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AMNA Ubs

Filed: 20 Aug 21, 7:44am

 

 

 

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 20, 2021

 

 

UBS Group AG

Commission File Number: 1-36764

 

UBS AG

Commission File Number: 1-15060

 

 

(Registrants' Name)

 

Bahnhofstrasse 45, Zurich, Switzerland and
Aeschenvorstadt 1, Basel, Switzerland

(Address of principal executive offices)

 

Indicate by check mark whether the registrants file or will file annual reports under cover of Form 20‑F or Form 40-F.

 

Form 20-F                         Form 40-F  

 


 

This Form 6-K consists of the Basel III Pillar 3 UBS Group AG Second Quarter 2021 Report, which appears immediately following this page.

 

 


 

30 June 2021 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

 


 

Contacts

 


Switchboards

For all general inquiries.
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

Institutional, professional and
retail investors are supported by UBS’s Investor Relations team.

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

ubs.com/investors

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

Media Relations

Global media and journalists
are supported by UBS’s Media Relations team.

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

Zurich +41-44-235 6652

Shareholder Services

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

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

sh-shareholder-services@ubs.com

Zurich +41-44-235 6652

US Transfer Agent

For global registered share-related
inquiries in the US.

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

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

Shareholder website:
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 | ubs.com
Language: English

© UBS 2021. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

  

 


 

Introduction and basis for preparation

Scope of Basel III Pillar 3 disclosures

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

This report provides Pillar 3 disclosures for the UBS Group and prudential key figures and regulatory information for UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated in the respective sections under “Significant regulated subsidiaries and sub-groups.”

As UBS is considered a systemically relevant bank (an SRB) under Swiss banking law, UBS Group AG and UBS AG are required to comply with regulations based on the Basel III framework as applicable to Swiss SRBs on a consolidated basis. Capital and other regulatory information as of 30 June 2021 for UBS Group AG consolidated is provided in the “Capital management” section of our second quarter 2021 report and for UBS AG consolidated in the “Capital management” section of the UBS AG second quarter 2021 report, both available under “Quarterly reporting” at ubs.com/investors

Local regulators may also require the publication of Pillar 3 information at a subsidiary or sub-group level. Where applicable, these local disclosures are provided under “Holding company and significant regulated subsidiaries and sub-groups” at ubs.com/investors

Significant BCBS and FINMA capital adequacy, 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 6 May 2021, the underlying BCBS guidance “Revised Pillar 3 disclosure requirements” issued in January 2015, the “Frequently asked questions on the revised Pillar 3 disclosure requirements” issued in August 2016, the “Pillar 3 disclosure requirements – consolidated and enhanced framework” issued in March 2017 and the subsequent “Technical Amendment – Pillar 3 disclosure requirements – regulatory treatment of accounting provisions” issued in August 2018.


Significant regulatory developments, and disclosure requirements and changes effective in the first half of 2021

COVID-19 temporary regulatory measures

The temporary exemption from FINMA for banks to exclude central bank sight deposits from the leverage ratio denominator (the LRD) for the purpose of calculating going concern ratios applied from 25 March 2020 until 1 January 2021 and was not extended thereafter.

FINMA’s assessment of the recovery and resolution planning

In March 2021, FINMA published its annual assessment of the recovery and resolution plans of systemically important financial institutions in Switzerland. The report noted that FINMA had approved UBS’s group recovery plan and assessed its Swiss Emergency Plan as effective. It also highlighted that UBS has made further progress in improving its global resolvability by building up the necessary capabilities and removing obstacles to the implementation of the resolution strategy, while pointing out areas for further improvement.

Based on the actions we completed by December 2020 to improve resolvability, FINMA granted an increase of the maximum rebate, from 47.5% to 55.0%, on the Swiss SRB gone concern capital requirements for UBS Group AG consolidated and UBS AG consolidated, effective from 1 July 2021.

   Refer to the “Going and gone concern requirements and eligible capital” section of this report

Swiss Federal Council report on systemically important banks

In June 2021, the Swiss Federal Council issued the results of its bi-annual review of the Swiss too-big-to-fail regulatory framework. The report concludes that no fundamental changes to the framework are needed. Potential areas for adjustment identified include the further tightening of the liquidity requirements for systemically important banks and the alignment of incentive systems to support a bank’s resolvability.

Further details on potential changes to the regulatory framework are expected by the end of 2021.

Federal Reserve Board stress test results

In June 2021, the Federal Reserve Board (the FRB) released the results of the 2021 Dodd–Frank Act Stress Test (DFAST), which is complementary to the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR) process. UBS’s intermediate holding company, UBS Americas Holding LLC, exceeded minimum capital requirements under the severely adverse scenario. The FRB also lifted the temporary limitations on capital distributions imposed during the pandemic. As a result, UBS Americas Holding LLC is permitted to make capital distributions as long as it maintains compliance with its total capital requirements, including its stress capital buffer (SCB). The FRB assigned UBS Americas Holding LLC an SCB of 7.1% with effect as of 1 October 2021, which replaces the current SCB of 6.7%.

   Refer to the “UBS Americas Holding LLC consolidated” section of this report

 

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Sale of our remaining investment in Clearstream Fund Centre

On 1 June 2021, we sold our remaining minority investment in Clearstream Fund Centre to Deutsche Börse AG for CHF 390 million. The transaction follows the sale of a majority investment and successful transfer of control of Fondcenter AG to Deutsche Börse AG in September 2020. The sale of our remaining 48.8% investment resulted in a post-tax gain of USD 37 million in Asset Management, with no associated net tax expense. The increase in UBS’s common equity tier 1 (CET1) capital of USD 412 million was significantly greater than the gain in IFRS equity, due to the effect of goodwill associated with the investment, which had been deducted from CET1 capital. Long-term commercial cooperation arrangements remain in place for the provision of services by Clearstream to UBS, including jointly servicing banks and insurance companies.

