UBS Group AG 6-K, filed Oct 26, 2021
UBS Group AG (UBS)
About this 6-K
UBS Group AG filed this 6-K on October 26, 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: October 26, 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 30 September 2021 Pillar 3 Report for UBS Group AG and significant regulated subsidiaries and sub-groups, which appears immediately following this page.
30 September 2021 Pillar 3 report
UBS Group and significant regulated subsidiaries and sub-groups
Terms usedin this report, unless the context requires otherwise
| “UBS,” “UBS<br> Group,” “UBS Group AG consolidated,” “Group,” “the Group,” “we,” “us” and<br> “our” | UBS Group AG and its<br> consolidated subsidiaries | ||
|---|---|---|---|
| “UBS AG consolidated” | UBS AG and its<br> consolidated subsidiaries | ||
| “UBS Group AG” and “UBS<br> Group AG standalone” | UBS Group AG on a<br> standalone basis | ||
| “UBS AG” and<br> “UBS AG standalone” | UBS AG on a standalone<br> basis | ||
| “UBS<br> Switzerland AG” and “UBS Switzerland AG standalone” | UBS Switzerland AG on a<br> standalone basis | ||
| “UBS Europe SE<br> consolidated” | UBS Europe SE and its<br> consolidated subsidiaries | ||
| “UBS Americas Holding LLC”<br> and<br><br> <br>“UBS Americas Holding LLC<br> consolidated” | UBS Americas Holding LLC<br> and its consolidated subsidiaries | ||
| Table<br> of contents | |||
| --- | --- | --- | --- |
| Introduction and basis for preparation | |||
| **** | |||
| UBS Group | |||
| 6 | Section 1 | Key metrics | |
| 9 | Section 2 | Risk-weighted assets | |
| 13 | Section 3 | Going and gone concern requirements <br><br> and eligible capital | |
| 14 | Section 4 | Leverage ratio | |
| 17 | Section 5 | Liquidity coverage ratio | |
| **** | **** | **** | |
| Significant regulated subsidiaries and sub-groups | |||
| 20 | Section 1 | Introduction | |
| 20 | Section 2 | UBS AG standalone | |
| 25 | Section 3 | UBS Switzerland AG standalone | |
| 32 | Section 4 | UBS Europe SE consolidated | |
| 33 | Section 5 | UBS Americas Holding LLC consolidated | |
| **** | **** | ||
| Appendix | |||
| 34 | Abbreviations frequently used in our financial reports | ||
| 36 | Cautionary statement |
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Introduction and basis for preparation
Scope of Basel IIIPillar 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 the 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 30 September 2021 for UBS Group AG consolidated is provided in the “Capital management” section of our third quarter 2021 report, available under “Quarterly reporting” at ubs.com/investors, and for UBS AG consolidated in the “Capital management” section of the UBS AG third quarter 2021 report, which will be available as of 29 October 2021 under “Quarterly 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.
Significant BCBS and FINMA capital adequacy, liquidityand funding, and related disclosure requirements
This Pillar 3 report has been prepared in accordance with Swiss Financial Market Supervisory Authority (FINMA) Pillar 3 disclosure requirements (FINMA Circular 2016/1 “Disclosure – banks”), as revised on 6 May 2021, 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.
Significantregulatory developments, and disclosure requirements and changes effective in thisquarter
Swiss Federal Council report on systemically important banks and revision of the Swiss Liquidity Ordinance
In June 2021, the Swiss Federal Council issued the results of its bi-annual review of the Swiss too-big-to-fail regulatory framework. The report concludes that no fundamental changes to the framework are needed. Potential areas for adjustment identified include the further tightening of the liquidity requirements for systemically important banks and the alignment of incentive systems to support a bank’s resolvability.
Subsequently, the Swiss Federal Department of Finance launched a consultation on proposed revisions to the Swiss Liquidity Ordinance in September 2021, with the aim of strengthening the resilience of systemically important banks in Switzerland. As proposed, the revisions would increase the regulatory minimum liquidity requirements for systemically important banks, including UBS. The consultation period is scheduled to end on 13 January 2022. UBS is assessing the implications of the proposed revisions.
NSFR implementation
On 1 July 2021, the net stable funding ratio (the NSFR) regulation, which was adopted by the Swiss Federal Council in 2020, came into effect. 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.
Based on the regulation, and as agreed with FINMA, UBS AG standalone is required to maintain a minimum NSFR of at least 80% without taking into account excess funding of UBS Switzerland AG and 100% after taking into account such excess funding.
› Refer to the “Key metrics,” “UBS AGstandalone” and “UBS Switzerland AG standalone” sections of this report
Registration under the US security-based swaps regulations
Under US Securities and Exchange Commission (SEC) regulations, UBS AG is required to register as a security-based swap dealer by 1 November 2021. On 8 October 2021, FINMA and the SEC finalized a memorandum of understanding relating to cooperation in oversight of Swiss entities registered under the SEC’s security-based swaps regulations. The SEC also published a substituted compliance order modifying the application of certain of its regulations for Swiss security-based swap dealers.
Stress capital buffer in the US
Following the completion of the annual Dodd–Frank Act Stress Testing (DFAST) and the Comprehensive Capital Analysis and Review (CCAR), UBS Americas Holding LLC was assigned a stress capital buffer (SCB) of 7.1% (previously 6.7%) under the SCB rule as of 1 October 2021, resulting in a total common equity tier 1 (CET1) capital requirement of 11.6%. As of 30 September 2021, the CET1 ratio of UBS Americas Holding LLC was 20.7%.
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Removal of ECB restrictions on dividend payments by banks
In July 2021, the European Central Bank (the ECB) announced its decision to remove the COVID-19-related restrictions on capital distributions and share buybacks by banks with effect from 1 October 2021.
FINMA’s assessment of the recovery and resolution planning
In March 2021, FINMA published its annual assessment of the recovery and resolution plans of systemically important financial institutions in Switzerland. The report noted that FINMA had approved UBS’s group recovery plan and assessed its Swiss Emergency Plan as effective. It also highlighted that UBS has made further progress in improving its global resolvability by building up the necessary capabilities and removing obstacles to the implementation of the resolution strategy, while pointing out areas for further improvement.
Based on the actions we completed by December 2020 to improve resolvability, FINMA granted an increase of the maximum rebate, from 47.5% to 55.0%, on the Swiss SRB gone concern capital requirements for UBS Group AG consolidated and UBS AG consolidated, effective from 1 July 2021.
› Refer to the “Going and gone concernrequirements and eligible capital” section of this report
COVID-19 temporary regulatory measures
The temporary exemption from FINMA for banks to exclude central bank sight deposits from the leverage ratio denominator (LRD) for the purpose of calculating going concern ratios applied from 25 March 2020 until 1 January 2021 and was not extended thereafter.
Strategic partnership with Sumitomo Mitsui Trust Holdings
In 2019, UBS entered into a strategic wealth management partnership in Japan with Sumitomo Mitsui Trust Holdings, Inc. (SuMi Trust Holdings). In January 2020, the first phase was launched, with operations commencing in the joint venture that was established to promote our respective services. At the time, UBS and SuMi Trust Holdings also started offering each other’s products and services to their respective clients.
In the third quarter of 2021, the second phase of the partnership was completed, with the launch of a new operational partnership entity, UBS SuMi TRUST Wealth Management Co., Ltd., which is 51% owned and controlled by UBS, requiring us to consolidate this entity. The new entity offers global securities and wealth management capabilities, together with the custody, real estate, inheritance and wealth transfer expertise of a Japanese trust banking group.
Upon completion of this transaction in the third quarter of 2021, UBS’s CET1 capital increased by USD 189 million, with no effect on profit or loss.
Material model updates
Effective from the third quarter of 2020, we began to phase in risk-weighted asset (RWA) increases resulting from new probability of default (PD) and loss given default (LGD) models for the mortgage portfolio in the US. As agreed with FINMA, the effect on RWA is being phased in over six quarters, through the end of 2021, resulting in an increase of USD 0.5 billion in the third quarter of 2021.
At the beginning of the second quarter of 2021, we also began to phase in an RWA increase related to a new model for structured margin loans and similar products in Global Wealth Management. This RWA increase is being phased in over five quarters and the model will be fully implemented by the second quarter of 2022. RWA increased by USD 0.7 billion in the third quarter of 2021 due to the aforementioned model introduction.
The third quarter of 2021 also included an RWA reduction of USD 0.3 billion related to the introduction of new models for the leasing of aircraft and industrial goods.
Material regulatory add-ons
The third quarter included a market risk RWA increase due to the introduction of a regulatory add-on of USD 5.5 billion, which considers profit or loss resulting from time decay in addition to the regulatory value-at-risk (VaR) and stressed VaR. The add-on reflects the outcome of discussions with FINMA regarding our regulatory VaR model, which started in late 2019. The integration of time decay into the regulatory VaR model, which would replace the add-on, is subject to further discussions between FINMA and UBS.
The third quarter of 2021 also included RWA increases related to regulatory add-ons in credit and counterparty credit risk of USD 1.2 billion for prime brokerage clients, as well as USD 0.4 billion for clients leasing aircraft and industrial goods. We expect further increases of around USD 2 billion related to prime brokerage clients in the fourth quarter of 2021.
Changes to capital add-on requirements
The applicable market share add-on requirements set by FINMA for UBS Group AG consolidated, UBS AG standalone and UBS Switzerland AG standalone as of 30 September 2021 were 0.72% for risk-weighted asset (RWA) and 0.25% for leverage ratio denominator (LRD) purposes. These add-ons were increased by 0.36% for RWA and 0.125% for LRD in the third quarter of 2021, reflecting an increase in UBS’s market share in the Swiss credit business to more than 17%.
Frequency and comparability of Pillar 3 disclosures
FINMA has specified the reporting frequency for each disclosure, as outlined in the table on pages 7–9 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.
In line with the FINMA-specified disclosure frequency and requirements for disclosure with regard to comparative periods, we provide quantitative comparative information as of 30 June 2021 for disclosures required on a quarterly basis. Where specifically required by FINMA and / or the BCBS, we disclose comparative information for additional reporting dates.
› Refer to our 30 June 2021 Pillar 3report, available under “Pillar 3 disclosures” at ubs.com/investors , **** formore information about previously published quarterly movement commentary
3
UBS Group
UBS Group AG consolidated
Section1 Key metrics
Key metrics of the third quarter of 2021
The KM1 and KM2 tables on the following pages are based on the Basel Committee on Banking Supervision (the BCBS) Basel III rules. 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.
Our common equity tier 1 (CET1) and leverage ratios increased in the third quarter of 2021, primarily reflecting increases in capital. Our CET1 capital increased by USD 2.4 billion to USD 45.0 billion, mainly reflecting operating profit before tax of USD 2.9 billion, an increase of USD 0.2 billion related to the launch of our new operational partnership entity with Sumitomo Mitsui Trust Holdings, Inc. and USD 0.2 billion higher eligible deferred tax assets on temporary differences. These effects were partly offset by current tax expenses of USD 0.4 billion, accruals for capital returns to shareholders of USD 0.3 billion and negative foreign currency translation effects of USD 0.2 billion.
Our tier 1 capital increased by USD 1.2 billion to USD 60.4 billion, primarily reflecting the aforementioned increase in our CET1 capital, partly offset by the call of an additional tier 1 (AT1) capital instrument with a nominal amount of USD 1.1 billion.
The TLAC available as of 30 September 2021 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 are measured at the lower of cost or market value. This amount was negligible as of 30 September 2021, but is included as available TLAC in the KM2 table in this section.
Our available TLAC decreased by USD 1.5 billion to USD 102.8 billion in the third quarter of 2021, reflecting the aforementioned USD 1.2 billion increase in our tier 1 capital and a USD 2.7 billion decrease in non-regulatory capital instruments, which mainly resulted from a USD 2 billion low-trigger loss-absorbing tier 2 capital instrument that ceased to be eligible as it had less than one year to maturity, the call of a EUR 1.75 billion TLAC-eligible senior unsecured debt, and effects from interest rate risk hedges and foreign currency translation, partly offset by a USD 2 billion issuance of TLAC-eligible senior unsecured debt.
Risk-weighted assets (RWA) increased by USD 9.1 billion to USD 302.4 billion, mainly due to increases in market risk RWA of USD 6.2 billion, counterparty credit risk RWA of USD 1.2 billion, and credit risk RWA of USD 1.0 billion. The increase in RWA more than offset the increases in tier 1 and total capital, resulting in decreases in the tier 1 and total capital ratios of 0.2 and 0.4 percentage points, respectively, during the third quarter of 2021.
