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: August 14, 2020

 

 

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                         Form 40-F 

 


 

This Form 6-K consists of the Basel III Pillar 3 UBS Group AG Second Quarter 2020 Report, which appears immediately following this page.

 

 


 

  

 

 

30 June 2020 Pillar 3 report

 

UBS Group and significant regulated subsidiaries and sub-groups

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Terms used in this report, unless the context requires otherwise

“UBS,” “UBS Group,” “UBS Group AG consolidated,” “Group,” “the Group,” “we,” “us” and “our”

UBS Group AG and its consolidated subsidiaries

“UBS AG consolidated”

UBS AG and its consolidated subsidiaries

“UBS Group AG” and “UBS Group AG standalone”

UBS Group AG on a standalone basis

“UBS AG” and “UBS AG standalone”

UBS AG on a standalone basis

“UBS Switzerland AG” and “UBS Switzerland AG standalone”

UBS Switzerland AG on a standalone basis

“UBS Europe SE consolidated”

UBS Europe SE and its consolidated subsidiaries

“UBS Americas Holding LLC” and

“UBS Americas Holding LLC consolidated”

UBS Americas Holding LLC and its consolidated subsidiaries

 


 

Table of contents

Introduction and basis for preparation

 

UBS Group

6

Section 1

Key metrics

9

Section 2

Regulatory exposures and risk-weighted assets

13

Section 3

Credit risk

26

Section 4

Counterparty credit risk

34

Section 5

Securitizations

36

Section 6

Market risk

40

Section 7

Going and gone concern requirements and eligible capital

49

Section 8

Total loss-absorbing capacity

51

Section 9

Leverage ratio

54

Section 10

Liquidity coverage ratio

56

Section 11

Requirements for global systemically important banks and related indicators

 

 

 

 

 

 

Significant regulated subsidiaries and sub-groups

58

Section 1

Introduction

58

Section 2

UBS AG standalone

63

Section 3

UBS Switzerland AG standalone

70

Section 4

UBS Europe SE consolidated

71

Section 5

UBS Americas Holding LLC consolidated

 

 

 

Appendix

73

Abbreviations frequently used in our financial reports

75

Cautionary statement

       

Contacts

 


Switchboards

For all general inquiries.
www.ubs.com/contact

Zurich +41-44-234 1111
London +44-207-567 8000
New York +1-212-821 3000
Hong Kong +852-2971 8888
Singapore +65-6495 8000

Investor Relations

UBS’s Investor Relations team supports institutional, professional and retail investors from
our offices in Zurich,
London, New York and Krakow.

UBS Group AG, Investor Relations
P.O. Box, CH-8098 Zurich, Switzerland

www.ubs.com/investors

Zurich +41-44-234 4100
New York +1-212-882 5734

Media Relations

UBS’s Media Relations team supports
global media and journalists
from our offices in Zurich, London, New York and Hong Kong.

www.ubs.com/media

Zurich +41-44-234 8500
mediarelations@ubs.com

London +44-20-7567 4714
ubs-media-relations@ubs.com

New York +1-212-882 5858
mediarelations@ubs.com

Hong Kong +852-2971 8200
sh-mediarelations-ap@ubs.com


Office of the Group Company Secretary

The Group Company Secretary receives inquiries on compensation and related issues addressed to members of the Board of Directors.

UBS Group AG, Office of the
Group Company Secretary
P.O. Box, CH-8098 Zurich, Switzerland

sh-company-secretary@ubs.com

+41-44-235 6652

Shareholder Services

UBS’s Shareholder Services team,
a unit of the Group Company Secretary’s office, is responsible
for the registration of UBS Group AG registered shares.

UBS Group AG, Shareholder Services
P.O. Box, CH-8098 Zurich, Switzerland

sh-shareholder-services@ubs.com

+41-44-235 6652

US Transfer Agent

For global registered share-related
inquiries in the US.

Computershare Trust Company NA
P.O. Box 505000
Louisville, KY 40233-5000, USA

Shareholder online inquiries:
www-us.computershare.com/
investor/Contact

Shareholder website:
www.computershare.com/investor

Calls from the US

+1-866-305-9566
Calls from outside the US
+1-781-575-2623
TDD for hearing impaired
+1-800-231-5469
TDD for foreign shareholders
+1-201-680-6610

 

 


Imprint

Publisher: UBS Group AG, Zurich, Switzerland | www.ubs.com
Language: English

© UBS 2020. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

 

 

  

 


 

Introduction and basis for preparation

Scope of Basel III Pillar 3 disclosures

The Basel Committee on Banking Supervision (BCBS) Basel III capital adequacy framework consists of three complementary pillars. Pillar 1 provides a framework for measuring minimum capital requirements for the credit, market, operational and non-counterparty-related risks faced by banks. Pillar 2 addresses the principles of the supervisory review process, emphasizing the need for a qualitative approach to supervising banks. Pillar 3 requires banks to publish a range of disclosures, mainly covering risk, capital, leverage, liquidity and remuneration.

This report provides Pillar 3 disclosures for 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 June 2020 for UBS Group AG consolidated is provided in the “Capital management” section of our second quarter report and for UBS AG consolidated in the “Capital management” section of our UBS AG second quarter 2020 report, available under “Quarterly reporting” at www.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 www.ubs.com/investors. 

Significant BCBS and FINMA capital adequacy, liquidity and 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 31 October 2019, the underlying BCBS guidance “Revised Pillar 3 disclosure requirements” issued in January 2015, the “Frequently asked questions on the revised Pillar 3 disclosure requirements” issued in August 2016, the “Pillar 3 disclosure requirements – consolidated and enhanced framework” issued in March 2017 and the subsequent “Technical Amendment – Pillar 3 disclosure requirements – regulatory treatment of accounting provisions” issued in August 2018.


Significant regulatory developments, and disclosure requirements and changes effective in this quarter

COVID-19 temporary regulatory measures

In May 2020, FINMA published guidance related to regulatory exemptions that were provided in the first quarter of 2020 in light of the COVID-19 pandemic. Based on such guidance, the temporary exemption that permits banks to exclude central bank sight deposits from the leverage ratio denominator (the LRD) for the purpose of calculating going concern ratios has been extended for all banks from 1 July 2020 until 1 January 2021.

FINMA announced in May 2020 that the previously introduced temporary exemption, freezing the total number of backtesting exceptions until 1 July 2020 at a level of 1 February 2020, will be introduced into supervisory practice; the content of the exemption therefore continues to apply beyond 1 July 2020. UBS Group AG did not benefit from this measure in the first two quarters of 2020.

The loan guarantee program that was set up by the Swiss Federal Council in March 2020 to support small and medium-sized entities (SMEs) via Swiss banks permits the issuance of new credit lines until 31 July 2020. As of 17 July 2020, we had committed CHF 2.7 billion of loans up to CHF 0.5 million, which are 100% guaranteed by the Swiss government, and CHF 0.5 billion of loans between CHF 0.5 million and CHF 20 million, which are 85% government-guaranteed. As of the same date, CHF 1.5 billion (i.e., 47% of the committed funds) had been drawn under the program. The Swiss Federal Council issued a draft law in July 2020 with a planned duration until 31 December 2032, seeking to transpose the loan guarantee program created under the emergency law in March 2020 into a federal law. The law will include provisions to terminate temporary measures early.

US regulatory authorities temporarily eased the supplementary leverage ratio (SLR) requirements for subsidiary banks of bank holding companies and intermediate holding companies in May 2020. UBS Americas Holding LLC has been subject to SLR requirements for local US reporting since 1 April 2020. The relief also permits exclusion of US Treasury securities and deposits at Federal Reserve Banks from the SLR denominator through March 2021.

The EU has adjusted the Capital Requirements Regulation in order to mitigate unintended consequences stemming from the COVID-19 pandemic, including the possibility to exclude central bank deposits and unsettled trades from the LRD. The measures are expected to have a limited impact on UBS Europe SE.

®   Refer to the “UBS Group AG consolidated,” “UBS AG standalone” and “UBS Switzerland AG standalone” sections of this report for more information about the effects of the temporary exemption granted by FINMA in connection with COVID-19

®   Refer to the “Significant regulated subsidiaries and sub-groups” section of this report for more information about the implementation of SLR requirements for UBS Americas Holding LLC

2 


 

Revision of the Swiss Banking Act

In June 2020, the Swiss Federal Council adopted a dispatch on the partial revision of the Swiss Banking Act.

The proposed measures would strengthen the Swiss depositor protection scheme by requiring banks to deposit half of their contribution obligations for the deposit protection scheme in securities or cash with a custodian. An adjustment to the Intermediated Securities Act would require custodians of securities to separate their own portfolios from the portfolios of their clients. Furthermore, the revision amends the section of the Swiss Banking Act on bank insolvency provisions, including the ranking of claims in case of a bail-in and the required subordination of bail-in bonds, except those issued by a holding company with pari-passu liabilities of less than 5% of gone concern eligible bail-in bonds.

The revised Swiss Banking Act is not expected to come into force until the start of 2022. We expect moderate additional costs for all Switzerland-based Group entities in scope.

First publication of the Pillar 3 ”CCR8 – Exposures to central counterparties” table

Following the adoption of the FINMA revisions to the capital treatment concerning UBS’s exposures to central counterparties in January 2020, we disclose the semiannual “CCR8 – Exposures to central counterparties” table for the first time in this report.

Simplification of Pillar 3 disclosures

Considering the current immaterial business volumes and declining trend of total securitization exposures over the past years, we have condensed the following semiannual Pillar 3 disclosures into one single tabular disclosure titled ”Securitization exposures in the banking and trading book and associated regulatory capital requirements”:

   ”SEC1 – Securitization exposures in the banking book”;

   ”SEC2 – Securitization exposures in the trading book”;

   ”SEC3 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as originator or as sponsor”; and

   ”SEC4 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as investor.”

The new table is presented for the first time in this report.


Market risk RWA are mainly based on the internal models approach, with the exception of securitization exposures in the trading book, which are subject to the standardized approach. From the second quarter of 2020 onward, the MR1 table is therefore no longer separately presented and RWA from securitization exposures in the trading book continues to be disclosed in the “OV1 – Overview of RWA” and “Regulatory exposures and risk-weighted assets” tables as well as in the narrative of section 5 on securitization exposures in the trading book.

Removal of market risk RWA multiplier

When our value-at-risk (VaR) model was structurally changed in the first quarter of 2016, FINMA introduced a temporary market risk RWA multiplier of 1.3 to be applied in the calculation of VaR and stressed VaR (SVaR) RWA. As of 30 June 2020, we have removed this specific multiplier following the demonstration of model performance in certain sub-portfolios.

Changes to accounting treatment affecting Pillar 1 and Pillar 3 disclosures of UBS AG standalone

In June 2020, we aligned the accounting treatment of investments in associates in the UBS AG IFRS standalone accounts with the ”equity method” accounting applied in the UBS Group IFRS financial statements. Previously, we had applied a ”cost less impairment” approach for these investments in the UBS AG standalone IFRS financial statements. Effective 30 June 2020, UBS AG standalone CET1 capital, LRD and RWA increased by approximately USD 0.9 billion, USD 0.9 billion and USD 2.4 billion, respectively.

®   Refer to the “UBS AG standalone” section of this report for more information about the restated comparatives

Results of the annual Comprehensive Capital Analysis and Review

In June 2020, the Federal Reserve Board released the results of its annual Dodd–Frank Act Stress Tests (DFAST) and Comprehensive Capital Analysis and Review (CCAR). UBS Americas Holding LLC exceeded minimum capital requirements under the severely adverse scenario and the Federal Reserve Board did not object to its capital plan. As a result, UBS Americas Holding LLC will no longer be subject to the qualitative assessment component of CCAR. The Federal Reserve Board also conducted sensitivity analyses to model the economic effects of the COVID-19 pandemic. As a result of these supplementary analyses, the Federal Reserve Board determined that firms should resubmit revised capital plans based on a new stress scenario that is to be provided to supervised firms by 30 September 2020.

 

3 


 

Frequency and comparability of Pillar 3 disclosures

FINMA has specified the reporting frequency for each disclosure, as outlined in the table on pages 7 and 8 of our 31 December 2019 Pillar 3 report, available under “Pillar 3 disclosures” at www.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 31 March 2020 for disclosures required on a quarterly basis and as of 31 December 2019 for disclosures required on a semiannual basis. Where specifically required by FINMA and/or the BCBS, we disclose comparative information for additional reporting dates.


Where required, movement commentary is aligned with the corresponding disclosure frequency required by FINMA and always refers to the latest comparative period. Throughout this report, signposts are displayed at the beginning of a section, table or chart – Semiannual | Quarterly | – indicating whether the disclosure is provided semiannually or quarterly. A triangle symbol – – indicates the end of the signpost.

®   Refer to our 31 March 2020 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors for more information about previously published quarterly movement commentary

®   Refer to our 31 December 2019 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors for more information about previously published semiannual movement commentary

  

4 


 

UBS Group

 


UBS Group AG consolidated 

 

Section 1  Key metrics

Key metrics of the second quarter of 2020

Quarterly | The KM1 and KM2 tables on the following pages are based on the Basel Committee on Banking Supervision (BCBS) Basel III rules; however, they do not reflect the effects of the temporary exemption granted by the Swiss Financial Market Supervisory Authority (FINMA) in connection with COVID-19 that permits banks to exclude central bank sight deposits from the leverage ratio calculation. The KM2 table includes a reference to the total loss-absorbing capacity (TLAC) term sheet, published by the Financial Stability Board (the FSB). The FSB provides this term sheet at www.fsb.org/2015/11/total-loss-absorbing-capacity-tlac-principles-and-term-sheet

During the second quarter of 2020, our common equity tier 1 (CET1) capital increased by USD 1.5 billion to USD 38.1 billion, mainly as a result of operating profit before tax and foreign currency effects, which were partially offset by current taxes, defined benefit plans and accruals for capital returns to shareholders. Our Tier 1 capital increased by USD 1.6 billion to USD 53.5 billion, predominantly driven by the aforementioned USD 1.5 billion increase in CET1 capital. Total capital increased by USD 1.1 billion to USD 58.9 billion from the aforementioned increase in CET1 capital, and was partially offset by the decrease in eligibility of a Tier 2 capital instrument amounting to USD 0.5 billion due to the shortening of its residual tenor.

®   Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures, and to “Effects of the application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Going and gone concern requirements and eligible capital“ section of this report for additional information


The TLAC available as of 30 June 2020 of USD 93.7 billion included CET1 capital of USD 38.1 billion, additional tier 1 and tier 2 capital instruments of USD 15.4 billion and USD 7.7 billion, respectively, eligible under the TLAC framework, and non-regulatory capital elements of TLAC of USD 32.4 billion, as disclosed in section 8 of this report. Under the Swiss systemically relevant bank (SRB) framework, TLAC excludes 45% of the gross unrealized gains on debt instruments measured at fair value through other comprehensive income for accounting purposes, which for regulatory capital purposes is measured at the lower of cost or market value. This amount was USD 0.1 billion as of 30 June 2020, and is included as total capital in the KM1 table, and as available TLAC in the KM2 table in this section.

Our available TLAC was stable at USD 93.7 billion, as the aforementioned USD 1.6 billion increase of Tier 1 capital, three new issuances of TLAC instruments amounting to USD 0.8 billion and interest rate risk hedge, foreign currency translation and other effects were offset by a decrease in the eligibility of two TLAC instruments of USD 2.9 billion due to the shortening of their residual tenor.

Risk-weighted assets (RWA) were stable at USD 286.4 billion, primarily driven by an increase in credit risk RWA, partly offset by a reduction in counterparty credit risk (CCR) RWA and market risk RWA.

The leverage ratio exposure increased by USD 18 billion to USD 974 billion, driven by an increase of on-balance sheet exposures (excluding derivatives and SFT) of USD 37 billion, partially offset by lower derivative exposures of USD 14 billion and a decrease in SFT exposures of USD 5 billion.

High-quality liquid assets (HQLA) increased by USD 36 billion, driven by greater average cash balances due to increased debt issuances, lower net funding consumption by the business divisions and higher customer deposit balances in Global Wealth Management. Net cash outflows increased by USD 11.4 billion due to reduced average net inflows from secured financing transactions and higher average outflows from customer deposits, partly offset by higher average inflows from derivative transactions.

 

 

6 


 

Quarterly |

KM1: Key metrics

 

 

 

 

 

 

 

 

 

USD million, except where indicated

 

 

 

 

30.6.20

 

31.3.20

 

31.12.19

 

30.9.19

30.6.19

Available capital (amounts)

 

 

 

 

 

 

 

 

 

1

Common equity tier 1 (CET1)

 

38,146

 

36,691

 

35,582

 

34,673

34,948

1a

Fully loaded ECL accounting model CET11

 

38,102

 

36,656

 

35,538

 

34,635

34,904

2

Tier 1

 

53,537

 

51,916

 

51,888

 

50,702

49,993

2a

Fully loaded ECL accounting model Tier 11

 

53,492

 

51,882

 

51,844

 

50,664

49,949

3

Total capital

 

58,908

 

57,784

 

57,614

 

56,396

56,345

3a

Fully loaded ECL accounting model total capital1

 

58,863

 

57,750

 

57,570

 

56,358

56,302

Risk-weighted assets (amounts)

 

 

 

 

 

 

 

 

 

4

Total risk-weighted assets (RWA)

 

286,436

 

286,256

 

259,208

 

264,626

262,135

4a

Minimum capital requirement2

 

22,915

 

22,901

 

20,737

 

21,170

20,971

4b

Total risk-weighted assets (pre-floor)

 

286,436

 

286,256

 

259,208

 

264,626

262,135

Risk-based capital ratios as a percentage of RWA

 

 

 

 

 

 

 

 

 

5

Common equity tier 1 ratio (%)

 

13.32

 

12.82

 

13.73

 

13.10

13.33

5a

Fully loaded ECL accounting model Common equity tier 1 ratio (%)1

 

13.30

 

12.81

 

13.71

 

13.09

13.32

6

Tier 1 ratio (%)

 

18.69

 

18.14

 

20.02

 

19.16

19.07

6a

Fully loaded ECL accounting model Tier 1 ratio (%)1

 

18.67

 

18.12

 

20.00

 

19.15

19.05

7

Total capital ratio (%)

 

20.57

 

20.19

 

22.23

 

21.31

21.49

7a

Fully loaded ECL accounting model total capital ratio (%)1

 

20.55

 

20.17

 

22.21

 

21.30

21.48

Additional CET1 buffer requirements as a percentage of RWA

 

 

 

 

 

 

 

 

 

8

Capital conservation buffer requirement (2.5% from 2019) (%)

 

2.50

 

2.50

 

2.50

 

2.50

2.50

9

Countercyclical buffer requirement (%)

 

0.02

 

0.02

 

0.08

 

0.10

0.09

9a

Additional countercyclical buffer for Swiss mortgage loans (%)

 

0.00

 

0.00

 

0.23

 

0.21

0.22

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

 

3.58

 

3.60

3.59

12

CET1 available after meeting the bank’s minimum capital requirements (%)

 

8.82

 

8.32

 

9.23

 

8.60

8.83

Basel III leverage ratio3

 

 

 

 

 

 

 

 

 

13

Total Basel III leverage ratio exposure measure

 

974,348

 

955,932

 

911,325

 

901,914

911,379

14

Basel III leverage ratio (%)

 

5.49

 

5.43

 

5.69

 

5.62

5.49

14a

Fully loaded ECL accounting model Basel III leverage ratio (%)1

 

5.49

 

5.43

 

5.69

 

5.62

5.48

Liquidity coverage ratio4

 

 

 

 

 

 

 

 

 

15

Total HQLA

 

 206,693 

 

 170,630 

 

 166,215 

 

 167,916 

 176,173 

16

Total net cash outflow

 

 133,786 

 

 122,383 

 

 124,112 

 

 122,025 

 121,314 

17

LCR (%)

 

 155 

 

 139 

 

 134 

 

 138 

 145 

1 The fully loaded ECL accounting model excludes the transitional relief of recognizing ECL allowances and provisions in CET1 capital in accordance with FINMA Circular 2013/1 “Eligible capital – banks.”    2 Calculated as 8% of total RWA, based on total capital minimum requirements, excluding CET1 buffer requirements.    3 Leverage ratio exposures and leverage ratios for 30 June 2020 and 31 March 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Going and gone concern requirements and eligible capital“ section for more information.    4 Calculated based on quarterly average. Refer to “Liquidity coverage ratio” in section 10 of this report for more information.

p

 

7 


UBS Group AG consolidated 

Quarterly |

KM2: Key metrics – TLAC requirements (at resolution group level)1

USD million, except where indicated

 

 

 

 

 

 

 

 

 

 

 

 

30.6.20

 

31.3.20

 

31.12.19

 

30.9.19

 

30.6.19

1

Total loss-absorbing capacity (TLAC) available

 

 93,658 

 

 93,718 

 

 89,660 

 

 88,197 

 

 87,388 

1a

Fully loaded ECL accounting model TLAC available2

 

 93,613 

 

 93,684 

 

 89,616 

 

 88,159 

 

 87,344 

2

Total RWA at the level of the resolution group

 

 286,436 

 

 286,256 

 

 259,208 

 

 264,626 

 

 262,135 

3

TLAC as a percentage of RWA (%)

 

 32.70 

 

 32.74 

 

 34.59 

 

 33.33 

 

 33.34 

3a

Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model RWA (%)2

 

 32.68 

 

 32.73 

 

 34.57 

 

 33.31 

 

 33.32 

4

Leverage ratio exposure measure at the level of the resolution group3

 

 974,348 

 

 955,932 

 

 911,325 

 

 901,914 

 

 911,379 

5

TLAC as a percentage of leverage ratio exposure measure (%)3

 

 9.61 

 

 9.80 

 

 9.84 

 

 9.78 

 

 9.59 

5a

Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model leverage exposure measure (%)2,3

 

 9.61 

 

 9.80 

 

 9.83 

 

 9.77 

 

 9.58 

6a

Does the subordination exemption in the antepenultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply?

 

No

6b

Does the subordination exemption in the penultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply?

 

No

6c

If the capped subordination exemption applies, the amount of funding issued that ranks pari passu with excluded liabilities and that is recognized as external TLAC, divided by funding issued that ranks pari passu with excluded liabilities and that would be recognized as external TLAC if no cap was applied (%)

 

N/A – Refer to our response to 6b.

1 Resolution group level is defined as the UBS Group AG consolidated level.    2 The fully loaded ECL accounting model excludes the transitional relief of recognizing ECL allowances and provisions in CET1 capital in accordance with FINMA Circular 2013/1 “Eligible capital – banks.”    3 Leverage ratio exposures and leverage ratios for 30 June 2020 and 31 March 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Going and gone concern requirements and eligible capital“ section for more information.

p

  

8 


 

Section 2  Regulatory exposures and risk-weighted assets

Our approach to measuring risk exposure and risk-weighted assets

Quarterly | Depending on the intended purpose, the measurement of risk exposure that we apply may differ. Exposures may be 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 (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 12–14 of our 31 December 2019 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors.

RWA development in the second quarter of 2020

Quarterly | The OV1 table on the next 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 second quarter of 2020, RWA increased by USD 0.2 billion to USD 286.4 billion, primarily driven by an increase in credit risk RWA of USD 2.9 billion, partly offset by a reduction in counterparty credit risk (CCR) RWA of USD 1.6 billion and market risk RWA of USD 0.9 billion.

Credit risk RWA under the internal ratings-based approach increased by USD 2.9 billion, mainly due to business growth in Global Wealth Management and Personal & Corporate Banking. Changes in credit ratings and loss given default resulted in an increase of less than USD 1.0 billion in RWA during the second quarter of 2020. Counterparty credit risk RWA on derivatives including those under the standardized approach and the internal model method decreased by USD 2.7 billion, mainly as a result of lower volumes in Global Markets. RWA on securities financing transactions, including those subject to value-at-risk (VaR) and other counterparty credit risk treatments, increased by USD 1.1 billion, mainly driven by increased prime brokerage volumes in Global Markets. Market risk RWA decreased by USD 0.9 billion, primarily driven by the removal of a model multiplier, as well as the impact of client activity and market conditions on stressed and regulatory VaR.

The flow tables for credit risk, counterparty credit risk and market risk RWA in the respective sections of this report provide further details regarding the movements in RWA in the second quarter of 2020. More information about capital management and RWA, including details regarding movements in RWA during the second quarter of 2020, is provided on pages 53–54 in the “Capital management” section of our second quarter 2020 report, available under “Quarterly reporting” at www.ubs.com/investors.  

 

 

9 


UBS Group AG consolidated 

Quarterly |

OV1: Overview of RWA

 

 

RWA

 

Minimum capital requirements1

USD million

 

30.6.20

31.3.20

31.12.19

 

30.6.20

1

Credit risk (excluding counterparty credit risk)

 

 133,180 

 130,236 

 121,244 

 

 10,654 

2

of which: standardized approach (SA)

 

 30,144 

 30,159 

 28,386 

 

 2,412 

2a

  of which: non-counterparty-related risk

 

 13,219 

 13,061 

 13,135 

 

 1,058 

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

 

 103,036 

 100,076 

 92,858 

 

 8,243 

6

Counterparty credit risk2

 

 39,983 

 41,560 

 36,354 

 

 3,199 

7

of which: SA for counterparty credit risk (SA-CCR)3

 

 5,903 

 7,254 

 4,699 

 

 472 

8

of which: internal model method (IMM)

 

 19,284 

 20,582 

 20,275 

 

 1,543 

8a

of which: value-at-risk (VaR)

 

 8,055 

 6,663 

 5,502 

 

 644 

9

of which: other CCR

 

 6,741 

 7,061 

 5,879 

 

 539 

10

Credit valuation adjustment (CVA)

 

 4,523 

 3,889 

 1,900 

 

 362 

11

Equity positions under the simple risk weight approach4

 

 2,646 

 3,136 

 3,261 

 

 212 

12

Equity investments in funds – look-through approach5

 

 705 

 671 

 

 

 56 

13

Equity investments in funds – mandate-based approach5

 

 611 

 735 

 

 

 49 

14

Equity investments in funds – fallback approach5

 

 25 

 110 

 

 

 2 

15

Settlement risk

 

 395 

 1,201 

 357 

 

 32 

16

Securitization exposures in banking book

 

 598 

 607 

 633 

 

 48 

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)

 

 564 

 574 

 598 

 

 45 

19

of which securitization standardized approach (SEC-SA)

 

 34 

 33 

 35 

 

 3 

20

Market Risk

 

 14,228 

 15,096 

 6,556 

 

 1,138 

21

of which: standardized approach (SA)

 

 370 

 449 

 419 

 

 30 

22

of which: internal model approaches (IMA)

 

 13,859 

 14,647 

 6,137 

 

 1,109 

23

Capital charge for switch between trading book and banking book6

 

 

 

 

 

 

24

Operational risk

 

 77,542 

 77,542 

 77,542 

 

 6,203 

25

Amounts below thresholds for deduction (250% risk weight)7

 

 12,005 

 11,473 

 11,361 

 

 960 

25a

 of which: Deferred tax assets

 

 9,212 

 8,705 

 8,951 

 

 737 

26

Floor adjustment8

 

 

 

 

 

 

27

Total

 

 286,436 

 286,256 

 259,208 

 

 22,915 

1 Calculated based on 8% of RWA.    2 Excludes settlement risk, which is separately reported in line 15 “Settlement risk.” Includes RWA with central counterparties. The split between the sub-components of counterparty credit risk refers to the calculation of the exposure measure.    3 Calculated in accordance with the standardized approach for counterparty credit risk (SA-CCR) from 1 January 2020 onward, whereas periods prior to 2020 were calculated in accordance with the current exposure method (CEM).    4 Information as of 31 December 2019 includes investments in funds calculated based on the simple risk-weight approach, whereas from 1 January 2020 onward investments in funds are disclosed in rows 12, 13 and 14 based on risk weighting in accordance with the new regulation for investments in funds.    5 From 2020 onward, the risk weighting has been calculated in accordance with the regulation for investments in funds.    6 Not applicable until the implementation of the final rules on the minimum capital requirements for market risk (the Fundamental Review of the Trading Book).    7 Includes items subject to threshold deduction treatment that do not exceed their respective threshold and are risk weighted at 250%. Items subject to threshold deduction treatment include significant investments in common shares of non-consolidated financial institutions (banks, insurance and other financial entities) and deferred tax assets arising from temporary differences.    8 No floor effect, as 80% of our Basel I RWA, including the RWA equivalent of the Basel I capital deductions, do not exceed our Basel III RWA, including the RWA equivalent of the Basel III capital deductions. For the status of the finalization of the Basel III capital framework, refer to the “Regulatory and legal developments” section of our Annual Report 2019, which outlines how the proposed floor calculation would differ in significant aspects from the current approach.

p

 

10 


 

The table below and on the following pages is provided on a voluntary basis to complement other disclosures presented in this report. It is aligned with the principles applied in the OV1 table and presents the net exposure at default (EAD) and RWA by risk type and FINMA-defined asset class, which forms the basis for the calculation of RWA. These exposures are further subdivided into standardized approaches and advanced internal ratings-based (A-IRB) or model-based approaches. For credit risk, the classification defines the method used to derive the risk weight factors, through either internal ratings (A-IRB) or external ratings (standardized approach). The split between standardized approaches and A-IRB or model-based approaches for counterparty credit risk refers to the exposure measure, whereas the split in templates CCR3 and CCR4 refers to the risk weighting approach. Market and operational risk RWA, excluding securitization and re-securitization in the trading book, are derived using model calculations and are therefore included in the model-based approach columns.

The table provides references to sections in this report containing more information about the specific topics.