Material model updates

In the third quarter of 2020, we began to phase in risk-weighted assets (RWA) increases resulting from new probability of default (PD) and loss given default (LGD) models for the mortgage portfolio in the US. As agreed with FINMA, the effect on RWA is being phased in over six quarters, through the end of 2021, resulting in an increase of USD 0.5 billion in the first quarter of 2021 and an additional increase of USD 0.5 billion in the second quarter of 2021.

In addition, we have updated the LGD model for mortgages in Switzerland, which resulted in an RWA increase of USD 0.9 billion in the second quarter of 2021.

At the beginning of the second quarter of 2021, we also began to phase in an RWA increase related to a new model for structured margin loans and sophisticated lending. This RWA increase is being phased in over five quarters and the model will be fully implemented by the second quarter of 2022. RWA increased by USD 0.7 billion in the second quarter of 2021 due to the aforementioned model introduction.

Material regulatory add-ons

The second quarter of 2021 included an RWA increase of USD 0.5 billion related to a regulatory add-on in connection with the introduction of a new model for credit card exposures in Switzerland.

Material methodology changes

A methodology change related to credit valuation adjustment (CVA) risk for derivative exposures with Lombard clients resulted in an increase of USD 1.1 billion in RWA in the first quarter of 2021.


Additionally, the approach used for the covered bonds within the high-quality liquid asset (HQLA) portfolio has been changed from the advanced internal ratings-based (A-IRB) approach to the standardized approach, as requested by FINMA, resulting in an RWA increase of USD 1.0 billion in the second quarter of 2021.

Minimum haircut floors for securities financing transactions

On 1 July 2021, the BCBS set out two technical amendments to the standard on minimum haircut floors for securities financing transactions (SFTs); we do not expect the relevant Swiss regulations to come into effect until after the introduction of the revised BCBS standards, which will enter into force on 1 January 2023. The technical amendments address an interpretative issue relating to collateral upgrade transactions and correct for a misstatement in the formula used to calculate haircut floors for netted SFTs.

Frequency and comparability of Pillar 3 disclosures

FINMA has specified the reporting frequency for each disclosure, as outlined in the table on pages 7–9 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors

In line with the FINMA-specified disclosure frequency and requirements for disclosure with regard to comparative periods, we provide quantitative comparative information as of 31 March 2021 for disclosures required on a quarterly basis and as of 31 December 2020 for disclosures required on a semi-annual basis. Where specifically required by FINMA and / or the BCBS, we disclose comparative information for additional reporting dates.

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

   Refer to our 31 March 2021 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information about previously published quarterly movement commentary

   Refer to our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investorsfor more information about previously published semi-annual movement commentary

 

  

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UBS Group

 


UBS Group AG consolidated 

 

Section 1  Key metrics

Key metrics of the second quarter of 2021

Quarterly | The KM1 and KM2 tables on the following pages are based on the Basel Committee on Banking Supervision (the BCBS) Basel III rules. The KM2 table includes a reference to the total loss-absorbing capacity (TLAC) term sheet, published by the Financial Stability Board (the FSB). The FSB provides this term sheet at fsb.org/2015/11/total-loss-absorbing-capacity-tlac-principles-and-term-sheet

Our capital and leverage ratios increased in the second quarter of 2021, primarily reflecting increases in capital. Our common equity tier 1 (CET1) capital increased by USD 2.2 billion to USD 42.6 billion, mainly reflecting operating profit before tax of USD 2.6 billion, a USD 0.4 billion lower deduction of goodwill resulting from the sale of our remaining minority investment in Clearstream Fund Centre, positive foreign currency translation effects of USD 0.3 billion and USD 0.2 billion higher eligible deferred tax assets on temporary differences, partly offset by compensation- and own share-related capital components of USD 0.4 billion, current tax expenses of USD 0.4 billion and accruals for capital returns to shareholders of USD 0.3 billion.

Our tier 1 capital increased by USD 2.9 billion to USD 59.2 billion, primarily reflecting the aforementioned increase in our CET1 capital and the issuance of an additional tier 1 (AT1) instrument with a nominal value of USD 750 million.

The TLAC available as of 30 June 2021 included CET1 capital, AT1 and tier 2 capital instruments eligible under the TLAC framework, and non-regulatory capital elements of TLAC. Under the Swiss systemically relevant bank (SRB) framework, including transitional arrangements, TLAC excludes 45% of the gross unrealized gains on debt instruments measured at fair value through other comprehensive income for accounting purposes, which for regulatory capital purposes are measured at the lower of cost or market value. This amount was negligible as of 30 June 2021, but is included as available TLAC in the KM2 table in this section.


Our available TLAC increased by USD 3.6 billion to USD 104.3 billion in the second quarter of 2021, reflecting the aforementioned USD 2.9 billion increase in our tier 1 capital and a USD 0.7 billion increase in non-regulatory capital instruments, which mainly resulted from the issuance of USD 265 million of TLAC-eligible senior unsecured debt, as well as effects from interest rate risk hedges and foreign currency translation.

Risk-weighted assets (RWA) increased by USD 5.4 billion to USD 293.3 billion, including an increase of USD 1.8 billion related to currency effects, mainly due to credit risk RWA increasing by USD 8.7 billion, partly offset by decreases in market risk RWA of USD 2.5 billion and counterparty credit risk RWA of USD 1.6 billion.

The leverage ratio exposure increased by USD 2 billion to USD 1,040 billion, including currency effects of USD 9 billion, driven by on-balance sheet exposures (other than securities financing transactions (SFTs) and derivatives), partly offset by decreases in derivative exposures and SFTs.