The leverage ratio exposure increased by USD 5 billion to USD 1,045 billion, driven by on-balance sheet exposures (other than securities financing transactions (SFTs) and derivatives) and derivative exposures, partly offset by a decrease in SFTs.
Average high-quality liquid assets (HQLA) decreased by USD 1.1 billion to USD 230.9 billion, driven by an increase in assets subject to local transfer restrictions. Average total net cash outflows decreased by USD 2.4 billion to USD 146.8 billion, mainly due to decreases in outflows from secured financing transactions.
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| KM1: Key metrics | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
|---|---|---|---|---|---|---|---|---|---|---|
| million, except where indicated | ||||||||||
| **** | **** | 30.9.21 | 30.6.21 | 31.3.21 | 31.12.20 | 30.9.20 | ||||
| Available capital (amounts) | **** | |||||||||
| 1 | Common Equity Tier 1 (CET1) | 45,022 | 42,583 | 40,426 | 39,890 | 38,197 | ||||
| 1a | Fully loaded ECL accounting model CET1^1^ | 45,008 | 42,561 | 40,403 | 39,856 | 38,162 | ||||
| 2 | Tier 1 | 60,369 | 59,188 | 56,288 | 56,178 | 54,396 | ||||
| 2a | Fully loaded ECL accounting model Tier 1^1^ | 60,355 | 59,166 | 56,264 | 56,144 | 54,360 | ||||
| 3 | Total capital | 61,855 | 61,184 | 58,822 | 61,226 | 59,382 | ||||
| 3a | Fully loaded ECL accounting model total capital^1^ | 61,841 | 61,162 | 58,799 | 61,193 | 59,347 | ||||
| Risk-weighted assets (amounts) | **** | |||||||||
| 4 | Total risk-weighted assets (RWA) | 302,426 | 293,277 | 287,828 | 289,101 | 283,133 | ||||
| 4a | Minimum capital requirement^2^ | 24,194 | 23,462 | 23,026 | 23,128 | 22,651 | ||||
| 4b | Total risk-weighted assets (pre-floor) | 302,426 | 293,277 | 287,828 | 289,101 | 283,133 | ||||
| Risk-based capital ratios as a percentage of RWA | **** | |||||||||
| 5 | CET1 ratio (%) | 14.89 | 14.52 | 14.05 | 13.80 | 13.49 | ||||
| 5a | Fully loaded ECL accounting model CET1 ratio (%)^1^ | 14.88 | 14.51 | 14.04 | 13.79 | 13.48 | ||||
| 6 | Tier 1 ratio (%) | 19.96 | 20.18 | 19.56 | 19.43 | 19.21 | ||||
| 6a | Fully loaded ECL accounting model Tier 1 ratio (%)^1^ | 19.96 | 20.17 | 19.55 | 19.42 | 19.20 | ||||
| 7 | Total capital ratio (%) | 20.45 | 20.86 | 20.44 | 21.18 | 20.97 | ||||
| 7a | Fully loaded ECL accounting model total capital ratio (%)^1^ | 20.45 | 20.85 | 20.43 | 21.17 | 20.96 | ||||
| Additional CET1 buffer requirements as a percentage of RWA | **** | |||||||||
| 8 | Capital conservation buffer requirement (%) | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 | ||||
| 9 | Countercyclical buffer requirement (%) | 0.02 | 0.02 | 0.02 | 0.02 | 0.02 | ||||
| 9a | Additional countercyclical buffer for Swiss mortgage loans (%) | **** | ||||||||
| 10 | Bank G-SIB and / or D-SIB additional requirements (%) | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||
| 11 | Total of bank CET1 specific buffer requirements (%) | 3.52 | 3.52 | 3.52 | 3.52 | 3.52 | ||||
| 12 | CET1 available after meeting the bank’s minimum capital<br> requirements (%) | 10.39 | 10.02 | 9.55 | 9.30 | 8.99 | ||||
| Basel III leverage ratio3 | **** | |||||||||
| 13 | Total Basel III leverage ratio exposure measure | 1,044,916 | **** | 1,039,939 | 1,038,225 | 1,037,150 | 994,366 | |||
| 14 | Basel III leverage ratio (%) | 5.78 | **** | 5.69 | 5.42 | 5.42 | 5.47 | |||
| 14a | Fully loaded ECL accounting model Basel III leverage ratio (%)^1^ | 5.78 | 5.69 | 5.42 | 5.41 | 5.47 | ||||
| Liquidity coverage ratio (LCR)4 | **** | |||||||||
| 15 | Total high-quality liquid assets (HQLA) | 230,885 | 232,026 | 221,371 | 214,276 | 211,185 | ||||
| 16 | Total net cash outflow | 146,831 | 149,183 | 146,314 | 140,891 | 137,345 | ||||
| 17 | LCR (%) | 157 | 156 | 151 | 152 | 154 | ||||
| Net stable funding ratio (NSFR)5 | **** | |||||||||
| 18 | Total available stable funding | 558,936 | ||||||||
| 19 | Total required stable funding | 473,140 | ||||||||
| 20 | NSFR (%) | 118 | ||||||||
| 1 The fully loaded<br> ECL accounting model excludes the transitional relief of recognizing ECL<br> allowances and provisions in CET1 capital in accordance with FINMA Circular<br> 2013/1 “Eligible capital – banks.” 2 Calculated as 8% of total RWA,<br> based on total capital minimum requirements, excluding CET1 buffer<br> requirements. 3 Leverage ratio exposures and leverage ratios for the<br> respective periods in 2020 do not reflect the effects of the temporary<br> exemption that applied from 25 March 2020 until 1 January 2021 and was<br> granted by FINMA in connection with COVID-19. Refer to the “Introduction and<br> basis for preparation” section 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 our<br> 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures”<br> at ubs.com/investors, for more information. 4 Calculated based on<br> quarterly average. Refer to the “Liquidity coverage ratio” section of this<br> report for more information. 5 Refer to the “Introduction and basis for<br> preparation” section of this report and to the “Liquidity and funding<br> management” section of the UBS Group third quarter 2021 report for more<br> information. |
All values are in US Dollars.
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UBS Group AG consolidated
| KM2: Key metrics –<br> TLAC requirements (at resolution group level)1 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| million, except where indicated | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| **** | 30.9.21 | 30.6.21 | 31.3.21 | 31.12.20 | 30.9.20 | ||||||
| 1 | Total loss-absorbing capacity (TLAC) available | 102,840 | 104,348 | 100,720 | 101,814 | 97,753 | |||||
| 1a | Fully loaded ECL accounting model TLAC available^2^ | 102,827 | 104,325 | 100,697 | 101,780 | 97,717 | |||||
| 2 | Total RWA at the level of the resolution group | 302,426 | 293,277 | 287,828 | 289,101 | 283,133 | |||||
| 3 | TLAC as a percentage of RWA (%) | 34.01 | 35.58 | 34.99 | 35.22 | 34.53 | |||||
| 3a | Fully loaded ECL accounting model TLAC as a percentage of fully<br> loaded ECL accounting model RWA (%)^2^ | 34.00 | 35.57 | 34.98 | 35.21 | 34.51 | |||||
| 4 | Leverage ratio exposure measure at the level of the resolution<br> group^3^ | 1,044,916 | 1,039,939 | 1,038,225 | 1,037,150 | 994,366 | |||||
| 5 | TLAC as a percentage of leverage ratio exposure measure (%) | 9.84 | 10.03 | 9.70 | 9.82 | 9.83 | |||||
| 5a | Fully loaded ECL accounting model TLAC as a percentage of fully<br> loaded ECL accounting model leverage exposure measure (%)^2,3^ | 9.84 | 10.03 | 9.70 | 9.81 | 9.83 | |||||
| 6a | Does the subordination exemption in the antepenultimate<br> paragraph of Section 11 of the FSB TLAC Term Sheet apply? | No | |||||||||
| 6b | Does the subordination exemption in the penultimate paragraph of<br> Section 11 of the FSB TLAC Term Sheet apply? | No | |||||||||
| 6c | If the capped subordination exemption applies, the amount of<br> funding issued that ranks pari passu with excluded liabilities and that is<br> recognized as external TLAC, divided by funding issued that ranks pari passu<br> with excluded liabilities and that would be recognized as external TLAC if no<br> cap was applied (%) | N/A – Refer to our response to 6b. | |||||||||
| 1 Resolution group<br> level is defined as the UBS Group AG consolidated level. 2 The fully<br> loaded ECL accounting model excludes the transitional relief of recognizing<br> ECL allowances and provisions in CET1 capital in accordance with FINMA<br> Circular 2013/1 “Eligible capital – banks.” 3 Leverage ratio<br> exposures and leverage ratios for the respective periods in 2020 do not<br> reflect the effects of the temporary exemption that applied from 25 March<br> 2020 until 1 January 2021 and was granted by FINMA in connection with<br> COVID-19. Refer to the “Introduction and basis for preparation” section and<br> to “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 our 31 December 2020 Pillar 3 report, available under<br> “Pillar 3 disclosures” at ubs.com/investors, for more information. |
All values are in US Dollars.
8
Section 2 Risk-weighted assets
Our approach to measuring risk exposure and risk-weightedassets
Exposures are measured for financial accounting purposes under International Financial Reporting Standards (IFRS), for deriving our regulatory capital requirements 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 risk-weighted assets (RWA) are calculated according to the Basel Committee on Banking Supervision (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 the Swiss Financial Market Supervisory Authority (FINMA).
For information about the measurement of risk exposures and RWA, refer to pages 13–15 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.
Overview of RWA and capital requirements
The OV1 table on the following page provides an overview of our RWA and the related minimum capital requirements by risk type. The table presented is based on the respective FINMA template and empty rows indicate current non-applicability to UBS.
During the third quarter of 2021, RWA increased by USD 9.1 billion to USD 302.4 billion, mainly due to increases in market risk RWA of USD 6.2 billion, counterparty credit risk RWA of USD 1.2 billion, and credit risk RWA of USD 1.0 billion. The increase of USD 9.1 billion included a decrease of USD 1.6 billion related to currency effects.
Market risk RWA increased by USD 6.2 billion to USD 14.0 billion in the third quarter of 2021, primarily due to the introduction of a regulatory add-on of USD 5.5 billion, which considers profit or loss resulting from time decay in addition to the regulatory value-at-risk (VaR) and stressed VaR. The add-on reflects the outcome of discussions with FINMA regarding our regulatory VaR model, which started in late 2019. The integration of time decay into the regulatory VaR model, which would replace the add-on, is subject to further discussions between FINMA and UBS. The market risk RWA increase was also driven by a USD 1.0 billion increase from portfolio and market movements, primarily in the Investment Bank’s Global Markets business.
Credit Risk RWA increased by USD 1.0 billion, primarily driven by model updates of USD 1.0 billion, mainly due to the quarterly phase-in impacts for structured margin loans and similar products in Global Wealth Management, as well as new probability of default (PD) and loss given default (LGD) models for the mortgage portfolio in the US, partly offset by a reduction related to the introduction of new models for the leasing of aircraft and industrial goods. Asset size and other movements increased by USD 0.7 billion, reflecting increases in Lombard and other loans in Global Wealth Management. Credit risk RWA in the third quarter of 2021 also included a regulatory add-on of USD 0.4 billion related to the aforementioned models for the leasing of aircraft and industrial goods. These increases were partly offset by a decrease related to currency effects of USD 1.0 billion.
Counterparty credit risk RWA increased by USD 1.2 billion, primarily due to a regulatory add-on of USD 1.2 billion related to prime brokerage clients. Asset size and other movements increased by USD 0.7 billion, mainly driven by increased RWA for derivatives in the Investment Bank. These increases were partly offset by decreases related to currency effects of USD 0.4 billion, model updates of USD 0.1 billion, and methodology and policy changes of USD 0.1 billion.
The flow tables for credit risk, counterparty credit risk and market risk RWA in this section provide further details regarding the movements in RWA in the third quarter of 2021.
More information about capital management and RWA, including details regarding movements in RWA during the third quarter of 2021, is provided on pages 42–43 in the “Capital management” section of our third quarter 2021 report, available under ”Quarterly reporting” at ubs.com/investors.