 

  

Regulatory exposures and risk-weighted assets

30.6.20

 

A-IRB / model-based approach

 

Standardized approach

 

Total

USD million

 

Net EAD

RWA

Section or table reference

 

Net EAD

RWA

Section or table reference

 

Net EAD

RWA

Credit risk (excluding counterparty credit risk)

 

 636,927 

 103,036 

 3 

 

 51,894 

 30,144 

 3 

 

 688,821 

 133,180 

Central governments and central banks

 

 198,976 

 3,343 

CR6, CR7

 

 10,048 

 913 

CR4, CR5

 

 209,025 

 4,256 

Banks and securities dealers

 

 17,763 

 5,948 

CR6, CR7

 

 6,129 

 1,479 

CR4, CR5

 

 23,892 

 7,427 

Public-sector entities, multilateral development banks

 

 10,169 

 1,041 

CR6, CR7

 

 1,490 

 368 

CR4, CR5

 

 11,659 

 1,409 

Corporates: specialized lending

 

 25,207 

 11,963 

CR6, CR7

 

 

 

 

 

 25,207 

 11,963 

Corporates: other lending

 

 61,820 

 38,067 

CR6, CR7

 

 7,799 

 6,381 

CR4, CR5

 

 69,619 

 44,448 

Central counterparties

 

 

 

 

 

 775 

 24 

 

 

 775 

 24 

Retail

 

 322,991 

 42,674 

 

 

 11,538 

 7,760 

CR4, CR5

 

 334,529 

 50,434 

Residential mortgages

 

 155,269 

 30,337 

CR6, CR7

 

 6,171 

 2,619 

 

 

 161,440 

 32,956 

Qualifying revolving retail exposures (QRRE) 

 

 1,660 

 661 

CR6, CR7

 

 

 

 

 

 1,660 

 661 

Other retail1

 

 166,062 

 11,676 

CR6, CR7

 

 5,367 

 5,141 

 

 

 171,428 

 16,817 

Non-counterparty-related risk

 

 

 

 

 

 14,115 

 13,220 

CR4, CR5

 

 14,115 

 13,219 

Property, equipment and software

 

 

 

 

 

 12,829 

 12,829 

 

 

 12,829 

 12,829 

Other

 

 

 

 

 

 1,286 

 391 

 

 

 1,286 

 391 

Counterparty credit risk2

 

 108,774 

 27,339 

 4 

 

 78,905 

 12,644 

 4 

 

 187,679 

 39,983 

Central governments and central banks

 

 8,818 

 1,068 

CCR3, CCR4

 

 1,875 

 135 

CCR3, CCR4

 

 10,693 

 1,204 

Banks and securities dealers

 

 20,801 

 5,663 

CCR3, CCR4

 

 2,673 

 855 

CCR3, CCR4

 

 23,474 

 6,518 

Public-sector entities, multilateral development banks

 

 2,013 

 347 

CCR3, CCR4

 

 755 

 47 

CCR3, CCR4

 

 2,768 

 395 

Corporates incl. specialized lending

 

 54,921 

 19,695 

CCR3, CCR4

 

 23,605 

 9,642 

CCR3, CCR4

 

 78,526 

 29,338 

Central counterparties

 

 22,113 

 457 

CCR8

 

 40,211 

 959 

CCR8

 

 62,325 

 1,416 

Retail

 

 108 

 108 

CCR3, CCR4

 

 9,785 

 1,005 

CCR3, CCR4

 

 9,893 

 1,113 

Credit valuation adjustment (CVA)

 

 

 3,082 

4, CCR2

 

 

 1,441 

4, CCR2

 

 

 4,523 

Equity positions under the simple risk weight approach3

 

 634 

 2,646 

3, CR10

 

 

 

 

 

 634 

 2,646 

Equity investments in funds in the banking book (CR)4

 

 284 

 1,341 

 

 

 

 

 

 

 284 

 1,341 

Settlement risk

 

 835 

 215 

 

 

 491 

 180 

 

 

 1,325 

 395 

Securitization exposure in the banking book

 

 

 

 

 

 176 

 598 

5,6

 

 176 

 598 

Market risk5

 

 

 13,859 

 6 

 

 655 

 370 

 6 

 

 655 

 14,228 

Value-at-risk (VaR)

 

 

 1,848 

MR2

 

 

 

 

 

 

 1,848 

Stressed value-at risk (SVaR)

 

 

 3,619 

MR2

 

 

 

 

 

 

 3,619 

Add-on for risks-not-in-VaR (RniV)

 

 

 7,021 

MR2

 

 

 

 

 

 

 7,021 

Incremental risk charge (IRC)

 

 

 1,371 

MR2

 

 

 

 

 

 

 1,371 

Comprehensive risk measure (CRM)6

 

 

 

 

 

 

 

 

 

 

 

Securitization / re-securitization in the trading book5

 

 

 

 

 

 655 

 370 

 5 

 

 655 

 370 

Operational risk

 

 

 77,542 

 

 

 

 

 

 

 

 77,542 

Amounts below thresholds for deduction (250% risk weight)

 

 1,117 

 2,793 

 

 

 3,685 

 9,212 

 

 

 4,802 

 12,005 

Deferred tax assets

 

 

 

 

 

 3,685 

 9,212 

 

 

 3,685 

 9,212 

Significant investments in non-consolidated financial institutions

 

 1,117 

 2,793 

 

 

 

 

 

 

 1,117 

 2,793 

Total

 

 736,409 

 231,847 

 

 

 147,964 

 54,589 

 

 

 884,373 

 286,436 

 

11 


UBS Group AG consolidated 

Regulatory exposures and risk-weighted assets (continued)

31.12.19

 

A-IRB / model-based approach

 

Standardized approach

 

Total

USD million

 

Net EAD

RWA

Section or table reference

 

Net EAD

RWA

Section or table reference

 

Net EAD

RWA

Credit risk (excluding counterparty credit risk)

 

 551,748 

 92,858 

 3 

 

 49,939 

 28,386 

 3 

 

 601,687 

 121,244 

Central governments and central banks

 

 138,880 

 2,482 

CR6, CR7

 

 10,687 

 938 

CR4, CR5

 

 149,567 

 3,420 

Banks and securities dealers

 

 17,614 

 6,102 

CR6, CR7

 

 5,541 

 1,314 

CR4, CR5

 

 23,155 

 7,416 

Public-sector entities, multilateral development banks

 

 8,012 

 844 

CR6, CR7

 

 920 

 238 

CR4, CR5

 

 8,932 

 1,082 

Corporates: specialized lending

 

 23,313 

 11,475 

CR6, CR7

 

 

 

 

 

 23,313 

 11,475 

Corporates: other lending

 

 52,533 

 31,836 

CR6, CR7

 

 6,017 

 4,824 

CR4, CR5

 

 58,550 

 36,660 

Central counterparties

 

 

 

 

 

 474 

 16 

 

 

 474 

 16 

Retail

 

 311,396 

 40,118 

 

 

 12,074 

 7,923 

CR4, CR5

 

 323,469 

 48,041 

Residential mortgages

 

 149,255 

 29,133 

CR6, CR7

 

 6,466 

 2,641 

 

 

 155,721 

 31,774 

Qualifying revolving retail exposures (QRRE) 

 

 1,944 

 687 

CR6, CR7

 

 

 

 

 

 1,944 

 687 

Other retail1

 

 160,197 

 10,298 

CR6, CR7

 

 5,608 

 5,282 

 

 

 165,805 

 15,580 

Non-counterparty-related risk

 

 

 

 

 

 14,226 

 13,135 

CR4, CR5

 

 14,226 

 13,135 

Property, equipment and software

 

 

 

 

 

 12,756 

 12,756 

 

 

 12,756 

 12,756 

Other

 

 

 

 

 

 1,470 

 378 

 

 

 1,470 

 378 

Counterparty credit risk2

 

 102,536 

 25,777 

 4 

 

 70,327 

 10,577 

 4 

 

 172,863 

 36,354 

Central governments and central banks

 

 7,070 

 670 

CCR3, CCR4

 

 2,091 

 104 

CCR3, CCR4

 

 9,161 

 774 

Banks and securities dealers

 

 18,078 

 5,376 

CCR3, CCR4

 

 2,328 

 660 

CCR3, CCR4

 

 20,407 

 6,036 

Public-sector entities, multilateral development banks

 

 1,917 

 423 

CCR3, CCR4

 

 755 

 45 

CCR3, CCR4

 

 2,673 

 469 

Corporates incl. specialized lending

 

 48,331 

 18,759 

CCR3, CCR4

 

 17,402 

 7,722 

CCR3, CCR4

 

 65,733 

 26,481 

Central counterparties

 

 27,139 

 547 

CCR8

 

 41,531 

 1,343 

CCR8

 

 68,671 

 1,891 

Retail

 

 

 

CCR3, CCR4

 

 6,219 

 703 

CCR3, CCR4

 

 6,219 

 703 

Credit valuation adjustment (CVA)

 

 

 974 

4, CCR2

 

 

 926 

4, CCR2

 

 

 1,900 

Equity positions under the simple risk weight approach3

 

 778 

 3,261 

3, CR10

 

 

 

 

 

 778 

 3,261 

Equity investments in funds in the banking book (CR)4

 

 

 

 

 

 

 

 

 

 

 

Settlement risk

 

 30 

 54 

 

 

 183 

 303 

 

 

 213 

 357 

Securitization exposure in the banking book

 

 

 

 

 

 188 

 633 

5,6

 

 188 

 633 

Market risk5

 

 

 6,137 

 6 

 

 670 

 419 

 6 

 

 670 

 6,556 

Value-at-risk (VaR)

 

 

 487 

MR2

 

 

 

 

 

 

 487 

Stressed value-at risk (SVaR)

 

 

 2,082 

MR2

 

 

 

 

 

 

 2,082 

Add-on for risks-not-in-VaR (RniV)

 

 

 2,344 

MR2

 

 

 

 

 

 

 2,344 

Incremental risk charge (IRC)

 

 

 1,224 

MR2

 

 

 

 

 

 

 1,224 

Comprehensive risk measure (CRM)6

 

 

 

 

 

 

 

 

 

 

 

Securitization / re-securitization in the trading book5

 

 

 

 

 

 670 

 419 

 5 

 

 670 

 419 

Operational risk

 

 

 77,542 

 

 

 

 

 

 

 

 77,542 

Amounts below thresholds for deduction (250% risk weight)

 

 964 

 2,410 

 

 

 3,580 

 8,951 

 

 

 4,544 

 11,361 

Deferred tax assets

 

 

 

 

 

 3,580 

 8,951 

 

 

 3,580 

 8,951 

Significant investments in non-consolidated financial institutions

 

 964 

 2,410 

 

 

 

 

 

 

 964 

 2,410 

Total

 

 656,055 

 209,014 

 

 

 124,887 

 50,194 

 

 

 780,942 

 259,208 

1 Consists primarily of Lombard lending, which represents loans made against the pledge of eligible marketable securities or cash, as well as exposures to small businesses, private clients and other retail customers without mortgage financing.    2 The split between A-IRB / model-based approach and standardized approach for counterparty credit risk refers to the exposure measure, whereas the split in CCR3 and CCR4 refers to the risk weight approach. As of 30 June 2020, USD 117,863 million of EAD (31 December 2019, USD 97,845 million) was subject to the A-IRB risk weight approach, and USD 7,491 million of EAD (31 December 2019, USD 6,348 million) was subject to the standardized risk weight approach.    3 Comparative period prior to 2020 includes investments in funds calculated based on the simple risk-weight approach, whereas from 1 January 2020 onward investments in funds are disclosed in row “Equity investments in funds in the banking book (CR)” based on the new regulation for investments in funds risk weighting.    4 From 2020 onward based on the regulation for investments in funds risk weighting.    5 From the second quarter of 2020 onward, RWA from securitization exposures in the trading book continue to be disclosed in the “OV1 – Overview of RWA” and “Regulatory exposures and risk-weighted assets” tables and the MR1 table is therefore no longer separately presented. Refer to the “Introduction and basis for preparation” section of this report for more information.    6 As of 30 June 2020 and 31 December 2019, the CRM-based capital requirement was not applicable to us, as we did not hold eligible correlation trading positions.

12 


 

 

Section 3  Credit risk

Introduction

Semiannual | This section provides information about the exposures subject to the Basel III credit risk framework, as presented in the “Regulatory exposures and risk-weighted assets” table on pages 11–12 of this report. Information about counterparty credit risk is reflected in the “Counterparty credit risk” section on pages 26–33 of this report. Securitization positions are reported in the “Securitizations” section on pages 34–35 of this report.

The tables in this section provide details regarding the exposures relevant for the determination of the firm’s credit risk-related regulatory capital requirement. The parameters applied under the advanced internal ratings-based (A-IRB) approach are generally based on the same methodologies, data and systems we use for internal credit risk quantification, except where certain treatments are specified by regulatory requirements. These include, for example, the application of regulatory prescribed floors and multipliers, and differences with respect to eligibility criteria and exposure definitions. The exposure information presented in this section may therefore differ from our internal management view disclosed in the “Risk management and control” sections of our quarterly and annual reports. Similarly, the prescribed regulatory capital measure of credit risk exposure also differs from how it is defined under International Financial Reporting Standards (IFRS).

For information about credit risk exposure categories, credit risk management and credit risk mitigation (CRM), refer to pages 26–27, 31 and 35–38 of our 31 December 2019 Pillar 3 report, which is available under ”Pillar 3 disclosures” at www.ubs.com/investors.


Credit risk exposure categories

Semiannual | The definitions of the Swiss Financial Market Supervisory Authority (FINMA)-defined Pillar 3 credit risk exposure categories “Loans” and “Debt securities” below, as referred to in the “CR1: Credit quality of assets” and “CR3: Credit risk mitigation techniques – overview” tables in this section, provide a link to the IFRS balance sheet structure.

The Pillar 3 category “Loans” comprises financial instruments held with the intent to collect the contractual payments and includes the following IFRS balances to the extent that they are subject to the credit risk framework:

   balances at central banks;

   Loans and advances to banks

   Loans and advances to customers

   Other financial assets measured at amortized cost, excluding money market instruments, checks and bills and other debt instruments;

   traded loans in the banking book that are included within Financial assets at fair value held for trading

   brokerage receivables;

   loans including structured loans that are included within Financial assets at fair value not held for trading; and

   other non-financial assets.

 

The Pillar 3 category “Debt securities” includes the following IFRS balances to the extent that they are subject to the credit risk framework:

   money market instruments, checks and bills and other debt instruments that are included within Other financial assets measured at amortized cost

   Financial assets at fair value held for trading, excluding traded loans;

   Financial assets at fair value not held for trading, excluding loans; and

   Financial assets measured at fair value through other comprehensive income.

 

 

13 


UBS Group AG consolidated 

Credit quality of assets

Semiannual | The CR1 table below provides a breakdown of defaulted and non-defaulted loans, debt securities and off-balance sheet exposures. The table includes a split of expected credit loss (ECL) accounting provisions based on the standardized approach and the internal ratings-based approach.

The increases in the total carrying amount of loans and debt securities of USD 61.5 billion and USD 19.2 billion, respectively, are explained in the CR3 table of this report. The increase in the total carrying amount of off-balance sheet exposures of USD 11.3 billion was driven by new loan commitments and financing activities.

For information about the definitions of default and credit-impairment, refer to page 136 of our Annual Report 2019, which is available under ”Annual reporting” at www.ubs.com/investors.  

More information about the net value movements related to Loans and Debt securities shown in the table is provided on page 15 of this report in the “CR3: Credit risk mitigation techniques – overview” table.

 

Semiannual |

CR1: Credit quality of assets

 

 

 

Gross carrying amounts of:

 

Allowances / impairments

 

Of which: ECL accounting provisions for credit losses on SA exposures

 

Of which: ECL accounting provisions for credit losses on IRB exposures

(stage 1, 2, 3)

 

Net values

USD million

 

Defaulted exposures1

Non-defaulted exposures

 

 

Allocated in regulatory category of Specific

(stage 3

credit-impaired)

Allocated in regulatory category of General

(stage 1 & 2)

 

 

30.6.20

 

 

 

 

 

 

 

 

 

 

 

 

1

Loans2

 

 3,564 

 516,755 

 

 (1,244)4

 

 (115) 

 (75) 

 

 (1,054) 

 

 519,076 

2

Debt securities

 

 

 81,980 

 

 

 

 

 

 

 

 

 81,980 

3

Off-balance sheet exposures3

 

 290 

 63,927 

 

 (168)4

 

 (1) 

 (2) 

 

 (165) 

 

 64,048 

4

Total

 

 3,854 

 662,662 

 

 (1,411)4

 

 (116) 

 (77) 

 

 (1,218) 

 

 665,104 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.19

 

 

 

 

 

 

 

 

 

 

 

 

1

Loans2

 

 2,981 

 455,494 

 

 (911)4

 

 (114) 

 (68) 

 

 (729) 

 

 457,564 

2

Debt securities

 

 

 62,766 

 

 

 

 

 

 

 

 

 62,766 

3

Off-balance sheet exposures3

 

 132 

 52,725 

 

 (78)4

 

 (1) 

 (3) 

 

 (75) 

 

 52,778 

4

Total

 

 3,113 

 570,986 

 

 (989)4

 

 (115) 

 (71) 

 

 (804) 

 

 573,108 

1 Defaulted exposures are in line with credit-impaired exposures (stage 3) under IFRS 9. Refer to Note 23 “Expected credit loss measurement“ of our Annual Report 2019 for more information about IFRS 9.    2 Loan exposure is reported in line with the Pillar 3 definition. Refer to “Credit risk exposure categories” in this section for more information about the classification of Loans and Debt securities.    3 Off-balance sheet exposures include unutilized credit facilities, guarantees provided and forward starting loan commitments but exclude prolongations of loans that do not increase the initially committed loan amount. Unutilized credit facilities exclude unconditionally revocable as well as uncommitted credit facilities, even if they attract RWA.    4 Expected credit loss allowances and provisions amount to USD 1,489 million as of 30 June 2020, as disclosed in Note 10 of the UBS Group AG second quarter 2020 report. This Pillar 3 table excludes ECL on revocable off-balance sheet exposures (30 June 2020: USD 65 million; 31 December 2019: USD 35 million), ECL on exposures subject to counterparty credit risk (30 June 2020: USD 6 million; 31 December 2019: USD 5 million) and ECL on irrevocable committed prolongation of loans that do not give rise to additional credit exposures of USD 7 million as of 30 June 2020.

p

Semiannual | The CR2 table below illustrates changes in stock of defaulted loans, debt securities and off-balance sheet exposures for the first half year of 2020. The total amount of defaulted loans and debt securities was USD 3.9 billion as of 30 June 2020.

 

Semiannual |

CR2: Changes in stock of defaulted loans, debt securities and off-balance sheet exposures

USD million

For the half year ended 30.6.201

For the half year ended 31.12.191

1

Defaulted loans, debt securities and off-balance sheet exposures as of the beginning of the half year

 3,113 

 2,920 

2

Loans and debt securities that have defaulted since the last reporting period

 1,314 

 780 

3

Returned to non-defaulted status

 (337) 

 (225) 

4

Amounts written off

 (103) 

 (70) 

5

Other changes

 (133) 

 (292) 

6

Defaulted loans, debt securities and off-balance sheet exposures as of the end of the half year

 3,854 

 3,113 

1 Off-balance sheet exposures include unutilized credit facilities, guarantees provided and forward starting loan commitments but exclude prolongations of loans that do not increase the initially committed loan amount. Unutilized credit facilities exclude unconditionally revocable as well as uncommitted credit facilities, even if they attract RWA.

p

 

14 


 

Credit risk mitigation

Semiannual | The CR3 table below provides a breakdown of loans and debt securities into unsecured and partially or fully secured exposures, with additional information about the security type.

The carrying amount for unsecured exposures increased by USD 65.3 billion to USD 267 billion, mainly as a result of higher balances at central banks to maintain increased liquidity levels presented under loans and purchases of high-quality liquid assets (HQLA) presented under debt securities. The carrying amount of partially or fully secured exposures increased by USD 15.5 billion to USD 334.1 billion, mainly as a result of an increase in secured loans and mortgages to customers related to government-guaranteed lending programs.

Semiannual |

CR3: Credit risk mitigation techniques – overview1

 

 

 

 

 

 

Secured portion of exposures partially or fully secured:

USD million

 

Exposures fully unsecured: carrying amount

Exposures partially or fully secured: carrying amount

Total: carrying amount

 

Exposures secured by collateral

Exposures secured by financial guarantees

Exposures secured by credit derivatives

 

 

 

 

 

 

 

 

 

 

30.6.20

 

 

 

 

 

 

 

 

1

Loans2

 

 185,026 

 334,050 

 519,076 

 

 320,139 

 3,368 

 11 

2

Debt securities

 

 81,980 

 

 81,980 

 

 

 

 

3

Total

 

 267,006 

 334,050 

 601,056 

 

 320,139 

 3,368 

 11 

4

of which: defaulted

 

 657 

 2,089 

 2,745 

 

 1,440 

 212 

 

 

 

 

 

 

 

 

 

 

 

31.12.19

 

 

 

 

 

 

 

 

1

Loans2

 

 138,961 

 318,603 

 457,564 

 

 307,400 

 1,125 

 

2

Debt securities

 

 62,766 

 

 62,766 

 

 

 

 

3

Total

 

 201,727 

 318,603 

 520,330 

 

 307,400 

 1,125 

 

4

of which: defaulted

 

 504 

 1,823 

 2,327 

 

 1,167 

 225 

 

1 Exposures in this table represent carrying amounts in accordance with the regulatory scope of consolidation.    2 Loan exposure is reported in line with the Pillar 3 definition. Refer to “Credit risk exposure categories” in this section for more information about the classification of Loans and Debt securities.

p

 

15 


UBS Group AG consolidated 

Standardized approach – credit risk mitigation

Semiannual | The CR4 table below illustrates the effect of CRM on the calculation of capital requirements under the standardized approach. In the first half of 2020, off-balance sheet exposures before credit conversion factors (CCF) and CRM under the Corporates asset class increased by USD 5.8 billion to USD 14.6 billion, reflecting increases in margin loan commitments in the Investment Bank as well as exposures to certain clients within Global Wealth Management.

 

Semiannual |

CR4: Standardized approach – credit risk exposure and credit risk mitigation (CRM) effects

 

 

 

Exposures

before CCF and CRM1

 

Exposures

post-CCF and post-CRM

 

RWA and RWA density

USD million, except where indicated

 

On-balance sheet amount

Off-balance sheet amount

Total

 

On-balance sheet amount

Off-balance sheet amount

Total

 

RWA

RWA density in %

 

 

 

 

 

 

 

 

 

 

 

 

 

30.6.20

 

 

Asset classes2

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 10,043 

 

 10,043 

 

 10,042 

 

 10,042 

 

 912 

 9.1 

2

Banks and securities dealers

 

 5,655 

 998 

 6,653 

 

 5,654 

 475 

 6,129 

 

 1,478 

 24.1 

3

Public-sector entities and multilateral development banks

 

 1,183 

 869 

 2,053 

 

 1,183 

 307 

 1,490 

 

 368 

 24.7 

4

Corporates

 

 6,570 

 14,643 

 21,212 

 

 6,509 

 2,071 

 8,580 

 

 6,407 

 74.7 

5

Retail

 

 11,789 

 3,982 

 15,771 

 

 11,422 

 116 

 11,538 

 

 7,760 

 67.3 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets3

 

 14,048 

 67 

 14,115 

 

 14,048 

 67 

 14,115 

 

 13,219 

 93.6 

8

Total

 

 49,288 

 20,559 

 69,847 

 

 48,859 

 3,035 

 51,894 

 

 30,144 

 58.1 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.19

 

 

Asset classes2

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 10,687 

 

 10,687 

 

 10,687 

 

 10,687 

 

 938 

 8.8 

2

Banks and securities dealers

 

 5,072 

 928 

 6,000 

 

 5,071 

 464 

 5,536 

 

 1,314 

 23.7 

3

Public-sector entities and multilateral development banks

 

 844 

 372 

 1,216 

 

 844 

 74 

 918 

 

 237 

 25.9 

4

Corporates

 

 6,310 

 8,823 

 15,133 

 

 5,847 

 651 

 6,499 

 

 4,839 

 74.5 

5

Retail

 

 12,141 

 4,071 

 16,212 

 

 11,974 

 100 

 12,074 

 

 7,923 

 65.6 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets3

 

 14,226 

 

 14,226 

 

 14,226 

 

 14,226 

 

 13,135 

 92.3 

8

Total

 

 49,280 

 14,194 

 63,475 

 

 48,648 

 1,290 

 49,939 

 

 28,386 

 56.8 

1 Exposures in this table represent carrying amounts in accordance with the regulatory scope of consolidation.    2 The CRM effect is reflected in the original asset class, i.e., CRM effects of purchased credit protection by means of guarantees or credit derivatives are reflected in the asset class of the obligor. Refer to “CR5: Standardized approach – exposures by asset classes and risk weights” for a view of the CRM effect reflected in the asset class of the protection provider.    3 Excludes securitization exposures and RWA under the standardized approach. Refer to the “Regulatory exposures and risk-weighted assets” table in section 2 and to section 5 of this report for more information.

p

 

16 


 

IRB approach – credit derivatives used as credit risk mitigation

Semiannual | Probability of default (PD) substitution is only applied in the risk-weighted assets (RWA) calculation when the PD of the hedge provider is lower than the PD of the obligor. In addition, the default correlation between the obligor and the hedge provider is taken into account through the double default approach. Credit derivatives with tranched cover or first-loss protection are recognized through the securitization framework. Refer to the “CCR6: Credit derivatives exposures” table in section 4 of this report for notional and fair value information about credit derivatives used as CRM.

  

 

Semiannual |

CR7: IRB – effect on RWA of credit derivatives used as CRM techniques1

 

 

30.6.20

 

31.12.19

USD million

 

Pre-credit derivatives RWA

Actual RWA

 

Pre-credit derivatives RWA

Actual RWA

1

Central governments and central banks – FIRB

 

 

 

 

 

 

2

Central governments and central banks – AIRB

 

 3,159 

 3,159 

 

 2,446 

 2,446 

3

Banks and securities dealers – FIRB

 

 

 

 

 

 

4

Banks and securities dealers – AIRB

 

 5,777 

 5,777 

 

 5,911 

 5,911 

5

Public-sector entities, multilateral development banks – FIRB

 

 

 

 

 

 

6

Public-sector entities, multilateral development banks – AIRB

 

 1,046 

 1,046 

 

 847 

 847 

7

Corporates: specialized lending – FIRB

 

 

 

 

 

 

8

Corporates: specialized lending – AIRB

 

 12,003 

 12,003 

 

 11,525 

 11,525 

9

Corporates: other lending – FIRB

 

 

 

 

 

 

10

Corporates: other lending – AIRB

 

 38,811 

 38,503 

 

 32,394 

 32,144 

11

Retail: mortgage loans

 

 30,319 

 30,319 

 

 29,118 

 29,118 

12

Retail exposures: qualifying revolving retail (QRRE)

 

 661 

 661 

 

 687 

 687 

13

Retail: other

 

 11,567 

 11,567 

 

 10,180 

 10,180 

14

Equity positions (PD / LGD approach)

 

 

 

 

 

 

15

Total

 

 103,344 

 103,036 

 

 93,108 

 92,858 

1 The CRM effect is reflected in the original asset class, i.e., CRM effects of purchased credit protection by means of credit derivatives are reflected in the asset class of the obligor. Refer to “CR6: IRB – Credit risk exposures by portfolio and PD range” for a view of the CRM effect reflected in the asset class of the protection provider.

p

 

17 


UBS Group AG consolidated 

Credit risk under the standardized approach

Semiannual | The standardized approach is generally applied where it is not possible to use the A-IRB approach. The table below illustrates the exposures by asset classes and the risk weights applied.

 

Semiannual |

CR5: Standardized approach – exposures by asset classes and risk weights

USD million

 

 

 

 

 

 

 

 

 

 

 

Risk weight

 

0%

10%

20%

35%

50%

75%

100%

150%

Others

Total credit exposures amount (post-CCF and post-CRM)3

 

 

 

 

 

 

 

 

 

 

 

 

 

30.6.20

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 8,934 

 

 207 

 

 71 

 

 836 

 

 

 10,048 

2

Banks and securities dealers

 

 

 

 5,319 

 

 784 

 

 26 

 

 

 6,129 

3

Public-sector entities and multilateral development banks

 

 149 

 

 1,128 

 

 143 

 

 70 

 

 

 1,490 

4

Corporates

 

 

 

 2,088 

 

 125 

 1,2192

 5,130 

 12 

 

 8,574 

5

Retail

 

 

 

 

 5,433 

 

 1,331 

 4,600 

 173 

 

 11,538 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 894 

 

 

 

 

 

 13,221 

 

 

 14,115 

8

Total

 

 9,977 

 

 8,743 

 5,433 

 1,124 

 2,550 

 23,883 

 186 

 

 51,894 

9

of which: mortgage loans

 

 

 

 

 5,433 

 

 84 

 655 

 

 

 6,171 

10

of which: past due1

 

 

 

 

 

 

 

 274 

 

 

 274 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.19

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 9,540 

 

 225 

 

 58 

 

 864 

 

 

 10,687 

2

Banks and securities dealers

 

 

 

 4,863 

 

 673 

 

 5 

 

 

 5,541 

3

Public-sector entities and multilateral development banks

 

 398 

 

 256 

 

 155 

 

 110 

 

 

 920 

4

Corporates

 

 

 

 1,831 

 

 137 

 1722

 4,348 

 2 

 

 6,491 

5

Retail

 

 

 

 

 5,846 

 

 1,622 

 4,496 

 109 

 

 12,074 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 1,091 

 

 

 

 

 

 13,135 

 

 

 14,226 

8

Total

 

 11,030 

 

 7,175 

 5,846 

 1,023 

 1,794 

 22,959 

 112 

 

 49,939 

9

of which: mortgage loans

 

 

 

 

 5,846 

 

 99 

 521 

 

 

 6,466 

10

of which: past due1

 

 

 

 

 

 

 

 242 

 

 

 242 

1 Includes mortgage loans.    2 Relates to structured margin lending exposures based on the methodology agreed with FINMA.    3 The CRM effect is reflected in the asset class of the protection provider. Refer to “CR4: Standardized approach – credit risk exposure and credit risk mitigation (CRM) effects” for a view of the CRM effect reflected in the asset class of the obligor.

p

18 


 

Credit risk under internal ratings-based approaches

Semiannual | The CR6 table on the following pages provides information about credit risk exposures under the A-IRB approach, including a breakdown of the main parameters used in A-IRB models for the calculation of capital requirements, presented by portfolio and PD range across FINMA-defined asset classes. Exposures subject to credit risk mitigation through financial guarantees and credit derivatives are reflected in the asset class of the protection provider.