The average high-quality liquid assets (HQLA) increased by USD 10.7 billion to USD 232.0 billion, driven by higher average cash balances, due to a decrease in assets subject to local transfer restrictions, lower funding consumption by the Investment Bank and net deposit growth. Average total net cash outflows increased by USD 2.9 billion to USD 149.2 billion, mainly due to decreases in inflows from secured financing transactions.

 

 

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Quarterly |

KM1: Key metrics

 

 

 

 

 

 

 

 

 

USD million, except where indicated

 

 

 

 

30.6.21

 

31.3.21

 

31.12.20

 

30.9.20

30.6.20

Available capital (amounts)

 

 

 

 

 

 

 

 

 

1

Common equity tier 1 (CET1)

 

42,583

 

40,426

 

39,890

 

38,197

38,114

1a

Fully loaded ECL accounting model CET11

 

42,561

 

40,403

 

39,856

 

38,162

38,070

2

Tier 1

 

59,188

 

56,288

 

56,178

 

54,396

53,505

2a

Fully loaded ECL accounting model Tier 11

 

59,166

 

56,264

 

56,144

 

54,360

53,460

3

Total capital

 

61,184

 

58,822

 

61,226

 

59,382

58,876

3a

Fully loaded ECL accounting model total capital1

 

61,162

 

58,799

 

61,193

 

59,347

58,831

Risk-weighted assets (amounts)

 

 

 

 

 

 

 

 

 

4

Total risk-weighted assets (RWA)

 

293,277

 

287,828

 

289,101

 

283,133

286,436

4a

Minimum capital requirement2

 

23,462

 

23,026

 

23,128

 

22,651

22,915

4b

Total risk-weighted assets (pre-floor)

 

293,277

 

287,828

 

289,101

 

283,133

286,436

Risk-based capital ratios as a percentage of RWA

 

 

 

 

 

 

 

 

 

5

Common equity tier 1 ratio (%)

 

14.52

 

14.05

 

13.80

 

13.49

13.31

5a

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

 

14.51

 

14.04

 

13.79

 

13.48

13.29

6

Tier 1 ratio (%)

 

20.18

 

19.56

 

19.43

 

19.21

18.68

6a

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

 

20.17

 

19.55

 

19.42

 

19.20

18.66

7

Total capital ratio (%)

 

20.86

 

20.44

 

21.18

 

20.97

20.55

7a

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

 

20.85

 

20.43

 

21.17

 

20.96

20.54

Additional CET1 buffer requirements as a percentage of RWA

 

 

 

 

 

 

 

 

 

8

Capital conservation buffer requirement (%)

 

2.50

 

2.50

 

2.50

 

2.50

2.50

9

Countercyclical buffer requirement (%)

 

0.02

 

0.02

 

0.02

 

0.02

0.02

9a

Additional countercyclical buffer for Swiss mortgage loans (%)

 

 

 

 

 

 

 

 

 

10

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

 

1.00

 

1.00

 

1.00

 

1.00

1.00

11

Total of bank CET1-specific buffer requirements (%)

 

3.52

 

3.52

 

3.52

 

3.52

3.52

12

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

 

10.02

 

9.55

 

9.30

 

8.99

8.81

Basel III leverage ratio3

 

 

 

 

 

 

 

 

 

13

Total Basel III leverage ratio exposure measure

 

1,039,939

 

1,038,225

 

1,037,150

 

994,366

974,359

14

Basel III leverage ratio (%)

 

5.69

 

5.42

 

5.42

 

5.47

5.49

14a

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

 

5.69

 

5.42

 

5.41

 

5.47

5.49

Liquidity coverage ratio4

 

 

 

 

 

 

 

 

 

15

Total HQLA

 

 232,026 

 

 221,371 

 

 214,276 

 

 211,185 

 206,693 

16

Total net cash outflow

 

 149,183 

 

 146,314 

 

 140,891 

 

 137,345 

 133,786 

17

LCR (%)

 

 156 

 

 151 

 

 152 

 

 154 

 155 

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 the respective periods in 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section 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 our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information.    4 Calculated based on quarterly average. Refer to the “Liquidity coverage ratio” section of this report for more information.

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UBS Group AG consolidated 

Quarterly |

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

USD million, except where indicated

 

 

 

 

 

 

 

 

 

 

 

 

30.6.21

 

31.3.21

 

31.12.20

 

30.9.20

 

30.6.20

1

Total loss-absorbing capacity (TLAC) available

 

 104,348 

 

 100,720 

 

 101,814 

 

 97,753 

 

 93,626 

1a

Fully loaded ECL accounting model TLAC available2

 

 104,325 

 

 100,697 

 

 101,780 

 

 97,717 

 

 93,581 

2

Total RWA at the level of the resolution group

 

 293,277 

 

 287,828 

 

 289,101 

 

 283,133 

 

 286,436 

3

TLAC as a percentage of RWA (%)

 

 35.58 

 

 34.99 

 

 35.22 

 

 34.53 

 

 32.69 

3a

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

 

 35.57 

 

 34.98 

 

 35.21 

 

 34.51 

 

 32.67 

4

Leverage ratio exposure measure at the level of the resolution group3

 

 1,039,939 

 

 1,038,225 

 

 1,037,150 

 

 994,366 

 

 974,359 

5

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

 

 10.03 

 

 9.70 

 

 9.82 

 

 9.83 

 

 9.61 

5a

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

 

 10.03 

 

 9.70 

 

 9.81 

 

 9.83 

 

 9.60 

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 the respective periods in 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section 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 our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information.