9
UBS Group AG consolidated
| OV1: Overview of RWA | ||||||
|---|---|---|---|---|---|---|
| RWA | Minimum capital requirements^1^ | |||||
| million | 30.9.21 | 30.6.21 | 30.9.21 | |||
| 1 | Credit risk (excluding counterparty credit risk) | 147,143 | 146,162 | 11,771 | ||
| 2 | of which: standardized approach (SA) | 34,959 | 34,895 | 2,797 | ||
| 2a | of which: non-counterparty-related risk | 12,842 | 12,921 | 1,027 | ||
| 3 | of which: foundation internal ratings-based (F-IRB) approach | **** | **** | |||
| 4 | of which: supervisory slotting approach | **** | **** | |||
| 5 | of which: advanced internal ratings-based (A-IRB) approach | 112,184 | 111,267 | 8,975 | ||
| 6 | Counterparty credit risk^2^ | 40,270 | 39,058 | 3,222 | ||
| 7 | of which: SA for counterparty credit risk (SA-CCR) | 7,437 | 7,406 | 595 | ||
| 8 | of which: internal model method (IMM) | 18,555 | 17,232 | 1,484 | ||
| 8a | of which: value-at-risk (VaR) | 8,921 | 7,909 | 714 | ||
| 9 | of which: other CCR | 5,356 | 6,510 | 429 | ||
| 10 | Credit valuation adjustment (CVA) | 4,054 | 3,938 | 324 | ||
| 11 | Equity positions under the simple risk-weight approach | 3,308 | 3,197 | 265 | ||
| 12 | Equity investments in funds – look-through approach | 1,100 | 1,070 | 88 | ||
| 13 | Equity investments in funds – mandate-based approach | 1,331 | 1,486 | 106 | ||
| 14 | Equity investments in funds – fallback approach | 393 | 378 | 31 | ||
| 15 | Settlement risk | 549 | 341 | 44 | ||
| 16 | Securitization exposures in banking book | 405 | 379 | 32 | ||
| 17 | of which: securitization internal ratings-based approach (SEC-IRBA) | **** | **** | |||
| 18 | of which: securitization external ratings-based approach (SEC-ERBA), including internal assessment approach (IAA) | 260 | 305 | 21 | ||
| 19 | of which: securitization standardized approach (SEC-SA) | 145 | 74 | 12 | ||
| 20 | Market Risk | 14,044 | 7,818 | 1,123 | ||
| 21 | of which: standardized approach (SA) | 684 | 726 | 55 | ||
| 22 | of which: internal models approach (IMA) | 13,359 | 7,093 | 1,069 | ||
| 23 | Capital charge for switch between trading book and banking book^3^ | **** | **** | **** | ||
| 24 | Operational risk | 75,775 | 75,775 | 6,062 | ||
| 25 | Amounts below thresholds for deduction (250% risk weight)^4^ | 14,055 | 13,676 | 1,124 | ||
| 25a | of which: deferred tax assets | 10,803 | 10,392 | 864 | ||
| 26 | Floor adjustment^5^ | **** | **** | |||
| 27 | Total | 302,426 | 293,277 | **** | 24,194 | |
| 1 Calculated based<br> on 8% of RWA. 2 Excludes settlement risk, which is separately reported in<br> line 15 “Settlement risk.” Includes RWA with central counterparties. The<br> split between the sub-components of counterparty credit risk refers to the calculation<br> of the exposure measure. 3 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). 4 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. 5 No floor<br> effect, as 80% of our Basel I RWA, including the RWA equivalent of the Basel<br> I capital deductions, does not exceed our Basel III RWA, including the RWA<br> equivalent of the Basel III capital deductions. |
All values are in US Dollars.
10
RWA flow statements of creditrisk exposures under IRB
The CR8 table below provides a breakdown of the credit risk RWA movements in the third quarter of 2021 across movement categories defined by the BCBS. These categories are described on page 48 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.
Credit risk RWA under the A-IRB approach increased by USD 0.9 billion to USD 112.2 billion during the third quarter of 2021.
The RWA increase from asset size movements of USD 2.0 billion was predominantly driven by increases in Lombard and other loans in Global Wealth Management and increases in loans and loan commitments to corporate clients in Personal & Corporate Banking. The RWA related to asset quality decreased by USD 1.1 billion, mainly due to improvements in average risk profiles in Global Wealth Management and Personal & Corporate Banking. Model updates of USD 1.0 billion were mainly due to the quarterly phase-in impacts for structured margin loans and similar products in Global Wealth Management, as well as new probability of default (PD) and loss given default (LGD) models for the mortgage portfolio in the US, partly offset by a reduction related to the introduction of new models for the leasing of aircraft and industrial goods. Regulatory add-ons of USD 0.4 billion were primarily related to the aforementioned models for the leasing of aircraft and industrial goods. Foreign exchange movements led to an RWA decrease of USD 0.7 billion.
| CR8: RWA flow statements of credit risk exposures under IRB | ||
|---|---|---|
| million | For the quarter ended 30.9.21 | |
| 1 | RWA as of the beginning of the quarter | 111,267 |
| 2 | Asset size | 1,985 |
| 3 | Asset quality | (1,141) |
| 4 | Model updates | 986 |
| 5 | Methodology and policy | 375 |
| 5a | of which: regulatory add-ons | 375 |
| 6 | Acquisitions and disposals | (15) |
| 7 | Foreign exchange movements | (723) |
| 8 | Other | (550) |
| 9 | RWA as of the end of the quarter | 112,184 |
All values are in US Dollars.
RWA flow statements ofcounterparty credit risk exposures under the IMM and VaR
The CCR7 table below presents a flow statement explaining changes in counterparty credit risk (CCR) RWA determined under the internal model method (IMM) for derivatives and the VaR approach for securities financing transactions (SFTs).
CCR RWA on derivatives under the IMM increased by USD 1.3 billion to USD 18.6 billion during the third quarter of 2021, primarily due to asset size movements in the Investment Bank, mainly as a result of higher client activity levels. The increase was partly offset by a decrease related to currency effects of USD 0.2 billion, model updates of USD 0.1 billion, and methodology and policy changes of USD 0.1 billion.
CCR RWA on SFTs under the VaR approach increased by USD 1.0 billion to USD 8.9 billion during the third quarter of 2021, primarily driven by a regulatory add-on of USD 1.2 billion related to prime brokerage clients.
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” on page 48 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.
| CCR7: RWA flow statements of CCR exposures under Internal Model<br> Method (IMM) and value-at-risk (VaR) | |||||
|---|---|---|---|---|---|
| For the quarter ended 30.9.21 | |||||
| million | Derivatives | SFTs | Total | ||
| Subject to IMM | Subject to VaR | **** | |||
| 1 | RWA as of the beginning of the quarter | **** | 17,232 | 7,909 | 25,141 |
| 2 | Asset size | 1,721 | (45) | 1,676 | |
| 3 | Credit quality of counterparties | 61 | (35) | 26 | |
| 4 | Model updates | (135) | **** | (135) | |
| 5 | Methodology and policy | (90) | 1,152 | 1,062 | |
| 5a | of which: regulatory add-ons | **** | 1,152 | 1,152 | |
| 6 | Acquisitions and disposals | **** | **** | **** | |
| 7 | Foreign exchange movements | (233) | (61) | (294) | |
| 8 | Other | **** | **** | **** | |
| 9 | RWA as of the end of the quarter | **** | 18,555 | 8,921 | 27,477 |
All values are in US Dollars.
11
UBS Group AG consolidated
RWA flow statements of marketrisk exposures under an internal models approach
The three main components that contribute to market risk RWA are VaR, stressed value-at-risk (SVaR) and the incremental risk charge (IRC). The VaR and SVaR components include the RWA charge for risks not in VaR (RniV).
The MR2 table below provides a breakdown of the movement in market risk RWA in the third quarter of 2021 under an internal models approach (IMA) across those components, pursuant to the movement categories defined by the BCBS. These categories are described on page 78 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.
Market risk RWA under an IMA increased by USD 6.3 billion to USD 13.4 billion in the third quarter of 2021, primarily due to the introduction of a regulatory add-on of USD 5.5 billion. For further information, refer to the “Introduction and basis for preparation” section of this report.
The VaR multiplier was unchanged compared with the prior quarter, at 3.0.
| MR2: RWA flow statements of market risk exposures under an IMA1 | |||||||
|---|---|---|---|---|---|---|---|
| million | VaR | Stressed VaR | IRC | CRM | Other | Total RWA | |
| 1 | RWA as of 30.6.21 | 1,036 | 3,846 | 2,211 | **** | **** | 7,093 |
| 1a | Regulatory adjustment | (727) | (2,288) | **** | **** | **** | (3,015) |
| 1b | RWA at previous quarter-end (end of day) | 309 | 1,558 | 2,211 | **** | **** | 4,078 |
| 2 | Movement in risk levels | 475 | 22 | (470) | **** | **** | 27 |
| 3 | Model updates/changes | (49) | (135) | **** | **** | **** | (184) |
| 4 | Methodology and policy | 2,428 | 2,428 | **** | **** | **** | 4,856 |
| 5 | Acquisitions and disposals | **** | **** | **** | **** | **** | **** |
| 6 | Foreign exchange movements | **** | **** | **** | **** | **** | **** |
| 7 | Other | 17 | 61 | **** | **** | **** | 78 |
| 8a | RWA at the end of the reporting period (end of day) | 3,180 | 3,933 | 1,741 | **** | **** | 8,854 |
| 8b | Regulatory adjustment | 846 | 3,659 | **** | **** | **** | 4,505 |
| 8c | RWA as of 30.9.21 | 4,026 | 7,593 | 1,741 | **** | **** | 13,359 |
| 1 Components that<br> describe movements in RWA are presented in italics. |
All values are in US Dollars.
12
Section 3 Going and gone concern requirements and eligiblecapital
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). More information about capital management is provided on pages 35–45 in the “Capital management” section of our third quarter 2021 report, available under ”Quarterly reporting” at ubs.com/investors.
| Swiss SRB going and gone concern requirements and information | ||||||
|---|---|---|---|---|---|---|
| As of 30.9.21 | RWA | LRD | ||||
| million, except where indicated | in % | **** | in % | **** | ||
| Required going concern capital | **** | **** | **** | **** | **** | |
| Total going concern capital | 14.32^1^ | 43,309 | **** | 5.00^1^ | 52,246 | |
| Common equity tier 1 capital | 10.02 | 30,305 | **** | 3.50^2^ | 36,572 | |
| of which: minimum capital | 4.50 | 13,609 | 1.50 | 15,674 | ||
| of which: buffer capital | 5.50 | 16,633 | 2.00 | 20,898 | ||
| of which: countercyclical buffer | 0.02 | 62 | ||||
| Maximum additional tier 1 capital | 4.30 | 13,004 | **** | 1.50 | 15,674 | |
| of which: additional tier 1 capital | 3.50 | 10,585 | 1.50 | 15,674 | ||
| of which: additional tier 1 buffer capital | 0.80 | 2,419 | ||||
| Eligible going concern capital | **** | **** | **** | **** | **** | |
| Total going concern capital | 19.96 | 60,369 | **** | 5.78 | 60,369 | |
| Common equity tier 1 capital | 14.89 | 45,022 | 4.31 | 45,022 | ||
| Total loss-absorbing additional tier 1 capital3 | 5.07 | 15,347 | **** | 1.47 | 15,347 | |
| of which: high-trigger loss-absorbing additional tier 1 capital | 4.26 | 12,874 | 1.23 | 12,874 | ||
| of which: low-trigger loss-absorbing additional tier 1 capital | 0.82 | 2,473 | 0.24 | 2,473 | ||
| Required gone concern capital | **** | **** | **** | **** | **** | |
| Total gone concern loss-absorbing capacity4 | 10.73 | 32,447 | **** | 3.77 | 39,433 | |
| of which: base requirement5 | 12.86 | 38,892 | 4.50 | 47,021 | ||
| of which: additional requirement for market share and LRD6 | 1.44 | 4,355 | 0.50 | 5,225 | ||
| of which: applicable reduction on requirements | (3.57) | (10,800) | (1.23) | (12,813) | ||
| of which: rebate granted (equivalent to 55% of maximum rebate) | (3.14) | (9,481) | (1.10) | (11,494) | ||
| of which: reduction for usage of low-trigger tier 2 capital<br> instruments | (0.44) | (1,319) | (0.13) | (1,319) | ||
| Eligible gone concern capital | **** | **** | **** | **** | **** | |
| Total gone concern loss-absorbing capacity | 14.03 | 42,428 | **** | 4.06 | 42,428 | |
| Total tier 2 capital | 1.05 | 3,185 | **** | 0.30 | 3,185 | |
| of which: low-trigger loss-absorbing tier 2 capital | 0.87 | 2,638 | 0.25 | 2,638 | ||
| of which: non-Basel III-compliant tier 2 capital | 0.18 | 548 | 0.05 | 548 | ||
| TLAC-eligible senior unsecured debt | 12.98 | 39,242 | **** | 3.76 | 39,242 | |
| Total loss-absorbing capacity | **** | **** | **** | **** | **** | |
| Required total loss-absorbing capacity | 25.05 | 75,756 | **** | 8.77 | 91,679 | |
| Eligible total loss-absorbing capacity | 33.99 | 102,796 | **** | 9.84 | 102,796 | |
| **** | **** | **** | **** | **** | **** | **** |
| Risk-weighted assets / leverage ratio denominator | **** | **** | **** | **** | **** | |
| Risk-weighted assets | **** | 302,426 | **** | **** | **** | |
| Leverage ratio denominator | **** | **** | **** | **** | 1,044,916 | |
| 1 Includes<br> applicable add-ons of 1.44% for RWA and 0.50% for LRD. 2 Our minimum CET1<br> leverage ratio requirement of 3.5% consists of a 1.5% base requirement, a<br> 1.5% base buffer capital requirement, a 0.25% LRD add-on requirement and a<br> 0.25% market share add-on requirement based on our Swiss credit business. <br> 3 Includes outstanding low-trigger loss-absorbing additional tier 1 (AT1)<br> capital instruments, which are available under the Swiss SRB framework to<br> meet the going concern requirements until their first call date. As of their<br> first call date, these instruments are eligible to meet the gone concern<br> requirements. 4 A maximum of 25% of the gone concern requirements can be<br> 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. 5 The<br> gone concern requirement after the application of the rebate for<br> resolvability measures and the reduction for the use of higher quality<br> capital instruments is floored at 8.6% and 3% for the RWA- and LRD-based requirements,<br> respectively. This means that the combined reduction may not exceed 5.7<br> percentage points for the RWA-based requirement of 14.3% and 2.0 percentage<br> points for the LRD-based requirement of 5.0%. 6 A higher add-on<br> requirement for market share was applied in the third quarter of 2021, of<br> which 0.72% was applied for RWA and 0.25% for LRD. |
All values are in US Dollars.