As of 30 June 2020, exposures before the application of CCFs increased by USD 98 billion to USD 898 billion across various asset classes, resulting in an overall RWA increase of USD 10 billion.

In the Central governments and central banks asset class, total exposures pre-CCF increased by USD 61 billion to USD 200 billion, as a result of maintaining increased liquidity levels.

In the Corporates: other lending asset class, total exposure pre-CCF increased by USD 10 billion to 96 billion and RWA increased by USD 6 billion to USD 38 billion, primarily driven by an increase in Lombard loans, fixed-term mortgages and fixed-term loans.

In the Retail: residential mortgages asset class, total exposures pre-CCF increased by USD 6 billion to USD 157 billion and RWA increased by USD 1 billion to USD 30 billion, reflecting business growth and recalibration of risk parameters for real estate portfolios and Lombard loans in Global Wealth Management and Personal & Corporate Banking.

In the Retail: other retail asset class, total exposures pre-CCF increased by USD 15 billion to USD 372 billion and RWA increased by USD 1 billion to USD 12 billion, mainly due to business growth and changes in credit ratings and loss given default with regard to Lombard exposures in Global Wealth Management.

Information about credit risk RWA for the first quarter of 2020, including details regarding movements in RWA, is provided on pages 8–11 of our 31 March 2020 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors, and for the second quarter of 2020 on page 25 of this report.

 

  

19 


UBS Group AG consolidated 

Semiannual |

CR6: IRB – Credit risk exposures by portfolio and PD range

 

 

 

 

 

 

 

 

USD million, except where indicated

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Total exposures pre-CCF

Average CCF in %

EAD post-CCF and post-CRM1

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

EL

Provisions2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central governments and central banks as of 30.6.20

 

 

0.00 to <0.15

 

 197,825 

 2,178 

 200,002 

 55.3 

 198,965 

 0.0 

 0.1 

 31.5 

 1.1 

 3,334 

 1.7 

 8 

 

0.15 to <0.25

 

 0 

 

 0 

 

 0 

 0.2 

<0.1

 63.1 

 1.0 

 0 

 39.9 

 0 

 

0.25 to <0.50

 

 0 

 

 0 

 

 0 

 0.3 

<0.1

 45.0 

 1.0 

 0 

 44.4 

 0 

 

0.50 to <0.75

 

 3 

 

 3 

 

 3 

 0.7 

<0.1

 52.9 

 1.1 

 3 

 78.0 

 0 

 

0.75 to <2.50

 

 0 

 7 

 7 

 51.9  

 4 

 1.8 

<0.1

 30.4 

 2.6 

 3 

 75.5 

 0 

 

2.50 to <10.00

 

 0 

 3 

 4 

 57.0 

 2 

 2.7 

<0.1

 29.0 

 2.6 

 2 

 75.6 

 0 

 

10.00 to <100.00

 

 0 

 0 

 0 

 10.4 

 0 

 13.0 

<0.1

 45.0 

 1.0 

 0 

 207.0 

 0 

 

100.00 (default)

 

 12 

 4 

 16 

 3.5 

 1 

 100.0 

<0.1

 65.14

 3.55

 2 

 106.0 

 11 

 

Subtotal

 

 197,841 

 2,192 

 200,033 

 55.2 

 198,976 

 0.0 

 0.1 

 31.5 

 1.1 

 3,343 

 1.7 

 19 

 12 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central governments and central banks as of 31.12.19

 

 

0.00 to <0.15

 

 138,755 

 207 

 138,961 

 49.4 

 138,852 

 0.0 

 0.1 

 30.4 

 1.0 

 2,455 

 1.8 

 3 

 

0.15 to <0.25

 

 0 

 

 0 

 

 0 

 0.2 

<0.1

 65.8 

 1.0 

 0 

 41.8 

 0 

 

0.25 to <0.50

 

 0 

 

 0 

 

 0 

 0.3 

<0.1

 45.0 

 1.0 

 0 

 44.4 

 0 

 

0.50 to <0.75

 

 4 

 

 4 

 

 4 

 0.7 

<0.1

 53.1 

 1.1 

 3 

 77.7 

 0 

 

0.75 to <2.50

 

 1 

 0 

 1 

 55.0 

 1 

 1.4 

<0.1

 39.4 

 2.5 

 1 

 111.6 

 0 

 

2.50 to <10.00

 

 0 

 1 

 1 

 76.1 

 1 

 2.7 

<0.1

 10.2 

 4.4 

 0 

 33.0 

 0 

 

10.00 to <100.00

 

 0 

 0 

 0 

 9.7 

 0 

 13.0 

<0.1

 45.0 

 1.0 

 0 

 206.7 

 0 

 

100.00 (default)

 

 13 

 36 

 49 

 55.0 

 22 

 100.0 

<0.1

 21.84

 4.35

 23 

 106.0 

 11 

 

Subtotal

 

 138,772 

 243 

 139,016 

 50.4 

 138,880 

 0.0 

 0.1 

 30.4 

 1.0 

 2,482 

 1.8 

 14 

 11 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 30.6.20

 

 

0.00 to <0.15

 

 12,069 

 2,658 

 14,727 

 52.3 

 13,295 

 0.0 

 0.5 

 39.6 

 1.1 

 2,050 

 15.4 

 3 

 

0.15 to <0.25

 

 1,392 

 681 

 2,073 

 41.4 

 1,321 

 0.2 

 0.3 

 53.0 

 1.2 

 652 

 49.4 

 2 

 

0.25 to <0.50

 

 453 

 341 

 794 

 50.4 

 517 

 0.4 

 0.2 

 61.8 

 1.1 

 433 

 83.8 

 1 

 

0.50 to <0.75

 

 237 

 240 

 477 

 43.9 

 303 

 0.7 

 0.1 

 55.3 

 1.1 

 307 

 101.3 

 1 

 

0.75 to <2.50

 

 966 

 619 

 1,585 

 49.6 

 1,058 

 1.4 

 0.2 

 53.4 

 1.2 

 1,295 

 122.4 

 8 

 

2.50 to <10.00

 

 424 

 2,262 

 2,686 

 45.1 

 1,262 

 3.3 

 0.2 

 27.4 

 1.0 

 1,190 

 94.3 

 14 

 

10.00 to <100.00

 

 2 

 14 

 16 

 31.6 

 7 

 12.9 

<0.1

 52.8 

 1.7 

 21 

 303.6 

 3 

 

100.00 (default)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 15,544 

 6,815 

 22,359 

 48.0 

 17,763 

 0.4 

 1.5 

 41.5 

 1.1 

 5,948 

 33.5 

 33 

 15 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 31.12.19

 

 

0.00 to <0.15

 

 11,797 

 1,914 

 13,711 

 50.6 

 12,591 

 0.0 

 0.5 

 39.0 

 1.0 

 1,877 

 14.9 

 3 

 

0.15 to <0.25

 

 691 

 2,191 

 2,882 

 84.3 

 2,304 

 0.2 

 0.3 

 50.4 

 2.1 

 1,335 

 58.0 

 2 

 

0.25 to <0.50

 

 665 

 431 

 1,097 

 52.1 

 815 

 0.4 

 0.2 

 47.4 

 1.5 

 532 

 65.3 

 1 

 

0.50 to <0.75

 

 478 

 287 

 765 

 44.2 

 577 

 0.6 

 0.1 

 45.3 

 1.0 

 478 

 82.8 

 2 

 

0.75 to <2.50

 

 830 

 574 

 1,404 

 47.5 

 922 

 1.4 

 0.2 

 46.3 

 1.3 

 1,013 

 109.8 

 6 

 

2.50 to <10.00

 

 282 

 462 

 744 

 44.8 

 377 

 3.6 

 0.2 

 64.4 

 1.1 

 810 

 214.7 

 9 

 

10.00 to <100.00

 

 44 

 11 

 54 

 43.3 

 27 

 14.2 

<0.1

 38.2 

 1.2 

 57 

 212.6 

 4 

 

100.00 (default)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 14,786 

 5,870 

 20,657 

 62.2 

 17,614 

 0.3 

 1.5 

 42.0 

 1.2 

 6,102 

 34.6 

 28 

 11 

 

20 


 

CR6: IRB – Credit risk exposures by portfolio and PD range (continued)

 

 

 

 

 

 

 

 

USD million, except where indicated

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Total exposures pre-CCF

Average CCF in %

EAD post-CCF and post-CRM1

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

EL

Provisions2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public-sector entities, multilateral development banks as of 30.6.20

 

 

0.00 to <0.15

 

 8,895 

 1,234 

 10,129 

 17.5 

 9,112 

 0.0 

 0.3 

 37.2 

 1.1 

 741 

 8.1 

 1 

 

0.15 to <0.25

 

 270 

 288 

 559 

 11.5 

 304 

 0.2 

 0.2 

 31.2 

 2.6 

 79 

 26.1 

 0 

 

0.25 to <0.50

 

 617 

 308 

 925 

 28.3 

 704 

 0.3 

 0.2 

 25.0 

 2.5 

 195 

 27.7 

 1 

 

0.50 to <0.75

 

 38 

 23 

 61 

 24.3 

 44 

 0.6 

<0.1

 29.9 

 2.8 

 21 

 48.7 

 0 

 

0.75 to <2.50

 

 1 

 0 

 1 

 96.4 

 1 

 1.0 

<0.1

 12.0 

 1.2 

 0 

 16.9 

 0 

 

2.50 to <10.00

 

 1 

 0 

 1 

 0.0 

 1 

 2.9 

<0.1

 9.1 

 5.0 

 0 

 26.6 

 0 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100.00 (default)

 

 4 

 

 4 

 

 4 

 100.0 

<0.1

 

 1.05

 4 

 106.0 

 0 

 

Subtotal

 

 9,827 

 1,854 

 11,680 

 18.5 

 10,169 

 0.1 

 0.7 

 36.1 

 1.2 

 1,041 

 10.2 

 2 

 0 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public-sector entities, multilateral development banks as of 31.12.19

 

 

0.00 to <0.15

 

 6,854 

 754 

 7,609 

 12.8 

 6,951 

 0.0 

 0.3 

 35.3 

 1.1 

 543 

 7.8 

 1 

 

0.15 to <0.25

 

 277 

 239 

 516 

 11.8 

 305 

 0.2 

 0.2 

 30.7 

 2.7 

 82 

 26.9 

 0 

 

0.25 to <0.50

 

 608 

 405 

 1,013 

 25.7 

 713 

 0.3 

 0.2 

 25.3 

 2.5 

 198 

 27.8 

 1 

 

0.50 to <0.75

 

 33 

 7 

 41 

 10.0 

 34 

 0.6 

<0.1

 28.7 

 2.7 

 16 

 47.3 

 0 

 

0.75 to <2.50

 

 1 

 0 

 1 

 97.9 

 1 

 1.0 

<0.1

 13.4 

 1.2 

 0 

 18.9 

 0 

 

2.50 to <10.00

 

 1 

 6 

 7 

 54.7 

 4 

 2.9 

<0.1

 6.0 

 5.0 

 1 

 17.6 

 0 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100.00 (default)

 

 4 

 

 4 

 

 4 

 100.0 

<0.1

 

 1.05

 4 

 106.0 

 

 

Subtotal

 

 7,779 

 1,412 

 9,191 

 16.5 

 8,012 

 0.1 

 0.8 

 34.2 

 1.3 

 844 

 10.5 

 2 

 1 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporates: specialized lending as of 30.6.20

 

 

0.00 to <0.15

 

 2,451 

 480 

 2,931 

 73.3 

 2,803 

 0.1 

 0.5 

 13.9 

 2.0 

 199 

 7.1 

 0 

 

0.15 to <0.25

 

 1,802 

 378 

 2,180 

 68.0 

 2,059 

 0.2 

 0.3 

 15.4 

 2.1 

 309 

 15.0 

 1 

 

0.25 to <0.50

 

 4,372 

 2,000 

 6,371 

 35.9 

 5,045 

 0.4 

 0.6 

 28.0 

 1.8 

 1,622 

 32.2 

 5 

 

0.50 to <0.75

 

 4,619 

 3,475 

 8,094 

 26.8 

 5,506 

 0.6 

 0.6 

 31.7 

 1.6 

 2,677 

 48.6 

 11 

 

0.75 to <2.50

 

 7,274 

 2,350 

 9,624 

 37.4 

 8,126 

 1.4 

 1.4 

 31.0 

 1.7 

 5,439 

 66.9 

 36 

 

2.50 to <10.00

 

 1,402 

 329 

 1,731 

 58.1 

 1,593 

 3.4 

 0.3 

 35.6 

 1.5 

 1,631 

 102.4 

 20 

 

10.00 to <100.00

 

 4 

 0 

 4 

 100.0 

 4 

 11.0 

<0.1

 60.0 

 1.0 

 9 

 258.2 

 0 

 

100.00 (default)

 

 167 

 7 

 174 

 68.3 

 72 

 100.0 

 0.1 

 57.64

 3.05

 76 

 106.0 

 100 

 

Subtotal

 

 22,089 

 9,020 

 31,109 

 36.9 

 25,207 

 1.2 

 3.8 

 27.8 

 1.8 

 11,963 

 47.5 

 174 

 115 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporates: specialized lending as of 31.12.19

 

 

0.00 to <0.15

 

 1,947 

 420 

 2,367 

 77.3 

 2,271 

 0.1 

 0.4 

 14.9 

 2.1 

 174 

 7.6 

 0 

 

0.15 to <0.25

 

 1,501 

 524 

 2,024 

 60.7 

 1,819 

 0.2 

 0.3 

 15.9 

 2.0 

 265 

 14.6 

 1 

 

0.25 to <0.50

 

 3,812 

 2,141 

 5,953 

 31.3 

 4,464 

 0.4 

 0.6 

 27.3 

 2.0 

 1,436 

 32.2 

 4 

 

0.50 to <0.75

 

 4,141 

 3,420 

 7,560 

 31.5 

 5,141 

 0.6 

 0.6 

 31.8 

 1.5 

 2,470 

 48.0 

 10 

 

0.75 to <2.50

 

 7,333 

 2,377 

 9,710 

 36.8 

 8,206 

 1.4 

 1.4 

 31.7 

 1.7 

 5,550 

 67.6 

 37 

 

2.50 to <10.00

 

 1,163 

 296 

 1,459 

 61.0 

 1,343 

 3.5 

 0.3 

 39.2 

 1.5 

 1,507 

 112.2 

 19 

 

10.00 to <100.00

 

 0 

 

 0 

 

 0 

 12.0 

<0.1

 65.0 

 1.0 

 0 

 289.5 

 0 

 

100.00 (default)

 

 167 

 2 

 168 

 75.9 

 70 

 100.0 

 0.1 

 58.34

 3.15

 74 

 106.0 

 98 

 

Subtotal

 

 20,063 

 9,178 

 29,241 

 37.5 

 23,313 

 1.2 

 3.8 

 28.5 

 1.8 

 11,475 

 49.2 

 169 

 112 

 

21 


UBS Group AG consolidated 

CR6: IRB – Credit risk exposures by portfolio and PD range (continued)

 

 

 

 

 

 

 

 

USD million, except where indicated

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Total exposures pre-CCF

Average CCF in %

EAD post-CCF and post-CRM1

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

EL

Provisions2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporates: other lending as of 30.6.20

 

 

0.00 to <0.15

 

 15,863 

 19,429 

 35,292 

 33.2 

 19,690 

 0.0 

 3.8 

 34.5 

 1.6 

 4,010 

 20.4 

 3 

 

0.15 to <0.25

 

 6,463 

 7,520 

 13,983 

 34.9 

 8,592 

 0.2 

 1.7 

 36.6 

 2.4 

 3,498 

 40.7 

 5 

 

0.25 to <0.50

 

 3,944 

 3,844 

 7,788 

 37.3 

 5,307 

 0.4 

 2.5 

 34.9 

 2.2 

 2,715 

 51.2 

 7 

 

0.50 to <0.75

 

 4,038 

 2,762 

 6,800 

 41.9 

 5,218 

 0.6 

 2.4 

 32.5 

 1.9 

 3,246 

 62.2 

 11 

 

0.75 to <2.50

 

 9,499 

 6,936 

 16,436 

 42.5 

 12,530 

 1.4 

 11.2 

 30.9 

 2.2 

 9,466 

 75.5 

 54 

 

2.50 to <10.00

 

 5,978 

 7,761 

 13,739 

 37.6 

 8,936 

 4.4 

 4.8 

 33.0 

 2.2 

 13,102 

 146.6 

 127 

 

10.00 to <100.00

 

 342 

 323 

 665 

 57.9 

 530 

 15.2 

 0.1 

 26.7 

 2.2 

 951 

 179.5 

 18 

 

100.00 (default)

 

 1,392 

 228 

 1,619 

 46.8 

 1,017 

 100.0 

 0.7 

 32.74

 2.75

 1,078 

 106.0 

 486 

 

Subtotal

 

 47,520 

 48,801 

 96,322 

 36.5 

 61,820 

 2.8 

 27.3 

 33.6 

 2.0 

 38,067 

 61.6 

 711 

 878 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporates: other lending as of 31.12.19

 

 

0.00 to <0.15

 

 13,796 

 18,886 

 32,682 

 34.4 

 16,701 

 0.0 

 3.4 

 37.3 

 1.8 

 3,682 

 22.0 

 9 

 

0.15 to <0.25

 

 3,965 

 5,479 

 9,444 

 37.2 

 5,489 

 0.2 

 1.6 

 32.5 

 2.4 

 2,016 

 36.7 

 3 

 

0.25 to <0.50

 

 4,094 

 3,403 

 7,497 

 35.3 

 5,233 

 0.4 

 2.5 

 33.6 

 2.0 

 2,715 

 51.9 

 6 

 

0.50 to <0.75

 

 2,997 

 2,434 

 5,431 

 41.0 

 4,060 

 0.6 

 2.4 

 32.9 

 1.8 

 2,207 

 54.4 

 8 

 

0.75 to <2.50

 

 9,093 

 8,342 

 17,435 

 37.9 

 12,372 

 1.4 

 11.1 

 30.8 

 2.1 

 9,329 

 75.4 

 52 

 

2.50 to <10.00

 

 4,303 

 7,958 

 12,261 

 38.5 

 7,399 

 4.1 

 4.9 

 32.1 

 2.4 

 10,543 

 142.5 

 100 

 

10.00 to <100.00

 

 319 

 286 

 604 

 58.8 

 487 

 17.6 

 0.1 

 13.6 

 1.8 

 506 

 103.9 

 11 

 

100.00 (default)

 

 1,091 

 166 

 1,257 

 44.9 

 790 

 100.0 

 0.7 

 33.14

 2.75

 838 

 106.0 

 385 

 

Subtotal

 

 39,657 

 46,955 

 86,612 

 36.6 

 52,533 

 2.7 

 26.6 

 33.5 

 2.0 

 31,836 

 60.6 

 575 

 554 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: residential mortgages as of 30.6.20

 

 

0.00 to <0.15

 

 66,295 

 1,706 

 68,001 

 58.3 

 67,295 

 0.1 

 129.6 

 18.6 

 

 2,806 

 4.2 

 11 

 

0.15 to <0.25

 

 15,046 

 375 

 15,421 

 71.2 

 15,314 

 0.2 

 22.0 

 21.7 

 

 1,364 

 8.9 

 6 

 

0.25 to <0.50

 

 22,364 

 632 

 22,996 

 76.5 

 22,849 

 0.4 

 29.1 

 22.8 

 

 3,349 

 14.7 

 18 

 

0.50 to <0.75

 

 14,569 

 458 

 15,026 

 79.4 

 14,934 

 0.6 

 16.0 

 23.6 

 

 3,431 

 23.0 

 22 

 

0.75 to <2.50

 

 22,774 

 1,598 

 24,372 

 76.6 

 23,998 

 1.3 

 28.5 

 27.5 

 

 10,495 

 43.7 

 89 

 

2.50 to <10.00

 

 8,763 

 432 

 9,195 

 74.8 

 9,086 

 4.3 

 10.5 

 23.9 

 

 6,812 

 75.0 

 93 

 

10.00 to <100.00

 

 1,082 

 38 

 1,120 

 87.3 

 1,115 

 15.3 

 1.2 

 22.3 

 

 1,359 

 121.9 

 38 

 

100.00 (default)

 

 701 

 6 

 707 

 64.5 

 679 

 100.0 

 1.0 

 3.64

 

 720 

 106.0 

 26 

 

Subtotal

 

 151,593 

 5,246 

 156,839 

 70.4 

 155,269 

 1.2 

 237.8 

 21.7 

 

 30,337 

 19.5 

 304 

 130 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: residential mortgages as of 31.12.19

 

 

0.00 to <0.15

 

 64,019 

 1,427 

 65,447 

 60.5 

 64,883 

 0.1 

 129.2 

 18.5 

 

 2,692 

 4.1 

 10 

 

0.15 to <0.25

 

 14,093 

 290 

 14,383 

 75.6 

 14,312 

 0.2 

 21.0 

 22.5 

 

 1,324 

 9.3 

 6 

 

0.25 to <0.50

 

 21,278 

 505 

 21,783 

 81.3 

 21,688 

 0.3 

 28.4 

 23.3 

 

 3,238 

 14.9 

 18 

 

0.50 to <0.75

 

 14,121 

 363 

 14,484 

 87.7 

 14,439 

 0.6 

 16.2 

 24.0 

 

 3,377 

 23.4 

 22 

 

0.75 to <2.50

 

 22,450 

 1,358 

 23,808 

 80.0 

 23,536 

 1.3 

 28.5 

 26.7 

 

 10,025 

 42.6 

 85 

 

2.50 to <10.00

 

 8,416 

 318 

 8,734 

 82.6 

 8,678 

 4.4 

 10.8 

 23.5 

 

 6,479 

 74.7 

 90 

 

10.00 to <100.00

 

 981 

 26 

 1,007 

 94.8 

 1,006 

 15.8 

 1.2 

 22.6 

 

 1,245 

 123.8 

 35 

 

100.00 (default)

 

 735 

 2 

 737 

 67.1 

 711 

 100.0 

 1.1 

 3.54

 

 754 

 106.0 

 26 

 

Subtotal

 

 146,093 

 4,290 

 150,383 

 74.3 

 149,255 

 1.2 

 236.3 

 21.7 

 

 29,133 

 19.5 

 292 

 110 

 

22 


 

CR6: IRB – Credit risk exposures by portfolio and PD range (continued)

 

 

 

 

 

 

 

 

USD million, except where indicated

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Total exposures pre-CCF

Average CCF in %

EAD post-CCF and post-CRM1

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

EL

Provisions2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: qualifying revolving retail exposures (QRRE) as of 30.6.20

 

 

0.00 to <0.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.15 to <0.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.25 to <0.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.50 to <0.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.75 to <2.50

 

 53 

 430 

 483 

 

 74 

 1.7 

 28.8 

 47.0 

 

 88 

 119.1 

 1 

 

2.50 to <10.00

 

 1,130 

 5,961 

 7,091 

 

 1,565 

 2.7 

 936.6 

 42.0 

 

 550 

 35.2 

 17 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100.00 (default)

 

 37 

 

 37 

 

 22 

 100.0 

 25.5 

 40.04

 

 23 

 106.0 

 15 

 

Subtotal

 

 1,220 

 6,391 

 7,611 

 

 1,660 

 3.9 

 990.9 

 42.2 

 

 661 

 39.8 

 32 

 28 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: qualifying revolving retail exposures (QRRE) as of 31.12.19

 

 

0.00 to <0.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.15 to <0.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.25 to <0.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.50 to <0.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.75 to <2.50

 

 107 

 373 

 480 

 

 148 

 1.7 

 36.3 

 47.0 

 

 41 

 28.0 

 1 

 

2.50 to <10.00

 

 1,282 

 5,632 

 6,915 

 

 1,776 

 2.7 

 947.4 

 42.0 

 

 625 

 35.2 

 19 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100.00 (default)

 

 33 

 

 33 

 

 20 

 100.0 

 24.4 

 40.04

 

 21 

 106.0 

 13 

 

Subtotal

 

 1,422 

 6,006 

 7,428 

 

 1,944 

 3.6 

 1,008.2 

 42.4 

 

 687 

 35.3 

 34 

 28 

 

23 


UBS Group AG consolidated 

CR6: IRB – Credit risk exposures by portfolio and PD range (continued)

 

 

 

 

 

 

 

 

USD million, except where indicated

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Total exposures pre-CCF

Average CCF in %

EAD post-CCF and post-CRM1

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

EL

Provisions2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: other retail as of 30.6.20

 

 

0.00 to <0.15

 

 106,954 

 217,503 

 324,457 

 18.3 

 146,586 

 0.0 

 172.7 

 30.7 

 

 6,069 

 4.1 

 19 

 

0.15 to <0.25

 

 2,310 

 6,556 

 8,866 

 17.9 

 3,481 

 0.2 

 4.8 

 26.6 

 

 355 

 10.2 

 2 

 

0.25 to <0.50

 

 3,122 

 6,703 

 9,825 

 19.0 

 4,396 

 0.4 

 6.4 

 28.7 

 

 779 

 17.7 

 4 

 

0.50 to <0.75

 

 2,573 

 10,748 

 13,321 

 17.7 

 4,478 

 0.6 

 6.7 

 28.4 

 

 1,292 

 28.9 

 9 

 

0.75 to <2.50

 

 3,925 

 9,452 

 13,377 

 20.6 

 5,874 

 1.1 

 41.7 

 29.6 

 

 2,006 

 34.2 

 20 

 

2.50 to <10.00

 

 782 

 810 

 1,592 

 19.7 

 939 

 5.0 

 1.6 

 56.2 

 

 894 

 95.2 

 31 

 

10.00 to <100.00

 

 83 

 62 

 145 

 23.6 

 98 

 20.7 

 0.6 

 25.5 

 

 59 

 60.6 

 5 

 

100.00 (default)

 

 215 

 21 

 235 

 0.1 

 209 

 100.0 

<0.1

 15.04

 

 222 

 106.0 

 18 

 

Subtotal

 

 119,963 

 251,854 

 371,818 

 18.3 

 166,062 

 0.3 

 234.6 

 30.6 

 

 11,676 

 7.0 

 108 

 83 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: other retail as of 31.12.19

 

 

0.00 to <0.15

 

 108,053 

 226,115 

 334,169 

 18.4 

 149,666 

 0.0 

 201.8 

 32.5 

 

 6,535 

 4.4 

 20 

 

0.15 to <0.25

 

 1,977 

 3,610 

 5,587 

 18.9 

 2,660 

 0.2 

 4.5 

 29.7 

 

 304 

 11.4 

 1 

 

0.25 to <0.50

 

 1,405 

 2,235 

 3,640 

 18.2 

 1,811 

 0.4 

 2.2 

 34.4 

 

 385 

 21.3 

 2 

 

0.50 to <0.75

 

 837 

 1,193 

 2,031 

 18.4 

 1,056 

 0.6 

 1.7 

 33.1 

 

 315 

 29.9 

 2 

 

0.75 to <2.50

 

 2,793 

 7,052 

 9,845 

 15.0 

 3,846 

 1.1 

 42.5 

 35.4 

 

 1,568 

 40.8 

 14 

 

2.50 to <10.00

 

 860 

 773 

 1,633 

 16.5 

 980 

 5.6 

 1.4 

 64.5 

 

 1,073 

 109.5 

 41 

 

10.00 to <100.00

 

 166 

 26 

 192 

 31.9 

 175 

 15.4 

 0.7 

 30.8 

 

 115 

 65.7 

 9 

 

100.00 (default)

 

 4 

 7 

 11 

 2.3 

 4 

 100.0 

<0.1

 42.54

 

 4 

 106.0 

 5 

 

Subtotal

 

 116,096 

 241,012 

 357,108 

 18.3 

 160,197 

 0.1 

 254.9 

 32.8 

 

 10,298 

 6.4 

 95 

 9 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total 30.6.20

 

 565,598 

 332,172 

 897,770 

 22.8 

 636,927 

 0.7 

 1,496.8 

 29.3 

 1.36

 103,036 

 16.2 

 1,381 

 1,262 

Total 31.12.19

 

 484,669 

 314,965 

 799,634 

 22.9 

 551,748 

 0.7 

 1,532.1 

 29.4 

 1.36

 92,858 

 16.8 

 1,208 

 836 

1 The CRM effect is reflected in the asset class of the protection provider. Refer to “CR7: IRB – effect on RWA of credit derivatives used as CRM techniques” for a view of the CRM effect reflected in the asset class of the obligor.    2 In line with the BCBS Pillar 3 disclosure requirements, provisions are only provided for the sub-totals by asset class.    3 For the calculation of the “EAD post-CCF and post-CRM” column, a balance factor approach is used instead of a CCF approach. The EAD is calculated by multiplying the on-balance sheet exposure with a fixed factor of 1.4.    4 Average LGD for defaulted exposures disclosed in the table are not used to calculate RWA. The disclosed number is derived using ECL accounting provisions (stage 3) divided by total exposures pre-CCF.    5 Average maturity for defaulted exposures disclosed in the table is not used to calculate RWA. The comparative-period number has been restated for Central governments and central banks to cap it to five years or below.    6 Retail asset classes are excluded from the average maturity as they are not subject to maturity treatment.