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Section 2  Overview of risk-weighted assets

Our approach to measuring risk exposure and risk-weighted assets

Quarterly | Exposures are measured for financial accounting purposes under International Financial Reporting Standards (IFRS), for deriving our regulatory capital requirements or for internal risk management and control purposes. Our Pillar 3 disclosures are generally based on measures of risk exposure used to derive the regulatory capital required under Pillar 1. Our risk-weighted assets (RWA) are calculated according to the Basel Committee on Banking Supervision (the BCBS) Basel III framework, as implemented by the Swiss Capital Adequacy Ordinance issued by the Swiss Federal Council and by the associated circulars issued by the Swiss Financial Market Supervisory Authority (FINMA).

For information about the measurement of risk exposures and RWA, refer to pages 13–15 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.

Overview of RWA and capital requirements

Quarterly | The OV1 table on the following page provides an overview of our RWA and the related minimum capital requirements by risk type. The table presented is based on the respective FINMA template and empty rows indicate current non-applicability to UBS.

During the second quarter of 2021, RWA increased by USD 5.4 billion to USD 293.3 billion, including an increase related to currency effects of USD 1.8 billion, mainly due to credit risk RWA increasing by USD 8.7 billion, partly offset by decreases in market risk RWA of USD 2.5 billion and counterparty credit risk RWA of USD 1.6 billion.

Credit Risk RWA under the advanced internal ratings-based (A-IRB) approach and the standardized approach increased by USD 5.1 billion and USD 3.6 billion, respectively, primarily driven by asset size and other movements of USD 3.2 billion, mainly due to increases in Lombard and other loans in Global Wealth Management and increases in loans and loan commitments in Personal & Corporate Banking. The second quarter of 2021 also included model updates that resulted in an RWA increase of USD 2.5 billion, mainly due to the phase-in impacts related to a new model for structured margin loans and sophisticated lending, as well as new probability of default (PD) and loss given default (LGD) models for mortgages in the US, and due to updates to the LGD model for mortgages in Switzerland. In addition, credit risk RWA increased due to currency effects of USD 1.5 billion, as well as methodology and policy changes of USD 1.0 billion, primarily due to the application of the standardized approach to covered bonds in the high-quality liquid asset (HQLA) portfolio.

Market Risk RWA decreased by USD 2.5 billion, driven primarily by lower average value-at-risk (VaR) levels in the Investment Bank’s Global Markets business. Ongoing discussions regarding our regulatory VaR model with FINMA, which started prior to the COVID-19 pandemic, may lead to VaR model updates that would likely result in an increase in market risk RWA in the second half of 2021.

Counterparty credit risk RWA decreased by USD 1.6 billion, primarily driven by a reduction in derivatives exposures in the Investment Bank.

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 2021.

More information about capital management and RWA, including details regarding movements in RWA during the second quarter of 2021, is provided on pages 41–42 in the “Capital management” section of our second quarter 2021 report, available under ”Quarterly reporting” at ubs.com/investors

 

 

9 


UBS Group AG consolidated 

Quarterly |

OV1: Overview of RWA

 

 

 

 

Section or table reference

 

Minimum capital requirements1

USD million

 

30.6.21

31.3.21

31.12.20

 

 

 

30.6.21

1

Credit risk (excluding counterparty credit risk)

 

 146,162 

 137,485 

 139,846 

 

 3 

 

 11,693 

2

of which: standardized approach (SA)

 

 34,895 

 31,299 

 31,565 

 

CR4

 

 2,792 

2a

of which: non-counterparty-related risk

 

 12,921 

 12,922 

 13,393 

 

CR4

 

 1,034 

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

 

 111,267 

 106,186 

 108,281 

 

CR6, CR7, CR8

 

 8,901 

6

Counterparty credit risk2

 

 39,058 

 40,691 

 40,354 

 

4, CCR1, CCR8

 

 3,125 

7

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

 

 7,406 

 7,193 

 6,006 

 

 

 

 592 

8

of which: internal model method (IMM)

 

 17,232 

 19,352 

 19,380 

 

CCR7

 

 1,379 

8a

of which: value-at-risk (VaR)

 

 7,909 

 7,353 

 8,386 

 

CCR7

 

 633 

9

of which: other CCR

 

 6,510 

 6,793 

 6,581 

 

 

 

 521 

10

Credit valuation adjustment (CVA)

 

 3,938 

 4,080 

 2,945 

 

4, CCR2

 

 315 

11

Equity positions under the simple risk-weight approach

 

 3,197 

 2,794 

 2,795 

 

3, CR10

 

 256 

12

Equity investments in funds – look-through approach

 

 1,070 

 893 

 882 

 

 

 

 86 

13

Equity investments in funds – mandate-based approach

 

 1,486 

 1,916 

 648 

 

 

 

 119 

14

Equity investments in funds – fallback approach

 

 378 

 86 

 126 

 

 

 

 30 

15

Settlement risk

 

 341 

 341 

 372 

 

 

 

 27 

16

Securitization exposures in banking book

 

 379 

 281 

 314 

 

 5 

 

 30 

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)

 

 305 

 265 

 301 

 

 5 

 

 24 

19

of which: securitization standardized approach (SEC-SA)

 

 74 

 16 

 13 

 

 5 

 

 6 

20

Market Risk

 

 7,818 

 10,354 

 11,841 

 

5,6

 

 625 

21

of which: standardized approach (SA)

 

 726 

 588 

 456 

 

 5 

 

 58 

22

of which: internal models approach (IMA)

 

 7,093 

 9,767 

 11,385 

 

MR2

 

 567 

23

Capital charge for switch between trading book and banking book3

 

 

 

 

 

 

 

 

24

Operational risk

 

 75,775 

 75,775 

 75,775 

 

 

 

 6,062 

25

Amounts below thresholds for deduction (250% risk weight)4

 

 13,676 

 13,133 

 13,202 

 

 

 

 1,094 

25a

 of which: deferred tax assets

 

 10,392 

 9,906 

 9,981 

 

 

 

 831 

26

Floor adjustment5

 

 

 

 

 

 

 

 

27

Total

 

 293,277 

 287,828 

 289,101 

 

 

 

 23,462 

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 Not applicable until the implementation of the final rules on the minimum capital requirements for market risk (the Fundamental Review of the Trading Book).    4 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.    5 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.