13
UBS Group AG consolidated
Section 4 Leverage ratio
Basel III leverage ratio
The Basel Committee on Banking Supervision (the 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 (the 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 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.
Difference between the Swiss SRB and BCBS leverage ratio
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 UBS is 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.
| Reconciliation of IFRS total assets to BCBS Basel III total on-balance sheet exposures excluding derivatives and securities financing transactions | ||
|---|---|---|
| USD million | 30.9.21 | 30.6.21 |
| On-balance sheet exposures | **** | **** |
| IFRS total assets | 1,088,773 | 1,086,519 |
| 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 | (21,307) | (22,344) |
| 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^1^ | (152,856) | (151,418) |
| Less carrying amount of securities financing transactions in<br> IFRS total assets^2^ | (100,171) | (111,216) |
| Adjustments to accounting values | **** | |
| On-balance sheet items excluding derivatives and securities financing transactions, but including collateral | 814,440 | 801,541 |
| Asset amounts deducted in determining BCBS Basel III tier 1<br> capital | (11,565) | (11,963) |
| Total on-balance sheet exposures (excluding derivatives and securities financing transactions) | 802,875 | 789,578 |
| 1 The<br> exposures consist of derivative financial instruments and cash collateral<br> receivables on derivative instruments, all of which are in accordance with<br> the regulatory scope of consolidation. 2 The exposures consist of<br> receivables from SFTs, margin loans, prime brokerage receivables and<br> financial assets at fair value not held for trading, both related to SFTs,<br> all of which are in accordance with the regulatory scope of consolidation. |
14
During the third quarter of 2021, the LRD increased by USD 5 billion to USD 1,045 billion. On-balance sheet exposures (excluding derivatives and SFTs) increased by USD 13 billion, mainly driven by higher central bank balances and trading assets, partly offset by a reduction in high-quality liquid asset (HQLA) securities. Derivative exposures increased by USD 3 billion, mainly reflecting higher client volumes and market-driven movements in the Investment Bank. SFTs decreased by
USD 11 billion, mainly due to excess cash reinvestment trade roll-offs and a reduction in collateral sourcing requirements, as well as lower brokerage receivables and a decrease in borrowing activities.
› Refer to “Leverage ratio denominator”in the “Capital management” section of our third quarter 2021 report, availableunder “Quarterly reporting” at ubs.com/investors, for more information
| LR2: BCBS Basel III leverage ratio common disclosure | |||
|---|---|---|---|
| million, except where indicated | 30.9.21 | 30.6.21 | |
| **** | On-balance sheet exposures | **** | **** |
| 1 | On-balance sheet items excluding derivatives and SFTs, but<br> including collateral | 814,440 | 801,541 |
| 2 | (Asset amounts deducted in determining Basel III Tier 1 capital) | (11,565) | (11,963) |
| 3 | Total on-balance sheet exposures (excluding derivatives and SFTs) | 802,875 | 789,578 |
| **** | Derivative exposures | **** | **** |
| 4 | Replacement cost associated with all derivatives transactions<br> (i.e., net of eligible cash variation margin) | 50,712 | 49,315 |
| 5 | Add-on amounts for PFE associated with all derivatives<br> transactions | 85,073 | 84,187 |
| 6 | Gross-up for derivatives collateral provided where deducted from<br> the balance sheet assets pursuant to the operative accounting framework | 0 | 0 |
| 7 | (Deductions of receivables assets for cash variation margin<br> provided in derivatives transactions) | (20,096) | (19,910) |
| 8 | (Exempted CCP leg of client-cleared trade exposures) | (15,947) | (16,753) |
| 9 | Adjusted effective notional amount of all written credit<br> derivatives^1^ | 50,580 | 72,949 |
| 10 | (Adjusted effective notional offsets and add-on deductions for<br> written credit derivatives)^2^ | (49,892) | (72,063) |
| 11 | Total derivative exposures | 100,430 | 97,726 |
| **** | Securities financing transaction exposures | **** | **** |
| 12 | Gross SFT assets (with no recognition of netting), after<br> adjusting for sale accounting transactions | 189,625 | 191,453 |
| 13 | (Netted amounts of cash payables and cash receivables of gross<br> SFT assets) | (89,454) | (80,150) |
| 14 | CCR exposure for SFT assets | 10,104 | 10,204 |
| 15 | Agent transaction exposures | **** | |
| 16 | Total securities financing transaction exposures | 110,275 | 121,507 |
| **** | Other off-balance sheet exposures | **** | **** |
| 17 | Off-balance sheet exposure at gross notional amount | 101,347 | 98,778 |
| 18 | (Adjustments for conversion to credit equivalent amounts) | (70,011) | (67,649) |
| 19 | Total off-balance sheet items | 31,336 | 31,129 |
| **** | Total exposures (leverage ratio denominator) | 1,044,916 | 1,039,939 |
| **** | Capital and total exposures (leverage ratio denominator) | **** | **** |
| 20 | Tier 1 capital | 60,369 | 59,188 |
| 21 | Total exposures (leverage ratio denominator) | 1,044,916 | 1,039,939 |
| **** | Leverage ratio | **** | **** |
| 22 | Basel III leverage ratio (%) | 5.8 | 5.7 |
| 1 Includes<br> protection sold, including agency transactions. 2 Protection sold can<br> be offset with protection bought on the same underlying reference entity,<br> provided that the conditions according to the Basel III leverage ratio<br> framework and disclosure requirements are met. |
All values are in US Dollars.
15
UBS Group AG consolidated
| LR1: BCBS Basel III<br> leverage ratio summary comparison | |||
|---|---|---|---|
| million | 30.9.21 | 30.6.21 | |
| 1 | Total consolidated assets as per published financial statements | 1,088,773 | 1,086,519 |
| 2 | Adjustment for investments in banking, financial, insurance or commercial<br> entities that are consolidated for accounting purposes but outside the scope<br> of regulatory consolidation^1^ | (32,872) | (34,307) |
| 3 | 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 | **** | |
| 4 | Adjustments for derivative financial instruments | (52,426) | (53,692) |
| 5 | Adjustment for securities financing transactions (i.e., repos<br> and similar secured lending) | 10,104 | 10,291 |
| 6 | Adjustment for off-balance sheet items (i.e., conversion to<br> credit equivalent amounts of off-balance sheet exposures) | 31,336 | 31,129 |
| 7 | Other adjustments | **** | |
| 8 | Leverage ratio exposure (leverage ratio denominator) | 1,044,916 | 1,039,939 |
| 1 Includes assets<br> that are deducted from tier 1 capital. |
All values are in US Dollars.
16
Section 5 Liquidity coverage ratio
Liquiditycoverage ratio
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.
| Pillar 3 disclosure requirement | Third quarter 2021 report section | Disclosure | Third quarter 2021 report page number |
|---|---|---|---|
| Concentration of funding sources | Balance sheet and off-balance sheet | Liabilities by product and currency | 50 |
High-quality liquid assets
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.
| High-quality liquid assets | ||||||||
|---|---|---|---|---|---|---|---|---|
| Average 3Q21^1^ | Average 2Q21^1^ | |||||||
| 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^ | ||
| Cash balances3 | 154 | **** | 154 | **** | 154 | 154 | ||
| Securities (on- and off-balance sheet) | 59 | 17 | 76 | 61 | 17 | 78 | ||
| Total high-quality liquid assets4 | 213 | 17 | 231 | **** | 215 | 17 | 232 | |
| 1 Calculated based<br> on an average of 65 data points in the third quarter of 2021 and 64 data<br> points in the second quarter of 2021. 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. |
All values are in US Dollars.
17
UBS Group AG consolidated
LCR development during the third quarter of 2021
In the third quarter of 2021, the UBS Group quarterly average LCR increased 1 percentage point to 157%, remaining above the prudential requirement communicated by the Swiss Financial Market Supervisory Authority (FINMA).
The increase in average LCR was driven by a decrease in average total net cash outflows of USD 2 billion to USD 147 billion, mainly due to decreases in outflows from secured financing transactions. Average HQLA decreased by USD 1 billion to USD 231 billion, driven by an increase in assets subject to local transfer restrictions.
| LIQ1: Liquidity coverage ratio | **** | **** | **** | **** | **** | **** | |
|---|---|---|---|---|---|---|---|
| Average 3Q21^1^ | Average 2Q21^1^ | ||||||
| billion, except where indicated | Unweighted value | Weighted value^2^ | Unweighted value | Weighted value^2^ | |||
| High-quality liquid assets | |||||||
| 1 | High-quality liquid assets | **** | 234 | 231 | 235 | 232 | |
| Cash outflows | |||||||
| 2 | Retail deposits and deposits from small business customers | 290 | 33 | **** | 296 | 33 | |
| 3 | of which: stable deposits | 41 | 1 | **** | 42 | 1 | |
| 4 | of which: less stable deposits | **** | 249 | 31 | **** | 254 | 32 |
| 5 | Unsecured wholesale funding | 243 | 127 | **** | 241 | 129 | |
| 6 | of which: operational deposits (all counterparties) | 54 | 13 | **** | 53 | 13 | |
| 7 | of which: non-operational deposits (all counterparties) | 176 | 101 | **** | 173 | 101 | |
| 8 | of which: unsecured debt | **** | 13 | 13 | **** | 15 | 15 |
| 9 | Secured wholesale funding | **** | **** | 75 | **** | 79 | |
| 10 | Additional requirements | 93 | 27 | **** | 96 | 27 | |
| 11 | of which: outflows related to derivatives and other transactions | 52 | 18 | **** | 54 | 18 | |
| 12 | of which: outflows related to loss of funding on debt products^3^ | 0 | 0 | **** | 0 | 0 | |
| 13 | of which: committed credit and liquidity facilities | 41 | 9 | **** | 42 | 9 | |
| 14 | Other contractual funding obligations | 11 | 10 | **** | 11 | 9 | |
| 15 | Other contingent funding obligations | 224 | 4 | **** | 264 | 6 | |
| 16 | Total cash outflows | **** | **** | 275 | **** | **** | 284 |
| Cash inflows | |||||||
| 17 | Secured lending | 247 | 83 | **** | 269 | 84 | |
| 18 | Inflows from fully performing exposures | 72 | 32 | **** | 77 | 35 | |
| 19 | Other cash inflows | 13 | 13 | **** | 16 | 16 | |
| 20 | Total cash inflows | **** | 332 | 128 | **** | 361 | 135 |
| **** | **** | **** | Average 3Q21^1^ | **** | Average 2Q21^1^ | ||
| billion, except where indicated | **** | Total adjusted value^4^ | **** | Total adjusted value^4^ | |||
| Liquidity coverage ratio | |||||||
| 21 | High-quality liquid assets | **** | 231 | **** | 232 | ||
| 22 | Net cash outflows | **** | 147 | **** | 149 | ||
| 23 | Liquidity coverage ratio (%) | **** | **** | 157 | **** | **** | 156 |
| 1 Calculated based<br> on an average of 65 data points in the third quarter of 2021 and 64 data<br> points in the second quarter of 2021. 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.
