adopted the capital requirements for investments in funds in the banking book detailed in FINMA Circular 2017/7 “Credit risk – banks,” whereby investments in funds that are held in the banking book are consistently treated with one of the following three approaches, which vary in their degree of risk sensitivity and conservatism: the “look-through approach,” the “mandate-based approach” or the “fallback approach.” The implementation of these revised capital requirements for fund investments led to a USD 0.6 billion increase in RWA, which was fully absorbed during the first quarter of 2020.
In addition, we have implemented the FINMA revisions to the capital treatment concerning UBS’s exposures to central counterparties, which mainly include a single approach for calculating capital requirements for exposures arising from UBS’s contributions to the mutualized default fund resources of a qualifying central counterparty (a QCCP) which had no material impact on risk-weighted assets, and the specific guidance regarding multi-level client structures where UBS clears its trades through intermediaries linked to a central counterparty.
Swiss SRB going and gone concernrequirements
As of 1 January 2020, we have fully phased in the going and gone concern requirements of the Swiss Capital Adequacy Ordinance (the CAO) that include the too-big-to-fail provisions applicable to Swiss SRBs.
As of 1 January 2020, instruments meeting gone concern requirements continue to remain eligible until one year before maturity; the previously applicable 50% haircut in the last year of eligibility has been removed. Instead, a maximum of 25% of the gone concern requirements can now be met with instruments that have a remaining maturity of between one and
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two years (i.e., are in the last year of eligibility). Once at least 75% of the gone concern requirement has been met with instruments that have a remaining maturity of greater than two years, all instruments that have a remaining maturity of between one and two years remain eligible to be included in the total gone concern capital. Our gone concern instruments are reasonably evenly distributed across maturities, with no major cliffs; therefore, this 25% restriction has not affected us and we do not anticipate that it will affect us in the future.
Under the Swiss SRB framework, banks are eligible for a rebate on the gone concern requirement if they take actions that facilitate recovery and resolvability beyond the minimum requirements. The amount of the rebate for improved resolvability is assessed annually by FINMA. Based on actions we had completed by December 2019 to improve resolvability, FINMA granted a rebate on the gone concern requirement of 47.5% of the aforementioned maximum rebate in the third quarter of 2020, which resulted in a reduction of 2.54 percentage points for the RWA-based requirement and 0.89 percentage points for the LRD-based requirement.
Our gone concern requirements are further reduced when higher quality capital instruments (CET1 capital, low-trigger loss-absorbing AT1 or certain low-trigger tier 2 capital instruments) are used to meet gone concern requirements. As of 31 December 2020, UBS has used low-trigger tier 2 capital instruments to fulfill gone concern requirements, resulting in a reduction of 1.25 percentage points for the RWA-based requirement and 0.35 percentage points for the LRD-based requirement.
Until 31 December 2021, the gone concern requirement following the application of the rebate for resolvability measures and the reduction for the use of higher quality capital instruments is floored at 8.6% and 3% for the RWA- and LRD-based requirements, respectively. From 1 January 2022 onwards, this floor increases to 10% and 3.75% for the RWA- and LRD-based requirements, respectively.
› Refer to the “Capital, liquidity and funding, and balance sheet”section of our Annual Report 2020, available under ”Annual reporting” at ubs.com/investors ,for information about the current capital requirements
Gone concern capital requirements forUBS AG standalone and UBS Switzerland AG
Effective 1 January 2020, UBS AG standalone is subject to the gone concern capital requirements for Switzerland-based intermediate parent banks of global systemically important banks (G-SIBs) on a standalone basis, as stipulated in the revised CAO issued in November 2019. We have provided the necessary disclosure since the first quarter of 2020.
UBS Switzerland AG is subject to a lower gone concern requirement effective 1 January 2020, corresponding to 62% of the Group’s gone concern requirement (before applicable reductions) as outlined in the revised CAO.
› Refer to the “UBS AG standalone” and the “UBS Switzerland AG standalone”sections of this report for more information about the revised gone concerncapital requirements
Revision of the Swiss Banking Act
In June 2020, the Swiss Federal Council adopted a dispatch on the partial revision of the Banking Act. The proposed measures
would strengthen the Swiss depositor protection scheme by requiring banks to deposit half of their contribution obligations for the deposit protection scheme in securities or cash with a custodian. A related adjustment to the Intermediated Securities Act would require custodians of securities to separate their own portfolios from the portfolios of their clients. Furthermore, the revision would amend the section of the Swiss Banking Act on bank insolvency provisions, including the ranking of claims in case of a bail-in and the required subordination of bail-in bonds, except those issued by a holding company with pari passu liabilities of less than 5% of the total bail-in bond capital.
As the next step, both chambers of the Parliament will debate the bill; the revised Banking Act is not expected to come into force until the start of 2022. We expect moderate additional costs for all Switzerland-based Group entities in scope.
Results of the annual Comprehensive Capital Analysis and Review
In June 2020, the Federal Reserve released the results of its annual Dodd–Frank Act Stress Tests (DFAST) and Comprehensive Capital Analysis and Review (CCAR).
UBS’s intermediate holding company, UBS Americas Holding LLC, exceeded minimum capital requirements under the severely adverse scenario and the Federal Reserve did not object to its capital plan. As a result, UBS Americas Holding LLC will no longer be subject to the qualitative assessment component of CCAR.
Following the completion of the annual DFAST and CCAR, UBS Americas Holding LLC was assigned a stress capital buffer (an SCB) of 6.7% under the SCB rule (based on Dodd–Frank Act stress test results and planned future dividends), which results in the imposition of restrictions if the SCB is not maintained above specified regulatory minimum capital requirements.
The Federal Reserve also conducted sensitivity analyses to model the economic effects of the COVID-19 pandemic. As a result of these supplementary analyses, the Federal Reserve determined that firms should resubmit revised capital plans based on a new stress scenario. In December 2020, the Federal Reserve released the results of this second CCAR of 2020. UBS Americas Holding LLC’s projected stress capital ratios exceeded regulatory capital minima under the updated supervisory scenarios.
Restatement of compensation-related liabilities
During 2020, UBS restated its balance sheet and statement of changes in equity as of 1 January 2018 to correct a liability understatement in connection with a legacy Global Wealth Management deferred compensation plan in the Americas region, resulting in a decrease in equity attributable to shareholders of USD 32 million. The corresponding effects on regulatory capital and other disclosed metrics were reflected in the comparative period figures where applicable. The restatement had no effect on net profit / (loss) for the current period or for any comparative periods.
› Refer to “Note 1b Changes in accounting policies, comparability andother adjustments” in the “Consolidated financial statements” section of our AnnualReport 2020 report for more information
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Changes to Pillar 3 disclosure requirements
First publicationof the Pillar 3 ”CCR8 – Exposures to central counterparties” table
Following the adoption of the FINMA revisions to the capital treatment concerning UBS’s exposures to central counterparties in January 2020, we disclose the semi-annual “CCR8 – Exposures to central counterparties” table.
Other changes to Pillar 3 disclosures
Simplification of Pillar 3 disclosures
Given the current immaterial business volumes and declining trend of total securitization exposures over the past years, we have condensed the following semi-annual Pillar 3 disclosures into one single tabular disclosure titled ”Securitization exposures in the banking and trading book and associated regulatory capital requirements”:
– ”SEC1 – Securitization exposures in the banking book”;
– ”SEC2 – Securitization exposures in the trading book”;
– ”SEC3 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as originator or as sponsor”; and
– ”SEC4 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as investor.”
The new table is presented in this report and in our 30 June 2020 Pillar 3 report.
Market risk RWA are mainly based on the internal models approach, with the exception of securitization exposures in the trading book, which are subject to the standardized approach. From the second quarter of 2020 onward, the MR1 table is therefore no longer separately presented and RWA from securitization exposures in the trading book continues to be disclosed in the “OV1 – Overview of RWA” and in the narrative of section 7 on securitization exposures in the trading book.
Significant model updates and accounting and methodology changeseffective in or from 2020
Removal of market risk RWA multiplier
When our value-at-risk (VaR) model was structurally changed in the first quarter of 2016, FINMA introduced a temporary market risk RWA multiplier of 1.3 to be applied in the calculation of VaR and stressed VaR (SVaR) RWA. As of 30 June 2020, we have removed this specific multiplier, following the demonstration of model performance.
Operational risk RWA model recalibration
During the fourth quarter of 2020, FINMA approved the annual Group advanced measurement approach (AMA) recalibration, resulting in a reduction of operational risk RWA by USD 1.8 billion, to USD 75.8 billion.
Phase-in of RWA effects
Effective from the third quarter of 2020, we began to phase in RWA increases related to the fourth quarter of 2020 release of new probability of default (PD) and loss given default (LGD) parameters for the mortgage portfolios in the US. As agreed with FINMA, the RWA effects of such model updates will be phased in over six quarters, until the end of 2021, with an estimated quarterly RWA increase of USD 0.5 billion.
Changes to accounting treatment affecting Pillar 1 and Pillar 3 disclosures of UBS AG standalone
In June 2020, we aligned the accounting treatment of investments in associates in the UBS AG International Financial Reporting Standards (IFRS) standalone accounts with the ”equity method” accounting applied in the UBS Group IFRS financial statements. Previously, we had applied a ”cost less impairment” approach for these investments in the UBS AG standalone IFRS financial statements. Effective 30 June 2020, UBS AG standalone CET1 capital, LRD and RWA increased by approximately USD 0.9 billion, USD 0.9 billion and USD 2.4 billion, respectively.
› Refer to the “UBS AG standalone” section of our 30 June 2020Pillar 3 report for more information about the restated comparatives
Significant regulatoryand disclosure requirements to be adopted in 2021 or later
NSFR implementation
In September 2020, the Swiss Federal Council adopted an amendment to the Liquidity Ordinance for the implementation of the net stable funding ratio (the NSFR). The NSFR regulation was finalized in the fourth quarter of 2020 with the release of the revised FINMA liquidity circular, and will become effective on 1 July 2021. It applies to UBS Group AG at the consolidated level and to UBS AG, UBS Switzerland AG and UBS Swiss Financial Advisers AG at the standalone level. UBS is on schedule to operationalize the NSFR regulation; its overall effect on UBS is expected to be limited.
In October 2020, the US banking regulators finalized the NSFR rule for supervised firms to ensure a minimum level of stable funding. The rule becomes effective as of 1 July 2021 and will require semi-annual disclosure from 1 January 2023. As a Category III firm under the Federal Reserve’s Tailoring Rule (2019), UBS’s intermediate holding company, UBS Americas Holding LLC, and its subsidiary bank, UBS Bank USA, will be subject to an NSFR requirement of 85%.
In the European Union, the European Commission adopted the updated Capital Requirements Regulation in June 2019, which will become effective from 28 June 2021. The regulation requires UBS Europe SE to provide a detailed annual NSFR disclosure and a semi-annual NSFR key metrics disclosure.
› Refer to the “Capital, liquidity and funding, and balance sheet”section of our Annual Report 2020, available under ”Annual reporting” at ubs.com/investors , **** for more information about the NSFR
Basel III finalization and adjustments to market risk framework
The BCBS announced the finalization of the Basel III framework in December 2017, and published the final rules on the minimum capital requirements for market risk (the Fundamental Review of the Trading Book) in January 2019. In response to COVID-19, the Group of Central Bank Governors and Heads of Supervision, which acts as the Basel Committee’s oversight body, endorsed the deferral of the implementation date by one year, to 1 January 2023. The accompanying transitional arrangements for the output floor have also been extended by one year, to 1 January 2028. The most significant changes include:
– placing floors on certain model inputs under the IRB approach to calculate credit risk RWA;
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– requiring the use of standardized approaches for calculation of the credit valuation adjustment and for operational risk RWA;
– placing an aggregate output floor on the group RWA equal to 72.5% of the RWA calculated using a revised standardized approach; and
– revising the LRD calculation and introducing a leverage ratio surcharge for G-SIBs.
The revisions to the minimum capital requirements on market risk include adjustments to the risk sensitivity of the standardized approach, the calibration of certain elements of the framework and adjustments of the internal models approach. The revised BCBS standards will take effect from 1 January 2023.
We do not expect the Swiss regulations to become mandatory until after the BCBS target effective date of 1 January 2023.
Leverage ratio treatment
In June 2019, the BCBS aligned the leverage ratio measurement of client-cleared derivatives with SA-CCR. This treatment permits both cash and non-cash forms of segregated initial margin, as well as cash and non-cash variation margin, received from a client to offset the replacement cost and potential future exposure for client-cleared derivatives only. This will help to mitigate any potential effect on the LRD from the finalization of the Basel III framework. The modified standardized approach for counterparty credit risk for leverage ratio purposes will become effective 1 January 2023. We expect the effective date in Switzerland to be aligned with the adoption of the Basel III finalization.
Pillar 3 disclosure requirements
The BCBS has updated the Pillar 3 disclosure requirements to reflect the revisions to the operational risk, market risk, credit risk, credit value adjustments and leverage ratio under the finalized Basel III framework. In addition, there will be new disclosure requirements on asset encumbrance and, if required by national supervisors at the jurisdictional level, on capital distribution constraints. Further, banks are asked to disclose their leverage ratios based on quarter-end and daily average values of securities financing transactions. These requirements will become effective 1 January 2023. We expect the effective date in Switzerland to be aligned with the adoption of the Basel III finalization.
Revisions to the CVA risk framework
In July 2020, the BCBS replaced the Credit Valuation Adjustment (CVA) risk framework published in December 2017 with an updated standard. This final standard incorporates changes proposed in the consultation published in November 2019, and includes recalibrated risk weights, different treatment of certain client cleared derivatives and an overall recalibration of the standardized and basic approach including a reduced value of the aggregate multiplier for banks using the SA-CVA. These revisions come into effect on 1 January 2023. We expect the effective date in Switzerland to be aligned with the adoption of the Basel III finalization.
Capital treatment of securitizations of non-performing loans
The BCBS issued a technical amendment in November 2020 that sets out capital requirements for non-performing loan securitizations, with an expected implementation date no later than 1 January 2023. The technical amendment establishes a 100% risk weight for certain tranches of non-performing loan securitizations. The risk weights applicable to the other positions are determined by the existing hierarchy of approaches, in conjunction with a 100% risk weight floor and a ban on the use of certain inputs for capital requirements. This amendment does not change the applicable capital requirements to securitizations of performing assets. We expect the effective date in Switzerland to be aligned with the adoption of the Basel III finalization.
Significant BCBS and FINMA consultation papers
Minimum haircut floors for securitiesfinancing transactions
On 26 January 2021, the BCBS issued a consultation to seek public feedback on two technical amendments to the standard on minimum haircut floors for securities financing transactions (SFTs). The amendments seek to address an interpretative issue relating to collateral upgrade transactions and correct for a misstatement of the formula used to calculate haircut floors for netting sets of SFTs. Comments on this consultative paper are due by 31 March 2021.
Frequency and comparability of Pillar 3disclosures
The table on the next page summarizes the reporting frequency for each disclosure as per the current FINMA requirements applicable to UBS.
We provide quantitative comparative information as of 30 September 2020 for disclosures required on a quarterly basis and as of 30 June 2020 for disclosures required on a semi-annual basis. Where specifically required by FINMA and / or the BCBS, we disclose comparative information for additional reporting dates.
Where required, movement commentary is aligned with the corresponding disclosure frequency required by FINMA and always refers to the latest comparative period. Throughout this report, signposts are displayed at the beginning of a section, table or chart – Annual | Semi-annual | Quarterly | – indicating whether the disclosure is provided annually, semi-annually or quarterly. A triangle symbol – p p p – indicates the end of the signpost.
› Refer to our 31 March 2020, 30 June 2020 and 30 September2020 Pillar 3 reports, available under “Pillar 3 disclosures” at ubs.com/investors , for more information aboutpreviously published quarterly movement commentary
› Refer to our 30 June 2020 Pillar 3 report, available under“Pillar 3 disclosures” at ubs.com/investors ,for more information about previously published semi-annual movement commentary
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The following table outlines the annual, semi-annual and quarterly disclosure requirements that are satisfied in this report for UBS Group and significant regulated subsidiaries and sub-groups as applicable. For specific disclosures, this report may refer to our Annual Report 2020.
| FINMA reference^1^ | Disclosure title in this report | Section of this report | Page number in this report |
|---|---|---|---|
| Annual disclosure requirements | |||
| OVA | Bank risk<br> management approach | Introduction and<br> basis for preparation | 11–12 |
| LI1 | Differences<br> between accounting and regulatory scopes of consolidation and mapping of<br> financial statements with regulatory risk categories | Section 3<br> Linkage between financial statements and regulatory exposures | 23 |
| LI2 | Main sources of<br> differences between regulatory exposure amounts and carrying values in<br> financial statements (under the regulatory scope of consolidation) | Section 3<br> Linkage between financial statements and regulatory exposures | 25 |
| LIA | Explanations of<br> differences between accounting and regulatory exposure amounts | Section 3 Linkage<br> between financial statements and regulatory exposures | 24 |
| PV1 | Prudent<br> valuation adjustments (PVA) | Section 11 Going<br> and gone concern requirements and eligible capital | 99 |
| GSIB1 | Disclosure of<br> G-SIB indicators | Section 16<br> Requirements for global systemically important banks and related indicators | 109 |
| LIQA | Liquidity risk<br> management | Section 14<br> Liquidity coverage ratio | 107 |
| CRA | Credit risk<br> management | Section 4 Credit<br> risk | 27 |
| CRB | Additional<br> disclosure related to the credit quality of assets:<br><br> <br>– <br> Breakdown<br> of exposures by industry<br><br> <br>– <br> Breakdown<br> of exposures by geographical area<br><br> <br>– <br> Breakdown<br> of exposures by residual maturity<br><br> <br>– <br> Credit-impaired<br> exposures by industry<br><br> <br>– <br> Credit-impaired<br> exposures by geographical area<br><br> <br>– <br> Past<br> due exposures<br><br> <br>– <br> Breakdown<br> of restructured exposures between credit-impaired and non-credit-impaired | Section 4 Credit<br> risk | 28<br><br> <br>28<br><br> <br>29<br><br> <br>30<br><br> <br>30<br><br> <br>32<br><br> <br>32 |
| CRC | Credit risk<br> mitigation | Section 4 Credit<br> risk | 33 |
| CRD | Qualitative<br> disclosures on banks’ use of external credit ratings under the standardized<br> approach for credit risk | Section 4 Credit<br> risk | 37 |
| CRE | Internal<br> ratings-based models | Section 4 Credit<br> risk | 39 |
| CR9 | IRB –<br> backtesting of probability of default (PD) per portfolio | Section 4 Credit<br> risk | 50–56 |
| CCRA | Counterparty<br> credit risk management | Section 5<br> Counterparty credit risk | 58 |
| SECA | – <br> Introduction<br><br> <br>– <br> Objectives,<br> roles and involvement | Section 7<br> Securitization | 74<br><br> <br>74–75 |
| MRA | Market risk | Section 8 Market<br> risk | 77 |
| MRB | Internal models<br> approach | Section 8 Market<br> risk | 80 |
| IRRBBA | Interest rate<br> risk in the banking book | Section 10<br> Interest rate risk in the banking book | 88 |
| IRRBB1 | Quantitative<br> information about IRRBB | Section 10<br> Interest rate risk in the banking book | 89 |
| IRRBBA1 | Quantitative<br> disclosures relating to the position structure and interest rate reset of<br> IRRBB risk | Section 10<br> Interest rate risk in the banking book | 90–91 |
| REMA | Remuneration<br> policy | Section 15<br> Remuneration | 108 |
| ORA | Operational risk | Section 9<br> Operational risk | 87 |
| - | Calculation of<br> VaR- and SVaR-based RWA as of 31 December 2020 | Section 8 Market<br> risk | 82 |
| - | Calculation of<br> RniV-based RWA as of 31 December 2020 | Section 8 Market<br> risk | 84 |
| - | Calculation of<br> IRC-based RWA as of 31 December 2020 | Section 8 Market<br> risk | 85 |
| - | Comprehensive<br> risk measure | Section 8 Market<br> risk | 86 |
7
| FINMA referenc e^1^ | Disclosure title in this report | Section in this report | Page number in this report |
|---|---|---|---|
| Semi-annual disclosure requirements | |||
| CR1 | Credit quality<br> of assets | Section 4 Credit<br> risk | 31 |
| CR2 | Changes in stock<br> of defaulted loans, debt securities and off-balance sheet exposures | Section 4 Credit<br> risk | 32 |
| CR3 | Credit risk<br> mitigation techniques – overview | Section 4 Credit<br> risk | 34 |
| CR4 | Standardized<br> approach – credit risk exposure and credit risk mitigation (CRM) effects | Section 4 Credit<br> risk | 35 |
| CR5 | Standardized<br> approach – exposures by asset classes and risk weights | Section 4 Credit<br> risk | 38 |
| CR6 | IRB – credit<br> risk exposures by portfolio and PD range | Section 4 Credit<br> risk | 40–47 |
| CR7 | IRB – effect on<br> RWA of credit derivatives used as CRM techniques | Section 4 Credit<br> risk | 36 |
| CR10 | IRB (equities<br> under the simple risk-weight method) | Section 4 Credit<br> risk | 57 |
| CCR1 | Analysis of<br> counterparty credit risk (CCR) exposure by approach | Section 5<br> Counterparty credit risk | 59 |
| CCR2 | Credit valuation<br> adjustment (CVA) capital charge | Section 5<br> Counterparty credit risk | 59 |
| CCR3 | Standardized<br> approach – CCR exposures by regulatory portfolio and risk weights | Section 5<br> Counterparty credit risk | 60 |
| CCR4 | IRB – CCR<br> exposures by portfolio and PD scale | Section 5<br> Counterparty credit risk | 61–65 |
| CCR5 | Composition of<br> collateral for CCR exposure | Section 5<br> Counterparty credit risk | 66 |
| CCR6 | Credit<br> derivatives exposures | Section 5<br> Counterparty credit risk | 66 |
| CCR8 | Exposures to<br> central counterparties | Section 5<br> Counterparty credit risk | 68 |
| SEC1, SEC2,<br> SEC3, SEC4 | Tailored table<br> “Securitization exposures in the banking and trading book and associated<br> regulatory capital requirements“ | Section 7<br> Securitizations | 76 |
| MR1 | The data is<br> reflected in the “Securitization exposures in the banking and trading book<br> and associated regulatory capital requirements” table | Section 7<br> Securitizations | 76 |
| MR3 | IMA values for<br> trading portfolios | Section 8 Market<br> risk | 81 |
| MR4 | Comparison of<br> VaR estimates with gains / losses | Section 8 Market<br> risk | 83 |
| CC1 | Composition of<br> regulatory capital | Section 11 Going<br> and gone concern requirements and eligible capital | 96–98 |
| CC2 | Reconciliation<br> of accounting balance sheet to balance sheet under the regulatory scope of<br> consolidation | Section 11 Going<br> and gone concern requirements and eligible capital | 94–95 |
| CCA | Main features of<br> regulatory capital instruments and other TLAC-eligible instruments | n/a – The CCA<br> table is published on our website. Refer to the document titled “Capital and<br> total loss-absorbing capacity instruments of UBS Group AG consolidated and<br> UBS AG consolidated and standalone – key features” under “Bondholder<br> information” at ubs.com/investors, for more information. | n/a |
| CCyB1 | Geographical<br> distribution of credit exposures used in the countercyclical capital buffer | Section 11 Going<br> and gone concern requirements and eligible capital | 93 |
| TLAC1 | TLAC composition<br> for G-SIBs (at resolution group level) | Section 12 Total<br> loss-absorbing capacity | 100 |
| TLAC2 | Material<br> sub-group entity – creditor ranking at legal entity level | Significant<br> regulated subsidiaries and sub-groups:<br><br> <br>Section 5 UBS<br> Americas Holding LLC consolidated | 125 |
| TLAC3 | Creditor ranking<br> at legal entity level for the resolution entity,<br><br> <br>UBS Group AG | Section 12 Total<br> loss-absorbing capacity | 101 |
| - | Main legal<br> entities consolidated under IFRS but not included in the regulatory scope of consolidation | Section 3<br> Linkage between financial statements and regulatory exposures | 24 |
8
| FINMA reference^1^ | Disclosure title in this report | Section in this report | Page number in this report |
|---|---|---|---|
| Quarterly disclosure requirements | |||
| KM1 | Key metrics | UBS Group:<br><br> <br>Section 1 Key<br> metrics<br><br> <br><br><br> <br>Significant<br> regulated subsidiaries and sub-groups:<br><br> <br>Section 2 UBS AG<br> standalone<br><br> <br>Section 3 UBS<br> Switzerland AG standalone<br><br> <br>Section 4 UBS<br> Europe SE consolidated<br><br> <br>Section 5 UBS<br> Americas Holding LLC consolidated | 18–19<br><br> <br><br><br> <br><br><br> <br>111<br><br> <br>116<br><br> <br>123<br><br> <br>124 |
| KM2 | Key metrics –<br> TLAC requirements (at resolution group level) | Section 1 Key<br> metrics | 18, 20 |
| OV1 | Overview of RWA | Section 2 Overview<br> of risk-weighted assets | 21–22 |
| CR8 | RWA flow<br> statements of credit risk exposures under IRB | Section 4 Credit<br> risk | 49 |
| CCR7 | RWA flow<br> statements of CCR exposures under internal model method (IMM) and<br> value-at-risk (VaR) | Section 5<br> Counterparty credit risk | 67 |
| MR2 | RWA flow<br> statements of market risk exposures under an internal models approach | Section 8 Market<br> risk | 79 |
| LR1 | BCBS Basel III<br> leverage ratio summary comparison | Section 13<br> Leverage ratio | 104 |
| LR2 | BCBS Basel III<br> leverage ratio common disclosure | Section 13<br> Leverage ratio | 103 |
| LIQ1 | Liquidity<br> coverage ratio | Section 14<br> Liquidity coverage ratio | 106 |
| - | High-quality<br> liquid assets | Section 14<br> Liquidity coverage ratio | 105 |
| - | Swiss SRB going<br> and gone concern requirements and information | UBS Group:<br><br> <br>Section 11 Going<br> and gone concern requirements and eligible capital<br><br> <br><br><br> <br>Significant<br> regulated subsidiaries and sub-groups:<br><br> <br>Section 2 UBS AG<br> standalone<br><br> <br>Section 3 UBS<br> Switzerland AG standalone | 92<br><br> <br><br><br> <br><br><br> <br><br><br> <br>113<br><br> <br>117 |
| - | Swiss SRB going<br> concern requirements and information including temporary FINMA exemption | UBS Group:<br><br> <br>Section 11 Going<br> and gone concern requirements and eligible capital<br><br> <br><br><br> <br>Significant<br> regulated subsidiaries and sub-groups:<br><br> <br>Section 2 UBS AG<br> standalone<br><br> <br>Section 3 UBS<br> Switzerland AG standalone | 93<br><br> <br><br><br> <br><br><br> <br><br><br> <br>112<br><br> <br>118 |
| - | Swiss SRB going and gone<br> concern information | Significant regulated<br> subsidiaries and sub-groups:<br><br> <br>Section 2 UBS AG standalone<br><br> <br>Section 3 UBS Switzerland<br> AG standalone | 114<br><br> <br>119 |
| - | Reconciliation of IFRS<br> total assets to BCBS Basel III total on-balance sheet exposures excluding derivatives<br> and securities financing transactions | Section 13 Leverage ratio | 102 |
| - | Swiss SRB leverage ratio<br> denominator | Significant regulated<br> subsidiaries and sub-groups:<br><br> <br>Section 2 UBS AG standalone<br><br> <br>Section 3 UBS Switzerland<br> AG standalone | 115<br><br> <br>120 |
1 Disclosure requirement per FINMA Circular 2016/1 “Disclosure – banks.”
9
Format of Pillar 3 disclosures
As defined by FINMA, certain Pillar 3 disclosures follow a fixed format, whereas other disclosures are flexible and may be modified to a certain degree to present the most relevant information. Pillar 3 requirements are presented under the relevant FINMA table / template reference (e.g., OVA, OV1, LI1, etc.). Pillar 3 disclosures may also include row labeling (1, 2, 3, etc.) as prescribed by FINMA. Naming conventions used in our Pillar 3 disclosures are based on the FINMA guidance and may not reflect UBS naming conventions.
The FINMA-defined asset classes used within this Pillar 3 report are as follows:
– Central governments and central banks, consisting of exposures relating to governments at the level of the nation state and their central banks. The European Union is also treated as a central government.
– Banks and securities dealers, consisting of exposures to legal entities holding banking licenses and securities firms subject to adequate supervisory and regulatory arrangements, including risk-based capital requirements. Securities firms can only be assigned to this asset class if they are subject to a supervision equivalent to that of banks.
– Public-sector entities and multi-lateral development banks, consisting of exposures to institutions established on the basis of public law in different forms, such as administrative entities or public companies and regional governments, the Bank for International Settlements, the International Monetary Fund, and eligible multi-lateral development banks recognized by FINMA.
– Corporates: specialized lending, consisting of exposures relating to income-producing real estate and high-volatility commercial real estate, commodities finance, project finance and object finance.
– Corporates: other lending, consisting of all exposures to corporates that are not specialized lending. This asset class includes private commercial entities, such as corporations, partnerships or proprietorships, insurance companies and funds (including managed funds).
– Retail: residential mortgages, consisting of residential mortgages, regardless of exposure size, if the owner occupies or rents out the mortgaged property.
– Retail: qualifying revolving retail exposures, consisting of unsecured and revolving credits to individuals that exhibit appropriate loss characteristics relating to credit card relationships at UBS.
– Retail: other, consisting primarily of Lombard lending that represents loans made against the pledge of eligible marketable securities or cash, as well as exposures to small businesses, private clients and other retail customers without mortgage financing.
– Equity, consisting of instruments that have no stated or predetermined maturity and represent a residual interest in the net assets of an entity.
– Other assets, consisting of the remainder of exposures which UBS is exposed to, mainly non-counterparty-related assets.
Governance over Pillar 3 disclosures
The Board of Directors (the BoD) and senior management are responsible for establishing and maintaining an effective internal control structure over the disclosure of financial information, including Pillar 3 disclosures. In line with BCBS and FINMA requirements, we have a BoD-approved Pillar 3 disclosure governance policy in place, which includes information about the key internal controls and procedures designed to govern the preparation, review and sign-off of Pillar 3 disclosures. This Pillar 3 report has been verified and approved in line with that policy.
10
Risk management framework
Our Group-wide risk management framework is applied across all risk types. The table below presents an overview of risk management disclosures that are provided separately in our Annual Report 2020, available under “Annual reporting” at ubs.com/investors.
Annual |
| OVA – Bank risk management approach | ||||
|---|---|---|---|---|
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
| Business model and risk profile | Our strategy, business model and environment | – | Risk factors | 56–66 |
| – | Current market climate and industry trends | 31–33 | ||
| Risk, capital, liquidity and funding, and balance sheet | –<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br><br><br> <br><br><br> <br>–<br><br> <br><br><br> <br><br><br> <br>–<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br>– | Overview of risks arising from our business activities<br><br> <br><br><br> <br>Risk categories<br><br> <br><br><br> <br>Top and emerging risks<br><br> <br><br><br> <br>Risk appetite framework<br><br> <br><br><br> <br>Risk measurement<br><br> <br><br><br> <br>Credit risk – Key developments, Main sources of credit risk,<br> Overview of measurement, monitoring and management techniques, Credit risk<br> profile of the Group<br><br> <br><br><br> <br>Market risk – Key developments, Main sources of market risk,<br> Overview of measurement, monitoring and management techniques<br><br> <br><br><br> <br>Interest rate risk in the banking book<br><br> <br><br><br> <br>Other market risk exposures<br><br> <br><br><br> <br>Country risk framework, Country risk exposure<br><br> <br><br><br> <br>Operational risk framework<br><br> <br><br><br> <br>Risk management and control principles | 91–92<br><br> <br><br><br> <br>93<br><br> <br><br><br> <br>94<br><br> <br><br><br> <br>97–100<br><br> <br><br><br> <br>103–105<br><br> <br><br><br> <br><br><br> <br>106–107<br><br> <br><br><br> <br><br><br> <br>124<br><br> <br><br><br> <br><br><br> <br>128–131<br><br> <br><br><br> <br>131–132<br><br> <br><br><br> <br>133–136<br><br> <br><br><br> <br>140<br><br> <br><br><br> <br>98 | |
| Risk governance | Risk, capital, liquidity and funding, and balance sheet | –<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br><br><br> <br>–<br><br> <br><br><br> <br><br><br> <br>– | Risk categories<br><br> <br><br><br> <br>Risk governance<br><br> <br><br><br> <br>Interest rate risk in the banking book – Risk management and<br> governance<br><br> <br><br><br> <br>Liquidity and funding management – Strategy, objectives and<br> governance<br><br> <br><br><br> <br>Capital management – Capital management objectives, Capital<br> planning and activities | 93<br><br> <br>95–96<br><br> <br>129<br><br> <br><br><br> <br>158<br><br> <br><br><br> <br>144 |
| Communication and enforcement of risk culture within the bank | Risk, capital, liquidity and funding, and balance sheet | –<br><br> <br>–<br><br> <br>–<br><br> <br>– | Risk governance<br><br> <br>Risk appetite framework<br><br> <br>Internal risk reporting<br><br> <br>Operational risk framework | 95–96<br><br> <br>97–100<br><br> <br>101<br><br> <br>140 |
| Scope and main features of risk measurement systems | Risk, capital, liquidity and funding, and balance sheet | –<br><br> <br>–<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br>–<br><br> <br>– | Risk measurement<br><br> <br>Credit risk – Overview of measurement, monitoring and management<br> techniques<br><br> <br>Market risk – Overview of measurement, monitoring and management<br> techniques<br><br> <br>Country risk exposure measure<br><br> <br>Advanced measurement approach model | 103–105<br><br> <br>107<br><br> <br><br><br> <br>124<br><br> <br><br><br> <br>133<br><br> <br>141 |
| Risk information reporting | Risk, capital, liquidity and funding, and balance sheet | –<br><br> <br>–<br><br> <br>– | Risk governance<br><br> <br>Internal risk reporting<br><br> <br>Risk management and control principles | 95–96<br><br> <br>101<br><br> <br>98 |
11
| OVA – Bank risk management approach (continued) | ||||
|---|---|---|---|---|
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
| Stress testing | Risk, capital, liquidity and funding, and balance sheet | – | Risk appetite framework | 97–100 |
| – | Stress testing | 103–104 | ||
| – | Credit risk models – Stress loss | 119 | ||
| – | Market risk stress loss | 125 | ||
| – | Interest rate risk in the banking book | 128–131 | ||
| – | Other market risk exposures | 131–132 | ||
| – | Liquidity management – Stress testing | 158 | ||
| Strategies and processes applied to manage, hedge and mitigate<br> risks | Risk, capital, liquidity and funding, and balance sheet | – | Credit risk – Overview of measurement, monitoring and management<br> techniques | 107 |
| – | Credit risk mitigation | 114–115 | ||
| – | Market risk – Overview of measurement, monitoring and management<br> techniques | 124 | ||
| – | Value-at-risk | 125–128 | ||
| – | Interest rate risk in the banking book | 128–131 | ||
| – | Other market risk exposures | 131–132 | ||
| – | Country risk exposure | 133–136 | ||
| – | Operational risk framework | 140 | ||
| – | Liquidity and funding management | 158–161 | ||
| – | Currency management | 171 | ||
| – | Risk management and control principles | 98 | ||
| Consolidated financial statements | – | Note 10 Derivative instruments | 320–321 | |
| – | Note 20d Maximum exposure to credit risk | 343 | ||
| – | Note 21i Maximum exposure to credit risk for financial<br> instruments measured at fair value | 362 | ||
| – | Note 22 Offsetting financial assets and financial liabilities | 364–365 |
p
12
Our approach to measuring risk exposure and risk-weighted assets
Depending on the intended purpose, the measurement of risk exposure that we apply may differ. Exposures may be measured for financial accounting purposes under IFRS for deriving our regulatory capital requirement or for internal risk management and control purposes. Our Pillar 3 disclosures are generally based on measures of risk exposure used to derive the regulatory capital required under Pillar 1. Our RWA are calculated according to the BCBS Basel III framework, as implemented by the Swiss Capital Adequacy Ordinance issued by the Swiss Federal Council and by the associated circulars issued by FINMA.
The table below provides a summary of the approaches we use for the main risk categories to determine the regulatory risk exposure and RWA.
| Category | Definition of risk | Regulatory risk exposure | Risk-weighted assets (RWA) |
|---|---|---|---|
| I. Credit risk | |||
| Credit risk | Credit risk is<br> the risk of a loss resulting from the failure of a counterparty to meet its<br> contractual obligations toward UBS arising from transactions such as loans,<br> debt securities held in our banking book and undrawn credit facilities.<br><br> <br><br><br> <br>Refer to section<br> 4, Credit risk. | Exposure at<br> default (EAD) is the amount we expect a counterparty to owe us at the time of<br> a possible default. For banking products, the EAD generally equals the IFRS<br> carrying amount as of the reporting date. The EAD is expected to remain constant<br> over the 12-month period. For loan commitments, a credit conversion factor is<br> applied to model expected future drawdowns over the 12-month period. | We apply two<br> approaches to measure credit risk RWA:<br><br> <br>– <br> Advanced internal ratings-based (A-IRB) approach, applied for<br> the majority of our businesses. Counterparty risk weights are determined by<br> reference to internal probability of default and loss given default<br> estimates.<br><br> <br>– <br> Standardized approach (SA), generally based on external ratings for a sub-set<br> of our credit portfolio where internal measures are not available. |
| Non-counterparty-related<br> risk | Non-counterparty-related<br> risk (NCPA) denotes the risk of a loss arising from changes in value or from<br> liquidation of assets not linked to any counterparty, for example, premises,<br> equipment and software, and deferred tax assets on temporary differences.<br><br> <br><br><br> <br>Refer to section<br> 2, Overview of risk-weighted assets. | The IFRS<br> carrying amount is the basis for measuring NCPA exposure. | We measure<br> non-counterparty-related risk RWA by applying prescribed regulatory risk<br> weights to the NCPA exposure. |
| Equity positions<br> in the banking book | Risk from equity<br> positions in the banking book refers to the investment risk arising from<br> equity positions and other relevant investments or instruments held in our<br> banking book.<br><br> <br><br><br> <br>Refer to section<br> 4, Credit risk. | The IFRS<br> carrying amount is the basis for measuring risk exposure for equity<br> securities held in our banking book, but reflecting a net position. | We measure the<br> RWA from equity positions in the banking book by applying prescribed<br> regulatory risk weights to our listed and unlisted equity exposures. |
13
| Category | Definition of risk | Regulatory risk exposure | Risk-weighted assets (RWA) |
|---|---|---|---|
| II. Counterparty credit risk | |||
| Counterparty<br> credit risk | Counterparty<br> credit risk is the risk that a counterparty for over-the-counter (OTC)<br> derivatives, exchange-traded derivatives (ETDs) or securities financing<br> transactions (SFTs) will default before the final settlement of a transaction<br> and cause a loss to the firm if the transaction has a positive economic value<br> at the time of default.<br><br> <br><br><br> <br>Refer to section<br> 5, Counterparty credit risk. | We primarily use<br> internal models to measure counterparty credit risk exposures to third<br> parties. All internal models are approved by FINMA.<br><br> <br>– <br> For OTC derivatives and ETDs, <br> we apply the effective expected positive exposure (EEPE) and stressed<br> expected positive exposure (stressed EPE) as defined in the Basel III framework.<br><br> <br>– <br> For SFTs, we apply the<br> close-out period approach.<br><br> <br><br><br> <br>In certain instances<br> where risk models are not available:<br><br> <br>– <br> Exposure on OTC derivatives and ETDs<br> is calculated considering the net positive replacement values and potential<br> future exposure.<br><br> <br>– Exposure for SFTs is based on the IFRS carrying amount, net of collateral mitigation. | We apply two<br> approaches to measure counterparty credit risk RWA:<br><br> <br>– <br> Advanced internal ratings-based (A-IRB) approach, applied for the majority of our businesses.<br> Counterparty risk weights are determined by reference to internal<br> counterparty ratings and loss given default estimates.<br><br> <br>– <br> Standardized approach (SA), generally based on external ratings for a sub-set<br> of our credit portfolio, where internal measures are not available.<br><br> <br><br><br> <br>We apply an<br> additional credit valuation adjustment (CVA) capital charge to hold capital<br> against the risk of mark-to-market losses associated with the deterioration<br> of counterparty credit quality. |
| Settlement risk | Settlement risk<br> is the risk of loss resulting from transactions that involve exchange of<br> value (e.g., security versus cash) where we must deliver without first being<br> able to determine with certainty that we will receive the countervalue.<br><br> <br><br><br> <br>Refer to section<br> 2, Overview of risk-weighted assets. | The IFRS<br> carrying amount is the basis for measuring settlement risk exposure. | We measure<br> settlement risk RWA through the application of prescribed regulatory risk<br> weights to the settlement risk exposure. |
| III. Securitization exposures in the banking book | |||
| Securitization<br> exposures in the banking book | Exposures arising from traditional and synthetic<br> securitizations held in our banking book.<br><br> <br><br><br> <br>Refer to section 7, Securitizations. | The IFRS carrying amount after eligible regulatory credit<br> risk mitigation and credit conversion factor is the basis for measuring<br> securitization exposure. | Consistent with the BCBS, we apply the FINMA-defined<br> hierarchy of approaches for banking book securitizations to measure RWA:<br><br> <br>– <br> Internal ratings-based approach (SEC-IRBA), considering<br> the advanced IRB risk weights, if the securitized pool largely consists of<br> IRB positions and internal ratings are available.<br><br> <br>– <br> External ratings-based approach (SEC-ERBA), if the IRB approach cannot be applied, risk weights are<br> applied based on external ratings, provided that we are able to demonstrate<br> our expertise in critically reviewing and challenging the external ratings.<br><br> <br>– <br> Standardized approach (SEC-SA) or 1,250% risk weight factor, if none of the aforementioned approaches can<br> be applied, we would apply the standardized approach where the delinquency<br> status of a significant portion of the underlying exposure can be determined<br> or a risk weight of 1,250%.<br><br> <br><br><br> <br>For<br> re-securitization exposures we apply either the standardized approach or a<br> risk weight factor of 1,250%. |
14
| Category | Definition of risk | Regulatory risk exposure | Risk-weighted assets (RWA) |
|---|---|---|---|
| IV . Market **** risk | |||
| Value-at-risk (VaR) | VaR is a<br> statistical measure of market risk, representing the market risk losses that<br> could potentially be realized over a set time horizon (holding period) at an<br> established level of confidence. For regulatory VaR, the holding period is 10<br> days and the confidence level is 99%. For our risk management measure<br> Management VaR we apply a holding period of 1 day and a confidence level of<br> 95%.<br><br> <br>For further<br> differences between the regulatory and Management VaR, refer to the “Risk management<br> and control” section of our Annual Report 2020.<br><br> <br><br><br> <br>Refer to section<br> 8, Market risk. | The VaR<br> component of market risk RWA is calculated by taking the maximum of the<br> period-end VaR and the product of the average VaR for the 60 trading days<br> immediately preceding the period end and a VaR multiplier. The quantity is<br> then multiplied by a risk weight factor of 1,250% to determine RWA. The VaR<br> multiplier is dependent on the number of VaR backtesting exceptions within<br> the most recent 250-business-day window. | |
| Stressed VaR <br> (SVaR) | SVaR is a 10-day<br> 99% VaR measure that is estimated with model parameters that are calibrated<br> to historical data covering a one-year period of significant financial stress<br> relevant to the firm’s current portfolio.<br><br> <br><br><br> <br>Refer to section<br> 8, Market risk. | The derivation<br> of SVaR RWA is similar to the one explained above for VaR. Unlike VaR, SVaR<br> is computed weekly, and as a result the average SVaR is computed over the<br> most recent 12 observations. | |
| Add-on for risks<br> not in VaR (RniV) | Potential risks<br> that are not fully captured by our VaR model are referred to as RniV. We have<br> a framework to identify and quantify these potential risks and underpin them<br> with capital.<br><br> <br><br><br> <br>Refer to section<br> 8, Market risk. | Our RniV<br> framework is used to derive the RniV-based component of the market risk RWA,<br> which is approved by FINMA. Starting in the second quarter of 2018, RniV and<br> RWA resulting from RniV are recalibrated on a monthly basis.<br><br> <br><br><br> <br>As the RWA from<br> RniV are add-ons, they do not reflect any diversification benefits across<br> risks capitalized through VaR and SVaR. | |
| Incremental risk charge (IRC) | The IRC<br> represents an estimate of the default and rating migration risk of all<br> trading book positions with issuer risk, except for equity products and<br> securitization exposures, measured over a one-year time horizon at a 99.9%<br> confidence level.<br><br> <br><br><br> <br>Refer to section<br> 8, Market risk. | The IRC is<br> calculated weekly, and the results are used to derive the IRC-based component<br> of the market risk RWA. The derivation is similar to that for VaR- and<br> SVaR-based RWA, but without a VaR multiplier. | |
| Comprehensive<br> risk measure (CRM) | The CRM is an<br> estimate of the default and complex price risk, including the convexity and<br> cross-convexity of the CRM portfolio across credit spread, correlation and<br> recovery, measured over a one-year time horizon at a 99.9% confidence level.<br><br> <br><br><br> <br>Refer to section<br> 8, Market risk. | Since the second<br> quarter of 2019, we have not held eligible correlation trading positions.<br> Prior to then, the CRM had been calculated weekly and used to derive the<br> CRM-based component of the market risk RWA, with the calculation subject to a<br> floor equal to 8% of the equivalent capital charge under the specific risk<br> measure (SRM) for the correlation trading portfolio. | |
| Securitization /<br><br> <br>re-securitization<br> in the trading book | Risk arising<br> from traditional and synthetic securitizations held in our trading book.<br><br> <br><br><br> <br>Refer to section<br> 7, Securitizations and <br><br> section 8, Market risk. | The exposure is<br> equal to the fair value of the net long or short securitization position. | We measure trading<br> book securitization RWA using the Ratings-based approach, i.e.,<br> applying risk weights based on external ratings. |
| V. Operational **** risk | |||
| Operational risk | Operational risk<br> is the risk of loss resulting from inadequate or failed internal processes,<br> people and systems or from external events, including cyber risk. Operational<br> risk includes, among others, legal risk, conduct risk and compliance risk.<br><br> <br><br><br> <br>Refer to section<br> 9, Operational risk. | We use the<br> advanced measurement approach to measure operational risk RWA in accordance<br> with FINMA requirements. |
15
UBS Group
UBS Group AG consolidated
Section 1 Key metrics
Key metrics of the fourth quarter of 2020
Quarterly | The KM1 and KM2 tables on the following pages are based on the Basel Committee on Banking Supervision (the BCBS) Basel III rules; however, they do not reflect the effects of the temporary exemption granted by the Swiss Financial Market Supervisory Authority (FINMA) in connection with COVID-19 that permits banks to exclude central bank sight deposits from the leverage ratio calculation. The KM2 table includes a reference to the total loss-absorbing capacity (TLAC) term sheet, published by the Financial Stability Board (the FSB). The FSB provides this term sheet at fsb.org/2015/11/total-loss-absorbing-capacity-tlac-principles-and-term-sheet.
During the fourth quarter of 2020, our common equity tier 1 (CET1) capital increased by USD 1.7 billion to USD 39.9 billion, mainly due to operating profit before tax, foreign currency effects and deferred tax assets on temporary differences, partially offset by a higher capital reserve for potential share repurchases, current tax expenses and accruals for dividends. Our tier 1 capital increased by USD 1.8 billion to USD 56.2 billion, primarily reflecting the aforementioned increase in our CET1 capital and foreign currency translation effects on our additional tier 1 (AT1) instruments.
The TLAC available as of 31 December 2020 included CET1 capital, AT1 and tier 2 capital instruments eligible under the TLAC framework, and non-regulatory capital elements of TLAC. Under the Swiss systemically relevant bank (SRB) framework, including transitional arrangements, TLAC excludes 45% of the gross unrealized gains on debt instruments measured at fair value through other comprehensive income for accounting purposes, which for regulatory capital purposes is measured at the lower of cost or market value. This amount was negligible as of 31 December 2020, but is included as available TLAC in the KM2 table in this section. Our available TLAC increased by USD 4.1 billion to USD 101.8 billion in the fourth quarter of 2020, reflecting the aforementioned USD 1.8 billion increase in our tier 1 capital and a USD 2.2 billion increase in non-regulatory capital instruments, which resulted mainly from the issuance of new instruments and foreign currency effects.
Risk-weighted assets (RWA) increased by USD 6 billion to USD 289.1 billion, including currency effects of USD 4.7 billion, mainly due to an increase of USD 5.1 billion in credit risk RWA, an increase of USD 1.2 billion in market risk RWA and an increase of USD 0.8 billion in amounts below the threshold for deduction, primarily related to deferred tax assets. This was partly offset by a reduction of USD 1.8 billion in operational risk RWA.
Leverage ratio exposure increased by USD 43 billion to USD 1,037 billion, including currency effects of USD 24 billion, driven by on-balance sheet exposures (other than securities financing transactions (SFTs) and derivatives), partly offset by decreases in SFTs and derivative exposures.