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10 


 

 

Section 3  Credit risk

Introduction

Semi-annual | This section provides information about the exposures subject to the Basel III credit risk framework.

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

Credit risk exposure categories

Semi-annual | The following definitions of the Swiss Financial Market Supervisory Authority (FINMA) Pillar 3 credit risk exposure categories “Loans” and “Debt securities,” 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 intention of collecting 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 tradingand 

   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.

11 


UBS Group AG consolidated 

Credit quality of assets

Introduction

Amounts shown in the following tables relate to on-balance sheet IFRS carrying amounts as well as off-balance sheet items according to the regulatory scope of consolidation that give rise to credit risk exposure under the Basel III framework.

Breakdown of credit quality of assets

Semi-annual | The CR1 table below provides a breakdown of defaulted and non-defaulted loans, debt securities and off-balance sheet exposures. The table includes a split of expected credit loss (ECL) accounting provisions on exposures subject to the standardized approach (SA) and the A-IRB approach.


Increases in net carrying values of loans and decreases in net carrying values of debt securities, compared with 31 December 2020, are further discussed in the CR3 table of this report. The net carrying value of off-balance sheet exposures decreased by USD 1.3 billion, to USD 66.5 billion, compared with 31 December 2020, mainly due to decreased loan commitments in our Personal & Corporate banking business, mainly driven by currency effects. For information about the definitions of default and credit impairment, refer to page 122 of our Annual Report 2020, available under ”Annual reporting” at ubs.com/investors

More information about the net value movements related to Loans and Debt securities, as shown in the table below, is provided on page 13 in the “CR3: Credit risk mitigation techniques – overview” table.

 

Semi-annual |

CR1: Credit quality of assets

 

 

 

Gross carrying amounts of:

 

Allowances / impairments

 

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

 

Of which: ECL accounting provisions for credit losses on

A-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)

 

 

30.6.21

 

 

 

 

 

 

 

 

 

 

 

 

1

Loans2

 

 2,979 

 577,556 

 

 (1,079)4

 

 (108) 

 (65) 

 

 (906) 

 

 579,456 

2

Debt securities

 

 

 58,041 

 

 

 

 

 

 

 

 

 58,041 

3

Off-balance sheet exposures3

 

 339 

 66,375 

 

 (170)4

 

 (1) 

 (3) 

 

 (166) 

 

 66,544 

4

Total

 

 3,318 

 701,972 

 

 (1,249)4

 

 (110) 

 (68) 

 

 (1,072) 

 

 704,041 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.20

 

 

 

 

 

 

 

 

 

 

 

 

1

Loans2

 

 3,504 

 562,025 

 

 (1,207)4

 

 (115) 

 (73) 

 

 (1,019) 

 

 564,322 

2

Debt securities

 

 

 74,059 

 

 

 

 

 

 

 

 

 74,059 

3

Off-balance sheet exposures3

 

 273 

 67,794 

 

 (205)4

 

 (1) 

 (6) 

 

 (197) 

 

 67,862 

4

Total

 

 3,778 

 703,878 

 

 (1,412)4

 

 (116) 

 (80) 

 

 (1,216) 

 

 706,243 

1 Defaulted exposures are in line with credit-impaired exposures (stage 3) under IFRS 9. Refer to Note 20 “Expected credit loss measurement“ in our Annual Report 2020 for more information about IFRS 9, available under ”Annual reporting” at ubs.com/investors.    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 and uncommitted credit facilities, even if they are subject to RWA.    4 Expected credit loss allowances and provisions amounted to USD 1,294 million as of 30 June 2021, as disclosed in Note 7 of the UBS Group AG second quarter 2021 report. This Pillar 3 table excludes ECL on revocable off-balance sheet exposures (30 June 2021: USD 33 million; 31 December 2020: USD 50 million), ECL on exposures subject to counterparty credit risk (30 June 2021: USD 6 million; 31 December 2020: USD 5 million) and ECL on irrevocable committed prolongation of loans that do not give rise to additional credit exposures (30 June 2021: USD 4 million; 31 December 2020: USD 2 million).

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12 


 

Semi-annual | The CR2 table below presents changes in stock of defaulted loans, debt securities and off-balance sheet exposures for the first half of 2021. The total amount of defaulted loans, debt securities and off-balance sheet exposures was USD 3.3 billion as of 30 June 2021. The net decrease of USD 0.5 billion compared with 31 December 2020 was mainly driven by the economic recovery and the resulting return to non-defaulted status and repayments.

 

Semi-annual |

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

USD million

For the half year ended 30.6.211

For the half year ended 31.12.201

1

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

 3,778 

 3,854 

2

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

 378 

 1,180 

3

Returned to non-defaulted status

 (390) 

 (993) 

4

Amounts written off

 (44) 

 (244) 

5

Other changes

 (404) 

 (19) 

6

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

 3,318 

 3,778 

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 and uncommitted credit facilities, even if they attract RWA.