18
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 30 September 2021 for UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated. Capital information in the following sections 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 are agreed with regulators based on the risk profile of the respective entity.
Section 2 UBS AGstandalone
Keymetrics of the third quarter of 2021
The table on the next page is based on the Basel Committee on Banking Supervision (the BCBS) Basel III rules.
During the third quarter of 2021, common equity tier 1 (CET1) capital was largely unchanged at USD 51.2 billion, as the additional accruals for capital returns to UBS Group AG were almost entirely offset by operating profit before tax. Tier 1 capital decreased by USD 1.3 billion to USD 65.2 billion, primarily driven by the call of an additional tier 1 capital instrument with a nominal amount of USD 1.1 billion. Total capital decreased by USD 1.8 billion to USD 66.6 billion, reflecting the aforementioned decrease in tier 1 capital and a decrease in the remaining eligibility of a EUR 1.75 billion tier 2 capital instrument.
Risk-weighted assets (RWA) decreased by USD 0.4 billion to USD 318.8 billion during the third quarter of 2021, primarily driven by a decrease in credit and counterparty credit risk RWA and partly offset by an increase in market risk RWA. Leverage ratio exposure decreased by USD 9 billion to USD 598 billion, mainly driven by lower securities financing transactions and lending balances, partly offset by increases in cash and balances at central banks and derivative exposures.
Correspondingly, our CET1 capital ratio was stable at 16.1% whereas our tier 1 and total capital ratio decreased during the quarter, due to the aforementioned decreases in tier 1 and total capital. Our Basel III leverage ratio was largely unchanged at 10.9%, as the decrease in tier 1 capital was almost offset by the decrease in leverage ratio exposure.
Average high-quality liquid assets (HQLA) increased by USD 3.4 billion to USD 92.3 billion, driven by greater average cash balances due to a reduction of funding consumption in the business divisions. Average total net cash outflows increased by USD 0.2 billion to USD 50.7 billion.
20
| KM1: Key metrics | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
|---|---|---|---|---|---|---|---|---|---|---|
| million, except where indicated | ||||||||||
| **** | **** | 30.9.21 | 30.6.21 | 31.3.21 | 31.12.20 | 30.9.20 | ||||
| Available capital (amounts) | ||||||||||
| 1 | Common Equity Tier 1 (CET1) | 51,233 | 51,279 | 50,223 | 50,269 | 51,793 | ||||
| 1a | Fully loaded ECL accounting model CET1^1^ | 51,217 | 51,255 | 50,189 | 50,266 | 51,791 | ||||
| 2 | Tier 1 | 65,211 | 66,487 | 64,652 | 64,699 | 66,145 | ||||
| 2a | Fully loaded ECL accounting model Tier 1^1^ | 65,195 | 66,463 | 64,618 | 64,696 | 66,143 | ||||
| 3 | Total capital | 66,639 | 68,421 | 67,126 | 69,639 | 71,020 | ||||
| 3a | Fully loaded ECL accounting model total capital^1^ | 66,624 | 68,398 | 67,091 | 69,636 | 71,018 | ||||
| Risk-weighted assets (amounts) | **** | |||||||||
| 4 | Total risk-weighted assets (RWA) | 318,755 | 319,195 | 317,824 | 305,575 | 309,019 | ||||
| 4a | Minimum capital requirement^2^ | 25,500 | 25,536 | 25,426 | 24,446 | 24,722 | ||||
| 4b | Total risk-weighted assets (pre-floor) | 318,755 | 319,195 | 317,824 | 305,575 | 309,019 | ||||
| Risk-based capital ratios as a percentage of RWA | **** | |||||||||
| 5 | CET1 ratio (%) | 16.07 | 16.06 | 15.80 | 16.45 | 16.76 | ||||
| 5a | Fully loaded ECL accounting model CET1 ratio (%)^1^ | 16.07 | 16.06 | 15.79 | 16.45 | 16.76 | ||||
| 6 | Tier 1 ratio (%) | 20.46 | 20.83 | 20.34 | 21.17 | 21.40 | ||||
| 6a | Fully loaded ECL accounting model Tier 1 ratio (%)^1^ | 20.45 | 20.82 | 20.33 | 21.17 | 21.40 | ||||
| 7 | Total capital ratio (%) | 20.91 | 21.44 | 21.12 | 22.79 | 22.98 | ||||
| 7a | Fully loaded ECL accounting model total capital ratio (%)^1^ | 20.90 | 21.43 | 21.11 | 22.79 | 22.98 | ||||
| Additional CET1 buffer requirements as a percentage of RWA | **** | |||||||||
| 8 | Capital conservation buffer requirement (%) | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 | ||||
| 9 | Countercyclical buffer requirement (%) | 0.02 | 0.02 | 0.02 | 0.01 | 0.02 | ||||
| 9a | Additional countercyclical buffer for Swiss mortgage loans (%) | **** | ||||||||
| 10 | Bank G-SIB and / or D-SIB additional requirements (%)^3^ | **** | ||||||||
| 11 | Total of bank CET1 specific buffer requirements (%) | 2.52 | 2.52 | 2.52 | 2.51 | 2.52 | ||||
| 12 | CET1 available after meeting the bank’s minimum capital<br> requirements (%) | 11.57 | 11.56 | 11.30 | 11.95 | 12.26 | ||||
| Basel III leverage ratio4 | **** | |||||||||
| 13 | Total Basel III leverage ratio exposure measure | 597,542 | 606,536 | 611,022 | 595,017 | 588,204 | ||||
| 14 | Basel III leverage ratio (%) | 10.91 | 10.96 | 10.58 | 10.87 | 11.25 | ||||
| 14a | Fully loaded ECL accounting model Basel III leverage ratio (%)^1^ | 10.91 | 10.96 | 10.58 | 10.87 | 11.24 | ||||
| Liquidity coverage ratio (LCR)5 | **** | |||||||||
| 15 | Total high-quality liquid assets (HQLA) | 92,333 | 88,964 | 82,041 | 83,905 | 88,424 | ||||
| 16 | Total net cash outflow | 50,733 | 50,537 | 47,927 | 52,851 | 52,463 | ||||
| 17 | LCR (%) | 183 | 176 | 172 | 159 | 169 | ||||
| Net stable funding ratio (NSFR)6 | **** | |||||||||
| 18 | Total available stable funding | 251,277 | ||||||||
| 19 | Total required stable funding | 283,682 | ||||||||
| 20 | NSFR (%) | 89 | ||||||||
| 1 The fully loaded<br> ECL accounting model excludes the transitional relief of recognizing ECL<br> allowances and provisions in CET1 capital in accordance with FINMA Circular<br> 2013/1 “Eligible capital – banks.” 2 Calculated as 8% of total RWA,<br> based on total capital minimum requirements, excluding CET1 buffer<br> requirements. 3 Swiss SRB going and gone concern requirements and<br> information for UBS AG standalone are provided on the following pages in this<br> section. 4 The temporary exemption that applied from 25 March 2020<br> until 1 January 2021 and was granted by FINMA in connection with COVID-19 had<br> no net effect on UBS AG standalone in 2020. Refer to the “Introduction and<br> basis for preparation” and “UBS AG standalone” sections of our 31 December<br> 2020 Pillar 3 report, available under “Pillar 3 disclosures” at<br> ubs.com/investors, for more information. 5 Calculated based on<br> quarterly average. Refer to “Liquidity coverage ratio” in this section for<br> more information. 6 In accordance with Art. 17h para. 3 and 4 of the<br> Liquidity Ordinance, UBS AG standalone is required to maintain a minimum NSFR<br> of at least 80% without taking into account excess funding of UBS Switzerland<br> AG and 100% after taking into account such excess funding. Refer to the<br> “Introduction and basis for preparation” section of this report for more<br> information. |
All values are in US Dollars.
21
Significant regulated subsidiaries and sub-groups
Swiss SRBgoing and gone concern requirements and information
The tables below and on the next page provide details of the Swiss systemically relevant bank (SRB) RWA- and leverage ratio denominator (LRD)-based going and gone concern requirements and information as required by the Swiss Financial Market Supervisory Authority (FINMA); details regarding eligible gone concern instruments are provided on the next page.
More information about the going and gone concern requirements and information is provided on page 112 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.
The applicable market share add-on requirements as of 30 September 2021 were 0.72% for RWA and 0.25% for LRD purposes. These add-ons were increased by 0.36% for RWA and 0.125% for LRD in the third quarter of 2021, reflecting an increase in UBS’s market share in the Swiss credit business to more than 17%. The applicable LRD add-on requirements remained unchanged at 0.72% for RWA and 0.25% for LRD purposes, as our Group LRD remained within the same add-on bucket.
| Swiss SRB going and gone concern requirements and information | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| As of 30.9.21 | RWA, phase-in | RWA, fully applied as of 1.1.28 | LRD | ||||||
| million, except where indicated | in % | **** | in% | **** | in % | **** | |||
| Required going concern capital | **** | **** | **** | **** | **** | **** | **** | **** | |
| Total going concern capital | 14.32^1^ | 45,633 | **** | 14.32^1^ | 54,913 | **** | 5.00^1^ | 29,877 | |
| Common equity tier 1 capital | 10.02 | 31,926 | **** | 10.02 | 38,419 | **** | 3.50 | 20,914 | |
| of which: minimum capital | 4.50 | 14,344 | **** | 4.50 | 17,261 | **** | 1.50 | 8,963 | |
| of which: buffer capital | 5.50 | 17,532 | **** | 5.50 | 21,097 | **** | 2.00 | 11,951 | |
| of which: countercyclical buffer | 0.02 | 51 | **** | 0.02 | 61 | **** | **** | **** | |
| Maximum additional tier 1 capital | 4.30 | 13,706 | **** | 4.30 | 16,494 | **** | 1.50 | 8,963 | |
| of which: additional tier 1 capital | 3.50 | 11,156 | **** | 3.50 | 13,425 | **** | 1.50 | 8,963 | |
| of which: additional tier 1 buffer capital | 0.80 | 2,550 | **** | 0.80 | 3,069 | **** | **** | **** | |
| Eligible going concern capital | **** | **** | **** | **** | **** | **** | **** | **** | |
| Total going concern capital | 20.46 | 65,211 | **** | 17.00 | 65,211 | **** | 10.91 | 65,211 | |
| Common equity tier 1 capital | 16.07 | 51,233 | **** | 13.36 | 51,233 | **** | 8.57 | 51,233 | |
| Total loss-absorbing additional tier 1 capital | 4.39 | 13,978 | **** | 3.64 | 13,978 | **** | 2.34 | 13,978 | |
| of which: high-trigger loss-absorbing additional tier 1 capital | 3.61 | 11,509 | **** | 3.00 | 11,509 | **** | 1.93 | 11,509 | |
| of which: low-trigger loss-absorbing additional tier 1 capital | 0.77 | 2,469 | **** | 0.64 | 2,469 | **** | 0.41 | 2,469 | |
| Risk-weighted assets / leverage ratio denominator | **** | **** | **** | **** | **** | **** | **** | **** | |
| Risk-weighted assets | **** | 318,755 | **** | **** | 383,582 | **** | **** | **** | |
| Leverage ratio denominator | **** | **** | **** | **** | **** | **** | **** | 597,542 | |
| Required gone concern capital2 | Higher of RWA- or LRD-based | ||||||||
| Total gone concern loss-absorbing capacity | **** | 38,482 | |||||||
| Eligible gone concern capital | **** | ||||||||
| Total gone concern loss-absorbing capacity | **** | 42,412 | |||||||
| Gone concern capital coverage ratio | 110.21 | **** | |||||||
| 1 Includes<br> applicable add-ons of 1.44% for RWA and 0.50% for LRD. 2 A maximum of 25%<br> of the gone 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. |
All values are in US Dollars.