Average high-quality liquid assets (HQLA) increased by USD 3.1 billion, due to higher holdings of liquidity buffer securities. Average total net cash outflows increased by USD 3.5 billion due to higher customer deposit outflows. p
18
Quarterly |
| KM1: Key metrics | **** | **** | **** | **** | **** |
|---|---|---|---|---|---|
| million, except where<br> indicated | |||||
| 31.12.20 | 30.9.20 | 30.6.20^1^ | 31.3.20^1^ | 31.12.19^1^ | |
| Available capital (amounts) | **** | ||||
| 1 | 39,890 | 38,197 | 38,114 | 36,659 | 35,535 |
| 1a | 39,856 | 38,162 | 38,070 | 36,624 | 35,491 |
| 2 | 56,178 | 54,396 | 53,505 | 51,884 | 51,842 |
| 2a | 56,144 | 54,360 | 53,460 | 51,850 | 51,797 |
| 3 | 61,226 | 59,382 | 58,876 | 57,752 | 57,568 |
| 3a | 61,193 | 59,347 | 58,831 | 57,718 | 57,524 |
| Risk-weighted assets (amounts) | **** | ||||
| 4 | 289,101 | 283,133 | 286,436 | 286,256 | 259,208 |
| 4a | 23,128 | 22,651 | 22,915 | 22,901 | 20,737 |
| 4b | 289,101 | 283,133 | 286,436 | 286,256 | 259,208 |
| Risk-based capital ratios as a<br> percentage of RWA | **** | ||||
| 5 | 13.80 | 13.49 | 13.31 | 12.81 | 13.71 |
| 5a | 13.79 | 13.48 | 13.29 | 12.79 | 13.69 |
| 6 | 19.43 | 19.21 | 18.68 | 18.12 | 20.00 |
| 6a | 19.42 | 19.20 | 18.66 | 18.11 | 19.98 |
| 7 | 21.18 | 20.97 | 20.55 | 20.17 | 22.21 |
| 7a | 21.17 | 20.96 | 20.54 | 20.16 | 22.19 |
| Additional CET1 buffer<br> requirements as a percentage of RWA | **** | ||||
| 8 | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 |
| 9 | 0.02 | 0.02 | 0.02 | 0.02 | 0.08 |
| 9a | **** | 0.23 | |||
| 10 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
| 11 | 3.52 | 3.52 | 3.52 | 3.52 | 3.58 |
| 12 | 9.30 | 8.99 | 8.81 | 8.31 | 9.21 |
| Basel III leverage ratio4 | **** | ||||
| 13 | 1,037,150 | 994,366 | 974,359 | 955,943 | 911,322 |
| 14 | 5.42 | 5.47 | 5.49 | 5.43 | 5.69 |
| 14a | 5.41 | 5.47 | 5.49 | 5.42 | 5.68 |
| Liquidity coverage ratio5 | **** | ||||
| 15 | 214,276 | 211,185 | 206,693 | 170,630 | 166,215 |
| 16 | 140,891 | 137,345 | 133,786 | 122,383 | 124,112 |
| 17 | 152 | 154 | 155 | 139 | 134 |
| 1 Refer to the “Introduction and basis for preparation” section<br> of this report for information on the restatement of comparative information,<br> as applicable. 2 The fully loaded ECL accounting model excludes the<br> transitional relief of recognizing ECL allowances and provisions in CET1<br> capital in accordance with FINMA Circular 2013/1 “Eligible capital –<br> banks.” 3 Calculated as 8% of total RWA, based on total capital<br> minimum requirements, excluding CET1 buffer requirements. 4 Leverage<br> ratio exposures and leverage ratios for the respective periods in 2020 do not<br> reflect the effects of the temporary exemption that has been granted by FINMA<br> in connection with COVID-19. Refer to the “Introduction and basis for<br> preparation” section of this report and to “Application of the temporary<br> COVID-19-related FINMA exemption of central bank sight deposits” in the<br> “Going and gone concern requirements and eligible capital“ section of this<br> report for more information. 5 Calculated based on quarterly average.<br> Refer to the “Liquidity coverage ratio” section of this report for more<br> information. |
All values are in US Dollars.
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19
UBS Group AG consolidated
Quarterly |
| KM2: Key metrics – TLAC<br> requirements (at resolution group level)1 | |||||
|---|---|---|---|---|---|
| million, except where<br> indicated | **** | **** | **** | **** | **** |
| 31.12.20 | 30.9.20 | 30.6.20^2^ | 31.3.20^2^ | 31.12.19^2^ | |
| 1 | 101,814 | 97,753 | 93,626 | 93,686 | 89,613 |
| 1a | 101,780 | 97,717 | 93,581 | 93,652 | 89,569 |
| 2 | 289,101 | 283,133 | 286,436 | 286,256 | 259,208 |
| 3 | 35.22 | 34.53 | 32.69 | 32.73 | 34.57 |
| 3a | 35.21 | 34.51 | 32.67 | 32.72 | 34.56 |
| 4 | 1,037,150 | 994,366 | 974,359 | 955,943 | 911,322 |
| 5 | 9.82 | 9.83 | 9.61 | 9.80 | 9.83 |
| 5a | 9.81 | 9.83 | 9.60 | 9.80 | 9.83 |
| 6a | No | ||||
| 6b | No | ||||
| 6c | N/A – Refer to our response to 6b. | ||||
| 1 Resolution group level is defined as the UBS Group AG<br> consolidated level. 2 Refer to the “Introduction and basis for<br> preparation” section of this report for information on the restatement of<br> comparative information, as applicable. 3 The fully loaded ECL accounting<br> model excludes the transitional relief of recognizing ECL allowances and<br> provisions in CET1 capital in accordance with FINMA Circular 2013/1 “Eligible<br> capital – banks.” 4 Leverage ratio exposures and leverage ratios for<br> the respective periods in 2020 do not reflect the effects of the temporary<br> exemption that has been granted by FINMA in connection with COVID-19. Refer<br> to the “Introduction and basis for preparation” section of this report and to<br> “Application of the temporary COVID-19-related FINMA exemption of central<br> bank sight deposits” in the “Going and gone concern requirements and eligible<br> capital“ section of this report for more information. |
All values are in US Dollars.
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20
Section 2 Overview of risk-weightedassets
RWA development in the fourth quarter of2020
Quarterly | The OV1 table on the following page provides an overview of our risk-weighted assets (RWA) and the related minimum capital requirements by risk type. The table presented is based on the respective Swiss Financial Market Supervisory Authority (FINMA) template and empty rows indicate current non-applicability to UBS.
From this report onward, we have discontinued the voluntary “Regulatory exposures and risk-weighted assets” table. As a result, an additional column has been added in the OV1 table, providing references to the relevant sections in this report for the various risk types.
During the fourth quarter of 2020, RWA increased by USD 6 billion to USD 289.1 billion, including currency effects of USD 4.7 billion, mainly due to an increase of USD 5.1 billion in credit risk RWA, an increase of USD 1.2 billion in market risk RWA and an increase of USD 0.8 billion in amounts below threshold for deduction, primarily related to deferred tax assets. This was partly offset by a reduction of USD 1.8 billion in operational risk RWA.
Credit Risk RWA under the standardized approach and the internal ratings-based approach increased by USD 1.8 billion and USD 3.3 billion, respectively, primarily driven by currency effects as well as by higher RWA from loans and loan commitments in Global Wealth Management. Further, Group Functions included higher RWA from nostro account balances. These increases were partly offset by a decrease in RWA from loans in the Investment Bank.
Market Risk RWA increased by USD 1.2 billion, mainly driven by an increase in asset size and other movements in the Investment Bank.
RWA related to amounts below thresholds for deduction increased by USD 0.8 billion, primarily driven by higher RWA from deferred tax assets.
Operational Risk RWA decreased by USD 1.8 billion, driven by the annual recalibration of the advanced measurement approach (AMA) model.
The flow tables for credit risk, counterparty credit risk and market risk RWA in the respective sections of this report provide further details regarding the movements in RWA in the fourth quarter of 2020.
More information about RWA movements in the fourth quarter of 2020 is provided on pages 48–49 of our fourth quarter 2020 report, available under “Quarterly reporting” at ubs.com/investors.
Additional information about capital management and RWA, including details regarding movements in RWA during 2020, is provided on pages 153–154 in the “Capital, liquidity and funding, and balance sheet” section of our Annual Report 2020, available under ”Annual reporting” at ubs.com/investors. p
21
UBS Group AG consolidated
Quarterly |
| OV1: Overview of RWA | |||||||
|---|---|---|---|---|---|---|---|
| RWA | Section or table reference | Minimum capital requirements^1^ | |||||
| million | 31.12.20 | 30.9.20 | 30.6.20 | 31.3.20 | 31.12.19 | 31.12.20 | |
| 1 | 139,846 | 134,753 | 133,180 | 130,236 | 121,244 | 4 | 11,188 |
| 2 | 31,565 | 29,811 | 30,144 | 30,159 | 28,386 | CR4 | 2,525 |
| 2a | 13,393 | 13,227 | 13,219 | 13,061 | 13,135 | CR4 | 1,071 |
| 3 | **** | **** | **** | ||||
| 4 | **** | **** | **** | ||||
| 5 | 108,281 | 104,942 | 103,036 | 100,076 | 92,858 | CR6, CR7, CR8 | 8,662 |
| 6 | 40,354 | 39,917 | 39,983 | 41,560 | 36,354 | 5, CCR1, CCR8 | 3,228 |
| 7 | 6,006 | 6,898 | 5,903 | 7,254 | 4,699 | **** | 480 |
| 8 | 19,380 | 18,394 | 19,284 | 20,582 | 20,275 | CCR7 | 1,550 |
| 8a | 8,386 | 7,607 | 8,055 | 6,663 | 5,502 | CCR7 | 671 |
| 9 | 6,581 | 7,018 | 6,741 | 7,061 | 5,879 | **** | 527 |
| 10 | 2,945 | 3,300 | 4,523 | 3,889 | 1,900 | 5, CCR2 | 236 |
| 11 | 2,795 | 2,624 | 2,646 | 3,136 | 3,261 | 4, CR10 | 224 |
| 12 | 882 | 849 | 705 | 671 | **** | **** | 71 |
| 13 | 648 | 530 | 611 | 735 | **** | **** | 52 |
| 14 | 126 | 41 | 25 | 110 | **** | **** | 10 |
| 15 | 372 | 295 | 395 | 1,201 | 357 | **** | 30 |
| 16 | 314 | 314 | 598 | 607 | 633 | 7 | 25 |
| 17 | **** | **** | **** | ||||
| 18 | 301 | 300 | 564 | 574 | 598 | 7 | 24 |
| 19 | 13 | 14 | 34 | 33 | 35 | 7 | 1 |
| 20 | 11,841 | 10,593 | 14,228 | 15,096 | 6,556 | 7,8 | 947 |
| 21 | 456 | 361 | 370 | 449 | 419 | 7 | 37 |
| 22 | 11,385 | 10,232 | 13,859 | 14,647 | 6,137 | MR2 | 911 |
| 23 | **** | **** | **** | **** | **** | **** | **** |
| 24 | 75,775 | 77,542 | 77,542 | 77,542 | 77,542 | **** | 6,062 |
| 25 | 13,202 | 12,379 | 12,005 | 11,473 | 11,361 | **** | 1,056 |
| 25a | 9,981 | 9,363 | 9,212 | 8,705 | 8,951 | **** | 798 |
| 26 | **** | **** | **** | ||||
| 27 | 289,101 | 283,133 | 286,436 | 286,256 | 259,208 | **** | 23,128 |
| 1 Calculated based on 8% of RWA. 2 Excludes settlement risk,<br> which is separately reported in line 15 “Settlement risk.” Includes RWA with<br> central counterparties. The split between the sub-components of counterparty<br> credit risk refers to the calculation of the exposure measure. <br> 3 Calculated in accordance with the standardized approach for<br> counterparty credit risk (SA-CCR) from 1 January 2020 onward, whereas<br> information as of 31 December 2019 was calculated in accordance with the<br> current exposure method (CEM). 4 Information as of 31 December 2019<br> includes investments in funds calculated based on the simple risk-weight<br> approach, whereas from 1 January 2020 onward investments in funds are<br> disclosed in rows 12, 13 and 14 based on risk weighting in accordance with<br> the new regulation for investments in funds. 5 From 2020 onward, the<br> risk weighting has been calculated in accordance with the regulation for<br> investments in funds. 6 Not applicable until the implementation of<br> the final rules on the minimum capital requirements for market risk (the<br> Fundamental Review of the Trading Book). 7 Includes items subject to<br> threshold deduction treatment that do not exceed their respective threshold<br> and are risk-weighted at 250%. Items subject to threshold deduction treatment<br> include significant investments in common shares of non-consolidated<br> financial institutions (banks, insurance and other financial entities) and<br> deferred tax assets arising from temporary differences. 8 No floor<br> effect, as 80% of our Basel I RWA, including the RWA equivalent of the Basel<br> I capital deductions, do not exceed our Basel III RWA, including the RWA<br> equivalent of the Basel III capital deductions. For the status of the<br> finalization of the Basel III capital framework, refer to the “Introduction<br> and basis for preparation” section of this report, which outlines how the<br> proposed floor calculation would differ in significant aspects from the<br> current approach. |
All values are in US Dollars.
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Section 3 Linkage between financial statements and regulatoryexposures
This section provides information about the differences between our regulatory exposures and carrying amounts presented in our financial statements prepared in accordance with International Financial Reporting Standards (IFRS). Assets and liabilities presented in our IFRS financial statements may be subject to more than one risk framework, as explained further on the next page.
Annual |
| LI1: Differences between<br> accounting and regulatory scopes of consolidation and mapping of financial<br> statement categories with regulatory risk categories | ||||||
|---|---|---|---|---|---|---|
| 31.12.20 | Carrying values under scope of regulatory consolidation | Carrying values of items: | ||||
| million | **** | Subject to credit risk framework^1^ | Subject to counterparty credit risk framework^2^ | Subject to securitization framework^3^ | Subject to market risk framework | Not subject to capital requirements or subject to deduction from capital |
| Assets | **** | **** | **** | **** | **** | **** |
| Cash and balances at central banks | 158,231 | 158,231 | **** | **** | **** | **** |
| Loans and advances to banks | 15,181 | 14,430 | 751^4^ | **** | **** | **** |
| Receivables from securities financing transactions | 74,210 | **** | 74,210 | **** | **** | **** |
| Cash collateral receivables on derivative instruments | 32,737 | **** | 32,737 | **** | 325 | **** |
| Loans and advances to customers | 379,573 | 374,999 | 4,573^4^ | **** | **** | **** |
| Other financial assets measured at amortized cost | 26,959 | 26,788 | 2,677^6^ | **** | **** | **** |
| Total financial assets<br> measured at amortized cost | 686,890 | 574,449 | 114,948 | **** | 325 | **** |
| Financial assets at fair value held for trading | 125,355 | 5,807^5^ | 47,098^6^ | 112 | 119,436 | **** |
| Derivative financial instruments | 159,633 | **** | 159,632 | **** | 159,632 | 1^10^ |
| Brokerage receivables | 24,659 | 4,935 | 19,724 | **** | **** | **** |
| Financial assets at fair value not held for trading7 | 59,630 | 44,268 | 9,135^6, 8^ | 35 | 15,000 | **** |
| Total financial assets<br> measured at fair value through profit or loss | 369,277 | 55,009 | 235,589 | 148 | 294,068 | 1 |
| Financial assets measured at<br> fair value through other comprehensive income | 8,258 | 8,258 | 149^6^ | **** | 0 | **** |
| Investments in associates | 1,652 | 1,239 | **** | **** | **** | 414 |
| Property, equipment and software | 13,065 | 13,065 | **** | **** | **** | **** |
| Goodwill and intangible assets | 6,480 | **** | **** | **** | **** | 6,480 |
| Deferred tax assets | 9,212^9^ | 3,819 | **** | **** | **** | 5,393 |
| Other non-financial assets | 9,764 | 3,458 | **** | **** | 6,264 | 42 |
| Total assets | 1,104,599 | 659,297 | 350,686 | 148 | 300,657 | 12,330 |
| Liabilities | **** | **** | **** | **** | **** | **** |
| Amounts due to banks | 11,024 | **** | **** | **** | **** | 11,024 |
| Payables from securities financing transactions | 6,321 | **** | 6,321 | **** | **** | **** |
| Cash collateral payables on derivative instruments | 37,312 | **** | 37,312 | **** | 634 | **** |
| Customer deposits | 524,636 | **** | **** | **** | **** | 524,636 |
| Debt issued measured at amortized cost | 139,230 | **** | **** | **** | **** | 139,230 |
| Other financial liabilities measured at amortized cost | 9,565 | **** | **** | **** | **** | 9,565 |
| Total financial liabilities<br> measured at amortized cost | 728,088 | **** | 43,633 | **** | 634 | 684,455 |
| Financial liabilities at fair value held for trading | 33,595 | **** | **** | **** | 33,595 | **** |
| Derivative financial instruments | 161,107 | **** | 161,075 | **** | 160,473 | 32^10^ |
| Brokerage payables designated at fair value | 38,742 | **** | 20,755 | **** | **** | 17,987 |
| Debt issued designated at fair value | 61,243 | **** | **** | **** | 59,448 | 1,795 |
| Other financial liabilities designated at fair value | 9,396 | **** | 8,563 | **** | 9,191 | 41 |
| Total financial liabilities<br> measured at fair value through profit or loss | 304,083 | **** | 190,393 | **** | 262,708 | 19,855 |
| Provisions | 2,827 | **** | **** | **** | **** | 2,827 |
| Other non-financial liabilities | 9,853 | **** | **** | **** | **** | 9,853 |
| Total liabilities | 1,044,852 | **** | 234,027 | **** | 263,342 | 716,990 |
| 1 Includes non-counterparty-related risk, equity investments in<br> funds subject to look-through approach, mandate-based approach, fallback<br> approach and equity positions in the banking book subject to the simple risk<br> weight method of 20,916 million, which are excluded from the credit risk<br> tables CR1, CR2, CR3 and CRB in section 3 of this report, resulting in IFRS<br> carrying values reflected in the credit risk section of 638,381<br> million. However, credit risk tables CR4 and CR5 include non-counterparty-related<br> risk, and credit risk table CR10 includes equity positions in the banking<br> book subject to the simple risk weight method. 2 Includes settlement risk,<br> which is not included in section 5 of this report. 3 This column only<br> consists of securitization positions in the banking book. Trading book<br> securitizations are included in column “Subject to market risk framework.” <br> 4 Consists of settlement risk and margin loans, which are both subject to<br> counterparty credit risk. 5 Includes trading portfolio assets in the<br> banking book and traded loans. 6 Includes assets pledged as<br> collateral, since collateral posted is subject to counterparty credit<br> risk. 7 Funded collar trades without re-hypothecation rights are treated<br> as non-credit bearing exposures and are excluded from column “Subject to<br> credit risk framework.” 8 Includes securities financing transactions as<br> well as other exposures subject to the counterparty credit risk framework. <br> 9 Net of deferred tax liabilities, which are offset against prudential<br> filters (e.g., goodwill and intangibles, as well as cash flow hedges) in the<br> regulatory capital calculation. 10 Relates to the carrying values of<br> derivative loan commitments and forward starting SFTs that are measured at<br> fair value. The replacement values are not representative for our capital<br> calculations. |
All values are in US Dollars.
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23
UBS Group AG consolidated
Annual | The LI1 table on the previous page provides a breakdown of the International Financial Reporting Standards (IFRS) balance sheet into the risk types used to calculate our regulatory capital requirements. Cash collateral receivables and payables on derivative instruments, derivative financial instruments, and financial assets at fair value not held for trading are subject to capital requirements under both market risk and counterparty credit risk frameworks. In addition, other financial assets measured at amortized cost, financial assets measured at fair value through profit or loss and financial assets measured at fair value through other comprehensive income include securities that have been pledged as collateral. These securities are also considered in the counterparty credit risk framework, as collateral pledged is subject to counterparty credit risk. p
LIA: Explanation of the differencesbetween the IFRS and regulatory scopes of consolidation
Annual
| The scope of consolidation for the purpose of calculating Group regulatory capital is generally the same as the consolidation scope under IFRS and includes subsidiaries that are directly or indirectly controlled by UBS Group AG and are active in banking and finance. However, subsidiaries consolidated under IFRS whose business is outside the banking and finance sector are excluded from the regulatory scope of consolidation.
The key difference between the IFRS and regulatory scope of consolidation as of 31 December 2020 relates to investments in insurance, real estate and commercial companies, as well as investment vehicles, that are consolidated under IFRS but not for regulatory capital purposes, where they are subject to risk-weighting.
The table below provides a list of the most significant entities that were included in the IFRS scope of consolidation but not in the regulatory scope of consolidation. These entities account for most of the difference between the “Balance sheet in accordance with IFRS scope of consolidation” and the “Balance sheet in accordance with regulatory scope of consolidation” columns in the CC2 table. Such difference is mainly related to financial assets at fair value not held for trading and other financial liabilities designated at fair value. As of 31 December 2020, entities consolidated under either IFRS or the regulatory scope of consolidation did not report any significant capital deficiencies.
In the banking book, certain equity investments are not consolidated under either the IFRS or under the regulatory scope. As of 31 December 2020, these investments mainly consisted of infrastructure holdings and joint operations (e.g., settlement and clearing institutions, stock and financial futures exchanges) and included our participation in the SIX Group. These investments are risk-weighted based on applicable threshold rules.
More information about the legal structure of UBS Group and the IFRS scope of consolidation is provided on pages 14 and 288, respectively, of our Annual Report 2020, available under “Annual reporting” at ubs.com/investors. p
Semi-annual |
| Main legal entities consolidated under IFRS but not included in the regulatory scope of consolidation | |||
|---|---|---|---|
| **** | 31.12.20 | **** | |
| USD million | Total assets^1^ | Total equity^1^ | Purpose |
| UBS Asset Management Life Ltd | 21,088 | 47 | Life Insurance |
| UBS Life Insurance Company USA | 143 | 43 | Life insurance |
| 1 Total assets and total equity on a standalone basis. |
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24
Annual |
| LI2: Main sources of differences between<br> regulatory exposure amounts and carrying values in financial statements<br> (under the regulatory scope of consolidation) | |||||
|---|---|---|---|---|---|
| 31.12.20 | Total | Items subject to: | |||
| million | **** | Credit risk framework | Counterparty credit risk framework | Securitization framework | Market risk framework |
| 1 | 1,104,599 | 659,297^1^ | 350,686 | 148 | 300,657 |
| 2 | (160,234) | **** | (160,234) | **** | **** |
| 3 | 944,365 | 659,297 | 190,452 | 148 | 300,657 |
| 4 | 91,476 | 90,566 | 911 | **** | **** |
| 5 | (12,329) | **** | **** | **** | **** |
| 6 | 77,219 | **** | 77,219 | **** | **** |
| 7 | (76,515) | **** | (76,515) | **** | **** |
| 8 | (87,830) | (6,229) | **** | (7) | (300,113)^4^ |
| 9 | 936,387 | 743,634 | 192,067 | 141 | 545 |
| 1 Includes non-counterparty-related risk, equity investments in<br> funds subject to look-through approach, mandate-based approach, fallback<br> approach and equity positions in the banking book subject to the simple risk<br> weight method of 20,916 million, which are excluded from the credit risk<br> tables CR1, CR2, CR3 and CRB in section 4 of this report, resulting in IFRS<br> carrying values reflected in the credit risk section of 638,381<br> million. However, credit risk tables CR4 and CR5 include<br> non-counterparty-related risk, and credit risk table CR10 includes equity<br> positions in the banking book subject to the simple risk weight method. 2<br> Includes the amounts of financial instruments and cash collateral considered<br> for netting per the relevant netting agreement in order to not exceed the net<br> amount of financial assets presented on the balance sheet (included in row<br> 1); i.e., over-collateralization, where it exists, is not reflected in the<br> table. 3 Includes off-balance sheet exposures where a credit conversion<br> factor is applied. 4 Exposure at default is only calculated for<br> securitization exposures in the trading book, resulting in a difference<br> between carrying amounts and exposure amounts considered for regulatory<br> purposes. The effect on the total exposure is higher, since certain exposures<br> are subject to regulatory capital charges in both the market risk and the<br> counterparty credit risk categories. |
All values are in US Dollars.
p
Regulatory exposures
Annual | The LI2 table above illustrates the key differences between regulatory exposure amounts and accounting carrying amounts under the regulatory scope of consolidation. In addition to the accounting carrying amounts, the regulatory exposure amounts include:
– netting of financial instruments and cash collateral where an enforceable master netting agreement is in place (row 2);
– off-balance sheet amounts not related to derivatives and SFTs (row 4);
– potential future exposure (PFE) for derivatives, offset by eligible financial collateral deductions (row 6);
– effects from the model calculation of effective expected positive exposure (EEPE) applied to derivatives (row 6);
– any collateral mitigation through the application of the close-out period approach or the comprehensive measurement approach (row 7); and
– effects of collateral mitigation in the banking book (row 8).
The regulatory exposure amount excludes prudential filters (row 5), consisting of items subject to deduction from capital, which are not risk-weighted. In addition, exposures that are only subject to market risk do not create any regulatory exposure, as their risk is reflected as part of our market risk RWA calculation (row 8). p
Fair value measurement
The table below refers to additional information about fair value measurement that is provided in our Annual Report 2020, available under “Annual reporting” at ubs.com/investors.
Annual |
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
|---|---|---|---|---|
| Valuation methodologies applied, including mark-to-market and<br> mark-to-model methodologies in use | Consolidated financial statements | – | Note 21a Valuation principles | 348 |
| – | Note 21c Fair value hierarchy | 349–354 | ||
| – | Note 21f Level 3 instruments: valuation techniques and inputs | 357–359 | ||
| Description of the independent price verification process | Consolidated financial statements | – | Note 21b Valuation governance | 348 |
| Procedures for valuation adjustments or reserves for valuing<br> trading positions by type of instrument | Consolidated financial statements | – | Note 21d Valuation adjustments | 355–356 |
p
25
UBS Group AG consolidated
Section 4 Credit risk
Introduction
Semi-annual | This section provides information about the exposures subject to the Basel III credit risk framework. Information about counterparty credit risk is reflected in the “Counterparty credit risk” section of this report. Securitization positions are reported in the “Securitizations” section of this report.
The tables in this section provide details regarding the exposures relevant for determining the firm’s credit risk-related regulatory capital requirement. The parameters applied under the advanced internal ratings-based (A-IRB) approach are generally based on the same methodologies, data and systems we use for internal credit risk quantification, except where certain treatments are specified by regulatory requirements. These include, for example, the application of regulatory prescribed floors and multipliers, and differences with respect to eligibility criteria and exposure definitions. The exposure information presented in this section may thus differ from our internal management view disclosed in the “Risk management and control” sections of our quarterly and annual reports. Similarly, the regulatory capital prescribed measure of credit risk exposure also differs from how it is defined under International Financial Reporting Standards (IFRS). p
Credit risk exposure categories
Semi-annual | The definitions of the Swiss Financial Market Supervisory Authority (FINMA) defined Pillar 3 credit risk exposure categories “Loans” and “Debt securities” below, as referred to in the “CR1: Credit quality of assets” and “CR3: Credit risk mitigation techniques – overview” tables in this section, provide a link to the IFRS balance sheet structure.
The Pillar 3 category “Loans” comprises financial instruments held with the intent to collect the contractual payments and includes the following IFRS balances to the extent that they are subject to the credit risk framework:
– balances at central banks;
– Loans and advances tobanks;
– Loans and advances tocustomers;
– Other financial assetsmeasured at amortized cost, excluding money market instruments, checks and bills and other debt instruments;
– traded loans in the banking book that are included within Financial assets at fair value held fortrading;
– Brokerage receivables;
– loans including structured loans that are included within Financial assets at fair value not held fortrading; and
– Other non-financialassets.
The Pillar 3 category “Debt securities” includes the following IFRS balances to the extent that they are subject to the credit risk framework:
– money market instruments, checks and bills and other debt instruments that are included within Otherfinancial assets measured at amortized cost;
– Financial assets at fairvalue held for trading, excluding traded loans;
– Financial assets at fairvalue not held for trading, excluding loans; and
– Financial assetsmeasured at fair value through other comprehensive income. p
26
Credit risk management
The table below presents an overview of Pillar 3 disclosures that are provided separately in our Annual Report 2020.
Annual |
| CRA – Credit risk management | ||||
|---|---|---|---|---|
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
| Translation of the business model into the components of the<br> bank’s credit risk profile | Risk management and control | – | Key risks, risk measures and performance by business division<br> and Group Functions | 92 |
| – | Risk categories | 93 | ||
| – | Credit risk profile of the Group | 107 | ||
| – | Main sources of credit risk | 106 | ||
| Consolidated financial statements | – | Note 20d Maximum exposure to credit risk | 343 | |
| Criteria and approach used for defining credit risk management<br> policy and for setting credit risk limits | Risk management and control | – | Risk governance | 95–96 |
| – | Risk appetite framework | 97–100 | ||
| – | Risk measurement | 103–105 | ||
| – | Credit risk – Overview of measurement, monitoring and management<br> techniques | 107 | ||
| Structure and organization of the credit risk management and<br> control function | Risk management and control | – | Risk governance | 95–96 |
| Interaction between the credit risk management, risk control,<br> compliance and internal audit functions | Risk management and control | – | Risk governance | 95–96 |
| – | Risk appetite framework | 97–100 | ||
| Scope and content of the reporting on credit risk exposure to<br> the executive management and to the board of directors | Risk management and control | – | Risk governance | 95–96 |
| – | Internal risk reporting | 101 | ||
| – | Credit risk profile of the Group | 107 | ||
| – | Risk appetite framework | 97–100 |
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27
UBS Group AG consolidated
Credit risk exposure and credit quality of assets
Annual | Amounts shown in the tables below and on the following pages relate to on-balance sheet IFRS carrying amounts as well as off-balance sheet items according to the regulatory scope of consolidation that give rise to credit risk exposure under the Basel III framework. p
Annual |
| CRB: Breakdown of exposures by industry^1^ | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 31.12.20 | ||||||||||||||
| USD million | Banks and central banks | Construc-<br><br> <br>tion | Electricity, gas, water supply | Financial services | Hotels and restaurants | Manufac-<br><br> <br>turing^4^ | Mining | Private households | Public authorities | Real estate and rentals | Retail and wholesale^5^ | Services | Other^6^ | Total carrying amount of assets |
| Loans^2^ | 172,805 | 2,901 | 1,022 | 76,718 | 2,144 | 4,020 | 566 | 235,062 | 2,325 | 20,239 | 10,518 | 29,917 | 6,085 | 564,322 |
| Debt securities | 14,042 | 0 | 251 | 12,722 | 0 | 1 | 0 | 2 | 41,920 | 0 | 0 | 5,112 | 11 | 74,059 |
| Off-balance sheet exposures^3^ | 7,301 | 1,306 | 817 | 14,248 | 826 | 11,847 | 1,545 | 6,871 | 1,364 | 1,186 | 7,012 | 10,772 | 2,766 | 67,862 |
| Total | 194,148 | 4,207 | 2,090 | 103,688 | 2,970 | 15,867 | 2,111 | 241,934 | 45,609 | 21,425 | 17,530 | 45,801 | 8,863 | 706,243 |
| 31.12.19 | ||||||||||||||
| Loans^2^ | 118,853 | 2,839 | 977 | 62,562 | 1,665 | 3,990 | 647 | 209,832 | 2,447 | 16,231 | 7,105 | 24,501 | 5,914 | 457,564 |
| Debt securities | 15,188 | 113 | 15 | 9,909 | 0 | 0 | 0 | 256 | 33,626 | 1,208 | 0 | 2,452 | 0 | 62,766 |
| Off-balance sheet exposures^3^ | 3,669 | 1,938 | 802 | 12,432 | 1,053 | 10,999 | 1,448 | 4,276 | 440 | 1,347 | 6,038 | 5,946 | 2,389 | 52,778 |
| Total | 137,710 | 4,890 | 1,794 | 84,902 | 2,719 | 14,989 | 2,095 | 214,363 | 36,513 | 18,786 | 13,143 | 32,900 | 8,303 | 573,108 |
| 1 Effective from 31 December 2020, we have aligned the row<br> structure to “CR1: Credit quality of assets.” Prior periods have been<br> restated accordingly. 2 Loan exposure is reported in line with the IFRS<br> definition. 3 Off-balance sheet exposures include unutilized credit<br> facilities, guarantees provided and forward starting loan commitments, but<br> exclude prolongations of loans that do not increase the initially committed<br> loan amount. Unutilized credit facilities exclude unconditionally revocable<br> and uncommitted credit facilities, even if they attract RWA. 4 Includes<br> the chemicals industry. 5 Includes the food and beverages industry. 6<br> Consists of Transport, storage, communications and other. |
p
Annual | The table below provides a breakdown of our credit risk exposures by geographical area. The geographical distribution is based on the legal domicile of the counterparty or issuer. p
Annual |
| CRB: Breakdown of exposures by geographical area^1^ | |||||||
|---|---|---|---|---|---|---|---|
| 31.12.20 | |||||||
| USD million | Asia Pacific | Latin America | Middle East and Africa | North America | Switzerland | Rest of Europe | Total carrying amount of assets |
| Loans^2^ | 38,864 | 5,759 | 8,570 | 147,448 | 296,912 | 66,769 | 564,322 |
| Debt securities | 13,168 | 814 | 397 | 34,309 | 4,080 | 21,291 | 74,059 |
| Off-balance sheet exposures^3^ | 4,957 | 444 | 3,583 | 23,839 | 22,211 | 12,827 | 67,862 |
| Total | 56,990 | 7,017 | 12,550 | 205,596 | 323,203 | 100,887 | 706,243 |
| 31.12.19 | |||||||
| Loans^2^ | 37,083 | 5,720 | 5,326 | 110,447 | 246,021 | 52,965 | 457,564 |
| Debt securities | 8,343 | 834 | 45 | 34,858 | 1,226 | 17,459 | 62,766 |
| Off-balance sheet exposures^3^ | 3,021 | 457 | 908 | 19,090 | 17,986 | 11,314 | 52,778 |
| Total | 48,448 | 7,012 | 6,280 | 164,396 | 265,234 | 81,739 | 573,108 |
| 1 Effective from 31 December 2020, we have aligned the row<br> structure to “CR1: Credit quality of assets.” Prior periods have been<br> restated accordingly. 2 Loan exposure is reported in line with the IFRS definition. <br> 3 Off-balance sheet exposures include unutilized credit facilities,<br> guarantees provided and forward starting loan commitments, but exclude<br> prolongations of loans that do not increase the initially committed loan<br> amount. Unutilized credit facilities exclude unconditionally revocable and<br> uncommitted credit facilities, even if they attract RWA. |
p
28
Annual | The table below provides a breakdown of our credit risk exposure by residual maturity. Residual maturity is presented based on contract end date and does not include potential early redemption features. p
Annual |
| CRB: Breakdown of exposures by residual maturity^1^ | ||||
|---|---|---|---|---|
| 31.12.20 | ||||
| USD million | Due in<br><br> <br>1 year or less | Due between<br><br> <br>1 year and 5 years | Due over<br><br> <br>5 years | Total carrying amount of assets |
| Loans^2^ | 396,329 | 104,352 | 63,641 | 564,322 |
| Debt securities | 31,226 | 22,651 | 20,181 | 74,059 |
| Off-balance sheet exposures^3^ | 29,952 | 32,686 | 5,224 | 67,862 |
| Total | 457,508 | 159,689 | 89,047 | 706,243 |
| 31.12.19 | ||||
| Loans^2^ | 313,561 | 89,838 | 54,144 | 457,543 |
| Debt securities | 19,848 | 25,654 | 17,285 | 62,787 |
| Off-balance sheet exposures^3^ | 19,973 | 25,623 | 7,181 | 52,778 |
| Total | 353,382 | 141,114 | 78,611 | 573,108 |
| 1 Effective from 31 December 2020, we have aligned the row<br> structure to “CR1: Credit quality of assets.” Prior periods have been restated<br> accordingly. 2 Loan exposure is reported in line with the IFRS<br> definition. 3 Off-balance sheet exposures include unutilized credit<br> facilities, guarantees provided and forward starting loan commitments, but<br> exclude prolongations of loans that do not increase the initially committed<br> loan amount. Unutilized credit facilities exclude unconditionally revocable<br> and uncommitted credit facilities, even if they attract RWA. |
p
Policies for past-due, non-performing and credit-impaired claims
Annual | In line with the regulatory definition, we report a claim as non-performing when: (i) it is more than 90 days past due; (ii) it is subject to restructuring proceedings, where preferential conditions concerning interest rates, subordination, tenor, etc. have been granted in order to avoid default of the counterparty (forbearance); or (iii) the counterparty is subject to bankruptcy / enforced liquidation proceedings in any form, even if there is sufficient collateral to cover the due payment or there is other evidence that payment obligations will not be fully met without recourse to collateral.
UBS applies a single definition of default for classifying assets and determining the probability of default (PD) of its obligors for risk modeling purposes. The definition of default is based on quantitative and qualitative criteria. A counterparty is classified as defaulted at the latest when material payments of interest, principal or fees are overdue for more than 90 days, or more than 180 days for certain exposures in relation to loans to private and commercial clients in Personal & Corporate Banking, and to private clients of Global Wealth Management Region Switzerland. UBS does not consider the general 90-day presumption for default recognition appropriate for those latter portfolios, based on an analysis of the cure rates, which demonstrated that strict application of the 90-day criterion would not accurately reflect the inherent credit risk. Counterparties are also classified as defaulted when: bankruptcy, insolvency proceedings or enforced liquidation have commenced; obligations have been restructured on preferential terms (forbearance); or there is other evidence that payment obligations will not be fully met without recourse to collateral. The latter may be the case even if, to date, all contractual payments have been made when due. If one claim against a counterparty is defaulted on, generally all claims against that counterparty are treated as defaulted.
An instrument is classified as credit-impaired if the counterparty is classified as defaulted and / or the instrument is identified as purchased or originated credit-impaired (POCI). An instrument is POCI if it has been purchased at a deep discount to its carrying amount following a risk event of the issuer or originated with a defaulted counterparty. Once a financial asset is classified as defaulted / credit-impaired (except POCI), it is reported as a stage 3 instrument and remains as such unless all past due amounts have been rectified, additional payments have been made on time, the position is not classified as credit-restructured, and there is general evidence of credit recovery. A three-month probation period is applied before a transfer back to stages 1 or 2 can be triggered. However, most instruments remain in stage 3 for a longer period.
The tables on the next page provide a breakdown of impaired exposures by geographical region and industry. The amounts shown are IFRS carrying amounts. The geographical distribution is based on the legal domicile of the counterparty or issuer. p
29
UBS Group AG consolidated
Annual |
| CRB: Credit-impaired exposures by industry | ||||
|---|---|---|---|---|
| 31.12.20 | ||||
| USD million | Credit-impaired exposures, gross (Stage 3) | Allowances for credit-impaired exposures | Credit-impaired exposures net of allowances | Write-offs for the year ended |
| Banks | 1 | (1) | 0 | 0 |
| Construction | 171 | (20) | 151 | (2) |
| Electricity, gas, water supply | 14 | (3) | 11 | **** |
| Financial services | 515 | (133) | 382 | (59) |
| Hotels and restaurants | 92 | (16) | 76 | (6) |
| Manufacturing^1^ | 202 | (135) | 66 | (27) |
| Mining | 44 | (17) | 27 | (142) |
| Private households | 1,431 | (148) | 1,282 | (27) |
| Public authorities | 33 | (5) | 28 | 0 |
| Real estate and rentals | 214 | (55) | 159 | (15) |
| Retail and wholesale^2^ | 532 | (185) | 347 | (53) |
| Services | 251 | (48) | 203 | (6) |
| Transport, storage, communications and other | 278 | (58) | 220 | (8) |
| Total | 3,778 | (826) | 2,952 | (346) |
| 31.12.19 | ||||
| Banks | 1 | 0 | 1 | (2) |
| Construction | 46 | (12) | 35 | (4) |
| Electricity, gas, water supply | 14 | 0 | 14 | (2) |
| Financial services | 298 | (62) | 237 | (5) |
| Hotels and restaurants | 23 | (11) | 12 | (7) |
| Manufacturing^1^ | 249 | (103) | 146 | (30) |
| Mining | 97 | (53) | 44 | (1) |
| Private households | 1,252 | (139) | 1,113 | (21) |
| Public authorities | 34 | (5) | 29 | |
| Real estate and rentals | 485 | (36) | 448 | (4) |
| Retail and wholesale^2^ | 270 | (167) | 104 | (14) |
| Services | 130 | (40) | 91 | (13) |
| Transport, storage, communications and other | 212 | (60) | 153 | (39) |
| Total | 3,113 | (688) | 2,425 | (142) |
| 1 Includes the chemicals industry. 2 Includes the food and<br> beverages industry. |
p
Annual | The table below provides a breakdown of our credit risk exposures by geographical region. The geographical distribution is based on the legal domicile of the counterparty or issuer. p
Annual |
| CRB: Credit-impaired exposures by geographical area | ||||
|---|---|---|---|---|
| 31.12.20 | **** | **** | **** | **** |
| USD million | Credit-impaired exposures, gross (Stage 3) | Allowances for credit-impaired exposures | Credit-impaired exposures net of allowances | Write-offs for the year ended |
| Asia Pacific | 241 | (88) | 153 | (1) |
| Latin America | 77 | (17) | 60 | (11) |
| Middle East and Africa | 74 | (62) | 12 | 0 |
| North America | 1,017 | (172) | 845 | (182) |
| Switzerland | 1,983 | (389) | 1,594 | (79) |
| Rest of Europe | 386 | (98) | 288 | (72) |
| Total | 3,778 | (826) | 2,952 | (346) |
| 31.12.19 | ||||
| Asia Pacific | 106 | (3) | 103 | (46) |
| Latin America | 67 | (43) | 24 | (4) |
| Middle East and Africa | 21 | (1) | 19 | (2) |
| North America | 943 | (150) | 792 | (43) |
| Switzerland | 1,573 | (361) | 1,212 | (44) |
| Rest of Europe | 402 | (129) | 274 | (4) |
| Total | 3,113 | (688) | 2,425 | (142) |
p
30
Semi-annual |
The CR1 table below provides a breakdown of defaulted and non-defaulted loans, debt securities and off-balance sheet exposures. The table includes a split of expected credit loss (ECL) accounting provisions based on the standardized approach and the internal ratings-based approach.
Increases in net carrying values of Loans and decreases in net carrying values of Debt securities, when compared with 30 June 2020, are explained in the CR3 table of this report. Compared with 30 June 2020, gross carrying value of off-balance sheet exposures increased by USD 3.9 billion to USD 68.1 billion mainly due to increased loan commitments in our Global Wealth Management and Personal & Corporate business divisions primarily reflecting higher business volumes as well as currency effects.
For information about the definitions of default and credit impairment, refer to page 122 of our Annual Report 2020, which is available under ”Annual reporting” at ubs.com/investors.
More information about the net value movements related to Loans and Debt securities shown in the table is provided on page 34 in the “CR3: Credit risk mitigation techniques – overview” table. p
Semi-annual |
| CR1: Credit quality of assets | |||||||
|---|---|---|---|---|---|---|---|
| Gross carrying amounts of: | Allowances / impairments | Of which: ECL accounting provisions for credit losses on SA exposures | Of which: ECL accounting provisions for credit losses on IRB exposures<br><br> <br>(stage 1, 2, 3) | Net values | |||
| million | Defaulted exposures^1^ | Non-defaulted exposures | Allocated in regulatory category of Specific<br><br> <br>(stage 3<br><br> <br>credit-impaired) | Allocated in regulatory category of General<br><br> <br>(stage 1 & 2) | |||
| 31.12.20 | **** | **** | **** | ||||
| 1 | 3,504 | 562,025 | (1,207)^4^ | (115) | (73) | (1,019) | 564,322 |
| 2 | **** | 74,059 | **** | **** | **** | **** | 74,059 |
| 3 | 273 | 67,794 | (205)^4^ | (1) | (6) | (197) | 67,862 |
| 4 | 3,778 | 703,878 | (1,412)^4^ | (116) | (80) | (1,216) | 706,243 |
| 30.6.20 | **** | **** | **** | ||||
| 1 | 3,564 | 516,755 | (1,244)^4^ | (115) | (75) | (1,054) | 519,076 |
| 2 | 81,980 | 81,980 | |||||
| 3 | 290 | 63,927 | (168)^4^ | (1) | (2) | (165) | 64,048 |
| 4 | 3,854 | 662,662 | (1,411)^4^ | (116) | (77) | (1,218) | 665,104 |
| 31.12.19 | **** | **** | **** | ||||
| 1 | 2,981 | 455,494 | (911)^4^ | (114) | (68) | (729) | 457,564 |
| 2 | 62,766 | 62,766 | |||||
| 3 | 132 | 52,725 | (78)^4^ | (1) | (3) | (75) | 52,778 |
| 4 | 3,113 | 570,986 | (989)^4^ | (115) | (71) | (804) | 573,108 |
| 1 Defaulted exposures are in line with credit-impaired exposures<br> (stage 3) under IFRS 9. Refer to Note 20 “Expected credit loss measurement“<br> of our Annual Report 2020 for more information about IFRS 9. 2 Loan<br> exposure is reported in line with the Pillar 3 definition. Refer to “Credit<br> risk exposure categories” in this section for more information about the<br> classification of Loans and Debt securities. 3 Off-balance sheet exposures<br> include unutilized credit facilities, guarantees provided and forward<br> starting loan commitments, but exclude prolongations of loans that do not<br> increase the initially committed loan amount. Unutilized credit facilities<br> exclude unconditionally revocable and uncommitted credit facilities, even if<br> they attract RWA. 4 Expected credit loss allowances and provisions amount<br> to 1,468 million as of 31 December 2020, as disclosed in Note<br> 20 of our Annual Report 2020. This Pillar 3 table excludes ECL on revocable<br> off-balance sheet exposures (31 December 2020: 50 million; 30 June 2020:<br> 65 million; 31 December 2019: 35 million), ECL on<br> exposures subject to counterparty credit risk (31 December 2020: 5<br> million; 30 June 2020: 6 million; 31 December 2019: 5<br> million) and ECL on irrevocable committed prolongation of loans that do not<br> give rise to additional credit exposures of 2 million as of 31 December<br> 2020. |
All values are in US Dollars.
p
31
UBS Group AG consolidated
Semi-annual | The CR2 table below presents changes in stock of defaulted loans, debt securities and off-balance sheet exposures for the second half of 2020. The total amount of defaulted loans and debt securities was USD 3.8 billion as of 31 December 2020, largely unchanged compared with USD 3.9 billion as of 30 June 2020. p
Semi-annual |
| CR2: Changes in stock of<br> defaulted loans, debt securities and off-balance sheet exposures | ||
|---|---|---|
| million | For the half year ended 31.12.20^1^ | For the half year ended 30.6.20^1^ |
| 1 | 3,854 | 3,113 |
| 2 | 1,180 | 1,314 |
| 3 | (993) | (337) |
| 4 | (244) | (103) |
| 5 | (19) | (133) |
| 6 | 3,778 | 3,854 |
| 1 Off-balance sheet exposures include unutilized credit<br> facilities, guarantees provided and forward starting loan commitments, but<br> exclude prolongations of loans that do not increase the initially committed<br> loan amount. Unutilized credit facilities exclude unconditionally revocable<br> and uncommitted credit facilities, even if they attract RWA. |
All values are in US Dollars.
p
Annual | The table below provides a breakdown of total loan balances where payments have been missed. The decrease in past-due amounts is mainly related to a Non-core and Legacy Portfolio position that has been restructured and is now carried at fair value instead of amortized cost. The amount of past-due mortgage loans was not significant compared with the overall size of the mortgage portfolio. Amounts in the table below are IFRS carrying amounts and include IFRS balance sheet lines Loansand advances to customers and Loans and advances to banks. p
Annual |
| CRB: Past due exposures | |
|---|---|
| million | 31.12.19 |
| 1–10 days | 45 |
| 11–30 days | 178 |
| 31–60 days | 166 |
| 61–90 days | 90 |
| >90 days | 1,635 |
| of which: mortgage loans | 675^1^ |
| Total | 2,113 |
| 1 Total mortgage loans as of 31 December 2020: 196,341<br> million (31 December 2019: 172,853 million). |
All values are in US Dollars.
p
Restructured exposures
Annual | Under imminent payment default, or where default has already occurred, we may grant concessions to borrowers in financial difficulties that we would otherwise not consider in the normal course of our business, such as offering preferential interest rates, extending maturity, modifying the schedule of repayments, debt / equity swap, subordination, etc. When a forbearance measure takes place, each case is considered individually and the exposure is generally classified as defaulted. Forbearance classification will remain until the loan is collected or written off, non-preferential conditions are granted that supersede the preferential conditions or until the counterparty has recovered and the preferential conditions no longer exceed our risk tolerance.
Contractual adjustments when there is no evidence of imminent payment default, or where changes to terms and conditions are within our usual risk appetite, are not considered to be forborne.