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Credit risk mitigation

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

Compared with 31 December 2020, the carrying amount of unsecured loans increased by USD 4.1 billion, to USD 196.8 billion, mainly due to an increase in cash and balances with central banks. This was primarily driven by a shift within the high-quality liquid asset (HQLA) portfolio into cash and net new issuances of long-term debt measured at amortized cost, partly offset by currency effects. Debt securities, which are unsecured, decreased by USD 16.0 billion to USD 58.0 billion, mainly due to the aforementioned shift within the HQLA portfolio from securities into cash.

The carrying amount of partially or fully secured loans increased by USD 11.1 billion to USD 382.7 billion, of which the carrying amount of loans secured by collateral increased by USD 9.9 billion to USD 365.3 billion, mainly as a result of higher Lombard and mortgage lending.

 

Semi-annual |

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

 

 

 

 

 

 

 

 

 

 

30.6.21

 

 

 

 

 

 

 

 

1

Loans2

 

 196,793 

 382,662 

 579,456 

 

 365,259 

 4,482 

 30 

1a

of which: cash and balances at central banks

 

 159,997 

 

 159,997 

 

 

 

 

2

Debt securities

 

 58,041 

 

 58,041 

 

 

 

 

3

Total

 

 254,835 

 382,662 

 637,497 

 

 365,259 

 4,482 

 30 

4

of which: defaulted

 

 114 

 2,110 

 2,224 

 

 1,368 

 195 

 

 

 

 

 

 

 

 

 

 

 

31.12.20

 

 

 

 

 

 

 

 

1

Loans2

 

 192,669 

 371,652 

 564,322 

 

 355,364 

 4,392 

 12 

1a

of which: cash and balances at central banks

 

 157,489 

 

 157,489 

 

 

 

 

2

Debt securities

 

 74,059 

 

 74,059 

 

 

 

 

3

Total

 

 266,729 

 371,652 

 638,381 

 

 355,364 

 4,392 

 12 

4

of which: defaulted

 

 250 

 2,461 

 2,711 

 

 1,662 

 218 

 

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.

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13 


UBS Group AG consolidated 

Credit risk under the standardized approach

Introduction

The standardized approach is generally applied where using the A-IRB approach is not possible. The standardized approach requires banks to use risk assessments prepared by external credit assessment institutions (ECAIs) or export credit agencies to determine the risk weightings applied to rated counterparties.


Credit risk exposure and CRM effects

Semi-annual | The CR4 table below illustrates the credit risk exposure and effect of credit risk mitigation (CRM) on the calculation of capital requirements under the standardized approach. Compared with 31 December 2020, on-balance sheet exposures before credit conversion factors (CCF) and CRM increased by USD 13.5 billion, while on-balance sheet exposures post-CCF and post-CRM increased by USD 13.7 billion, primarily as the approach used for the covered bonds within the HQLA portfolio was changed from the A-IRB approach to the standardized approach. Off-balance sheet exposures before CCF and CRM in the Corporates asset class decreased by USD 3.8 billion, mainly due to decreases in margin loan commitments in the Investment Bank.

 

Semi-annual |

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 %

 

 

 

 

 

 

 

 

 

 

 

 

 

30.6.21

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 8,717 

 

 8,717 

 

 8,724 

 1 

 8,724 

 

 720 

 8.3 

2

Banks and securities dealers

 

 10,696 

 1,241 

 11,937 

 

 10,696 

 533 

 11,229 

 

 2,527 

 22.5 

3

Public-sector entities and multi-lateral development banks

 

 3,156 

 910 

 4,066 

 

 3,152 

 342 

 3,494 

 

 810 

 23.2 

4

Corporates

 

 13,821 

 11,523 

 25,344 

 

 13,790 

 1,069 

 14,859 

 

 9,718 

 65.4 

5

Retail

 

 12,380 

 4,160 

 16,540 

 

 12,110 

 526 

 12,636 

 

 8,199 

 64.9 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets2

 

 13,640 

 

 13,640 

 

 13,640 

 

 13,640 

 

 12,921 

 94.7 

8

Total

 

 62,410 

 17,834 

 80,243 

 

 62,111 

 2,472 

 64,583 

 

 34,895 

 54.0 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.20

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 8,292 

 

 8,292 

 

 8,296 

 123 

 8,420 

 

 876 

 10.4 

2

Banks and securities dealers

 

 5,404 

 1,162 

 6,566 

 

 5,404 

 530 

 5,934 

 

 1,327 

 22.4 

3

Public-sector entities and multi-lateral development banks

 

 212 

 731 

 943 

 

 211 

 148 

 359 

 

 144 

 40.1 

4

Corporates

 

 8,007 

 15,371 

 23,379 

 

 7,972 

 1,815 

 9,787 

 

 7,576 

 77.4 

5

Retail

 

 12,617 

 4,301 

 16,917 

 

 12,196 

 248 

 12,444 

 

 8,250 

 66.3 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets2

 

 14,345 

 

 14,345 

 

 14,345 

 

 14,345 

 

 13,391 

 93.3 

8

Total

 

 48,878 

 21,565 

 70,443 

 

 48,424 

 2,865 

 51,289 

 

 31,564 

 61.5 

1 Exposures in this table represent carrying amounts in accordance with the regulatory scope of consolidation.    2 Includes Non-counterparty-related assets.

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14 


 

Exposures by asset class and risk weight

Semi-annual | The CR5 table below provides an overview of exposures by asset classes and risk weights applied.