22
| Swiss SRB going and<br> gone concern information | ||||
|---|---|---|---|---|
| million, except where indicated | 30.9.21 | **** | 30.6.21 | |
| Eligible going concern capital | **** | **** | **** | |
| Total going concern capital | 65,211 | **** | 66,487 | |
| Total tier 1 capital | 65,211 | **** | 66,487 | |
| Common equity tier 1 capital | 51,233 | **** | 51,279 | |
| Total loss-absorbing additional tier 1 capital | 13,978 | **** | 15,208 | |
| of which: high-trigger loss-absorbing additional tier 1 capital | 11,509 | 12,702 | ||
| of which: low-trigger loss-absorbing additional tier 1 capital | 2,469 | 2,506 | ||
| Eligible gone concern capital | **** | **** | **** | |
| Total gone concern loss-absorbing capacity | 42,412 | **** | 45,091 | |
| Total tier 2 capital | 3,170 | **** | 5,214 | |
| of which: low-trigger loss-absorbing tier 2 capital | 2,635 | 4,678 | ||
| of which: non-Basel III-compliant tier 2 capital | 534 | 536 | ||
| TLAC-eligible senior unsecured debt | 39,242 | 39,878 | ||
| Total loss-absorbing capacity | **** | **** | **** | |
| Total loss-absorbing capacity | 107,623 | 111,578 | ||
| Denominators for going and gone concern ratios | **** | **** | **** | |
| Risk-weighted assets phase-in | 318,755 | 319,195 | ||
| of which: investments in Swiss-domiciled subsidiaries1 | 38,227 | 38,456 | ||
| of which: investments in foreign-domiciled subsidiaries1 | 108,837 | 108,593 | ||
| Risk-weighted assets fully applied as of 1.1.28 | 383,582 | 383,929 | ||
| of which: investments in Swiss-domiciled subsidiaries1 | 44,450 | 44,717 | ||
| of which: investments in foreign-domiciled subsidiaries1 | 167,442 | 167,066 | ||
| Leverage ratio denominator | 597,542 | **** | 606,536 | |
| Capital and loss-absorbing capacity ratios (%) | **** | **** | **** | |
| Going concern capital ratio, phase-in | 20.5 | 20.8 | ||
| of which: common equity tier 1 capital ratio, phase-in | 16.1 | 16.1 | ||
| Going concern capital ratio, fully applied as of 1.1.28 | 17.0 | 17.3 | ||
| of which: common equity tier 1 capital ratio, fully applied as<br> of 1.1.28 | 13.4 | **** | 13.4 | |
| Leverage ratios (%) | **** | **** | **** | |
| Going concern leverage ratio | 10.9 | 11.0 | ||
| of which: common equity tier 1 leverage ratio | 8.6 | **** | 8.5 | |
| Capital coverage ratio (%) | **** | **** | **** | |
| Gone concern capital coverage ratio | 110.2 | **** | 120.6 | |
| 1 Net exposure for<br> direct and indirect investments including holding of regulatory capital<br> instruments in Switzerland-domiciled subsidiaries (30 September 2021: <br> 17,780 million; 30 June 2021: 17,887 million) and for direct and indirect<br> investments including holding of regulatory capital instruments in<br> foreign-domiciled subsidiaries (30 September 2021: 41,860 million; 30<br> June 2021: 41,767 million) are risk-weighted at 215% and 260%,<br> respectively, for the current year. Risk weights will gradually increase by 5<br> percentage points per year for Swiss-domiciled investments and 20 percentage<br> points per year for foreign-domiciled investments until the fully applied<br> risk weights of 250% and 400%, respectively, are applied. |
All values are in US Dollars.
23
Significant regulated subsidiaries and sub-groups
Leverage ratio information
| Swiss SRB leverage ratio denominator | |||
|---|---|---|---|
| **** | |||
| billion | 30.9.21 | 30.6.21 | |
| Leverage ratio denominator | |||
| Swiss GAAP total assets | 508.8 | 512.0 | |
| Difference between Swiss GAAP and IFRS total assets | 121.5 | 120.8 | |
| Less: derivative exposures and SFTs1 | (225.2) | (232.5) | |
| Less: funding provided to significant regulated subsidiaries<br> eligible as gone concern capital | (20.8) | (20.8) | |
| On-balance sheet exposures (excluding derivative exposures and<br> SFTs) | 384.2 | 379.5 | |
| Derivative exposures | 103.6 | 100.1 | |
| Securities financing transactions | 88.6 | 105.7 | |
| Off-balance sheet items | 22.5 | 22.7 | |
| Items deducted from Swiss SRB tier 1 capital | (1.4) | (1.4) | |
| Total exposures (leverage ratio denominator) | 597.5 | 606.5 | |
| 1 The exposures<br> consist of derivative financial instruments, cash collateral receivables on<br> derivative instruments, receivables from SFTs, and margin loans, as well as<br> prime brokerage receivables and financial assets at fair value not held for<br> trading, both related to SFTs. These exposures are presented separately under<br> Derivative exposures and Securities financing transactions in this table. |
All values are in US Dollars.
Liquidity coverage ratio
In the third quarter of 2021, the UBS AG liquidity coverage ratio (LCR) was 183%, remaining above the prudential requirements communicated by FINMA.
| Liquidity coverage ratio | |||
|---|---|---|---|
| Weighted value^1^ | |||
| billion, except where indicated | Average 3Q21^2^ | Average 2Q21^2^ | |
| High-quality liquid assets | 92 | 89 | |
| Total net cash outflows | 51 | 51 | |
| of which: cash outflows | 167 | 171 | |
| of which: cash inflows | 117 | 120 | |
| Liquidity coverage ratio (%) | 183 | 176 | |
| 1 Calculated after<br> the application of haircuts and inflow and outflow rates, as well as, where<br> applicable, caps on Level 2 assets and cash inflows. 2 Calculated based on<br> an average of 65 data points in the third quarter of 2021 and 64 data points<br> in the second quarter of 2021. |
All values are in US Dollars.
24
Section 3 UBS Switzerland AG standalone
Key metrics of the thirdquarter of 2021
The table below is based on the Basel Committee on Banking Supervision (the BCBS) Basel III rules.
During the third quarter of 2021, common equity tier 1 (CET1) capital decreased slightly by CHF 0.1 billion to CHF 12.2 billion, mainly as additional accruals for dividends were almost entirely offset by operating profit. Risk-weighted assets (RWA) were largely stable at CHF 110.0 billion. Leverage ratio exposure decreased by CHF 3 billion to CHF 339 billion, mainly driven by lower securities financing transactions and high-quality liquid asset (HQLA) securities, partly offset by an increase in lending balances.
Average HQLA decreased by CHF 5.4 billion to CHF 92.3 billion, driven by lower average cash balances mainly due to a net deposit decrease and higher lending activities. Average total net cash outflows decreased by CHF 0.7 billion to CHF 64.5 billion.
| KM1: Key metrics | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| CHF million, except where indicated | |||||||||||
| **** | **** | 30.9.21 | 30.6.21 | 31.3.21 | 31.12.20 | 30.9.20 | |||||
| Available capital (amounts) | |||||||||||
| 1 | Common Equity Tier 1 (CET1) | 12,199 | 12,312 | 12,417 | 12,234 | 11,992 | |||||
| 1a | Fully loaded ECL accounting model CET1^1^ | 12,198 | 12,311 | 12,416 | 12,233 | 11,989 | |||||
| 2 | Tier 1 | 17,596 | 17,705 | 17,819 | 17,410 | 16,683 | |||||
| 2a | Fully loaded ECL accounting model Tier 1^1^ | 17,595 | 17,704 | 17,818 | 17,409 | 16,680 | |||||
| 3 | Total capital | 17,596 | 17,705 | 17,819 | 17,410 | 16,683 | |||||
| 3a | Fully loaded ECL accounting model total capital^1^ | 17,595 | 17,704 | 17,818 | 17,409 | 16,680 | |||||
| Risk-weighted assets (amounts) | **** | ||||||||||
| 4 | Total risk-weighted assets (RWA) | 109,941 | 109,602 | 110,194 | 107,253 | 107,066 | |||||
| 4a | Minimum capital requirement^2^ | 8,795 | 8,768 | 8,816 | 8,580 | 8,565 | |||||
| 4b | Total risk-weighted assets (pre-floor) | 93,839 | 93,853 | 93,149 | 92,164 | 92,755 | |||||
| Risk-based capital ratios as a percentage of RWA | **** | ||||||||||
| 5 | CET1 ratio (%) | 11.10 | 11.23 | 11.27 | 11.41 | 11.20 | |||||
| 5a | Fully loaded ECL accounting model CET1 ratio (%)^1^ | 11.10 | 11.23 | 11.27 | 11.41 | 11.20 | |||||
| 6 | Tier 1 ratio (%) | 16.00 | 16.15 | 16.17 | 16.23 | 15.58 | |||||
| 6a | Fully loaded ECL accounting model Tier 1 ratio (%)^1^ | 16.00 | 16.15 | 16.17 | 16.23 | 15.58 | |||||
| 7 | Total capital ratio (%) | 16.00 | 16.15 | 16.17 | 16.23 | 15.58 | |||||
| 7a | Fully loaded ECL accounting model total capital ratio (%)^1^ | 16.00 | 16.15 | 16.17 | 16.23 | 15.58 | |||||
| Additional CET1 buffer requirements as a percentage of RWA | **** | ||||||||||
| 8 | Capital conservation buffer requirement (%) | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 | |||||
| 9 | Countercyclical buffer requirement (%) | 0.02 | 0.02 | 0.02 | 0.01 | 0.01 | |||||
| 9a | Additional countercyclical buffer for Swiss mortgage loans (%) | **** | |||||||||
| 10 | Bank G-SIB and / or D-SIB additional requirements (%)^3^ | **** | |||||||||
| 11 | Total of bank CET1 specific buffer requirements (%) | 2.52 | 2.52 | 2.52 | 2.51 | 2.51 | |||||
| 12 | CET1 available after meeting the bank’s minimum capital<br> requirements (%) | 6.60 | 6.73 | 6.77 | 6.91 | 6.70 | |||||
| Basel III leverage ratio^4^ | **** | ||||||||||
| 13 | Total Basel III leverage ratio exposure measure | 338,636 | 341,991 | 344,925 | 335,251 | 327,113 | |||||
| 14 | Basel III leverage ratio (%) | 5.20 | 5.18 | 5.17 | 5.19 | 5.10 | |||||
| 14a | Fully loaded ECL accounting model Basel III leverage ratio (%)^1^ | 5.20 | **** | 5.18 | 5.17 | 5.19 | 5.10 | ||||
| Liquidity coverage ratio (LCR)^5^ | **** | **** | |||||||||
| 15 | Total high-quality liquid assets (HQLA) | 92,341 | 97,744 | 96,366 | 91,909 | 87,254 | |||||
| 16 | Total net cash outflow | 64,491 | 65,177 | 65,829 | 62,074 | 59,930 | |||||
| 17 | LCR (%) | 143 | **** | 150 | 146 | 148 | 146 | ||||
| Net stable funding ratio (NSFR)^6^ | **** | ||||||||||
| 18 | Total available stable funding | 229,666 | |||||||||
| 19 | Total required stable funding | 156,849 | |||||||||
| 20 | NSFR (%) | 146 | **** | ||||||||
| 1 The fully loaded<br> ECL accounting model excludes the transitional relief of recognizing ECL<br> allowances and provisions in CET1 capital in accordance with FINMA Circular<br> 2013/1 “Eligible capital – banks.” 2 Calculated as 8% of total RWA,<br> based on total capital minimum requirements, excluding CET1 buffer requirements. <br> 3 Swiss SRB going and gone concern requirements and information for UBS<br> Switzerland AG are provided on the next page. 4 Leverage ratio<br> exposures and leverage ratios for the respective periods in 2020 do not<br> reflect the effects of the temporary exemption that applied from 25 March<br> 2020 until 1 January 2021 and was granted by FINMA in connection with<br> COVID-19. Refer to the “Introduction and basis for preparation” and “UBS<br> Switzerland AG standalone” sections of our 31 December 2020 Pillar 3 report,<br> available under “Pillar 3 disclosures” at ubs.com/investors, for more<br> information. 5 Calculated based on quarterly average. Refer to<br> “Liquidity coverage ratio” in this section for more information. <br> 6 UBS Switzerland AG is required to maintain a minimum NSFR of at least<br> 100% on an ongoing basis as defined by Art. 17h para. 1 of the Liquidity<br> Ordinance. A portion of the excess funding is needed to fulfill the NSFR<br> requirement of UBS AG. Refer to the “Introduction and basis for preparation”<br> section of this report for more information. |
25
Significant regulated subsidiaries and sub-groups
Swiss SRBgoing and gone concern requirements and information
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 30 September 2021, the going concern capital and leverage ratio requirements for UBS Switzerland AG standalone were 14.32%, including a countercyclical buffer of 0.02%, and 5.00%, respectively.