 

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24 


 

Credit risk RWA development in the second quarter of 2020

Quarterly | The CR8 table below provides a breakdown of the credit risk RWA movements in the second quarter of 2020 across movement categories defined by the Basel Committee on Banking Supervision (BCBS). These categories are described on page 50 of our 31 December 2019 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors

Credit risk RWA under the A-IRB approach increased by USD 3 billion (of which USD 1 billion is due to FX increase, mainly driven by depreciation of the US dollar against the Swiss Franc) to USD 103 billion as of 30 June 2020.


The RWA increase from asset size movements of USD 0.5 billion was predominantly driven by increases in Lombard loans, and unutilized credit lines in Global Wealth Management and Personal & Corporate Banking.

The increase in RWA from asset quality of USD 0.9 billion was mainly due to rating deteriorations during the quarter in Global Wealth Management. Model updates of USD 0.9 billion were mainly driven by recalibration of risk parameters for real estate portfolios and Lombard loans in Personal & Corporate Banking and Global Wealth Management.

Quarterly |

CR8: RWA flow statements of credit risk exposures under IRB

USD million

For the quarter ended 30.6.20

For the quarter ended 31.3.20

1

RWA as of the beginning of the quarter

 100,076 

 92,858 

2

Asset size

 536 

 7,543 

3

Asset quality

 863 

 (241) 

4

Model updates

 870 

 

5

Methodology and policy

 

 60 

5a

of which: regulatory add-ons

 

 60 

6

Acquisitions and disposals

 

 

7

Foreign exchange movements

 1,098 

 (144) 

8

Other

 (407) 

 

9

RWA as of the end of the quarter

 103,036 

 100,076 

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Equity exposures

Semiannual | The table below provides information about our equity exposures under the simple risk weight method. RWA on equity exposures under the simple risk weight method decreased by USD 0.6 billion, mainly due to the exclusion of investments in funds.

  

 

Semiannual |

CR10: IRB (equities under the simple risk-weight method)1

USD million, except where indicated

 

On-balance sheet amount

Off-balance sheet amount

Risk weight in %2

Exposure amount3

RWA2

 

 

 

 

 

 

 

30.6.20

 

 

Exchange-traded equity exposures

 

 39 

 

 300 

 39 

 123 

Other equity exposures

 

 595 

 

 400 

 595 

 2,523 

Total

 

 634 

 

 

 634 

 2,646 

 

 

 

 

 

 

 

31.12.19

 

 

Exchange-traded equity exposures

 

 34 

 

 300 

 34 

 107 

Other equity exposures

 

 1,010 

 

 400 

 744 

 3,154 

Total

 

 1,043 

 

 

 777 

 3,261 

1 This table includes investment in funds until 31 December 2019, and excludes significant investments in the common shares of non-consolidated financial institutions (banks, insurance and other financial entities) that are subject to the threshold treatment and risk weighted at 250%.    2 RWA are calculated post-application of the A-IRB multiplier of 6%, therefore the respective risk weight is higher than 300% and 400%.    3 The exposure amount for equities in the banking book is based on the net position.

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25 


UBS Group AG consolidated 

Section 4  Counterparty credit risk

Introduction

Semiannual | This section provides information about the exposures subject to the Basel III counterparty credit risk (CCR) framework, as presented in the “Regulatory exposures and risk-weighted assets” table on pages 11–12 of this report.

CCR arises from over-the-counter (OTC) and exchange-traded derivatives (ETDs), securities financing transactions (SFTs) and long settlement transactions. Within traded products, we determine the regulatory credit exposure on the majority of our derivatives portfolio by applying the effective expected positive exposure (EEPE) and stressed expected positive exposure (stressed EPE) as defined in the Basel III framework. For the rest of the portfolio, we have applied the standardized approach for counterparty credit risk (SA-CCR) since 1 January 2020, whereas figures for prior periods were calculated in accordance with the current exposure method (CEM). For the majority of securities financing transactions (securities borrowing, securities lending, margin lending, repurchase agreements and reverse repurchase agreements), we determine the regulatory credit exposure using the close-out period (COP) approach.

®   Refer to the “Introduction and basis for preparation” section of our 31 March 2020 Pillar 3 report for more information about the implementation of SA-CCR

 

 

Counterparty credit risk exposure

Semiannual | Exposure at default (EAD) post credit-risk mitigation (CRM) related to CCR increased by USD 21.2 billion to USD 125.4 billion and RWA increased by USD 4.1 billion to USD 38.6 billion as of 30 June 2020. EAD post-CRM on SFTs increased by USD 16.3 billion to USD 63.8 billion, mainly driven by higher volumes in the Investment Bank resulting in an increase of RWA of USD 3.3 billion. EAD post-CRM on derivatives increased by USD 4.9 billion to USD 61.5 billion, mainly driven by higher volumes as well as the revised methodology for the calculation of exposure at default on derivatives (SA-CCR), resulting in an increase in RWA of USD 0.8 billion.

 

Semiannual |

CCR1: Analysis of counterparty credit risk (CCR) exposure by approach

 USD million, except where indicated

 

Replacement cost

Potential future exposure

EEPE

Alpha used for computing regulatory EAD

EAD

post-CRM

RWA

 

 

 

 

 

 

 

 

 

30.6.20

 

 

1

SA-CCR (for derivatives)1

 

 5,395 

 6,533 

 

 1.4 

 16,700 

 4,965 

2

Internal model method (for derivatives)

 

 

 

 28,005 

 1.6 

 44,808 

 19,073 

3

Simple approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 

 

4

Comprehensive approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 21,993 

 6,720 

5

VaR (for SFTs)

 

 

 

 

 

 41,853 

 7,810 

6

Total

 

 

 

 

 

 125,354 

 38,567 

 

 

 

 

 

 

 

 

 

31.12.19

 

 

1

SA-CCR (for derivatives)1

 

 5,2762

 5,947 

 

 1.0 

 11,224 

 3,376 

2

Internal model method (for derivatives)

 

 

 

 28,391 

 1.6 

 45,426 

 19,896 

3

Simple approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 

 

4

Comprehensive approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 17,572 

 5,858 

5

VaR (for SFTs)

 

 

 

 

 

 29,971 

 5,333 

6

Total

 

 

 

 

 

 104,192 

 34,463 

1 Calculated in accordance with the standardized approach for counterparty credit risk (SA-CCR) since 1 January 2020, whereas figures for prior periods were calculated in accordance with the current exposure method (CEM).    2 Replacement costs include collateral mitigation for on- and off-balance sheet exposures related to CCR for derivative transactions.   

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26 


 

Semiannual | In addition to the default risk capital requirements for CCR based on the advanced internal ratings-based (A-IRB) approach or standardized approach, we are required to add a capital charge to derivatives to cover the risk of mark-to-market losses associated with the deterioration of counterparty credit quality, referred to as the CVA. The advanced CVA value-at-risk (VaR) approach has been used to calculate the CVA capital charge where we apply the internal model method (IMM). Where this is not the case, the standardized CVA approach has been applied.

EAD post-CRM increased by USD 1.2 billion to USD 50.3 billion and the credit valuation adjustment RWA increased by USD 2.6 billion to USD 4.5 billion during the period, primarily due to increased trading volumes and market volatility during the period, as well as the revised methodology for the calculation of exposure at default on derivatives (SA-CCR).

Semiannual |

CCR2: Credit valuation adjustment (CVA) capital charge

 

 

 

30.6.20

 

31.12.19

USD million

 

EAD post-CRM1

RWA

 

EAD post-CRM1

RWA

 

Total portfolios subject to the advanced CVA capital charge

 

 43,939 

 3,082 

 

 44,520 

 974 

1

(i) VaR component (including the 3× multiplier)

 

 

 906 

 

 

 180 

2

(ii) Stressed VaR component (including the 3× multiplier)

 

 

 2,176 

 

 

 794 

3

All portfolios subject to the standardized CVA capital charge

 

 6,380 

 1,441 

 

 4,630 

 926 

4

Total subject to the CVA capital charge

 

 50,318 

 4,523 

 

 49,150 

 1,900 

1 Comparative figures for EAD post-CRM have been adjusted to include stressed exposure at default on derivatives.

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Semiannual | The CCR3 table below provides information about our CCR exposures under the standardized approach. Total CCR exposures increased by USD 1.1 billion to USD 7.5 billion, primarily driven by increases in our Investment Bank and Global Wealth Management business mainly due to increased derivative exposure reflecting higher volumes and the implementation of SA-CCR, as well as increases in securities financing transactions (SFTs).

 

Semiannual |

CCR3: Standardized approach – CCR exposures by regulatory portfolio and risk weights

USD million

 

 

 

 

 

 

 

 

 

 

Risk weight

 

0%

10%

20%

50%

75%

100%

150%

Others

Total credit exposure

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory portfolio as of 30.6.20

 

 

1

Central governments and central banks

 

 164 

 

 

 

 

 

 

 

 164 

2

Banks and securities dealers

 

 

 

 15 

 436 

 

 3 

 

 

 453 

3

Public-sector entities and multilateral development banks

 

 

 

 38 

 275 

 

 18 

 

 

 331 

4

Corporates

 

 

 

 6 

 5 

 4,3191

 1,988 

 9 

 

 6,327 

5

Retail

 

 

 

 

 

 7 

 209 

 

 

 216 

6

Equity

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 

 

 

 

 

 

 

 

 

8

Total

 

 164 

 

 58 

 716 

 4,326 

 2,218 

 9 

 

 7,491 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory portfolio as of 31.12.19

 

 

1

Central governments and central banks

 

 207 

 

 

 

 

 

 

 

 207 

2

Banks and securities dealers

 

 

 

 63 

 72 

 

 4 

 

 

 140 

3

Public-sector entities and multilateral development banks

 

 

 

 31 

 446 

 

 11 

 

 

 488 

4

Corporates

 

 

 

 9 

 101 

 3,9521

 1,302 

 26 

 

 5,389 

5

Retail

 

 

 

 

 

 1 

 123 

 

 

 124 

6

Equity

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 

 

 

 

 

 

 

 

 

8

Total

 

 207 

 

 102 

 620 

 3,954 

 1,439 

 26 

 

 6,348 

1 Relates to structured margin lending exposures based on the methodology agreed with FINMA. 

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27 


UBS Group AG consolidated 

Semiannual | Information about RWA, including details of movements in CCR RWA, is provided on pages 6–10 of our 31 March 2020 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors and on page 32 of this report

The CCR4 table below and on the following pages provides a breakdown of the key parameters used for the calculation of capital requirements under the A-IRB approach, by a probability of default (PD) range across Swiss Financial Market Supervisory Authority (FINMA)-defined asset classes. EAD post-CRM increased by USD 20.0 billion to USD 117.9 billion and RWA increased by USD 3.1 billion to USD 32.7 billion during the period. These increases are mainly related to the Investment Bank, with increases in EAD post-CRM of USD 15.7 billion and RWA of USD 2.7 billion, primarily reflecting increased volumes and trading activity in both Securities Financing Transactions and Derivatives, as well as in Global Wealth Management, with increases in EAD post-CRM of USD 3.4 billion and RWA of USD 0.4 billion, primarily in derivative transactions.

 

Semiannual |

CCR4: IRB – CCR exposures by portfolio and PD scale

USD million, except where indicated

 

EAD post-CRM

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years1

RWA

RWA density in %

 

 

 

 

 

 

 

 

 

Central governments and central banks as of 30.6.20

 

 

0.00 to <0.15

 

 9,795 

 0.0 

 0.2 

 38.6 

 0.4 

 629 

 6.4 

0.15 to <0.25

 

 203 

 0.2 

<0.1

 47.0 

 0.7 

 57 

 28.1 

0.25 to <0.50

 

 437 

 0.3 

<0.1

 96.4 

 1.0 

 438 

 100.4 

0.50 to <0.75

 

 56 

 0.7 

<0.1

 55.0 

 1.0 

 45 

 80.4 

0.75 to <2.50

 

 37 

 0.9 

<0.1

 57.2 

 0.4 

 32 

 86.5 

2.50 to <10.00

 

 2 

 2.6 

<0.1

 70.2 

 1.0 

 3 

 173.8 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 10,528 

 0.1 

 0.2 

 41.4 

 0.4 

 1,203 

 11.4 

 

 

 

 

 

 

 

 

 

Central governments and central banks as of 31.12.19

 

 

0.00 to <0.15

 

 8,443 

 0.0 

 0.1 

 35.4 

 0.4 

 490 

 5.8 

0.15 to <0.25

 

 129 

 0.2 

<0.1

 50.3 

 0.6 

 37 

 28.6 

0.25 to <0.50

 

 261 

 0.3 

<0.1

 53.1 

 0.7 

 149 

 57.3 

0.50 to <0.75

 

 108 

 0.7 

<0.1

 55.0 

 1.0 

 87 

 80.4 

0.75 to <2.50

 

 13 

 1.0 

<0.1

 44.7 

 0.8 

 11 

 87.2 

2.50 to <10.00

 

 

 

 

 

 

 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 8,954 

 0.1 

 0.1 

 36.3 

 0.4 

 774 

 8.6 

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 30.6.20

 

 

0.00 to <0.15

 

 15,403 

 0.1 

 0.4 

 50.4 

 0.7 

 2,836 

 18.4 

0.15 to <0.25

 

 4,782 

 0.2 

 0.2 

 49.1 

 0.6 

 1,578 

 33.0 

0.25 to <0.50

 

 1,753 

 0.4 

 0.2 

 47.3 

 0.7 

 838 

 47.8 

0.50 to <0.75

 

 365 

 0.6 

 0.1 

 58.7 

 0.9 

 329 

 90.2 

0.75 to <2.50

 

 690 

 1.1 

 0.2 

 49.8 

 0.8 

 660 

 95.6 

2.50 to <10.00

 

 27 

 3.6 

<0.1

 71.7 

 1.0 

 56 

 210.1 

10.00 to <100.00

 

 0 

 22.0 

<0.1

 45.0 

 1.0 

 0 

 241.3 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 23,021 

 0.2 

 1.1 

 50.0 

 0.6 

 6,297 

 27.4 

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 31.12.19

 

 

0.00 to <0.15

 

 13,108 

 0.1 

 0.4 

 48.9 

 0.8 

 2,539 

 19.4 

0.15 to <0.25

 

 4,287 

 0.2 

 0.2 

 48.7 

 0.8 

 1,568 

 36.6 

0.25 to <0.50

 

 1,615 

 0.4 

 0.2 

 46.6 

 0.7 

 766 

 47.4 

0.50 to <0.75

 

 650 

 0.7 

 0.1 

 63.1 

 0.8 

 632 

 97.3 

0.75 to <2.50

 

 573 

 1.1 

 0.1 

 38.6 

 0.9 

 404 

 70.5 

2.50 to <10.00

 

 33 

 3.2 

<0.1

 73.5 

 1.0 

 71 

 217.8 

10.00 to <100.00

 

 1 

 14.9 

<0.1

 90.0 

 1.0 

 6 

 431.9 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 20,267 

 0.2 

 1.1 

 48.9 

 0.8 

 5,985 

 29.5 

 

28 


 

CCR4: IRB – CCR exposures by portfolio and PD scale (continued)

USD million, except where indicated

 

EAD post-CRM

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years1

RWA

RWA density in %

 

 

 

 

 

 

 

 

 

Public-sector entities, multilateral development banks as of 30.6.20

 

 

0.00 to <0.15

 

 2,143 

 0.0 

 0.1 

 36.1 

 1.3 

 136 

 6.3 

0.15 to <0.25

 

 265 

 0.2 

<0.1

 51.1 

 1.0 

 79 

 29.8 

0.25 to <0.50

 

 

 

 

 

 

 

 

0.50 to <0.75

 

 0 

 0.6 

<0.1

 100.0 

 2.0 

 0 

 134.6 

0.75 to <2.50

 

 

 

 

 

 

 

 

2.50 to <10.00

 

 

 

 

 

 

 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 29 

 100.0 

<0.1

 

 3.3 

 31 

 106.0 

Subtotal

 

 2,438 

 1.2 

 0.1 

 37.4 

 1.3 

 246 

 10.1 

 

 

 

 

 

 

 

 

 

Public-sector entities, multilateral development banks as of 31.12.19

 

 

0.00 to <0.15

 

 2,102 

 

 0.1 

 36.1 

 1.1 

 133 

 6.3 

0.15 to <0.25

 

 58 

 0.2 

<0.1

 86.5 

 1.0 

 27 

 46.7 

0.25 to <0.50

 

 4 

 0.4 

<0.1

 86.9 

 1.0 

 4 

 114.7 

0.50 to <0.75

 

 

 

 

 

 

 

 

0.75 to <2.50

 

 0 

 1.0 

<0.1

 35.0 

 1.0 

 0 

 60.4 

2.50 to <10.00

 

 

 

 

 

 

 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 22 

 100.0 

<0.1

 

 3.4 

 23 

 106.0 

Subtotal

 

 2,185 

 1.0 

 0.1 

 37.2 

 1.1 

 187 

 8.6 

 

 

 

 

 

 

 

 

 

Corporates: including specialized lending as of 30.6.202

 

 

0.00 to <0.15

 

 49,085 

 0.0 

 12.2 

 35.0 

 0.5 

 6,587 

 13.4 

0.15 to <0.25

 

 8,386 

 0.2 

 1.9 

 52.2 

 0.6 

 4,459 

 53.2 

0.25 to <0.50

 

 2,635 

 0.4 

 0.8 

 87.4 

 0.8 

 3,821 

 145.0 

0.50 to <0.75

 

 3,590 

 0.6 

 0.8 

 39.9 

 0.5 

 3,429 

 95.5 

0.75 to <2.50

 

 6,059 

 1.2 

 1.6 

 27.5 

 0.5 

 4,936 

 81.5 

2.50 to <10.00

 

 2,442 

 3.1 

 0.2 

 7.7 

 0.2 

 828 

 33.9 

10.00 to <100.00

 

 2 

 22.0 

<0.1

 19.9 

 1.0 

 4 

 173.4 

100.00 (default)

 

 0 

 100.0 

<0.1

 

 1.0 

 0 

 106.0 

Subtotal

 

 72,199 

 0.3 

 17.5 

 37.6 

 0.5 

 24,065 

 33.3 

 

 

 

 

 

 

 

 

 

Corporates: including specialized lending as of 31.12.192

 

 

0.00 to <0.15

 

 40,175 

 0.0 

 11.6 

 35.7 

 0.5 

 5,807 

 14.5 

0.15 to <0.25

 

 6,620 

 0.2 

 1.7 

 57.5 

 0.7 

 4,217 

 63.7 

0.25 to <0.50

 

 2,305 

 0.4 

 0.8 

 83.7 

 0.9 

 3,494 

 151.6 

0.50 to <0.75

 

 3,351 

 0.6 

 0.9 

 36.9 

 0.6 

 3,000 

 89.5 

0.75 to <2.50

 

 5,708 

 1.2 

 1.5 

 28.9 

 0.5 

 4,655 

 81.5 

2.50 to <10.00

 

 2,182 

 3.2 

 0.2 

 10.1 

 0.2 

 940 

 43.1 

10.00 to <100.00

 

 2 

 14.9 

<0.1

 90.0 

 1.0 

 10 

 431.9 

100.00 (default)

 

 1 

 100.0 

<0.1

 

 1.0 

 1 

 106.0 

Subtotal

 

 60,344 

 0.3 

 16.7 

 38.4 

 0.6 

 22,125 

 36.7 

 

29 


UBS Group AG consolidated 

CCR4: IRB – CCR exposures by portfolio and PD scale (continued)

USD million, except where indicated

 

EAD post-CRM

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years1

RWA

RWA density in %

 

 

 

 

 

 

 

 

 

Retail: other retail as of 30.6.20

 

 

0.00 to <0.15

 

 7,749 

 0.0 

 13.9 

 29.0 

 

 307 

 4.0 

0.15 to <0.25

 

 309 

 0.2 

 0.2 

 29.4 

 

 36 

 11.5 

0.25 to <0.50

 

 155 

 0.4 

 0.1 

 30.3 

 

 38 

 24.4 

0.50 to <0.75

 

 198 

 0.6 

 0.1 

 34.7 

 

 60 

 30.5 

0.75 to <2.50

 

 1,212 

 1.0 

 10.5 

 30.3 

 

 435 

 35.9 

2.50 to <10.00

 

 44 

 3.8 

 0.1 

 31.8 

 

 22 

 49.8 

10.00 to <100.00

 

 9 

 19.9 

 0.1 

 26.3 

 

 5 

 61.5 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 9,677 

 0.2 

 25.0 

 29.3 

 

 903 

 9.3 

 

 

 

 

 

 

 

 

 

Retail: other retail as of 31.12.19

 

 

0.00 to <0.15

 

 5,355 

 0.0 

 13.1 

 31.1 

 

 223 

 4.2 

0.15 to <0.25

 

 31 

 0.2 

 0.1 

 27.0 

 

 3 

 10.4 

0.25 to <0.50

 

 32 

 0.4 

 0.1 

 31.5 

 

 6 

 19.5 

0.50 to <0.75

 

 44 

 0.6 

 0.1 

 44.5 

 

 17 

 38.5 

0.75 to <2.50

 

 591 

 1.0 

 10.7 

 29.9 

 

 312 

 52.7 

2.50 to <10.00

 

 40 

 3.4 

 0.1 

 28.8 

 

 17 

 43.2 

10.00 to <100.00

 

 2 

 21.5 

<0.1

 28.9 

 

 1 

 70.1 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 6,095 

 0.2 

 24.1 

 31.1 

 

 579 

 9.5 

 

 

 

 

 

 

 

 

 

Total 30.6.20

 

 117,863 

 0.3 

 43.7 

 39.7 

 0.53

 32,715 

 27.8 

Total 31.12.19

 

 97,845 

 0.3 

 42.1 

 39.9 

 0.63

 29,651 

 30.3 

1 Average maturity for defaulted exposures disclosed in the table is not used to calculate RWA.    2 Includes exposures to managed funds.    3 Retail asset classes are excluded from the average maturity as they are not subject to maturity treatment.

p

 

30 


 

Semiannual | The fair value of collateral received for derivatives increased by USD 7.9 billion to USD 66.7 billion and the fair value of collateral posted for derivatives increased by USD 11.2 billion to USD 53.8 billion, mainly in the Investment Bank, primarily due to increased market volatility resulting in increased margin requirements as well as lower interest rates during the period. The fair value of collateral received for securities financing transactions (SFTs) decreased by USD 25.5 billion to USD 615.4 billion, mainly in the Prime Brokerage business within the Investment Bank, primarily due to client-driven de-leveraging.

 

Semiannual |

CCR5: Composition of collateral for CCR exposure1

 

 

Collateral used in derivative transactions

 

Collateral used in SFTs

 

 

Fair value of collateral received

 

Fair value of posted collateral

 

Fair value of collateral received

 

Fair value of posted collateral

USD million

 

Segregated2

Unsegregated

Total

 

Segregated3

Unsegregated

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.6.20

 

 

Cash – domestic currency4

 

 2,150 

 19,145 

 21,295 

 

 2,468 

 10,045 

 12,513 

 

 36,710 

 

 77,581 

Cash – other currencies4

 

 

 24,387 

 24,387 

 

 1,913 

 16,644 

 18,557 

 

 10,543 

 

 34,675 

Sovereign debt

 

 6,139 

 7,858 

 13,997 

 

 9,230 

 6,621 

 15,851 

 

 233,058 

 

 171,259 

Other debt securities

 

 

 3,318 

 3,318 

 

 2,442 

 186 

 2,628 

 

 79,662 

 

 35,842 

Equity securities

 

 3,662 

 16 

 3,677 

 

 2,838 

 1,436 

 4,273 

 

 255,428 

 

 150,127 

Total

 

 11,950 

 54,723 

 66,673 

 

 18,891 

 34,931 

 53,822 

 

 615,402 

 

 469,483 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.19

 

 

Cash – domestic currency4

 

 2,369 

 18,398 

 20,767 

 

 1,179 

 7,736 

 8,915 

 

 30,621 

 

 76,209 

Cash – other currencies4

 

 

 18,735 

 18,735 

 

 1,429 

 12,308 

 13,736 

 

 8,955 

 

 31,899 

Sovereign debt

 

 6,432 

 6,150 

 12,582 

 

 8,373 

 5,243 

 13,616 

 

 232,051 

 

 162,091 

Other debt securities

 

 

 2,231 

 2,231 

 

 1,643 

 409 

 2,052 

 

 78,903 

 

 28,532 

Equity securities

 

 4,391 

 18 

 4,409 

 

 4,138 

 180 

 4,317 

 

 290,369 

 

 168,088 

Total

 

 13,192 

 45,532 

 58,725 

 

 16,761 

 25,874 

 42,635 

 

 640,899 

 

 466,820 

1 This table includes collateral received and posted with and without the right of rehypothecation, but excludes securities placed with central banks related to undrawn credit lines and for payment, clearing and settlement purposes for which there were no associated liabilities or contingent liabilities.    2 Includes collateral received in derivative transactions, primarily initial margins, that is placed with a third-party custodian and to which UBS has access only in the case of counterparty default.    3 Includes collateral posted to central counterparties, where we apply a 0% risk weight for trades that we have entered into on behalf of a client and where the client has signed a legally enforceable agreement stipulating that the default risk of that central counterparty is carried by the client.    4 Cash collateral received and posted for derivatives and SFTs are subject to netting recognized on the IFRS balance sheet.

p

 

Semiannual | Notionals for credit derivatives where UBS is a seller of protection increased by USD 1 billion, primarily due to increased market volatility, partly offset by trade compressions, terminations and maturities during the period.

 

Semiannual |

CCR6: Credit derivatives exposures

 

 

30.6.20

 

31.12.19

USD million

 

Protection bought

Protection

sold

 

Protection bought

Protection

sold

Notionals1

 

 

 

 

 

 

Single-name credit default swaps

 

 35,166 

 36,020 

 

 37,578 

 38,687 

Index credit default swaps

 

 36,635 

 31,782 

 

 32,426 

 27,887 

Total return swaps

 

 2,133 

 901 

 

 3,692 

 1,606 

Credit options

 

 3,436 

 556 

 

 3,757 

 56 

Total notionals

 

 77,370 

 69,260 

 

 77,452 

 68,236 

Fair values

 

 

 

 

 

 

Positive fair value (asset)

 

 1,081 

 878 

 

 682 

 1,338 

Negative fair value (liability)

 

 1,408 

 1,295 

 

 2,050 

 916 

1 Includes notional amounts for client-cleared transactions.

 

p

31 


UBS Group AG consolidated 

Counterparty credit risk risk-weighted assets

Quarterly | CCR RWA on derivatives under the internal model method (IMM) decreased by USD 1.3 billion to USD 19.3 billion during the second quarter of 2020, primarily in the Investment Bank as a result of lower volumes in Global Markets. CCR RWA on securities financing transactions (SFTs) under the value-at-risk (VaR) approach increased by USD 1.4 billion to USD 8.1 billion during the second quarter of 2020, mainly driven by increased trading activity. For definitions of CCR RWA movement table components, refer to “Definitions of credit risk and counterparty credit risk RWA movement table components for CR8 and CCR7” on page 50 of our 31 December 2019 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors.

 

Quarterly |

CCR7: RWA flow statements of CCR exposures under internal model method (IMM) and value-at-risk (VaR)

  

 

For the quarter ended 30.6.20

 

For the quarter ended 31.3.20

USD million

 

Derivatives

SFTs

Total

 

Derivatives

SFTs

Total

 

 

 

Subject to IMM

Subject to VaR

 

 

Subject to IMM

Subject to VaR

 

1

RWA as of the beginning of the quarter

 

 20,582 

 6,663 

 27,245 

 

 20,275 

 5,502 

 25,777 

2

Asset size

 

 (1,878) 

 922 

 (956) 

 

 1,091 

 1,421 

 2,511 

3

Credit quality of counterparties

 

 (167) 

 10 

 (157) 

 

 (434) 

 (180) 

 (614) 

4

Model updates

 

 310 

 400 

 710 

 

 (133) 

 

 (133) 

5

Methodology and policy

 

 (60) 

 

 (60) 

 

 

 

 

5a

of which: regulatory add-ons

 

 

 

 

 

 

 

 

6

Acquisitions and disposals

 

 

 

 

 

 

 

 

7

Foreign exchange movements

 

 206 

 60 

 267 

 

 (217) 

 (79) 

 (296) 

8

Other

 

 290 

 

 290 

 

 

 

 

9

RWA as of the end of the quarter

 

 19,284 

 8,055 

 27,339 

 

 20,582 

 6,663 

 27,245 

p

 

32 


 

Semiannual | The CCR8 table below presents a breakdown of the Group’s RWA by type of exposure to central counterparties.

 

Semiannual |

CCR8: Exposures to central counterparties

USD million

 

 

30.6.20

EAD (post-CRM)

RWA

1

Exposures to QCCPs (total)1

 62,167 

 1,264 

2

Exposures for trades at QCCPs (excluding initial margin and default fund contributions); of which

 34,584 

 401 

3

(i) OTC derivatives

 1,420 

 27 

4

(ii) Exchange-traded derivatives

 22,470 

 160 

5

(iii) Securities financing transactions

 10,694 

 214 

6

(iv) Netting sets where cross-product netting has been approved

 

 

7

Segregated initial margin

 

 

8

Non-segregated initial margin2

 25,665 

 237 

9

Pre-funded default fund contributions

 1,917 

 625 

10

Unfunded default fund contributions

 

 

11

Exposures to non-QCCPs (total)

 158 

 153 

12

Exposures for trades at non-QCCPs (excluding initial margin and default fund contributions); of which

 135 

 51 

13

(i) OTC derivatives

 0 

 0 

14

(ii) Exchange-traded derivatives

 4 

 3 

15

(iii) Securities financing transactions

 131 

 49 

16

(iv) Netting sets where cross-product netting has been approved

 

 

17

Segregated initial margin

 

 

18

Non-segregated initial margin2

 16 

 12 

19

Pre-funded default fund contributions

 7 

 89 

20

Unfunded default fund contributions

 

 

1 A qualifying central counterparty (QCCP) is an entity licensed by the regulator to operate as a CCP.    2 Exposures associated with initial margin, where the exposures are measured under the IMM or the VaR approach, have been included within the exposures for trades. The exposure for non-segregated initial margin, i.e., not bankruptcy-remote in accordance with FINMA Circular 2017/7, reflects the replacement costs under SA-CCR multiplied by an alpha factor of 1.4. The risk-weighted assets reflect the exposure multiplied by the applied risk-weight of derivatives. Under SA-CCR, collateral posted to a segregated, bankruptcy-remote account does not increase the value of replacement costs.