 

Semi-annual |

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

30.6.21

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 7,894 

 

 104 

 

 53 

 

 673 

 

 

 8,724 

2

Banks and securities dealers

 

 

 

 10,302 

 

 919 

 

 7 

 

 

 11,229 

3

Public-sector entities and multi-lateral development banks

 

 3 

 

 3,200 

 

 244 

 

 48 

 

 

 3,494 

4

Corporates

 

 

 

 5,837 

 

 525 

 442

 8,445 

 8 

 

 14,859 

5

Retail

 

 

 

 

 6,446 

 

 1,236 

 4,833 

 122 

 

 12,636 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 720 

 

 

 

 

 

 12,921 

 

 

 13,640 

8

Total

 

 8,616 

 

 19,443 

 6,446 

 1,742 

 1,280 

 26,926 

 130 

 

 64,583 

9

of which: mortgage loans

 

 

 

 

 6,432 

 

 182 

 557 

 

 

 7,172 

10

of which: past due1

 

 

 

 112 

 5 

 0 

 310 

 116 

 

 

 544 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.20

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 7,423 

 

 116 

 

 56 

 

 824 

 

 

 8,420 

2

Banks and securities dealers

 

 

 

 5,531 

 

 363 

 

 40 

 

 

 5,934 

3

Public-sector entities and multi-lateral development banks

 

 6 

 

 208 

 

 91 

 

 54 

 

 

 359 

4

Corporates

 

 

 

 1,959 

 

 512 

 1,0372

 6,275 

 4 

 

 9,787 

5

Retail

 

 

 

 

 6,052 

 

 1,321 

 4,929 

 141 

 

 12,444 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 954 

 

 

 

 

 

 13,391 

 

 

 14,345 

8

Total

 

 8,383 

 

 7,815 

 6,052 

 1,022 

 2,359 

 25,513 

 145 

 

 51,289 

9

of which: mortgage loans

 

 

 

 

 6,052 

 

 113 

 604 

 

 

 6,770 

10

of which: past due1

 

 

 

 104 

 7 

 4 

 428 

 133 

 

 

 676 

1 Comparative periods for past-due exposures have been adjusted to include loans to financial advisors.    2 Relates to structured margin lending exposures based on the methodology agreed with FINMA.

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15 


UBS Group AG consolidated 

Credit risk under the advanced internal ratings-based approaches

Introduction

Under the A-IRB approach, the required capital for credit risk is quantified through empirical models that we have developed internally to estimate the probability of default (PD), loss given default (LGD), exposure at default (EAD) and other parameters, subject to FINMA approval.

Credit risk exposures by portfolio and PD range

Semi-annual | The CR6 table on the following pages provides information about credit risk exposures under the A-IRB approach, including a breakdown of the main parameters used in A-IRB models to calculate the capital requirements, presented by portfolio and PD range across FINMA-defined asset classes.

Compared with 31 December 2020, exposures before the application of CCFs increased by USD 1.3 billion, to USD 1,029.9 billion across various asset classes, along with an overall RWA increase of USD 3.0 billion.

In the Retail: other retail asset class, total exposures pre-CCF increased by USD 28.5 billion to USD 508.6 billion and RWA increased by USD 2.0 billion to USD 15.9 billion, mainly reflecting higher drawn and unutilized Lombard facilities as well as the phase-in impact related to a new model for structured margin loans and sophisticated lending in Global Wealth Management.


In the Central governments and central banks asset class, total exposures pre-CCF decreased by USD 12.4 billion to USD 186.6 billion and RWA decreased by USD 0.5 billion to USD 2.3 billion, primarily due to a reduction in HQLA in Group Functions.

In the Public-sector entities and multi-lateral development banks asset class, total exposures pre-CCF decreased by USD 5.5 billion to USD 8.0 billion and RWA decreased by USD 0.6 billion to USD 0.6 billion, primarily driven by methodology and policy changes, due to the application of the standardized approach to covered bonds, as well as a reduction in HQLA in Group Functions.

In the Corporates: other lending asset class, total exposures pre-CCF decreased by USD 2.9 billion to USD 105.4 billion, primarily driven by methodology and policy changes, due to the application of the standardized approach to covered bonds, as well as a decrease in loans and loan commitments in Personal & Corporate Banking. RWA increased by USD 1.2 billion to USD 38.0 billion, mainly driven by increased loans and loan commitments in the Investment Bank.

Information about credit risk RWA for the first quarter of 2021, including details regarding movements in RWA, is provided on pages 8–10 of our 31 March 2021 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors. Further details about the movement of credit risk exposures under the A-IRB approach for the second quarter of 2021 are available in our CR8 disclosure on page 23 of this report.

 

 

  

16 


 

Credit risk exposures by portfolio and PD range

Semi-annual |

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-CCF1

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 30.6.21

 

 

0.00 to <0.15

 

 185,370 

 1 

 185,371 

 13.2 

 189,771 

 0.0 

<0.1

 30.4 

 1.1 

 2,171 

 1.1 

 5 

 

0.15 to <0.25

 

 567 

 

 567 

 

 475 

 0.2 

<0.1

 46.7 

 1.0 

 136 

 28.7 

 0 

 

0.25 to <0.50

 

 0 

 0 

 0 

 10.2 

 0 

 0.3 

<0.1

 45.2 

 2.4 

 0 

 60.7 

 0 

 

0.50 to <0.75

 

 82 

 3 

 86 

 55.0 

 5 

 0.6 

<0.1

 54.4 

 2.8 

 5 

 85.4 

 0 

 

0.75 to <2.50

 

 1 

 0 

 1 

 10.2 

 1 

 1.2 

<0.1

 38.8 

 3.0 

 1 

 94.1 

 0 

 

2.50 to <10.00

 

 127 

 465 

 592 

 36.6 

 20 

 3.8 

<0.1

 42.5 

 2.0 

 24 

 120.3 

 0 

 

10.00 to <100.00

 

 0 

 

 0 

 

 0 

 13.0 

<0.1

 45.5 

 1.0 

 0 

 209.0 

 0 

 

100.00 (default)

 

 10 

 0 

 10 

 10.2 

 4 

 100.0 

<0.1

 56.55

 4.3 

 5 

 106.0 

 5 

 