The gone concern requirements were 8.87% for the RWA-based requirement and 3.10% 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, corresponding to 62% of the Group’s gone concern requirement (before applicable reductions).
| Swiss SRB going and gone concern requirements and information | ||||||
|---|---|---|---|---|---|---|
| As of 30.9.21 | RWA | LRD | ||||
| CHF million, except where indicated | in % | **** | in % | **** | ||
| Required going concern capital | **** | **** | **** | **** | **** | **** |
| Total going concern capital | **** | 14.32^1^ | 15,742 | **** | 5.00^1^ | 16,932 |
| Common equity tier 1 capital | **** | 10.02 | 11,015 | **** | 3.50 | 11,852 |
| of which: minimum capital | **** | 4.50 | 4,947 | **** | 1.50 | 5,080 |
| of which: buffer capital | **** | 5.50 | 6,047 | **** | 2.00 | 6,773 |
| of which: countercyclical buffer | 0.02 | 21 | **** | **** | **** | |
| Maximum additional tier 1 capital | **** | 4.30 | 4,727 | **** | 1.50 | 5,080 |
| of which: additional tier 1 capital | **** | 3.50 | 3,848 | **** | 1.50 | 5,080 |
| of which: additional tier 1 buffer capital | 0.80 | 880 | **** | **** | **** | |
| Eligible going concern capital | **** | **** | **** | **** | **** | **** |
| Total going concern capital | **** | 16.00 | 17,596 | **** | 5.20 | 17,596 |
| Common equity tier 1 capital | **** | 11.10 | 12,199 | **** | 3.60 | 12,199 |
| Total loss-absorbing additional tier 1 capital | **** | 4.91 | 5,396 | **** | 1.59 | 5,396 |
| of which: high-trigger loss-absorbing additional tier 1 capital | 4.91 | 5,396 | **** | 1.59 | 5,396 | |
| Required gone concern capital^2^ | **** | **** | **** | **** | **** | **** |
| Total gone concern loss-absorbing capacity | **** | 8.87 | 9,747 | **** | 3.10 | 10,498 |
| of which: base requirement | 7.97 | 8,766 | **** | 2.79 | 9,448 | |
| of which: additional requirement for market share and LRD^3^ | 0.89 | 982 | **** | 0.31 | 1,050 | |
| Eligible gone concern capital | **** | **** | **** | **** | **** | **** |
| Total gone concern loss-absorbing capacity | **** | 9.89 | 10,876 | **** | 3.21 | 10,876 |
| TLAC-eligible senior unsecured debt | **** | 9.89 | 10,876 | **** | 3.21 | 10,876 |
| Total loss-absorbing capacity | **** | **** | **** | **** | **** | **** |
| Required total loss-absorbing capacity | **** | 23.18 | 25,490 | **** | 8.10 | 27,430 |
| Eligible total loss-absorbing capacity | **** | 25.90 | 28,472 | **** | 8.41 | 28,472 |
| Risk-weighted assets / leverage ratio denominator | **** | **** | **** | **** | **** | **** |
| Risk-weighted assets | **** | 109,941 | **** | **** | **** | |
| Leverage ratio denominator | **** | **** | **** | **** | **** | 338,636 |
| 1 Includes<br> applicable add-ons of 1.44% for RWA and 0.50% for LRD. 2 A maximum of 25%<br> of the gone 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. 3 A higher add-on requirement<br> for market share was applied in the third quarter of 2021, of which 0.45% was<br> applied for RWA and 0.16% for LRD. |
26
Swiss SRB loss-absorbingcapacity
| Swiss SRB going and gone concern information | ||||
|---|---|---|---|---|
| CHF million, except where indicated | 30.9.21 | 30.6.21 | ||
| Eligible going concern capital | **** | **** | **** | **** |
| Total going concern capital | **** | 17,596 | **** | 17,705 |
| Total tier 1 capital | **** | 17,596 | **** | 17,705 |
| Common equity tier 1 capital | 12,199 | **** | 12,312 | |
| Total loss-absorbing additional tier 1 capital | **** | 5,396 | **** | 5,393 |
| of which: high-trigger loss-absorbing additional tier 1 capital | 5,396 | **** | 5,393 | |
| Eligible gone concern capital | **** | **** | **** | **** |
| Total gone concern loss-absorbing capacity | 10,876 | **** | 10,868 | |
| TLAC-eligible senior unsecured debt | **** | 10,876 | **** | 10,868 |
| Total loss-absorbing capacity | **** | **** | **** | **** |
| Total loss-absorbing capacity | **** | 28,472 | **** | 28,572 |
| Risk-weighted assets / leverage ratio denominator | **** | **** | **** | **** |
| Risk-weighted assets | 109,941 | 109,602 | ||
| Leverage ratio denominator | 338,636 | 341,991 | ||
| Capital and loss-absorbing capacity ratios (%) | **** | **** | **** | **** |
| Going concern capital ratio | 16.0 | 16.2 | ||
| of which: common equity tier 1 capital ratio | 11.1 | 11.2 | ||
| Gone concern loss-absorbing capacity ratio | 9.9 | 9.9 | ||
| Total loss-absorbing capacity ratio | **** | 25.9 | **** | 26.1 |
| Leverage ratios (%) | **** | **** | **** | **** |
| Going concern leverage ratio | 5.2 | 5.2 | ||
| of which: common equity tier 1 leverage ratio | 3.6 | 3.6 | ||
| Gone concern leverage ratio | 3.2 | 3.2 | ||
| Total loss-absorbing capacity leverage ratio | **** | 8.4 | **** | 8.4 |
27
Significant regulated subsidiaries and sub-groups
Leverage ratio information
| Swiss SRB leverage ratio denominator | **** | **** | **** |
|---|---|---|---|
| CHF billion | 30.9.21 | 30.6.21 | |
| Leverage ratio denominator | |||
| Swiss GAAP total assets | **** | 319.2 | 323.3 |
| Difference between Swiss GAAP and IFRS total assets | **** | 3.3 | 3.6 |
| Less: derivative exposures and SFTs^1^ | **** | (11.1) | (13.8) |
| On-balance sheet exposures (excluding derivative exposures and SFTs) | **** | 311.4 | 313.1 |
| Derivative exposures | **** | 4.8 | 5.2 |
| Securities financing transactions | **** | 6.2 | 8.4 |
| Off-balance sheet items | **** | 16.5 | 15.6 |
| Items deducted from Swiss SRB tier 1 capital | **** | (0.3) | (0.2) |
| Total exposures (leverage ratio denominator) | **** | 338.6 | 342.0 |
| 1 The exposures<br> consist of derivative financial instruments, cash collateral receivables on<br> derivative instruments, receivables from SFTs, and margin loans, as well as<br> prime brokerage receivables and financial assets at fair value not held for<br> trading, both related to SFTs. These exposures are presented separately under<br> Derivative exposures and Securities financing transactions in this table. |
Liquidity coverage ratio
In the third quarter of 2021, the liquidity coverage ratio (LCR) of UBS Switzerland AG, which is a Swiss SRB, was 143%, remaining above the prudential requirement communicated by the Swiss Financial Market Supervisory Authority (FINMA) in connection with the Swiss Emergency Plan.
| Liquidity coverage ratio | **** | **** | **** |
|---|---|---|---|
| Weighted value^1^ | |||
| CHF billion, except where indicated | **** | Average 3Q21^2^ | Average 2Q21^2^ |
| High-quality liquid assets | 92 | 98 | |
| Total net cash outflows | 64 | 65 | |
| of which: cash outflows | 89 | 93 | |
| of which: cash inflows | 25 | 28 | |
| Liquidity coverage ratio (%) | 143 | 150 | |
| 1 Calculated after<br> the application of haircuts and inflow and outflow rates, as well as, where<br> applicable, caps on Level 2 assets and cash inflows. 2 Calculated based on<br> an average of 65 data points in the third quarter of 2021 and 64 data points<br> in the second quarter of 2021. |
28
Capital instruments
| 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 | UBS Switzerland AG, Switzerland | ||
| 1a | Instrument number | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | ||
| 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 1,000 | CHF 825 | USD 425 | CHF 475 | CHF 500 | CHF 700 | CHF 675 | CHF 825 | ||
| 9 | Par value of instrument (currency in millions) | CHF 10.0 | CHF 1,000 | CHF 825 | USD 425 | CHF 475 | CHF 500 | CHF 700 | CHF 675 | CHF 825 | ||
| 10 | Accounting classification^4^ | Equity attributable to UBS Switzerland AG shareholders | Due to banks held at amortized cost | |||||||||
| 11 | Original date of issuance | – | 18 December 2017 | 12 December 2018 | 12 December 2018 | 11 December 2019 | 29 October 2020 | 11 March 2021 | 2 June 2021 | 2 June 2021 | ||
| 12 | Perpetual or dated | – | Perpetual | |||||||||
| 13 | Original maturity date | – | – | |||||||||
| 14 | Issuer call subject to prior supervisory approval | – | Yes |
29
Significant regulated subsidiaries and sub-groups
| Capital instruments of UBS Switzerland AG – key features (continued) | **** | **** | **** | **** | **** | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Presented according to issuance date. | ||||||||||||
| **** | **** | Share capital | Additional tier 1 capital | **** | ||||||||
| 15 | Optional call date, contingent call dates and redemption amount | – | 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 | First optional repayment date:<br><br> <br>11 March 2026 | First optional repayment date:<br><br> <br>2 June 2026 | First optional repayment date:<br><br> <br>2 June 2028 | ||
| 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. | 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. | 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. | 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. | 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. | 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. | Repayable on the first optional repayment date or on any of<br> every second interest payment date thereafter.<br><br> <br>Repayment subject to FINMA approval. Optional repayment amount:<br> principal amount, together with any accrued and unpaid interest thereon. | Repayable on the first optional repayment date or on any<br> interest payment date thereafter.<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 a tax event subject to FINMA approval.<br><br> <br>Repayment amount: principal amount, together with accrued and<br> unpaid interest. |
30
| Capital instruments of UBS Switzerland AG – key features (continued) | **** | **** | **** | **** | **** | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Coupons | ||||||||||||
| 17 | Fixed or floating dividend / coupon | – | Floating | |||||||||
| 18 | Coupon rate and any related index | – | 3-month SARON Compound<br><br> <br>+ 250 bps<br><br> <br>per annum quarterly | 3-month SARON Compound<br><br> <br>+ 489 bps<br><br> <br>per annum quarterly | 3-month SOFR Compound<br><br> <br>+ 561 bps<br><br> <br>per annum quarterly | 3-month SARON Compound<br><br> <br>+ 433 bps<br><br> <br>per annum quarterly | 3-month SARON Compound<br><br> <br>+ 397 bps<br><br> <br>per annum quarterly | 3-month SARON Compound<br><br> <br>+ 337 bps<br><br> <br>per annum quarterly | 3-month SARON Compound<br><br> <br>+ 307 bps<br><br> <br>per annum quarterly | 3-month SARON Compound<br><br> <br>+ 308 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. 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 senior to instrument in the insolvency creditor<br> hierarchy of the 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, each obligation of USB Switzerland AG that is unsubordinated or is<br> subordinated and not ranked junior (such as all classes of share capital) or<br> at par (such as tier 1 instruments) | |||||||||
| 36 | Non-compliant transitioned features | – | – | |||||||||
| 37 | If yes, specify non-compliant features | – | – | |||||||||
| 1 Based on Swiss<br> SRB (including transitional arrangement) requirements. 2 Based on Swiss<br> SRB requirements applicable as of 1 January 2020. 3 Loans granted by<br> UBS AG, Switzerland. 4 As applied in UBS Switzerland AG‘s financial<br> statements under Swiss GAAP. |
31
Significant regulated subsidiaries and sub-groups
Section 4 UBS Europe SE consolidated
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 third quarter of 2021, common equity tier 1 (CET1) remained stable. Risk-weighted assets increased by EUR 0.3 billion to EUR 13.5 billion, mainly driven by increases in credit risk related to derivative transactions. Leverage ratio exposure remained largely stable and amounted to EUR 47.2 billion. The average liquidity coverage ratio remained stable, with a EUR 0.3 billion decrease in total net cash outflows.