Refer to pages 121–123 of our Annual Report 2020, available under ”Annual reporting“ at ubs.com/investors, for more information about our policies for restructured exposures.
The table below provides more information about restructured exposures as of 31 December 2020. The increase is mainly related to a few large positions in the Investment Bank and Personal & Corporate Banking. p
Annual |
| CRB: Breakdown of restructured exposures between credit-impaired and non-credit-impaired | ||||||
|---|---|---|---|---|---|---|
| **** | Credit-impaired | Non-credit-impaired | Total | |||
| USD million | 31.12.20 | 31.12.19 | 31.12.20 | 31.12.19 | 31.12.20 | 31.12.19 |
| Restructured exposures | 1,600 | 1,152 | **** | 1,600 | 1,152 |
p
32
Credit risk mitigation
The table below presents an overview of Pillar 3 disclosures provided separately in our Annual Report 2020.
Annual |
| CRC – Credit risk mitigation | ||||
|---|---|---|---|---|
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
| Core features of policies and processes for, and an indication<br> of the extent to which the bank makes use of, on- and off-balance sheet<br> netting | Risk management and control | – | Traded products | 112–113 |
| Consolidated financial statements | –<br><br> <br>–<br><br> <br><br><br> <br>– | Note 10 Derivative instruments<br><br> <br>Note 22 Offsetting financial assets and financial liabilities<br><br> <br>Note 1a item 2i Offsetting | 320–321<br><br> <br>364–365<br><br> <br><br><br> <br>297 | |
| Core features of policies and processes for collateral<br> evaluation and management | Risk management and control | – | Credit risk mitigation | 114–115 |
| Information about market or credit risk concentrations under the<br> credit risk mitigation instruments used | Risk management and control | –<br><br> <br>– | Risk concentrations<br><br> <br>Credit risk mitigation | 105<br><br> <br>114–115 |
| Consolidated financial statements | –<br><br> <br>–<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br><br><br> <br><br><br> <br>– | Note 10 Derivative instruments<br><br> <br>Note 20d Maximum exposure to credit risk<br><br> <br>Note 21i Maximum exposure to credit risk for financial<br> instruments measured at fair value<br><br> <br>Note 22 Offsetting financial assets and financial liabilities | 320–321<br><br> <br>343<br><br> <br><br><br> <br>362<br><br> <br><br><br> <br><br><br> <br><br><br> <br>364–365 |
p
Additional information about counterparty credit risk mitigation is provided in the “Counterparty credit risk” section of this report.
33
UBS Group AG consolidated
Semi-annual | The CR3 table below provides a breakdown of loans and debt securities into unsecured and partially or fully secured exposures, with additional information about the security type.
Compared with 30 June 2020, the carrying amount of unsecured loans increased by USD 7.6 billion to USD 192.7 billion, mainly due to an increase in cash and balances with central banks. Unsecured debt securities decreased by USD 7.9 billion to USD 74.1 billion, mainly due to disposals of HQLA (high-quality liquid assets), as well as currency effects.
The carrying amount of partially or fully secured exposures increased by USD 37.6 billion to USD 371.7 billion, mainly as a result of currency effects and an increase in secured loans to customers. p
Semi-annual |
| CR3: Credit risk mitigation<br> techniques – overview1 | ||||||
|---|---|---|---|---|---|---|
| Secured portion of exposures partially or fully secured: | ||||||
| million | Exposures fully unsecured: carrying amount | Exposures partially or fully secured: carrying amount | Total: carrying amount | Exposures secured by collateral | Exposures secured by financial guarantees | Exposures secured by credit derivatives |
| 31.12.20 | **** | **** | **** | **** | **** | **** |
| 1 | 192,664 | 371,658 | 564,322 | 355,364 | 4,392 | 12 |
| 2 | 74,059 | **** | 74,059 | **** | **** | **** |
| 3 | 266,723 | 371,658 | 638,381 | 355,364 | 4,392 | 12 |
| 4 | 250 | 2,461 | 2,711 | 1,662 | 218 | **** |
| 30.6.20 | **** | **** | **** | **** | **** | **** |
| 1 | 185,026 | 334,050 | 519,076 | 320,139 | 3,368 | 11 |
| 2 | 81,980 | 81,980 | ||||
| 3 | 267,006 | 334,050 | 601,056 | 320,139 | 3,368 | 11 |
| 4 | 657 | 2,089 | 2,745 | 1,440 | 212 | |
| 31.12.19 | **** | |||||
| 1 | 138,961 | 318,603 | 457,564 | 307,400 | 1,125 | |
| 2 | 62,766 | 62,766 | ||||
| 3 | 201,727 | 318,603 | 520,330 | 307,400 | 1,125 | **** |
| 4 | 504 | 1,823 | 2,327 | 1,167 | 225 | |
| 1 Exposures in this table represent carrying amounts in<br> accordance with the regulatory scope of consolidation. 2 Loan exposure is<br> reported in line with the Pillar 3 definition. Refer to “Credit risk exposure<br> categories” in this section for more information about the classification of<br> Loans and Debt securities. |
All values are in US Dollars.
p
34
Standardized approach – credit risk exposure and credit risk mitigation
Semi-annual | The CR4 table below illustrates the credit risk exposure and effect of credit risk mitigation (CRM) on the calculation of capital requirements under the standardized approach. Compared with 30 June 2020, off-balance sheet exposures before credit conversion factors (CCF) and CRM under the Corporates asset class increased by USD 0.7 billion to USD 15.4 billion, reflecting higher exposures to certain clients in Global Wealth Management and Group Functions. On-balance sheet exposures in the Central governments and central banks asset class decreased by USD 1.8 billion, and on-balance sheet exposures in the Public-sector entities and multi-lateral development banks assets class decreased by USD 1.0 billion, reflecting the move of Group Treasury’s liquidity portfolio under A-IRB. p
Semi-annual |
| CR4: Standardized approach –<br> credit risk exposure and credit risk mitigation (CRM) effects1 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Exposures<br><br> <br>before CCF and CRM^2^ | Exposures<br><br> <br>post-CCF and post-CRM | RWA and RWA density | ||||||
| million, except where<br> indicated | On-balance sheet amount | Off-balance sheet amount | Total | On-balance sheet amount | Off-balance sheet amount | Total | RWA | RWA density in % |
| 31.12.20 | **** | |||||||
| Asset classes | **** | **** | **** | **** | **** | **** | **** | **** |
| 1 | 8,292 | **** | 8,292 | 8,296 | 123 | 8,420 | 876 | 10.4 |
| 2 | 5,404 | 1,162 | 6,566 | 5,404 | 530 | 5,934 | 1,327 | 22.4 |
| 3 | 212 | 731 | 943 | 211 | 148 | 359 | 144 | 40.1 |
| 4 | 8,007 | 15,371 | 23,379 | 7,972 | 1,815 | 9,787 | 7,576 | 77.4 |
| 5 | 12,617 | 4,301 | 16,917 | 12,196 | 248 | 12,444 | 8,250 | 66.3 |
| 6 | **** | **** | **** | **** | **** | **** | **** | **** |
| 7 | 14,345 | **** | 14,345 | 14,345 | **** | 14,345 | 13,391 | 93.3 |
| 8 | 48,878 | 21,565 | 70,443 | 48,424 | 2,865 | 51,289 | 31,564 | 61.5 |
| 30.6.20 | **** | |||||||
| Asset classes | **** | **** | **** | **** | **** | **** | **** | **** |
| 1 | 10,043 | 10,043 | 10,047 | 1 | 10,048 | 913 | 9.1 | |
| 2 | 5,655 | 998 | 6,653 | 5,654 | 475 | 6,129 | 1,479 | 24.1 |
| 3 | 1,183 | 869 | 2,053 | 1,181 | 309 | 1,490 | 368 | 24.7 |
| 4 | 6,570 | 14,643 | 21,212 | 6,506 | 2,068 | 8,574 | 6,406 | 74.7 |
| 5 | 11,789 | 3,982 | 15,771 | 11,422 | 116 | 11,538 | 7,760 | 67.3 |
| 6 | ||||||||
| 7 | 14,048 | 67 | 14,115 | 14,048 | 67 | 14,115 | 13,219 | 93.6 |
| 8 | 49,288 | 20,559 | 69,847 | 48,859 | 3,035 | 51,894 | 30,144 | 58.1 |
| 31.12.19 | **** | |||||||
| Asset classes | **** | **** | **** | **** | **** | **** | **** | **** |
| 1 | 10,687 | 10,687 | 10,687 | 10,687 | 938 | 8.8 | ||
| 2 | 5,072 | 928 | 6,000 | 5,077 | 464 | 5,541 | 1,316 | 23.7 |
| 3 | 844 | 372 | 1,216 | 843 | 77 | 920 | 240 | 26.1 |
| 4 | 6,310 | 8,823 | 15,133 | 5,842 | 649 | 6,490 | 4,835 | 74.5 |
| 5 | 12,141 | 4,071 | 16,212 | 11,974 | 100 | 12,074 | 7,923 | 65.6 |
| 6 | ||||||||
| 7 | 14,226 | 14,226 | 14,226 | 14,226 | 13,135 | 92.3 | ||
| 8 | 49,280 | 14,194 | 63,474 | 48,648 | 1,290 | 49,939 | 28,386 | 56.8 |
| 1 Effective from 31 December 2020, we have changed the<br> disclosure in order to disclose the exposures prior to CRM effects in the<br> asset class of the obligor, while the information post CRM is shown in the<br> asset class of the protection provider. Prior periods have been restated<br> accordingly. 2 Exposures in this table represent carrying amounts in<br> accordance with the regulatory scope of consolidation. 3 Includes Non-counterparty-related<br> assets. |
All values are in US Dollars.
p
35
UBS Group AG consolidated
IRB approach – credit derivatives used as credit risk mitigation
Semi-annual | Where credit derivatives are used as credit risk mitigation, the probability of default (PD) of the obligor is in general substituted with the PD of the hedge provider. In addition, default correlation between the obligor and the hedge provider is taken into account through the double default approach. Refer to the “CCR6: Credit derivatives exposures” table in section 5 of this report for notional and fair value information about credit derivatives used as CRM. p
Semi-annual |
| CR7: IRB – effect on RWA of<br> credit derivatives used as CRM techniques1 | ||||||
|---|---|---|---|---|---|---|
| 31.12.20 | 30.6.20 | 31.12.19 | ||||
| million | Pre-credit derivatives RWA | Actual RWA | Pre-credit derivatives RWA | Actual RWA | Pre-credit derivatives RWA | Actual RWA |
| 1 | **** | **** | ||||
| 2 | 2,847 | 2,847 | 3,343 | 3,343 | 2,482 | 2,482 |
| 3 | **** | **** | ||||
| 4 | 5,806 | 5,806 | 5,948 | 5,948 | 6,102 | 6,102 |
| 5 | **** | **** | ||||
| 6 | 1,190 | 1,190 | 1,041 | 1,041 | 844 | 844 |
| 7 | **** | **** | ||||
| 8 | 13,569 | 13,569 | 11,963 | 11,963 | 11,475 | 11,475 |
| 9 | **** | **** | ||||
| 10 | 37,220 | 36,855 | 38,375 | 38,067 | 32,087 | 31,836 |
| 11 | 33,439 | 33,439 | 30,337 | 30,337 | 29,133 | 29,133 |
| 12 | 729 | 729 | 661 | 661 | 687 | 687 |
| 13 | 13,847 | 13,847 | 11,676 | 11,676 | 10,298 | 10,298 |
| 14 | **** | **** | ||||
| 15 | 108,646 | 108,281 | 103,344 | 103,036 | 93,108 | 92,858 |
| 1 Effective from 31 December 2020, we have changed the<br> disclosure in order to disclose the CRM effect from purchased credit<br> protection through credit derivatives in the asset class of the protection<br> provider. Prior periods have been restated accordingly. |
All values are in US Dollars.
p
36
Creditrisk under the standardized approach
Annual | The standardized approach is generally applied where using the advanced internal ratings-based (A-IRB) approach is not possible. The standardized approach requires banks to, where possible, use risk assessments prepared by external credit assessment institutions (ECAIs) or export credit agencies to determine the risk weightings applied to rated counterparties. We use three FINMA-recognized ECAIs to determine the risk weights for certain counterparties according to the BCBS-defined asset classes: Standard & Poor’s, Moody’s Investors Service and Fitch Ratings.
The mapping of external ratings to the standardized approach risk weights is determined by FINMA and published on its website. There were no changes in the ECAIs used compared with 31 December 2019.
Debt instruments are risk-weighted in accordance with the specific issue ratings available. If there is no specific issue rating published by an ECAI, the issuer rating is applied to the senior unsecured claims of that issuer subject to the conditions prescribed by FINMA. For the asset classes Retail, Equity and Other assets, we apply the regulatory prescribed risk weights independent of an external credit rating. p
Annual |
| CRD: Qualitative disclosures on banks’ use of external credit ratings under the standardized approach for credit risk | ||||
|---|---|---|---|---|
| **** | **** | 31.12.20 | ||
| External ratings used | ||||
| Asset classes | Moody’s | Standard & Poor’s | Fitch | |
| 1 | Central governments and central banks | l | l | l |
| 2 | Banks and securities dealers | l | l | l |
| 3 | Public-sector entities and multi-lateral development banks | l | l | l |
| 4 | Corporates | l | l | l |
p
37
UBS Group AG consolidated
**Semi-annual |**The CR5 table below shows exposures by asset classes and risk weights applied. p
Semi-annual |
| CR5: Standardized approach –<br> exposures by asset classes and risk weights | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| million | ||||||||||
| Risk weight | 0% | 10% | 20% | 35% | 50% | 75% | 100% | 150% | Others | Total credit exposures amount (post-CCF and post-CRM) |
| 31.12.20 | **** | |||||||||
| Asset classes | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 1 | 7,423 | **** | 116 | **** | 56 | **** | 824 | **** | **** | 8,420 |
| 2 | **** | **** | 5,531 | **** | 363 | **** | 40 | **** | **** | 5,934 |
| 3 | 6 | **** | 208 | **** | 91 | **** | 54 | **** | **** | 359 |
| 4 | **** | **** | 1,959 | **** | 512 | 1,037^2^ | 6,275 | 4 | **** | 9,787 |
| 5 | **** | **** | **** | 6,052 | **** | 1,321 | 4,929 | 141 | **** | 12,444 |
| 6 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 7 | 954 | **** | **** | **** | **** | **** | 13,391 | **** | **** | 14,345 |
| 8 | 8,383 | **** | 7,815 | 6,052 | 1,022 | 2,359 | 25,513 | 145 | **** | 51,289 |
| 9 | **** | **** | **** | 6,052 | **** | 113 | 604 | **** | **** | 6,770 |
| 10 | **** | **** | **** | **** | **** | **** | 214 | **** | **** | 214 |
| 30.6.20 | **** | |||||||||
| Asset classes | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 1 | 8,934 | 207 | 71 | 836 | 10,048 | |||||
| 2 | 5,319 | 784 | 26 | 6,129 | ||||||
| 3 | 149 | 1,128 | 143 | 70 | 1,490 | |||||
| 4 | 2,088 | 125 | 1,219^2^ | 5,130 | 12 | 8,574 | ||||
| 5 | 5,433 | 1,331 | 4,600 | 173 | 11,538 | |||||
| 6 | ||||||||||
| 7 | 894 | 13,221 | 14,115 | |||||||
| 8 | 9,977 | **** | 8,743 | 5,433 | 1,124 | 2,550 | 23,883 | 186 | **** | 51,894 |
| 9 | 5,433 | 84 | 655 | 6,171 | ||||||
| 10 | 274 | 274 | ||||||||
| 31.12.19 | **** | |||||||||
| Asset classes | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 1 | 9,540 | 225 | 58 | 864 | 10,687 | |||||
| 2 | 4,863 | 673 | 5 | 5,541 | ||||||
| 3 | 398 | 256 | 155 | 110 | 920 | |||||
| 4 | 1,831 | 137 | 172^2^ | 4,348 | 2 | 6,491 | ||||
| 5 | 5,846 | 1,622 | 4,496 | 109 | 12,074 | |||||
| 6 | ||||||||||
| 7 | 1,091 | 13,135 | 14,226 | |||||||
| 8 | 11,030 | **** | 7,175 | 5,846 | 1,023 | 1,794 | 22,959 | 112 | **** | 49,939 |
| 9 | 5,846 | 99 | 521 | 6,466 | ||||||
| 10 | 242 | 242 | ||||||||
| 1 Includes mortgage loans. 2 Relates to structured margin<br> lending exposures based on the methodology agreed with FINMA. |
All values are in US Dollars.
p
38
Credit risk under internal ratings-based approaches
Annual | Under the A-IRB approach, the required capital for credit risk is quantified through empirical models that we have developed to estimate the probability of default (PD), loss given default (LGD), exposure at default (EAD) and other parameters, subject to FINMA approval. The table below presents an overview of Pillar 3 disclosures that are provided separately in our Annual Report 2020*.* p
Annual |
| CRE – Internal ratings-based models | ||||
|---|---|---|---|---|
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
| Internal model development, controls and changes | Risk management and control | – | Risk measurement | 103–105 |
| – | Credit risk models | 115–121 | ||
| – | Key features of our main credit risk models | 116 | ||
| –<br><br> <br>– | Risk governance<br><br> <br>Model risk management | 95–96<br><br> <br>102 | ||
| Relationships between risk management and internal audit and<br> independent review of IRB models | Risk management and control | – | Risk governance | 95–96 |
| – | Risk measurement | 103–105 | ||
| Scope and content of the reporting related to credit risk models | Risk management and control | – | Risk measurement | 103–105 |
| – | Credit risk – Overview of measurement, monitoring and management<br> techniques | 107 | ||
| – | Credit risk models | 115–121 | ||
| Supervisor approval of applied approaches | Risk management and control | – | Risk measurement | 103–105 |
| – | Changes to models and model parameters during the period | 121 | ||
| – | Stress testing | 103–104 | ||
| –<br><br> <br>– | Key features of our main credit risk models<br><br> <br>Model risk management | 116<br><br> <br>102 | ||
| Number of key models used by portfolio and the main differences<br> between models | Risk management and control | – | Credit risk models | 115–121 |
| Description of the main characteristics of approved models | Risk management and control | – | Credit risk models | 115–121 |
p
Annual | Semi-annual | The CR6 table on the following pages provides information about credit risk exposures under the A-IRB approach, including a breakdown of the main parameters used in A-IRB models to calculate the capital requirements, presented by portfolio and PD range across FINMA-defined asset classes. Effective from 31 December 2020, we have changed the disclosure to reflect that the information prior to CRM effects is shown in the asset class of the obligor, while the information post CRM is disclosed in the asset class of the protection provider. Prior periods have been restated accordingly.
Under the A-IRB approach, the required capital for credit risk is quantified through empirical models that we have developed to estimate the PD, LGD, EAD and other parameters, subject to FINMA approval. p
Compared with 30 June 2020, exposures before the application of credit conversion factors (CCFs) increased by USD 68 billion to USD 988 billion across various asset classes, resulting in an overall RWA increase of USD 5 billion.
In the Retail: other retail asset class, total exposures pre-CCF increased by USD 46 billion to USD 439 billion and RWA increased by USD 2 billion to USD 14 billion, mainly reflecting increases in drawn and unutilized Lombard facilities in Global Wealth Management.
In the Retail: residential mortgages asset class, total exposures pre-CCF increased by USD 12 billion to USD 169 billion and RWA increased by USD 3 billion to USD 33 billion, primarily due to currency effects and the recalibration of risk parameters for real estate portfolios in Global Wealth Management and Personal & Corporate Banking.
In the Corporates: specialized lending asset class, total exposures pre-CCF increased by USD 3 billion to USD 34 billion and RWA increased by USD 2 billion to USD 14 billion, primarily due to the depreciation of the US dollar against the Swiss franc in Personal & Corporate Banking.
In the Corporates: other lending asset class, total exposures pre-CCF increased by USD 5 billion to USD 108 billion, primarily driven by increased loan commitments in the Investment Bank as well as currency effects in Personal & Corporate Banking. RWA decreased by USD 1 billion to USD 37 billion, mainly driven by asset quality changes resulting in lower RWA density.
Information about credit risk RWA for the third quarter of 2020, including details regarding movements in RWA, is provided on pages 8–10 of our 30 September 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors. Further details about the movement of credit risk exposures under the A-IRB approach for the fourth quarter of 2020 are available in our CR8 disclosure on page 49 of this report. p
39
UBS Group AG consolidated
Semi-annual |
| CR6: IRB – Credit risk exposures by portfolio and PD range^1^ | **** | **** | **** | **** | **** | **** | **** | **** | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| USD million, except where indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF^2^ | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM^2^ | Average PD in % | Number of obligors (in thousands)^2^ | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions^3^ |
| Central governments and central banks as of 31.12.20 | **** | ||||||||||||
| 0.00 to <0.15 | 198,605 | 1 | 198,606 | 13.1 | 203,051 | 0.0 | <0.1 | 30.6 | 1.1 | 2,792 | 1.4 | 4 | **** |
| 0.15 to <0.25 | 2 | 100 | 102 | 55.0 | 2 | 0.2 | <0.1 | 10.0 | 1.0 | 0 | 6.4 | 0 | **** |
| 0.25 to <0.50 | 0 | **** | 0 | **** | 0 | 0.3 | <0.1 | 55.0 | 1.0 | 0 | 54.2 | 0 | **** |
| 0.50 to <0.75 | 5 | **** | 5 | **** | 3 | 0.7 | <0.1 | 96.5 | 1.0 | 4 | 141.2 | 0 | **** |
| 0.75 to <2.50 | 1 | 0 | 1 | 9.7 | 3 | 1.2 | <0.1 | 22.3 | 4.4 | 2 | 62.5 | 0 | **** |
| 2.50 to <10.00 | 33 | 219 | 253 | 53.7 | 28 | 3.6 | <0.1 | 52.5 | 1.1 | 40 | 145.9 | 1 | **** |
| 10.00 to <100.00 | 0 | **** | 0 | **** | 0 | 13.2 | <0.1 | 48.9 | 1.0 | 0 | 226.0 | 0 | **** |
| 100.00 (default) | 92 | 6 | 98 | 55.0 | 7 | 100.0 | <0.1 | 39.8^5^ | 4.2 | 7 | 106.0 | 5 | **** |
| Subtotal | 198,738 | 327 | 199,065 | 54.0 | 203,094 | 0.0 | 0.1 | 30.6 | 1.1 | 2,847 | 1.4 | 10 | 6 |
| Central governments and central banks as of 30.6.20 | **** | ||||||||||||
| 0.00 to <0.15 | 194,454 | 1 | 194,455 | 13.3 | 198,965 | 0.0 | 0.1 | 31.5 | 1.1 | 3,334 | 1.7 | 8 | |
| 0.15 to <0.25 | 0 | 0 | 0 | 0.2 | <0.1 | 63.1 | 1.0 | 0 | 39.9 | 0 | |||
| 0.25 to <0.50 | 0 | 0 | 0 | 0.3 | <0.1 | 45.0 | 1.0 | 0 | 44.4 | 0 | |||
| 0.50 to <0.75 | 6 | 6 | 3 | 0.7 | <0.1 | 52.9 | 1.1 | 3 | 78.0 | 0 | |||
| 0.75 to <2.50 | 0 | 4 | 5 | 50.0 | 4 | 1.8 | <0.1 | 30.4 | 2.6 | 3 | 75.5 | 0 | |
| 2.50 to <10.00 | 6 | 172 | 178 | 55.0 | 2 | 2.7 | <0.1 | 29.0 | 2.6 | 2 | 75.6 | 0 | |
| 10.00 to <100.00 | 0 | 0 | 0 | 10.4 | 0 | 13.0 | <0.1 | 45.0 | 1.0 | 0 | 207.0 | 0 | |
| 100.00 (default) | 87 | 9 | 96 | 55.0 | 1 | 100.0 | <0.1 | 65.1^5^ | 3.5 | 2 | 106.0 | 11 | |
| Subtotal | 194,553 | 187 | 194,740 | 54.7 | 198,976 | 0.0 | 0.1 | 31.5 | 1.1 | 3,343 | 1.7 | 19 | 12 |
| Central governments and central banks as of 31.12.19 | **** | ||||||||||||
| 0.00 to <0.15 | 137,739 | 2 | 137,741 | 25.1 | 138,852 | 0.0 | 0.1 | 30.4 | 1.0 | 2,455 | 1.8 | 3 | |
| 0.15 to <0.25 | 0 | 0 | 0 | 0.2 | <0.1 | 65.8 | 1.0 | 0 | 41.8 | 0 | |||
| 0.25 to <0.50 | 0 | 0 | 0 | 0.3 | <0.1 | 45.0 | 1.0 | 0 | 44.4 | 0 | |||
| 0.50 to <0.75 | 7 | 7 | 4 | 0.7 | <0.1 | 53.1 | 1.1 | 3 | 77.7 | 0 | |||
| 0.75 to <2.50 | 2 | 0 | 2 | 55.0 | 1 | 1.4 | <0.1 | 39.4 | 2.5 | 1 | 111.6 | 0 | |
| 2.50 to <10.00 | 5 | 1 | 5 | 76.1 | 1 | 2.7 | <0.1 | 10.2 | 4.4 | 0 | 33.0 | 0 | |
| 10.00 to <100.00 | 0 | 0 | 0 | 9.7 | 0 | 13.0 | <0.1 | 45.0 | 1.0 | 0 | 206.7 | 0 | |
| 100.00 (default) | 59 | 36 | 95 | 55.0 | 22 | 100.0 | <0.1 | 21.8^5^ | 4.3 | 23 | 106.0 | 11 | |
| Subtotal | 137,812 | 38 | 137,851 | 54.3 | 138,880 | 0.0 | 0.1 | 30.4 | 1.0 | 2,482 | 1.8 | 14 | 11 |
40
| CR6: IRB – Credit risk exposures by portfolio and PD range (continued)^1^ | **** | **** | **** | **** | **** | **** | **** | **** | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| USD million, except where indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF^2^ | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM^2^ | Average PD in % | Number of obligors (in thousands)^2^ | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions^3^ |
| Banks and securities dealers as of 31.12.20 | **** | ||||||||||||
| 0.00 to <0.15 | 10,177 | 1,171 | 11,348 | 54.0 | 11,541 | 0.0 | 0.5 | 40.7 | 1.0 | 1,880 | 16.3 | 5 | **** |
| 0.15 to <0.25 | 1,001 | 333 | 1,334 | 39.7 | 969 | 0.2 | 0.3 | 52.3 | 1.7 | 531 | 54.8 | 1 | **** |
| 0.25 to <0.50 | 601 | 418 | 1,019 | 48.2 | 588 | 0.4 | 0.2 | 59.8 | 1.0 | 470 | 79.9 | 1 | **** |
| 0.50 to <0.75 | 186 | 303 | 489 | 45.0 | 305 | 0.7 | 0.1 | 63.1 | 1.1 | 354 | 116.2 | 2 | **** |
| 0.75 to <2.50 | 931 | 472 | 1,403 | 43.9 | 1,145 | 1.7 | 0.2 | 58.8 | 1.2 | 1,598 | 139.5 | 12 | **** |
| 2.50 to <10.00 | 422 | 412 | 835 | 43.2 | 385 | 4.6 | 0.2 | 67.0 | 1.1 | 925 | 240.4 | 12 | **** |
| 10.00 to <100.00 | 31 | 116 | 147 | 51.6 | 15 | 10.8 | <0.1 | 63.9 | 1.0 | 48 | 319.5 | 1 | **** |
| 100.00 (default) | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Subtotal | 13,348 | 3,225 | 16,574 | 48.0 | 14,948 | 0.3 | 1.5 | 44.8 | 1.1 | 5,806 | 38.8 | 33 | 20 |
| Banks and securities dealers as of 30.6.20 | **** | ||||||||||||
| 0.00 to <0.15 | 12,658 | 1,095 | 13,753 | 55.1 | 13,295 | 0.0 | 0.5 | 39.6 | 1.1 | 2,050 | 15.4 | 3 | |
| 0.15 to <0.25 | 1,387 | 340 | 1,728 | 37.3 | 1,321 | 0.2 | 0.3 | 53.0 | 1.2 | 652 | 49.4 | 2 | |
| 0.25 to <0.50 | 451 | 317 | 768 | 49.5 | 517 | 0.4 | 0.2 | 61.8 | 1.1 | 433 | 83.8 | 1 | |
| 0.50 to <0.75 | 226 | 195 | 421 | 40.4 | 303 | 0.7 | 0.1 | 55.3 | 1.1 | 307 | 101.3 | 1 | |
| 0.75 to <2.50 | 960 | 405 | 1,365 | 45.5 | 1,058 | 1.4 | 0.2 | 53.4 | 1.2 | 1,295 | 122.4 | 8 | |
| 2.50 to <10.00 | 431 | 2,442 | 2,873 | 45.9 | 1,262 | 3.3 | 0.2 | 27.4 | 1.0 | 1,190 | 94.3 | 14 | |
| 10.00 to <100.00 | 2 | 15 | 16 | 31.9 | 7 | 12.9 | <0.1 | 52.8 | 1.7 | 21 | 303.6 | 3 | |
| 100.00 (default) | |||||||||||||
| Subtotal | 16,116 | 4,808 | 20,924 | 47.3 | 17,763 | 0.4 | 1.5 | 41.5 | 1.1 | 5,948 | 33.5 | 33 | 15 |
| Banks and securities dealers as of 31.12.19 | **** | ||||||||||||
| 0.00 to <0.15 | 12,204 | 863 | 13,067 | 52.0 | 12,591 | 0.0 | 0.5 | 39.0 | 1.0 | 1,877 | 14.9 | 3 | |
| 0.15 to <0.25 | 686 | 1,885 | 2,571 | 90.1 | 2,304 | 0.2 | 0.3 | 50.4 | 2.1 | 1,335 | 58.0 | 2 | |
| 0.25 to <0.50 | 655 | 370 | 1,025 | 49.9 | 815 | 0.4 | 0.2 | 47.4 | 1.5 | 532 | 65.3 | 1 | |
| 0.50 to <0.75 | 467 | 282 | 749 | 44.0 | 577 | 0.6 | 0.1 | 45.3 | 1.0 | 478 | 82.8 | 2 | |
| 0.75 to <2.50 | 823 | 392 | 1,216 | 45.5 | 922 | 1.4 | 0.2 | 46.3 | 1.3 | 1,013 | 109.8 | 6 | |
| 2.50 to <10.00 | 290 | 490 | 780 | 45.8 | 377 | 3.6 | 0.2 | 64.4 | 1.1 | 810 | 214.7 | 9 | |
| 10.00 to <100.00 | 44 | 9 | 53 | 29.2 | 27 | 14.2 | <0.1 | 38.2 | 1.2 | 57 | 212.6 | 5 | |
| 100.00 (default) | |||||||||||||
| Subtotal | 15,169 | 4,292 | 19,461 | 66.7 | 17,614 | 0.3 | 1.5 | 42.0 | 1.2 | 6,102 | 34.6 | 28 | 11 |
41
UBS Group AG consolidated
| CR6: IRB – Credit risk exposures by portfolio and PD range (continued)^1^ | **** | **** | **** | **** | **** | **** | **** | **** | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| USD million, except where indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF^2^ | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM^2^ | Average PD in % | Number of obligors (in thousands)^2^ | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions^3^ |
| Public-sector entities and multi-lateral development banks as of 31.12.20 | **** | ||||||||||||
| 0.00 to <0.15 | 9,792 | 1,293 | 11,085 | 17.8 | 10,059 | 0.0 | 0.3 | 38.6 | 1.1 | 819 | 8.1 | 1 | **** |
| 0.15 to <0.25 | 923 | 372 | 1,296 | 19.3 | 993 | 0.2 | 0.2 | 18.3 | 1.7 | 140 | 14.1 | 0 | **** |
| 0.25 to <0.50 | 649 | 356 | 1,005 | 23.8 | 737 | 0.3 | 0.2 | 23.9 | 2.5 | 202 | 27.4 | 1 | **** |
| 0.50 to <0.75 | 40 | 27 | 67 | 22.2 | 45 | 0.6 | <0.1 | 30.8 | 2.8 | 22 | 49.4 | 0 | **** |
| 0.75 to <2.50 | 1 | 0 | 1 | 81.4 | 2 | 1.0 | <0.1 | 17.2 | 2.6 | 1 | 33.7 | 0 | **** |
| 2.50 to <10.00 | 68 | 0 | 68 | 9.7 | 1 | 2.9 | <0.1 | 17.1 | 5.0 | 1 | 49.9 | 0 | **** |
| 10.00 to <100.00 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 100.00 (default) | 5 | **** | 5 | **** | 5 | 100.0 | <0.1 | 0.2^5^ | 1.0 | 5 | 106.0 | **** | **** |
| Subtotal | 11,478 | 2,048 | 13,526 | 19.2 | 11,841 | 0.1 | 0.7 | 35.9 | 1.2 | 1,190 | 10.0 | 2 | 0 |
| Public-sector entities and multi-lateral development banks as of 30.6.20 | **** | ||||||||||||
| 0.00 to <0.15 | 8,865 | 1,233 | 10,098 | 17.6 | 9,112 | 0.0 | 0.3 | 37.2 | 1.1 | 741 | 8.1 | 1 | |
| 0.15 to <0.25 | 272 | 288 | 561 | 11.5 | 304 | 0.2 | 0.2 | 31.2 | 2.6 | 79 | 26.1 | 0 | |
| 0.25 to <0.50 | 626 | 324 | 950 | 29.4 | 704 | 0.3 | 0.2 | 25.0 | 2.5 | 195 | 27.7 | 1 | |
| 0.50 to <0.75 | 39 | 23 | 63 | 25.0 | 44 | 0.6 | <0.1 | 29.9 | 2.8 | 21 | 48.7 | 0 | |
| 0.75 to <2.50 | 1 | 0 | 1 | 96.4 | 1 | 1.0 | <0.1 | 12.0 | 1.2 | 0 | 16.9 | 0 | |
| 2.50 to <10.00 | 60 | 6 | 66 | 54.7 | 1 | 2.9 | <0.1 | 9.1 | 5.0 | 0 | 26.6 | 0 | |
| 10.00 to <100.00 | |||||||||||||
| 100.00 (default) | 4 | 4 | 4 | 100.0 | <0.1 | 0.0^5^ | 1.0 | 4 | 106.0 | ||||
| Subtotal | 9,868 | 1,875 | 11,743 | 18.9 | 10,169 | 0.1 | 0.7 | 36.1 | 1.2 | 1,041 | 10.2 | 2 | 0 |
| Public-sector entities and multi-lateral development banks as of 31.12.19 | **** | ||||||||||||
| 0.00 to <0.15 | 6,826 | 753 | 7,578 | 12.8 | 6,951 | 0.0 | 0.3 | 35.3 | 1.1 | 543 | 7.8 | 1 | |
| 0.15 to <0.25 | 277 | 239 | 517 | 11.8 | 305 | 0.2 | 0.2 | 30.7 | 2.7 | 82 | 26.9 | 0 | |
| 0.25 to <0.50 | 618 | 407 | 1,025 | 25.7 | 713 | 0.3 | 0.2 | 25.3 | 2.5 | 198 | 27.8 | 1 | |
| 0.50 to <0.75 | 33 | 7 | 40 | 10.0 | 34 | 0.6 | <0.1 | 28.7 | 2.7 | 16 | 47.3 | 0 | |
| 0.75 to <2.50 | 1 | 0 | 1 | 97.9 | 1 | 1.0 | <0.1 | 13.4 | 1.2 | 0 | 18.9 | 0 | |
| 2.50 to <10.00 | 60 | 6 | 66 | 54.7 | 4 | 2.9 | <0.1 | 6.0 | 5.0 | 1 | 17.6 | 0 | |
| 10.00 to <100.00 | |||||||||||||
| 100.00 (default) | 4 | 4 | 4 | 100.0 | <0.1 | 0.0^5^ | 1.0 | 4 | 106.0 | 0 | |||
| Subtotal | 7,819 | 1,412 | 9,231 | 16.5 | 8,012 | 0.1 | 0.8 | 34.2 | 1.3 | 844 | 10.5 | 2 | 1 |
42
| CR6: IRB – Credit risk exposures by portfolio and PD range (continued)^1^ | **** | **** | **** | **** | **** | **** | **** | **** | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| USD million, except where indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF^2^ | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM^2^ | Average PD in % | Number of obligors (in thousands)^2^ | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions^3^ |
| Corporates: specialized lending as of 31.12.20 | **** | ||||||||||||
| 0.00 to <0.15 | 3,082 | 684 | 3,767 | 71.9 | 3,372 | 0.1 | 0.5 | 13.8 | 2.0 | 229 | 6.8 | 0 | **** |
| 0.15 to <0.25 | 2,023 | 452 | 2,475 | 65.1 | 2,317 | 0.2 | 0.3 | 14.2 | 2.0 | 304 | 13.1 | 1 | **** |
| 0.25 to <0.50 | 5,025 | 2,361 | 7,386 | 34.8 | 5,745 | 0.4 | 0.6 | 24.8 | 1.8 | 1,954 | 34.0 | 5 | **** |
| 0.50 to <0.75 | 4,286 | 2,892 | 7,177 | 32.8 | 5,147 | 0.6 | 0.6 | 27.0 | 1.7 | 2,450 | 47.6 | 9 | **** |
| 0.75 to <2.50 | 8,141 | 2,715 | 10,856 | 39.3 | 9,189 | 1.4 | 1.4 | 29.2 | 1.8 | 6,275 | 68.3 | 38 | **** |
| 2.50 to <10.00 | 1,660 | 398 | 2,059 | 61.3 | 1,904 | 3.4 | 0.3 | 35.8 | 2.0 | 2,172 | 114.1 | 23 | **** |
| 10.00 to <100.00 | 18 | **** | 18 | **** | 18 | 22.0 | <0.1 | 33.0 | 5.0 | 72 | 398.0 | 1 | **** |
| 100.00 (default) | 209 | 8 | 218 | 75.0 | 106 | 100.0 | <0.1 | 50.2^5^ | 2.4 | 113 | 106.0 | 108 | **** |
| Subtotal | 24,443 | 9,512 | 33,955 | 40.7 | 27,799 | 1.3 | 3.7 | 25.3 | 1.8 | 13,569 | 48.8 | 186 | 125 |
| Corporates: specialized lending as of 30.6.20 | **** | ||||||||||||
| 0.00 to <0.15 | 2,452 | 480 | 2,932 | 73.3 | 2,803 | 0.1 | 0.5 | 13.9 | 2.0 | 199 | 7.1 | 0 | |
| 0.15 to <0.25 | 1,802 | 378 | 2,180 | 68.0 | 2,059 | 0.2 | 0.3 | 15.4 | 2.1 | 309 | 15.0 | 1 | |
| 0.25 to <0.50 | 4,408 | 2,021 | 6,429 | 36.5 | 5,045 | 0.4 | 0.6 | 28.0 | 1.8 | 1,622 | 32.2 | 5 | |
| 0.50 to <0.75 | 4,650 | 3,518 | 8,168 | 27.4 | 5,506 | 0.6 | 0.6 | 31.7 | 1.6 | 2,677 | 48.6 | 11 | |
| 0.75 to <2.50 | 7,280 | 2,351 | 9,631 | 37.4 | 8,126 | 1.4 | 1.4 | 31.0 | 1.7 | 5,439 | 66.9 | 36 | |
| 2.50 to <10.00 | 1,403 | 330 | 1,733 | 58.1 | 1,593 | 3.4 | 0.3 | 35.6 | 1.5 | 1,631 | 102.4 | 20 | |
| 10.00 to <100.00 | 4 | 0 | 4 | 100.0 | 4 | 11.0 | <0.1 | 60.0 | 1.0 | 9 | 258.2 | 0 | |
| 100.00 (default) | 167 | 7 | 174 | 68.1 | 72 | 100.0 | 0.1 | 57.6^5^ | 3.0 | 76 | 106.0 | 100 | |
| Subtotal | 22,165 | 9,086 | 31,252 | 37.3 | 25,207 | 1.2 | 3.8 | 27.8 | 1.8 | 11,963 | 47.5 | 174 | 115 |
| Corporates: specialized lending as of 31.12.19 | **** | ||||||||||||
| 0.00 to <0.15 | 1,948 | 420 | 2,368 | 77.3 | 2,271 | 0.1 | 0.4 | 14.9 | 2.1 | 174 | 7.6 | 0 | |
| 0.15 to <0.25 | 1,501 | 524 | 2,024 | 60.7 | 1,819 | 0.2 | 0.3 | 15.9 | 2.0 | 265 | 14.6 | 1 | |
| 0.25 to <0.50 | 3,838 | 2,190 | 6,029 | 32.8 | 4,464 | 0.4 | 0.6 | 27.3 | 2.0 | 1,436 | 32.2 | 4 | |
| 0.50 to <0.75 | 4,187 | 3,459 | 7,647 | 32.1 | 5,141 | 0.6 | 0.6 | 31.8 | 1.5 | 2,470 | 48.0 | 10 | |
| 0.75 to <2.50 | 7,339 | 2,377 | 9,716 | 36.8 | 8,206 | 1.4 | 1.4 | 31.7 | 1.7 | 5,550 | 67.6 | 37 | |
| 2.50 to <10.00 | 1,163 | 296 | 1,460 | 61.1 | 1,343 | 3.5 | 0.3 | 39.2 | 1.5 | 1,507 | 112.2 | 19 | |
| 10.00 to <100.00 | 0 | 0 | 0 | 12.0 | <0.1 | 65.0 | 1.0 | 0 | 289.5 | 0 | |||
| 100.00 (default) | 167 | 2 | 168 | 75.9 | 70 | 100.0 | 0.1 | 58.3^5^ | 3.1 | 74 | 106.0 | 98 | |
| Subtotal | 20,143 | 9,268 | 29,411 | 38.1 | 23,313 | 1.2 | 3.8 | 28.5 | 1.8 | 11,475 | 49.2 | 169 | 112 |
43
UBS Group AG consolidated
| CR6: IRB – Credit risk exposures by portfolio and PD range (continued)^1^ | **** | **** | **** | **** | **** | **** | **** | **** | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| USD million, except where indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF^2^ | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM^2^ | Average PD in % | Number of obligors (in thousands)^2^ | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions^3^ |
| Corporates: other lending as of 31.12.20 | **** | ||||||||||||
| 0.00 to <0.15 | 18,411 | 20,390 | 38,801 | 34.3 | 22,251 | 0.1 | 4.7 | 33.0 | 1.5 | 4,486 | 20.2 | 4 | **** |
| 0.15 to <0.25 | 6,697 | 6,593 | 13,290 | 35.3 | 8,393 | 0.2 | 1.7 | 36.4 | 2.2 | 3,287 | 39.2 | 5 | **** |
| 0.25 to <0.50 | 4,536 | 4,490 | 9,026 | 38.5 | 5,311 | 0.4 | 2.7 | 33.2 | 2.2 | 2,620 | 49.3 | 6 | **** |
| 0.50 to <0.75 | 4,370 | 3,403 | 7,773 | 38.1 | 5,489 | 0.6 | 2.4 | 31.3 | 1.9 | 3,122 | 56.9 | 11 | **** |
| 0.75 to <2.50 | 11,515 | 8,534 | 20,049 | 44.4 | 13,078 | 1.4 | 10.8 | 30.1 | 2.1 | 9,441 | 72.2 | 57 | **** |
| 2.50 to <10.00 | 4,995 | 11,609 | 16,605 | 39.6 | 8,392 | 4.4 | 4.7 | 32.5 | 2.1 | 11,715 | 139.6 | 120 | **** |
| 10.00 to <100.00 | 319 | 443 | 762 | 57.3 | 470 | 14.8 | 0.3 | 29.1 | 2.0 | 1,040 | 221.1 | 20 | **** |
| 100.00 (default) | 1,576 | 358 | 1,934 | 53.2 | 1,079 | 100.0 | 0.6 | 31.6^5^ | 3.0 | 1,144 | 106.0 | 487 | **** |
| Subtotal | 52,420 | 55,821 | 108,241 | 37.9 | 64,463 | 2.8 | 28.0 | 32.6 | 1.9 | 36,855 | 57.2 | 712 | 862 |
| Corporates: other lending as of 30.6.20 | **** | ||||||||||||
| 0.00 to <0.15 | 16,445 | 19,874 | 36,319 | 33.7 | 19,690 | 0.0 | 3.8 | 34.5 | 1.6 | 4,010 | 20.4 | 3 | |
| 0.15 to <0.25 | 6,486 | 7,623 | 14,110 | 35.0 | 8,592 | 0.2 | 1.7 | 36.6 | 2.4 | 3,498 | 40.7 | 5 | |
| 0.25 to <0.50 | 4,007 | 4,743 | 8,750 | 36.6 | 5,307 | 0.4 | 2.5 | 34.9 | 2.2 | 2,715 | 51.2 | 7 | |
| 0.50 to <0.75 | 4,149 | 2,950 | 7,099 | 42.8 | 5,218 | 0.6 | 2.4 | 32.5 | 1.9 | 3,246 | 62.2 | 11 | |
| 0.75 to <2.50 | 10,787 | 8,165 | 18,953 | 44.6 | 12,530 | 1.4 | 11.2 | 30.9 | 2.2 | 9,466 | 75.5 | 54 | |
| 2.50 to <10.00 | 6,431 | 8,503 | 14,934 | 39.3 | 8,936 | 4.4 | 4.8 | 33.0 | 2.2 | 13,102 | 146.6 | 127 | |
| 10.00 to <100.00 | 368 | 491 | 859 | 57.0 | 530 | 15.2 | 0.1 | 26.7 | 2.2 | 951 | 179.5 | 18 | |
| 100.00 (default) | 1,538 | 380 | 1,919 | 51.6 | 1,017 | 100.0 | 0.7 | 32.7^5^ | 2.7 | 1,078 | 106.0 | 486 | |
| Subtotal | 50,211 | 52,730 | 102,941 | 37.6 | 61,820 | 2.8 | 27.3 | 33.6 | 2.0 | 38,067 | 61.6 | 711 | 878 |
| Corporates: other lending as of 31.12.19 | **** | ||||||||||||
| 0.00 to <0.15 | 13,726 | 18,836 | 32,562 | 34.3 | 16,701 | 0.0 | 3.4 | 37.3 | 1.8 | 3,682 | 22.0 | 9 | |
| 0.15 to <0.25 | 3,969 | 5,443 | 9,412 | 36.9 | 5,489 | 0.2 | 1.6 | 32.5 | 2.4 | 2,016 | 36.7 | 3 | |
| 0.25 to <0.50 | 4,101 | 3,994 | 8,095 | 35.1 | 5,233 | 0.4 | 2.5 | 33.6 | 2.0 | 2,715 | 51.9 | 6 | |
| 0.50 to <0.75 | 3,030 | 2,509 | 5,539 | 41.4 | 4,060 | 0.6 | 2.4 | 32.9 | 1.8 | 2,207 | 54.4 | 8 | |
| 0.75 to <2.50 | 9,263 | 8,543 | 17,805 | 38.3 | 12,372 | 1.4 | 11.1 | 30.8 | 2.1 | 9,329 | 75.4 | 52 | |
| 2.50 to <10.00 | 4,519 | 8,690 | 13,209 | 40.0 | 7,399 | 4.1 | 4.9 | 32.1 | 2.4 | 10,543 | 142.5 | 100 | |
| 10.00 to <100.00 | 351 | 460 | 811 | 60.1 | 487 | 17.6 | 0.1 | 13.6 | 1.8 | 506 | 103.9 | 11 | |
| 100.00 (default) | 1,253 | 178 | 1,432 | 48.2 | 790 | 100.0 | 0.7 | 33.1^5^ | 2.7 | 838 | 106.0 | 385 | |
| Subtotal | 40,212 | 48,653 | 88,866 | 37.0 | 52,533 | 2.7 | 26.6 | 33.5 | 2.0 | 31,836 | 60.6 | 575 | 554 |
44
| CR6: IRB – Credit risk exposures by portfolio and PD range (continued)^1^ | **** | **** | **** | **** | **** | **** | **** | **** | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| USD million, except where indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF^2^ | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM^2^ | Average PD in % | Number of obligors (in thousands)^2^ | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions^3^ |
| Retail: residential mortgages as of 31.12.20 | **** | ||||||||||||
| 0.00 to <0.15 | 74,826 | 1,790 | 76,616 | 67.1 | 75,989 | 0.1 | 136.1 | 18.3 | **** | 3,041 | 4.0 | 12 | **** |
| 0.15 to <0.25 | 18,179 | 477 | 18,656 | 71.2 | 18,522 | 0.2 | 22.3 | 25.2 | **** | 1,702 | 9.2 | 9 | **** |
| 0.25 to <0.50 | 24,542 | 750 | 25,292 | 73.9 | 25,097 | 0.4 | 28.7 | 26.8 | **** | 3,956 | 15.8 | 24 | **** |
| 0.50 to <0.75 | 14,554 | 652 | 15,206 | 73.0 | 15,034 | 0.6 | 13.8 | 29.2 | **** | 3,952 | 26.3 | 28 | **** |
| 0.75 to <2.50 | 21,785 | 1,838 | 23,623 | 73.3 | 23,132 | 1.3 | 26.3 | 32.4 | **** | 11,402 | 49.3 | 100 | **** |
| 2.50 to <10.00 | 7,174 | 548 | 7,722 | 78.5 | 7,612 | 4.5 | 8.5 | 30.9 | **** | 7,098 | 93.2 | 103 | **** |
| 10.00 to <100.00 | 982 | 59 | 1,041 | 70.5 | 1,025 | 15.2 | 0.9 | 31.7 | **** | 1,525 | 148.9 | 49 | **** |
| 100.00 (default) | 746 | 3 | 749 | 59.8 | 721 | 100.0 | 1.0 | 3.7^5^ | **** | 764 | 106.0 | 27 | **** |
| Subtotal | 162,788 | 6,117 | 168,906 | 71.8 | 167,131 | 1.1 | 237.6 | 23.9 | **** | 33,439 | 20.0 | 352 | 177 |
| Retail: residential mortgages as of 30.6.20 | **** | ||||||||||||
| 0.00 to <0.15 | 66,295 | 1,707 | 68,002 | 58.3 | 67,295 | 0.1 | 129.6 | 18.6 | 2,806 | 4.2 | 11 | ||
| 0.15 to <0.25 | 15,046 | 375 | 15,421 | 71.2 | 15,314 | 0.2 | 22.0 | 21.7 | 1,364 | 8.9 | 6 | ||
| 0.25 to <0.50 | 22,360 | 633 | 22,992 | 76.5 | 22,849 | 0.4 | 29.1 | 22.8 | 3,349 | 14.7 | 18 | ||
| 0.50 to <0.75 | 14,570 | 458 | 15,028 | 79.4 | 14,934 | 0.6 | 16.0 | 23.6 | 3,431 | 23.0 | 22 | ||
| 0.75 to <2.50 | 22,773 | 1,598 | 24,371 | 76.6 | 23,998 | 1.3 | 28.5 | 27.5 | 10,495 | 43.7 | 89 | ||
| 2.50 to <10.00 | 8,756 | 432 | 9,187 | 74.8 | 9,086 | 4.3 | 10.5 | 23.9 | 6,812 | 75.0 | 93 | ||
| 10.00 to <100.00 | 1,081 | 38 | 1,120 | 87.3 | 1,115 | 15.3 | 1.2 | 22.3 | 1,359 | 121.9 | 38 | ||
| 100.00 (default) | 701 | 6 | 707 | 64.4 | 679 | 100.0 | 1.0 | 3.6^5^ | 720 | 106.0 | 26 | ||
| Subtotal | 151,582 | 5,247 | 156,829 | 70.4 | 155,269 | 1.2 | 237.8 | 21.7 | 30,337 | 19.5 | 304 | 156 | |
| Retail: residential mortgages as of 31.12.19 | **** | ||||||||||||
| 0.00 to <0.15 | 64,016 | 1,427 | 65,443 | 60.5 | 64,883 | 0.1 | 129.2 | 18.5 | 2,692 | 4.1 | 10 | ||
| 0.15 to <0.25 | 14,088 | 290 | 14,377 | 75.6 | 14,312 | 0.2 | 21.0 | 22.5 | 1,324 | 9.3 | 6 | ||
| 0.25 to <0.50 | 21,277 | 505 | 21,782 | 81.3 | 21,688 | 0.3 | 28.4 | 23.3 | 3,238 | 14.9 | 18 | ||
| 0.50 to <0.75 | 14,120 | 363 | 14,482 | 87.7 | 14,439 | 0.6 | 16.2 | 24.0 | 3,377 | 23.4 | 22 | ||
| 0.75 to <2.50 | 22,448 | 1,358 | 23,806 | 80.0 | 23,536 | 1.3 | 28.5 | 26.7 | 10,025 | 42.6 | 85 | ||
| 2.50 to <10.00 | 8,409 | 318 | 8,727 | 82.5 | 8,678 | 4.4 | 10.8 | 23.5 | 6,479 | 74.7 | 90 | ||