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UBS Group AG consolidated 

Section 5  Securitizations

Introduction

Semiannual | This section provides details of traditional and synthetic securitization exposures in the banking and trading book based on the revised Basel III securitization framework, applicable since 1 January 2018.

In a traditional securitization, a pool of loans (or other debt obligations) is transferred to structured entities that have been established to own the loan pool and to issue tranched securities to third-party investors referencing this pool of loans. In a synthetic securitization, legal ownership of securitized pools of assets is typically retained, but associated credit risk is transferred to structured entities commonly through guarantees, credit derivatives or credit-linked notes. Hybrid structures with a mix of traditional and synthetic features are disclosed as synthetic securitizations.

We act in different roles in securitization transactions. As originator, we create or purchase financial assets, which are
then securitized in traditional or synthetic securitization transactions, enabling us to transfer significant risk to third-party investors. As sponsor, we manage, provide financing for or advise on securitization programs. In line with the Basel III framework, sponsoring includes underwriting activities. In all other cases, we act as an investor by taking securitization positions.
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Securitization exposures in the banking and trading book

Semiannual | Based on the current immaterial business volumes and declining trend of total securitization exposures over the past years, we have condensed the following semiannual Pillar 3 disclosures into one single tabular disclosure titled ”Securitization exposures in the banking and trading book and regulatory capital requirements”:

– ”SEC1 – Securitization exposures in the banking book”;

– ”SEC2 – Securitization exposures in the trading book”;

– ”SEC3 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as originator or as sponsor”; and

– ”SEC4 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as investor.”

The new table outlines the carrying values on the balance sheet in the banking and trading books as of 30 June 2020 and 31 December 2019. Additionally, the table provides the market risk RWA from securitization and the capital charge after application of the revised securitization framework caps.

Development of securitization exposures in the first half of 2020

In the first half of 2020, securitization exposures in the banking book decreased from USD 188 million to USD 176 million, reflecting the amortization of exposure. The securitization exposures in the trading book decreased from USD 352 million to USD 334 million, mainly related to secondary trading in commercial mortgage-backed securities in the Investment Bank. p  

 

34 


 

Semiannual |

Securitization exposures in the banking and trading book and associated regulatory capital requirements

USD million

 

Carrying Value

 

RWA

 

Total Capital Charge after cap

 

 

 

 

 

 

 

30.6.20

Asset Classes – Banking Book1

 

 

 

 

 

 

Retail

 

 78 

 

 534 

 

 43 

Wholesale

 

 98 

 

 64 

 

 5 

Re-securitization

 

 0 

 

 0 

 

 0 

Total Banking Book

 

 176 

 

 598 

 

 48 

Asset Classes – Trading Book

 

 

 

 

 

 

Retail

 

 19 

 

 180 

 

 15 

Wholesale

 

 303 

 

 174 

 

 14 

Re-securitization

 

 12 

 

 16 

 

 1 

Total Trading Book

 

 334 

 

 370 

 

 30 

Total

 

 510 

 

 968 

 

 78 

 

 

 

 

 

 

 

31.12.19

Asset Classes – Banking Book1

 

 

 

 

 

 

Retail

 

 82 

 

 564 

 

 45 

Wholesale

 

 106 

 

 69 

 

 6 

Re-securitization

 

 0 

 

 0 

 

 0 

Total Banking Book

 

 188 

 

 633 

 

 51 

Asset Classes – Trading Book

 

 

 

 

 

 

Retail

 

 23 

 

 199 

 

 16 

Wholesale

 

 316 

 

 201 

 

 16 

Re-securitization

 

 13 

 

 19 

 

 2 

Total Trading Book

 

 352 

 

 419 

 

 34 

Total

 

 540 

 

 1,052 

 

 85 

1 Of the securitization exposures in the banking book, 56% carry a risk weighting of up to 100% as of 30 June 2020 (31 December 2019: 56%).

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UBS Group AG consolidated 

Section 6  Market risk

Overview

Semiannual | The amount of capital required to underpin market risk in the regulatory trading book is calculated using a variety of methods approved by the Swiss Financial Market Supervisory Authority (FINMA). The components that contribute to market risk risk-weighted assets (RWA) are value-at-risk (VaR), stressed value-at-risk (SVaR), an add-on for risks that are potentially not fully modeled in VaR (risks not in VaR, or RniV), the incremental risk charge (IRC) and the securitization framework for securitization positions in the trading book. Refer to pages 72–73, 85 and 87–89 of our 31 December 2019 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors, for more information about each of these components.


Market risk risk-weighted assets

Market risk RWA development in the second quarter of 2020

Quarterly | The three main components that contribute to market risk RWA are VaR, SVaR and IRC. VaR and SVaR components include the RWA charge for RniV.

The MR2 table on the next page provides a breakdown of the market risk RWA under an internal models approach movement in the second quarter of 2020 across these components, according to the movement categories defined by the Basel Committee on Banking Supervision (BCBS).

These categories are described on page 81 of our 31 December 2019 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors.  

Market risk RWA under an internal models approach decreased by USD 0.8 billion to USD 13.9 billion in the second quarter of 2020, driven by a decrease of USD 3.3 billion from regulatory policy changes from the removal of the model multiplier of 1.3 introduced by FINMA in 2016, as well as a decrease in asset size and other movements in the Investment Bank’s Global Markets business from client activity and asset price movements. This was partly offset by an increase related to the ongoing parameter update of our VaR model, and an increase from regulatory add-ons, which reflected updates from the monthly risks-not-in-VaR assessment.

The VaR multiplier remained unchanged, at 3.0, compared with the first quarter of 2020. FINMA’s freeze on back-testing exceptions did not affect this multiplier.

 

 

36 


 

Quarterly |

MR2: RWA flow statements of market risk exposures under an internal models approach1

USD million

VaR

Stressed VaR

IRC

CRM

Other

Total RWA

1

RWA as of 31.12.19

 901 

 4,012 

 1,224 

 

 

 6,137 

1a

Regulatory adjustment

 (382) 

 (2,500) 

 0 

 

 

 (2,882) 

1b

RWA at previous quarter-end (end of day)

 519 

 1,512 

 1,224 

 

 

 3,255 

2

Movement in risk levels

 1,410 

 1,981 

 (368) 

 

 

 3,023 

3

Model updates / changes

 866 

 (723) 

 98 

 

 

 241 

4

Methodology and policy

 0 

 0 

 0 

 

 

 0 

5

Acquisitions and disposals

 0 

 0 

 0 

 

 

 0 

6

Foreign exchange movements

 0 

 0 

 0 

 

 

 0 

7

Other

 (256) 

 (217) 

 0 

 

 

 (473) 

8a

RWA at the end of the reporting period (end of day)

 2,539 

 2,552 

 954 

 

 

 6,045 

8b

Regulatory adjustment

 1,247 

 7,052 

 304 

 

 

 8,602 

8c

RWA as of 31.3.20

 3,786 

 9,604 

 1,258 

 

 

 14,647 

1

RWA as of 31.3.20

 3,786 

 9,604 

 1,258 

 

 

 14,647 

1a

Regulatory adjustment

 (1,247) 

 (7,052) 

 (304) 

 

 

 (8,602) 

1b

RWA at previous quarter-end (end of day)

 2,539 

 2,552 

 954 

 

 

 6,045 

2

Movement in risk levels

 (1,604) 

 (1,110) 

 417 

 

 

 (2,298) 

3

Model updates / changes

 702 

 1,234 

 0 

 

 

 1,937 

4

Methodology and policy

 (378) 

 (618) 

 0 

 

 

 (995) 

5

Acquisitions and disposals

 0 

 0 

 0 

 

 

 0 

6

Foreign exchange movements

 0 

 0 

 0 

 

 

 0 

7

Other

 608 

 880 

 0 

 

 

 1,488 

8a

RWA at the end of the reporting period (end of day)

 1,868 

 2,939 

 1,371 

 

 

 6,177 

8b

Regulatory adjustment

 2,281 

 5,401 

 0 

 

 

 7,682 

8c

RWA as of 30.6.20

 4,149 

 8,339 

 1,371 

 

 

 13,859 

1 Components that describe movements in RWA are presented in italics.

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UBS Group AG consolidated 

Securitization positions in the trading book

Semiannual | Our exposure to securitization positions in the trading book includes exposures arising from secondary trading in commercial mortgage-backed securities in the Investment Bank, and limited positions in the Non-core and Legacy Portfolio within Group Functions that we continue to wind down. Refer to the “Regulatory exposures and risk-weighted assets” table on pages 11–12 of this report and to the “Securitizations” section of this report for more information.


Securitization exposures in the trading book is the only relevant disclosure component of market risk under the standardized approach. Our market risk RWA from securitization exposures in the trading book decreased from USD 419 million as of 31 December 2019 to USD 370 million as of 30 June 2020.

®   Refer to the “Securitizations” section of this report for more information about the securitization exposures in the trading book

 

 

Regulatory calculation of market risk

Semiannual | The MR3 table below shows minimum, maximum, average and period-end regulatory VaR, stressed VaR, the IRC and the comprehensive risk capital charge. Since the second quarter of 2019, we have not held eligible correlation trading positions.

During the first half of 2020, 10-day 99% regulatory VaR and SVaR increased, driven by the Investment Bank’s Global Markets business from unprecedented and sharp market moves across asset classes along with time series updates incorporating the punitive shocks observed in March, as well as from new business transactions.

 

Semiannual |

MR3: IMA values for trading portfolios

 

For the six-month period ended 30.6.20

For the six-month period ended 31.12.19

For the six-month period ended 30.6.19

USD million

 

 

 

 

VaR (10-day 99%)

 

 

 

1

Maximum value

 139 

 78 

 88 

2

Average value

 46 

 19 

 31 

3

Minimum value

 5 

 0 

 17 

4

Period end

 56 

 16 

 24 

 

Stressed VaR (10-day 99%)

 

 

 

5

Maximum value

 261 

 96 

 143 

6

Average value

 100 

 51 

 74 

7

Minimum value

 36 

 22 

 45 

8

Period end

 86 

 45 

 61 

 

Incremental risk charge (99.9%)

 

 

 

9

Maximum value

 127 

 139 

 141 

10

Average value

 94 

 104 

 107 

11

Minimum value

 63 

 76 

 87 

12

Period end

 110 

 98 

 105 

 

Comprehensive risk capital charge (99.9%)

 

 

 

13

Maximum value

 

 

 

14

Average value

 

 

 

15

Minimum value

 

 

 

16

Period end

 

 

 

17

Floor (standardized measurement method)

 

 

 

 

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38 


 

MR4: Comparison of VaR estimates with gains/losses

Semiannual | The “Group: development of regulatory backtesting revenues and actual trading revenues against backtesting VaR” chart below shows the six-month development of backtesting VaR against the Group’s backtesting revenues and actual trading revenues for the first half of 2020. The chart shows both the 99% and the 1% backtesting VaR. The asymmetry between the negative and positive tails is a result of the long gamma risk profile that has been run historically in the Investment Bank.

The actual trading revenues include, in addition to backtesting revenues, intraday revenues.

There were three new Group VaR backtesting exceptions in the first half of 2020. The total number of backtesting exceptions within the most recent 250-business-day window increased from 0 to 3. These resulted from the unprecedented price moves in various asset classes during the first quarter of 2020. The FINMA VaR multiplier for market risk RWA remained 3.0, as the increase in backtesting exceptions did not trigger a higher multiplier.

On 14 April 2020, in light of the COVID-19 pandemic and its impact on the financial markets, FINMA announced that the total number of backtesting exceptions will be temporarily frozen at the level reported on 1 February 2020. Since UBS Group recorded no backtesting exceptions in the 250 trading days leading up to 1 February 2020 and noted only 3 negative exceptions between 1 February 2020 and 30 June 2020, this temporary FINMA exemption had no effect on our market risk RWA in the first half of 2020.

Semiannual |

  

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UBS Group AG consolidated 

Section 7  Going and gone concern requirements and eligible capital

Quarterly I The table below provides details of the Swiss systemically relevant bank (SRB) going and gone concern capital requirements as required by the Swiss Financial Market Supervisory Authority (FINMA); however, it does not reflect the effects of the temporary exemption granted by FINMA on 25 March 2020 in connection with COVID-19, which permits the exclusion of central bank sight deposits from the going concern leverage ratio calculation. The respective effect is presented on the next page. More information about capital management is provided on pages 46–56 in the “Capital management” section of our second quarter 2020 report, available under ”Quarterly reporting” at www.ubs.com/investors.

 

Quarterly |

Swiss SRB going and gone concern requirements and information

As of 30.6.20

 

RWA

 

LRD1

USD million, except where indicated

 

in %

 

 

in %

 

Required going concern capital

 

 

 

 

 

 

Total going concern capital

 

 13.962

 39,979 

 

 4.882

 47,499 

Common equity tier 1 capital

 

 9.66 

 27,663 

 

 3.38 

 32,884 

of which: minimum capital

 

 4.50 

 12,890 

 

 1.50 

 14,615 

of which: buffer capital

 

 5.14 

 14,723 

 

 1.88 

 18,269 

of which: countercyclical buffer

 

 0.02 

 50 

 

 

 

Maximum additional tier 1 capital

 

 4.30 

 12,317 

 

 1.50 

 14,615 

of which: additional tier 1 capital

 

 3.50 

 10,025 

 

 1.50 

 14,615 

of which: additional tier 1 buffer capital

 

 0.80 

 2,291 

 

 

 

 

 

 

 

 

 

 

Eligible going concern capital

 

 

 

 

 

 

Total going concern capital

 

 18.69 

 53,537 

 

 5.49 

 53,537 

Common equity tier 1 capital

 

 13.32 

 38,146 

 

 3.92 

 38,146 

Total loss-absorbing additional tier 1 capital3

 

 5.37 

 15,390 

 

 1.58 

 15,390 

of which: high-trigger loss-absorbing additional tier 1 capital

 

 4.50 

 12,899 

 

 1.32 

 12,899 

of which: low-trigger loss-absorbing additional tier 1 capital

 

 0.87 

 2,491 

 

 0.26 

 2,491 

 

 

 

 

 

 

 

Required gone concern capital4

 

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 10.44 

 29,897 

 

 3.72 

 36,203 

of which: base requirement

 

 12.86 

 36,836 

 

 4.50 

 43,846 

of which: additional requirement for market share and LRD

 

 1.08 

 3,094 

 

 0.38 

 3,654 

of which: applicable reduction on requirements

 

 (3.50) 

 (10,032) 

 

 (1.16) 

 (11,296) 

of which: rebate granted (equivalent to 42.5% of maximum rebate)5

 

 (2.27) 

 (6,501) 

 

 (0.80) 

 (7,764) 

of which: reduction for usage of low-trigger tier 2 capital instruments

 

 (1.23) 

 (3,532) 

 

 (0.36) 

 (3,532) 

 

 

 

 

 

 

 

Eligible gone concern capital

 

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 13.97 

 40,021 

 

 4.11 

 40,021 

Total tier 2 capital

 

 2.65 

 7,598 

 

 0.78 

 7,598 

of which: low-trigger loss-absorbing tier 2 capital

 

 2.47 

 7,063 

 

 0.72 

 7,063 

of which: non-Basel III-compliant tier 2 capital

 

 0.19 

 534 

 

 0.05 

 534 

TLAC-eligible senior unsecured debt

 

 11.32 

 32,423 

 

 3.33 

 32,423 

 

 

 

 

 

 

 

Total loss-absorbing capacity

 

 

 

 

 

 

Required total loss-absorbing capacity

 

 24.40 

 69,876 

 

 8.59 

 83,703 

Eligible total loss-absorbing capacity

 

 32.66 

 93,557 

 

 9.60 

 93,557 

 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

 

 

Risk-weighted assets

 

 

 286,436 

 

 

 

Leverage ratio denominator1

 

 

 

 

 

 974,348 

1 LRD-based requirements and eligible capital presented in this table do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report and to the COVID-19-related information in this section for more information.    2 Includes applicable add-ons of 1.08% for RWA and 0.375% for LRD.    3 Includes outstanding low-trigger loss-absorbing additional tier 1 (AT1) capital instruments, which are available under the Swiss SRB framework to meet the going concern requirements until their first call date. As of their first call date, these instruments are eligible to meet the gone concern requirements.    4 From 1 January 2020 onward, a maximum of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between one and two years.    5 Based on the actions we completed up to December 2019 to improve resolvability, FINMA granted an increase of rebate on the gone concern requirement from 42.5% to 47.5% of the maximum rebate, effective from 1 July 2020.

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40 


 

Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits

In line with the FINMA exemption rules that apply until 1 January 2021, the eligible leverage ratio denominator (LRD) relief applicable to UBS is reduced by the going concern LRD equivalent of the capital distribution that UBS plans to make for the financial year 2019.

The table below summarizes the effects on our Swiss SRB going concern capital requirements and information. The FINMA exemption rules have no effect on our Swiss SRB gone concern capital requirements and ratios.


Outside of this section, for simplicity and due to the short-term nature of the FINMA exemption, we have chosen to present LRD excluding the temporary FINMA exemption.

The LRD reflecting the aforementioned temporary FINMA exemption under Basel Committee on Banking Supervision (BCBS) rules is identical to the Swiss SRB number presented in the table below. The BCBS Basel III leverage ratio was 6.05% after the temporary FINMA exemption was reflected.

  

  

Swiss SRB going concern requirements and information including temporary FINMA exemption

As of 30.6.20

 

LRD

USD million, except where indicated

 

in %

 

 

 

 

 

Leverage ratio denominator before temporary exemption

 

 

 974,348 

Effective relief

 

 

 (89,202) 

of which: central bank sight deposits eligible for relief

 

 

 (142,987) 

of which: reduction of relief due to paid and planned dividend distribution1

 

 

 53,785 

Leverage ratio denominator after temporary exemption

 

 

 885,146 

 

 

 

 

Required going concern capital

 

 

 

Total going concern capital

 

 4.88 

 43,151 

Common equity tier 1 capital

 

 3.38 

 29,874 

 

 

 

 

Eligible going concern capital

 

 

 

Total going concern capital

 

 6.05 

 53,537 

Common equity tier 1 capital

 

 4.31 

 38,146 

1 Represents the leverage ratio denominator equivalent to a 4.875% going concern leverage ratio requirement applied to the planned 2019 dividend of USD 2,622 million, which includes the first installment of the 2019 dividend (USD 0.365 per share, paid on 7 May 2020) and the special dividend reserve of USD 0.365 per share (this reserve is earmarked for distribution based on the decision to be taken at an extraordinary general meeting (EGM) planned for 19 November 2020).

 

41 


UBS Group AG consolidated 

Explanation of the differences between the IFRS and regulatory scopes of consolidation

The scope of consolidation for the purpose of calculating Group regulatory capital is generally the same as the consolidation scope under International Financial Reporting Standards (IFRS) and includes subsidiaries that are directly or indirectly controlled by UBS Group AG and are active in banking and finance. However, subsidiaries consolidated under IFRS whose business is outside the banking and finance sector are excluded from the regulatory scope of consolidation.

The key difference between the IFRS and regulatory scope of consolidation as of 30 June 2020 relates to investments in insurance, real estate and commercial companies, as well as investment vehicles, which are consolidated under IFRS, but not for regulatory capital purposes, where they are subject to risk-weighting.


The table below provides a list of the most significant entities that were included in the IFRS scope of consolidation but not in the regulatory scope of consolidation. These entities account for most of the difference between the “Balance sheet in accordance with IFRS scope of consolidation” and the “Balance sheet in accordance with regulatory scope of consolidation” columns in the CC2 table. This difference is mainly reflected in financial assets at fair value not held for trading and other financial liabilities designated at fair value. As of 30 June 2020, entities consolidated under either the IFRS or the regulatory scope of consolidation did not report any significant capital deficiencies.

In the banking book, certain equity investments are not consolidated under IFRS or under the regulatory scope. As of 30 June 2020, these investments mainly consisted of infrastructure holdings and joint operations (e.g., settlement and clearing institutions, stock and financial futures exchanges) and included our participation in SIX Group. These investments are risk-weighted based on applicable threshold rules.

More information about the legal structure of the UBS Group and on the IFRS scope of consolidation is provided on pages 15 and 312–313, respectively, of our Annual Report 2019, available under “Annual reporting” at www.ubs.com/investors.  

 

 

Semiannual |

Main legal entities consolidated under IFRS but not included in the regulatory scope of consolidation

 

 

30.6.20

 

 

USD million

 

Total assets1

Total equity1

 

 

Purpose

UBS Asset Management Life Ltd

 

 26,754 

 42 

 

 

Life Insurance

UBS Life Insurance Company USA

 

 106 

 44 

 

 

Life insurance

1 Total assets and total equity on a standalone basis.   

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Semiannual | The CC2 table below and on the following page provides a reconciliation of the IFRS balance sheet to the balance sheet according to the regulatory scope of consolidation as defined by the BCBS and FINMA. Lines in the balance sheet under the regulatory scope of consolidation are expanded and referenced where relevant to display all components that are used in the “CC1: Composition of regulatory capital” table. Refer to the “Main legal entities consolidated under IFRS but not included in the regulatory scope of consolidation” table in this section of this report for more information about the most significant entities consolidated under IFRS but not included in the regulatory scope of consolidation.

 

Semiannual |

CC2: Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation

As of 30.6.20

Balance sheet in

accordance with

IFRS scope

of consolidation

Effect of deconsolidated entities for regulatory consolidation

Effect of additional consolidated entities for regulatory consolidation

Balance sheet in accordance with regulatory scope of consolidation

Ref1

USD million

 

 

 

 

 

Assets

 

 

 

 

 

Cash and balances at central banks

 149,549 

 0 

 

 149,549 

 

Loans and advances to banks

 15,633 

 (276) 

 

 15,357 

 

Receivables from securities financing transactions

 85,271 

 

 

 85,271 

 

Cash collateral receivables on derivative instruments

 30,846 

 

 

 30,846 

 

Loans and advances to customers

 344,652 

 56 

 

 344,708 

 

Other financial assets measured at amortized cost

 27,253 

 (185) 

 

 27,068 

 

Total financial assets measured at amortized cost

 653,205 

 (405) 

 

 652,800 

 

Financial assets at fair value held for trading

 98,046 

 (39) 

 

 98,007 

 

of which: assets pledged as collateral that may be sold or repledged by counterparties

 38,505 

 

 

 38,505 

 

Derivative financial instruments

 152,008 

 11 

 

 152,019 

 

Brokerage receivables

 19,848 

 

 

 19,848 

 

Financial assets at fair value not held for trading

 94,292 

 (26,395) 

 

 67,897 

 

Total financial assets measured at fair value through profit or loss

 364,194 

 (26,424) 

 

 337,770 

 

Financial assets measured at fair value through other comprehensive income

 8,624 

 0 

 

 8,624 

 

Investments in associates

 1,054 

 96 

 

 1,150 

 

of which: goodwill

 20 

 

 

 20 

 4 

Property, equipment and software

 12,875 

 (46) 

 

 12,829 

 

Goodwill and intangible assets

 6,414 

 

 

 6,414 

 

of which: goodwill

 6,259 

 

 

 6,259 

 4 

of which: intangible assets

 155 

 

 

 155 

 5 

Deferred tax assets

 9,294 

 0 

 

 9,294 

 

of which: deferred tax assets recognized for tax loss carry-forwards

 5,829 

 0 

 

 5,829 

 6 

of which: deferred tax assets on temporary differences                

 3,465 

 0 

 

 3,465 

 10 

Other non-financial assets

 8,177 

 (6) 

 

 8,171 

 

of which: net defined benefit pension and other post-employment assets

 0 

 

 

 0 

 8 

Total assets

 1,063,838 

 (26,785) 

 

 1,037,053 

 

 

 

 

 

 

 

 

43 


UBS Group AG consolidated 

 

 

CC2: Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation (continued)

As of 30.6.20

Balance sheet in

accordance with

IFRS scope

of consolidation

Effect of deconsolidated entities for regulatory consolidation

Effect of additional consolidated entities for regulatory consolidation

Balance sheet in accordance with regulatory scope of consolidation

Ref1

USD million

 

 

 

 

 

Liabilities

 

 

 

 

 

Amounts due to banks

 12,410 

 (20) 

 

 12,389 

 

Payables from securities financing transactions

 12,019 

 

 

 12,019 

 

Cash collateral payables on derivative instruments

 36,882 

 

 

 36,882 

 

Customer deposits

 474,254 

 27 

 

 474,281 

 

Debt issued measured at amortized cost

 126,744 

 (3) 

 

 126,741 

 

of which: amount eligible for high-trigger loss-absorbing additional tier 1 capital

 11,041 

 

 

 11,041 

 9 

of which: amount eligible for low-trigger loss-absorbing additional tier 1 capital

 2,491 

 

 

 2,491 

 9 

of which: amount eligible for low-trigger loss-absorbing tier 2 capital

 7,063 

 

 

 7,063 

 11 

of which: amount eligible for capital instruments subject to phase-out from tier 2 capital

 534 

 

 

 534 

 12 

Other financial liabilities measured at amortized cost

 9,699 

 (201) 

 

 9,498 

 

Total financial liabilities measured at amortized cost

 672,007 

 (198) 

 

 671,809 

 

Financial liabilities at fair value held for trading

 34,426 

 0 

 

 34,426 

 

Derivative financial instruments

 152,280 

 3 

 

 152,283 

 

Brokerage payables designated at fair value

 40,248 

 

 

 40,248 

 

Debt issued designated at fair value

 58,864 

 0 

 

 58,864 

 

Other financial liabilities designated at fair value

 37,902 

 (26,590) 

 

 11,311 

 

Total financial liabilities measured at fair value through profit or loss

 323,721 

 (26,588) 

 

 297,133 

 

Provisions

 2,601 

 0 

 

 2,601 

 

Other non-financial liabilities

 8,302 

 (1) 

 

 8,301 

 

of which: amount eligible for high-trigger loss-absorbing capital (Deferred Contingent Capital Plan (DCCP))2

 1,408 

 

 

 1,408 

 9 

of which: deferred tax liabilities related to goodwill

 276 

 

 

 276 

 4 

of which: deferred tax liabilities related to other intangible assets

 2 

 

 

 2 

 5 

Total liabilities

 1,006,630 

 (26,786) 

 

 979,844 

 

Equity

 

 

 

 

 

Share capital

 338 

 

 

 338 

 1 

Share premium

 17,125 

 

 

 17,125 

 1 

Treasury shares

 (3,592) 

 

 

 (3,592) 

 3 

Retained earnings

 35,991 

 (12) 

 

 35,979 

 2 

Other comprehensive income recognized directly in equity, net of tax

 7,173 

 14 

 

 7,187 

 3 

of which: unrealized gains / (losses) from cash flow hedges

 2,871 

 

 

 2,871 

 7 

Equity attributable to shareholders

 57,035 

 2 

 

 57,036 

 

Equity attributable to non-controlling interests

 173 

 

 

 173 

 

Total equity

 57,207 

 2 

 

 57,209 

 

Total liabilities and equity

 1,063,838 

 (26,785) 

 

 1,037,053 

 

1 References link the lines of this table to the respective reference numbers provided in the “References” column in the “CC1: Composition of regulatory capital” table in this section.    2 IFRS carrying amount of total DCCP liabilities was USD 1,858 million as of 30 June 2020. Refer to the “Compensation” section of our Annual Report 2019 for more information about the DCCP.

p

 

44 


 

Semiannual | The CC1 table below and on the following pages provides the composition of capital in the format prescribed by the BCBS and FINMA, and is based on BCBS Basel III rules, unless stated otherwise. Reference is made to items reconciling to the balance sheet under the regulatory scope of consolidation as disclosed in the “CC2: Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation” table.


Refer to the documents titled “Capital and total loss-absorbing capacity instruments of UBS Group AG consolidated and UBS AG consolidated and standalone – key features” and “UBS Group AG consolidated capital instruments and TLAC-eligible senior unsecured debt” under “Bondholder information” at www.ubs.com/investors  for an overview of the main features of our regulatory capital instruments, as well as the full terms and conditions.