Entities may also be subject to significant Pillar 2 requirements, which represent additional amounts of capital considered necessary and are agreed with regulators based on the risk profile of the respective entity.
| KM1: Key metrics1 | **** | **** | **** | ||||
|---|---|---|---|---|---|---|---|
| million, except where indicated | |||||||
| **** | **** | 30.9.21 | 30.6.21^2^ | 31.3.21^2^ | 31.12.20 | 30.9.20 | |
| Available capital (amounts) | |||||||
| 1 | Common Equity Tier 1 (CET1) | 3,930 | 3,927 | 3,721 | 3,703 | 3,728 | |
| 2 | Tier 1 | 4,220 | 4,217 | 4,011 | 3,993 | 4,018 | |
| 3 | Total capital | 4,220 | 4,217 | 4,011 | 3,993 | 4,018 | |
| Risk-weighted assets (amounts) | **** | **** | **** | **** | **** | ||
| 4 | Total risk-weighted assets (RWA) | 13,455 | 13,119 | 14,022 | 13,175 | 13,285 | |
| 4a | Minimum capital requirement^3^ | 1,076 | 1,050 | 1,122 | 1,054 | 1,063 | |
| Risk-based capital ratios as a percentage of RWA | **** | **** | **** | **** | **** | ||
| 5 | CET1 ratio (%) | 29.2 | 29.9 | 26.5 | 28.1 | 28.1 | |
| 6 | Tier 1 ratio (%) | 31.4 | 32.1 | 28.6 | 30.3 | 30.2 | |
| 7 | Total capital ratio (%) | 31.4 | 32.1 | 28.6 | 30.3 | 30.2 | |
| Additional CET1 buffer requirements as a percentage of RWA | **** | **** | **** | **** | **** | ||
| 8 | Capital conservation buffer requirement (%) | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | |
| 9 | Countercyclical buffer requirement (%) | 0.1 | 0.1 | 0.1 | 0.0 | 0.0 | |
| 10 | Bank G-SIB and / or D-SIB additional requirements (%) | **** | |||||
| 11 | Total of bank CET1 specific buffer requirements (%) | 2.6 | 2.6 | 2.6 | 2.5 | 2.5 | |
| 12 | CET1 available after meeting the bank’s minimum capital<br> requirements (%)^4^ | 23.4 | 24.1 | 20.7 | 22.3 | 22.2 | |
| Basel III leverage ratio | **** | **** | **** | **** | **** | ||
| 13 | Total Basel III leverage ratio exposure measure | 47,237 | 47,094^5^ | 43,620 | 41,376 | 43,371 | |
| 14 | Basel III leverage ratio (%)^6^ | 8.9 | 9.0^5^ | 9.2 | 9.7 | 9.3 | |
| Liquidity coverage ratio (LCR)7 | **** | **** | **** | **** | **** | ||
| 15 | Total high-quality liquid assets (HQLA) | 17,108 | 17,106 | 17,175 | 17,074 | 16,257 | |
| 16 | Total net cash outflow | 10,373 | 10,684 | 11,003 | 11,334 | 11,276 | |
| 17 | LCR (%) | 165 | 161 | 157 | 151 | 144 | |
| Net stable funding ratio (NSFR)8 | **** | **** | **** | **** | **** | ||
| 18 | Total available stable funding | 15,472 | 15,816 | ||||
| 19 | Total required stable funding | 9,160 | 9,631 | ||||
| 20 | NSFR (%) | 169 | 164 | ||||
| 1 Based on<br> applicable EU regulatory rules. 2 Comparative figures have been<br> restated to align with the regulatory reports as submitted to the European<br> Central Bank (the ECB). 3 Calculated as 8% of total RWA, based on<br> total capital minimum requirements, excluding CET1 buffer requirements. <br> 4 This represents the CET1 ratio that is available for meeting buffer<br> requirements. It is calculated as the CET1 ratio minus 4.5% and after<br> considering, where applicable, CET1 capital that has been used to meet tier 1<br> and / or total capital ratio requirements under Pillar 1. <br> 5 Comparative figures have been adjusted following the initial CRRII<br> go-live to align with the regulatory reports as submitted to the European<br> Central Bank (the ECB). 6 On the basis of tier 1 capital. <br> 7 Figures are calculated on a twelve-month average. 8 The local<br> disclosure requirement for the net stable funding ratio came into force in<br> June 2021. |
All values are in Euros.
32
Section5 UBS Americas Holding LLC consolidated
The table below provides information about the regulatory capital components, capital ratios, leverage ratio and liquidity of UBS Americas Holding LLC consolidated, based on the Pillar 1 requirements and in accordance with US Basel III rules.
Effective 1 October 2021, UBS Americas Holding LLC is subject to a stress capital buffer (SCB) of 7.1%, 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 (CCAR) (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 third quarter of 2021, common equity tier 1 (CET1) remained stable. Risk-weighted assets (RWA) increased by USD 2.4 billion to USD 71.6 billion, mainly driven by an increase in credit risk RWA. Leverage ratio exposure, calculated on an average basis, increased by USD 4.5 billion to USD 175.5 billion due to increased lending exposure.
Entities may also be subject to significant Pillar 2 requirements, which represent additional amounts of capital considered necessary and are agreed with regulators based on the risk profile of the respective entity.
| KM1: Key metrics1 | **** | **** | **** | **** | **** | **** | **** | **** | |||
|---|---|---|---|---|---|---|---|---|---|---|---|
| million, except where indicated | |||||||||||
| **** | **** | 30.9.21 | 30.6.21 | 31.3.21 | 31.12.20 | 30.9.20 | |||||
| Available capital (amounts) | |||||||||||
| 1 | Common Equity Tier 1 (CET1) | 14,831 | 14,477 | 14,716 | 14,384 | 13,840 | |||||
| 2 | Tier 1 | 17,877 | 17,523 | 17,763 | 17,431 | 16,883 | |||||
| 3 | Total capital | 18,485 | 18,143 | 18,498 | 18,166 | 17,626 | |||||
| Risk-weighted assets (amounts) | **** | ||||||||||
| 4 | Total risk-weighted assets (RWA) | 71,571 | 69,139 | 69,481 | 63,929 | 65,084 | |||||
| 4a | Minimum capital requirement^2^ | 5,726 | 5,531 | 5,558 | 5,114 | 5,207 | |||||
| Risk-based capital ratios as a percentage of RWA | **** | ||||||||||
| 5 | CET1 ratio (%) | 20.7 | 20.9 | 21.2 | 22.5 | 21.3 | |||||
| 6 | Tier 1 ratio (%) | 25.0 | 25.3 | 25.6 | 27.3 | 25.9 | |||||
| 7 | Total capital ratio (%) | 25.8 | 26.2 | 26.6 | 28.4 | 27.1 | |||||
| Additional CET1 buffer requirements as a percentage of RWA | **** | ||||||||||
| 8 | Capital conservation buffer requirement (%) | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | |||||
| 8a | Stress capital buffer requirement (%) | 6.7 | 6.7 | 6.7 | 6.7 | ||||||
| 9 | Countercyclical buffer requirement (%) | **** | |||||||||
| 10 | Bank G-SIB and / or D-SIB additional requirements (%) | **** | |||||||||
| 11 | Total of bank CET1 specific buffer requirements (%) | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | |||||
| 11a | Total bank specific capital requirements (%) | 6.7 | 6.7 | 6.7 | 6.7 | ||||||
| 12 | CET1 available after meeting the bank’s minimum capital<br> requirements (%)^3^ | 16.2 | 16.4 | 16.7 | 18.0 | 16.8 | |||||
| Basel III leverage ratio | **** | ||||||||||
| 13 | Total Basel III leverage ratio exposure measure | 175,486 | 170,985 | 169,386 | 154,609 | 148,038 | |||||
| 14 | Basel III leverage ratio (%)^4^ | 10.2 | 10.2 | 10.5 | 11.3 | 11.4 | |||||
| 14a | Total Basel III supplementary leverage ratio exposure measure^5^ | 199,073 | 195,617 | 159,587 | 150,019 | 150,609 | |||||
| 14b | Basel III supplementary leverage ratio (%)^4,5^ | **** | 9.0 | 9.0 | 11.1 | 11.6 | 11.2 | ||||
| Liquidity coverage ratio (LCR)6 | **** | ||||||||||
| 15 | Total high-quality liquid assets (HQLA) | 30,058 | 29,029 | ||||||||
| 16 | Total net cash outflow | 19,548 | 17,509 | ||||||||
| 17 | LCR (%) | 154 | 166 | ||||||||
| 1 The liquidity<br> coverage ratio (LCR) requirement became effective as of 1 January 2021<br> and the related disclosure requirement in the second quarter of 2021. The net<br> stable funding ratio (NSFR) requirement became effective as of 1 July<br> 2021 and related disclosures will come into effect in the second quarter of<br> 2023. 2 Calculated as 8% of total RWA, based on total capital minimum<br> requirements, excluding CET1 buffer requirements. 3 This represents<br> the CET1 ratio that is available for meeting buffer requirements. It is<br> calculated as the CET1 ratio minus 4.5%. 4 On the basis of tier 1<br> capital. 5 US Regulatory authorities temporarily eased the<br> requirements for the SLR, permitting the exclusion of US Treasury securities<br> and deposits with the Federal Reserve Banks from the SLR denominator through<br> March 2021. This exclusion resulted in an increase in the SLR of 187 bps<br> on 31 March 2021, 170 bps on 31 December 2020 and 136 bps<br> on 30 September 2020. 6 Figures are calculated on a quarterly<br> average. |
All values are in US Dollars.
33
Abbreviations frequently used in our financial reports
A
ABS asset-backed securities
AEI automatic exchange of information
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
APAC Asia Pacific
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
BEAT base erosion and anti-abuse tax
BIS Bank for International Settlements
BoD Board of Directors
BVG Swiss occupational
pension plan
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 capital 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
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)
CRR Capital Requirements Regulation
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
D-SIB domestic systemically important bank
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
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
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
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
GBP pound sterling
GDP gross domestic product
GEB Group Executive Board
GIA Group Internal Audit
GIIPS Greece, Italy, Ireland,
Portugal and Spain
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
34
Abbreviations frequently used in our financial reports (continued)
I
IAA internal assessment approach
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
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
NCL Non-core and Legacy Portfolio
NII net interest income
NRV negative replacement value
NSFR net stable funding ratio
NYSE New York Stock Exchange
O
OCA own credit adjustment
OCI other comprehensive income
OTC over-the-counter
P
PD probability of default
PFE potential future exposure
PIT point in time
P&L profit or loss
POCI purchased or originated credit-impaired
PRA UK Prudential Regulation Authority
PRV positive replacement value
Q
QCCP qualifying central counterparty
QRRE qualifying revolving retail exposures
R
RBA role-based allowances
RBC risk-based capital
RbM risk-based monitoring
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
RV replacement value
RW risk weight
RWA risk-weighted assets
S
SA standardized approach
SA-CCR standardized approach for counterparty credit risk
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
SICR significant increase in credit risk
SIX SIX Swiss Exchange
SME small and medium-sized entity
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
TCJA US Tax Cuts and Jobs Act
TLAC total loss-absorbing capacity
TTC through-the-cycle
U
UBS RESI UBS Real Estate Securities Inc.
UoM units of measure
USD US dollar
V
VaR value-at-risk
VAT value added tax
W
WEKO Swiss Competition Commission
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.
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Cautionary Statement | 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 on Form 20-F, quarterly reports and other information furnished to or filed with the US Securities and Exchange Commission on Form 6-K, 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 disclosed in text and tables are calculated on the basis of unrounded figures. Absolute changes between reporting periods disclosed in the text, which can be derived from numbers presented in related tables, are calculated on a rounded basis.
Tables | Within tables, blank fields generally indicate non-applicability or that presentation of any content would not be 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. Values that are zero on a rounded basis can be either negative or positive on an actual basis.
36
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: October 26, 2021