| 10.00 to <100.00 | 980 | 26 | 1,007 | 94.9 | 1,006 | 15.8 | 1.2 | 22.6 | 1,245 | 123.8 | 35 | ||
| 100.00 (default) | 735 | 2 | 737 | 67.1 | 711 | 100.0 | 1.1 | 3.5^5^ | 754 | 106.0 | 26 | ||
| Subtotal | 146,073 | 4,289 | 150,362 | 74.3 | 149,255 | 1.2 | 236.3 | 21.7 | 29,133 | 19.5 | 292 | 110 |
45
UBS Group AG consolidated
| CR6: IRB – Credit risk exposures by portfolio and PD range (continued)^1^ | **** | **** | **** | **** | **** | **** | **** | **** | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| USD million, except where indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF^2^ | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM^2^ | Average PD in % | Number of obligors (in thousands)^2^ | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions^3^ |
| Retail: qualifying revolving retail exposures (QRRE) as of 31.12.20^4^ | **** | ||||||||||||
| 0.00 to <0.15 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.15 to <0.25 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.25 to <0.50 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.50 to <0.75 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.75 to <2.50 | 66 | 462 | 528 | **** | 91 | 1.7 | 29.1 | 47.0 | **** | 97 | 106.6 | 1 | **** |
| 2.50 to <10.00 | 1,245 | 6,425 | 7,670 | **** | 1,723 | 2.7 | 901.7 | 42.0 | **** | 606 | 35.2 | 19 | **** |
| 10.00 to <100.00 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 100.00 (default) | 40 | **** | 40 | **** | 24 | 100.0 | 23.0 | 40.0^5^ | **** | 25 | 106.0 | 16 | **** |
| Subtotal | 1,350 | 6,888 | 8,238 | **** | 1,838 | 3.9 | 953.8 | 42.2 | **** | 729 | 39.6 | 35 | 31 |
| Retail: qualifying revolving retail exposures (QRRE) as of 30.6.20^4^ | **** | ||||||||||||
| 0.00 to <0.15 | |||||||||||||
| 0.15 to <0.25 | |||||||||||||
| 0.25 to <0.50 | |||||||||||||
| 0.50 to <0.75 | |||||||||||||
| 0.75 to <2.50 | 53 | 430 | 483 | 74 | 1.7 | 28.8 | 47.0 | 88 | 119.1 | 1 | |||
| 2.50 to <10.00 | 1,130 | 5,961 | 7,091 | 1,565 | 2.7 | 936.6 | 42.0 | 550 | 35.2 | 17 | |||
| 10.00 to <100.00 | |||||||||||||
| 100.00 (default) | 37 | 37 | 22 | 100.0 | 25.5 | 40.0^5^ | 23 | 106.0 | 15 | ||||
| Subtotal | 1,220 | 6,391 | 7,611 | 1,660 | 3.9 | 990.9 | 42.2 | 661 | 39.8 | 32 | 28 | ||
| Retail: qualifying revolving retail exposures (QRRE) as of 31.12.19^4^ | **** | ||||||||||||
| 0.00 to <0.15 | |||||||||||||
| 0.15 to <0.25 | |||||||||||||
| 0.25 to <0.50 | |||||||||||||
| 0.50 to <0.75 | |||||||||||||
| 0.75 to <2.50 | 107 | 373 | 480 | 148 | 1.7 | 36.3 | 47.0 | 41 | 28.0 | 1 | |||
| 2.50 to <10.00 | 1,282 | 5,632 | 6,915 | 1,776 | 2.7 | 947.4 | 42.0 | 625 | 35.2 | 19 | |||
| 10.00 to <100.00 | |||||||||||||
| 100.00 (default) | 33 | 33 | 20 | 100.0 | 24.4 | 40.0^5^ | 21 | 106.0 | 13 | ||||
| Subtotal | 1,422 | 6,006 | 7,428 | 1,944 | 3.6 | 1,008.2 | 42.4 | 687 | 35.3 | 34 | 28 |
46
| CR6: IRB – Credit risk exposures by portfolio and PD range (continued)^1^ | **** | **** | **** | **** | **** | **** | **** | **** | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| USD million, except where indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF^2^ | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM^2^ | Average PD in % | Number of obligors (in thousands)^2^ | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions^3^ |
| Retail: other retail as of 31.12.20 | **** | ||||||||||||
| 0.00 to <0.15 | 120,619 | 269,626 | 390,245 | 18.5 | 170,442 | 0.0 | 343.2 | 31.0 | **** | 7,337 | 4.3 | 23 | **** |
| 0.15 to <0.25 | 3,940 | 6,764 | 10,704 | 19.0 | 5,221 | 0.2 | 7.2 | 27.7 | **** | 556 | 10.7 | 2 | **** |
| 0.25 to <0.50 | 5,109 | 7,635 | 12,744 | 18.8 | 6,541 | 0.4 | 8.4 | 31.7 | **** | 1,281 | 19.6 | 7 | **** |
| 0.50 to <0.75 | 3,855 | 6,451 | 10,306 | 20.2 | 5,160 | 0.6 | 8.8 | 27.8 | **** | 1,240 | 24.0 | 9 | **** |
| 0.75 to <2.50 | 4,522 | 8,480 | 13,002 | 21.5 | 6,352 | 1.1 | 47.8 | 31.3 | **** | 2,276 | 35.8 | 23 | **** |
| 2.50 to <10.00 | 884 | 897 | 1,781 | 18.7 | 1,143 | 4.8 | 3.4 | 52.0 | **** | 1,004 | 87.8 | 35 | **** |
| 10.00 to <100.00 | 128 | 90 | 218 | 20.1 | 146 | 18.4 | 0.9 | 28.2 | **** | 93 | 63.6 | 8 | **** |
| 100.00 (default) | 77 | 28 | 105 | 27.9 | 56 | 100.0 | <0.1 | 28.0^5^ | **** | 60 | 106.0 | 28 | **** |
| Subtotal | 139,134 | 299,971 | 439,105 | 18.7 | 195,062 | 0.2 | 419.6 | 31.0 | **** | 13,847 | 7.1 | 135 | 43 |
| Retail: other retail as of 30.6.20 | **** | ||||||||||||
| 0.00 to <0.15 | 106,954 | 239,003 | 345,957 | 18.4 | 150,814 | 0.0 | 172.7 | 29.9 | 6,069 | 4.0 | 19 | ||
| 0.15 to <0.25 | 2,310 | 6,556 | 8,866 | 17.9 | 3,481 | 0.2 | 4.8 | 26.6 | 355 | 10.2 | 2 | ||
| 0.25 to <0.50 | 3,122 | 6,703 | 9,825 | 19.0 | 4,396 | 0.4 | 6.4 | 28.7 | 779 | 17.7 | 4 | ||
| 0.50 to <0.75 | 2,573 | 10,748 | 13,321 | 17.7 | 4,478 | 0.6 | 6.7 | 28.4 | 1,292 | 28.9 | 9 | ||
| 0.75 to <2.50 | 3,923 | 9,452 | 13,375 | 20.6 | 5,874 | 1.1 | 41.7 | 29.6 | 2,006 | 34.2 | 20 | ||
| 2.50 to <10.00 | 703 | 805 | 1,507 | 19.3 | 939 | 5.0 | 1.6 | 56.2 | 894 | 95.2 | 31 | ||
| 10.00 to <100.00 | 83 | 62 | 145 | 23.6 | 98 | 20.7 | 0.6 | 25.5 | 59 | 60.6 | 5 | ||
| 100.00 (default) | 215 | 21 | 235 | 0.1 | 209 | 100.0 | <0.1 | 15.0^5^ | 222 | 106.0 | 18 | ||
| Subtotal | 119,882 | 273,349 | 393,231 | 18.4 | 170,290 | 0.3 | 234.6 | 29.9 | 11,676 | 6.9 | 108 | 58 | |
| Retail: other retail as of 31.12.19 | **** | ||||||||||||
| 0.00 to <0.15 | 108,053 | 246,984 | 355,038 | 18.5 | 153,741 | 0.0 | 201.8 | 31.7 | 6,535 | 4.3 | 20 | ||
| 0.15 to <0.25 | 1,977 | 3,610 | 5,587 | 18.9 | 2,660 | 0.2 | 4.5 | 29.7 | 304 | 11.4 | 1 | ||
| 0.25 to <0.50 | 1,405 | 2,235 | 3,640 | 18.2 | 1,811 | 0.4 | 2.2 | 34.4 | 385 | 21.3 | 2 | ||
| 0.50 to <0.75 | 837 | 1,193 | 2,031 | 18.4 | 1,056 | 0.6 | 1.7 | 33.1 | 315 | 29.9 | 2 | ||
| 0.75 to <2.50 | 2,792 | 7,052 | 9,844 | 15.0 | 3,846 | 1.1 | 42.5 | 35.4 | 1,568 | 40.8 | 14 | ||
| 2.50 to <10.00 | 783 | 768 | 1,551 | 16.1 | 980 | 5.6 | 1.4 | 64.5 | 1,073 | 109.5 | 41 | ||
| 10.00 to <100.00 | 166 | 26 | 192 | 31.9 | 175 | 15.4 | 0.7 | 30.8 | 115 | 65.7 | 9 | ||
| 100.00 (default) | 4 | 7 | 11 | 2.3 | 4 | 100.0 | <0.1 | 42.5^5^ | 4 | 106.0 | 5 | ||
| Subtotal | 116,018 | 261,876 | 377,894 | 18.4 | 164,273 | 0.1 | 254.9 | 31.9 | 10,298 | 6.3 | 95 | 9 | |
| Total 31.12.20 | 603,700 | 383,909 | 987,609 | 22.8 | 686,177 | 0.6 | 1,645.1 | 29.5 | 1.3^6^ | 108,281 | 15.8 | 1,466 | 1,264 |
| Total 30.6.20 | 565,598 | 353,672 | 919,270 | 22.6 | 641,155 | 0.7 | 1,496.8 | 29.1 | 1.3^6^ | 103,036 | 16.1 | 1,381 | 1,262 |
| Total 31.12.19 | 484,669 | 335,834 | 820,503 | 22.7 | 555,823 | 0.7 | 1,532.1 | 29.2 | 1.3^6^ | 92,858 | 16.7 | 1,208 | 836 |
| 1 Effective from 31 December 2020, we have changed the<br> disclosure in order to reflect that the information prior to CRM effects is<br> shown in the asset class of the obligor, while the information post-CRM is<br> disclosed in the asset class of the protection provider. Prior periods have<br> been restated accordingly. 2 Comparative figures for off-balance<br> sheet exposures, as well as EAD post-CCF and post-CRM, have been adjusted to<br> include uncommitted and fully unutilized Lombard loan limits. The numbers of<br> obligors reflect uncommitted and fully unutilized Lombard loan limits from 31<br> December 2020 onward. 3 In line with the BCBS Pillar 3 disclosure<br> requirements, provisions are only provided for the sub-totals by asset<br> class. 4 For the calculation of the “EAD post-CCF and post-CRM” column, a<br> balance factor approach is used instead of a CCF approach. The EAD is<br> calculated by multiplying the on-balance sheet exposure with a fixed factor<br> of 1.4. 5 Average LGD for defaulted exposures disclosed in the table are<br> not used to calculate RWA. The disclosed number is derived using ECL<br> accounting provisions (stage 3) divided by total exposures pre-CCF. 6<br> Retail asset classes are excluded from the average maturity as they are not<br> subject to maturity treatment. |
p
47
UBS Group AG consolidated
Credit risk risk-weighted assets under the A-IRB approach
This sub-section provides disclosures on the quarterly credit risk RWA development for the credit risk measured under the A-IRB approach. The table below provides definitions applied in the CR8 table on the following page.
Definitionsof credit risk and counterparty credit risk RWA movement table components forCR8 and CCR7
The references in the table below refer to the line numbers provided in the movement tables on the next page and page 67 of this report.
| Reference | Description | Definition |
|---|---|---|
| 2 | Asset size | Movements arising in the ordinary course of business,<br> such as new transactions, sales and write-offs. |
| 3 | Asset quality / Credit quality of counterparties | Movements resulting from changes in the underlying<br> credit quality of counterparties. These are caused by changes to risk<br> parameters, e.g., counterparty ratings, LGD estimates or credit hedges. |
| 4 | Model updates | Movements arising from the implementation of new<br> models and from parameter changes to existing models. The RWA effect of model<br> updates is estimated based on the portfolio at the time of the implementation<br> of the change. |
| 5 | Methodology and policy | Movements due to methodological changes in<br> calculations driven by regulatory policy changes, including revisions to<br> existing regulations, new regulations and add-ons mandated by the regulator.<br> The effect of methodology and policy changes on RWA is estimated based on the<br> portfolio at the time of the implementation of the change. |
| 6 | Acquisitions and disposals | Movements as a result of disposal or acquisition of<br> business operations, quantified based on the credit risk exposures as of the<br> end of the quarter preceding a disposal or following an acquisition.<br> Purchases and sales of exposures in the ordinary course of business are<br> reflected under Asset size. |
| 7 | Foreign exchange movements | Movements as a result of exchange rate changes of the<br> transaction currencies against the US dollar. |
| 8 | Other | Movements due to changes that cannot be attributed to<br> any other category. |
48
Development in the fourth quarter of 2020
Quarterly | Credit risk RWA under the A-IRB approach increased by USD 3.3 billion to USD 108.3 billion during the fourth quarter of 2020.
The RWA increase from asset size movements of USD 1.2 billion was predominantly driven by increases from loans and loan commitments in Global Wealth Management as well as higher nostro account balances in Group Functions. These increases were partly offset by a decrease from loans in the Investment Bank.
The RWA from asset quality decreased by USD 0.9 billion, mainly driven by rating changes to credit defaults during the fourth quarter of 2020 in the Investment Bank. Model updates of USD 0.5 billion were mainly driven by the recalibration of risk parameters for real estate portfolios in Global Wealth Management. The RWA from foreign exchange movements increased by USD 2.6 billion, due to the depreciation of the US dollar. p
Quarterly |
| CR8: RWA flow statements of<br> credit risk exposures under IRB | ||||
|---|---|---|---|---|
| million | For the quarter ended 31.12.20 | For the quarter ended 30.9.20 | For the quarter ended 30.6.20 | For the quarter ended 31.3.20 |
| 1 | 104,942 | 103,036 | 100,076 | 92,858 |
| 2 | 1,171 | (1,059) | 536 | 7,543 |
| 3 | (923) | 676 | 863 | (241) |
| 4 | 492 | 583 | 870 | |
| 5 | **** | 60 | ||
| 5a | **** | 60 | ||
| 6 | **** | |||
| 7 | 2,599 | 1,930 | 1,098 | (144) |
| 8 | **** | (224) | (407) | |
| 9 | 108,281 | 104,942 | 103,036 | 100,076 |
All values are in US Dollars.
p
49
UBS Group AG consolidated
Backtesting
Annual | More information about backtesting of credit models is provided on pages 120–121 of our Annual Report 2020*.* p
Annual |
| CR9: IRB – Backtesting of probability of default (PD) per portfolio^1^ | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| PD range | External rating equivalent<br><br> <br><br><br> <br>Moody’s | External rating equivalent<br><br> <br><br><br> <br>Standard & Poor’s | External rating equivalent<br><br> <br><br><br> <br>Fitch | Weighted average PD in % | Arithmetic average PD<br><br> <br>by obligors in % | Number of obligors<br><br> <br>(in thousands)^2^ | Defaulted obligors<br><br> <br>in the year | of which: new defaulted obligors in the year | Average historical annual default rate in %^3^ | |
| End of previous year | End of the year | |||||||||
| Central governments and central banks as of 31.12.20 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.0 | 0.1 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.3 | 0.4 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.7 | 0.6 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.5 | 1.3 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 2.7 | 4.2 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 13.0 | 15.7 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| Subtotal | 0.1 | 1.7 | < 0.1 | < 0.1 | 0 | 0 | 0.0 | |||
| Central governments and central banks as of 31.12.19 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.0 | 0.0 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.3 | 0.3 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.7 | 0.7 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 2.0 | 1.4 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 3.6 | 3.3 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 13.9 | 13.0 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| Subtotal | 0.1 | 1.4 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
50
| CR9: IRB – Backtesting of probability of default (PD) per portfolio (continued)^1^ | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| PD range | External rating equivalent<br><br> <br><br><br> <br>Moody’s | External rating equivalent<br><br> <br><br><br> <br>Standard & Poor’s | External rating equivalent<br><br> <br><br><br> <br>Fitch | Weighted average PD in % | Arithmetic average PD<br><br> <br>by obligors in % | Number of obligors<br><br> <br>(in thousands)^2^ | Defaulted obligors<br><br> <br>in the year | of which: new defaulted obligors in the year | Average historical annual default rate in %^3^ | |
| End of previous year | End of the year | |||||||||
| Banks and securities dealers as of 31.12.20 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.0 | 0.1 | 0.5 | 0.5 | 0 | 0 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 0.3 | 0.3 | 0 | 0 | 0.1 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.4 | 0.4 | 0.2 | 0.2 | 0 | 0 | 0.0 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | < 0.1 | < 0.1 | 0 | 0 | 0.1 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.7 | 1.4 | 0.2 | 0.2 | 0 | 0 | 0.2 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 3.6 | 3.1 | 0.2 | 0.2 | 0 | 0 | 0.3 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 14.2 | 22.0 | < 0.1 | < 0.1 | 0 | 0 | 1.0 |
| Subtotal | 0.3 | 0.7 | 1.4 | 1.4 | 0 | 0 | 0.1 | |||
| Banks and securities dealers as of 31.12.19 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.1 | 0.1 | 0.5 | 0.5 | 0 | 0 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 0.3 | 0.3 | 0 | 0 | 0.1 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.4 | 0.4 | 0.2 | 0.2 | 0 | 0 | 0.0 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | < 0.1 | < 0.1 | 0 | 0 | 0.1 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.7 | 1.4 | 0.2 | 0.2 | 0 | 0 | 0.2 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 4.7 | 3.1 | 0.2 | 0.2 | 0 | 0 | 0.3 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 15.9 | 16.0 | < 0.1 | < 0.1 | 0 | 0 | 1.1 |
| Subtotal | 0.4 | 0.7 | 1.4 | 1.4 | 0 | 0 | 0.1 |
51
UBS Group AG consolidated
| CR9: IRB – Backtesting of probability of default (PD) per portfolio (continued)^1^ | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| PD range | External rating equivalent<br><br> <br><br><br> <br>Moody’s | External rating equivalent<br><br> <br><br><br> <br>Standard & Poor’s | External rating equivalent<br><br> <br><br><br> <br>Fitch | Weighted average PD in % | Arithmetic average PD<br><br> <br>by obligors in % | Number of obligors<br><br> <br>(in thousands)^2^ | Defaulted obligors<br><br> <br>in the year | of which: new defaulted obligors in the year | Average historical annual default rate in %^3^ | |
| End of previous year | End of the year | |||||||||
| Public-sector entities, multi-lateral development banks as of 31.12.20 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.0 | 0.1 | 0.3 | 0.3 | 0 | 0 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 0.2 | 0.2 | 0 | 0 | 0.0 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.3 | 0.3 | 0.2 | 0.2 | 0 | 0 | 0.0 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | < 0.1 | < 0.1 | 0 | 0 | 0.5 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.0 | 1.2 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 2.9 | 2.7 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 0.0 | 0.0 | 0 | 0 | 7.7 | ||
| Subtotal | 0.2 | 0.2 | 0.7 | 0.7 | 0 | 0 | 0.0 | |||
| Public-sector entities, multi-lateral development banks as of 31.12.19 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.0 | 0.1 | 0.4 | 0.3 | 0 | 0 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 0.2 | 0.2 | 0 | 0 | 0.0 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.3 | 0.3 | 0.2 | 0.2 | 0 | 0 | 0.0 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | < 0.1 | < 0.1 | 1 | 0 | 0.6 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.2 | 1.3 | < 0.1 | < 0.1 | 0 | 0 | 0.0 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 0.0 | < 0.1 | 0 | 0 | 0.0 | ||
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 0.0 | 0.0 | 0 | 0 | 8.3 | ||
| Subtotal | 0.1 | 0.2 | 0.8 | 0.7 | 1 | 0 | 0.0 |
52
| CR9: IRB – Backtesting of probability of default (PD) per portfolio (continued)^1^ | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| PD range | External rating equivalent<br><br> <br><br><br> <br>Moody’s | External rating equivalent<br><br> <br><br><br> <br>Standard & Poor’s | External rating equivalent<br><br> <br><br><br> <br>Fitch | Weighted average PD in % | Arithmetic average PD<br><br> <br>by obligors in % | Number of obligors<br><br> <br>(in thousands)^2^ | Defaulted obligors<br><br> <br>in the year | of which: new defaulted obligors in the year | Average historical annual default rate in %^3^ | |
| End of previous year | End of the year | |||||||||
| Corporates: specialized lending as of 31.12.20 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.1 | 0.1 | 0.4 | 0.5 | 1 | 0 | 0.1 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 0.3 | 0.3 | 0 | 0 | 0.1 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.4 | 0.4 | 0.6 | 0.6 | 1 | 0 | 0.1 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | 0.6 | 0.6 | 3 | 0 | 0.2 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.4 | 1.4 | 1.4 | 1.4 | 3 | 0 | 0.4 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 3.5 | 3.5 | 0.3 | 0.3 | 3 | 0 | 1.3 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 0.0 | 0.0 | 0 | 0 | 5.7 | ||
| Subtotal | 1.2 | 1.1 | 3.7 | 3.7 | 11 | 0 | 0.3 | |||
| Corporates: specialized lending as of 31.12.19 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.1 | 0.1 | 0.4 | 0.4 | 0 | 0 | 0.1 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 0.3 | 0.3 | 1 | 0 | 0.1 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.4 | 0.4 | 0.6 | 0.6 | 0 | 0 | 0.1 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | 0.6 | 0.6 | 0 | 0 | 0.2 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.3 | 1.4 | 1.5 | 1.4 | 4 | 0 | 0.4 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 3.3 | 3.5 | 0.4 | 0.3 | 6 | 0 | 1.3 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 0.0 | 0.0 | 0 | 0 | 6.1 | ||
| Subtotal | 1.6 | 1.1 | 3.7 | 3.7 | 11 | 0 | 0.3 |
53
UBS Group AG consolidated
| CR9: IRB – Backtesting of probability of default (PD) per portfolio (continued)^1^ | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| PD range | External rating equivalent<br><br> <br><br><br> <br>Moody’s | External rating equivalent<br><br> <br><br><br> <br>Standard & Poor’s | External rating equivalent<br><br> <br><br><br> <br>Fitch | Weighted average PD in % | Arithmetic average PD<br><br> <br>by obligors in % | Number of obligors<br><br> <br>(in thousands)^2^ | Defaulted obligors<br><br> <br>in the year | of which: new defaulted obligors in the year | Average historical annual default rate in %^3^ | |
| End of previous year | End of the year | |||||||||
| Corporates: other lending as of 31.12.20 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.1 | 0.1 | 3.3 | 3.7 | 4 | 0 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 1.6 | 1.6 | 1 | 0 | 0.0 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.4 | 0.4 | 2.4 | 2.6 | 4 | 0 | 0.2 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | 2.4 | 2.4 | 6 | 0 | 0.3 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.4 | 1.5 | 11.0 | 10.7 | 101 | 10 | 0.6 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 4.0 | 3.9 | 4.9 | 4.9 | 110 | 1 | 1.9 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 17.6 | 15.0 | < 0.1 | < 0.1 | 18 | 0 | 11.5 |
| Subtotal | 2.2 | 1.5 | 25.7 | 26.0 | 244 | 11 | 0.3 | |||
| Corporates: other lending as of 31.12.19 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.1 | 0.1 | 3.8 | 3.3 | 6 | 0 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 1.6 | 1.6 | 5 | 0 | 0.0 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.4 | 0.4 | 2.4 | 2.4 | 8 | 2 | 0.2 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | 2.5 | 2.4 | 10 | 1 | 0.3 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.4 | 1.5 | 11.2 | 11.0 | 86 | 3 | 0.5 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 3.4 | 3.9 | 4.7 | 4.9 | 131 | 2 | 1.8 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 15.3 | 15.2 | 0.1 | < 0.1 | 15 | 1 | 10.8 |
| Subtotal | 2.8 | 1.5 | 26.3 | 25.7 | 261 | 9 | 0.3 |
54
| CR9: IRB – Backtesting of probability of default (PD) per portfolio (continued)^1^ | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| PD range | External rating equivalent<br><br> <br><br><br> <br>Moody’s | External rating equivalent<br><br> <br><br><br> <br>Standard & Poor’s | External rating equivalent<br><br> <br><br><br> <br>Fitch | Weighted average PD in % | Arithmetic average PD<br><br> <br>by obligors in % | Number of obligors<br><br> <br>(in thousands)^2^ | Defaulted obligors<br><br> <br>in the year | of which: new defaulted obligors in the year | Average historical annual default rate in %^3^ | |
| End of previous year | End of the year | |||||||||
| Retail: residential mortgages as of 31.12.20 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.1 | 0.1 | 129.2 | 136.1 | 73 | 0 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 21.0 | 22.3 | 30 | 1 | 0.1 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.3 | 0.4 | 28.4 | 28.7 | 47 | 1 | 0.1 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | 16.2 | 13.8 | 103 | 6 | 0.4 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.3 | 1.3 | 28.5 | 26.3 | 88 | 1 | 0.4 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 4.4 | 4.2 | 10.8 | 8.5 | 116 | 3 | 1.2 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 15.8 | 15.7 | 1.2 | 0.9 | 57 | 0 | 3.5 |
| Subtotal | 1.2 | 0.6 | 235.2 | 236.6 | 514 | 12 | 0.2 | |||
| Retail: residential mortgages as of 31.12.19 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.1 | 0.1 | 129.5 | 129.2 | 88 | 0 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 20.7 | 21.0 | 29 | 0 | 0.1 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.4 | 0.4 | 27.8 | 28.4 | 49 | 0 | 0.1 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | 15.4 | 16.2 | 89 | 0 | 0.3 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.3 | 1.3 | 27.0 | 28.5 | 85 | 1 | 0.4 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 4.3 | 4.2 | 10.2 | 10.8 | 98 | 0 | 1.2 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 15.3 | 15.7 | 1.2 | 1.2 | 39 | 0 | 3.4 |
| Subtotal | 1.2 | 0.6 | 231.7 | 235.2 | 477 | 1 | 0.2 |
55
UBS Group AG consolidated
| CR9: IRB – Backtesting of probability of default (PD) per portfolio (continued)^1^ | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| PD range | External rating equivalent<br><br> <br><br><br> <br>Moody’s | External rating equivalent<br><br> <br><br><br> <br>Standard & Poor’s | External rating equivalent<br><br> <br><br><br> <br>Fitch | Weighted average PD in % | Arithmetic average PD<br><br> <br>by obligors in % | Number of obligors<br><br> <br>(in thousands)^2^ | Defaulted obligors<br><br> <br>in the year | of which: new defaulted obligors in the year | Average historical annual default rate in %^3^ | |
| End of previous year | End of the year | |||||||||
| Retail: other retail as of 31.12.20 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.0 | 0.0 | 201.8 | 343.2 | 13 | 0 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 4.5 | 7.2 | 0 | 0 | 0.0 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.4 | 0.4 | 2.2 | 8.4 | 0 | 0 | 0.1 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | 1.7 | 8.8 | 2 | 0 | 0.1 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.1 | 1.0 | 42.5 | 47.8 | 16 | 1 | 0.0 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 5.6 | 3.4 | 1.4 | 3.4 | 1 | 0 | 0.1 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 15.4 | 21.3 | 0.7 | 0.9 | 3 | 0 | 0.0 |
| Subtotal | 0.1 | 0.3 | 254.9 | 419.6 | 35 | 1 | 0.0 | |||
| Retail: other retail as of 31.12.19 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| 0.00 to <0.15 | Aaa to A3 | AAA to A– | AAA to AA– | 0.0 | 0.0 | 195.3 | 201.8 | 15 | 1 | 0.0 |
| 0.15 to <0.25 | Baa1 to Baa2 | BBB+ to BBB | BBB+ to BBB | 0.2 | 0.2 | 6.2 | 4.5 | 1 | 0 | 0.1 |
| 0.25 to <0.50 | Baa3 | BBB– | BBB– | 0.4 | 0.4 | 2.6 | 2.2 | 1 | 0 | 0.1 |
| 0.50 to <0.75 | Ba1 | BB+ | BB+ | 0.6 | 0.6 | 1.8 | 1.7 | 0 | 0 | 0.1 |
| 0.75 to <2.50 | Ba2 to Ba3 | BB to BB– | BB to BB– | 1.1 | 1.0 | 48.1 | 42.5 | 6 | 1 | 0.0 |
| 2.50 to <10.00 | B1 to B3 | B+ to B– | B+ to B– | 4.2 | 3.4 | 1.5 | 1.4 | 0 | 0 | 0.1 |
| 10.00 to <100.00 | Caa to C | CCC to C | CCC to C | 16.4 | 21.3 | 0.7 | 0.7 | 0 | 0 | 0.0 |
| Subtotal | 0.1 | 0.3 | 256.2 | 254.9 | 23 | 2 | 0.0 | |||
| 1 This table covers all Pillar 1 PD models that are approved by<br> FINMA and are subject to a yearly confirmation / backtesting. Refer to the<br> “Key features of our main credit risk models” table under “Credit risk<br> models” in the “Risk management and control” section of our Annual Report<br> 2020 for more information. 2 The numbers of obligors reflect<br> uncommitted and fully unutilized Lombard loan limits from 31 December 2020<br> onward. 3 We use 13 years of data for the calculation of the “average<br> historical annual default rate.” |
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Equity exposures
The table below provides information about our equity exposures under the simple risk-weight method.
Semi-annual |
| CR10: IRB (equities under the simple risk-weight method)^1^ | |||||
|---|---|---|---|---|---|
| USD million, except where indicated | On-balance sheet amount | Off-balance sheet amount | Risk weight in %^2^ | Exposure amount^3^ | RWA^2^ |
| 31.12.20 | **** | ||||
| Exchange-traded equity exposures | 29 | 0 | 300 | 29 | 92 |
| Other equity exposures | 638 | 0 | 400 | 638 | 2,704 |
| Total | 667 | 0 | **** | 667 | 2,796 |
| 30.6.20 | **** | ||||
| Exchange-traded equity exposures | 39 | 300 | 39 | 123 | |
| Other equity exposures | 595 | 400 | 595 | 2,523 | |
| Total | 634 | **** | **** | 634 | 2,646 |
| 31.12.19 | **** | ||||
| Exchange-traded equity exposures | 34 | 300 | 34 | 107 | |
| Other equity exposures | 1,010 | 400 | 744 | 3,154 | |
| Total | 1,043 | **** | **** | 777 | 3,261 |
| 1 This table includes investment in funds until 31 December<br> 2019, and excludes significant investments in the common shares of<br> non-consolidated financial institutions (banks, insurance and other financial<br> entities) that are subject to the threshold treatment and risk-weighted at<br> 250%. 2 RWA are calculated post-application of the A-IRB multiplier of 6%,<br> therefore the respective risk weight is higher than 300% and 400%. 3 The<br> exposure amount for equities in the banking book is based on the net<br> position. |
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UBS Group AG consolidated
Section 5 Counterparty credit risk
Introduction
Semi-annual I This section provides information about the exposures subject to the Basel III counterparty credit risk (CCR) framework. CCR arises from over-the-counter (OTC) and exchange-traded derivatives (ETDs), securities financing transactions (SFTs) and long settlement transactions. Within traded products, we determine the regulatory credit exposure on the majority of our derivatives portfolio by applying the effective expected positive exposure (EEPE) and stressed expected positive exposure (stressed EPE) as defined in the Basel III framework. For the rest of the portfolio, we have applied the standardized approach for counterparty credit risk (SA-CCR) since 1 January 2020, whereas figures for prior periods were calculated in accordance with the current exposure method (CEM). For the majority of securities financing transactions (securities borrowing, securities lending, margin lending, repurchase agreements and reverse repurchase agreements), we determine the regulatory credit exposure using the close-out period (COP) approach. p
› Refer to the “Introduction and basis for preparation” section ofthis report for more information about the implementation of SA-CCR
Counterparty credit risk management
The table below presents an overview of Pillar 3 disclosures that are provided separately in our Annual Report 2020.
Annual |
| CCRA – Counterparty credit risk management | ||||
|---|---|---|---|---|
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
| Risk management objectives and policies related to counterparty<br> credit risk | Risk management and control | – | Traded products | 112–113 |
| – | Credit hedging | 115 | ||
| – | Mitigation of settlement risk | 115 | ||
| Consolidated financial statements | – | Note 1a item 2j Hedge accounting | 298 | |
| – | Note 10 Derivative instruments | 320–321 | ||
| The method used to assign the operating limits defined in terms<br> of internal capacity for counterparty credit exposures and for CCP exposures | Risk management and control | – | Risk governance | 95–96 |
| – | Portfolio and position limits | 105 | ||
| – | Credit risk – Overview of measurement, monitoring and management<br> techniques | 107 | ||
| – | Credit hedging | 115 | ||
| – | Credit risk models | 115–121 | ||
| Policies relating to guarantees and other risk mitigants, and<br> counterparty risk assessment | Risk management and control | – | Credit risk mitigation | 114–115 |
| Consolidated financial statements | – | Note 10 Derivative instruments | 320–321 | |
| – | Note 22 Offsetting financial assets and financial liabilities | 364–365 | ||
| Policies with respect to wrong-way risk exposures | Risk management and control | – | Exposure at default | 117-118 |
| The effect on the firm of a credit rating downgrade (i.e.,<br> amount of collateral that the firm would be required to provide) | Risk management and control | – | Credit ratings | 160 |
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Counterparty credit exposure
Semi-annual I The CCR1 table below presents the methods used to calculate counterparty credit risk exposure.
Compared with 30 June 2020, exposure at default (EAD) post-credit risk mitigation (CRM) related to CCR increased by USD 10.7 billion to USD 136.0 billion and RWA decreased by USD 0.3 billion to USD 38.3 billion. EAD post-CRM on derivative exposures under the internal model method increased by USD 4.3 billion to USD 49.1 billion as well as EAD post-CRM on SFTs under the comprehensive approach and the VaR approach increased by USD 8.5 billion to USD 72.3 billion, mainly driven by higher client activity levels, predominantly in the Investment Bank. EAD post-CRM and associated RWA on derivative exposures under the SA-CCR approach decreased by USD 2 billion and USD 0.6 billion, respectively, mainly due to lower potential future exposure, primarily in Global Wealth Management. p
Semi-annual |
| CCR1: Analysis of counterparty<br> credit risk (CCR) exposure by approach | ||||||
|---|---|---|---|---|---|---|
| million, except where<br> indicated | Replacement cost | Potential future exposure | EEPE | Alpha used for computing regulatory EAD | EAD<br><br> <br>post-CRM | RWA |
| 31.12.20 | **** | |||||
| 1 | 5,090 | 5,383 | **** | 1.4 | 14,663 | 4,353 |
| 2 | **** | **** | 30,672 | 1.6 | 49,075 | 19,179 |
| 3 | **** | **** | **** | **** | **** | **** |
| 4 | **** | **** | **** | **** | 23,464 | 6,544 |
| 5 | **** | **** | **** | **** | 48,834 | 8,226 |
| 6 | **** | **** | **** | **** | 136,036 | 38,301 |
| 30.6.20 | **** | |||||
| 1 | 5,395 | 6,533 | 1.4 | 16,700 | 4,965 | |
| 2 | 28,005 | 1.6 | 44,808 | 19,073 | ||
| 3 | ||||||
| 4 | 21,993 | 6,720 | ||||
| 5 | 41,853 | 7,810 | ||||
| 6 | **** | **** | **** | **** | 125,354 | 38,567 |
| 31.12.19 | **** | |||||
| 1 | 5,276^2^ | 5,947 | 1.0 | 11,224 | 3,376 | |
| 2 | 28,391 | 1.6 | 45,426 | 19,896 | ||
| 3 | ||||||
| 4 | 17,572 | 5,858 | ||||
| 5 | 29,971 | 5,333 | ||||
| 6 | **** | **** | **** | **** | 104,192 | 34,463 |
| 1 Calculated in accordance with the standardized approach for<br> counterparty credit risk (SA-CCR) since 1 January 2020, whereas figures for<br> 31 December 2019 were calculated in accordance with the current exposure<br> method (CEM). 2 Replacement costs include collateral mitigation for on-<br> and off-balance sheet exposures related to CCR for derivative<br> transactions. |
All values are in US Dollars.
p
Semi-annual | The CCR2 table below presents the credit valuation adjustment (CVA) capital charge with a breakdown by standardized and advanced approaches. In addition to the default risk capital requirements for CCR on derivatives, we are required to add a CVA capital charge to cover the risk of mark-to-market losses associated with the deterioration of counterparty credit quality. The advanced CVA value-at-risk (VaR) approach has been used to calculate the CVA capital charge where we use the internal model method (IMM). Where this is not the case, the standardized CVA approach has been used.
Compared with 30 June 2020, the credit valuation adjustment RWA decreased by USD 1.6 billion to USD 2.9 billion, primarily due to risk management activity. p
Semi-annual |
| CCR2: Credit valuation adjustment<br> (CVA) capital charge | ||||||
|---|---|---|---|---|---|---|
| 31.12.20 | 30.6.20 | 31.12.19 | ||||
| million | EAD post-CRM | RWA | EAD post-CRM | RWA | EAD post-CRM^1^ | RWA |
| 48,453 | 1,358 | 43,939 | 3,082 | 44,520 | 974 | |
| 1 | **** | 371 | 906 | 180 | ||
| 2 | **** | 987 | 2,176 | 794 | ||
| 3 | 5,470 | 1,586 | 6,380 | 1,441 | 4,630 | 926 |
| 4 | 53,923 | 2,945 | 50,318 | 4,523 | 49,150 | 1,900 |
| 1 Comparative figures for EAD post-CRM have been adjusted in the<br> second quarter of 2020 to include stressed exposure at default on<br> derivatives. |
All values are in US Dollars.
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UBS Group AG consolidated
Semi-annual | The CCR3 table below provides information about our CCR exposures under the standardized approach. Compared with 30 June 2020, the total CCR exposures decreased by USD 1.2 billion to USD 6.3 billion, primarily related to a reduction from margin loans in the Investment Bank. p
Semi-annual |
| CCR3: Standardized approach – CCR<br> exposures by regulatory portfolio and risk weights | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| million | |||||||||
| Risk weight | 0% | 10% | 20% | 50% | 75% | 100% | 150% | Others | Total credit exposure |
| **** | |||||||||
| 1 | **** | **** | **** | **** | **** | **** | **** | **** | 0 |
| 2 | **** | **** | 48 | 111 | **** | 0 | **** | **** | 159 |
| 3 | **** | **** | 139 | 135 | **** | 0 | **** | **** | 274 |
| 4 | **** | **** | 77 | 123 | 3,712 | 1,758 | 2 | **** | 5,672 |
| 5 | **** | **** | 0 | **** | 3 | 179 | **** | **** | 182 |
| 6 | **** | **** | **** | **** | **** | 0 | **** | **** | 0 |
| 7 | **** | **** | **** | **** | 0 | 0 | **** | **** | 0 |
| 8 | **** | **** | 263 | 369 | 3,715 | 1,938 | 2 | **** | 6,287 |
| **** | |||||||||
| 1 | 164 | 164 | |||||||
| 2 | 15 | 436 | 0 | 3 | 453 | ||||
| 3 | 38 | 275 | 0 | 18 | 331 | ||||
| 4 | 6 | 5 | 4,319^1^ | 1,988 | 9 | 6,327 | |||
| 5 | 0 | 7 | 209 | 216 | |||||
| 6 | |||||||||
| 7 | |||||||||
| 8 | 164 | **** | 58 | 716 | 4,326 | 2,218 | 9 | **** | 7,491 |
| **** | |||||||||
| 1 | 207 | 207 | |||||||
| 2 | 63 | 72 | 4 | 140 | |||||
| 3 | 31 | 446 | 11 | 488 | |||||
| 4 | 9 | 101 | 3,952^1^ | 1,302 | 26 | 5,389 | |||
| 5 | 1 | 123 | 124 | ||||||
| 6 | |||||||||
| 7 | |||||||||
| 8 | 207 | **** | 102 | 620 | 3,954 | 1,439 | 26 | **** | 6,348 |
| 1 Relates to structured margin lending exposures based on the<br> methodology agreed with FINMA. |
All values are in US Dollars.
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Semi-annual | Information about RWA, including details of movements in CCR RWA, is provided on pages 6–9 of our 30 September 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors, and on page 67 of this report.
The CCR4 table below and on the following pages provides a breakdown of the key parameters used for the calculation of capital requirements under the A-IRB approach, by a probability of default (PD) range across Swiss Financial Market Supervisory Authority (FINMA)-defined asset classes. Compared with 30 June 2020, EAD post-CRM increased by USD 11.9 billion to USD 129.7 billion across various asset classes, resulting in an overall RWA increase of USD 0.6 billion to USD 33.3 billion.
In the Central governments and central banks asset class, EAD post-CRM increased by USD 5.0 billion to USD 15.6 billion, mainly as a result of increased client activity in securities financing transactions in the Investment Bank and Group Functions.
In the Banks and securities dealers asset class, EAD post-CRM increased by USD 4.7 billion to USD 27.7 billion and RWA increased by USD 1.2 billion to USD 7.5 billion, primarily driven by increased client activity in securities financing transactions in the Investment Bank and Group Functions.
In the Public-sector entities and multi-lateral development banks asset class, EAD post-CRM decreased by USD 0.6 billion to USD 1.8 billion, due to decreases in derivatives in Group Functions and the Investment Bank.
In the Corporates: including specialized lending asset class, EAD post-CRM increased by USD 3.9 billion to USD 76.1 billion, due to exposure increases in securities financing transactions and derivatives, as a result of increased client activity, mainly in the Investment Bank. RWA decreased by USD 0.7 billion to USD 23.4 billion, primarily reflecting risk management activity.