 

Semiannual |

CC1: Composition of regulatory capital

As of 30.6.20

Amounts

References1

USD million except where indicated

 

 

 

Common Equity Tier 1 capital: instruments and reserves

 

 

1

Directly issued qualifying common share (and equivalent for non-joint stock companies) capital plus related stock surplus

 17,463 

 1 

2

Retained earnings

 35,979 

 2 

3

Accumulated other comprehensive income (and other reserves)

 3,594 

 3 

4

Directly issued capital subject to phase-out from CET1 (only applicable to non-joint stock companies)

 

 

5

Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)

 

 

6

Common Equity Tier 1 capital before regulatory adjustments

 57,036 

 

 

Common Equity Tier 1 capital: regulatory adjustments

 

 

7

Prudent valuation adjustments

 (155) 

 

8

Goodwill (net of related tax liability)

 (6,003) 

 4 

9

Other intangibles other than mortgage servicing rights (net of related tax liability)

 (153) 

 5 

10

Deferred tax assets that rely on future profitability, excluding those arising from temporary differences (net of related tax liability)2

 (6,093) 

 6 

11

Cash flow hedge reserve

 (2,871) 

 7 

12

Shortfall of provisions to expected losses

 (262) 

 

13

Securitization gain on sale

 

 

14

Gains and losses due to changes in own credit risk on fair valued liabilities

 (39) 

 

15

Defined benefit pension fund net assets

 0 

 8 

16

Investments in own shares (if not already subtracted from paid-in capital on reported balance sheet)3

 (1,185) 

 9 

17

Reciprocal cross-holdings in common equity

 

 

17a

Qualified holdings where a significant influence is exercised with other owners (CET1 instruments)

 

 

17b

Immaterial investments (CET1 items)

 

 

18

Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold)

 

 

19

Significant investments in the common stock of banking, financial and insurance entities that are outside the scope of regulatory consolidation (amount above 10% threshold)

 

 

20

Mortgage servicing rights (amount above 10% threshold)

 

 

21

Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability)

 

 10 

22

Amount exceeding the 15% threshold

 

 

23

of which: significant investments in the common stock of financials

 

 

24

of which: mortgage servicing rights

 

 

25

of which: deferred tax assets arising from temporary differences

 

 

26

Expected losses on equity investment under the PD / LGD approach

 

 

26a

Further adjustments to financial statements in accordance with a recognized international accounting standard

 (163) 

 

26b

Other adjustments

 (1,967) 

 

27

Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover deductions

 

 

28

Total regulatory adjustments to Common Equity Tier 1

 (18,890) 

 

29

Common Equity Tier 1 capital (CET1)

 38,146 

 

 

 

45 


UBS Group AG consolidated 

CC1: Composition of regulatory capital (Continued)

As of 30.6.20

Amounts

References1

USD million except where indicated

 

 

 

Additional Tier 1 capital: instruments

 

 

30

Directly issued qualifying additional Tier 1 instruments plus related stock surplus

 15,394 

 

31

of which: classified as equity under applicable accounting standards

 

 

32

of which: classified as liabilities under applicable accounting standards

 15,394 

 

33

Directly issued capital instruments subject to phase-out from additional Tier 1

 

 

34

Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third parties (amount allowed in group AT1)

 

 

35

of which: instruments issued by subsidiaries subject to phase-out

 

 

36

Additional Tier 1 capital before regulatory adjustments

 15,394 

 

 

Additional Tier 1 capital: regulatory adjustments

 

 

37

Investments in own additional Tier 1 instruments

 (4) 

 

38

Reciprocal cross-holdings in additional Tier 1 instruments

 

 

38a

Qualified holdings where a significant influence is exercised with other owners (AT1 instruments)

 

 

38b

Immaterial investments (AT1 instruments)

 

 

39

Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity (amount above 10% threshold)

 

 

40

Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation

 

 

41

Other adjustments

 

 

42

Regulatory adjustments applied to additional Tier 1 due to insufficient Tier 2 to cover deductions

 

 

42a

Regulatory adjustments applied to CET1 capital due to insufficient additional Tier 1 to cover deductions

 

 

43

Total regulatory adjustments to additional Tier 1 capital

 

 

44

Additional Tier 1 capital (AT1)

 15,390 

 9 

45

Tier 1 capital (T1 = CET1 + AT1)

 53,537 

 

 

Tier 2 capital: instruments and provisions

 

 

46

Directly issued qualifying Tier 2 instruments plus related stock surplus

 4,8464

 11 

47

Directly issued capital instruments subject to phase-out from Tier 2

 550 

 12 

48

Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties (amount allowed in group Tier 2)

 

 

49

of which: instruments issued by subsidiaries subject to phase-out

 

 

50

Provisions

 

 

51

Tier 2 capital before regulatory adjustments

 5,396 

 

 

Tier 2 capital: regulatory adjustments

 

 

52

Investments in own Tier 2 instruments5

 (24) 

11, 12

53

Reciprocal cross-holdings in Tier 2 instruments and other TLAC liabilities

 

 

53a

Qualified holdings where a significant influence is exercised with other owners (T2 instruments and other TLAC instruments)

 

 

53b

Immaterial investments (T2 instruments and other TLAC instruments)

 

 

54

Investments in the capital and other TLAC liabilities of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity (amount above 10% threshold)

 

 

55

Significant investments in the capital and other TLAC liabilities of banking, financial and insurance entities that are outside the scope of regulatory consolidation (net of eligible short positions)

 

 

56

Other adjustments

 

 

56a

Excess of the adjustments, which are allocated to the AT1 capital

 

 

57

Total regulatory adjustments to Tier 2 capital

 (24) 

 

58

Tier 2 capital (T2)

 5,371 

 

59

Total regulatory capital (TC = T1 + T2)

 58,908 

 

60

Total risk-weighted assets

 286,436 

 

 

46 


 

CC1: Composition of regulatory capital (Continued)

As of 30.6.20

Amounts

References1

USD million except where indicated

 

 

 

Capital ratios and buffers

 

 

61

Common Equity Tier 1 (as a percentage of risk-weighted assets)

 13.32 

 

62

Tier 1 (as a percentage of risk-weighted assets)

 18.69 

 

63

Total capital (as a percentage of risk-weighted assets)

 20.57 

 

64

Institution-specific buffer requirement (capital conservation buffer plus countercyclical buffer requirements plus higher loss absorbency requirement, expressed as a percentage of risk-weighted assets)6

 3.52 

 

65

of which: capital conservation buffer requirement

 2.50 

 

66

of which: bank-specific countercyclical buffer requirement

 0.02 

 

67

of which: higher loss absorbency requirement 

 1.00 

 

68

Common Equity Tier 1 (as a percentage of risk-weighted assets) available after meeting the bank’s minimum capital requirements

 8.82 

 

 

Amounts below the thresholds for deduction (before risk weighting)

 

 

72

Non-significant investments in the capital and other TLAC liabilities of other financial entities

 1,750 

 

73

Significant investments in the common stock of financial entities

 1,103 

 

74

Mortgage servicing rights (net of related tax liability)

 

 

75

Deferred tax assets arising from temporary differences (net of related tax liability)

 3,685 

 

 

Applicable caps on the inclusion of provisions in Tier 2

 

 

76

Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardized approach (prior to application of cap)

 

 

77

Cap on inclusion of provisions in Tier 2 under standardized approach

 

 

78

Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap)

 

 

79

Cap for inclusion of provisions in Tier 2 under internal ratings-based approach

 

 

 

Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022) according to CAO Art. 141

 

 

80

Current cap on CET1 instruments subject to phase-out arrangements

 

 

81

Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities)

 

 

82

Current cap on AT1 instruments subject to phase-out arrangements

 

 

83

Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities)

 

 

84

Current cap on T2 instruments subject to phase-out arrangements

 1,179 

 

85

Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)

 

 

1 References link the lines of this table to the respective reference numbers provided in the “References” column in the “CC2: Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation” table in this section.    2 IFRS netting for deferred tax assets and liabilities is reversed for items deducted from CET1 capital.    3 Includes USD 450 million in compensation-related charge for regulatory capital purposes.    4 Consists of instruments with a IFRS carrying amount of USD 7.1 billion less amortization of instruments where remaining maturity is between one and five years, and 45% of the gross unrealized gains on debt instruments measured at fair value through other comprehensive income, which are measured at the lower of cost or market value for regulatory capital purposes.    5 Includes own instruments subject to phase-out from tier 2 capital of USD 15.6 million and Tier 2-eligible instruments of USD 8.6 million.    6 BCBS requirements are exceeded by our Swiss SRB requirements. Refer to the “Capital management“ section of our second quarter 2020 report for more information about the Swiss SRB requirements.

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47 


UBS Group AG consolidated 

Semiannual | The CCyB1 table below provides details of the underlying exposures and risk-weighted assets (RWA) used in the computation of the countercyclical buffer requirement applicable to UBS Group AG consolidated. Further information about the methodology of geographical allocation used is provided on page 149 of our Annual Report 2019, available under ”Annual reporting” at www.ubs.com/investors


Luxembourg introduced a countercyclical buffer requirement of 0.25%, effective from 1 January 2020. Following the outbreak of the COVID-19 pandemic, several countries reduced their countercyclical capital buffers (CCyB): Hong Kong decreased its CCyB rate from 2% to 1% and Sweden decreased its CCyB rate from 2.5% to 0%, both effective from 16 March 2020; the United Kingdom decreased its CCyB rate from 1% to 0%, effective from 24 March 2020; and France decreased its CCyB rate from 0.25% to 0%, effective from 1 April 2020.

 

 

Semiannual |

CCyB1: Geographical distribution of credit exposures used in the countercyclical capital buffer

USD million, except where indicated

 

 

 

 

 

 

Geographical breakdown

Countercyclical capital buffer rate, %

Exposure values and/or risk-weighted assets used in the computation of the countercyclical capital buffer

Bank-specific countercyclical capital buffer rate, %

Countercyclical amount

Exposure values1

 

Risk-weighted assets

Hong Kong

 1.00 

 6,110 

 

 2,378 

 

 

Luxembourg

 0.25 

 16,935 

 

 3,018 

 

 

Sum

 

 23,045 

 

 5,396 

 

 

Total

 

 568,233 

 

 179,163 

 0.02 

 50 

1 Includes private sector exposures in the countries that are Basel Committee on Banking Supervision member jurisdictions under categories “Credit risk,” “Counterparty credit risk,” “Equity positions in the banking book,” “Settlement risk,” “Securitization exposures in the banking book” and “Amounts below thresholds for deduction” as shown in the “Regulatory exposures and risk-weighted assets” table in section 2 of this report.   

p

  

48 


 

  

Section 8 Total loss-absorbing capacity

Resolution group – composition of total loss-absorbing capacity (TLAC)

Semiannual | The TLAC1 table below is based on Basel Committee on Banking Supervision (BCBS) rules, and only applicable to UBS Group AG as the ultimate parent entity of the defined UBS resolution group, to which, in case of resolution, resolution tools (e.g., a bail-in) are expected to be applied.

In the first half of 2020, our total loss absorbing capacity (TLAC) increased by USD 4.0 billion to USD 93.7 billion, mainly driven by an increase of our CET1 capital of USD 2.6 billion and five new issuances of non-regulatory capital instruments amounting to USD 2.6 billion denominated in both euro and US dollars as well as interest rate hedge, foreign currency and other effects of USD 1.4 billion across all TLAC components.

These increases were partially offset by a USD 1.4 billion decrease in eligibility of two non-regulatory capital instruments due to the shortening of their residual tenor and the call of a USD 1.25 billion high-trigger loss absorbing additional tier 1 (AT1) capital instrument denominated in US dollars.

 

Semiannual |

TLAC1: TLAC composition for G-SIBs (at resolution group level)

 

 

 

30.6.20

31.12.19

USD million, except where indicated

 

 

 

 

Regulatory capital elements of TLAC and adjustments

 

 

 

1

Common Equity Tier 1 capital (CET1)

 

 38,146 

 35,582 

2

Additional Tier 1 capital (AT1) before TLAC adjustments 

 

 15,390 

 16,306 

3

AT1 ineligible as TLAC as issued out of subsidiaries to third parties

 

 

 

4

Other adjustments 

 

 

 

5

Total AT1 instruments eligible under the TLAC framework 

 

 15,390 

 16,306 

6

Tier 2 capital (T2) before TLAC adjustments 

 

 5,371 

 5,726 

7

Amortized portion of T2 instruments where remaining maturity > 1 year 

 

 2,327 

 1,724 

8

T2 capital ineligible as TLAC as issued out of subsidiaries to third parties

 

 

 

9

Other adjustments 

 

 

 

10

Total T2 instruments eligible under the TLAC framework 

 

 7,698 

 7,450 

11

TLAC arising from regulatory capital 

 

 61,235 

 59,338 

 

Non-regulatory capital elements of TLAC 

 

 

 

12

External TLAC instruments issued directly by the bank and subordinated to excluded liabilities

 

 

 

13

External TLAC instruments issued directly by the bank which are not subordinated to excluded liabilities but meet all other TLAC term sheet requirements

 

 32,423 

 30,322 

14

of which: amount eligible as TLAC after application of the caps

 

 

 

15

External TLAC instruments issued by funding vehicles prior to 1 January 2022

 

 

 

16

Eligible ex ante commitments to recapitalize a G-SIB in resolution

 

 

 

17

TLAC arising from non-regulatory capital instruments before adjustments

 

 32,423 

 30,322 

 

Non-regulatory capital elements of TLAC: adjustments

 

 

 

18

TLAC before deductions

 

 93,658 

 89,660 

19

Deductions of exposures between multiple-point-of-entry (MPE) resolution groups that correspond to items eligible for TLAC (not applicable to SPE G-SIBs)

 

 

 

20

Deduction of investments in own other TLAC liabilities

 

 

 

21

Other adjustments to TLAC 

 

 

 

22

TLAC after deductions

 

 93,658 

 89,660 

 

Risk-weighted assets and leverage exposure measure for TLAC purposes

 

 

 

23

Total risk-weighted assets adjusted as permitted under the TLAC regime

 

 286,436 

 259,208 

24

Leverage exposure measure1

 

 974,348 

 911,325 

 

TLAC ratios and buffers

 

 

 

25

TLAC (as a percentage of risk-weighted assets adjusted as permitted under the TLAC regime)

 

 32.70 

 34.59 

26

TLAC (as a percentage of leverage exposure)1

 

 9.61 

 9.84 

27

CET1 (as a percentage of risk-weighted assets) available after meeting the resolution group’s minimum capital and TLAC requirements

 

 8.82 

 9.23 

28

Institution-specific buffer requirement (capital conservation buffer plus countercyclical buffer requirements plus higher loss absorbency requirement, expressed as a percentage of risk-weighted assets)

 

 3.52 

 3.58 

29

of which: capital conservation buffer requirement

 

 2.50 

 2.50 

30

of which: bank-specific countercyclical buffer requirement

 

 0.02 

 0.08 

31

of which: higher loss absorbency requirement 

 

 1.00 

 1.00 

1 The leverage ratio exposure and leverage ratio for 30 June 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Going and gone concern requirements and eligible capital“ section for more information.

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49 


UBS Group AG consolidated 

Resolution entity – creditor ranking at legal entity level

Semiannual | The TLAC3 table below provides an overview of the creditor ranking structure of the resolution entity, UBS Group AG, on a standalone basis.

UBS Group AG issues loss-absorbing additional tier 1 capital instruments and TLAC-eligible senior unsecured debt.

UBS Group AG grants Deferred Contingent Capital Plan (DCCP) awards to UBS Group employees. Awards granted since February 2015 qualify as Basel III AT1 capital on a UBS Group consolidated basis and totaled USD 1,858 million as of 30 June 2020 (31 December 2019: USD 1,962 million). The related liabilities of UBS Group AG on a standalone basis of USD 1,397 million (31 December 2019: USD 1,583 million) are not included in the table below, as these do not give rise to a current claim until the awards are legally vested.


As of 30 June 2020, the TLAC available on a UBS Group AG consolidated basis amounted to USD 93,658 million (31 December 2019: USD 89,660 million).

®   Refer to “Bondholder information” at www.ubs.com/investors for more information

®   Refer to the “TLAC1: TLAC composition for G-SIBs (at resolution group level)” table in this section for more information about TLAC for UBS Group AG consolidated

 

Financial information for UBS Group AG standalone for the six months ended 30 June 2020 is provided under “Holding company and significant regulated subsidiaries and sub-groups” at www.ubs.com/investors.

 

 

Semiannual |

TLAC3 – creditor ranking at legal entity level for the resolution entity, UBS Group AG

 

As of 30.6.20

 

Creditor ranking

 

Total

USD million

 

1

2

3

 

 

1

Description of creditor ranking

 

Common shares

(most junior)2

Additional Tier 1

Bail-in debt and pari passu liabilities (most senior)

 

 

2

Total capital and liabilities net of credit risk mitigation1

 

 40,465 

 13,252 

 37,209 

 

 90,926 

3

Subset of row 2 that are excluded liabilities 

 

 

 

 

 

 

4

Total capital and liabilities less excluded liabilities (row 2 minus row 3)

 

 40,465 

 13,2523

 37,2094,5

 

 90,926 

5

Subset of row 4 that are potentially eligible as TLAC 

 

 40,465 

 12,862 

 31,2696

 

 84,596 

6

Subset of row 5 with 1 year ≤ residual maturity < 2 years

 

 

 

 2,817 

 

 2,817 

7

Subset of row 5 with 2 years ≤ residual maturity < 5 years

 

 

 

 15,882 

 

 15,882 

8

Subset of row 5 with 5 years ≤ residual maturity < 10 years

 

 

 

 9,933 

 

 9,933 

9

Subset of row 5 with residual maturity ≥ 10 years, but excluding perpetual securities

 

 

 

 2,637 

 

 2,637 

10

Subset of row 5 that is perpetual securities

 

 40,465 

 12,862 

 

 

 53,327 

1 No credit risk mitigation is applied to capital and liabilities for UBS Group AG standalone.    2 Common shares, including the associated reserves, are equal to equity attributable to shareholders as disclosed in the UBS Group AG standalone financial information for the six months ended 30 June 2020, which was prepared in accordance with the principles of the Swiss Law on Accounting and Financial Reporting (32nd title of the Swiss Code of Obligations).    3 Includes interest expense accrued on AT1 capital instruments, which does not qualify as TLAC.    4 Includes interest expense accrued on bail-in debt, interest-bearing liabilities that comprise loans from UBS AG and UBS Switzerland AG, and negative replacement values, as well tax and other liabilities that are not excluded liabilities under Swiss law that rank pari passu to bail-in debt.    5 Bail-in debt of USD 2.6 billion was issued during the six months ended 30 June 2020.    6 Bail-in debt of USD 4.8 billion has residual maturity of less than one year and is not potentially eligible as TLAC.

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50 


 

 

Section 9  Leverage ratio

Basel III leverage ratio

Quarterly | The Basel Committee on Banking Supervision (BCBS) leverage ratio is calculated by dividing the period-end tier 1 capital by the period-end leverage ratio denominator (LRD), as summarized in the table below. The LRD presented below does not reflect the effects of the temporary exemption related to the central bank sight deposit exclusion from the leverage ratio calculation granted by the Swiss Financial Market Supervisory Authority (FINMA) on 25 March 2020 in connection with COVID-19. The effects of such temporary exemption are presented in the “Going and gone concern requirements and eligible capital“ section of this report.

®   Refer to the ”Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures

 

Quarterly |

BCBS Basel III leverage ratio

USD million, except where indicated

 

 

 

 

 

 

30.6.20

31.3.20

31.12.19

30.9.19

30.6.19

Total tier 1 capital

 53,537 

 51,916 

 51,888 

 50,702 

 49,993 

BCBS total exposures (leverage ratio denominator)1

 974,348 

 955,932 

 911,325 

 901,914 

 911,379 

BCBS Basel III leverage ratio (%)1

 5.5 

 5.4 

 5.7 

 5.6 

 5.5 

1 Leverage ratio denominators (LRDs) and leverage ratios for 30 June 2020 and 31 March 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Going and gone concern requirements and eligible capital“ section for more information.

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Quarterly | The LRD consists of International Financial Reporting Standards (IFRS) on-balance sheet assets and off-balance sheet items. Derivative exposures are adjusted for a number of items, including replacement values and eligible cash variation margin netting, the current exposure method add-on and net notional amounts for written credit derivatives. The LRD also includes an additional charge for counterparty credit risk related to securities financing transactions (SFTs).

The “Reconciliation of IFRS total assets to BCBS Basel III total on-balance sheet exposures excluding derivatives and securities financing transactions” table on the next page 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: BCBS Basel III leverage ratio common disclosure” 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

Quarterly | The LRD is the same under Swiss systemically relevant bank (SRB) and BCBS rules. However, there is a difference in the capital numerator between the two frameworks. Under BCBS rules, only common equity tier 1 and additional tier 1 capital are included in the numerator. Under Swiss SRB rules we are required to meet going as well as 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.

 

 

51 


UBS Group AG consolidated 

The tables presented below and on the next page do not reflect the effects of the temporary exemption granted by FINMA on 25 March 2020 in connection with COVID-19, that permits the exclusion of central bank sight deposits from the leverage ratio calculation. The effects of the temporary exemption granted by FINMA in connection with COVID-19 are presented in the “Going and gone concern requirements and eligible capital“ section of this report.

®   Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures

 

Quarterly |

Reconciliation of IFRS total assets to BCBS Basel III total on-balance sheet exposures excluding derivatives and securities financing transactions1

USD million

30.6.20

31.3.20

On-balance sheet exposures

 

 

IFRS total assets

 1,063,838 

 1,098,099 

Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes but outside the scope of regulatory consolidation

 (26,785) 

 (23,285) 

Adjustment for investments in banking, financial, insurance or commercial entities that are outside the scope of consolidation for accounting purposes but consolidated for regulatory purposes

 

 

Adjustment for fiduciary assets recognized on the balance sheet pursuant to the operative accounting framework but excluded from the leverage ratio exposure measure

 

 

Less carrying amount of derivative financial instruments in IFRS total assets2

 (182,866) 

 (252,537) 

Less carrying amount of securities financing transactions in IFRS total assets3

 (112,995) 

 (117,778) 

Adjustments to accounting values

 

 

On-balance sheet items excluding derivatives and securities financing transactions, but including collateral

 741,193 

 704,500 

Asset amounts deducted in determining BCBS Basel III tier 1 capital

 (12,674) 

 (13,084) 

Total on-balance sheet exposures (excluding derivatives and securities financing transactions)

 728,519 

 691,415 

1 This table does not reflect the effects of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Going and gone concern requirements and eligible capital“ section for more information.    2 Consists of derivative financial instruments and cash collateral receivables on derivative instruments in accordance with the regulatory scope of consolidation.    3 Consists of receivables from securities financing transactions, margin loans, prime brokerage receivables and financial assets at fair value not held for trading related to securities financing transactions in accordance with the regulatory scope of consolidation.

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Quarterly |

LR1: BCBS Basel III leverage ratio summary comparison1

 

 

USD million

30.6.20

31.3.20

1

Total consolidated assets as per published financial statements

 1,063,838 

 1,098,099 

2

Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes but outside the scope of regulatory consolidation2

 (39,458) 

 (36,370) 

3

Adjustment for fiduciary assets recognized on the balance sheet pursuant to the operative accounting framework but excluded from the leverage ratio exposure measure

 

 

4

Adjustments for derivative financial instruments

 (90,338) 

 (145,801) 

5

Adjustment for securities financing transactions (i.e., repos and similar secured lending)

 9,830 

 10,118 

6

Adjustment for off-balance sheet items (i.e., conversion to credit equivalent amounts of off-balance sheet exposures)

 30,476 

 29,885 

7

Other adjustments

 

 

8

Leverage ratio exposure (leverage ratio denominator)

 974,348 

 955,932 

1 This table does not reflect the effects of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Going and gone concern requirements and eligible capital“ section for more information.    2 Includes assets that are deducted from tier 1 capital.

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52 


 

Quarterly | During the second quarter of 2020, LRD increased by USD 18 billion to USD 974 billion. On-balance sheet exposures (excluding derivatives and SFTs) increased by USD 37 billion, mainly driven by an increase in high-quality liquid assets (HQLA) in the liquidity buffer portfolio in Group Functions, higher cash and balances with central banks across multiple businesses and higher trading portfolio assets in the Investment Bank. Derivative exposures decreased by USD 14 billion mainly driven by foreign exchange and equity / index contracts in the Investment Bank, reflecting roll-offs and market-driven movements. SFTs decreased by USD 5 billion, mainly due to lower collateral sourcing in Group Functions.

®   Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures, and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Going and gone concern requirements and eligible capital“ section of this report for additional information

                                                                                                                                                                                                  

Quarterly |

LR2: BCBS Basel III leverage ratio common disclosure1

 

 

USD million, except where indicated

30.6.20

31.3.20

 

 

 

 

 

On-balance sheet exposures

 

 

1

On-balance sheet items excluding derivatives and SFTs, but including collateral

 741,193 

 704,500 

2

(Asset amounts deducted in determining Basel III tier 1 capital)

 (12,674) 

 (13,084) 

3

Total on-balance sheet exposures (excluding derivatives and SFTs)

 728,519 

 691,415 

 

 

 

 

 

Derivative exposures

 

 

4

Replacement cost associated with all derivatives transactions (i.e., net of eligible cash variation margin)

 49,952 

 65,769 

5

Add-on amounts for PFE associated with all derivatives transactions

 74,580 

 77,082 

6

Gross-up for derivatives collateral provided where deducted from the balance sheet assets pursuant to the operative accounting framework

 0 

 0 

7

(Deductions of receivables assets for cash variation margin provided in derivatives transactions)

 (19,254) 

 (20,839) 

8

(Exempted CCP leg of client-cleared trade exposures)

 (13,609) 

 (16,227) 

9

Adjusted effective notional amount of all written credit derivatives2

 68,072 

 75,646 

10

(Adjusted effective notional offsets and add-on deductions for written credit derivatives)3

 (67,214) 

 (74,695) 

11

Total derivative exposures

 92,528 

 106,736 

 

 

 

 

 

Securities financing transaction exposures

 

 

12

Gross SFT assets (with no recognition of netting), after adjusting for sale accounting transactions

 208,211 

 228,572 

13

(Netted amounts of cash payables and cash receivables of gross SFT assets)

 (95,216) 

 (110,794) 

14

CCR exposure for SFT assets

 9,830 

 10,118 

15

Agent transaction exposures

 

 

16

Total securities financing transaction exposures

 122,825 

 127,896 

 

 

 

 

 

Other off-balance sheet exposures

 

 

17

Off-balance sheet exposure at gross notional amount

 100,676 

 90,163 

18

(Adjustments for conversion to credit equivalent amounts)

 (70,200) 

 (60,277) 

19

Total off-balance sheet items

 30,476 

 29,885 

 

Total exposures (leverage ratio denominator)

 974,348 

 955,932 

 

 

 

 

 

Capital and total exposures (leverage ratio denominator)

 

 

20

Tier 1 capital

 53,537 

 51,916 

21

Total exposures (leverage ratio denominator)

 974,348 

 955,932 

 

 

 

 

 

Leverage ratio

 

 

22

Basel III leverage ratio (%)

 5.5 

 5.4 

1 This table does not reflect the effects of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Going and gone concern requirements and eligible capital“ section for more information.    2 Includes protection sold, including agency transactions.    3 Protection sold can be offset with protection bought on the same underlying reference entity, provided that the conditions according to the Basel III leverage ratio framework and disclosure requirements are met.

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53 


UBS Group AG consolidated 

Section 10  Liquidity coverage ratio

Liquidity coverage ratio

Quarterly | We monitor the liquidity coverage ratio (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

 

Quarterly Report 2020 section

 

Disclosure

 

Second quarter 2020 page number

 

 

 

 

 

 

 

 

Concentration of funding sources

 

Treasury management

 

Liabilities by product and currency

 

45

               

 

High-quality liquid assets

Quarterly | HQLA must be easily and immediately convertible into cash at little or no loss of value, especially during a period of stress. HQLA are assets that are of low risk and are unencumbered. Other characteristics of HQLA are ease and certainty of valuation, low correlation with risky assets, listing of the assets on a developed and recognized exchange, existence of an active and sizable market for the assets, and low volatility. Our HQLA predominantly consist of assets that qualify as Level 1 in the LCR framework, including cash, central bank reserves and government bonds.

 

Quarterly |

High-quality liquid assets

 

 

Average 2Q201

 

Average 1Q201

USD billion

 

Level 1

weighted

liquidity

value2

Level 2

weighted

liquidity

value2

Total

weighted

liquidity

value2

 

Level 1

weighted

liquidity

value2

Level 2

weighted

liquidity

value2

Total

weighted

liquidity

value2

Cash balances3

 

 145 

 

 145 

 

 106 

 

 106 

Securities (on- and off-balance sheet)

 

 47 

 15 

 62 

 

 48 

 17 

 65 

Total high-quality liquid assets4

 

 191 

 15 

 207 

 

 154 

 17 

 171 

1 Calculated based on an average of 65 data points in the second quarter of 2020 and 63 data points in the first quarter of 2020.    2 Calculated after the application of haircuts and, where applicable, caps on Level 2 assets.    3 Includes cash and balances with central banks and other eligible balances as prescribed by FINMA.    4 Calculated in accordance with FINMA requirements.

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54 


 

LCR development during the second quarter of 2020

Quarterly | In the second quarter of 2020, the UBS Group LCR increased 16 percentage points to 155%, remaining above the 110% Group LCR minimum requirement communicated by the Swiss Financial Market Supervisory Authority (FINMA). The LCR increase was primarily driven by higher average HQLA balances due to increased debt issuances, lower net funding consumption by the business divisions and higher customer deposit balances in Global Wealth Management. In addition, net cash outflows increased due to reduced average net inflows from secured financing transactions and higher average outflows from customer deposits, partly offset by higher average inflows from derivative transactions.