In the Retail: other retail asset class, EAD post-CRM decreased by USD 1.1 billion to USD 8.5 billion, mainly due to decreases in derivatives in Global Wealth Management. p
Semi-annual |
| CCR4: IRB – CCR exposures by portfolio and PD scale | |||||||
|---|---|---|---|---|---|---|---|
| USD million, except where indicated | EAD post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years^1^ | RWA | RWA density in % |
| Central governments and central banks as of 31.12.20 | **** | ||||||
| 0.00 to <0.15 | 14,751 | 0.0 | 0.1 | 38.6 | 0.5 | 787 | 5.3 |
| 0.15 to <0.25 | 199 | 0.2 | <0.1 | 38.2 | 0.9 | 53 | 26.4 |
| 0.25 to <0.50 | 494 | 0.3 | <0.1 | 96.3 | 0.9 | 469 | 94.9 |
| 0.50 to <0.75 | 128 | 0.7 | <0.1 | 99.6 | 1.0 | 186 | 145.7 |
| 0.75 to <2.50 | **** | **** | **** | **** | **** | **** | **** |
| 2.50 to <10.00 | 0 | 2.6 | <0.1 | 75.0 | 1.0 | 0 | 228.3 |
| 10.00 to <100.00 | **** | **** | **** | **** | **** | **** | **** |
| 100.00 (default) | **** | **** | **** | **** | **** | **** | **** |
| Subtotal | 15,572 | 0.0 | 0.1 | 40.9 | 0.5 | 1,495 | 9.6 |
| Central governments and central banks as of 30.6.20 | **** | ||||||
| 0.00 to <0.15 | 9,795 | 0.0 | 0.2 | 38.6 | 0.4 | 629 | 6.4 |
| 0.15 to <0.25 | 203 | 0.2 | <0.1 | 47.0 | 0.7 | 57 | 28.1 |
| 0.25 to <0.50 | 437 | 0.3 | <0.1 | 96.4 | 1.0 | 438 | 100.4 |
| 0.50 to <0.75 | 56 | 0.7 | <0.1 | 55.0 | 1.0 | 45 | 80.4 |
| 0.75 to <2.50 | 37 | 0.9 | <0.1 | 57.2 | 0.4 | 32 | 86.5 |
| 2.50 to <10.00 | 2 | 2.6 | <0.1 | 70.2 | 1.0 | 3 | 173.8 |
| 10.00 to <100.00 | |||||||
| 100.00 (default) | |||||||
| Subtotal | 10,528 | 0.1 | 0.2 | 41.4 | 0.4 | 1,203 | 11.4 |
| Central governments and central banks as of 31.12.19 | **** | ||||||
| 0.00 to <0.15 | 8,443 | 0.0 | 0.1 | 35.4 | 0.4 | 490 | 5.8 |
| 0.15 to <0.25 | 129 | 0.2 | <0.1 | 50.3 | 0.6 | 37 | 28.6 |
| 0.25 to <0.50 | 261 | 0.3 | <0.1 | 53.1 | 0.7 | 149 | 57.3 |
| 0.50 to <0.75 | 108 | 0.7 | <0.1 | 55.0 | 1.0 | 87 | 80.4 |
| 0.75 to <2.50 | 13 | 1.0 | <0.1 | 44.7 | 0.8 | 11 | 87.2 |
| 2.50 to <10.00 | |||||||
| 10.00 to <100.00 | |||||||
| 100.00 (default) | |||||||
| Subtotal | 8,954 | 0.1 | 0.1 | 36.3 | 0.4 | 774 | 8.6 |
61
UBS Group AG consolidated
| CCR4: IRB – CCR exposures by portfolio and PD scale (continued) | |||||||
|---|---|---|---|---|---|---|---|
| USD million, except where indicated | EAD post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years^1^ | RWA | RWA density in % |
| Banks and securities dealers as of 31.12.20 | **** | ||||||
| 0.00 to <0.15 | 18,474 | 0.1 | 0.4 | 50.0 | 0.6 | 3,150 | 17.1 |
| 0.15 to <0.25 | 5,913 | 0.2 | 0.2 | 49.7 | 0.5 | 1,964 | 33.2 |
| 0.25 to <0.50 | 1,894 | 0.4 | 0.2 | 48.5 | 0.7 | 904 | 47.7 |
| 0.50 to <0.75 | 633 | 0.7 | <0.1 | 60.4 | 0.6 | 582 | 91.9 |
| 0.75 to <2.50 | 738 | 1.3 | 0.1 | 52.4 | 1.0 | 827 | 112.1 |
| 2.50 to <10.00 | 29 | 3.9 | <0.1 | 77.8 | 1.0 | 67 | 231.7 |
| 10.00 to <100.00 | 0 | 22.0 | <0.1 | 45.0 | 1.0 | 0 | 241.8 |
| 100.00 (default) | **** | **** | **** | **** | **** | **** | **** |
| Subtotal | 27,681 | 0.2 | 1.0 | 50.1 | 0.6 | 7,494 | 27.1 |
| Banks and securities dealers as of 30.6.20 | **** | ||||||
| 0.00 to <0.15 | 15,403 | 0.1 | 0.4 | 50.4 | 0.7 | 2,836 | 18.4 |
| 0.15 to <0.25 | 4,782 | 0.2 | 0.2 | 49.1 | 0.6 | 1,578 | 33.0 |
| 0.25 to <0.50 | 1,753 | 0.4 | 0.2 | 47.3 | 0.7 | 838 | 47.8 |
| 0.50 to <0.75 | 365 | 0.6 | 0.1 | 58.7 | 0.9 | 329 | 90.2 |
| 0.75 to <2.50 | 690 | 1.1 | 0.2 | 49.8 | 0.8 | 660 | 95.6 |
| 2.50 to <10.00 | 27 | 3.6 | <0.1 | 71.7 | 1.0 | 56 | 210.1 |
| 10.00 to <100.00 | 0 | 22.0 | <0.1 | 45.0 | 1.0 | 0 | 241.3 |
| 100.00 (default) | |||||||
| Subtotal | 23,021 | 0.2 | 1.1 | 50.0 | 0.6 | 6,297 | 27.4 |
| Banks and securities dealers as of 31.12.19 | **** | ||||||
| 0.00 to <0.15 | 13,108 | 0.1 | 0.4 | 48.9 | 0.8 | 2,539 | 19.4 |
| 0.15 to <0.25 | 4,287 | 0.2 | 0.2 | 48.7 | 0.8 | 1,568 | 36.6 |
| 0.25 to <0.50 | 1,615 | 0.4 | 0.2 | 46.6 | 0.7 | 766 | 47.4 |
| 0.50 to <0.75 | 650 | 0.7 | 0.1 | 63.1 | 0.8 | 632 | 97.3 |
| 0.75 to <2.50 | 573 | 1.1 | 0.1 | 38.6 | 0.9 | 404 | 70.5 |
| 2.50 to <10.00 | 33 | 3.2 | <0.1 | 73.5 | 1.0 | 71 | 217.8 |
| 10.00 to <100.00 | 1 | 14.9 | <0.1 | 90.0 | 1.0 | 6 | 431.9 |
| 100.00 (default) | |||||||
| Subtotal | 20,267 | 0.2 | 1.1 | 48.9 | 0.8 | 5,985 | 29.5 |
62
| CCR4: IRB – CCR exposures by portfolio and PD scale (continued) | |||||||
|---|---|---|---|---|---|---|---|
| USD million, except where indicated | EAD post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years^1^ | RWA | RWA density in % |
| Public-sector entities and multi-lateral development banks as of 31.12.20 | **** | ||||||
| 0.00 to <0.15 | 1,308 | 0.0 | <0.1 | 41.0 | 0.7 | 129 | 9.9 |
| 0.15 to <0.25 | 470 | 0.2 | <0.1 | 42.1 | 1.3 | 111 | 23.7 |
| 0.25 to <0.50 | **** | **** | **** | **** | **** | **** | **** |
| 0.50 to <0.75 | 0 | 0.6 | <0.1 | 100.0 | 1.4 | 0 | 121.3 |
| 0.75 to <2.50 | **** | **** | **** | **** | **** | **** | **** |
| 2.50 to <10.00 | **** | **** | **** | **** | **** | **** | **** |
| 10.00 to <100.00 | **** | **** | **** | **** | **** | **** | **** |
| 100.00 (default) | 26 | 100.0 | <0.1 | **** | 2.9 | 27 | 103.0 |
| Subtotal | 1,805 | 1.5 | <0.1 | 40.7 | 0.9 | 268 | 14.8 |
| Public-sector entities and multi-lateral development banks as of 30.6.20 | **** | ||||||
| 0.00 to <0.15 | 2,143 | 0.0 | 0.1 | 36.1 | 1.3 | 136 | 6.3 |
| 0.15 to <0.25 | 265 | 0.2 | <0.1 | 51.1 | 1.0 | 79 | 29.8 |
| 0.25 to <0.50 | |||||||
| 0.50 to <0.75 | 0 | 0.6 | <0.1 | 100.0 | 2.0 | 0.1 | 134.6 |
| 0.75 to <2.50 | |||||||
| 2.50 to <10.00 | |||||||
| 10.00 to <100.00 | |||||||
| 100.00 (default) | 29 | 100.0 | <0.1 | 3.3 | 31 | 106.0 | |
| Subtotal | 2,438 | 1.2 | 0.1 | 37.4 | 1.3 | 246 | 10.1 |
| Public-sector entities and multi-lateral development banks as of 31.12.19 | **** | ||||||
| 0.00 to <0.15 | 2,102 | 0.1 | 36.1 | 1.1 | 133 | 6.3 | |
| 0.15 to <0.25 | 58 | 0.2 | <0.1 | 86.5 | 1.0 | 27 | 46.7 |
| 0.25 to <0.50 | 4 | 0.4 | <0.1 | 86.9 | 1.0 | 4 | 114.7 |
| 0.50 to <0.75 | |||||||
| 0.75 to <2.50 | 0 | 1.0 | <0.1 | 35.0 | 1.0 | 0 | 60.4 |
| 2.50 to <10.00 | |||||||
| 10.00 to <100.00 | |||||||
| 100.00 (default) | 22 | 100.0 | <0.1 | 3.4 | 23 | 106.0 | |
| Subtotal | 2,185 | 1.0 | 0.1 | 37.2 | 1.1 | 187 | 8.6 |
63
UBS Group AG consolidated
| CCR4: IRB – CCR exposures by portfolio and PD scale (continued) | |||||||
|---|---|---|---|---|---|---|---|
| USD million, except where indicated | EAD post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years^1^ | RWA | RWA density in % |
| Corporates: including specialized lending as of 31.12.20^2^ | **** | ||||||
| 0.00 to <0.15 | 52,552 | 0.0 | 10.8 | 34.5 | 0.5 | 6,653 | 12.7 |
| 0.15 to <0.25 | 8,375 | 0.2 | 1.9 | 54.9 | 0.7 | 4,992 | 59.6 |
| 0.25 to <0.50 | 3,074 | 0.3 | 0.7 | 70.1 | 0.7 | 3,539 | 115.1 |
| 0.50 to <0.75 | 2,579 | 0.6 | 0.6 | 32.7 | 0.6 | 1,846 | 71.6 |
| 0.75 to <2.50 | 7,392 | 1.2 | 1.1 | 22.6 | 0.4 | 4,719 | 63.8 |
| 2.50 to <10.00 | 2,171 | 3.1 | 0.1 | 15.9 | 0.3 | 1,609 | 74.1 |
| 10.00 to <100.00 | 3 | 13.0 | <0.1 | 20.0 | 1.0 | 5 | 147.0 |
| 100.00 (default) | 0 | 100.0 | <0.1 | **** | 1.0 | 0 | 106.0 |
| Subtotal | 76,146 | 0.3 | 15.4 | 36.5 | 0.5 | 23,363 | 30.7 |
| Corporates: including specialized lending as of 30.6.20^2^ | **** | ||||||
| 0.00 to <0.15 | 49,085 | 0.0 | 12.2 | 35.0 | 0.5 | 6,587 | 13.4 |
| 0.15 to <0.25 | 8,386 | 0.2 | 1.9 | 52.2 | 0.6 | 4,459 | 53.2 |
| 0.25 to <0.50 | 2,635 | 0.4 | 0.8 | 87.4 | 0.8 | 3,821 | 145.0 |
| 0.50 to <0.75 | 3,590 | 0.6 | 0.8 | 39.9 | 0.5 | 3,429 | 95.5 |
| 0.75 to <2.50 | 6,059 | 1.2 | 1.6 | 27.5 | 0.5 | 4,936 | 81.5 |
| 2.50 to <10.00 | 2,442 | 3.1 | 0.2 | 7.7 | 0.2 | 828 | 33.9 |
| 10.00 to <100.00 | 2 | 22.0 | <0.1 | 19.9 | 1.0 | 4 | 173.4 |
| 100.00 (default) | 0 | 100.0 | <0.1 | 1.0 | 0 | 106.0 | |
| Subtotal | 72,199 | 0.3 | 17.5 | 37.6 | 0.5 | 24,065 | 33.3 |
| Corporates: including specialized lending as of 31.12.19^2^ | **** | ||||||
| 0.00 to <0.15 | 40,175 | 0.0 | 11.6 | 35.7 | 0.5 | 5,807 | 14.5 |
| 0.15 to <0.25 | 6,620 | 0.2 | 1.7 | 57.5 | 0.7 | 4,217 | 63.7 |
| 0.25 to <0.50 | 2,305 | 0.4 | 0.8 | 83.7 | 0.9 | 3,494 | 151.6 |
| 0.50 to <0.75 | 3,351 | 0.6 | 0.9 | 36.9 | 0.6 | 3,000 | 89.5 |
| 0.75 to <2.50 | 5,708 | 1.2 | 1.5 | 28.9 | 0.5 | 4,655 | 81.5 |
| 2.50 to <10.00 | 2,182 | 3.2 | 0.2 | 10.1 | 0.2 | 940 | 43.1 |
| 10.00 to <100.00 | 2 | 14.9 | <0.1 | 90.0 | 1.0 | 10 | 431.9 |
| 100.00 (default) | 1 | 100.0 | <0.1 | 1.0 | 1 | 106.0 | |
| Subtotal | 60,344 | 0.3 | 16.7 | 38.4 | 0.6 | 22,125 | 36.7 |
64
| CCR4: IRB – CCR exposures by portfolio and PD scale (continued) | |||||||
|---|---|---|---|---|---|---|---|
| USD million, except where indicated | EAD post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years^1^ | RWA | RWA density in % |
| Retail: other retail as of 31.12.20 | **** | ||||||
| 0.00 to <0.15 | 7,157 | 0.0 | 12.7 | 29.8 | **** | 306 | 4.3 |
| 0.15 to <0.25 | 74 | 0.2 | 0.1 | 28.1 | **** | 9 | 11.5 |
| 0.25 to <0.50 | 189 | 0.3 | 0.1 | 32.8 | **** | 46 | 24.5 |
| 0.50 to <0.75 | 175 | 0.6 | <0.1 | 30.5 | **** | 53 | 30.1 |
| 0.75 to <2.50 | 915 | 1.0 | 9.5 | 31.3 | **** | 293 | 32.1 |
| 2.50 to <10.00 | 32 | 3.9 | <0.1 | 29.8 | **** | 15 | 46.4 |
| 10.00 to <100.00 | 3 | 14.4 | <0.1 | 27.9 | **** | 2 | 56.9 |
| 100.00 (default) | **** | **** | **** | **** | **** | **** | **** |
| Subtotal | 8,546 | 0.2 | 22.7 | 30.1 | **** | 724 | 8.5 |
| Retail: other retail as of 30.6.20 | **** | ||||||
| 0.00 to <0.15 | 7,749 | 0.0 | 13.9 | 29.0 | 307 | 4.0 | |
| 0.15 to <0.25 | 309 | 0.2 | 0.2 | 29.4 | 36 | 11.5 | |
| 0.25 to <0.50 | 155 | 0.4 | 0.1 | 30.3 | 38 | 24.4 | |
| 0.50 to <0.75 | 198 | 0.6 | 0.1 | 34.7 | 60 | 30.5 | |
| 0.75 to <2.50 | 1,212 | 1.0 | 10.5 | 30.3 | 435 | 35.9 | |
| 2.50 to <10.00 | 44 | 3.8 | 0.1 | 31.8 | 22 | 49.8 | |
| 10.00 to <100.00 | 9 | 19.9 | 0.1 | 26.3 | 5 | 61.5 | |
| 100.00 (default) | |||||||
| Subtotal | 9,677 | 0.2 | 25.0 | 29.3 | 903 | 9.3 | |
| Retail: other retail as of 31.12.19 | **** | ||||||
| 0.00 to <0.15 | 5,355 | 0.0 | 13.1 | 31.1 | 223 | 4.2 | |
| 0.15 to <0.25 | 31 | 0.2 | 0.1 | 27.0 | 3 | 10.4 | |
| 0.25 to <0.50 | 32 | 0.4 | 0.1 | 31.5 | 6 | 19.5 | |
| 0.50 to <0.75 | 44 | 0.6 | 0.1 | 44.5 | 17 | 38.5 | |
| 0.75 to <2.50 | 591 | 1.0 | 10.7 | 29.9 | 312 | 52.7 | |
| 2.50 to <10.00 | 40 | 3.4 | 0.1 | 28.8 | 17 | 43.2 | |
| 10.00 to <100.00 | 2 | 21.5 | <0.1 | 28.9 | 1 | 70.1 | |
| 100.00 (default) | |||||||
| Subtotal | 6,095 | 0.2 | 24.1 | 31.1 | 579 | 9.5 | |
| Total 31.12.20 | 129,750 | 0.2 | 38.3 | 39.6 | 0.6^3^ | 33,344 | 25.7 |
| Total 30.6.20 | 117,863 | 0.3 | 43.7 | 39.7 | 0.5^3^ | 32,715 | 27.8 |
| Total 31.12.19 | 97,845 | 0.3 | 42.1 | 39.9 | 0.6^3^ | 29,651 | 30.3 |
| 1 Average maturity for defaulted exposures disclosed in the<br> table is not used to calculate RWA. 2 Includes exposures to managed<br> funds. 3 Retail asset classes are excluded from the average maturity as<br> they are not subject to maturity treatment. |
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65
UBS Group AG consolidated
Semi-annual | The CCR5 table below presents a breakdown of collateral posted or received related to counterparty credit risk exposures from derivative transactions or SFTs.
Compared with 30 June 2020, the fair value of collateral received for derivatives increased by USD 3.6 billion to USD 70.3 billion, resulting from higher client activity in the Investment Bank. The fair value of collateral received for SFTs increased by USD 53.4 billion to USD 668.7 billion, primarily reflecting higher client activity in the prime brokerage business of the Investment Bank. p
Semi-annual |
| CCR5: Composition of collateral for CCR exposure^1^ | ||||||||
|---|---|---|---|---|---|---|---|---|
| Collateral used in derivative transactions | Collateral used in SFTs | |||||||
| Fair value of collateral received | Fair value of posted collateral | Fair value of collateral received | Fair value of posted collateral | |||||
| USD million | Segregated^2^ | Unsegregated | Total | Segregated^3^ | Unsegregated | Total | ||
| 31.12.20 | **** | |||||||
| Cash – domestic currency^4^ | 2,375 | 20,252 | 22,627 | 1,955 | 11,094 | 13,049 | 27,309 | 70,886 |
| Cash – other currencies^4^ | **** | 23,884 | 23,884 | 1,401 | 17,859 | 19,260 | 11,284 | 34,253 |
| Sovereign debt | 6,801 | 10,392 | 17,193 | 8,059 | 8,586 | 16,645 | 239,763 | 163,865 |
| Other debt securities | **** | 2,317 | 2,317 | 503 | 524 | 1,027 | 81,959 | 33,238 |
| Equity securities | 4,241 | 31 | 4,271 | 2,604 | 3,077 | 5,681 | 308,349 | 185,050 |
| Total | 13,417 | 56,876 | 70,293 | 14,523 | 41,139 | 55,662 | 668,664 | 487,292 |
| 30.6.20 | **** | |||||||
| Cash – domestic currency^4^ | 2,150 | 19,145 | 21,295 | 2,468 | 10,045 | 12,513 | 36,710 | 77,581 |
| Cash – other currencies^4^ | 24,387 | 24,387 | 1,913 | 16,644 | 18,557 | 10,543 | 34,675 | |
| Sovereign debt | 6,139 | 7,858 | 13,997 | 9,230 | 6,621 | 15,851 | 233,058 | 171,259 |
| Other debt securities | 3,318 | 3,318 | 2,442 | 186 | 2,628 | 79,662 | 35,842 | |
| Equity securities | 3,662 | 16 | 3,677 | 2,838 | 1,436 | 4,273 | 255,428 | 150,127 |
| Total | 11,950 | 54,723 | 66,673 | 18,891 | 34,931 | 53,822 | 615,402 | 469,483 |
| 31.12.19 | **** | |||||||
| Cash – domestic currency^4^ | 2,369 | 18,398 | 20,767 | 1,179 | 7,736 | 8,915 | 30,621 | 76,209 |
| Cash – other currencies^4^ | 18,735 | 18,735 | 1,429 | 12,308 | 13,736 | 8,955 | 31,899 | |
| Sovereign debt | 6,432 | 6,150 | 12,582 | 8,373 | 5,243 | 13,616 | 232,051 | 162,091 |
| Other debt securities | 2,231 | 2,231 | 1,643 | 409 | 2,052 | 78,903 | 28,532 | |
| Equity securities | 4,391 | 18 | 4,409 | 4,138 | 180 | 4,317 | 290,369 | 168,088 |
| Total | 13,192 | 45,532 | 58,725 | 16,761 | 25,874 | 42,635 | 640,899 | 466,820 |
| 1 This table includes collateral received and posted with and without<br> the right of rehypothecation, but excludes securities placed with central<br> banks related to undrawn credit lines and for payment, clearing and<br> settlement purposes for which there were no associated liabilities or<br> contingent liabilities. 2 Includes collateral received in derivative<br> transactions, primarily initial margins, that is placed with a third-party<br> custodian and to which UBS has access only in the case of counterparty<br> default. 3 Includes collateral posted to central counterparties, where we<br> apply a 0% risk weight for trades that we have entered into on behalf of a<br> client and where the client has signed a legally enforceable agreement<br> stipulating that the default risk of that central counterparty is carried by<br> the client. 4 Cash collateral received and posted for derivatives and SFTs<br> are subject to netting recognized on the IFRS balance sheet. |
p
Semi-annual | The CCR6 table below presents an overview of credit risk protection bought or sold through credit derivatives.
Compared to 30 June 2020, notionals for credit derivatives increased by USD 19.2 billion for protection bought and by USD 18.5 billion for protection sold, primarily in Single-name credit default swaps and Index credit default swaps, mostly driven by higher client activity. p
Semi-annual |
| CCR6: Credit derivatives exposures | ||||||
|---|---|---|---|---|---|---|
| **** | 31.12.20 | 30.6.20 | 31.12.19 | |||
| USD million | Protection bought | Protection<br><br> <br>sold | Protection bought | Protection<br><br> <br>sold | Protection bought | Protection<br><br> <br>sold |
| Notionals^1^ | ||||||
| Single-name credit default swaps | 42,073 | 46,350 | 35,166 | 36,020 | 37,578 | 38,687 |
| Index credit default swaps | 49,311 | 40,022 | 36,635 | 31,782 | 32,426 | 27,887 |
| Total return swaps | 3,128 | 1,344 | 2,133 | 901 | 3,692 | 1,606 |
| Credit options | 2,045 | 61 | 3,436 | 556 | 3,757 | 56 |
| Total notionals | 96,556 | 87,777 | 77,370 | 69,260 | 77,452 | 68,236 |
| Fair values | **** | **** | ||||
| Positive fair value (asset) | 535 | 1,839 | 1,081 | 878 | 682 | 1,338 |
| Negative fair value (liability) | 2,256 | 682 | 1,408 | 1,295 | 2,050 | 916 |
| 1 Includes notional amounts for client-cleared transactions. |
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66
Counterparty credit risk risk-weighted assets
Quarterly | The CCR7 table below presents a flow statement explaining changes in counterparty credit risk RWA determined under the internal model method (IMM) for derivatives and the value-at-risk (VaR) approach for SFTs.
CCR RWA on derivatives under the IMM increased by USD 1.0 billion to USD 19.4 billion during the fourth quarter of 2020, primarily due to asset size movements in the Investment Bank mainly as a result of higher client activity, as well as foreign currency exchange movements due to the depreciation of
the US dollar. This was partly offset by lower RWA from asset quality movements, mainly due to risk management activity in the Investment Bank. CCR RWA on SFTs under the VaR approach increased by USD 0.8 billion to USD 8.4 billion during the fourth quarter of 2020, primarily driven by asset size movements due to increased trading activity.
For definitions of CCR RWA movement table components, refer to “Definitions of credit risk and counterparty credit risk RWA movement table components for CR8 and CCR7” in the “Credit risk” section on page 48 of this report. p
Quarterly |
| CCR7: RWA flow statements of CCR<br> exposures under internal model method (IMM) and value-at-risk (VaR) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| For the quarter ended 31.12.20 | For the quarter ended 30.9.20 | For the quarter ended 30.6.20 | For the quarter ended 31.3.20 | |||||||||
| million | Derivatives | SFTs | Total | Derivatives | SFTs | Total | Derivatives | SFTs | Total | Derivatives | SFTs | Total |
| Subject to IMM | Subject to VaR | **** | Subject to IMM | Subject to VaR | Subject to IMM | Subject to VaR | Subject to IMM | Subject to VaR | ||||
| 1 | 18,394 | 7,607 | 26,001 | 19,284 | 8,055 | 27,339 | 20,582 | 6,663 | 27,245 | 20,275 | 5,502 | 25,777 |
| 2 | 1,539 | 622 | 2,161 | 880 | (4) | 877 | (1,878) | 922 | (956) | 1,091 | 1,421 | 2,511 |
| 3 | (476) | 135 | (342) | (1,913) | 108 | (1,805) | (167) | 10 | (157) | (434) | (180) | (614) |
| 4 | (225) | (130) | (355) | (99) | (666) | (765) | 310 | 400 | 710 | (133) | (133) | |
| 5 | (154) | **** | (154) | (60) | (60) | |||||||
| 5a | (250) | **** | (250) | |||||||||
| 6 | **** | **** | **** | |||||||||
| 7 | 302 | 153 | 456 | 241 | 113 | 354 | 206 | 60 | 267 | (217) | (79) | (296) |
| 8 | **** | **** | **** | 290 | 290 | |||||||
| 9 | 19,380 | 8,386 | 27,767 | 18,394 | 7,607 | 26,001 | 19,284 | 8,055 | 27,339 | 20,582 | 6,663 | 27,245 |
All values are in US Dollars.
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67
UBS Group AG consolidated
Semi-annual | The CCR8 table below presents a breakdown of exposures to central counterparties and related RWA. Compared with 30 June 2020, QCCP exposures related to exchange-traded derivatives decreased by USD 5.3 billion, primarily driven by lower exposures in the Investment Bank. QCCP exposures related to securities financing transactions decreased by USD 4.9 billion, mainly due to a decrease in bond repo trades. p
| CCR8: Exposures to central<br> counterparties | ||||
|---|---|---|---|---|
| 31.12.20 | 30.6.20 | |||
| million | EAD (post-CRM) | RWA | EAD (post-CRM) | RWA |
| 1 | 54,507 | 1,431 | 62,167 | 1,264 |
| 2 | 24,531 | 258 | 34,584 | 401 |
| 3 | 1,614 | 29 | 1,420 | 27 |
| 4 | 17,126 | 113 | 22,470 | 160 |
| 5 | 5,792 | 116 | 10,694 | 214 |
| 6 | **** | **** | ||
| 7 | **** | **** | ||
| 8 | 28,023 | 248 | 25,665 | 237 |
| 9 | 1,953 | 925 | 1,917 | 625 |
| 10 | **** | **** | ||
| 11 | 478 | 622 | 158 | 153 |
| 12 | 143 | 143 | 135 | 51 |
| 13 | 1 | 1 | 0 | 0 |
| 14 | 65 | 65 | 4 | 3 |
| 15 | 77 | 77 | 131 | 49 |
| 16 | **** | **** | ||
| 17 | **** | **** | ||
| 18 | 322 | 322 | 16 | 12 |
| 19 | 6 | 73 | 7 | 89 |
| 20 | 7 | 84 | ||
| 1 A qualifying central counterparty (QCCP) is an entity licensed<br> by the regulator to operate as a CCP. 2 Exposures associated with initial<br> margin, where the exposures are measured under the IMM or the VaR approach,<br> have been included within the exposures for trades (refer to line 2 for QCCPs<br> and line 12 for non-QCCPs). The exposures for non-segregated initial margin<br> (refer to line 8 for QCCPs and line 18 for non-QCCPs), i.e., not<br> bankruptcy-remote in accordance with FINMA Circular 2017/7, reflect the<br> replacement costs under SA-CCR multiplied by an alpha factor of 1.4. The RWA<br> reflect the exposure multiplied by the applied risk weight of derivatives.<br> Under SA-CCR, collateral posted to a segregated, bankruptcy-remote account does<br> not increase the value of replacement costs. |
All values are in US Dollars.
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68
Section 6 Comparison of A-IRB approach and standardized approachfor credit risk
Background
Annual | In accordance with current prudential regulations, the Swiss Financial Market Supervisory Authority (FINMA) has approved our use of the advanced internal ratings-based (A-IRB) approach for calculating the required capital for the majority of our credit risk exposures.
The principal differences between the standardized approach (the SA) and the A-IRB approach identified below are based on the current SA rules without consideration of the material revisions announced by the Basel Committee on Banking Supervision (the BCBS) in December 2017.
We believe advanced approaches that adequately capture economic risks are paramount for the appropriate representation of the capital requirements related to risk-taking activities. Within a strong risk control framework, in combination with robust stress testing practices, strict risk limits, as well as leverage and liquidity requirements, advanced approaches promote a proactive risk culture, setting the right incentives to prudently manage risks.
Refer to the “Introduction and basis for preparation” section of this report for information about FINMA-defined asset classes. p
Key methodological differences between the A-IRB approach and current SA
Annual | In line with the BCBS objectives, the A-IRB approach aims to balance the maintaining of prudent levels of capital while encouraging, where appropriate, the use of advanced risk management techniques. By design, the calibration of the current SA and the A-IRB approach is such that low-risk, short-maturity, well-collateralized portfolios across the various asset classes (with the exception of Central governments and central banks) receive lower risk weights under the A-IRB than under the current SA rules. Accordingly, risk-weighted assets (RWA) and capital requirements under the current SA would be substantially higher than under the A-IRB approach for lower-risk portfolios. Conversely, RWA for higher-risk portfolios are higher under the A-IRB approach than under the current SA.
Methodological differences primarily arise due to the measurement of exposure at default (EAD) and the risk weights applied. In both cases, the treatment of risk mitigation, such as collateral, can have a significant effect.
EAD measurement
For the measurement of EAD, the main methodological differences relate to derivatives, driven by the differences between the internal model method (IMM) and the regulatory-prescribed standardized approach for counterparty credit risk (SA-CCR).
The model-based approaches to derive estimates of EAD for derivatives and securities financing transactions (SFTs) reflect the detailed characteristics of individual transactions. They model the range of possible exposure outcomes across all transactions within the same legally enforceable netting set at various future time points. The modeling assesses the net amount that may be owed to us or that we may owe to others, taking into account the effect of correlated market moves over the potential time it may take to close out a position. The calculation considers current market conditions and is therefore sensitive to deteriorations in the market environment.
In contrast, EAD under the regulatory-prescribed rules is calculated as replacement costs at the balance sheet date plus regulatory add-ons, which take into account potential future market movements but at predetermined fixed rates, not sensitive to changes in market conditions. These add-ons are crudely differentiated by reference to only five product types and three maturity buckets. Moreover, the current regulatory-prescribed rules calculation gives very limited recognition to the benefits of diversification across transactions covered under the same legally enforceable netting agreement. As a result, large diversified portfolios, such as those arising from our activities with other market-making banks, will generate much higher EAD under the current regulatory-prescribed rules than under our internal model-based approaches.
Risk weights
Under the A-IRB approach, risk weights are assigned according to the firm’s internal credit assessment of the counterparty to determine the probability of default (PD) and loss given default (LGD).
PD is an estimate of the likelihood of a counterparty defaulting on its contractual obligations over the next 12 months. It is assessed using rating tools tailored to the various categories of counterparties. Statistically developed scorecards, based on key attributes of the obligor, are used to determine PD for many of our corporate clients and for loans secured by real estate. Where available, market data may also be used to derive the PD for large corporate counterparties. For low-default portfolios, we take into account, where available, relevant external default data in the rating tool development. For Lombard loans, Merton-type historical return-based model simulations taking into account potential changes in the value of securities collateral are used in our rating approach. PD is not only an integral part of the credit risk measurement, but also an important input for determining the level of credit approval required for any given transaction. Moreover, for the purpose of capital underpinning, the majority of counterparty PDs are subject to a floor.
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LGD is the magnitude of the likely loss if there is a default. The calculation takes into account the loss of principal, interest and other amounts, such as workout costs, including the cost of carrying an impaired position during the workout process, less recovered amounts. Importantly, LGD considers the likely recovery rate of claims against defaulted counterparties, which depends on the type of counterparty and any credit mitigation by way of collateral or guarantees, with our estimates being supported by our internal historical loss data and external information where available.
The combination of PD and LGD determined at the counter-party level results in a highly granular level of differentiation of the economic risk from different borrowers and transactions.
In contrast, SA risk weights are largely reliant on external rating agencies’ assessments of the credit quality of the counterparty, with a 100% risk weight typically being applied where no external rating is available. Even where external ratings are available, there is only a coarse granularity of risk weights, with only four primary risk weights used for differentiating counterparties, with the addition of a 0% risk weight for AA– or better rated central governments and central banks. Risk weights of 35%, 75% and 100% are used for mortgages and retail exposures not in default, respectively.
The SA does not differentiate across transaction maturities except for exposures to banks, albeit in a very simplistic manner considering transactions only shorter or longer than three months. This has clear limitations: for example, the economic risk of a six-month loan to a BB-rated US corporation is significantly different to that of a 10-year loan to the same borrower. This difference is evident from the distinction of PD levels based on ratings assigned by external rating agencies through their separate ratings for short-term and long-term debt for a given issuer.
The SA typically assigns lower risk weights to sub-investment grade counterparties than the A-IRB approach, thereby potentially understating the economic risk. Conversely, investment grade counterparties typically receive higher risk weights under the SA than under the A-IRB approach.
Maturity is also an important factor for all asset classes except Retail, with the A-IRB approach producing a higher capital requirement for longer-maturity exposures than for shorter-maturity exposures.
Additionally, under the A-IRB approach we calculate expected loss measures that are deducted from common equity tier 1 (CET1) capital to the extent that they exceed general provisions, which is not the case under the SA.
Given the divergence between the SA and the economic risk, which is better represented under the A-IRB approach, particularly for lower-grade counterparties, there is a risk that applying the SA could incentivize higher risk-taking without a commensurate increase in required capital. p
Comparison of the A-IRB approach EAD and leverage ratio denominator by asset class
Annual | The following table shows EAD, average risk weight, RWA and leverage ratio denominator (LRD) for the asset classes Central governments and central banks; Public-sector entities; Multi-lateral development banks; Banks and securities dealers; Corporates; and Retail credit risk and counterparty credit risk exposures subject to the A-IRB approach. LRD is the exposure measure used for the leverage ratio.
LRD estimates presented in the table reflect the credit risk and counterparty credit risk components of exposures only and are therefore not representative of the LRD requirement at UBS level overall. The LRD estimates exclude exposures subject to market risk, non-counterparty-related risk and SA credit risk to provide a like-for-like comparison with the A-IRB credit risk EAD disclosed below. p
Annual |
| Comparison of A-IRB approach EAD and leverage ratio denominator by asset class | ||||
|---|---|---|---|---|
| 31.12.20 | A-IRB, credit and counterparty credit risk | LRD | ||
| in USD billion, except where indicated | Net EAD | Average RW % | RWA | |
| Central governments and central banks | 219 | 2 | 4 | 227 |
| Multi-lateral development banks | 5 | 3 | 0 | 5 |
| Public-sector entities | 9 | 15 | 1 | 10 |
| Banks and securities dealers | 43 | 31 | 13 | 63 |
| Corporates | 168 | 44 | 74 | 234 |
| Retail | 373 | 13 | 49 | 326 |
| of which: Residential mortgages | 167 | 29 | 49 | 172 |
| of which: Lombard lending | 204 | 7 | 14 | 148 |
| Total | 816 | 17 | 142 | 865 |
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Comparison of the A-IRB approach, the SA and LRD by asset class
Annual | The differences between the A-IRB approach, the SA and LRD per asset class are discussed below and on the following pages.
Central governments and central banks, Public-sectorentities, and Multi-lateral development banks
The regulatory net EAD for Central governments and central banks, Public-sector entities, and Multi-lateral development banks as of 31 December 2020 was USD 232 billion under the A-IRB approach. Since the vast majority of our exposure is driven by exposures to banking products, the LRD is broadly in line with the A-IRB net EAD and we would expect a similar amount under the SA.
The charts on this page provide comparisons of risk weights for exposures to the asset class Central governments and central banks and the sub-asset classes (i) highly rated Multi-lateral development banks as well as (ii) other Multi-lateral development banks and Public-sector entities calculated under the A-IRB approach and the SA. Risk weights under the A-IRB approach are shown for one-year and five-year maturities, both assuming an LGD of 45%. Our internal A-IRB ratings have been mapped to external ratings based on the long-term average of one-year default rates available from the major credit rating agencies, as described on page 117 of our Annual Report 2020.
The SA assigns a zero risk weight to central governments and central banks rated AA– and better, as well as to highly rated Multi-lateral development bank counterparties, while the A-IRB approach generally assigns risk weights higher than zero to even the highest-quality sovereign counterparties.
For other Multi-lateral development bank and Public-sector entity counterparties rated AA– and better, the risk weight applied under the SA is 20%.
Despite the zero risk weights under the SA for central governments and central banks rated AA– and better, and for highly rated Multi-lateral development bank counterparties, we would expect an increase in average risk weight under the SA. Counterparties contributing to higher risk weights under the SA include sovereign wealth funds, which attract a 100% risk weight despite being generally considered very low risk, and short-term repurchase agreement transactions with central banks rated below AA–.
However, as asset class is not a significant driver of RWA, we would expect any resulting RWA increase to be relatively small.
Banks andsecurities dealers
The regulatory net EAD for the asset class Banks and securities dealers as of 31 December 2020 was USD 43 billion under the A-IRB approach. The A-IRB net EAD is lower than the LRD, as a result of collateral mitigation on derivatives and SFTs. We would expect the net EAD to increase under the SA, related to derivatives and SFTs within the Investment Bank, due to the aforementioned methodological differences between the calculation of EAD under the two approaches.
The chart below provides a comparison of risk weights for Banks and securities dealers exposures calculated under the A‑IRB approach and the SA.
****
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The vast majority of our exposure with Banks and securities dealers is of investment grade quality. The average contractual maturity of this exposure is closer to the one-year example provided in the chart on the prior page. Therefore, we would expect a higher average risk weight under the SA than the 25% average risk weight under the A-IRB approach. In combination with higher EAD, we would expect this to lead to significantly higher RWA for Banks and securities dealers under the SA.
Corporates
The regulatory net EAD for the Corporates asset class as of 31 December 2020 was USD 168 billion under the A-IRB approach. The A-IRB net EAD is lower than the LRD, as a result of collateral mitigation on derivatives and SFTs. We would expect the EAD to be higher under the regulatory-prescribed rules related to derivatives and SFTs, due to the aforementioned methodological differences between the calculation of EAD under the two approaches. Derivatives and SFTs account for 45% of the EAD for this asset class as of 31 December 2020.
The following chart provides a comparison of risk weights for Corporates exposures calculated under the A-IRB approach and the SA. These exposures primarily arise from corporate lending and derivatives trading within the Investment Bank, and lending to large corporate clients and small and medium-sized entities (SMEs) in Switzerland. The comparison does not include the FINMA-required multiplier applied to the Investment Bank’s Corporates exposures under the A-IRB approach.
Investment grade counterparties typically receive higher risk weights under the SA than under the A-IRB approach. The majority of our Corporates exposures fall into this category. We would therefore expect risk weights for Corporates to be generally higher under the SA.
In addition, SA risk weights rely on external ratings, with a default weighting of 100% being applied where no external rating is available. Typically, counterparties with no external rating are riskier and thus have higher risk weights under the A-IRB approach. However, managed funds, which comprise nearly one-third of our Corporates EAD, typically have no debt and are therefore unrated. The SA applies a 100% risk weight to exposures to such funds. Under A-IRB, these funds are considered very low risk and as of 31 December 2020 had an average risk weight of 21%. We believe the SA significantly overstates the associated risk.
Conversely, for certain exposures we consider the risk weight of 100% under the SA resulting from the absence of an external rating as insufficient, as evident from the hypothetical leveraged finance counterparty example in the table below. p
Annual | **** Comparison of riskweights as a function of internal rating assessment
The table assumes two counterparties without external rating assignments.
| Interest payment coverage (EBITDA / total interest payments) | Total debt / EBITDA | Debt / assets | Liquidity (fraction of assets that are liquid) | Internal rating assessment | Exposure maturity | A-IRB risk weight range | SA risk weight | |
|---|---|---|---|---|---|---|---|---|
| Managed funds | NA | NA | 0 | 100% | AAA–A | < 1Y | 10–20% | 100% |
| Leveraged <br><br> finance<br><br> counterparty | < 2 | > 2.5 | > 50% | 0% | BB–C | > 5Y | 100–250% | 100% |
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Retail
Residential mortgages
The regulatory net EAD for the sub-asset class Residential mortgages as of 31 December 2020 was USD 167 billion under the A-IRB approach. Since the vast majority of our exposures is driven by banking products, the LRD is broadly in line with the A-IRB net EAD and we would expect a similar amount under the SA.
Due to the size of our personal and corporate banking business in Switzerland, our domestic portfolios represent a significant portion of our overall lending exposures, with the largest being loans secured by residential properties. Our internal models assign risk weights to such loans by considering the debt service capacity of borrowers and the availability of other collateral, among other factors. These are important considerations for the Swiss market, where there is legal recourse to the borrower.
In contrast, and different to the assignment of risk weights for the aforementioned asset classes, the SA is less complex and only differentiates the risk weights based on loan-to-value (LTV) ranges, as shown in the chart below.
****
The vast majority of our exposures would attract the minimum 35% risk weight under the SA, compared with an average of 20% as of 31 December 2020 observed under the A‑IRB approach.
The difference is largely due to the current SA rules not providing benefit to the portion of exposures with an LTV below 67%. The vast majority of exposures fall within this category, as shown in the “Swiss mortgages: distribution of net exposure at default (EAD) across exposure segments and loan-to-value (LTV) buckets” table on page 110 of our Annual Report 2020, available under ”Annual reporting” at ubs.com/investors.
Lombard lending
Annual | The regulatory net EAD for the Lombard loans sub-asset class as of 31 December 2020 was USD 204 billion under the A‑IRB approach, and mainly arises in our wealth management business.
Eligible collateral is more limited under the SA than under A‑IRB. However, the haircuts applied to collateral under the A‑IRB approach are generally greater than those prescribed under the SA. Given this, we would expect the overall effect of applying current SA rules to be limited for this portfolio. p
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Section 7 Securitizations
SECA – Introduction
Annual | This section provides details of traditional and synthetic securitization exposures in the banking and trading book based on the Basel III securitization framework.
In a traditional securitization, a pool of loans (or other debt obligations) is transferred to structured entities that have been established to own the loan pool and to issue tranched securities to third-party investors referencing this pool of loans. In a synthetic securitization, legal ownership of securitized pools of assets is typically retained but associated credit risk is transferred to structured entities, commonly through guarantees, credit derivatives or credit-linked notes. Hybrid structures with a mix of traditional and synthetic features are disclosed as synthetic securitizations.
We act in different roles in securitization transactions. As originator, we create or purchase financial assets, which are then securitized in traditional or synthetic securitization transactions, enabling us to transfer significant risk to third-party investors. As sponsor, we manage, provide financing for or advise on securitization programs. In line with the Basel III framework, sponsoring includes underwriting activities. In all other cases we act as an investor, by taking securitization positions. p
SECA – Objectives, roles andinvolvement
Securitization in the banking book
Annual | Securitization positions held in the banking book include legacy risk positions in Non-core and Legacy Portfolio within Group Functions. In 2020, for the majority of securitization carrying amounts on the balance sheet, we acted as an originator or investor. Securitization and re-securitization positions in the banking book are measured at fair value, reflecting market prices where available, or based on our internal pricing models. p
Securitization in the trading book
Annual | Securitizations held in the trading book are part of trading activities, including market-making and client facilitation, that could result in retention of certain securitization positions as an investor, including those we may have originated or sponsored. In the trading book, securitization and re-securitization positions are measured at fair value, reflecting market prices where available, or based on our internal pricing models. p
Type of structured entities and affiliated entities involved in securitization transactions
Annual | For securitization transactions, the type of structured entities or special purpose vehicles employed is selected as appropriate based on the type of transaction undertaken. Examples include limited liability companies, common law trusts and depositor entities.
Refer to “Note 28 Interests in subsidiaries and other entities” on pages 390–395 of our Annual Report 2020, available under ”Annual reporting” at ubs.com/investors, for further information about interests in structured entities. p
Managing and monitoring of the credit and market risk of securitization positions
Annual | The banking book securitization and re-securitization portfolio is subject to specific risk monitoring, which may include interest rate and credit spread sensitivity analysis, as well as inclusion in firm-wide earnings-at-risk, capital-at-risk and combined stress test metrics.
The trading book securitization positions are also subject to multiple risk limits, such as management value-at-risk (VaR) and stress limits, as well as market value limits. As part of managing risks within predefined risk limits, traders may utilize hedging and risk mitigation strategies. Hedging may, however, expose us to basis risks, as the hedging instrument and the position being hedged may not always move in parallel. Such basis risks are managed within the overall limits. Any retained securitization from origination activities and any purchased securitization positions are governed by risk limits together with any other trading positions. Legacy trading book securitization exposure is subject to the same management VaR limit framework. Additionally, risk limits are used to control the unwinding, novation and asset sales process on an ongoing basis. p
Accounting policies
Annual | **** Refer to “Consolidation” on page 288 in “Note 1 Summary of significant accounting policies” in the “Consolidated financial statements” section of our Annual Report 2020, available under ”Annual reporting” at ubs.com/investors, for information about accounting policies that relate to securitization activities. **** p
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Regulatory capital treatment of securitization exposures
Annual | In line with the revised securitization framework for banking book securitization exposures, we apply the following approaches to calculate the associated risk-weighted assets (RWA):
– we use external ratings (external ratings-based approach (SEC-ERBA)), if available, from Standard & Poor’s, Moody’s Investors Service and Fitch Ratings for securitization exposures, provided that we are able to demonstrate our expertise in both critically challenging and reviewing the external ratings; or
– if we cannot apply the ERBA method, we apply the standardized approach (SEC-SA) where the delinquency status of a significant portion of the underlying exposure can be determined or a risk weight of 1,250%. Re-securitization positions are either treated under the standardized approach or with a 1,250% risk weight.
The selection of the external credit assessment institutions (ECAIs) is based on the primary rating agency concept. This concept is applied, in principle, to avoid having the credit assessment by one ECAI applied to one or more tranches and by another ECAI to the other tranches, unless this is the result of the application of the specific rules for multiple assessments. If any two of the aforementioned rating agencies have issued a rating for a particular exposure, we apply the lower of the two credit ratings. If all three rating agencies have issued a rating for a particular exposure, we apply the middle of the three credit ratings. As of 31 December 2020, UBS did not use internal ratings for the purpose of the RWA calculation for securitization positions in the banking book. p
Securitization exposures in the banking and trading book
Semi-annual | Due to the current immaterial business volumes and declining trend of total securitization exposures over the past years, we have condensed the following semi-annual Pillar 3 disclosures into one single tabular disclosure on the following page titled ”Securitization exposures in the banking and trading book and regulatory capital requirements” as of the second quarter of 2020:
– ”SEC1 – Securitization exposures in the banking book”;
– ”SEC2 – Securitization exposures in the trading book”;
– ”SEC3 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as originator or as sponsor”; and
– ”SEC4 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as investor.”
The new table outlines the carrying values on the balance sheet in the banking and trading books as of 31 December 2020, 30 June 2020, and 31 December 2019. Additionally, the table provides the market risk RWA from securitization and the capital charge after application of the revised securitization framework caps.
Development of securitization exposures in the second half of 2020
In comparison with 30 June 2020, securitization exposures in the banking book decreased from USD 176 million to USD 148 million, mainly reflecting the amortization of exposure. The securitization exposures in the trading book decreased from USD 334 million to USD 257 million, mainly related to secondary trading in commercial mortgage-backed securities in the Investment Bank. p
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Semi-annual |
| Securitization exposures in the banking and trading book and associated regulatory capital requirements | |||
|---|---|---|---|
| USD million | Carrying Value | RWA | Total Capital Charge after cap |
| 31.12.20 | |||
| Asset Classes – Banking Book^1^ | |||
| Retail | 36 | 246 | 20 |
| Wholesale | 112 | 68 | 5 |
| Re-securitization | 0 | 0 | 0 |
| Total Banking Book | 148 | 314 | 25 |
| Asset Classes – Trading Book | |||
| Retail | 18 | 163 | 13 |
| Wholesale | 224 | 270 | 22 |
| Re-securitization | 14 | 23 | 2 |
| Total Trading Book | 257 | 456 | 37 |
| Total | 405 | 771 | 62 |
| 30.6.20 | |||
| Asset Classes – Banking Book^1^ | |||
| Retail | 78 | 534 | 43 |
| Wholesale | 98 | 64 | 5 |
| Re-securitization | 0 | 0 | 0 |
| Total Banking Book | 176 | 598 | 48 |
| Asset Classes – Trading Book | |||
| Retail | 19 | 180 | 15 |
| Wholesale | 303 | 174 | 14 |
| Re-securitization | 12 | 16 | 1 |
| Total Trading Book | 334 | 370 | 30 |
| Total | 510 | 968 | 78 |
| 31.12.19 | |||
| Asset Classes – Banking Book^1^ | |||
| Retail | 82 | 564 | 45 |
| Wholesale | 106 | 69 | 6 |
| Re-securitization | 0 | 0 | 0 |
| Total Banking Book | 188 | 633 | 51 |
| Asset Classes – Trading Book | |||
| Retail | 23 | 199 | 16 |
| Wholesale | 316 | 201 | 16 |
| Re-securitization | 13 | 19 | 2 |
| Total Trading Book | 352 | 419 | 34 |
| Total | 540 | 1,052 | 85 |
| 1 Of the securitization exposures in the banking book, 76% carry<br> a risk weighting of up to 100% as of 31 December 2020 (30 June 2020: 56%). |
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Section 8 Market risk
Overview
**Semi-annual |**The amount of capital required to underpin market risk in the regulatory trading book is calculated using a variety of methods approved by the Swiss Financial Market Supervisory Authority (FINMA). The components contributing to market risk risk-weighted assets (RWA) are value-at-risk (VaR), stressed value-at-risk (SVaR), an add-on for risks that are potentially not fully modeled in VaR (risks not in VaR, or RniV), the incremental risk charge (IRC) and the securitization framework for securitization positions in the trading book. More information about each of these components is provided on the following pages. p
The table below presents an overview of Pillar 3 disclosures separately provided in our Annual Report 2020.
Annual |
| MRA – Market risk | ||||
|---|---|---|---|---|
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
| Strategies and processes of the bank for market risk | Risk management and control | –<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br>– | Risk appetite framework<br><br> <br>Market risk – Overview of measurement, monitoring and<br><br> <br>management techniques<br><br> <br><br><br> <br>Market risk stress loss, Value-at-risk | 97–100<br><br> <br><br><br> <br>124<br><br> <br><br><br> <br><br><br> <br>125–128 |
| Consolidated financial statements | – | Note 10 Derivative instruments | 320–321 | |
| Structure and organization of the market risk management<br> function | Risk management and control | –<br><br> <br><br><br> <br>– | Key risks, risk measures and performance by business division<br> and Group Functions<br><br> <br>Risk governance | 92<br><br> <br><br><br> <br><br><br> <br>95–96 |
| Scope and nature of risk reporting and measurement systems | Risk management and control | –<br><br> <br><br><br> <br>– | Internal risk reporting<br><br> <br><br><br> <br>Main sources of market risk, Overview of measurement, monitoring<br> and management techniques | 101<br><br> <br><br><br> <br>124 |
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Market risk risk-weighted assets
Market risk RWA development in the fourth quarter of 2020
Quarterly | The three main components that contribute to market risk RWA are VaR, SVaR and IRC. The VaR and SVaR components include the RWA charge for RniV.
The MR2 table on the next page provides a breakdown of the movement in market risk RWA in the fourth quarter of 2020 under an internal models approach across those components, pursuant to the movement categories defined by the Basel Committee on Banking Supervision (the BCBS). These categories are described below. p
Definitions of market risk RWAmovement table components for MR2
References in the table below link to the line numbers provided in the movement table on the next page.
| Reference | Description | Definition |
|---|---|---|
| 1/8c | RWA as of previous and current reporting period end (end of period) | Quarter-end RWA. |
| 1a/8b | Regulatory adjustment | Indicates the difference between rows 1 and 1b, and<br> 8c and 8a, respectively. |
| 1b/8a | RWA at previous and current quarter end (end<br><br> <br>of day) | For<br> a given component (e.g., VaR), this refers to the RWA computed whenever that<br> component’s snapshot quarter-end figure is higher than the 60-day average for<br> regulatory VaR, and the 12-week average for SVaR and IRC, thus determining<br> the quarter-end RWA. The regulatory adjustment would be zero if the<br> quarter-end RWA were triggered by the snapshot quarter-end figure. |
| Movement of end-of-day RWA | ||
| 2 | Movement in risk levels | Movements due to changes in positions and risk<br> levels. |
| 3 | Model updates / changes | Movements due to routine updates to model parameters<br> and model changes. |
| 4 | Methodology and policy | Movements due to methodological changes in<br> calculations driven by regulatory policy changes, including revisions of<br> existing regulations, new regulations and add-ons mandated by the regulator. |
| 5 | Acquisitions and disposals | Movements due to the disposal or acquisition of<br> business operations, quantified based on the market risk exposures at the end<br> of the quarter preceding a disposal or following an acquisition. Purchases<br> and sales of exposures in the ordinary course of business are reflected in “Movements<br> in risk levels.” |
| 6 | Foreign exchange movements | Movements due to changes in exchange rates. Note that<br> the effect of movements in exchange rates is captured in “Movement in risk<br> levels,” since exchange rate movements are part of the effects of market<br> movements on risk levels. |
| 7 | Other | Movements due to changes that cannot be attributed to<br> any other category. |
RWA flow
Quarterly | Market risk RWA increased by USD 1.2 billion to USD 11.4 billion in the fourth quarter of 2020, driven primarily by an increase in asset size and other movements in the Investment Bank’s Global Markets business. This increase in turn was driven by higher stressed VaR (SVaR) levels, due to the portfolio being in the 2019–2020 one-year look-back SVaR window for most of the fourth quarter of 2020. As a result, the SVaR window included COVID-19-period shocks, leading to very high credit shocks being applied against the long credit inventory.
The VaR multiplier remained unchanged compared with the prior quarter, at 3.0. p
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Quarterly |
| MR2: RWA flow statements of<br> market risk exposures under an internal models approach1 | ||||||
|---|---|---|---|---|---|---|
| million | VaR | Stressed VaR | IRC | CRM | Other | Total RWA |
| 1 | 901 | 4,012 | 1,224 | **** | **** | 6,137 |
| 1a | (382) | (2,500) | (2,882) | |||
| 1b | 519 | 1,512 | 1,224 | 3,255 | ||
| 2 | 1,410 | 1,981 | (368) | 3,023 | ||
| 3 | 866 | (723) | 98 | 241 | ||
| 4 | ||||||
| 5 | ||||||
| 6 | ||||||
| 7 | (256) | (217) | (473) | |||
| 8a | 2,539 | 2,552 | 954 | 6,045 | ||
| 8b | 1,247 | 7,052 | 304 | 8,602 | ||
| 8c | 3,786 | 9,604 | 1,258 | **** | **** | 14,647 |
| 1 | 3,786 | 9,604 | 1,258 | **** | **** | 14,647 |
| 1a | (1,247) | (7,052) | (304) | (8,602) | ||
| 1b | 2,539 | 2,552 | 954 | 6,045 | ||
| 2 | (1,604) | (1,110) | 417 | (2,298) | ||
| 3 | 702 | 1,234 | 1,937 | |||
| 4 | (378) | (618) | (995) | |||
| 5 | ||||||
| 6 | ||||||
| 7 | 608 | 880 | 1,488 | |||
| 8a | 1,868 | 2,939 | 1,371 | 6,177 | ||
| 8b | 2,281 | 5,401 | 7,682 | |||
| 8c | 4,149 | 8,339 | 1,371 | **** | **** | 13,859 |
| 1 | 4,149 | 8,339 | 1,371 | **** | **** | 13,859 |
| 1a | (2,281) | (5,401) | (7,682) | |||
| 1b | 1,868 | 2,939 | 1,371 | 6,177 | ||
| 2 | (1,066) | (517) | 208 | (1,374) | ||
| 3 | 33 | 162 | 171 | 366 | ||
| 4 | ||||||
| 5 | ||||||
| 6 | ||||||
| 7 | (288) | (929) | (1,217) | |||
| 8a | 547 | 1,655 | 1,749 | 3,952 | ||
| 8b | 2,253 | 4,027 | 6,280 | |||
| 8c | 2,800 | 5,682 | 1,749 | **** | **** | 10,232 |
| 1 | 2,800 | 5,682 | 1,749 | **** | **** | 10,232 |
| 1a | (2,253) | (4,027) | **** | **** | **** | (6,280) |
| 1b | 547 | 1,655 | 1,749 | **** | **** | 3,952 |
| 2 | 269 | 1,527 | 209 | **** | **** | 2,005 |
| 3 | (18) | (159) | **** | **** | **** | (176) |
| 4 | **** | **** | **** | **** | **** | **** |
| 5 | **** | **** | **** | **** | **** | **** |
| 6 | **** | **** | **** | **** | **** | **** |
| 7 | 39 | 200 | **** | **** | **** | 239 |
| 8a | 838 | 3,223 | 1,958 | **** | **** | 6,019 |
| 8b | 1,332 | 4,034 | **** | **** | **** | 5,366 |
| 8c | 2,170 | 7,257 | 1,958 | **** | **** | 11,385 |
| 1 Components that describe movements in RWA are presented in<br> italics. |
All values are in US Dollars.
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79
UBS Group AG consolidated
Securitization positions in the trading book
Semi-annual |
Our exposure to securitization positions in the trading book includes exposures arising from secondary trading in commercial mortgage-backed securities in the Investment Bank, and limited positions in the Non-core and Legacy Portfolio within Group Functions that we continue to wind down.
Securitization exposures in the trading book is the only relevant disclosure component of market risk under the standardized approach. Our market risk RWA from securitization exposures in the trading book increased from USD 370 million as of 30 June 2020 to USD 456 million as of 31 December 2020. p
› Refer to the “Securitizations” section of this report for moreinformation about the securitization exposures in the trading book
Annual | The table below presents an overview of Pillar 3 disclosures separately provided in our Annual Report 2020. p
Annual |
| MRB – Internal models approach | ||||
|---|---|---|---|---|
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
| Description of activities and risks covered by the VaR models<br> and stressed VaR models | Risk management and control | – | Value-at-risk | 125–128 |
| – | Main sources of market risk | 124 | ||
| VaR models applied by different entities within the Group | Risk management and control | – | Main sources of market risk | 124 |
| – | Value-at-risk | 125–128 | ||
| General description of VaR and stressed VaR models | Risk management and control | – | Value-at-risk | 125–128 |
| Main differences between the VaR and stressed VaR models used<br> for management purposes and for regulatory purposes | Risk management and control | – | Value-at-risk | 125–128 |
| Further information on VaR models | Risk management and control | –<br><br> <br><br><br> <br>–<br><br> <br><br><br> <br><br><br> <br>– | Value-at-risk<br><br> <br><br><br> <br>Market risk stress loss<br><br> <br><br><br> <br>Market risk – Overview of measurement, monitoring and management<br> techniques | 125–128<br><br> <br>125<br><br> <br><br><br> <br>124 |
| Consolidated financial statements | – | Note 21 Fair value measurement | 348–363 | |
| Description of stress testing applied to modeling parameters | Consolidated financial statements | – | Note 21 Fair value measurement | 348–363 |
| Description of backtesting approach | Risk management and control | –<br><br> <br><br><br> <br>– | Backtesting of VaR<br><br> <br><br><br> <br>VaR model confirmation | 127–128<br><br> <br><br><br> <br>128 |
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Regulatory calculation of marketrisk
Semi-annual | The MR3 table below shows minimum, maximum, average and period-end regulatory VaR, SVaR, the IRC and the comprehensive risk capital charge. Since the second quarter of 2019, we have not held eligible correlation trading positions.
During the second half of 2020, 10-day 99% regulatory VaR and SVaR decreased, driven by the Investment Bank’s Global Markets business from less volatile markets observed during the period. p
Semi-annual |
| MR3: IMA values for trading<br> portfolios | |||
|---|---|---|---|
| For the six-month period ended 31.12.20 | For the six-month period ended 30.6.20 | For the six-month period ended 31.12.19 | |
| million | |||
| 1 | 76 | 139 | 78 |
| 2 | 34 | 46 | 19 |
| 3 | 15 | 5 | 0 |
| 4 | 37 | 56 | 16 |
| **** | |||
| 5 | 190 | 261 | 96 |
| 6 | 88 | 100 | 51 |
| 7 | 39 | 36 | 22 |
| 8 | 138 | 86 | 45 |
| **** | |||
| 9 | 158 | 127 | 139 |
| 10 | 126 | 94 | 104 |
| 11 | 100 | 63 | 76 |
| 12 | 157 | 110 | 98 |
| **** | |||
| 13 | **** | ||
| 14 | **** | ||
| 15 | **** | ||
| 16 | **** | ||
| 17 | **** |
All values are in US Dollars.
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81
UBS Group AG consolidated
Value-at-risk
VaR definition
Annual | VaR is a statistical measure of market risk, representing the market risk losses that could potentially be realized over a set time horizon (the holding period) at an established level of confidence. The measure assumes no change in the Group’s trading positions over the set time horizon.
We calculate VaR on a daily basis. The profit or loss distribution from which VaR is derived is generated by our internally developed VaR model. The VaR model simulates returns over the holding period of those risk factors to which our trading positions are sensitive, and subsequently quantifies the profit or loss effect of these risk factor returns on the trading positions. Risk factor returns associated with the risk factor classes of general interest rates, foreign exchange and commodities are based on a pure historical simulation approach, taking into account a five-year look-back window. Risk factor returns for selected issuer-based risk factors, such as equity price and credit spreads, are decomposed into systematic and residual issuer-specific components using a factor model approach. Systematic returns are based on historical simulation, and residual returns are based on a Monte Carlo simulation. The VaR model profit and loss distribution is derived from the sum of the systematic and residual returns in such a way that we consistently capture systematic and residual risk. Correlations among risk factors are implicitly captured via the historical simulation approach. In modeling the risk factor returns, we consider the stationarity properties of the historical time series of risk factor changes. Depending on the stationarity properties of the risk factors within a given risk factor class, we choose to model the risk factor returns using absolute returns or logarithmic returns. The risk factor return distributions are updated on a fortnightly basis.
Although our VaR model does not have full revaluation capability, we source full revaluation grids and sensitivities from our front-office systems, enabling us to capture material non-linear profit or loss effects.
We use a single VaR model for both internal management purposes and determining market risk RWA, although we consider different confidence levels and time horizons. For internal management purposes, we establish risk limits and measure exposures using VaR at the 95% confidence level with a one-day holding period, aligned to the way we consider the risks associated with our trading activities. The regulatory measure of market risk used to underpin the market risk capital requirement under Basel III requires a measure equivalent to a 99% confidence level using a 10-day holding period. In the calculation of a 10-day holding period VaR, we employ 10-day risk factor returns, whereby all observations are equally weighted.
Additionally, the population of the portfolio within management and regulatory VaR is slightly different. The population within regulatory VaR meets regulatory requirements for inclusion in regulatory VaR. Management VaR includes a broader population of positions: for example, regulatory VaR excludes the credit spread risks from the securitization portfolio, which are treated instead under the securitization approach for regulatory purposes.
We also use SVaR for the calculation of regulatory capital. SVaR adopts broadly the same methodology as regulatory VaR and is calculated using the same population, holding period (10-day) and confidence level (99%). However, unlike regulatory VaR, the historical data set for SVaR is not limited to five years, but spans the time period from 1 January 2007 to present. In deriving SVaR, we search for the largest 10-day holding period VaR for the current portfolio of the Group across all one-year look-back windows that fall into the interval from 1 January 2007 to present. SVaR is computed weekly. p
Derivation of VaR- and SVaR-based RWA
Annual | VaR and SVaR are used to derive the VaR and SVaR components of the market risk Basel III RWA. This calculation takes the maximum of the respective period-end VaR measure and the product of the average VaR measure for the 60 trading days immediately preceding the period end and a VaR multiplier set by FINMA. The VaR multiplier, which was 3.0 as of 31 December 2020, is dependent upon the number of VaR backtesting exceptions within a 250-business-day window. When the number of exceptions is greater than four, the multiplier increases gradually from three to a maximum of four if 10 or more backtesting exceptions occur. This is then multiplied by a risk weight factor of 1,250% to determine RWA. This calculation is set out in the table below.
In the second quarter of 2020, a temporary model multiplier of 1.3 introduced by FINMA in 2016 was removed. p
Annual |
| Calculation of VaR- and SVaR-based RWA as of 31 December 2020 | ||||||
|---|---|---|---|---|---|---|
| USD million | Period-end VaR<br><br> <br>(A) | 60-day average VaR<br><br> <br>(B) | VaR multiplier<br><br> <br>(C) | Max. (A, B x C)<br><br> <br>(D) | Risk weight factor<br><br> <br>(E) | Basel III RWA<br><br> <br>(D x E) |
| VaR (10-day 99%) | 37 | 32 | 3.00 | 97 | 1,250% | 1,209 |
| Stressed VaR (10-day 99%) | 138 | 106 | 3.00 | 319 | 1,250% | 3,990 |
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MR4:Comparison of VaR estimates with gains/losses
Semi-annual | VaR backtesting is a performance measurement process in which the 1-day VaR prediction is compared with the realized 1-day profit or loss (P&L). We compute backtesting VaR using a 99% confidence level and one-day holding period for the population included within regulatory VaR. Since 99% VaR at UBS is defined as a risk measure that operates on the lower tail of the P&L distribution, 99% backtesting VaR is a negative number. Backtesting revenues exclude non-trading revenues, such as valuation reserves, fees and commissions, and revenues from intraday trading, so as to provide a like-for-like comparison. A backtesting exception occurs when backtesting revenues are lower than the previous day’s backtesting VaR.
Statistically, given the confidence level of 99%, two or three backtesting exceptions per year can be expected. More than four exceptions could indicate that the VaR model is not performing appropriately, as could too few exceptions over a prolonged period of time. However, as noted under “VaR limitations” in the “Risk management and control” section of our Annual Report 2020, a sudden increase or decrease in market volatility relative to the five-year window could lead to a higher or lower number of exceptions, respectively. Accordingly, Group-level backtesting exceptions are investigated, as are exceptional positive backtesting revenues, with results being reported to senior business management, the Group Chief Risk Officer and the Group Chief Market & Treasury Risk Officer. Backtesting exceptions are also reported to internal and external auditors and to the relevant regulators.
The “Group: development of regulatory backtesting revenues and actual trading revenues against backtesting VaR” chart below shows the 12-month development of backtesting VaR against the Group’s backtesting revenues and actual trading revenues for 2020. The chart shows both the 99% and the 1% backtesting VaR. The asymmetry between the negative and positive tails is a result of the long gamma risk profile that has been run historically in the Investment Bank.
The actual trading revenues include, in addition to backtesting revenues, intraday revenues.
There were no new Group VaR backtesting exceptions in the second half of 2020. The total number of backtesting exceptions within the most recent 250-business-day window remained at 3. Correspondingly, the FINMA VaR multiplier used to compute regulatory and stressed VaR RWA remained unchanged at 3 throughout the period. FINMA’s freeze on backtesting exceptions did not affect this multiplier. p
Semi-annual |
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UBS Group AG consolidated
Risks notin VaR
Risks not in VaR definition
Annual | We have a framework to identify and quantify potential risks that are not entirely captured by our VaR model. We refer to these as risks not in VaR (RniV). This framework is used to underpin these potential risks with regulatory capital, calculated as a multiple of VaR and SVaR.
Our VaR model can be split into two components: the P&L representation and the risk factor model. This gives rise to two RniV categories: P&L representation RniV and risk factor RniV. P&L representation RniV arise from approximations made by the VaR model to quantify the effect of risk factor changes on the profit and loss of positions and portfolios. Risk factor RniV originate from an inadequate modeling of the stochastic behavior of the risk factors. p
Risks not in VaR quantification
Annual | The RniV quantification is conducted on the basis of a quantitative approach that was developed within the Risk Methodology department and that has been approved by FINMA. We quantify RniV on a monthly basis. The framework applies to both categories of RniV: P&L representation RniV and risk factor RniV. p
Risks not in VaR mitigation
Annual | Material RniV items are monitored and controlled by means and measures other than VaR, such as position limits and stress limits. Additionally, there are ongoing initiatives to extend the VaR model to better capture these risks. p
Derivation of RWA add-on for risks not in VaR
Annual |
The RniV framework is used to derive the RniV-based component of the market risk Basel III RWA, using the aforementioned approach, which is approved by FINMA and is subject to recalibration at least once a quarter. As RWA from RniV are add-ons, they do not reflect any diversification benefits across risks capitalized through VaR and SVaR.
The RniV VaR and SVaR capital ratios applicable as of 31 December 2020 were 80% and 82%, respectively.
FINMA continues to require that RniV stressed VaR capital is floored at RniV VaR capital. p
Annual |
| Calculation of RniV-based RWA as of 31 December 2020 | |||
|---|---|---|---|
| USD million | Period-end RWA<br><br> <br>(A) | RniV add-on<br><br> <br>(B) | RniV RWA<br><br> <br>(A x B) |
| Regulatory VaR | 1,209 | 80% | 961 |
| Stressed VaR | 3,990 | 82% | 3,267 |
| Total RniV RWA | 4,228 |
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Incremental riskcharge
Annual | Incremental risk charge (IRC) is the potential loss due to the defaulting or credit migration of issuers of non-securitized credit instruments in the trading book. IRC is calculated as the portfolio loss at the 99.9th percentile of the portfolio loss distribution over a one-year time horizon. It uses a multi-factor model applying the constant position assumption for all positions in the IRC portfolio. This means that all positions are kept unchanged over a one-year time period.
The portfolio loss distribution is estimated using a Monte Carlo simulation approach. The simulation is performed in two steps: first, the distribution of credit ratings (including the defaulted state) at the one-year time horizon is estimated by a portfolio rating migration model; and, second, default and migration losses conditional on credit events generated by the migration model are calculated and aggregated.
The portfolio rating migration model is of the Merton type: migrations of credit ratings are considered to be functions of the underlying asset value of a firm. The correlation structure of asset values is based on the FIS APT factor model, with factor loadings and volatilities homogenized within region / industry / size buckets. For the government bucket, a conservative expert-based correlation value is used. The transition matrix approach is utilized to set migration and default thresholds. The transition matrix for sovereign obligors is calibrated to the history of S&P sovereign ratings. The transition matrix for non-sovereigns is calibrated to the history of UBS internal ratings.
For each position related to a defaulted obligor, default losses are calculated based on the maximum default exposure measure (the loss in the case of a default event assuming zero recovery) and a random recovery concept. To account for potential basis risk between instruments, different recovery values may be generated for different instruments even if they belong to the same issuer. To calculate rating migration losses, a linear (delta) approximation is used. A loss resulting from a migration event is calculated as a change in the average credit spread due to the rating change, multiplied by the corresponding sensitivity of a position to changes in credit spreads.
The validation of the IRC model relies heavily on sensitivity analyses embedded into the annual model reconfirmation. p
Derivation of IRC-based RWA
Annual | IRC is calculated weekly and the results are used to derive the IRC-based component of the market risk Basel III RWA. The derivation is similar to that for VaR- and SVaR-based RWA, but without a VaR multiplier, and is shown below. p
Annual |
| Calculation of IRC-based RWA as<br> of 31 December 2020 | ||||
|---|---|---|---|---|
| Average of last<br><br> <br>12 weeks IRC<br><br> <br>(B) | Max (A, B)<br><br> <br>(C) | Risk weight factor<br><br> <br>(D) | Basel III RWA<br><br> <br>(C x D) | |
| million | ||||
| 133 | 157 | 1,250% | 1,958 |
All values are in US Dollars.
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UBS Group AG consolidated
Comprehensive risk measure
Annual | The comprehensive risk measure (the CRM) is an estimate of the default and complex price risk, including the convexity and cross-convexity of the CRM portfolio across credit spread, correlation and recovery, measured over a one-year time horizon at a 99.9% confidence level. The calculation assumes a static portfolio with trade aging, a modeling choice consistent with the portfolio being hedged in a back-to-back manner. The model scope covers collateralized debt obligation (CDO) swaps, credit-linked notes (CLNs), 1st- and nth-to-default swaps and CLNs and hedges for these positions, including single-name credit default swaps (CDSs), CLNs and index CDSs.
The CRM profit and loss distribution is estimated using a Monte Carlo simulation of defaults, loss given default (LGD)
rates and market data changes over the next 12 months, where spreads follow their own stochastic processes and are correlated to defaults. The risk engine loads the definition of all trades and, for each Monte Carlo scenario, generates the trade cash flows over the next 12 months and revalues the trades on the horizon date. The revaluation relies on sampled FX rates, credit spreads and index bases and introduces a correlation skew by using stochastic correlations and stochastic LGD rates. The correlation skew is calibrated at irregular intervals. The 99.9% negative quantile of the resulting profit and loss distribution is then taken to be the CRM result. Our CRM methodology is subject to minimum qualitative standards.
Since the second quarter of 2019, we have not held eligible correlation trading positions and therefore the CRM-based capital requirement has not been applicable to us. p
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Section 9 Operational risk
Annual | The table below presents an overview of Pillar 3 disclosures separately provided in our Annual Report 2020, available under ”Annual reporting” at ubs.com/investors. p
Annual |
| ORA: Operational risk | ||||
|---|---|---|---|---|
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
| Details of the approach for operational risk capital assessment<br> for which the bank qualifies | Risk management and control | – | Operational risk framework | 140 |
| Description of the advanced measurement approaches (AMA) for<br> operational risk | Risk management and control | – | Advanced measurement approach model | 141 |
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UBS Group AG consolidated
Section 10 Interest rate risk in thebanking book
Annual | The disclosures in this section take into account Swiss Financial Market Supervisory Authority (FINMA) Circular 2019/2, which sets out minimum standards for measuring, managing, monitoring and controlling interest rate risks in the banking book. p
Annual |
| Interest rate risk in the banking book | ||||
|---|---|---|---|---|
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
| The nature of interest rate risk in the banking book and key<br> assumptions applied | Risk management and control | – | Interest rate risk in the banking book | 128–131 |
p
Annual | Sources of interest rate risk in the banking book
Interest rate risk in the banking book (IRRBB) arises from balance sheet positions such as Loans and advances to banks, Loans and advances to customers, Financial assets at fair value not held for trading, Financial assetsmeasured at amortized cost, Customer deposits, Debt issuedmeasured at amortized cost, and derivatives, including those used for cash flow hedge accounting purposes. Fair value changes to these positions may affect other comprehensive income (OCI) or the income statement, depending on their accounting treatment.
Our largest banking book interest rate exposures arise from customer deposits and lending products in Global Wealth Management and Personal & Corporate Banking. The inherent interest rate risks are generally transferred from Global Wealth Management and Personal & Corporate Banking to Group Treasury, to be managed centrally. This allows for the netting of interest rate risks across different sources, while leaving the originating businesses with commercial margin and volume management. The residual interest rate risk is mainly hedged with interest rate swaps, to the vast majority of which we apply hedge accounting. Short-term exposures and high-quality liquid assets classified as financial assets at fair value not held for trading are hedged with derivatives accounted for on a mark-to-market basis. Long-term fixed-rate debt issued is hedged with interest rate swaps designated in fair value hedge accounting relationships.
Risk management and governance
IRRBB is measured using a number of metrics, the most relevant of which are the following.
– Interest rate sensitivities to parallel shifts in yield curves, calculated as changes in the present value of future cash flows irrespective of accounting treatment. These are also the key risk factors for statistical and stress-based measures, such as value-at-risk and stress scenarios (including economic value of equity (EVE) sensitivity), and are measured and reported daily. EVE sensitivity is the exposure arising from the most adverse regulatory interest rate scenario after netting across currencies. In addition to the regulatory measure, we apply an internal EVE sensitivity metric that includes equity, goodwill, real estate and additional tier 1 (AT1) capital instruments.
– Net interest income (NII) sensitivity assesses the change in NII over a set time horizon compared with the baseline NII, which we internally calculate by assuming that interest rates in all currencies develop according to their market-implied forward rates and assuming constant business volumes and no specific management actions. The internal NII sensitivity, which includes the contribution from cash held at central banks, unlike the Pillar 3 disclosure requirements, is measured and reported monthly.
We actively manage IRRBB, aiming to reduce the volatility of NII, while keeping the EVE sensitivity within set internal risk limits.
EVE and NII sensitivity are monitored against limits and triggers, both at consolidated and at significant legal entity levels. We also assess the sensitivity of EVE and NII under stressed market conditions, by applying a suite of parallel and non-parallel interest rate scenarios, as well as specific economic scenarios.
The Interest Rate Risk in the Banking Book Strategy Committee, which is a sub-committee of the Group Asset and Liability Committee (ALCO), and, where relevant, ALCOs at a legal entity level, perform independent oversight over the management of IRRBB. IRRBB is also subject to Group Internal Audit and model governance.
Key modeling assumptions
The cash flows from customer deposits and lending products used in the calculation of EVE sensitivity exclude commercial margins and other spread components and are aggregated by daily time-buckets, and are discounted using risk-free rates. Our external issuances are discounted using UBS’s senior debt curve, and capital instruments are modeled to the first call date. NII sensitivity, which includes commercial margins, is calculated over a one-year time horizon, assuming constant balance sheet structure and volumes, and considers the flooring effect of embedded interest rate options.
The average repricing maturity of non-maturing deposits and loans is determined via replication portfolio strategies that are designed to protect product margin. Optimal replicating portfolios are determined at a granular currency- and product-specific level by simulating and applying a real-world market rate model to historically calibrated client rate and volume models.
88
We use an econometric prepayment model to forecast prepayment rates on US mortgage loans in UBS Bank USA and agency mortgage-backed securities (MBSs) held in various liquidity portfolios of UBS Americas Holding LLC consolidated. These prepayment rates are used to forecast both mortgage loan and MBS balances under various macroeconomic scenarios. The prepayment model is used for a variety of purposes, including risk management and regulatory stress testing. Mortgages in Switzerland and fixed-term deposits generally do not carry similar optionality, due to prepayment and early redemption penalties.
Economic value and net interest income sensitivity
The interest rate risk sensitivity figures presented in the IRRBB1 table below represent the effect of six interest rate scenarios defined by FINMA on the theoretical present value of the banking book, as well as the effect of the two parallel shock scenarios on the net interest income of the banking book. EVE sensitivity excludes equity, goodwill, real estate and additional tier 1 (AT1) capital instruments.
As of 31 December 2020, the most adverse of the six FINMA interest rate scenarios with regard to EVE was the “Parallel up” scenario, resulting in a change of the economic value of equity of negative USD 5.6 billion, representing a pro forma reduction of 10.0% of tier 1 capital, which is well below the regulatory outlier test of 15% of tier 1 capital. The immediate effect of the “Parallel up” scenario on tier 1 capital as of 31 December 2020 would be a reduction of 1.2%, or USD 0.7 billion, arising from the part of our banking book that is measured at fair value through profit or loss and from the financial assets measured at fair value through other comprehensive income. This scenario would, however, have a positive effect on net interest income.
The more adverse of the two parallel interest rate scenarios with regard to NII over the next 12 months was the “Parallel up” scenario, resulting in a potential change of negative USD 0.4 billion. This excludes the contribution from cash held at central banks as per FINMA Pillar 3 disclosure requirements. With the inclusion of the cash held at central banks, the NII would increase by USD 1.2 billion under the “Parallel up” scenario. p
Annual |
| IRRBB1: Quantitative information about IRRBB | ||||
|---|---|---|---|---|
| As of 31.12.20 | Delta EVE – Change of economic value of equity | Delta NII – Change of Net interest income^1^ | ||
| USD million | 31.12.20 | 31.12.19 | 31.12.20 | 31.12.19 |
| Parallel up^2^ | (5,605) | (5,003) | (364) | (608) |
| Parallel down^2^ | 4,957 | 4,316 | 1,128 | 48 |
| Steepener^3^ | (849) | (816) | **** | |
| Flattener^4^ | (394) | (337) | **** | |
| Short-term up^5^ | (2,333) | (2,166) | **** | |
| Short-term down^6^ | 2,435 | 2,292 | **** | |
| Maximum^7^ | (5,605) | (5,003) | (364) | (608) |
| Period | 31.12.20 | 31.12.19 | ||
| Tier 1 capital | 56,178 | 51,888 | ||
| 1 Disclosure of the NII sensitivity is only required for the two<br> parallel shock scenarios. The NII sensitivity estimates reflect the impact of<br> immediate changes in interest rates, relative to constant rates, and assume<br> no change to balance sheet size and structure, constant foreign exchange<br> rates and no specific management action. Furthermore, the change in NII does<br> not include the contribution from cash held at central banks. 2 Rates<br> across all tenors move by ±150 bps for Swiss franc, ±200 bps for euro and US<br> dollar and ±250 bps for pound sterling. 3 Short-term rates decrease and<br> long-term rates increase. 4 Short-term rates increase and long-term rates<br> decrease. 5 Short-term rates increase more than long-term rates. 6<br> Short-term rates decrease more than long-term rates. 7 “Maximum” indicates<br> the most adverse interest rate scenario as shown in the table. |
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UBS Group AG consolidated
Annual |
| IRRBBA1: Quantitative disclosures<br> relating to the position structure and interest rate reset of IRRBB risk | ||||||||
|---|---|---|---|---|---|---|---|---|
| As of 31.12.20 | Volume^1^ | Average interest rate repricing period (in years) | Maximum interest rate repricing period (in years) for exposures with modeled interest rate repricing dates | |||||
| million, except where<br> indicated | Total | of which: CHF | of which: EUR | of which: USD | Total | of which: CHF | Total | of which: CHF |
| Determined <br> repricing period2 | 12,565 | 4,593 | 4,951 | 2,979 | 0.70 | 0.96 | **** | **** |
| 193,630 | 39,208 | 25,507 | 99,499 | 0.81 | 1.52 | **** | **** | |
| 37,291 | 37,291 | **** | **** | 0.14 | 0.14 | **** | **** | |
| 104,925 | 103,394 | 61 | 338 | 3.90 | 3.94 | **** | **** | |
| 64,759 | 4,207 | 10,834 | 38,900 | 2.91 | 4.22 | **** | **** | |
| 179,547 | 0 | 20,326 | 108,515 | 0.14 | 0.05 | **** | **** | |
| 702,621 | 109,014 | 122,322 | 383,237 | 1.18 | 0.89 | **** | **** | |
| (6,541) | (3,105) | 0 | (3,433) | 1.70 | 1.74 | **** | **** | |
| (35,888) | (150) | (3,409) | (20,782) | 0.44 | 1.14 | **** | **** | |
| (64) | (64) | 0 | **** | 1.24 | 2.70 | **** | **** | |
| (138,241) | (11,780) | (38,745) | (71,970) | 2.29 | 4.49 | **** | **** | |
| (85,004) | (37) | (13,148) | (37,414) | 0.07 | 0.01 | **** | **** | |
| (704,432) | (161,981) | (107,385) | (328,395) | 0.67 | 0.94 | **** | **** | |
| Undetermined <br> repricing period3 | **** | **** | **** | **** | **** | **** | **** | **** |
| 20,601 | 1,894 | 3,291 | 13,900 | 1.36 | 0.93 | **** | **** | |
| 21,425 | 1,587 | **** | 16,541 | 2.95 | 1.26 | **** | **** | |
| 310 | 310 | **** | **** | 1.47 | 1.47 | **** | **** | |
| (333,271) | (80,631) | (50,458) | (174,463) | 1.16 | 1.54 | **** | **** | |
| (27,581) | (9,415) | (3,774) | (13,081) | 0.08 | 0.03 | **** | **** | |
| (127,039) | (127,039) | **** | 0 | 2.05 | 2.05 | **** | **** | |
| 530,228 | 220,877 | 57,522 | 217,984 | 1.05 | 1.72 | 10 | 10 | |
| 1 The volume figures cover only banking book positions and are<br> risk-based measures which differ from the accounting values on the IFRS<br> balance sheet. 2 Receivables and payables from securities financing<br> transactions are reported on a gross basis, consistent with our interest rate<br> risk management and monitoring process. Subordinated liabilities are<br> excluded. 3 Swiss franc variable-rate mortgages and balances associated to<br> loans and advances to banks with a combined volume below 1 billion are<br> reported under Loans and advances to customers, consistent with our interest<br> rate risk management and monitoring process. |
All values are in US Dollars.
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Annual |
| IRRBBA1: Quantitative disclosures<br> relating to the position structure and interest rate reset of IRRBB risk | ||||||||
|---|---|---|---|---|---|---|---|---|
| As of 31.12.19 | Volume^1^ | Average interest rate repricing period (in years) | Maximum interest rate repricing period (in years) for exposures<br> with modeled interest rate repricing dates | |||||
| million, except where<br> indicated | Total | of which: CHF | of which: EUR | of which: USD | Total | of which: CHF | Total | of which: CHF |
| Determined <br> repricing period 2 | 11,913 | 4,969 | 3,705 | 3,199 | 0.73 | 0.94 | ||
| 145,829 | 36,282 | 12,071 | 79,396 | 0.73 | 1.48 | |||
| 41,311 | 41,311 | 0.14 | 0.14 | |||||
| 84,164 | 84,164 | 4.11 | 4.11 | |||||
| 47,022 | 1,182 | 5,259 | 32,279 | 1.73 | 3.15 | |||
| 182,792 | 0 | 14,691 | 125,810 | 0.11 | 0.09 | |||
| 635,141 | 86,494 | 107,881 | 356,096 | 1.26 | 1.12 | |||
| (4,752) | (3,388) | 0 | (1,201) | 1.12 | 1.13 | |||
| (52,106) | (130) | (354) | (41,316) | 0.39 | 1.55 | |||
| (88) | (88) | 0 | 1.27 | 2.57 | ||||
| (87,075) | (9,854) | (22,935) | (46,310) | 2.27 | 4.77 | |||
| (84,427) | 0 | (12,054) | (48,968) | 0.06 | 0.01 | |||
| (635,931) | (109,901) | (79,752) | (335,227) | 0.64 | 0.90 | |||
| Undetermined <br> repricing period3 | ||||||||
| 19,202 | 1,997 | 2,785 | 12,843 | 1.34 | 0.88 | |||
| 19,817 | 16,383 | 2.98 | ||||||
| 2,105 | 2,105 | 1.32 | 1.32 | |||||
| (277,888) | (90,043) | (52,891) | (113,900) | 1.19 | 1.23 | |||
| (109,018) | (109,018) | 2.23 | 2.23 | |||||
| 428,030 | 203,163 | 55,677 | 143,125 | 1.14 | 1.72 | 10 | 10 | |
| 1 The volume figures cover only banking book positions and are<br> risk-based measures which differ from the accounting values on the IFRS<br> balance sheet. 2 Receivables and payables from securities financing<br> transactions are reported on a gross basis, consistent with our interest rate<br> risk management and monitoring process. Subordinated liabilities are<br> excluded. 3 Swiss franc variable-rate mortgages and balances associated to<br> loans and advances to banks with a combined volume below 1 billion are<br> reported under Loans and advances to customers, consistent with our interest<br> rate risk management and monitoring process. |
All values are in US Dollars.
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91
UBS Group AG consolidated
Section 11 Going and gone concernrequirements and eligible capital
Quarterly | The table below provides details of the Swiss systemically relevant bank (SRB) going and gone concern capital requirements as required by the Swiss Financial Market Supervisory Authority (FINMA); however, it does not reflect the effects of the temporary exemption granted by FINMA on 25 March 2020 in connection with COVID-19 that applied until 1 January 2021, which permitted the exclusion of central bank sight deposits from the going concern leverage ratio calculation. The respective effect is presented on the next page. More information about capital management is provided in the “Capital, liquidity and funding, and balance sheet” section of our Annual Report 2020, available under ”Annual reporting” at ubs.com/investors. p
Quarterly |
| Swiss SRB going and gone concern requirements and information | ||||
|---|---|---|---|---|
| As of 31.12.20 | RWA | LRD^1^ | ||
| USD million, except where indicated | in % | **** | in % | **** |
| Required going concern capital | **** | **** | **** | **** |
| Total going concern capital | 13.96^2^ | 40,345 | 4.88^2^ | 50,561 |
| Common equity tier 1 capital | 9.66 | 27,914 | 3.38 | 35,004 |
| of which: minimum capital | 4.50 | 13,010 | 1.50 | 15,557 |
| of which: buffer capital | 5.14 | 14,860 | 1.88 | 19,447 |
| of which: countercyclical buffer | 0.02 | 45 | ||
| Maximum additional tier 1 capital | 4.30 | 12,431 | 1.50 | 15,557 |
| of which: additional tier 1 capital | 3.50 | 10,119 | 1.50 | 15,557 |
| of which: additional tier 1 buffer capital | 0.80 | 2,313 | ||
| Eligible going concern capital | **** | **** | **** | **** |
| Total going concern capital | 19.43 | 56,178 | 5.42 | 56,178 |
| Common equity tier 1 capital | 13.80 | 39,890 | 3.85 | 39,890 |
| Total loss-absorbing additional tier 1 capital^3^ | 5.63 | 16,288 | 1.57 | 16,288 |
| of which: high-trigger loss-absorbing additional tier 1 capital | 4.74 | 13,711 | 1.32 | 13,711 |
| of which: low-trigger loss-absorbing additional tier 1 capital | 0.89 | 2,577 | 0.25 | 2,577 |
| Required gone concern capital^4^ | **** | **** | **** | **** |
| Total gone concern loss-absorbing capacity^5^ | 10.16 | 29,367 | 3.64 | 37,724 |
| of which: base requirement | 12.86 | 37,178 | 4.50 | 46,672 |
| of which: additional requirement for market share and LRD | 1.08 | 3,122 | 0.38 | 3,889 |
| of which: applicable reduction on requirements | (3.78) | (10,933) | (1.24) | (12,838) |
| of which: rebate granted (equivalent to 47.5% of maximum rebate) | (2.54) | (7,333) | (0.89) | (9,237) |
| of which: reduction for usage of low-trigger tier 2 capital instruments | (1.25) | (3,600) | (0.35) | (3,600) |
| Eligible gone concern capital | **** | **** | **** | **** |
| Total gone concern loss-absorbing capacity | 15.75 | 45,545 | 4.39 | 45,545 |
| Total tier 2 capital | 2.68 | 7,744 | 0.75 | 7,744 |
| of which: low-trigger loss-absorbing tier 2 capital | 2.49 | 7,201 | 0.69 | 7,201 |
| of which: non-Basel III-compliant tier 2 capital | 0.19 | 543 | 0.05 | 543 |
| TLAC-eligible senior unsecured debt | 13.08 | 37,801 | 3.64 | 37,801 |
| Total loss-absorbing capacity | **** | **** | **** | **** |
| Required total loss-absorbing capacity | 24.11 | 69,713 | 8.51 | 88,285 |
| Eligible total loss-absorbing capacity | 35.19 | 101,722 | 9.81 | 101,722 |
| Risk-weighted assets / leverage ratio denominator | ||||
| Risk-weighted assets | 289,101 | |||
| Leverage ratio denominator^1^ | 1,037,150 | |||
| 1 LRD-based requirements and the LRD presented in this table do<br> not reflect the effects of the temporary exemption that has been granted by<br> FINMA in connection with COVID-19. Refer to the “Introduction and basis for<br> preparation” section of this report and to the COVID-19-related information<br> in this section for more information. 2 Includes applicable add-ons<br> of 1.08% for RWA and 0.375% for LRD. 3 Includes outstanding<br> low-trigger loss-absorbing additional tier 1 (AT1) capital instruments, which<br> are available under the Swiss SRB framework to meet the going concern<br> requirements until their first call date. As of their first call date, these<br> instruments are eligible to meet the gone concern requirements. 4 From 1<br> January 2020 onward, a maximum of 25% of the gone<br> concern requirements can be met with instruments that have a<br> remaining maturity of between one and two years. Once at least 75% of the<br> minimum gone concern requirement has been met with instruments that have a<br> remaining maturity of greater than two years, all instruments that have a<br> remaining maturity of between one and two years remain eligible to be<br> included in the total gone concern capital. 5 The gone concern requirement<br> after the application of the rebate for resolvability measures and the<br> reduction for the use of higher quality capital instruments is floored at<br> 8.6% and 3% for the RWA- and LRD-based requirements, respectively. This means<br> that the combined reduction may not exceed 5.34 percentage points for the<br> RWA-based requirement of 13.94% and 1.875 percentage points for the LRD-based<br> requirement of 4.875%. |
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92
Application of the temporary COVID-19-related FINMA exemption ofcentral bank sight deposits
In line with the FINMA exemption rules that applied until 1 January 2021, the eligible leverage ratio denominator (LRD) relief applicable to UBS is reduced by the going concern LRD equivalent of the capital distribution that UBS made for the 2019 financial year.
The table below summarizes the effects on our Swiss SRB going concern capital requirements and information. The FINMA exemption rules had no effect on our Swiss SRB gone concern capital requirements and ratios.
Outside of this section, for simplicity and due to the short-term nature of the FINMA exemption, we have chosen to present LRD excluding the temporary FINMA exemption.
The LRD reflecting the aforementioned temporary FINMA exemption under Basel Committee on Banking Supervision (BCBS) rules is identical to the Swiss SRB number presented in the table below. The BCBS Basel III leverage ratio was 5.95% after the temporary FINMA exemption was reflected.
Quarterly |
| Swiss SRB going concern requirements<br> and information including temporary FINMA exemption | |
|---|---|
| As of 31.12.20 | |
| million, except where<br> indicated | **** |
| Leverage ratio denominator<br> before temporary exemption | 1,037,150 |
| Effective relief | (92,827) |
| of which: central bank sight<br> deposits eligible for relief | (146,308) |
| of which: reduction of relief<br> due to paid dividend distribution1 | 53,481 |
| Leverage ratio denominator<br> after temporary exemption | 944,323 |
| Required going concern<br> capital | **** |
| Total going concern capital | 46,036 |
| Common equity tier 1 capital | 31,871 |
| Eligible going concern<br> capital | **** |
| Total going concern capital | 56,178 |
| Common equity tier 1 capital | 39,890 |
| 1 Represents the leverage ratio denominator equivalent to a<br> 4.875% going concern leverage ratio requirement applied to the 2019 paid<br> dividend of 2,607 million ( 0.365 per share, paid on 7 May 2020 and 27<br> November 2020). |
All values are in US Dollars.
p
Semi-annual | The CCyB1 table below provides details of the underlying exposures and risk-weighted assets (RWA) used in the computation of the countercyclical buffer requirement applicable to UBS Group AG consolidated. Further information about the methodology of geographical allocation used is provided on page 133 of our Annual Report 2020, available under ”Annual reporting” at ubs.com/investors.
There were no changes in the countercyclical buffer requirement during the second half of 2020. p
Semi-annual |
| CCyB1: Geographical distribution<br> of credit exposures used in the countercyclical capital buffer | ||||
|---|---|---|---|---|
| million, except where<br> indicated | ||||
| Geographical breakdown | Exposure values and / or risk-weighted assets used in the<br> computation of the countercyclical capital buffer | Bank-specific countercyclical capital buffer rate, % | Countercyclical amount | |
| Exposure values^1^ | Risk-weighted assets | |||
| Hong Kong | 8,168 | 1,949 | **** | **** |
| Luxembourg | 19,396 | 3,747 | **** | **** |
| Sum | 27,564 | 5,695 | **** | **** |
| Total | 621,855 | 186,261 | 0.02 | 45 |
| 1 Includes private sector exposures in the countries that are<br> Basel Committee on Banking Supervision member jurisdictions under categories<br> “Credit risk,” “Counterparty credit risk,” “Equity positions in the banking<br> book,” “Settlement risk,” “Securitization exposures in the banking book” and<br> “Amounts below thresholds for deduction.” 2 The countercyclical buffer for<br> Luxembourg will increase from 0.25% to 0.50%, effective from 1 January 2021. |
All values are in US Dollars.
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93
UBS Group AG consolidated
Semi-annual | The CC2 table below and on the following page provides a reconciliation of the IFRS balance sheet to the balance sheet according to the regulatory scope of consolidation as defined by the BCBS and FINMA. Lines in the balance sheet under the regulatory scope of consolidation are expanded and referenced where relevant to display all components that are used in the “CC1: Composition of regulatory capital” table. Refer to the “Linkage between financial statements and regulatory exposures” section of this report for more information about the most significant entities consolidated under IFRS but not included in the regulatory scope of consolidation. p
Semi-annual |
| CC2: Reconciliation of accounting<br> balance sheet to balance sheet under the regulatory scope of consolidation | ||||
|---|---|---|---|---|
| As of 31.12.20 | Effect of deconsolidated entities for regulatory consolidation | Effect of additional consolidated entities for regulatory consolidation | Balance sheet in accordance with regulatory scope of consolidation | Ref^1^ |
| million | **** | **** | ||
| Assets | **** | **** | ||
| Cash and balances at central banks | 0 | 158,231 | ||
| Loans and advances to banks | (263) | 15,181 | ||
| Receivables from securities financing transactions | 74,210 | |||
| Cash collateral receivables on derivative instruments | 32,737 | |||
| Loans and advances to customers | 44 | 379,573 | ||
| Other financial assets measured at amortized cost | (235) | 26,959 | ||
| Total financial assets<br> measured at amortized cost | (454) | **** | 686,890 | **** |
| Financial assets at fair value held for trading | (42) | 125,355 | ||
| of which: assets pledged as<br> collateral that may be sold or repledged by counterparties | **** | 47,098 | ||
| Derivative financial instruments | 16 | 159,633 | ||
| Brokerage receivables | **** | 24,659 | ||
| Financial assets at fair value not held for trading | (20,734) | 59,630 | ||
| Total financial assets<br> measured at fair value through profit or loss | (20,760) | **** | 369,277 | **** |
| Financial assets measured at<br> fair value through other comprehensive income | 0 | **** | 8,258 | **** |
| Investments in associates | 96 | 1,652 | ||
| of which: goodwill2 | **** | 414 | 4 | |
| Property, equipment and software | (43) | 13,065 | **** | |
| Goodwill and intangible assets | **** | 6,480 | **** | |
| of which: goodwill | **** | 6,182 | 4 | |
| of which: intangible assets | **** | 298 | 5 | |
| Deferred tax assets | 0 | 9,212 | **** | |
| of which: deferred tax assets<br> recognized for tax loss carry-forwards | **** | 5,393 | 6 | |
| of which: deferred tax assets<br> on temporary differences | 0 | 3,819 | 10 | |
| Other non-financial assets | (4) | 9,764 | **** | |
| of which: net defined benefit<br> pension and other post-employment assets | 42 | 8 | ||
| Total assets | (21,166) | **** | 1,104,599 |
All values are in US Dollars.