 

Quarterly |

LIQ1: Liquidity coverage ratio

 

 

 

 

 

 

 

 

 

Average 2Q201

 

Average 1Q201

USD billion, except where indicated

 

Unweighted value

Weighted value2

 

Unweighted value

Weighted value2

 

High-quality liquid assets

1

High-quality liquid assets

 

 209 

 207 

 

 176 

 171 

 

Cash outflows

2

Retail deposits and deposits from small business customers

 

 269 

 30 

 

 254 

 29 

3

of which: stable deposits

 

 38 

 1 

 

 33 

 1 

4

of which: less stable deposits

 

 231 

 29 

 

 220 

 28 

5

Unsecured wholesale funding

 

 210 

 114 

 

 199 

 110 

6

of which: operational deposits (all counterparties)

 

 44 

 11 

 

 44 

 11 

7

of which: non-operational deposits (all counterparties)

 

 153 

 90 

 

 144 

 89 

8

of which: unsecured debt

 

 13 

 13 

 

 11 

 11 

9

Secured wholesale funding

 

 

 65 

 

 

 71 

10

Additional requirements:

 

 83 

 25 

 

 74 

 23 

11

of which: outflows related to derivatives and other transactions

 

 46 

 17 

 

 41 

 16 

12

of which: outflows related to loss of funding on debt products3

 

 0 

 0 

 

 0 

 0 

13

of which: committed credit and liquidity facilities

 

 37 

 8 

 

 32 

 7 

14

Other contractual funding obligations

 

 13 

 11 

 

 13 

 11 

15

Other contingent funding obligations

 

 254 

 6 

 

 229 

 6 

16

Total cash outflows

 

 

 251 

 

 

 250 

 

Cash inflows

17

Secured lending

 

 289 

 69 

 

 303 

 81 

18

Inflows from fully performing exposures

 

 68 

 31 

 

 70 

 31 

19

Other cash inflows

 

 17 

 17 

 

 15 

 15 

20

Total cash inflows

 

 374 

 117 

 

 388 

 127 

 

 

 

 

Average 2Q201

 

Average 1Q201

USD billion, except where indicated

 

 

Total adjusted value4

 

 

Total adjusted value4

 

 

 

 

 

 

 

 

Liquidity coverage ratio

21

High-quality liquid assets

 

 

 207 

 

 

 171 

22

Net cash outflows

 

 

 134 

 

 

 122 

23

Liquidity coverage ratio (%)

 

 

 155 

 

 

 139 

1 Calculated based on an average of 65 data points in the second quarter of 2020 and 63 data points in the first quarter of 2020.    2 Calculated after the application of haircuts and inflow and outflow rates.    3 Includes outflows related to loss of funding on asset-backed securities, covered bonds, other structured financing instruments, asset-backed commercial papers, structured entities (conduits), securities investment vehicles and other such financing facilities.    4 Calculated after the application of haircuts and inflow and outflow rates as well as, where applicable, caps on Level 2 assets and cash inflows.

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55 


UBS Group AG consolidated 

 

Section 11  Requirements for global systemically important banks and related indicators

Semiannual | The Financial Stability Board (the FSB) has determined that UBS is a global systemically important bank (G-SIB), using an indicator-based methodology adopted by the Basel Committee on Banking Supervision (the BCBS). Banks that qualify as G-SIBs are required to disclose the 12 indicators for assessing the systemic importance of G-SIBs as defined by the BCBS. These indicators are used for the G-SIB score calculation and cover five categories: size, cross-jurisdictional activity, interconnectedness, substitutability / financial institution infrastructure, and complexity.

Based on the published indicators, G-SIBs are subject to additional CET1 capital buffer requirements in a range from 1.0% to 3.5%. In November 2019, the FSB confirmed that the requirement for UBS continues to be 1.0%. As our Swiss systemically relevant bank (SRB) Basel III capital requirements exceed the BCBS requirements including the G-SIB buffer, we are not affected by these additional G-SIB requirements.

In July 2018, the BCBS published a revised assessment methodology and higher loss absorbency requirements. These will come into effect in 2021, with the corresponding surcharge applied as of 1 January 2023. We do not expect these changes to result in an increase of our additional CET1 capital buffer requirement.

Our G-SIB indicators as of 31 December 2019 were published in July 2020 under “Pillar 3 disclosures” at www.ubs.com/investors.

  

56 


 

Significant regulated subsidiaries and sub-groups

 


Significant regulated subsidiaries and sub-groups  

 

Section 1  Introduction

Quarterly | The sections below include capital and other regulatory information as of 30 June 2020 for UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated.


Capital information in this section is based on Pillar 1 capital requirements. Entities may be subject to significant additional Pillar 2 requirements, which represent additional amounts of capital considered necessary and agreed with regulators based on the risk profile of the entities.

 

Section 2  UBS AG standalone

Key metrics of the second quarter of 2020

Quarterly | The table on the next page is based on the Basel Committee on Banking Supervision (BCBS) Basel III rules. The temporary exemption of central bank sight deposits for the leverage ratio calculation granted by the Swiss Financial Market Supervisory Authority (FINMA) in connection with COVID-19 had no net effect on UBS AG as of 30 June 2020.

During the second quarter of 2020, common equity tier 1 (CET1) capital increased by USD 2.8 billion to USD 51.8 billion, mainly due to operating profit and effects from a change in accounting treatment of investments in associates partially offset by accruals for capital returns. Tier 1 capital increased by USD 3.0 billion to USD 65.4 billion, mainly due to the aforementioned increase in CET1. Risk-weighted assets (RWA) decreased by USD 6.9 billion to USD 310.8 billion during the second quarter of 2020, primarily driven by decreases in market risk RWA, lower credit and counterparty credit risk RWA as well as operational risk RWA. Leverage ratio exposure decreased by USD 1.0 billion, predominantly driven by a decrease in derivative exposures which was largely offset by an overall increase of on-balance sheet exposures.

High-quality liquid assets (HQLA) increased by USD 23.9 billion driven by greater average cash balances due to increased debt issuances and lower net funding consumption by the business divisions. Net cash outflows increased by USD 3.9 billion, due to reduced average net inflows from secured financing transactions (SFTs).

®   Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures

®   Refer to the “Introduction and basis for preparation” section of this report for more information about the change in accounting treatment of investments in associates

 

 

58 


 

Quarterly |

KM1: Key metrics

 

 

 

 

 

 

 

 

 

USD million, except where indicated

 

 

 

30.6.20

31.3.20

 

31.12.19

 

30.9.19

 

30.6.19

Available capital (amounts)

 

 

 

 

 

 

 

 

 

1

Common equity tier 1 (CET1)

 

 51,810 

 48,998 

 

 49,521 

 

 50,458 

 

 51,261 

1a

Fully loaded ECL accounting model CET11

 

 51,808 

 48,994 

 

 49,518 

 

 50,456 

 

 51,258 

2

Tier 1

 

 65,361 

 62,382 

 

 63,893 

 

 64,545 

 

 64,315 

2a

Fully loaded ECL accounting model tier 11

 

 65,359 

 62,379 

 

 63,891 

 

 64,543 

 

 64,312 

3

Total capital

 

 70,612 

 68,130 

 

 69,576 

 

 70,194 

 

 70,612 

3a

Fully loaded ECL accounting model total capital1

 

 70,610 

 68,127 

 

 69,574 

 

 70,191 

 

 70,609 

Risk-weighted assets (amounts)

 

 

 

 

 

 

 

 

 

4

Total risk-weighted assets (RWA)

 

 310,752 

 317,621 

 

 287,999 

 

 297,200 

 

 294,348 

4a

Minimum capital requirement2

 

 24,860 

 25,410 

 

 23,040 

 

 23,776 

 

 23,548 

4b

Total risk-weighted assets (pre-floor)

 

 310,752 

 317,621 

 

 287,999 

 

 297,200 

 

 294,348 

Risk-based capital ratios as a percentage of RWA

 

 

 

 

 

 

 

 

 

5

Common equity tier 1 ratio (%)

 

 16.67 

 15.43 

 

 17.19 

 

 16.98 

 

 17.41 

5a

Fully loaded ECL accounting model CET1 ratio (%)1

 

 16.67 

 15.43 

 

 17.19 

 

 16.98 

 

 17.41 

6

Tier 1 ratio (%)

 

 21.03 

 19.64 

 

 22.19 

 

 21.72 

 

 21.85 

6a

Fully loaded ECL accounting model tier 1 ratio (%)1

 

 21.03 

 19.64 

 

 22.18 

 

 21.72 

 

 21.85 

7

Total capital ratio (%)

 

 22.72 

 21.45 

 

 24.16 

 

 23.62 

 

 23.99 

7a

Fully loaded ECL accounting model total capital ratio (%)1

 

 22.72 

 21.45 

 

 24.16 

 

 23.62 

 

 23.99 

Additional CET1 buffer requirements as a percentage of RWA

 

 

 

 

 

 

 

 

 

8

Capital conservation buffer requirement (2.5% from 2019) (%)

 

 2.50 

 2.50 

 

 2.50 

 

 2.50 

 

 2.50 

9

Countercyclical buffer requirement (%)

 

 0.02 

 0.01 

 

 0.07 

 

 0.08 

 

 0.08 

9a

Additional countercyclical buffer for Swiss mortgage loans (%)

 

 0.00 

 0.00 

 

 0.00 

 

 0.00 

 

 0.00 

10

Bank G-SIB and/or D-SIB additional requirements (%)3

 

 

 

 

 

 

 

 

 

11

Total of bank CET1-specific buffer requirements (%)

 

 2.52 

 2.51 

 

 2.57 

 

 2.58 

 

 2.58 

12

CET1 available after meeting the bank’s minimum capital requirements (%)

 

 12.17 

 10.93 

 

 12.69 

 

 12.48 

 

 12.91 

Basel III leverage ratio4

 

 

 

 

 

 

 

 

 

13

Total Basel III leverage ratio exposure measure

 

 573,741 

 574,692 

 

 589,127 

 

 609,656 

 

 618,704 

14

Basel III leverage ratio (%)

 

 11.39 

 10.85 

 

 10.85 

 

 10.59 

 

 10.40 

14a

Fully loaded ECL accounting model Basel III leverage ratio (%)1

 

 11.39 

 10.85 

 

 10.84 

 

 10.59 

 

 10.39 

Liquidity coverage ratio5

 

 

 

 

 

 

 

 

 

15

Total HQLA

 

 91,877 

 67,963 

 

 73,805 

 

 76,330 

 

 82,201 

16

Total net cash outflow

 

 52,209 

 48,320 

 

 53,960 

 

 55,607 

 

 56,626 

17

LCR (%)

 

 178 

 141 

 

 137 

 

 137 

 

 145 

1 The fully loaded ECL accounting model excludes the transitional relief of recognizing ECL allowances and provisions in CET1 capital in accordance with FINMA Circular 2013/1 “Eligible capital – banks.”    2 Calculated as 8% of total RWA, based on total capital minimum requirements, excluding CET1 buffer requirements.    3 Swiss SRB going concern requirements and information for UBS AG standalone is provided on the following pages in this section.    4 The temporary exemption granted by FINMA in connection with COVID-19 had no net effect on UBS AG standalone. Refer to the “Introduction and basis for preparation” section of this report and to the next page in this section for more information.    5 Calculated based on quarterly average. Refer to “Liquidity coverage ratio” in this section for more information.

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59 


Significant regulated subsidiaries and sub-groups  

Swiss SRB going and gone concern requirements and information

Quarterly | From 1 January 2020, UBS AG standalone is subject to a gone concern capital requirement based on the sum of (i) its third party exposure on a standalone basis, (ii) a buffer requirement equal to 30% of the Group’s gone concern capital requirement on UBS AG’s consolidated exposure, and (iii) the nominal value of the gone concern instruments issued by UBS entities and held by the parent bank. A transitional period until 2024 has been granted for the buffer requirement. ”Gone concern capital coverage ratio” represents how much gone concern capital is available to meet the gone concern requirement.

More information about the going concern requirements and

information is provided on page 115 of our 31 December 2019 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors. 

In connection with COVID-19, FINMA has permitted banks to temporarily exclude central bank sight deposits from the leverage ratio denominator (LRD) for the purpose of calculating going concern ratios. This exemption applies until 1 January 2021. Applicable dividends or similar distributions approved by shareholders after 25 March 2020 reduce the relief by the LRD equivalent of the capital distribution. This exemption had no net effect on UBS AG standalone as of 30 June 2020. 

®   Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures

 

The table below provides details of the Swiss systematically relevant bank (SRB) RWA- and LRD-based going and gone concern requirements and information as required by FINMA; details on eligible gone concern instruments are provided on the next page.

 

 

Quarterly |

Swiss SRB going and gone concern requirements and information

As of 30.6.20

 

RWA, phase-in

 

RWA, fully applied as of 1.1.28

 

LRD1

USD million, except where indicated

 

in %

 

 

in%

 

 

in %

 

Required going concern capital

 

 

 

 

 

 

 

 

 

Total going concern capital

 

 13.962

 43,366 

 

 13.962

 54,088 

 

 4.882

 27,970 

Common equity tier 1 capital

 

 9.66 

 30,004 

 

 9.66 

 37,422 

 

 3.38 

 19,364 

of which: minimum capital

 

 4.50 

 13,984 

 

 4.50 

 17,441 

 

 1.50 

 8,606 

of which: buffer capital

 

 5.14 

 15,973 

 

 5.14 

 19,922 

 

 1.88 

 10,758 

of which: countercyclical buffer

 

 0.02 

 47 

 

 0.02 

 59 

 

 

 

Maximum additional tier 1 capital

 

 4.30 

 13,362 

 

 4.30 

 16,666 

 

 1.50 

 8,606 

of which: additional tier 1 capital

 

 3.50 

 10,876 

 

 3.50 

 13,565 

 

 1.50 

 8,606 

of which: additional tier 1 buffer capital

 

 0.80 

 2,486 

 

 0.80 

 3,101 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eligible going concern capital

 

 

 

 

 

 

 

 

 

Total going concern capital

 

 21.03 

 65,361 

 

 16.86 

 65,361 

 

 11.39 

 65,361 

Common equity tier 1 capital

 

 16.67 

 51,810 

 

 13.37 

 51,810 

 

 9.03 

 51,810 

Total loss-absorbing additional tier 1 capital

 

 4.36 

 13,551 

 

 3.50 

 13,551 

 

 2.36 

 13,551 

of which: high-trigger loss-absorbing additional tier 1 capital

 

 3.56 

 11,058 

 

 2.85 

 11,058 

 

 1.93 

 11,058 

of which: low-trigger loss-absorbing additional tier 1 capital

 

 0.80 

 2,493 

 

 0.64 

 2,493 

 

 0.43 

 2,493 

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

 

 

 

 

 

Risk-weighted assets

 

 

 310,752 

 

 

 387,578 

 

 

 

Leverage ratio denominator

 

 

 

 

 

 

 

 

 573,741 

 

 

 

 

 

 

 

 

 

 

Required gone concern capital3

 

Higher of RWA- or LRD-based

 

 

 

 

 

 

Total gone concern loss-absorbing requirement

 

 

 32,350 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eligible gone concern capital

 

 

 

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 

 39,993 

 

 

 

 

 

Gone concern coverage capital ratio

 

 123.63 

 

 

 

 

 

 

 

1 LRD-based requirements and eligible capital presented in this table do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report for more information.    2 Includes applicable add-ons of 1.08% for RWA and 0.375% for LRD.    3 From 1 January 2020 onward, a maximum of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between one and two years.

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60 


 

Quarterly |

Swiss SRB going and gone concern information

USD million, except where indicated

 

30.6.201

 

31.3.20

31.12.19

 

 

 

 

 

 

Eligible going concern capital

 

 

 

 

 

Total going concern capital

 

 65,361 

 

 59,919 

 61,479 

Total tier 1 capital

 

 65,361 

 

 59,919 

 61,479 

Common equity tier 1 capital

 

 51,810 

 

 48,998 

 49,521 

Total loss-absorbing additional tier 1 capital

 

 13,551 

 

 10,921 

 11,958 

of which: high-trigger loss-absorbing additional tier 1 capital

 

 11,058 

 

 10,921 

 11,958 

of which: low-trigger loss-absorbing additional tier 1 capital2

 

 2,493 

 

 

 11,958 

 

 

 

 

 

 

Eligible gone concern capital

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 39,993 

 

 44,137 

 

Total tier 1 capital

 

 

 

 2,463 

 

of which: low-trigger loss-absorbing additional tier 1 capital2

 

 

 

 2,463 

 

Total tier 2 capital

 

 7,570 

 

 7,521 

 

of which: low-trigger loss-absorbing tier 2 capital

 

 7,043 

 

 6,995 

 

of which: non-Basel III-compliant tier 2 capital

 

 527 

 

 526 

 

TLAC-eligible senior unsecured debt

 

 32,423 

 

 34,153 

 

 

 

 

 

 

 

Total loss-absorbing capacity

 

 

 

 

 

Total loss-absorbing capacity

 

 105,355 

 

 104,056 

 61,479 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

 

Risk-weighted assets, phase-in

 

 310,752 

 

 317,621 

 287,999 

of which: direct and indirect investments in Switzerland-domiciled subsidiaries3

 

 35,213 

 

 34,211 

 34,418 

of which: direct and indirect investments in foreign-domiciled subsidiaries3

 

 105,179 

 

 105,384 

 96,307 

Risk-weighted assets, fully applied as of 1.1.28

 

 387,578 

 

 394,393 

 374,351 

of which: direct and indirect investments in Switzerland-domiciled subsidiaries3

 

 41,920 

 

 40,727 

 41,973 

of which: direct and indirect investments in foreign-domiciled subsidiaries3

 

 175,298 

 

 175,639 

 175,104 

Leverage ratio denominator4

 

 573,741 

 

 574,692 

 589,127 

 

 

 

 

 

 

Capital and loss-absorbing capacity ratios (%)

 

 

 

 

 

Going concern capital ratio, phase-in5

 

 21.0 

 

 18.9 

 23.1 

of which: common equity tier 1 capital ratio, phase-in

 

 16.7 

 

 15.4 

 17.2 

Going concern capital ratio, fully applied as of 1.1.28

 

 16.9 

 

 15.2 

 16.4 

of which: common equity tier 1 capital ratio, fully applied as of 1.1.28

 

 13.4 

 

 12.4 

 13.2 

 

 

 

 

 

 

Leverage ratios (%)4

 

 

 

 

 

Going concern leverage ratio, phase-in5

 

 

 

 

 11.3 

Going concern leverage ratio, fully applied as of 1.1.20

 

 11.4 

 

 10.4 

 10.4 

of which: common equity tier 1 leverage ratio, fully applied as of 1.1.20

 

 9.0 

 

 8.5 

 8.4 

 

 

 

 

 

 

Gone concern capital coverage ratio (%)

 

 

 

 

 

Gone concern capital coverage ratio

 

 123.6 

 

 142.7 

 

1 In June 2020, we aligned the accounting treatment of investments in associates in the UBS AG IFRS standalone accounts with the “equity method” accounting applied in the UBS Group IFRS financial statements. Previously, we had applied a “cost less impairment” approach for these investments in the UBS AG IFRS standalone accounts. Effective 30 June 2020, UBS AG standalone CET1 capital, LRD and RWA increased by approximately USD 0.9 billion, USD 0.9 billion and USD 2.4 billion, respectively.    2 The relevant capital instruments were issued after the new Swiss SRB framework had been implemented and therefore do not meet going concern capital requirements in all entities. Effective from 30 June 2020, these instruments can qualify as going concern capital of UBS AG, as agreed with FINMA.    3 Carrying amounts for direct and indirect investments including holding of regulatory capital instruments in Switzerland-domiciled subsidiaries (30 June 2020: USD 16,768 million; 31 March 2020: USD 16,291 million; 31 December 2019: USD 16,789 million) and for direct and indirect investments including holding of regulatory capital instruments in foreign-domiciled subsidiaries (30 June 2020: USD 43,825 million; 31 March 2020: USD 43,910 million; 31 December 2019: USD 43,776 million) are risk weighted at 210% and 240%, respectively, for the current year (31 December 2019: 205% and 220%, respectively). Risk weights will gradually increase 5 percentage points per year for Switzerland-domiciled investments and 20 percentage points per year for foreign-domiciled investments until the fully applied risk weights of 250% and 400%, respectively, are applied.    4 Leverage ratio denominators (LRDs) and leverage ratios for 30 June 2020 and 31 March 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report for more information. The effects of the temporary exemption granted by FINMA in connection with COVID-19 are presented on the previous page in this section.    5 As of 31 December 2019, Tier 2 capital of USD 5,153 million was eligible as going concern capital due to the transitional arrangements. The going concern phase-in capital ratios and leverage ratios presented for 2019 include this component.   

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61 


Significant regulated subsidiaries and sub-groups  

Leverage ratio information

Quarterly | Due to the adjustment for paid and planned dividends, the temporary exemption of central bank sight deposits for leverage ratio calculation granted by FINMA on 25 March 2020 in connection with COVID-19 had no net effect on UBS AG standalone as of 30 June 2020.

®   Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures

 

Quarterly |

Swiss SRB leverage ratio denominator1

 

 

 

 

 

USD billion

 

30.6.20

31.3.20

31.12.19

 

 

 

 

 

Leverage ratio denominator

 

 

 

 

Swiss GAAP total assets

 

 493.9 

 487.5 

 478.9 

Difference between Swiss GAAP and IFRS total assets

 

 149.9 

 200.3 

 122.3 

Less: derivative exposures and SFTs2

 

 (262.5) 

 (322.7) 

 (220.4) 

Less: funding provided to significant regulated subsidiaries eligible as gone concern capital

 

 (19.1) 

 (18.5) 

 

On-balance sheet exposures (excluding derivative exposures and SFTs)

 

 362.2 

 346.7 

 380.8 

Derivative exposures

 

 90.9 

 108.2 

 94.8 

Securities financing transactions

 

 98.5 

 96.3 

 92.6 

Off-balance sheet items

 

 22.9 

 24.3 

 21.7 

Items deducted from Swiss SRB tier 1 capital

 

 (0.7) 

 (0.8) 

 (0.8) 

Total exposures (leverage ratio denominator)

 

 573.7 

 574.7 

 589.1 

1 The temporary exemption granted by FINMA in connection with COVID-19 had no net effect on UBS AG standalone.    2 Consists of derivative financial instruments, cash collateral receivables on derivative instruments, receivables from securities financing transactions, and margin loans, as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to securities financing transactions, in accordance with the regulatory scope of consolidation, which are presented separately under Derivative exposures and Securities financing transactions in this table.

 

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Quarterly |

BCBS Basel III leverage ratio

USD million, except where indicated

 

30.6.20

31.3.20

31.12.19

30.9.19

30.6.19

Total tier 1 capital

 

 65,361 

 62,382 

 63,893 

 64,545 

 64,315 

Total exposures (leverage ratio denominator)1

 

 573,741 

 574,692 

 589,127 

 609,656 

 618,704 

BCBS Basel III leverage ratio (%)1

 

 11.4 

 10.9 

 10.8 

 10.6 

 10.4 

1 The temporary exemption granted by FINMA in connection with COVID-19 had no net effect on UBS AG standalone.  

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Liquidity coverage ratio

Quarterly | UBS AG is required to maintain a liquidity coverage ratio (LCR) of 105% as communicated by FINMA.

 

Quarterly |

Liquidity coverage ratio

 

 

Weighted value1

USD billion, except where indicated

 

Average 2Q202

Average 1Q202

High-quality liquid assets

 

 92 

 68 

Total net cash outflows

 

 52 

 48 

of which: cash outflows

 

 157 

 160 

of which: cash inflows

 

 104 

 112 

Liquidity coverage ratio (%)

 

 178 

 141 

1 Calculated after the application of haircuts and inflow and outflow rates as well as, where applicable, caps on Level 2 assets and cash inflows.    2 Calculated based on an average of 65 data points in the second quarter of 2020 and 63 data points in the first quarter of 2020.

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62 


 

Section 3  UBS Switzerland AG standalone

Key metrics of the second quarter of 2020

Quarterly | The table below is based on the Basel Committee on Banking Supervision (BCBS) Basel III rules; however, it does not reflect the effects of the temporary exemption of central bank sight deposits for leverage ratio calculations granted by the Swiss Financial Market Supervisory Authority (FINMA) in connection with COVID-19.

During the second quarter of 2020, common equity tier 1 (CET1) capital increased by CHF 0.3 billion to CHF 11.8 billion, mainly due to operating profit. Risk-weighted assets (RWA) were stable during the quarter. Leverage ratio exposure increased by CHF 6.0 billion to CHF 323.1 billion, mainly driven by an increase in cash and balances at central banks, as well as higher loans and advances to customers.


 High-quality liquid assets (HQLA) increased by CHF 10.6 billion, driven by higher average cash balances. Net cash outflows increased by CHF 8.8 billion, due to reduced average net inflows from secured financing transactions (SFTs) and increased average outflows from intercompany transactions.

®   Refer to the following pages for more information about the effects of the temporary exemption granted by FINMA in connection with COVID-19 on UBS Switzerland AG standalone

 

Quarterly |

KM1: Key metrics

 

 

 

 

 

 

 

 

 

 

CHF million, except where indicated

 

 

 

30.6.20

 

31.3.20

 

31.12.19

 

30.9.19

 

30.6.19

Available capital (amounts)

 

 

 

 

 

 

 

 

 

 

1

Common equity tier 1 (CET1)

 

 11,776 

 

 11,427 

 

 10,895 

 

 10,875 

 

 10,654 

1a

Fully loaded ECL accounting model CET11

 

 11,774 

 

 11,422 

 

 10,890 

 

 10,871 

 

 10,649 

2

Tier 1

 

 16,479 

 

 16,137 

 

 15,606 

 

 15,124 

 

 14,894 

2a

Fully loaded ECL accounting model tier 11

 

 16,476 

 

 16,132 

 

 15,601 

 

 15,120 

 

 14,889 

3

Total capital

 

 16,479 

 

 16,137 

 

 15,606 

 

 15,124 

 

 14,894 

3a

Fully loaded ECL accounting model total capital1

 

 16,476 

 

 16,132 

 

 15,601 

 

 15,120 

 

 14,889 

Risk-weighted assets (amounts)

 

 

 

 

 

 

 

 

 

 

4

Total risk-weighted assets (RWA)

 

 105,304 

 

 104,489 

 

 99,667 

 

 97,927 

 

 96,640 

4a

Minimum capital requirement2

 

 8,424 

 

 8,359 

 

 7,973 

 

 7,834 

 

 7,731 

4b

Total risk-weighted assets (pre-floor)

 

 92,740 

 

 92,981 

 

 89,234 

 

 90,338 

 

 91,013 

Risk-based capital ratios as a percentage of RWA

 

 

 

 

 

 

 

 

 

 

5

Common equity tier 1 ratio (%)

 

 11.18 

 

 10.94 

 

 10.93 

 

 11.10 

 

 11.02 

5a

Fully loaded ECL accounting model CET1 ratio (%)1

 

 11.18 

 

 10.93 

 

 10.93 

 

 11.10 

 

 11.02 

6

Tier 1 ratio (%)

 

 15.65 

 

 15.44 

 

 15.66 

 

 15.44 

 

 15.41 

6a

Fully loaded ECL accounting model tier 1 ratio (%)1

 

 15.65 

 

 15.44 

 

 15.65 

 

 15.44 

 

 15.41 

7

Total capital ratio (%)

 

 15.65 

 

 15.44 

 

 15.66 

 

 15.44 

 

 15.41 

7a

Fully loaded ECL accounting model total capital ratio (%)1

 

 15.65 

 

 15.44 

 

 15.65 

 

 15.44 

 

 15.41 

Additional CET1 buffer requirements as a percentage of RWA3

 

 

 

 

 

 

 

 

 

 

8

Capital conservation buffer requirement (2.5% from 2019) (%)

 

 2.50 

 

 2.50 

 

 2.50 

 

 2.50 

 

 2.50 

9

Countercyclical buffer requirement (%)

 

 0.01 

 

 0.01 

 

 0.01 

 

 0.01 

 

 0.01 

9a

Additional countercyclical buffer for Swiss mortgage loans (%)

 

 0.00 

 

 0.00 

 

 0.57 

 

 0.57 

 

 0.57 

10

Bank G-SIB and/or D-SIB additional requirements (%)4

 

 

 

 

 

 

 

 

 

 

11

Total of bank CET1-specific buffer requirements (%)

 

 2.51 

 

 2.51 

 

 2.51 

 

 2.51 

 

 2.51 

12

CET1 available after meeting the bank’s minimum capital requirements (%)

 

 6.68 

 

 6.44 

 

 6.43 

 

 6.60 

 

 6.52 

Basel III leverage ratio5

 

 

 

 

 

 

 

 

 

 

13

Total Basel III leverage ratio exposure measure

 

 323,068 

 

 317,071 

 

 302,304 

 

 309,750 

 

 311,212 

14

Basel III leverage ratio (%)

 

 5.10 

 

 5.09 

 

 5.16 

 

 4.88 

 

 4.79 

14a

Fully loaded ECL accounting model Basel III leverage ratio (%)1

 

 5.10 

 

 5.09 

 

 5.16 

 

 4.88 

 

 4.78 

Liquidity coverage ratio6

 

 

 

 

 

 

 

 

 

 

15

Total HQLA

 

 85,180 

 

 74,602 

 

 67,105 

 

 64,835 

 

 67,160 

16

Total net cash outflow

 

 61,847 

 

 53,059 

 

 51,561 

 

 49,242 

 

 48,761 

17

LCR (%)

 

 138 

 

 141 

 

 130 

 

 132 

 

 138 

1 The fully loaded ECL accounting model excludes the transitional relief of recognizing ECL allowances and provisions in CET1 capital in accordance with FINMA Circular 2013/1 “Eligible capital – banks.”    2 Calculated as 8% of total RWA, based on total capital minimum requirements, excluding CET1 buffer requirements.    3 As Annex 8 of the Swiss Capital Adequacy Ordinance (the CAO) does not apply to systemically relevant banks, we can abstain from disclosing the information required in lines 12a–12e. We nevertheless provide information about the Swiss sector-specific countercyclical buffer in row 9a pursuant to Art. 44 of the CAO.    4 Swiss SRB going and gone concern requirements and information for UBS Switzerland AG are provided on the next page.    5 Leverage ratio exposures and leverage ratios for 30 June 2020 and 31 March 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in this section for more information.    6 Calculated based on quarterly average. Refer to “Liquidity coverage ratio” in this section for more information.

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63 


Significant regulated subsidiaries and sub-groups  

Swiss SRB going and gone concern requirements and information

Quarterly | UBS Switzerland AG is considered a systemically relevant bank (SRB) under Swiss banking law and is subject to capital regulations on a standalone basis. As of 30 June 2020, the going concern capital requirement for UBS Switzerland AG standalone was 13.95%, including a countercyclical buffer of 0.01%, whereas the going concern leverage ratio requirement was 4.875%. The gone concern requirements were 8.64% for the RWA-based requirement and 3.02% for the leverage ratio denominator (LRD)-based requirement.


The Swiss SRB framework and requirements applicable to UBS Switzerland AG standalone are similar to those applicable to UBS Group AG consolidated, with the exception of a lower gone concern requirement effective from 1 January 2020, corresponding to 62% of the Group’s gone concern requirement (before applicable reductions).

In connection with COVID-19, FINMA has permitted banks to temporarily exclude central bank sight deposits from the LRD for the purpose of calculating going concern ratios. This exemption applies until 1 January 2021. Applicable dividends or similar distributions approved by shareholders after 25 March 2020 reduce the relief by the LRD equivalent of the capital distribution, except where dividends are paid to a regulated Swiss parent company or to an unregulated Swiss parent company which in turn pays no dividend. The effect of this exemption is that UBS Switzerland AG is eligible to reduce its LRD by USD 73 billion to USD 251 billion as of 30 June 2020.

 

Quarterly |

Swiss SRB going and gone concern requirements and information

As of 30.6.20

 

RWA

 

LRD1

CHF million, except where indicated

 

in %

 

 

in %

 

Required going concern capital

 

 

 

 

 

 

Total going concern capital

 

 13.952

 14,689 

 

 4.882

 15,750 

Common equity tier 1 capital

 

 9.65 

 10,161 

 

 3.38 

 10,904 

of which: minimum capital

 

 4.50 

 4,739 

 

 1.50 

 4,846 

of which: buffer capital

 

 5.14 

 5,413 

 

 1.88 

 6,058 

of which: countercyclical buffer

 

 0.01 

 10 

 

 

 

Maximum additional tier 1 capital

 

 4.30 

 4,528 

 

 1.50 

 4,846 

of which: additional tier 1 capital

 

 3.50 

 3,686 

 

 1.50 

 4,846 

of which: additional tier 1 buffer capital

 

 0.80 

 842 

 

 

 

 

 

 

 

 

 

 

Eligible going concern capital

 

 

 

 

 

 

Total going concern capital

 

 15.65 

 16,479 

 

 5.10 

 16,479 

Common equity tier 1 capital

 

 11.18 

 11,776 

 

 3.65 

 11,776 

Total loss-absorbing additional tier 1 capital

 

 4.47 

 4,703 

 

 1.46 

 4,703 

of which: high-trigger loss-absorbing additional tier 1 capital

 

 4.47 

 4,703 

 

 1.46 

 4,703 

 

 

 

 

 

 

 

Required gone concern capital3

 

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 8.64 

 9,101 

 

 3.02 

 9,765 

of which: base requirement

 

 7.97 

 8,396 

 

 2.79 

 9,014 

of which: additional requirement for market share and LRD

 

 0.67 

 705 

 

 0.23 

 751 

 

 

 

 

 

 

 

Eligible gone concern capital

 

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 10.34 

 10,892 

 

 3.37 

 10,892 

TLAC-eligible senior unsecured debt

 

 10.34 

 10,892 

 

 3.37 

 10,892 

 

 

 

 

 

 

 

Total loss-absorbing capacity

 

 

 

 

 

 

Required total loss-absorbing capacity

 

 22.59 

 23,791 

 

 7.90 

 25,514 

Eligible total loss-absorbing capacity

 

 25.99 

 27,371 

 

 8.47 

 27,371 

 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

Risk-weighted assets

 

 

 105,304 

 

 

 

Leverage ratio denominator

 

 

 

 

 

 323,068 

1 LRD-based requirements and eligible capital presented in this table do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report for more information. The effects of temporary exemption granted by FINMA in connection with COVID-19 are presented on the next page.    2 Includes applicable add-ons of 1.08% for RWA and 0.375% for LRD.    3 From 1 January 2020 onward, a maximum of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between one and two years.

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64 


 

Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits

The table below summarizes the effects on our Swiss SRB going concern capital requirements and information. The FINMA exemption rules have no effect on our Swiss SRB gone concern capital requirements and ratios.

The LRD is the same under Swiss SRB and BCBS rules, therefore the LRD after the aforementioned temporary FINMA exemption under BCBS rules is identical to the Swiss SRB number presented in the table below. The BCBS Basel III leverage ratio was 6.58% after considering the temporary FINMA exemption.

 

Swiss SRB going concern requirements and information including temporary FINMA exemption

As of 30.6.20

 

LRD

CHF million, except where indicated

 

in %

 

 

 

 

 

Leverage ratio denominator before temporary exemption

 

 

 323,068 

Effective relief

 

 

 (72,514) 

of which: central bank sight deposits eligible for relief

 

 

 (72,514) 

Leverage ratio denominator after temporary exemption

 

 

 250,553 

 

 

 

 

Required going concern capital

 

 

 

Total going concern capital

 

 4.88 

 12,214 

Common equity tier 1 capital

 

 3.38 

 8,456 

 

 

 

 

Eligible going concern capital

 

 

 

Total going concern capital

 

 6.58 

 16,479 

Common equity tier 1 capital

 

 4.70 

 11,776 

 

65 


Significant regulated subsidiaries and sub-groups  

Swiss SRB loss-absorbing capacity

Quarterly |

Swiss SRB going and gone concern information

CHF million, except where indicated

 

30.6.20

 

31.3.20

31.12.19

 

 

 

 

 

 

Eligible going concern capital

 

 

 

 

 

Total going concern capital

 

 16,479 

 

 16,137 

 15,606 

Total tier 1 capital

 

 16,479 

 

 16,137 

 15,606 

Common equity tier 1 capital

 

 11,776 

 

 11,427 

 10,895 

Total loss-absorbing additional tier 1 capital

 

 4,703 

 

 4,710 

 4,711 

 

 

 

 

 

 

Eligible gone concern capital

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 10,892 

 

 10,910 

 10,915 

TLAC-eligible senior unsecured debt

 

 10,892 

 

 10,910 

 10,915 

 

 

 

 

 

 

Total loss-absorbing capacity

 

 

 

 

 

Total loss-absorbing capacity

 

 27,371 

 

 27,047 

 26,521 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

 

Risk-weighted assets

 

 105,304 

 

 104,489 

 99,667 

Leverage ratio denominator1

 

 323,068 

 

 317,071 

 302,304 

 

 

 

 

 

 

Capital and loss-absorbing capacity ratios (%)

 

 

 

 

 

Going concern capital ratio

 

 15.6 

 

 15.4 

 15.7 

of which: common equity tier 1 capital ratio

 

 11.2 

 

 10.9 

 10.9 

Gone concern loss-absorbing capacity ratio

 

 10.3 

 

 10.4 

 11.0 

Total loss-absorbing capacity ratio

 

 26.0 

 

 25.9 

 26.6 

 

 

 

 

 

 

Leverage ratios (%)1

 

 

 

 

 

Going concern leverage ratio

 

 5.1 

 

 5.1 

 5.2 

of which: common equity tier 1 leverage ratio

 

 3.6 

 

 3.6 

 3.6 

Gone concern leverage ratio

 

 3.4 

 

 3.4 

 3.6 

Total loss-absorbing capacity leverage ratio

 

 8.5 

 

 8.5 

 8.8 

1 Leverage ratio denominators (LRDs) and leverage ratios for 30 June 2020 and 31 March 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report for more information. The effects of the temporary exemption granted by FINMA in connection with COVID-19 are presented in the preceding table.

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66 


 

Leverage ratio information

Quarterly | The tables in this section do not reflect the effects of the temporary exemption of central bank sight deposits granted by FINMA in connection with COVID-19.

®   Refer to the previous pages for more information about the effects of the temporary exemption granted by FINMA in connection with COVID-19 on UBS Switzerland AG standalone

 

Quarterly |

Swiss SRB leverage ratio denominator1

CHF billion

 

30.6.20

31.3.20

31.12.19

Leverage ratio denominator

 

 

 

 

Swiss GAAP total assets

 

 304.3 

 299.5 

 285.0 

Difference between Swiss GAAP and IFRS total assets

 

 4.2 

 4.7 

 3.6 

Less: derivative exposures and SFTs2

 

 (8.3) 

 (9.9) 

 (17.3) 

On-balance sheet exposures (excluding derivative exposures and SFTs)

 

 300.2 

 294.3 

 271.3 

Derivative exposures

 

 5.7 

 6.1 

 4.4 

Securities financing transactions

 

 2.3 

 2.9 

 12.7 

Off-balance sheet items

 

 15.1 

 14.0 

 14.2 

Items deducted from Swiss SRB tier 1 capital

 

 (0.2) 

 (0.3) 

 (0.3) 

Total exposures (leverage ratio denominator)

 

 323.1 

 317.1 

 302.3 

1 This table does not reflect the effects of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in this section for more information.    2 Consists of derivative financial instruments, cash collateral receivables on derivative instruments, receivables from securities financing transactions, and margin loans as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to securities financing transactions, in accordance with the regulatory scope of consolidation, which are presented separately under Derivative exposures and Securities financing transactions in this table.

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Quarterly |

BCBS Basel III leverage ratio

CHF million, except where indicated

 

30.6.20

31.3.20

31.12.19

30.9.19

30.6.19

Total tier 1 capital

 

 16,479 

 16,137 

 15,606 

 15,124 

 14,894 

Total exposures (leverage ratio denominator)1

 

 323,068 

 317,071 

 302,304 

 309,750 

 311,212 

BCBS Basel III leverage ratio (%)1

 

 5.1 

 5.1 

 5.2 

 4.9 

 4.8 

1 Leverage ratio denominators (LRDs) and leverage ratios for 30 June 2020 and 31 March 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of this report and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in this section for more information.   

p

 

Liquidity coverage ratio

Quarterly | UBS Switzerland AG, as a Swiss SRB, is required to maintain a liquidity coverage ratio (LCR) of 100%. In connection with the Swiss Emergency Plan, UBS Switzerland AG must satisfy additional liquidity requirements.

 

Quarterly |

Liquidity coverage ratio

 

 

 

 

 

Weighted value1

CHF billion, except where indicated

 

Average 2Q202

Average 1Q202

High-quality liquid assets

 

 85 

 75 

Total net cash outflows

 

 62 

 53 

of which: cash outflows

 

 90 

 86 

of which: cash inflows

 

 28 

 33 

Liquidity coverage ratio (%)

 

 138 

 141 

1 Calculated after the application of haircuts and inflow and outflow rates as well as, where applicable, caps on Level 2 assets and cash inflows.    2 Calculated based on an average of 65 data points in the second quarter of 2020 and 64 data points in the first quarter of 2020.

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67 


Significant regulated subsidiaries and sub-groups  

Capital instruments

Quarterly |

Capital instruments of UBS Switzerland AG – key features

 

 

 

Presented according to issuance date.

 

 

 

 

Share capital

 

Additional tier 1 capital

 

1

Issuer

 

UBS Switzerland AG, Switzerland

 

UBS Switzerland AG, Switzerland

UBS Switzerland AG, Switzerland

UBS Switzerland AG, Switzerland

UBS Switzerland AG, Switzerland

UBS Switzerland AG, Switzerland

UBS Switzerland AG, Switzerland

1a

Instrument number

 

1

 

 2 

 3 

 4 

5

6

7

2

Unique identifier (e.g., CUSIP, ISIN or Bloomberg identifier for private placement)

 

 

3

Governing law(s) of the instrument

 

Swiss

 

Swiss

3a

Means by which enforceability requirement of Section 13 of the TLAC Term Sheet is achieved (for other TLAC-eligible instruments governed by foreign law)

 

n/a

 

n/a

 

Regulatory treatment

 

 

 

 

 

 

 

 

 

4

Transitional Basel III rules1

 

CET1 – Going concern capital

 

Additional tier 1 capital

5

Post-transitional Basel III rules2

 

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

 

Loan4

8

Amount recognized in regulatory capital (currency in millions, as of most recent reporting date)1

 

CHF 10.0

 

CHF 1,500

CHF 500

CHF 1,000

CHF 825

USD 425

CHF 475

9

Par value of instrument

 

CHF 10.0

 

CHF 1,500

CHF 500

CHF 1,000

CHF 825

USD 425

CHF 475

10

Accounting classification3

 

Equity attributable to UBS Switzerland AG shareholders

 

Due to banks held at amortized cost

11

Original date of issuance

 

 

1 April 2015

11 March 2016

18 December 2017

12 December 2018

12 December 2018

11 December 2019

12

Perpetual or dated

 

 

Perpetual

13

Original maturity date

 

 

14

Issuer call subject to prior supervisory approval

 

 

Yes

15

Optional call date, contingent call dates and redemption amount

 

 

First optional repayment date:

1 April 2020

First optional repayment date:

11 March 2021

First optional repayment date:

18 December 2022

First optional repayment date:

12 December 2023

 

First optional repayment date:

12 December 2023

 

First optional repayment date:

11 December 2024

 

 

Repayable at any time after the first optional repayment date.

Repayment subject to FINMA approval. Optional repayment amount: 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. Repayment due to tax event subject to FINMA approval.

Repayment amount: principal amount, together with accrued and unpaid interest

 

 

 

68 


 

Capital instruments of UBS Switzerland AG – key features (continued)

 

 

 

 

Coupons

 

 

 

 

 

 

 

 

 

17

Fixed or floating dividend / coupon

 

 

Floating

18

Coupon rate and any related index

 

 

6-month CHF Libor + 

370 bps per annum

semiannually

3-month CHF Libor

459 bps per annum

quarterly

3-month CHF Libor + 

250 bps per annum

quarterly

3-month CHF Libor

+

489 bps per annum

quarterly

3-month USD Libor

+

547 bps per annum

quarterly

3-month CHF Libor

+

433 bps 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 Switzerland AG’s viability; or UBS Switzerland AG receives a commitment of governmental support that FINMA determines necessary to ensure UBS 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 instrument type immediately

senior to instrument in the insolvency creditor hierarchy of the legal entity concerned).

 

Unless otherwise stated in the articles of association, once debts are paid back, the assets of the liquidated company are divided between the shareholders pro rata based on their contributions and considering the preferences attached to certain categories of shares (Art. 745, Swiss Code of Obligations)

 

Subject to any obligations that are mandatorily preferred by law, all obligations of UBS Switzerland AG that are unsubordinated or that are subordinated and do not rank junior, such as all classes of share capital, or at par, such as tier 1 instruments

36

Non-compliant transitioned features

 

 

37

If yes, specify non-compliant features

 

 

1 Based on Swiss SRB (including transitional arrangement) requirements.    2 Based on Swiss SRB requirements applicable as of 1 January 2020.    3 As applied in UBS Switzerland AG‘s financial statements under Swiss GAAP.    4 Loans granted by UBS AG, Switzerland.

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69 


Significant regulated subsidiaries and sub-groups  

Section 4  UBS Europe SE consolidated

Quarterly | The table below provides information about the regulatory capital components, capital ratios, leverage ratio and liquidity of UBS Europe SE consolidated based on the Pillar 1 requirements.

During the second quarter of 2020, common equity tier 1 (CET1) capital remained stable. Risk-weighted assets (RWA) decreased by EUR 1.6 billion to EUR 13.6 billion, reflecting a decrease in credit risk RWA and credit valuation adjustment (CVA). Leverage ratio exposure decreased by EUR 6.8 billion to EUR 42.2 billion, mainly reflecting a decrease of EUR 3.1 billion in cash held at central banks, a decrease of EUR 3.9 billion in securities financing transactions (SFTs) and a decrease of EUR 0.8 billion in other cash balances. This decrease was partially offset by an increase in high quality liquid asset- (HQLA-) eligible bonds of EUR 2.0 billion. The average liquidity coverage ratio (LCR) remained stable, with a EUR 0.7 billion increase in high-quality liquid assets and a EUR 0.6 billion increase in total net cash outflows, mainly due to treasury management of the excess high-quality liquid assets through securities financing transactions.

Entities may also be subject to significant Pillar 2 requirements, which represent additional amounts of capital considered necessary and agreed with regulators based on the risk profile of the entities.

 

Quarterly |

KM1: Key metrics1,2,3

 

 

 

EUR million, except where indicated

 

 

 

 

 

 

30.6.20

31.3.204

31.12.194

30.9.19

30.6.19

Available capital (amounts)

 

 

 

 

 

 

1

Common equity tier 1 (CET1)

 

 3,013 

 3,043 

 3,028 

 3,528 

 3,543 

2

Tier 1

 

 3,303 

 3,333 

 3,318 

 3,818 

 3,833 

3

Total capital

 

 3,303 

 3,333 

 3,318 

 3,818 

 3,833 

Risk-weighted assets (amounts)

 

 

 

 

 

 

4

Total risk-weighted assets (RWA)

 

 13,559 

 15,154 

 15,146 

 14,407 

 13,725 

4a

Minimum capital requirement5

 

 1,085 

 1,212 

 1,212 

 1,153 

 1,098 

Risk-based capital ratios as a percentage of RWA

 

 

 

 

 

 

5

Common equity tier 1 ratio (%)

 

 22.2 

 20.1 

 20.0 

 24.5 

 25.8 

6

Tier 1 ratio (%)

 

 24.4 

 22.0 

 21.9 

 26.5 

 27.9 

7

Total capital ratio (%)

 

 24.4 

 22.0 

 21.9 

 26.5 

 27.9 

Additional CET1 buffer requirements as a percentage of RWA

 

 

 

 

 

 

8

Capital conservation buffer requirement (2.5% from 2019) (%)

 

 2.5 

 2.5 

 2.5 

 2.5 

 2.5 

9

Countercyclical buffer requirement (%)

 

 0.0 

 0.1 

 0.3 

 0.3 

 0.2 

10

Bank G-SIB and/or D-SIB additional requirements (%)

 

 

 

 

 

 

11

Total of bank CET1-specific buffer requirements (%)

 

 2.5 

 2.6 

 2.8 

 2.8 

 2.7 

12

CET1 available after meeting the bank’s minimum capital requirements (%)6

 

 16.4 

 14.0 

 14.0 

 18.5 

 19.9 

Basel III leverage ratio7

 

 

 

 

 

 

13

Total Basel III leverage ratio exposure measure

 

 42,172 

 49,004 

 41,924 

 50,199 

 52,291 

14

Basel III leverage ratio (%)8

 

 7.8 

 6.8 

 7.9 

 7.6 

 7.3 

Liquidity coverage ratio9

 

 

 

 

 

 

15

Total HQLA

 

 15,540 

 14,839 

 14,393 

 14,309 

 14,367 

16

Total net cash outflow10

 

 11,062 

 10,457 

 9,976 

 9,624 

 8,773 

17

LCR (%)10

 

 141 

 142 

 147 

 151 

 165 

1 Based on applicable EU Basel III rules.    2 As a result of the cross-border merger of UBS Limited into UBS Europe SE effective 1 March 2019, UBS Europe SE became a significant regulated subsidiary of UBS Group AG. The size, scope and business model of the merged entity is now materially different.    3 There is no local disclosure requirement for the net stable funding ratio as at 30 June 2020.    4 The Management Board of UBS Europe SE has proposed a dividend for the 2019 financial year, which will be subject to approval at an Extraordinary General Meeting in the fourth quarter of 2020. Comparative figures for 31 March 2020 and 31 December 2019 have been restated to align with the UBS Europe SE Pillar 3 report and other regulatory reports as submitted to the European Central Bank, which reflect this proposed dividend.    5 Calculated as 8% of total RWA, based on total capital minimum requirements, excluding CET1 buffer requirements.    6 This represents the CET1 ratio that is available for meeting buffer requirements. It is calculated as the CET1 ratio minus 4.5% and after considering, where applicable, CET1 capital that has been used to meet tier 1 and/or total capital ratio requirements under Pillar 1. Comparative figures for 30 June 2019 have been adjusted to adhere to this presentation.    7 The Total Basel III leverage ratio exposure measure and the Basel III leverage ratio as of 30 June 2020 have been aligned with the final information submitted to the European Central Bank and therefore differ from the information reported for UBS Europe SE in the UBS Group AG report for the second quarter of 2020 in the table “Financial and regulatory key figures for our significant regulated subsidiaries and sub-groups.”    8 On the basis of tier 1 capital.    9 Figures as of 30 June 2020 and 31 March 2020 are based on a twelve-month average. Comparative figures for 31 December 2019 are based on a ten-month average, as of 30 September 2019 on a seven-month average and as of 30 June 2019 on a four-month average rather than a twelve-month average, as data produced on the same basis is only available for the period since the cross-border merger.    10 Revised calculation excludes inflows from overdrafts that we cannot demand repayment of within 30 days. Comparative figures and ratios for 30 September 2019 and 30 June 2019 have been adjusted accordingly.

 

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70 


 

Section 5  UBS Americas Holding LLC consolidated

Quarterly | The table below provides information about the regulatory capital components and capital ratios, as well as the leverage ratio, of UBS Americas Holding LLC consolidated, based on the Pillar 1 requirements (i.e., US Basel III standardized rules).

UBS Americas Holding LLC, as a designated category III bank under US rules, has been subject to a simplification of regulatory capital rules since 1 April 2020. The revisions simplify the framework for regulatory capital deductions and increase the risk weights for mortgage servicing assets, certain deferred tax assets arising from temporary differences and investments in the capital of unconsolidated financial institutions.

During the second quarter of 2020, common equity tier 1 (CET1) capital increased by USD 1.6 billion, predominantly due to the implementation of the Capital Simplification Rule. Risk-weighted assets (RWA) increased by USD 10.5 billion to USD 64.3 billion, mainly driven by higher risk weights under the Capital Simplification Rule. Leverage ratio exposure increased by USD 11.1 billion to USD 146.6 billion during the quarter, primarily driven by higher average assets as well as lower Tier 1 deductions as a result of the implementation of the Capital Simplification Rule.

Entities may also be subject to significant Pillar 2 requirements, which represent additional amounts of capital considered necessary and agreed with regulators based on the risk profile of the entities.

 

Quarterly |

KM1: Key metrics1,2,3

 

 

 

 

 

 

 

 

USD million, except where indicated

 

 

 

30.6.204

 

31.3.20

 

31.12.19

 

30.9.19

 

30.6.19

Available capital (amounts)

 

 

 

 

 

 

 

 

 

 

1

Common equity tier 1 (CET1)

 

 13,567 

 

 11,975 

 

 11,939 

 

 11,868 

 

 12,900 

2

Tier 1

 

 16,610 

 

 15,024 

 

 14,987 

 

 14,923 

 

 15,055 

3

Total capital

 

 17,376 

 

 15,778 

 

 15,702 

 

 15,640 

 

 15,772 

Risk-weighted assets (amounts)

 

 

 

 

 

 

 

 

 

 

4

Total risk-weighted assets (RWA)

 

 64,324 

 

 53,812 

 

 54,058 

 

 52,947 

 

 53,892 

4a

Minimum capital requirement5

 

 5,146 

 

 4,305 

 

 4,325 

 

 4,236 

 

 4,311 

Risk-based capital ratios as a percentage of RWA

 

 

 

 

 

 

 

 

 

 

5

Common equity tier 1 ratio (%)

 

 21.1 

 

 22.3 

 

 22.1 

 

 22.4 

 

 23.9 

6

Tier 1 ratio (%)

 

 25.8 

 

 27.9 

 

 27.7 

 

 28.2 

 

 27.9 

7

Total capital ratio (%)

 

 27.0 

 

 29.3 

 

 29.0 

 

 29.5 

 

 29.3 

Additional CET1 buffer requirements as a percentage of RWA

 

 

 

 

 

 

 

 

 

 

8

Capital conservation buffer requirement (2.5% from 2019) (%)

 

 2.5 

 

 2.5 

 

 2.5 

 

 2.5 

 

 2.5 

9

Countercyclical buffer requirement (%)6

 

 

 

 

 

 

 

 

 

 

10

Bank G-SIB and/or D-SIB additional requirements (%)7

 

 

 

 

 

 

 

 

 

 

11

Total of bank CET1-specific buffer requirements (%)

 

 2.5 

 

 2.5 

 

 2.5 

 

 2.5 

 

 2.5 

12

CET1 available after meeting the bank’s minimum capital requirements (%)8

 

 16.6 

 

 17.8 

 

 17.6 

 

 17.9 

 

 19.4 

Basel III leverage ratio

 

 

 

 

 

 

 

 

 

 

13

Total Basel III leverage ratio exposure measure

 

 146,641 

 

 135,534 

 

 127,290 

 

 123,632 

 

 123,008 

14

Basel III leverage ratio (%)9

 

 11.3 

 

 11.1 

 

 11.8 

 

 12.1 

 

 12.2 

14a

Total Basel III supplementary leverage ratio exposure measure10

 

 147,672 

 

 

 

 

 

 

 

 

14b

Basel III supplementary leverage ratio (%)9,10

 

 11.2 

 

 

 

 

 

 

 

 

1 For UBS Americas Holding LLC based on applicable US Basel III rules.    2 There is no local disclosure requirement for liquidity coverage ratio or net stable funding ratio for UBS Americas Holding LLC as of 30 June 2020.    3 The adoption of ASU 2019-12 in the second quarter of 2020 resulted in a retrospective removal of cumulative tax expense and related balances pertaining to UBS Americas Holding LLC within the IHC tax group for financial reporting purposes. For the purpose of regulatory reporting, we have applied this accounting change prospectively and have not restated the corresponding comparative regulatory key figures.    4 UBS Americas Holding LLC, as a designated category III bank, has been subject to a simplification of regulatory capital rules since 1 April 2020. The revisions simplify the framework for regulatory capital deductions and increase risk weights for mortgage servicing assets, certain deferred tax assets arising from temporary differences, and investments in the capital of unconsolidated financial institutions (below the deduction threshold (25%), resulting in an impact of 0.3% on the CET1 ratio).    5 Calculated as 8% of total RWA, based on total capital minimum requirements, excluding CET1 buffer requirements.    6 UBS Americas Holding LLC is currently not subject to the countercyclical buffer requirement.    7 Not applicable, as requirements have not been proposed.    8 This represents the CET1 ratio that is available for meeting buffer requirements. It is calculated as the CET1 ratio minus 4.5% and after considering, where applicable, CET1 capital that has been used to meet tier 1 and/or total capital ratio requirements. Figures as of 30 June 2019 have been adjusted to adhere to this presentation.    9 On the basis of tier 1 capital.    10 UBS Americas Holding LLC, as a designated category III bank, has been subject to supplementary leverage ratio (SLR) reporting since 1 April 2020. Temporary relief will be provided by the Federal Reserve Board (the Federal Reserve), the Federal Deposit Insurance Corporation (the FDIC) and the Office of the Comptroller of the Currency (the OCC) through March 2021, allowing for the exclusion of US Treasury securities and deposits at Federal Reserve Banks from the SLR denominator. This exclusion resulted in an increase in SLR of 135 bps on 30 June 2020. 

p

 

71 


Significant regulated subsidiaries and sub-groups  

Material sub-group entity – creditor ranking at legal entity level

Semiannual | The TLAC2 table below provides an overview of the creditor ranking structure of UBS Americas Holding LLC on a standalone basis.


As of 30 June 2020, UBS Americas Holding LLC had a total loss-absorbing capacity (TLAC) of USD 22,110 million after regulatory capital deductions and adjustments. This amount included Tier 1 capital of USD 16,610 million and USD 5,500 million of internal long-term debt that is eligible as internal TLAC issued to UBS AG, a wholly owned subsidiary of the UBS Group AG resolution entity.

 

Semiannual |

TLAC2 – Material sub-group entity – creditor ranking at legal entity level 

As of 30.6.20

 

Creditor ranking

 

Total

USD million

 

1

2

3

4

 

 

1

Is the resolution entity the creditor / investor?

 

No

No

No

No

 

 

2

Description of creditor ranking

 

Common Equity (most junior)1

Preferred Shares (Additional tier 1)

Subordinated debt

Unsecured loans and other pari passu liabilities (most senior)

 

 

3

Total capital and liabilities net of credit risk mitigation

 

 24,977 

 3,150 

 600 

 26,240 

 

 54,967 

4

Subset of row 3 that are excluded liabilities

 

 

 

 

 521 

 

 521 

5

Total capital and liabilities less excluded liabilities (row 3 minus row 4)

 

 24,977 

 3,150 

 600 

 25,719 

 

 54,446 

6

Subset of row 5 that are eligible as TLAC

 

 24,977 

 3,150 

 

 5,500 

 

 33,627 

7

Subset of row 6 with 1 year ≤ residual maturity < 2 years

 

 

 

 

 

 

 

8

Subset of row 6 with 2 years ≤ residual maturity < 5 years

 

 

 

 

 3,300 

 

 3,300 

9

Subset of row 6 with 5 years ≤ residual maturity < 10 years

 

 

 

 

 2,200 

 

 2,200 

10

Subset of row 6 with residual maturity ≥ 10 years, but excluded perpetual securities

 

 

 

 

 

 

 

11

Subset of row 6 that is perpetual securities

 

 24,977 

 3,150 

 

 0 

 

 28,127 

1 Equity attributable to shareholders, which includes share premium and reserves.

p

 

  

72 


 

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 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

 

73 


 

 

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


SAR                 stock appreciation right or Special Administrative Region

SBC                 Swiss Bank Corporation

SDG                Sustainable Development Goal

SE                    structured entity

SEC                 US Securities and Exchange Commission

SEEOP             Senior Executive Equity Ownership Plan

SFT                  securities financing transaction

SI                     sustainable investing

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 2019, UBS’s second quarter 2020 report and UBS’s first quarter 2020 report on Forms 6K, available at www.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, percent changes, and adjusted results are calculated on the basis of unrounded figures. Information about absolute changes between reporting periods, which is provided in text and which can be derived from figures displayed in the tables, is calculated on a rounded basis.

Tables | Within tables, blank fields generally indicate that the field is not applicable or not meaningful, or that information is not available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis. Percentage changes are presented as a mathematical calculation of the change between periods.

75 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UBS Group AG

P.O. Box

CH-8098 Zurich

 

www.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:  August 14, 2020