94
CC2:Reconciliation of accounting balance sheet to balance sheet under theregulatory scope of consolidation (continued)
| As of 31.12.20 | Effect of deconsolidated entities for regulatory consolidation | Effect of additional consolidated entities for regulatory consolidation | Balance sheet in accordance with regulatory scope of consolidation | Ref^1^ |
|---|---|---|---|---|
| million | **** | **** | ||
| Liabilities | **** | |||
| Amounts due to banks | (26) | 11,024 | ||
| Payables from securities financing transactions | **** | 6,321 | ||
| Cash collateral payables on derivative instruments | **** | 37,312 | ||
| Customer deposits | 31 | 524,636 | ||
| Debt issued measured at amortized cost | (3) | 139,230 | ||
| of which: amount eligible for<br> high-trigger loss-absorbing additional tier 1 capital | **** | 11,837 | 9 | |
| of which: amount eligible for<br> low-trigger loss-absorbing additional tier 1 capital | **** | 2,577 | 9 | |
| of which: amount eligible for<br> low-trigger loss-absorbing tier 2 capital | **** | 7,201 | 11 | |
| of which: amount eligible for<br> capital instruments subject to phase-out from tier 2 capital | **** | 476 | 12 | |
| Other financial liabilities measured at amortized cost | (164) | 9,565 | ||
| Total financial liabilities<br> measured at amortized cost | (162) | **** | 728,088 | **** |
| Financial liabilities at fair value held for trading | 0 | 33,595 | ||
| Derivative financial instruments | 6 | 161,107 | ||
| Brokerage payables designated at fair value | **** | 38,742 | ||
| Debt issued designated at fair value | 0 | 61,243 | ||
| Other financial liabilities designated at fair value | (20,991) | 9,396 | ||
| Total financial liabilities<br> measured at fair value through profit or loss | (20,985) | **** | 304,083 | **** |
| Provisions | 0 | 2,827 | ||
| Other non-financial liabilities | (1) | 9,853 | ||
| of which: amount eligible for<br> high-trigger loss-absorbing capital (Deferred Contingent Capital Plan (DCCP))3 | **** | 1,625 | 9 | |
| of which: deferred tax<br> liabilities related to goodwill | **** | 277 | 4 | |
| of which: deferred tax<br> liabilities related to other intangible assets | 2 | 5 | ||
| Total liabilities | (21,148) | **** | 1,044,852 | **** |
| Equity | **** | |||
| Share capital | **** | 338 | 1 | |
| Share premium | **** | 16,753 | 1 | |
| Treasury shares | **** | (4,068) | 3 | |
| Retained earnings | (32) | 38,743 | 2 | |
| Other comprehensive income recognized directly in equity, net of<br> tax | 15 | 7,662 | 3 | |
| of which: unrealized gains /<br> (losses) from cash flow hedges | 2,321 | 7 | ||
| Equity attributable to<br> shareholders | (17) | **** | 59,428 | |
| Equity attributable to non-controlling interests | 319 | |||
| Total equity | (17) | **** | 59,747 | |
| Total liabilities and equity | (21,166) | **** | 1,104,599 | |
| 1 References link the lines of this table to the respective<br> reference numbers provided in the “References” column in the “CC1:<br> Composition of regulatory capital” table in this section. 2 Includes<br> goodwill from an associate that is not a banking, financial or insurance<br> entity, amounting to 1 million as of 31 December 2020, which is not<br> subject to capital deduction. 3 IFRS carrying amount of total DCCP<br> liabilities was 1,858 million as of 31 December 2020. Refer to the<br> “Compensation” section of our Annual Report 2020 for more information about<br> the DCCP. |
All values are in US Dollars.
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95
UBS Group AG consolidated
Semi-annual | The CC1 table below and on the following pages provides the composition of capital in the format prescribed by the BCBS and FINMA, and is based on BCBS Basel III rules, unless stated otherwise. Reference is made to items reconciling to the balance sheet under the regulatory scope of consolidation as disclosed in the “CC2: Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation” table in this section.
Refer to the documents titled “Capital and total loss-absorbing capacity instruments of UBS Group AG consolidated and UBS AG consolidated and standalone – key features” and “UBS Group AG consolidated capital instruments and TLAC-eligible senior unsecured debt”, available under “Bondholder information” at ubs.com/investors, for an overview of the main features of our regulatory capital instruments, as well as the full terms and conditions. p
Semi-annual |
| CC1: Composition of regulatory<br> capital | ||
|---|---|---|
| As of 31.12.20 | Amounts | References^1^ |
| million except where<br> indicated | **** | **** |
| **** | **** | |
| 1 | 17,091 | 1 |
| 2 | 38,743 | 2 |
| 3 | 3,594 | 3 |
| 4 | **** | **** |
| 5 | **** | **** |
| 6 | 59,428 | **** |
| **** | **** | |
| 7 | (150) | **** |
| 8 | (6,319) | 4 |
| 9 | (296) | 5 |
| 10 | (5,617) | 6 |
| 11 | (2,321) | 7 |
| 12 | (330) | **** |
| 13 | **** | **** |
| 14 | 336 | **** |
| 15 | (41) | 8 |
| 16 | (2,879)^3^ | 9 |
| 17 | **** | **** |
| 17a | **** | **** |
| 17b | **** | **** |
| 18 | **** | **** |
| 19 | **** | **** |
| 20 | **** | **** |
| 21 | (5) | 10 |
| 22 | **** | **** |
| 23 | **** | **** |
| 24 | **** | **** |
| 25 | **** | **** |
| 26 | **** | **** |
| 26a | (152) | **** |
| 26b | (1,767)^4^ | **** |
| 27 | **** | **** |
| 28 | (19,538) | **** |
| 29 | 39,890 | **** |
All values are in US Dollars.
96
| CC1:<br> Composition of regulatory capital (continued) | ||
|---|---|---|
| As of 31.12.20 | Amounts | References^1^ |
| million except where<br> indicated | **** | **** |
| **** | **** | |
| 30 | 16,288 | **** |
| 31 | **** | **** |
| 32 | 16,288 | **** |
| 33 | **** | **** |
| 34 | **** | **** |
| 35 | **** | **** |
| 36 | 16,288 | **** |
| **** | **** | |
| 37 | **** | **** |
| 38 | **** | **** |
| 38a | **** | **** |
| 38b | **** | **** |
| 39 | **** | **** |
| 40 | **** | **** |
| 41 | **** | **** |
| 42 | **** | **** |
| 42a | **** | **** |
| 43 | **** | **** |
| 44 | 16,288 | 9 |
| 45 | 56,178 | **** |
| **** | **** | |
| 46 | 4,573^6^ | 11 |
| 47 | 476 | 12 |
| 48 | **** | **** |
| 49 | **** | **** |
| 50 | **** | **** |
| 51 | 5,049 | **** |
| **** | **** | |
| 52 | **** | **** |
| 53 | **** | **** |
| 53a | **** | **** |
| 53b | **** | **** |
| 54 | **** | **** |
| 55 | **** | **** |
| 56 | **** | **** |
| 56a | **** | **** |
| 57 | **** | **** |
| 58 | 5,049 | **** |
| 59 | 61,226 | **** |
| 60 | 289,101 | **** |
All values are in US Dollars.
97
UBS Group AG consolidated
| CC1:<br> Composition of regulatory capital (continued) | ||
|---|---|---|
| As of 31.12.20 | Amounts | References^1^ |
| million except where<br> indicated | **** | **** |
| **** | **** | |
| 61 | 13.80 | **** |
| 62 | 19.43 | **** |
| 63 | 21.18 | **** |
| 64 | 3.52 | **** |
| 65 | 2.50 | **** |
| 66 | 0.02 | **** |
| 67 | 1.00 | **** |
| 68 | 9.30 | **** |
| **** | **** | |
| 72 | 2,000 | **** |
| 73 | 1,216 | **** |
| 74 | **** | **** |
| 75 | 3,989 | **** |
| **** | **** | |
| 76 | **** | **** |
| 77 | **** | **** |
| 78 | **** | **** |
| 79 | **** | **** |
| **** | **** | |
| 80 | **** | **** |
| 81 | **** | **** |
| 82 | **** | **** |
| 83 | **** | **** |
| 84 | 1,261 | **** |
| 85 | **** | **** |
| 1 References link the lines of this table to the respective<br> reference numbers provided in the “References” column in the “CC2:<br> Reconciliation of accounting balance sheet to balance sheet under the<br> regulatory scope of consolidation” table in this section. 2 IFRS netting<br> for deferred tax assets and liabilities is reversed for items deducted from CET1<br> capital. 3 Includes 2 billion of a capital reserve for potential<br> share repurchases. 4 Includes 499 million in compensation-related<br> charge for regulatory capital purposes. 5 Under IFRS, debt issued and<br> subsequently repurchased is treated as extinguished. 6 Consists of<br> instruments with a IFRS carrying amount of 7.2 billion less amortization<br> of instruments where remaining maturity is between one and five years, own<br> instruments held and 45% of the gross unrealized gains on debt instruments<br> measured at fair value through other comprehensive income, which are measured<br> at the lower of cost or market value for regulatory capital purposes. 7<br> BCBS requirements are exceeded by our Swiss SRB requirements. Refer to the<br> “Capital, liquidity and funding, and balance sheet“ section of our Annual<br> Report 2020 report for more information about the Swiss SRB requirements. |
All values are in US Dollars.
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98
Prudent valuation
Annual | The PV1 table below provides a breakdown of prudent valuation adjustments to CET1 capital. These adjustments are incremental to the ones made under IFRS, which include adjustments for liquidity and model uncertainty, as well as credit, funding and debit valuation adjustments.
Instruments that are measured as part of a portfolio of combined long and short positions are valued at mid-market levels to ensure consistent valuation of the long and short component risks. A liquidity valuation adjustment is then made to the overall net long or short exposure to move the fair value to bid or offer, as appropriate, reflecting current market liquidity levels.
Uncertainties associated with the use of model-based valuations are incorporated into the measurement of fair value through the use of model reserves. These reserves reflect the amounts that the Group estimates should be deducted from valuations produced directly by models to incorporate uncertainties in the relevant modeling assumptions, in the model and market inputs used, or in the calibration of the model output to adjust for known model deficiencies.
To ensure compliance with the prudent valuation requirements, UBS has established systems, controls and governance around the valuation of positions measured at fair value.
As of 31 December 2020, the prudential valuation adjustment increased by USD 46 million compared with the prior year, primarily due to reduced liquidity in the market for auction rate securities. p
› Refer to “Note 21 Fair value measurement” of our Annual Report 2020for more information about the valuation adjustments in the financial accountsand related governance
Annual |
| PV1: Prudent valuation<br> adjustments (PVA) | ||||||||
|---|---|---|---|---|---|---|---|---|
| As of 31.12.20 | ||||||||
| million | Equity | Interest rates | FX | Credit | Commodities | Total | Of which: In the trading book | Of which: In the banking book |
| 1 | (12) | (102) | 0 | (37) | 0 | (150) | (29) | (121) |
| 2 | **** | **** | **** | **** | **** | **** | **** | **** |
| 3 | **** | **** | **** | **** | **** | **** | **** | **** |
| 4 | (12) | (102) | 0 | (37) | 0 | (150) | (29) | (121) |
| 5 | **** | **** | **** | **** | **** | **** | **** | **** |
| 6 | **** | **** | **** | **** | **** | **** | **** | **** |
| 7 | **** | **** | **** | **** | **** | **** | **** | **** |
| 8 | **** | **** | **** | **** | **** | **** | **** | **** |
| 9 | **** | **** | **** | **** | **** | **** | **** | **** |
| 10 | **** | **** | **** | **** | **** | **** | **** | **** |
| 11 | **** | **** | **** | **** | **** | **** | **** | **** |
| 12 | (12) | (102) | 0 | (37) | 0 | (150) | (29) | (121) |
| As of 31.12.19 | ||||||||
| 1 | (9) | (70) | 0 | (25) | 0 | (104) | (25) | (79) |
| 2 | ||||||||
| 3 | ||||||||
| 4 | (9) | (70) | 0 | (25) | 0 | (104) | (25) | (79) |
| 5 | ||||||||
| 6 | ||||||||
| 7 | ||||||||
| 8 | ||||||||
| 9 | ||||||||
| 10 | ||||||||
| 11 | ||||||||
| 12 | (9) | (70) | 0 | (25) | 0 | (104) | (25) | (79) |
| 1 Valuation adjustments recognized already under the financial<br> accounting standards reflect an estimated total life-to-date loss of 960<br> million as of 31 December 2020 (31 December 2019: 665 million), of<br> which valuation adjustments account for an estimated life-to-date loss of <br> 340 million (31 December 2019: 300 million) for liquidity and of 479<br> million (31 December 2019: 266 million) for model uncertainty. Further<br> details are provided in “Note 21 Fair Value measurement” in the “Consolidated<br> financial statements” section of our Annual Report 2020. |
All values are in US Dollars.
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99
UBS Group AG consolidated
Section 12 Total loss-absorbing capacity
Resolution group– composition of total loss-absorbing capacity (TLAC)
Semi-annual | The TLAC1 table below is based on Basel Committee on Banking Supervision (BCBS) rules, and only applicable to UBS Group AG as the ultimate parent entity of the defined UBS resolution group, to which, in case of resolution, resolution tools (e.g., a bail-in) are expected to be applied.
In the second half of 2020, we issued a high-trigger loss absorbing additional tier 1 (AT1) capital instrument with a nominal value of USD 750 million denominated in US dollars. Non-regulatory capital instruments increased by USD 5.4 billion to USD 37.8 billion as of 31 December 2020, mainly driven by seven issuances amounting to USD 4.5 billion denominated in US dollars, euro and Australian dollars, as well as foreign currency and other effects, partly offset by the call of a TLAC-eligible instrument. p
Semi-annual |
| TLAC1: TLAC composition for<br> G-SIBs (at resolution group level) | **** | **** | |
|---|---|---|---|
| 31.12.20 | 30.6.20^1^ | 31.12.19^1^ | |
| million, except where<br> indicated | **** | **** | **** |
| **** | **** | **** | |
| 1 | 39,890 | 38,114 | 35,535 |
| 2 | 16,288 | 15,390 | 16,306 |
| 3 | **** | ||
| 4 | **** | ||
| 5 | 16,288 | 15,390 | 16,306 |
| 6 | 5,049 | 5,371 | 5,726 |
| 7 | 2,787 | 2,327 | 1,724 |
| 8 | **** | ||
| 9 | **** | ||
| 10 | 7,835 | 7,698 | 7,450 |
| 11 | 64,013 | 61,203 | 59,291 |
| **** | |||
| 12 | **** | ||
| 13 | 37,801 | 32,423 | 30,322 |
| 14 | **** | ||
| 15 | **** | ||
| 16 | **** | ||
| 17 | 37,801 | 32,423 | 30,322 |
| **** | |||
| 18 | 101,814 | 93,626 | 89,613 |
| 19 | **** | ||
| 20 | **** | ||
| 21 | **** | ||
| 22 | 101,814 | 93,626 | 89,613 |
| **** | |||
| 23 | 289,101 | 286,436 | 259,208 |
| 24 | 1,037,150 | 974,359 | 911,322 |
| **** | |||
| 25 | 35.22 | 32.69 | 34.57 |
| 26 | 9.82 | 9.61 | 9.83 |
| 27 | 9.30 | 8.81 | 9.21 |
| 28 | 3.52 | 3.52 | 3.58 |
| 29 | 2.50 | 2.50 | 2.50 |
| 30 | 0.02 | 0.02 | 0.08 |
| 31 | 1.00 | 1.00 | 1.00 |
| 1 Refer to the “Introduction and basis for preparation” section<br> of this report for information on the restatement of comparative information,<br> as applicable. 2 The leverage ratio exposures and leverage ratios for<br> 31 December 2020 and 30 June 2020 do not reflect the effects of the<br> temporary exemption that has been granted by FINMA in connection with<br> COVID-19. Refer to the “Introduction and basis for preparation” section of<br> this report and to “Application of the temporary COVID-19-related FINMA<br> exemption of central bank sight deposits” in the “Going and gone concern<br> requirements and eligible capital“ section for more information. |
All values are in US Dollars.
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Resolutionentity – creditor ranking at legal entity level
Semi-annual | The TLAC3 table below provides an overview of the creditor ranking structure of the resolution entity, UBS Group AG, on a standalone basis.
UBS Group AG issues loss-absorbing additional tier 1 capital instruments and TLAC-eligible senior unsecured debt.
UBS Group AG grants Deferred Contingent Capital Plan (DCCP) awards to UBS Group employees. Awards granted since February 2015 qualify as Basel III AT1 capital on a UBS Group consolidated basis and totaled USD 1,875 million as of 31 December 2020 (30 June 2020: USD 1,858 million). The related liabilities of UBS Group AG on a standalone basis of USD 1,613 million (30 June 2020: USD 1,397 million) are not included in the table below, as these do not give rise to any current claims until the awards are legally vested.
As of 31 December 2020, the TLAC available on a UBS Group AG consolidated basis amounted to USD 101,814 million (30 June 2020: USD 93,626 million).
› Refer to “Bondholder information” at ubs.com/investors, formore information
› Refer to the “TLAC1: TLAC composition for G-SIBs (at resolutiongroup level)” table in this section for more information about TLAC for UBSGroup AG consolidated
The financial statements of UBS Group AG standalone as of 31 December 2020 are provided under “Holding company and significant regulated subsidiaries and sub-groups” at ubs.com/investors. p
Semi-annual |
| TLAC3 – creditor ranking at legal<br> entity level for the resolution entity, UBS Group AG | ||||
|---|---|---|---|---|
| As of 31.12.20 | Creditor ranking | Total | ||
| million | 1 | 2 | 3 | **** |
| 1 | Common shares<br><br> <br>(most junior)^2^ | Additional Tier 1 | Bail-in debt and pari passu liabilities (most senior) | **** |
| 2 | 40,000 | 14,336 | 41,295 | 95,631 |
| 3 | **** | **** | **** | **** |
| 4 | 40,000 | 14,336^3,4^ | 41,295^6,7^ | 95,631 |
| 5 | 40,000 | 13,843 | 36,892^8^ | 90,735 |
| 6 | **** | **** | 6,502 | 6,502 |
| 7 | **** | **** | 16,791 | 16,791 |
| 8 | **** | **** | 12,353 | 12,353 |
| 9 | **** | **** | 1,246 | 1,246 |
| 10 | 40,000 | 13,843^5^ | **** | 53,843 |
| 1 No credit risk mitigation is applied to capital and<br> liabilities for UBS Group AG standalone. 2 Common shares including the<br> associated reserves are equal to equity attributable to shareholders as<br> disclosed in the UBS Group AG standalone financial statements as of 31<br> December 2020, which were prepared in accordance with the principles of the<br> Swiss Law on Accounting and Financial Reporting (32nd title of the Swiss Code<br> of Obligations). 3 Includes interest expense accrued on AT1 capital<br> instruments which does not qualify as TLAC. 4 An AT1 instrument of 0.8<br> billion was issued during the six months ended 31 December 2020. 5<br> Includes an AT1 instrument in the amount of 1.5 billion, the call of<br> which was announced on 10 February 2021 (call date 22 March 2021). 6<br> Includes interest expense accrued on bail-in debt, interest-bearing<br> liabilities which comprise loans from UBS AG and UBS Switzerland AG, negative<br> replacement values as well as tax and other liabilities which are not<br> excluded liabilities under Swiss law that rank pari-passu to bail-in debt. <br> 7 Bail-in debt of 4.6 billion was issued during the six months ended 31<br> December 2020. 8 Bail-in debt of 2.9 billion has residual maturity of<br> less than one year and is not potentially eligible as TLAC. |
All values are in US Dollars.
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UBS Group AG consolidated
Section 13 Leverage ratio
Basel III leverage ratio
Quarterly | The Basel Committee on Banking Supervision (BCBS) leverage ratio, as summarized in the “KM1: Key metrics“ table in section 1 of this report, is calculated by dividing the period-end tier 1 capital by the period-end leverage ratio denominator (LRD).
The LRD consists of International Financial Reporting Standards (IFRS) on-balance sheet assets and off-balance sheet items. Derivative exposures are adjusted for a number of items, including replacement values and eligible cash variation margin netting, the current exposure method add-on and net notional amounts for written credit derivatives. The LRD also includes an additional charge for counterparty credit risk related to securities financing transactions (SFTs).
The “Reconciliation of IFRS total assets to BCBS Basel III total on-balance sheet exposures excluding derivatives and securities financing transactions” table below shows the difference between total IFRS assets per IFRS consolidation scope and the BCBS total on-balance sheet exposures. Those exposures are the starting point for calculating the BCBS LRD, as shown in the LR2 table in this section. The difference is due to the application of the regulatory scope of consolidation for the purpose of the BCBS calculation. In addition, carrying amounts for derivative financial instruments and SFTs are deducted from IFRS total assets. They are measured differently under BCBS leverage ratio rules and are therefore added back in separate exposure line items in the LR2 table. p
Differencebetween the Swiss SRB and BCBS leverage ratio
Quarterly | The LRD is the same under Swiss systemically relevant bank (SRB) and BCBS rules. However, there is a difference in the capital numerator between the two frameworks. Under BCBS rules only common equity tier 1 and additional tier 1 capital are included in the numerator. Under Swiss SRB rules we are required to meet going and gone concern leverage ratio requirements. Therefore, depending on the requirement, the numerator includes tier 1 capital instruments, tier 2 capital instruments and / or total loss-absorbing capacity (TLAC)-eligible senior unsecured debt. p
The tables presented below and on the following pages do not reflect the effects of the temporary exemption granted by the Swiss Financial Market Supervisory Authority (FINMA) on 25 March 2020 in connection with COVID-19 that applied until 1 January 2021, which permitted the exclusion of central bank sight deposits from the leverage ratio calculation. The effects of the temporary exemption granted by FINMA in connection with COVID-19 are presented in the “Going and gone concern requirements and eligible capital“ section of this report.
› Refer to the “Introduction and basis for preparation” section of thisreport for more information about the COVID-19-related temporary regulatorymeasures
Quarterly |
| Reconciliation of IFRS total assets to BCBS Basel III total on-balance sheet exposures excluding derivatives and securities financing transactions^1^ | |||
|---|---|---|---|
| USD million | 31.12.20 | 30.9.20 | 31.12.19^2^ |
| On-balance sheet exposures | **** | **** | **** |
| IFRS total assets | 1,125,765 | 1,065,153 | 972,194 |
| Adjustment for investments in banking, financial, insurance or<br> commercial entities that are consolidated for accounting purposes but outside<br> the scope of regulatory consolidation | (21,166) | (20,643) | (28,281) |
| Adjustment for investments in banking, financial, insurance or<br> commercial entities that are outside the scope of consolidation for<br> accounting purposes but consolidated for regulatory purposes | **** | ||
| Adjustment for fiduciary assets recognized on the balance sheet<br> pursuant to the operative accounting framework but excluded from the leverage<br> ratio exposure measure | **** | ||
| Less carrying amount of derivative financial instruments in IFRS<br> total assets^3^ | (192,370) | (177,222) | (145,141) |
| Less carrying amount of securities financing transactions in<br> IFRS total assets^4^ | (105,587) | (109,350) | (108,471) |
| Adjustments to accounting values | **** | ||
| On-balance sheet items excluding derivatives and securities financing transactions, but including collateral | 806,642 | 757,937 | 690,302 |
| Asset amounts deducted in determining BCBS Basel III tier 1<br> capital | (12,754) | (12,913) | (13,298) |
| Total on-balance sheet exposures (excluding derivatives and securities financing transactions) | 793,888 | 745,024 | 677,004 |
| 1 This table does not reflect the effects of the temporary<br> exemption granted by FINMA in connection with COVID-19. Refer to the<br> “Introduction and basis for preparation” section of this report and to<br> “Application of the temporary COVID-19-related FINMA exemption of central<br> bank sight deposits” in the “Going and gone concern requirements and eligible<br> capital“ section of this report for more information. 2 Refer to the<br> “Introduction and basis for preparation” section of this report for<br> information on the restatement of comparative information, as applicable. <br> 3 Consists of derivative financial instruments and cash collateral<br> receivables on derivative instruments in accordance with the regulatory scope<br> of consolidation. 4 Consists of receivables from securities financing<br> transactions, margin loans, prime brokerage receivables and financial assets<br> at fair value not held for trading related to securities financing<br> transactions in accordance with the regulatory scope of consolidation. |
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Quarterly | During the fourth quarter of 2020, the LRD increased by USD 43 billion to USD 1,037 billion, including currency effects of USD 24 billion. On-balance sheet exposures (excluding derivatives and SFTs) increased by USD 49 billion, mainly driven by currency effects of USD 19 billion, as well as higher trading assets, Lombard loans and cash and balances at central banks. Derivative exposures decreased by USD 2 billion, mainly reflecting higher exemption on exposures to qualifying exchanges, lower potential future exposure and trade terminations. SFTs decreased by USD 3 billion due to trade roll-
offs, partly offset by higher brokerage receivables, and an increase in collateral sourcing requirements. p
› Refer to “Leverage ratio denominator” in the “Capital, liquidity andfunding, and balance sheet” section of our Annual Report 2020, available under“Annual reporting” at ubs.com/investors , for more information
› Refer to the “Introduction and basis for preparation” section of thisreport for more information about the COVID-19-related temporary regulatorymeasures, and to “Application of the temporary COVID-19-related FINMA exemptionof central bank sight deposits” in the “Going and gone concern requirements andeligible capital“ section of this report for additional information
Quarterly |
| LR2: BCBS Basel III leverage<br> ratio common disclosure1 | **** | **** | **** |
|---|---|---|---|
| million, except where<br> indicated | 31.12.20 | 30.9.20 | 31.12.19^2^ |
| **** | **** | **** | |
| 1 | 806,642 | 757,937 | 690,302 |
| 2 | (12,754) | (12,913) | (13,298) |
| 3 | 793,888 | 745,024 | 677,004 |
| **** | **** | **** | |
| 4 | 54,049 | 50,517 | 38,253 |
| 5 | 79,901 | 80,188 | 81,484 |
| 6 | 0 | 0 | 0 |
| 7 | (21,420) | (18,536) | (14,700) |
| 8 | (16,760) | (14,663) | (18,401) |
| 9 | 85,274 | 65,998 | 66,707 |
| 10 | (84,451) | (64,852) | (64,382) |
| 11 | 96,592 | 98,652 | 88,961 |
| **** | **** | **** | |
| 12 | 198,077 | 214,300 | 200,010 |
| 13 | (92,490) | (104,950) | (91,539) |
| 14 | 9,759 | 9,431 | 8,984 |
| 15 | **** | ||
| 16 | 115,346 | 118,781 | 117,455 |
| **** | **** | **** | |
| 17 | 105,084 | 105,094 | 86,627 |
| 18 | (73,760) | (73,184) | (58,725) |
| 19 | 31,324 | 31,910 | 27,902 |
| 1,037,150 | 994,366 | 911,322 | |
| **** | **** | **** | |
| 20 | 56,178 | 54,396 | 51,842 |
| 21 | 1,037,150 | 994,366 | 911,322 |
| **** | **** | **** | |
| 22 | 5.4 | 5.5 | 5.7 |
| 1 This table does not reflect the effects of the temporary<br> exemption granted by FINMA in connection with COVID-19. Refer to the<br> “Introduction and basis for preparation” section of this report and to<br> “Application of the temporary COVID-19-related FINMA exemption of central<br> bank sight deposits” in the “Going and gone concern requirements and eligible<br> capital“ section of this report for more information. 2 Refer to the<br> “Introduction and basis for preparation” section of this report for<br> information on the restatement of comparative information, as applicable. <br> 3 Includes protection sold, including agency transactions. <br> 4 Protection sold can be offset with protection bought on the same<br> underlying reference entity, provided that the conditions according to the<br> Basel III leverage ratio framework and disclosure requirements are met. |
All values are in US Dollars.
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UBS Group AG consolidated
Quarterly |
| LR1: BCBS Basel III leverage<br> ratio summary comparison1 | **** | **** | **** |
|---|---|---|---|
| million | 31.12.20 | 30.9.20 | 31.12.19^2^ |
| 1 | 1,125,765 | 1,065,153 | 972,194 |
| 2 | (33,919) | (33,557) | (41,579) |
| 3 | **** | ||
| 4 | (95,778) | (78,571) | (56,179) |
| 5 | 9,759 | 9,431 | 8,984 |
| 6 | 31,324 | 31,910 | 27,902 |
| 7 | **** | ||
| 8 | 1,037,150 | 994,366 | 911,322 |
| 1 This table does not reflect the effects of the temporary<br> exemption granted by FINMA in connection with COVID-19. Refer to the<br> “Introduction and basis for preparation” section of this report and to<br> “Application of the temporary COVID-19-related FINMA exemption of central<br> bank sight deposits” in the “Going and gone concern requirements and eligible<br> capital“ section of this report for more information. 2 Refer to the<br> “Introduction and basis for preparation” section of this report for<br> information on the restatement of comparative information, as applicable. <br> 3 Includes assets that are deducted from tier 1 capital. |
All values are in US Dollars.
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Section 14 Liquidity coverage ratio
Liquidity coverage ratio
Quarterly | We monitor the liquidity coverage ratio (the LCR) in all significant currencies in order to manage any currency mismatch between high-quality liquid assets (HQLA) and the net expected cash outflows in times of stress. p
| Pillar 3 disclosure requirement | Annual Report 2020 sub-section | Disclosure | Annual Report 2020 page number | |
|---|---|---|---|---|
| Concentration of funding sources | Balance sheet and off-balance sheet | – | Liabilities by product and currency | 166 |
| Currency mismatch in the LCR | Liquidity and funding management | – | Liquidity coverage ratio | 160 |
High-quality liquid assets
Quarterly | HQLA must be easily and immediately convertible into cash at little or no loss of value, especially during a period of stress. HQLA are assets that are of low risk and are unencumbered. Other characteristics of HQLA are ease and certainty of valuation, low correlation with risky assets, listing of the assets on a developed and recognized exchange, existence of an active and sizable market for the assets, and low volatility. Our HQLA predominantly consist of assets that qualify as Level 1 in the LCR framework, including cash, central bank reserves and government bonds. p
Quarterly |
| High-quality liquid assets | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Average 4Q20^1^ | Average 3Q20^1^ | Average 4Q19^1^ | |||||||
| USD billion | Level 1<br><br> <br>weighted<br><br> <br>liquidity<br><br> <br>value^2^ | Level 2<br><br> <br>weighted<br><br> <br>liquidity<br><br> <br>value^2^ | Total<br><br> <br>weighted<br><br> <br>liquidity<br><br> <br>value^2^ | Level 1<br><br> <br>weighted<br><br> <br>liquidity<br><br> <br>value^2^ | Level 2<br><br> <br>weighted<br><br> <br>liquidity<br><br> <br>value^2^ | Total<br><br> <br>weighted<br><br> <br>liquidity<br><br> <br>value^2^ | Level 1<br><br> <br>weighted<br><br> <br>liquidity<br><br> <br>value^2^ | Level 2<br><br> <br>weighted<br><br> <br>liquidity<br><br> <br>value^2^ | Total<br><br> <br>weighted<br><br> <br>liquidity<br><br> <br>value^2^ |
| Cash balances^3^ | 133 | **** | 133 | 133 | 133 | 100 | 100 | ||
| Securities (on- and off-balance sheet) | 63 | 18 | 81 | 61 | 18 | 78 | 52 | 14 | 66 |
| Total high-quality liquid assets^4^ | 196 | 18 | 214 | 193 | 18 | 211 | 152 | 14 | 166 |
| 1 Calculated based on an average of 63 data points in the fourth<br> quarter of 2020, 66 data points in the third quarter of 2020 and 64 data<br> points in the fourth quarter of 2019. 2 Calculated after the application<br> of haircuts and, where applicable, caps on Level 2 assets. 3<br> Includes cash and balances with central banks and other eligible balances as<br> prescribed by FINMA. 4 Calculated in accordance with FINMA requirements. |
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UBS Group AG consolidated
LCR development during the fourth quarter of 2020
Quarterly |
In the fourth quarter of 2020, the UBS Group LCR decreased 2 percentage points to 152%, remaining above the prudential requirement communicated by the Swiss Financial Market Supervisory Authority (FINMA).
The average LCR decrease was driven by increased net cash outflows from higher customer deposit outflows, which were mostly offset by increased HQLA due to higher holdings of liquidity buffer securities. p
Quarterly |
| LIQ1: Liquidity coverage ratio | **** | **** | **** | **** | **** | **** |
|---|---|---|---|---|---|---|
| Average 4Q20^1^ | Average 3Q20^1^ | Average 4Q19^1^ | ||||
| billion, except where<br> indicated | Unweighted value | Weighted value^2^ | Unweighted value | Weighted value^2^ | Unweighted value | Weighted value^2^ |
| High-quality liquid assets | ||||||
| 1 | 218 | 214 | 214 | 211 | 169 | 166 |
| Cash outflows | ||||||
| 2 | 296 | 33 | 285 | 32 | 243 | 28 |
| 3 | 41 | 1 | 39 | 1 | 32 | 1 |
| 4 | 255 | 32 | 246 | 31 | 211 | 27 |
| 5 | 224 | 119 | 213 | 113 | 190 | 106 |
| 6 | 52 | 13 | 49 | 12 | 41 | 10 |
| 7 | 157 | 92 | 152 | 89 | 136 | 83 |
| 8 | 14 | 14 | 13 | 13 | 13 | 13 |
| 9 | **** | 73 | 70 | 74 | ||
| 10 | 88 | 27 | 90 | 28 | 63 | 22 |
| 11 | 45 | 18 | 49 | 19 | 32 | 14 |
| 12 | 0 | 0 | 0 | 0 | 1 | 1 |
| 13 | 43 | 9 | 41 | 9 | 31 | 7 |
| 14 | 13 | 11 | 12 | 10 | 14 | 12 |
| 15 | 256 | 6 | 264 | 7 | 238 | 6 |
| 16 | **** | 269 | **** | 261 | **** | 248 |
| Cash inflows | ||||||
| 17 | 314 | 81 | 298 | 76 | 307 | 81 |
| 18 | 71 | 33 | 70 | 32 | 65 | 29 |
| 19 | 15 | 15 | 15 | 15 | 13 | 13 |
| 20 | 400 | 128 | 384 | 123 | 385 | 123 |
| Average 4Q20^1^ | Average 3Q20^1^ | Average 4Q19^1^ | ||||
| billion, except where<br> indicated | **** | Total adjusted value^4^ | Total adjusted value^4^ | Total adjusted value^4^ | ||
| Liquidity coverage ratio | ||||||
| 21 | **** | 214 | 211 | 166 | ||
| 22 | **** | 141 | 137 | 124 | ||
| 23 | **** | 152 | **** | 154 | **** | 134 |
| 1 Calculated based on an average of 63 data points in the fourth<br> quarter of 2020, 66 data points in the third quarter of 2020 and 64 data<br> points in the fourth quarter of 2019. 2 Calculated after the application<br> of haircuts and inflow and outflow rates. 3 Includes outflows related<br> to loss of funding on asset-backed securities, covered bonds, other<br> structured financing instruments, asset-backed commercial papers, structured<br> entities (conduits), securities investment vehicles and other such financing<br> facilities. 4 Calculated after the application of haircuts and inflow and<br> outflow rates, as well as, where applicable, caps on Level 2 assets and cash<br> inflows. |
All values are in US Dollars.
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Liquidity risk management
Annual | The table below presents an overview of risk management disclosures related to risks resulting from liquidity and funding activities that are provided separately in our Annual Report 2020. p
Annual |
| LIQA – Liquidity risk management | ||||
|---|---|---|---|---|
| Pillar 3 disclosure requirement | Annual Report 2020 section | Disclosure | Annual Report 2020 page number | |
| Liquidity risk management including risk tolerance and target /<br> limit setting, monitoring and reporting including policies and practices, as<br> well as governance and governance structure | Capital, liquidity and funding, and balance sheet | – | Strategy, objectives and governance | 158 |
| Funding risk strategy and management: objective, diversification<br> of funding sources, limits and targets approach | Capital, liquidity and funding, and balance sheet | – | Funding management | 159–160 |
| Liquidity risk management and strategy: objective,<br> diversification of liquid assets, limits and targets approach | Capital, liquidity and funding, and balance sheet | – | Liquidity management | 158–159 |
| Stress testing approach and stress scenario description | Risk management and control | – | Stress testing | 103–104 |
| Contingency funding plan | Capital, liquidity and funding, and balance sheet | – | Contingency funding plan | 159 |
| Asset encumbrance (encumbered, unencumbered and assets that<br> cannot be pledged as collateral);<br><br> <br>unencumbered assets by currency, limitations on the transferability<br> of liquidity | Capital, liquidity and funding, and balance sheet | – | Asset encumbrance<br><br> <br>Unencumbered assets available to secure funding on a Group and /<br> or legal entity level by currency<br><br> <br>Trapped liquidity at Group level (High-quality liquid assets<br> paragraph) | 163<br><br> <br><br><br> <br><br><br> <br>160 |
| Maturity of assets and liabilities to provide a view on the balance<br> sheet and off-balance sheet structure | Capital, liquidity and funding, and balance sheet | – | Maturity analysis of assets and liabilities | 167 |
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UBS Group AG consolidated
Section 15 Remuneration
Annual | Pillar 3 disclosures on remuneration are separately provided on pages 195 and 214–258 in our Annual Report 2020, available under “Annual reporting” at ubs.com/investors. p
108
Section 16 Requirements for globalsystemically important banks and related indicators
Semi-annual | The Financial Stability Board (the FSB) has determined that UBS is a global systemically important bank (G-SIB), using an indicator-based methodology adopted by the Basel Committee on Banking Supervision (the BCBS). Banks that qualify as G-SIBs are required to disclose 12 indicators for assessing the systemic importance of G-SIBs as defined by the BCBS. These indicators are used for the G-SIB score calculation and cover five categories: size, cross-jurisdictional activity, interconnectedness, substitutability / financial institution infrastructure, and complexity.
Based on the published indicators, G-SIBs are subject to additional CET1 capital buffer requirements in a range from 1.0% to 3.5%. In November 2020, the FSB determined that the requirement for UBS continues to be 1.0%. As our Swiss systemically relevant bank (SRB) Basel III capital requirements exceed the BCBS requirements including the G-SIB buffer, we are not affected by these additional G-SIB requirements.
In July 2018, the BCBS published a revised version of its assessment methodology. This will come into effect in 2022, based on end-2021 data, with the corresponding capital buffer requirement applied as of January 2024. We do not expect these changes to increase our additional CET1 capital buffer requirement.
We provide our G-SIB indicators as of 31 December 2019 under “Pillar 3 disclosures” at ubs.com/investors. Our G-SIB indicators as of 31 December 2020 will be published in July 2021 under “Pillar 3 disclosures” at ubs.com/investors. p
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Significant regulated subsidiaries and sub-groups
Significant regulated subsidiaries and sub-groups
Section 1 Introduction
The sections on the following pages include capital and other regulatory information as of 31 December 2020 for UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated. Capital information in this section is based on Pillar 1 capital requirements. Entities may be subject to significant additional Pillar 2 requirements, which represent additional amounts of capital considered necessary and agreed with regulators based on the risk profile of the entities.
Section 2 UBS AG standalone
Keymetrics of the fourth quarter of 2020
Quarterly | The table below is based on the Basel Committee on Banking Supervision (BCBS) Basel III rules. During the fourth quarter of 2020, common equity tier 1 (CET1) capital decreased by USD 1.5 billion to USD 50.3 billion, mainly due to accruals for dividends to UBS Group AG, partly offset by operating profit. Tier 1 capital decreased by USD 1.4 billion to USD 64.7 billion, primarily driven by the aforementioned decrease in CET1 capital.
Risk-weighted assets (RWA) decreased by USD 3.4 billion to USD 305.6 billion during the fourth quarter of 2020, primarily driven by decreases in market risk and operational risk RWA, partly offset by an increase in credit risk and participation RWA. Leverage ratio exposure increased by USD 7 billion to USD 595 billion, mainly driven by on-balance sheet exposures (excluding securities financing transactions (SFTs) and derivatives), partly offset by lower SFTs and derivatives.
Average high-quality liquid assets (HQLA) decreased by USD 4.5 billion, driven by a reduction of average cash balances due to an increase in business division funding requirements. Average total net cash outflows remained stable. p
Quarterly |
| KM1: Key metrics | **** | **** | **** | **** | **** |
|---|---|---|---|---|---|
| million, except where indicated | |||||
| 31.12.20 | 30.9.20 | 30.6.20 | 31.3.20 | 31.12.19 | |
| Available capital (amounts) | |||||
| 1 | 50,269 | 51,793 | 51,810 | 48,998 | 49,521 |
| 1a | 50,266 | 51,791 | 51,808 | 48,994 | 49,518 |
| 2 | 64,699 | 66,145 | 65,361 | 62,382 | 63,893 |
| 2a | 64,696 | 66,143 | 65,359 | 62,379 | 63,891 |
| 3 | 69,639 | 71,020 | 70,612 | 68,130 | 69,576 |
| 3a | 69,636 | 71,018 | 70,610 | 68,127 | 69,574 |
| Risk-weighted assets (amounts) | **** | ||||
| 4 | 305,575 | 309,019 | 310,752 | 317,621 | 287,999 |
| 4a | 24,446 | 24,722 | 24,860 | 25,410 | 23,040 |
| 4b | 305,575 | 309,019 | 310,752 | 317,621 | 287,999 |
| Risk-based capital ratios as a<br> percentage of RWA | **** | ||||
| 5 | 16.45 | 16.76 | 16.67 | 15.43 | 17.19 |
| 5a | 16.45 | 16.76 | 16.67 | 15.43 | 17.19 |
| 6 | 21.17 | 21.40 | 21.03 | 19.64 | 22.19 |
| 6a | 21.17 | 21.40 | 21.03 | 19.64 | 22.18 |
| 7 | 22.79 | 22.98 | 22.72 | 21.45 | 24.16 |
| 7a | 22.79 | 22.98 | 22.72 | 21.45 | 24.16 |
| Additional CET1 buffer<br> requirements as a percentage of RWA | **** | ||||
| 8 | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 |
| 9 | 0.01 | 0.02 | 0.02 | 0.01 | 0.07 |
| 9a | **** | ||||
| 10 | **** | ||||
| 11 | 2.51 | 2.52 | 2.52 | 2.51 | 2.57 |
| 12 | 11.95 | 12.26 | 12.17 | 10.93 | 12.69 |
| Basel III leverage ratio4 | **** | ||||
| 13 | 595,017 | 588,204 | 573,741 | 574,692 | 589,127 |
| 14 | 10.87 | 11.25 | 11.39 | 10.85 | 10.85 |
| 14a | 10.87 | 11.24 | 11.39 | 10.85 | 10.84 |
| Liquidity coverage ratio5 | **** | ||||
| 15 | 83,905 | 88,424 | 91,877 | 67,963 | 73,805 |
| 16 | 52,851 | 52,463 | 52,209 | 48,320 | 53,960 |
| 17 | 159 | 169 | 178 | 141 | 137 |
| 1 The fully loaded ECL accounting model excludes the<br> transitional relief of recognizing ECL allowances and provisions in CET1<br> capital in accordance with FINMA Circular 2013/1 “Eligible capital –<br> banks.” 2 Calculated as 8% of total RWA, based on total capital minimum<br> requirements, excluding CET1 buffer requirements. 3 Swiss SRB going<br> concern requirements and information for UBS AG standalone are provided on<br> the following pages in this section. 4 The temporary exemption<br> granted by FINMA in connection with COVID-19 had no net effect on UBS AG<br> standalone. Refer to the “Introduction and basis for preparation” section of<br> this report and to the next page in this section for more information. <br> 5 Calculated based on quarterly average. Refer to “Liquidity coverage ratio”<br> in this section for more information. |
All values are in US Dollars.
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Swiss SRB going and gone concern requirements and information
UBS AG standalone is considered a systemically relevant bank (an SRB) under Swiss banking law and is subject to capital regulations on a standalone basis.
The capital requirements based on RWA include a minimum CET1 capital requirement of 9.64% plus the effects from countercyclical buffers (CCyBs), and a total going concern capital requirement of 13.94% plus the effects from CCyBs. The capital requirements based on the leverage ratio denominator (the LRD) include a minimum CET1 capital requirement of 3.375% and a total going concern leverage ratio requirement of 4.875%.
CET1 and high-trigger additional tier 1 (AT1) capital instruments are eligible as going concern capital. As of 30 June 2020, the two low-trigger AT1 capital instruments, amounting to USD 2.5 billion, that were on-lent from UBS Group AG to UBS AG after the new Swiss SRB framework had been implemented, qualify as going concern capital, as agreed with the Swiss Financial Market Supervisory Authority (FINMA).
Starting from 1 January 2020, UBS AG standalone is subject to a gone concern capital requirement based on the sum of: (i) its third-party exposure on a standalone basis; (ii) a buffer requirement equal to 30% of the Group’s gone concern capital requirement on UBS AG’s consolidated exposure; and (iii) the nominal value of the gone concern instruments issued by UBS entities and held by the parent bank. A transitional period until 2024 has been granted for the buffer requirement. The gone concern capital coverage ratio reflects how much gone concern capital is available to meet the gone concern requirement. Outstanding high- and low-trigger loss-absorbing tier 2 capital instruments, non-Basel III-compliant tier 2 capital instruments and total loss-absorbing capacity (TLAC)-eligible senior unsecured debt instruments are eligible to meet gone concern requirements until one year before maturity.
FINMA granted relief concerning the regulatory capital requirements of UBS AG on a standalone basis by means of decrees issued on 20 December 2013 and 20 October 2017, the latter effective as of 1 July 2017 and partly replacing the former.
For direct and indirect investments, including holding of regulatory capital instruments of UBS AG in subsidiaries that are active in banking and finance, the FINMA decree introduced a risk-weighting approach, with a phase-in period until 1 January 2028. Starting from 1 July 2017, these investments were risk- weighted at 200%. From 1 January 2019 onward, the risk weights are being gradually raised by 5 percentage points per year for Switzerland-domiciled investments and by 20 percentage points per year for foreign-domiciled investments until the fully applied risk weights are 250% and 400%, respectively.
In connection with COVID-19, FINMA has permitted banks to temporarily exclude central bank sight deposits from the LRD for the purpose of calculating going concern ratios. This exemption applied until 1 January 2021. Applicable dividends or similar distributions approved by shareholders after 25 March 2020 reduce the relief by the LRD equivalent of the capital distribution. This exemption had no net effect on UBS AG standalone as of 31 December 2020.
› Refer to the “Introduction andbasis for preparation” section of this report for more information about therevised gone concern requirements and theCOVID-19-related temporary regulatory measures
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Significant regulated subsidiaries and sub-groups
The tables below and on the next page provide details of the Swiss systematically relevant bank (SRB) RWA- and LRD-based going and gone concern requirements and information as required by FINMA; details on eligible gone concern instruments are provided on the next page.
Quarterly |
| Swiss SRB going and gone concern requirements and information | ||||||
|---|---|---|---|---|---|---|
| As of 31.12.20 | RWA, phase-in | RWA, fully applied as of 1.1.28 | LRD^1^ | |||
| USD million, except where indicated | in % | **** | in % | **** | in % | **** |
| Required going concern capital | **** | **** | **** | **** | **** | **** |
| Total going concern capital | 13.95^2^ | 42,638 | 13.95^2^ | 52,926 | 4.88^2^ | 29,007 |
| Common equity tier 1 capital | 9.65 | 29,499 | 9.65 | 36,616 | 3.38 | 20,082 |
| of which: minimum capital | 4.50 | 13,751 | 4.50 | 17,069 | 1.50 | 8,925 |
| of which: buffer capital | 5.14 | 15,707 | 5.14 | 19,496 | 1.88 | 11,157 |
| of which: countercyclical buffer | 0.01 | 41 | 0.01 | 51 | ||
| Maximum additional tier 1 capital | 4.30 | 13,140 | 4.30 | 16,310 | 1.50 | 8,925 |
| of which: additional tier 1 capital | 3.50 | 10,695 | 3.50 | 13,276 | 1.50 | 8,925 |
| of which: additional tier 1 buffer capital | 0.80 | 2,445 | 0.80 | 3,034 | ||
| Eligible going concern capital | **** | **** | **** | **** | **** | **** |
| Total going concern capital | 21.17 | 64,699 | 17.06 | 64,699 | 10.87 | 64,699 |
| Common equity tier 1 capital | 16.45 | 50,269 | 13.25 | 50,269 | 8.45 | 50,269 |
| Total loss-absorbing additional tier 1 capital | 4.72 | 14,430 | 3.80 | 14,430 | 2.43 | 14,430 |
| of which: high-trigger loss-absorbing additional tier 1 capital | 3.88 | 11,854 | 3.13 | 11,854 | 1.99 | 11,854 |
| of which: low-trigger loss-absorbing additional tier 1 capital | 0.84 | 2,575 | 0.68 | 2,575 | 0.43 | 2,575 |
| Risk-weighted assets / leverage ratio denominator | **** | **** | **** | **** | **** | **** |
| Risk-weighted assets | **** | 305,575 | **** | 379,307 | **** | **** |
| Leverage ratio denominator | **** | **** | **** | **** | **** | 595,017 |
| Required gone concern capital^3^ | Higher of RWA- or LRD-based | |||||
| Total gone concern loss-absorbing requirement | **** | 33,547 | ||||
| Eligible gone concern capital | **** | |||||
| Total gone concern loss-absorbing capacity | **** | 45,520 | ||||
| Gone concern coverage capital ratio | 135.69 | **** | ||||
| 1 LRD-based requirements and the LRD presented in this table do<br> not reflect the effects of the temporary exemption that has been granted by<br> FINMA in connection with COVID-19. Refer to the “Introduction and basis for<br> preparation” section of this report for more information. 2 Includes<br> applicable add-ons of 1.08% for RWA and 0.375% for LRD. 3 From 1 January<br> 2020 onward, a maximum of 25% of the gone concern requirements can<br> be met with instruments that have a remaining maturity of between one and two<br> years. Once at least 75% of the minimum gone concern requirement has been met<br> with instruments that have a remaining maturity of greater than two years,<br> all instruments that have a remaining maturity of between one and two years<br> remain eligible to be included in the total gone concern capital. |
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Quarterly |
| Swiss SRB going and gone concern<br> information | ||
|---|---|---|
| million, except where<br> indicated | 30.9.20 | 31.12.19 |
| Eligible going concern<br> capital | **** | **** |
| Total going concern capital | 66,145 | 61,479 |
| Total tier 1 capital | 66,145 | 61,479 |
| Common equity tier 1 capital | 51,793 | 49,521 |
| Total loss-absorbing<br> additional tier 1 capital | 14,352 | 11,958 |
| of which: high-trigger<br> loss-absorbing additional tier 1 capital | 11,816 | 11,958 |
| of which: low-trigger<br> loss-absorbing additional tier 1 capital | 2,536 | |
| Eligible gone concern<br> capital | **** | **** |
| Total gone concern<br> loss-absorbing capacity | 43,236 | **** |
| Total tier 2 capital | 7,649 | **** |
| of which: low-trigger<br> loss-absorbing tier 2 capital | 7,120 | |
| of which: non-Basel<br> III-compliant tier 2 capital | 529 | |
| TLAC-eligible senior unsecured<br> debt | 35,587 | **** |
| Total loss-absorbing<br> capacity | **** | **** |
| Total loss-absorbing capacity | 109,381 | 61,479 |
| Risk-weighted assets /<br> leverage ratio denominator | **** | **** |
| Risk-weighted assets, phase-in | 309,019 | 287,999 |
| of which: direct and indirect<br> investments in Switzerland-domiciled subsidiaries1 | 36,047 | 34,418 |
| of which: direct and indirect<br> investments in foreign-domiciled subsidiaries1 | 106,200 | 96,307 |
| Risk-weighted assets, fully applied as of 1.1.28 | 386,685 | 374,351 |
| of which: direct and indirect<br> investments in Switzerland-domiciled subsidiaries1 | 42,914 | 41,973 |
| of which: direct and indirect investments<br> in foreign-domiciled subsidiaries1 | 177,000 | 175,104 |
| Leverage ratio denominator2 | 588,204 | 589,127 |
| Capital and loss-absorbing<br> capacity ratios (%) | **** | **** |
| Going concern capital ratio, phase-in | 21.4 | 23.1 |
| of which: common equity tier 1<br> capital ratio, phase-in | 16.8 | 17.2 |
| Going concern capital ratio, fully applied as of 1.1.28 | 17.1 | 16.4 |
| of which: common equity tier 1<br> capital ratio, fully applied as of 1.1.28 | 13.4 | 13.2 |
| Leverage ratios (%)2 | **** | **** |
| Going concern leverage ratio, phase-in | 11.3 | |
| Going concern leverage ratio, fully applied as of 1.1.20 | 11.2 | 10.4 |
| of which: common equity tier 1<br> leverage ratio, fully applied as of 1.1.20 | 8.8 | 8.4 |
| Gone concern capital<br> coverage ratio (%) | **** | **** |
| Gone concern capital coverage ratio | 132.0 | |
| 1 Carrying amounts for direct and indirect investments including<br> holding of regulatory capital instruments in Switzerland-domiciled<br> subsidiaries (31 December 2020: 18,271 million;<br> 30 September 2020: 17,165 million; 31 December 2019: <br> 16,789 million) and for direct and indirect investments including holding of<br> regulatory capital instruments in foreign-domiciled subsidiaries (31 December<br> 2020: 41,515 million; 30 September 2020:<br> 44,250 million; 31 December 2019: 43,776 million) are risk-weighted<br> at 210% and 240%, respectively, for the current year<br> (31 December 2019: 205% and 220%, respectively). 2 Leverage<br> ratio denominators (LRDs) and leverage ratios in this table do not reflect<br> the effects of the temporary exemption that has been granted by FINMA in<br> connection with COVID-19. Refer to the “Introduction and basis for<br> preparation” section of this report for more information. The effects of the<br> temporary exemption granted by FINMA in connection with COVID-19 are<br> presented under “Swiss SRB going and gone concern requirements and<br> information” in this section. |
All values are in US Dollars.
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Significant regulated subsidiaries and sub-groups
Leverage ratioinformation
Quarterly |
| Swiss SRB leverage ratio denominator^1^ | |||
|---|---|---|---|
| USD billion | 31.12.20 | 30.9.20 | 31.12.19 |
| Leverage ratio denominator | |||
| Swiss GAAP total assets | 509.0 | 499.8 | 478.9 |
| Difference between Swiss GAAP and IFRS total assets | 160.0 | 145.6 | 122.3 |
| Less: derivative exposures and SFTs^2^ | (271.8) | (265.7) | (220.4) |
| Less: funding provided to significant regulated subsidiaries<br> eligible as gone concern capital | (20.2) | (19.5) | |
| On-balance sheet exposures (excluding derivative exposures and SFTs) | 377.0 | 360.2 | 380.8 |
| Derivative exposures | 98.2 | 101.4 | 94.8 |
| Securities financing transactions | 99.4 | 104.8 | 92.6 |
| Off-balance sheet items | 21.6 | 22.7 | 21.7 |
| Items deducted from Swiss SRB tier 1 capital | (1.2) | (0.9) | (0.8) |
| Total exposures (leverage ratio denominator) | 595.0 | 588.2 | 589.1 |
| 1 The temporary exemption granted by FINMA in connection with COVID-19<br> had no net effect on UBS AG standalone. 2 Consists of derivative financial<br> instruments, cash collateral receivables on derivative instruments,<br> receivables from securities financing transactions, and margin loans, as well<br> as prime brokerage receivables and financial assets at fair value not held<br> for trading, both related to securities financing transactions, in accordance<br> with the regulatory scope of consolidation, which are presented separately<br> under Derivative exposures and Securities financing transactions in this<br> table. |
p
Liquidity coverage ratio
Quarterly | In the fourth quarter of 2020, the UBS AG liquidity coverage ratio (LCR) was 159%, remaining above the prudential requirements communicated by FINMA. p
Quarterly |
| Liquidity coverage ratio | ||
|---|---|---|
| Weighted value^1^ | ||
| USD billion, except where indicated | Average 4Q20^2^ | Average 4Q19^2^ |
| High-quality liquid assets | 84 | 74 |
| Total net cash outflows | 53 | 54 |
| of which: cash outflows | 166 | 160 |
| of which: cash inflows | 113 | 106 |
| Liquidity coverage ratio (%) | 159 | 137 |
| 1 Calculated after the application of haircuts and inflow and<br> outflow rates, as well as, where applicable, caps on Level 2 assets and cash<br> inflows. 2 Calculated based on an average of 63 data points in the fourth<br> quarter of 2020 and 64 data points in the fourth quarter of 2019. |
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Section 3 UBS Switzerland AG standalone
Keymetrics of the fourth quarter of 2020
Quarterly | The table below is based on the Basel Committee on Banking Supervision (the BCBS) Basel III rules.
During the fourth quarter of 2020, common equity tier 1 (CET1) capital increased by CHF 0.2 billion, mainly as a result of operating profit, partly offset by additional accruals for dividends. Tier 1 capital increased by CHF 0.7 billion, reflecting a new issuance of CHF 500 million of an additional tier 1 capital instrument and the aforementioned increase in the CET1 capital. Risk-weighted assets (RWA) remained largely stable at CHF 107.3 billion. Leverage ratio exposure increased by CHF 8 billion, mainly driven by on-balance sheet exposures excluding securities financing transactions and derivatives.
Average high-quality liquid assets (HQLA) increased by CHF 4.7 billion, driven by greater average cash balances. Average total net cash outflows increased by CHF 2.1 billion, due to increased net cash outflows in average customer deposit outflows. p
Quarterly |
| KM1: Key metrics | **** | **** | **** | **** | **** | |
|---|---|---|---|---|---|---|
| CHF million, except where indicated | ||||||
| **** | **** | 31.12.20 | 30.9.20 | 30.6.20 | 31.3.20 | 31.12.19 |
| Available capital (amounts) | ||||||
| 1 | Common equity tier 1 (CET1) | 12,234 | 11,992 | 11,776 | 11,427 | 10,895 |
| 1a | Fully loaded ECL accounting model CET1^1^ | 12,233 | 11,989 | 11,774 | 11,422 | 10,890 |
| 2 | Tier 1 | 17,410 | 16,683 | 16,479 | 16,137 | 15,606 |
| 2a | Fully loaded ECL accounting model tier 1^1^ | 17,409 | 16,680 | 16,476 | 16,132 | 15,601 |
| 3 | Total capital | 17,410 | 16,683 | 16,479 | 16,137 | 15,606 |
| 3a | Fully loaded ECL accounting model total capital^1^ | 17,409 | 16,680 | 16,476 | 16,132 | 15,601 |
| Risk-weighted assets (amounts) | **** | |||||
| 4 | Total risk-weighted assets (RWA) | 107,253 | 107,066 | 105,304 | 104,489 | 99,667 |
| 4a | Minimum capital requirement^2^ | 8,580 | 8,565 | 8,424 | 8,359 | 7,973 |
| 4b | Total risk-weighted assets (pre-floor) | 92,164 | 92,755 | 92,740 | 92,981 | 89,234 |
| Risk-based capital ratios as a percentage of RWA | **** | |||||
| 5 | Common equity tier 1 ratio (%) | 11.41 | 11.20 | 11.18 | 10.94 | 10.93 |
| 5a | Fully loaded ECL accounting model CET1 ratio (%)^1^ | 11.41 | 11.20 | 11.18 | 10.93 | 10.93 |
| 6 | Tier 1 ratio (%) | 16.23 | 15.58 | 15.65 | 15.44 | 15.66 |
| 6a | Fully loaded ECL accounting model tier 1 ratio (%)^1^ | 16.23 | 15.58 | 15.65 | 15.44 | 15.65 |
| 7 | Total capital ratio (%) | 16.23 | 15.58 | 15.65 | 15.44 | 15.66 |
| 7a | Fully loaded ECL accounting model total capital ratio (%)^1^ | 16.23 | 15.58 | 15.65 | 15.44 | 15.65 |
| Additional CET1 buffer requirements as a percentage of RWA | **** | |||||
| 8 | Capital conservation buffer requirement (2.5% from 2019) (%) | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 |
| 9 | Countercyclical buffer requirement (%) | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 |
| 9a | Additional countercyclical buffer for Swiss mortgage loans (%) | **** | 0.57 | |||
| 10 | Bank G-SIB and / or D-SIB additional requirements (%)^3^ | **** | ||||
| 11 | Total of bank CET1-specific buffer requirements (%) | 2.51 | 2.51 | 2.51 | 2.51 | 2.51 |
| 12 | CET1 available after meeting the bank’s minimum capital<br> requirements (%) | 6.91 | 6.70 | 6.68 | 6.44 | 6.43 |
| Basel III leverage ratio^4^ | **** | |||||
| 13 | Total Basel III leverage ratio exposure measure | 335,251 | 327,113 | 323,068 | 317,071 | 302,304 |
| 14 | Basel III leverage ratio (%) | 5.19 | 5.10 | 5.10 | 5.09 | 5.16 |
| 14a | Fully loaded ECL accounting model Basel III leverage ratio (%)^1^ | 5.19 | 5.10 | 5.10 | 5.09 | 5.16 |
| Liquidity coverage ratio^5^ | **** | |||||
| 15 | Total HQLA | 91,909 | 87,254 | 85,180 | 74,602 | 67,105 |
| 16 | Total net cash outflow | 62,074 | 59,930 | 61,847 | 53,059 | 51,561 |
| 17 | LCR (%) | 148 | 146 | 138 | 141 | 130 |
| 1 The fully loaded ECL accounting model excludes the<br> transitional relief of recognizing ECL allowances and provisions in CET1<br> capital in accordance with FINMA Circular 2013/1 “Eligible capital –<br> banks.” 2 Calculated as 8% of total RWA, based on total capital<br> minimum requirements, excluding CET1 buffer requirements. 3 Swiss SRB<br> going and gone concern requirements and information for UBS Switzerland AG<br> are provided on the next page. 4 Leverage ratio exposures and<br> leverage ratios for the respective periods in 2020 do not reflect the effects<br> of the temporary exemption that has been granted by FINMA in connection with<br> COVID-19. Refer to the “Introduction and basis for preparation” section of<br> this report and to “Application of the temporary COVID-19-related FINMA<br> exemption of central bank sight deposits” in this section for more<br> information. 5 Calculated based on quarterly average. Refer to<br> “Liquidity coverage ratio” in this section for more information. |
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Significant regulated subsidiaries and sub-groups
Swiss SRB going and gone concern requirements and information
Quarterly | UBS Switzerland AG is considered a systemically relevant bank (an SRB) under Swiss banking law and is subject to capital regulations on a standalone basis. As of 31 December 2020, the going concern capital and leverage ratio requirements for UBS Switzerland AG standalone were 13.95%, including a countercyclical buffer of 0.01%, and 4.875%, respectively. The gone concern requirements were 8.64% for the RWA-based requirement and 3.02% for the leverage ratio denominator (LRD)-based requirement.
The Swiss SRB framework and requirements applicable to UBS Switzerland AG standalone are the same as those applicable to UBS Group AG consolidated, with the exception of a lower gone concern requirement effective from 1 January 2020, corresponding to 62% of the Group’s gone concern requirement (before applicable reductions). p
In connection with COVID-19, the Swiss Financial Market Supervisory Authority (FINMA) has permitted banks to temporarily exclude central bank sight deposits from the LRD for the purpose of calculating going concern ratios. This exemption applied until 1 January 2021. Applicable dividends or similar distributions approved by shareholders after 25 March 2020 reduce the relief by the LRD equivalent of the capital distribution, except where dividends are paid to a regulated Swiss parent company or to an unregulated Swiss parent company that in turn pays no dividend. UBS Switzerland AG was eligible to reduce its LRD by USD 80 billion to USD 255 billion as of 31 December 2020.
› Refer to the “Introduction and basis for preparation” section ofthis report for more information about loss-absorbing capacity, leverage ratiorequirements and gone concern rebate
› Refer to “Additional information” in the “Capital, liquidity andfunding, and balance sheet” section of our Annual Report 2020 for moreinformation about the joint liability of UBS AG and UBS Switzerland AG
Quarterly |
| Swiss SRB going and gone concern requirements and information | ||||
|---|---|---|---|---|
| As of 31.12.20 | RWA | LRD^1^ | ||
| CHF million, except where indicated | in % | **** | in % | **** |
| Required going concern capital | **** | **** | **** | **** |
| Total going concern capital | 13.95^2^ | 14,961 | 4.88^2^ | 16,343 |
| Common equity tier 1 capital | 9.65 | 10,349 | 3.38 | 11,315 |
| of which: minimum capital | 4.50 | 4,826 | 1.50 | 5,029 |
| of which: buffer capital | 5.14 | 5,513 | 1.88 | 6,286 |
| of which: countercyclical buffer | 0.01 | 9 | ||
| Maximum additional tier 1 capital | 4.30 | 4,612 | 1.50 | 5,029 |
| of which: additional tier 1 capital | 3.50 | 3,754 | 1.50 | 5,029 |
| of which: additional tier 1 buffer capital | 0.80 | 858 | ||
| Eligible going concern capital | **** | **** | **** | **** |
| Total going concern capital | 16.23 | 17,410 | 5.19 | 17,410 |
| Common equity tier 1 capital | 11.41 | 12,234 | 3.65 | 12,234 |
| Total loss-absorbing additional tier 1 capital | 4.83 | 5,176 | 1.54 | 5,176 |
| of which: high-trigger loss-absorbing additional tier 1 capital | 4.83 | 5,176 | 1.54 | 5,176 |
| Required gone concern capital^3^ | **** | **** | **** | **** |
| Total gone concern loss-absorbing capacity | 8.64 | 9,270 | 3.02 | 10,133 |
| of which: base requirement | 7.97 | 8,551 | 2.79 | 9,354 |
| of which: additional requirement for market share and LRD | 0.67 | 718 | 0.23 | 779 |
| Eligible gone concern capital | **** | **** | **** | **** |
| Total gone concern loss-absorbing capacity | 10.09 | 10,824 | 3.23 | 10,824 |
| TLAC-eligible senior unsecured debt | 10.09 | 10,824 | 3.23 | 10,824 |
| Total loss-absorbing capacity | **** | **** | **** | **** |
| Required total loss-absorbing capacity | 22.59 | 24,230 | 7.90 | 26,476 |
| Eligible total loss-absorbing capacity | 26.32 | 28,234 | 8.42 | 28,234 |
| Risk-weighted assets / leverage ratio denominator | ||||
| Risk-weighted assets | **** | 107,253 | **** | **** |
| Leverage ratio denominator | **** | **** | **** | 335,251 |
| 1 LRD-based requirements and the LRD presented in this table do<br> not reflect the effects of the temporary exemption that has been granted by<br> FINMA in connection with COVID-19. Refer to the “Introduction and basis for<br> preparation” section of this report for more information. The effects of the<br> temporary exemption granted by FINMA in connection with COVID-19 are<br> presented on the next page. 2 Includes applicable add-ons of 1.08%<br> for RWA and 0.375% for LRD. 3 From 1 January 2020 onward, a maximum of 25%<br> of the gone concern requirements can be met with instruments that<br> have a remaining maturity of between one and two years. Once at least 75% of<br> the minimum gone concern requirement has been met with instruments that have<br> a remaining maturity of greater than two years, all instruments that have a<br> remaining maturity of between one and two years remain eligible to be<br> included in the total gone concern capital. |
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Application ofthe temporary COVID-19-related FINMA exemption of central bank sight deposits
The table below summarizes the effects of the temporary COVID-19-related FINMA exemption on our Swiss SRB going concern capital requirements and information. The FINMA exemption rules that applied until 1 January 2021 had no effect on our Swiss SRB gone concern capital requirements and ratios.
The LRD is the same under Swiss SRB and BCBS rules, therefore the LRD after the aforementioned temporary FINMA exemption under BCBS rules is identical to the Swiss SRB number presented in the table below. The BCBS Basel III leverage ratio was 6.83% after considering the temporary FINMA exemption.
Quarterly |
| Swiss SRB going concern requirements and information including temporary FINMA exemption | ||
|---|---|---|
| As of 31.12.20 | LRD | |
| CHF million, except where indicated | in % | **** |
| Leverage ratio denominator before temporary exemption | **** | 335,251 |
| Effective relief | **** | (80,494) |
| of which: central bank sight deposits eligible for relief | **** | (80,494) |
| Leverage ratio denominator after temporary exemption | **** | 254,757 |
| Required going concern capital | **** | **** |
| Total going concern capital | 4.88 | 12,419 |
| Common equity tier 1 capital | 3.38 | 8,598 |
| Eligible going concern capital | **** | **** |
| Total going concern capital | 6.83 | 17,410 |
| Common equity tier 1 capital | 4.80 | 12,234 |
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Swiss SRBloss-absorbing capacity
Quarterly |
| Swiss SRB going and gone concern information | |||
|---|---|---|---|
| CHF million, except where indicated | 31.12.20 | 30.9.20 | 31.12.19 |
| Eligible going concern capital | **** | **** | **** |
| Total going concern capital | 17,410 | 16,683 | 15,606 |
| Total tier 1 capital | 17,410 | 16,683 | 15,606 |
| Common equity tier 1 capital | 12,234 | 11,992 | 10,895 |
| Total loss-absorbing additional tier 1 capital | 5,176 | 4,692 | 4,711 |
| of which: high-trigger loss-absorbing additional tier 1 capital | 5,176 | 4,692 | 4,711 |
| Eligible gone concern capital | **** | **** | **** |
| Total gone concern loss-absorbing capacity | 10,824 | 10,863 | 10,915 |
| TLAC-eligible senior unsecured debt | 10,824 | 10,863 | 10,915 |
| Total loss-absorbing capacity | **** | **** | **** |
| Total loss-absorbing capacity | 28,234 | 27,547 | 26,521 |
| Risk-weighted assets / leverage ratio denominator | **** | **** | **** |
| Risk-weighted assets | 107,253 | 107,066 | 99,667 |
| Leverage ratio denominator^1^ | 335,251 | 327,113 | 302,304 |
| Capital and loss-absorbing capacity ratios (%) | **** | **** | **** |
| Going concern capital ratio | 16.2 | 15.6 | 15.7 |
| of which: common equity tier 1 capital ratio | 11.4 | 11.2 | 10.9 |
| Gone concern loss-absorbing capacity ratio | 10.1 | 10.1 | 11.0 |
| Total loss-absorbing capacity ratio | 26.3 | 25.7 | 26.6 |
| Leverage ratios (%)^1^ | **** | **** | **** |
| Going concern leverage ratio | 5.2 | 5.1 | 5.2 |
| of which: common equity tier 1 leverage ratio | 3.6 | 3.7 | 3.6 |
| Gone concern leverage ratio | 3.2 | 3.3 | 3.6 |
| Total loss-absorbing capacity leverage ratio | 8.4 | 8.4 | 8.8 |
| 1 Leverage ratio denominators (LRDs) and leverage ratios in this<br> table do not reflect the effects of the temporary exemption that has been granted<br> by FINMA in connection with COVID-19. Refer to the “Introduction and basis<br> for preparation” section of this report for more information. The effects of<br> the temporary exemption granted by FINMA in connection with COVID-19 are<br> presented in the preceding table. |
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Leverage ratio information
Quarterly |
| Swiss SRB leverage ratio denominator^1^ | **** | **** | **** |
|---|---|---|---|
| CHF billion | 31.12.20 | 30.9.20 | 31.12.19 |
| Leverage ratio denominator | |||
| Swiss GAAP total assets | 316.8 | 307.9 | 285.0 |
| Difference between Swiss GAAP and IFRS total assets | 4.5 | 4.3 | 3.6 |
| Less: derivative exposures and SFTs^2^ | (10.6) | (9.5) | (17.3) |
| On-balance sheet exposures (excluding derivative exposures and SFTs) | 310.7 | 302.8 | 271.3 |
| Derivative exposures | 5.7 | 6.2 | 4.4 |
| Securities financing transactions | 3.8 | 3.0 | 12.7 |
| Off-balance sheet items | 15.2 | 15.3 | 14.2 |
| Items deducted from Swiss SRB tier 1 capital | (0.2) | (0.2) | (0.3) |
| Total exposures (leverage ratio denominator) | 335.3 | 327.1 | 302.3 |
| 1 This table does not reflect the effects of the temporary<br> exemption granted by FINMA in connection with COVID-19. Refer to the<br> “Introduction and basis for preparation” section of this report and to<br> “Application of the temporary COVID-19-related FINMA exemption of central<br> bank sight deposits” in this section for more information. 2 Consists of<br> derivative financial instruments, cash collateral receivables on derivative<br> instruments, receivables from securities financing transactions, and margin<br> loans, as well as prime brokerage receivables and financial assets at fair<br> value not held for trading, both related to securities financing<br> transactions, in accordance with the regulatory scope of consolidation, which<br> are presented separately under Derivative exposures and Securities financing<br> transactions in this table. |
p
Liquidity coverage ratio
Quarterly | In the fourth quarter of 2020, the liquidity coverage ratio (LCR) of UBS Switzerland AG, which is a Swiss SRB, was 148%, remaining above the prudential requirement communicated by FINMA in connection with the Swiss Emergency Plan. p
Quarterly |
| Liquidity coverage ratio | **** | **** |
|---|---|---|
| Weighted value^1^ | ||
| CHF billion, except where indicated | Average 4Q20^2^ | Average 4Q19^2^ |
| High-quality liquid assets | 92 | 67 |
| Total net cash outflows | 62 | 52 |
| of which: cash outflows | 89 | 84 |
| of which: cash inflows | 27 | 33 |
| Liquidity coverage ratio (%) | 148 | 130 |
| 1 Calculated after the application of haircuts and inflow and<br> outflow rates, as well as, where applicable, caps on Level 2 assets and cash<br> inflows. 2 Calculated based on an average of 63 data points in the fourth<br> quarter of 2020 and 64 data points in the fourth quarter of 2019. |
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Significant regulated subsidiaries and sub-groups
Capitalinstruments
Quarterly |
| Capital instruments of UBS Switzerland AG – key features | **** | **** | **** | **** | |||||
|---|---|---|---|---|---|---|---|---|---|
| Presented according to issuance date. | |||||||||
| **** | **** | Share capital | Additional tier 1 capital | ||||||
| 1 | Issuer | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland |
| 1a | Instrument number | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
| 2 | Unique identifier (e.g., CUSIP, ISIN or Bloomberg identifier for<br> private placement) | – | – | ||||||
| 3 | Governing law(s) of the instrument | Swiss | Swiss | ||||||
| 3a | Means by which enforceability requirement of Section 13 of the<br> TLAC Term Sheet is achieved (for other TLAC-eligible instruments governed by<br> foreign law) | n/a | n/a | ||||||
| Regulatory treatment | |||||||||
| 4 | Transitional Basel III rules^1^ | CET1 – Going concern capital | Additional tier 1 capital | ||||||
| 5 | Post-transitional Basel III rules^2^ | CET1 – Going concern capital | Additional tier 1 capital | ||||||
| 6 | Eligible at solo / group / group and solo | UBS Switzerland AG consolidated and standalone | UBS Switzerland AG consolidated and standalone | ||||||
| 7 | Instrument type (types to be specified by each jurisdiction) | Ordinary shares | Loan^3^ | ||||||
| 8 | Amount recognized in regulatory capital (currency in millions,<br> as of most recent reporting date)^1^ | CHF 10.0 | CHF 1,500 | CHF 500 | CHF 1,000 | CHF 825 | USD 425 | CHF 475 | CHF 500 |
| 9 | Par value of instrument | CHF 10.0 | CHF 1,500 | CHF 500 | CHF 1,000 | CHF 825 | USD 425 | CHF 475 | CHF 500 |
| 10 | Accounting classification^4^ | Equity attributable to UBS Switzerland AG shareholders | Due to banks held at amortized cost | ||||||
| 11 | Original date of issuance | – | 1 April 2015 | 11 March 2016 | 18 December 2017 | 12 December 2018 | 12 December 2018 | 11 December 2019 | 29 October 2020 |
| 12 | Perpetual or dated | – | Perpetual | ||||||
| 13 | Original maturity date | – | – | ||||||
| 14 | Issuer call subject to prior supervisory approval | – | Yes | ||||||
| 15 | Optional call date, contingent call dates and redemption amount | – | First optional repayment date:<br><br> <br>1 April 2020 | First optional repayment date:<br><br> <br>11 March 2021 | First optional repayment date:<br><br> <br>18 December 2022 | First optional repayment date:<br><br> <br>12 December 2023 | First optional repayment date:<br><br> <br>12 December 2023 | First optional repayment date:<br><br> <br>11 December 2024 | First optional repayment date:<br><br> <br>29 October 2025 |
| Repayable at any time after the first optional repayment date.<br><br> <br>Repayment subject to FINMA approval. Optional repayment amount:<br> principal amount, together with any accrued and unpaid interest thereon | |||||||||
| 16 | Subsequent call dates, if applicable | – | Early repayment possible due to a tax or regulatory event.<br> Repayment due to tax event subject to FINMA approval.<br><br> <br>Repayment amount: principal amount, together with accrued and<br> unpaid interest |
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122
Quarterly |
| Capital instruments of UBS Switzerland AG – key features (continued) | **** | **** | **** | **** | |||||
|---|---|---|---|---|---|---|---|---|---|
| Coupons | |||||||||
| 17 | Fixed or floating dividend / coupon | – | Floating | ||||||
| 18 | Coupon rate and any related index | – | 6-month CHF LIBOR<br><br> <br>+ 370 bps<br><br> <br>per annum<br><br> <br>semi-annually | 3-month CHF LIBOR<br><br> <br>+ 459 bps<br><br> <br>per annum quarterly | 3-month CHF LIBOR<br><br> <br>+ 250 bps<br><br> <br>per annum quarterly | 3-month CHF LIBOR<br><br> <br>+ 489 bps<br><br> <br>per annum quarterly | 3-month USD LIBOR<br><br> <br>+ 547 bps<br><br> <br>per annum quarterly | 3-month CHF LIBOR<br><br> <br>+ 433 bps<br><br> <br>per annum quarterly | 3-month CHF SARON<br><br> <br>+ 397 bps<br><br> <br>per annum quarterly |
| 19 | Existence of a dividend stopper | – | No | ||||||
| 20 | Fully discretionary, partially discretionary or mandatory | Fully discretionary | Fully discretionary | ||||||
| 21 | Existence of step-up or other incentive to redeem | – | No | ||||||
| 22 | Non-cumulative or cumulative | Non-cumulative | Non-cumulative | ||||||
| 23 | Convertible or non-convertible | – | Non-convertible | ||||||
| 24 | If convertible, conversion trigger(s) | – | – | ||||||
| 25 | If convertible, fully or partially | – | – | ||||||
| 26 | If convertible, conversion rate | – | – | ||||||
| 27 | If convertible, mandatory or optional conversion | – | – | ||||||
| 28 | If convertible, specify instrument type convertible into | – | – | ||||||
| 29 | If convertible, specify issuer of instrument it converts into | – | – | ||||||
| 30 | Write-down feature | – | Yes | ||||||
| 31 | If write-down, write-down trigger(s) | – | Trigger: CET1 ratio is less than 7% | ||||||
| FINMA determines a write-down necessary to ensure UBS<br> Switzerland AG’s viability; or UBS Switzerland AG receives a commitment of<br> governmental support that FINMA determines necessary to ensure UBS<br> Switzerland AG‘s viability.<br><br> <br>Subject to applicable conditions | |||||||||
| 32 | If write-down, fully or partially | – | Fully | ||||||
| 33 | If write-down, permanent or temporary | – | Permanent | ||||||
| 34 | If temporary write-down, description of write-up mechanism | – | – | ||||||
| 34a | Type of subordination | Statutory | Contractual | ||||||
| 35 | Position in subordination hierarchy in liquidation (specify<br> instrument type immediately<br><br> <br>senior to instrument in the insolvency creditor hierarchy of the<br> legal entity concerned) | Unless otherwise stated in the articles of association, once<br> debts are paid back, the assets of the liquidated company are divided between<br> the shareholders pro rata based on their contributions and considering the<br> preferences attached to certain categories of shares (Art. 745, Swiss<br> Code of Obligations) | Subject to any obligations that are mandatorily preferred by<br> law, all obligations of UBS Switzerland AG that are unsubordinated or that<br> are subordinated and do not rank junior, such as all classes of share<br> capital, or at par, such as tier 1 instruments | ||||||
| 36 | Non-compliant transitioned features | – | – | ||||||
| 37 | If yes, specify non-compliant features | – | – | ||||||
| 1 Based on Swiss SRB (including transitional arrangement)<br> requirements. 2 Based on Swiss SRB requirements applicable as of 1 January<br> 2020. 3 Loans granted by UBS AG, Switzerland. 4 As applied in UBS<br> Switzerland AG‘s financial statements under Swiss GAAP. |
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Significant regulated subsidiaries and sub-groups
Section 4 UBS Europe SE consolidated
Quarterly | The table below provides information about the regulatory capital components, capital ratios, leverage ratio and liquidity of UBS Europe SE consolidated based on the Pillar 1 requirements.
During the fourth quarter of 2020, common equity tier 1 (CET1) capital and risk-weighted assets (RWA) remained stable. Leverage ratio exposure decreased by EUR 2.0 billion to EUR 41.4 billion, mainly reflecting a decrease in high-quality liquid asset (HQLA)-eligible bonds, securities financing transactions and other cash balances, partially offset by an increase in cash held at central banks.
The average liquidity coverage ratio increased by 7%, with a EUR 0.8 billion increase in high-quality liquid assets, primarily due to expectation of potential liquidity volatility around year-end.
Entities may also be subject to significant Pillar 2 requirements, which represent additional amounts of capital considered necessary and agreed with regulators based on the risk profile of the entities. p
Quarterly |
| KM1: Key metrics1,2,3 | **** | **** | **** | ||
|---|---|---|---|---|---|
| million, except where<br> indicated | |||||
| 31.12.20 | 30.9.20 | 30.6.20^4^ | 31.3.20^4^ | 31.12.19^4^ | |
| Available capital (amounts) | |||||
| 1 | 3,703 | 3,728 | 3,736 | 3,603 | 3,691 |
| 2 | 3,993 | 4,018 | 4,026 | 3,893 | 3,981 |
| 3 | 3,993 | 4,018 | 4,026 | 3,893 | 3,981 |
| Risk-weighted assets (amounts) | **** | **** | **** | **** | **** |
| 4 | 13,175 | 13,285 | 13,559 | 15,154 | 15,146 |
| 4a | 1,054 | 1,063 | 1,085 | 1,212 | 1,212 |
| Risk-based capital ratios as a<br> percentage of RWA | **** | **** | **** | **** | **** |
| 5 | 28.1 | 28.1 | 27.6 | 23.8 | 24.4 |
| 6 | 30.3 | 30.2 | 29.7 | 25.7 | 26.3 |
| 7 | 30.3 | 30.2 | 29.7 | 25.7 | 26.3 |
| Additional CET1 buffer<br> requirements as a percentage of RWA | **** | **** | **** | **** | **** |
| 8 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 9 | 0.0 | 0.0 | 0.0 | 0.1 | 0.3 |
| 10 | **** | ||||
| 11 | 2.5 | 2.5 | 2.5 | 2.6 | 2.8 |
| 12 | 22.3 | 22.2 | 21.7 | 17.7 | 18.3 |
| Basel III leverage ratio | **** | **** | **** | **** | **** |
| 13 | 41,376 | 43,371 | 42,172 | 49,004 | 41,924 |
| 14 | 9.7 | 9.3 | 9.6 | 7.9 | 9.5 |
| Liquidity coverage ratio8 | **** | **** | **** | **** | **** |
| 15 | 17,074 | 16,257 | 15,540 | 14,839 | 14,393 |
| 16 | 11,334 | 11,276 | 11,062 | 10,457 | 9,976 |
| 17 | 151 | 144 | 141 | 142 | 147 |
| 1 Based on applicable EU Basel III rules. 2 As a<br> result of the cross-border merger of UBS Limited into UBS Europe SE effective<br> 1 March 2019, UBS Europe SE became a significant regulated subsidiary of<br> UBS Group AG. The size, scope and business model of the merged entity is now<br> materially different. 3 There is no local disclosure requirement for<br> the net stable funding ratio as at 31 December 2020. 4 Comparative<br> figures have been restated to align with the UBS Europe SE Pillar 3<br> report and other regulatory reports as submitted to the European Central Bank<br> (the ECB), which reflect the ECB’s recommendation to EU financial<br> institutions to refrain from making capital distributions until the ECB<br> changes its guidance on dividend payments. 5 Calculated as 8% of<br> total RWA, based on total capital minimum requirements, excluding CET1 buffer<br> requirements. 6 This represents the CET1 ratio that is available for<br> meeting buffer requirements. It is calculated as the CET1 ratio minus 4.5%<br> and after considering, where applicable, CET1 capital that has been used to<br> meet tier 1 and / or total capital ratio requirements under Pillar 1. <br> 7 On the basis of tier 1 capital. 8 Figures as of 31 December<br> 2020, 30 September 2020, 30 June 2020 and 31 March 2020 are<br> based on a twelve-month average. Comparative figures as of 31 December<br> 2019 are based on a ten-month average rather than a twelve-month average, as<br> data produced on the same basis is only available for the period since the<br> cross-border merger. |
All values are in Euros.
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124
Section 5 UBS Americas Holding LLC consolidated
Quarterly | The table below provides information about the regulatory capital components and capital ratios, as well as the leverage ratio, of UBS Americas Holding LLC consolidated, based on the Pillar 1 requirements and in accordance with US Basel III rules.
Effective 1 October 2020, UBS Americas Holding LLC is subject to a stress capital buffer (an SCB) of 6.7%, in addition to the minimum capital requirements. The SCB was determined by the Federal Reserve Board following the completion of the annual Dodd–Frank Act Stress Testing (DFAST) and the Comprehensive Capital Analysis and Review (and based on DFAST results and planned future dividends). The SCB, which replaces the static capital conservation buffer of 2.5%, is subject to change on an annual basis or as otherwise determined by the Federal Reserve Board.
During the fourth quarter of 2020, common equity tier 1 (CET1) remained stable. Risk-weighted assets (RWA) decreased by USD 1.2 billion to USD 63.9 billion, mainly driven by a decrease in credit risk RWA. Leverage ratio exposure, calculated on an average basis, increased by USD 6.6 billion to USD 154.6 billion. The increase was due to a USD 6.1 billion increase in average assets, resulting from increases in cash held at Federal Reserve Banks and lending exposure, and a USD 0.4 billion decrease in tier 1 capital deductions due to a net decrease in deferred tax assets.
Entities may also be subject to significant Pillar 2 requirements, which represent additional amounts of capital considered necessary and agreed with regulators based on the risk profile of the entities. p
Quarterly |
| KM1: Key metrics1,2 | **** | **** | **** | **** | |
|---|---|---|---|---|---|
| million, except where indicated | |||||
| 31.12.20^3^ | 30.9.20^3^ | 30.6.20^3,4^ | 31.3.20^4^ | 31.12.19^4^ | |
| Available capital (amounts) | |||||
| 1 | 14,384 | 13,840 | 13,535 | 11,932 | 11,896 |
| 2 | 17,431 | 16,883 | 16,578 | 14,980 | 14,944 |
| 3 | 18,166 | 17,626 | 17,344 | 15,735 | 15,658 |
| Risk-weighted assets (amounts) | **** | ||||
| 4 | 63,929 | 65,084 | 64,351 | 53,812 | 54,057 |
| 4a | 5,114 | 5,207 | 5,148 | 4,305 | 4,325 |
| Risk-based capital ratios as a<br> percentage of RWA | **** | ||||
| 5 | 22.5 | 21.3 | 21.0 | 22.2 | 22.0 |
| 6 | 27.3 | 25.9 | 25.8 | 27.8 | 27.6 |
| 7 | 28.4 | 27.1 | 27.0 | 29.2 | 29.0 |
| Additional CET1 buffer<br> requirements as a percentage of RWA | **** | ||||
| 8 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 8a | 6.7 | ||||
| 9 | **** | ||||
| 10 | **** | ||||
| 11 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 11a | 6.7 | ||||
| 12 | 18.0 | 16.8 | 16.5 | 17.7 | 17.5 |
| Basel III leverage ratio | **** | ||||
| 13 | 154,609 | 148,038 | 146,652 | 135,534 | 127,290 |
| 14 | 11.3 | 11.4 | 11.3 | 11.1 | 11.7 |
| 14a | 150,019 | 150,609 | 147,683 | ||
| 14b | 11.6 | 11.2 | 11.2 | ||
| 1 The adoption of ASU 2019-12 in the second quarter of 2020<br> resulted in a retrospective removal of cumulative tax expense and related<br> balances pertaining to UBS Americas Holding LLC within the IHC tax group for<br> financial reporting purposes. For the purpose of regulatory reporting, this<br> accounting change has been applied prospectively and the corresponding<br> comparative regulatory key figures have not been restated. 2 There is<br> no local disclosure requirement for liquidity coverage ratio or net stable<br> funding ratio for UBS Americas Holding LLC. 3 UBS Americas Holding<br> LLC, as a designated category III bank, has been subject to a simplification<br> of regulatory capital rules since 1 April 2020. The revisions simplify<br> the framework for regulatory capital deductions and increase risk weights for<br> certain assets, impacting the CET1 ratio by 0.3% as of 31 December 2020,<br> 30 September 2020 and 30 June 2020. 4 Refer to the<br> “Introduction and basis for preparation” section of this report for<br> information on the restatement of comparative information, as applicable. <br> 5 Calculated as 8% of total RWA, based on total capital minimum<br> requirements, excluding CET1 buffer requirements. 6 This represents<br> the CET1 ratio that is available for meeting buffer requirements. It is<br> calculated as the CET1 ratio minus 4.5%. 7 On the basis of tier 1<br> capital. 8 UBS Americas Holding LLC, as a designated category III<br> bank, has been subject to supplementary leverage ratio (SLR) reporting since<br> 1 April 2020. US Regulatory authorities have temporarily eased the<br> requirements for the SLR, allowing for the exclusion of US Treasury<br> securities and deposits at the Federal Reserve Banks from the SLR denominator<br> through March 2021. This exclusion resulted in an increase in the SLR of 170<br> bps on 31 December 2020, 136 bps on 30 September 2020 and<br> 135 bps on 30 June 2020. |
All values are in US Dollars.
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125
Significant regulated subsidiaries and sub-groups
Material sub-group entity – creditor ranking at legal entity level
Semi-annual | The TLAC2 table below provides an overview of the creditor ranking structure of UBS Americas Holding LLC on a standalone basis.
As of 31 December 2020, UBS Americas Holding LLC had a total loss-absorbing capacity of USD 23,031 million after regulatory capital deductions and adjustments. This amount included Tier 1 capital of USD 17,431 million and USD 5,600 million of internal long-term debt which is eligible as internal TLAC issued to UBS AG, a wholly owned subsidiary of the UBS Group AG resolution entity. p
Semi-annual |
| TLAC2 – Material sub-group entity<br> – creditor ranking at legal entity level | |||||
|---|---|---|---|---|---|
| As of 31.12.20 | Creditor ranking | Total | |||
| million | 1 | 2 | 3 | 4 | **** |
| 1 | No | No | No | No | **** |
| 2 | Common Equity (most junior)^1^ | Preferred Shares (Additional tier 1) | Subordinated debt | Unsecured loans and other pari passu liabilities (most senior) | **** |
| 3 | 25,133 | 3,150 | 600 | 24,286 | 53,169 |
| 4 | **** | **** | **** | 558 | 558 |
| 5 | 25,133 | 3,150 | 600 | 23,728 | 52,611 |
| 6 | 25,133 | 3,150 | **** | 5,600 | 33,883 |
| 7 | **** | **** | **** | 0 | **** |
| 8 | **** | **** | **** | 4,400 | 4,400 |
| 9 | **** | **** | **** | 1,200 | 1,200 |
| 10 | **** | **** | **** | 0 | **** |
| 11 | 25,133 | 3,150 | **** | **** | 28,283 |
| 1 Equity attributable to shareholders, which includes share<br> premium and reserves. |
All values are in US Dollars.
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126
Abbreviations frequently used in our financial reports
A
ABS asset-backed securities
AGM Annual General Meeting of shareholders
A-IRB advanced internal
ratings-based
AIV alternative investment vehicle
ALCO Asset and Liability Committee
AMA advanced measurement approach
AML anti-money laundering
AoA Articles of Association
APM alternative performance measure
ARR alternative reference rate
ARS auction rate securities
ASF available stable funding
AT1 additional tier 1
AuM assets under management
B
BCBS Basel Committee on
Banking Supervision
BIS Bank for International Settlements
BoD Board of Directors
C
CAO Capital Adequacy Ordinance
CCAR Comprehensive Capital Analysis and Review
CCF credit conversion factor
CCP central counterparty
CCR counterparty credit risk
CCRC Corporate Culture and Responsibility Committee
CCyB countercyclical buffer
CDO collateralized debt
obligation
CDS credit default swap
CEA Commodity Exchange Act
CEM current exposure method
CEO Chief Executive Officer
CET1 common equity tier 1
CFO Chief Financial Officer
CFTC US Commodity Futures Trading Commission
CGU cash-generating unit
CHF Swiss franc
CIC Corporate & Institutional Clients
CIO Chief Investment Office
CLS Continuous Linked Settlement
CMBS commercial mortgage-backed security
C&ORC Compliance & Operational Risk Control
CRD IV EU Capital Requirements Directive of 2013
CRM credit risk mitigation (credit risk) or comprehensive risk measure (market risk)
CST combined stress test
CVA credit valuation adjustment
D
DBO defined benefit obligation
DCCP Deferred Contingent Capital Plan
DJSI Dow Jones Sustainability Indices
DM discount margin
DOJ US Department of Justice
DTA deferred tax asset
DVA debit valuation adjustment
E
EAD exposure at default
EB Executive Board
EBA European Banking Authority
EC European Commission
ECB European Central Bank
ECL expected credit loss
EGM Extraordinary General Meeting of shareholders
EIR effective interest rate
EL expected loss
EMEA Europe, Middle East and Africa
EOP Equity Ownership Plan
EPE expected positive exposure
EPS earnings per share
ESG environmental, social and governance
ETD exchange-traded derivatives
ETF exchange-traded fund
EU European Union
EUR euro
EURIBOR Euro Interbank Offered Rate
ESR environmental and social risk
EVE economic value of equity
EY Ernst & Young Ltd
F
FA financial advisor
FCA UK Financial Conduct
Authority
FCT foreign currency translation
FINMA Swiss Financial Market Supervisory Authority
FMIA Swiss Financial Market Infrastructure Act
Abbreviations frequently used in our financial reports (continued)
FSB Financial Stability Board
FTA Swiss Federal Tax Administration
FVA funding valuation adjustment
FVOCI fair value through other comprehensive income
FVTPL fair value through profit or loss
FX foreign exchange
G
GAAP generally accepted
accounting principles
GCRG Group Compliance, Regulatory & Governance
GBP pound sterling
GDP gross domestic product
GEB Group Executive Board
GHG greenhouse gas
GIA Group Internal Audit
GMD Group Managing Director
GRI Global Reporting Initiative
GSE government sponsored entities
G-SIB global systemically important bank
H
HQLA**** high-quality liquid assets
HR human resources
I
IAS International Accounting Standards
IASB International Accounting Standards Board
IBOR interbank offered rate
IFRIC International Financial Reporting Interpretations Committee
IFRS International Financial Reporting Standards
IHC intermediate holding company
IMA internal models approach
IMM internal model method
IRB internal ratings-based
IRC incremental risk charge
IRRBB interest rate risk in the banking book
ISDA International Swaps and Derivatives Association
K
KRT Key Risk Taker
L
LAS liquidity-adjusted stress
LCR liquidity coverage ratio
LGD loss given default
LIBOR London Interbank Offered Rate
LLC limited liability company
LoD lines of defense
LRD leverage ratio denominator
LTIP Long-Term Incentive Plan
LTV loan-to-value
M
M&A mergers and acquisitions
MiFID II Markets in Financial Instruments Directive II
MRT Material Risk Taker
N
NAV net asset value
NII net interest income
NSFR net stable funding ratio
NYSE New York Stock Exchange
O
OCA own credit adjustment
OCI other comprehensive income
ORF operational risk framework
OTC over-the-counter
P
PD probability of default
PIT point in time
P&L profit or loss
POCI purchased or originated credit-impaired
PRA UK Prudential Regulation Authority
PRV positive replacement value
R
RBA role-based allowance
RBC risk-based capital
RbM risk-based monitoring
REIT real estate investment trust
RMBS residential mortgage-backed securities
RniV risks not in VaR
RoAE return on attributed equity
RoCET1 return on CET1 capital
RoTE return on tangible equity
RoU right-of-use
rTSR relative total shareholder return
RV replacement value
RW risk weight
RWA risk-weighted assets
Abbreviations frequently used in our financial reports (continued)
S
SA standardized approach
SA-CCR standardized approach for counterparty credit risk
SAR stock appreciation right or Special Administrative Region
SBC Swiss Bank Corporation
SDG Sustainable Development Goal
SE structured entity
SEC US Securities and Exchange Commission
SEEOP Senior Executive Equity Ownership Plan
SFT securities financing transaction
SI sustainable investing or
sustainable investments
SICR significant increase in credit risk
SIX SIX Swiss Exchange
SME small and medium-sized entities
SMF Senior Management Function
SNB Swiss National Bank
SPPI solely payments of principal and interest
SRB systemically relevant bank
SRM specific risk measure
SVaR stressed value-at-risk
T
TBTF too big to fail
TCFD Task Force on Climate-related Financial Disclosures
TLAC total loss-absorbing capacity
U
UoM units of measure
USD US dollar
V
VaR value-at-risk
VAT value added tax
This is a general list of the abbreviations frequently used in our financial reporting. Not all of the listed abbreviations may appear in this particular report.
CautionaryStatement | This report and the information contained herein are provided solely for information purposes, and are not to be construed as solicitation of an offer to buy or sell any securities or other financial instruments in Switzerland, the United States or any other jurisdiction. No investment decision relating to securities of or relating to UBS Group AG, UBS AG or their affiliates should be made on the basis of this report. Refer to UBS’s Annual Report 2020, available at ubs.com/investors, for additional information.
Rounding | Numbers presented throughout this report may not add up precisely to the totals provided in the tables and text. Percentages and percent changes are calculated on the basis of unrounded figures. Information about absolute changes between reporting periods, which is provided in text and which can be derived from figures displayed in the tables, is calculated on a rounded basis.
Tables | Within tables, blank fields generally indicate that the field is not applicable or not meaningful, or that information is not available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis. Percentage changes are presented as a mathematical calculation of the change between periods.
UBS Group AG
P.O. Box
CH-8098 Zurich
ubs.com
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.
UBS Group AG
By: _/s/ David Kelly _____________
Name: David Kelly
Title: Managing Director
By: _/s/ Ella Campi ______________
Name: Ella Campi
Title: Executive Director
UBS AG
By: _/s/ David Kelly _____________
Name: David Kelly
Title: Managing Director
By: _/s/ Ella Campi ______________
Name: Ella Campi
Title: Executive Director
Date: March 5, 2021