Subtotal

 

 186,158 

 469 

 186,627 

 36.6 

 190,277 

 0.0 

 0.1 

 30.5 

 1.1 

 2,342 

 1.2 

 11 

 6 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central governments and central banks as of 31.12.20

 

 

0.00 to <0.15

 

 198,605 

 1 

 198,606 

 13.1 

 203,051 

 0.0 

<0.1

 30.6 

 1.1 

 2,792 

 1.4 

 4 

 

0.15 to <0.25

 

 2 

 100 

 102 

 55.0 

 2 

 0.2 

<0.1

 10.0 

 1.0 

 0 

 6.4 

 0 

 

0.25 to <0.50

 

 0 

 

 0 

 

 0 

 0.3 

<0.1

 55.0 

 1.0 

 0 

 54.2 

 0 

 

0.50 to <0.75

 

 5 

 

 5 

 

 3 

 0.7 

<0.1

 96.5 

 1.0 

 4 

 141.2 

 0 

 

0.75 to <2.50

 

 1 

 0 

 1 

 9.7 

 3 

 1.2 

<0.1

 22.3 

 4.4 

 2 

 62.5 

 0 

 

2.50 to <10.00

 

 33 

 219 

 253 

 53.7 

 28 

 3.6 

<0.1

 52.5 

 1.1 

 40 

 145.9 

 1 

 

10.00 to <100.00

 

 0 

 

 0 

 

 0 

 13.2 

<0.1

 48.9 

 1.0 

 0 

 226.0 

 0 

 

100.00 (default)

 

 92 

 6 

 98 

 55.0 

 7 

 100.0 

<0.1

 39.85

 4.2 

 7 

 106.0 

 5 

 

Subtotal

 

 198,738 

 327 

 199,065 

 54.0 

 203,094 

 0.0 

 0.1 

 30.6 

 1.1 

 2,847 

 1.4 

 10 

 6 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 30.6.21

 

 

0.00 to <0.15

 

 7,836 

 1,287 

 9,122 

 53.9 

 9,014 

 0.1 

 0.5 

 50.4 

 1.1 

 1,954 

 21.7 

 7 

 

0.15 to <0.25

 

 736 

 441 

 1,177 

 41.8 

 834 

 0.2 

 0.3 

 56.6 

 1.8 

 503 

 60.3 

 2 

 

0.25 to <0.50

 

 488 

 489 

 977 

 44.4 

 577 

 0.4 

 0.2 

 60.2 

 1.0 

 457 

 79.2 

 1 

 

0.50 to <0.75

 

 214 

 203 

 417 

 43.6 

 252 

 0.6 

 0.1 

 63.2 

 1.1 

 293 

 116.2 

 1 

 

0.75 to <2.50

 

 489 

 610 

 1,098 

 45.1 

 620 

 1.7 

 0.2 

 54.4 

 1.2 

 847 

 136.6 

 5 

 

2.50 to <10.00

 

 502 

 700 

 1,202 

 46.8 

 523 

 4.0 

 0.2 

 64.9 

 1.0 

 1,164 

 222.7 

 14 

 

10.00 to <100.00

 

 81 

 77 

 158 

 34.5 

 17 

 11.1 

<0.1

 56.4 

 1.1 

 48 

 284.6 

 1 

 

100.00 (default)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 10,347 

 3,805 

 14,152 

 47.6 

 11,837 

 0.3 

 1.5 

 52.5 

 1.1 

 5,266 

 44.5 

 31 

 17 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 31.12.20

 

 

0.00 to <0.15

 

 10,177 

 1,171 

 11,348 

 54.0 

 11,541 

 0.0 

 0.5 

 40.7 

 1.0 

 1,880 

 16.3 

 5 

 

0.15 to <0.25

 

 1,001 

 333 

 1,334 

 39.7 

 969 

 0.2 

 0.3 

 52.3 

 1.7 

 531 

 54.8 

 1 

 

0.25 to <0.50

 

 601 

 418 

 1,019 

 48.2 

 588 

 0.4 

 0.2 

 59.8 

 1.0 

 470 

 79.9 

 1 

 

0.50 to <0.75

 

 186 

 303 

 489 

 45.0 

 305 

 0.7 

 0.1 

 63.1 

 1.1 

 354 

 116.2 

 2 

 

0.75 to <2.50

 

 931 

 472 

 1,403 

 43.9 

 1,145 

 1.7 

 0.2 

 58.8 

 1.2 

 1,598 

 139.5 

 12 

 

2.50 to <10.00

 

 422 

 412 

 835 

 43.2 

 385 

 4.6 

 0.2 

 67.0 

 1.1 

 925 

 240.4 

 12 

 

10.00 to <100.00

 

 31 

 116 

 147 

 51.6 

 15 

 10.8 

<0.1

 63.9 

 1.0 

 48 

 319.5 

 1 

 

100.00 (default)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 13,348 

 3,225 

 16,574 

 48.0 

 14,948 

 0.3 

 1.5 

 44.8 

 1.1 

 5,806 

 38.8 

 33 

 20 

 

17 


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-CCF1

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, multi-lateral development banks as of 30.6.21

 

 

0.00 to <0.15

 

 5,316 

 1,198 

 6,514 

 17.9 

 5,566 

 0.0 

 0.3 

 38.5 

 1.1 

 325 

 5.8 

 0 

 

0.15 to <0.25

 

 284 

 183 

 467 

 12.6 

 306 

 0.2 

 0.2 

 31.5 

 2.6 

 80 

 26.1 

 0 

 

0.25 to <0.50

 

 576 

 367 

 943 

 24.8 

 668 

 0.3 

 0.2 

 25.8 

 2.4 

 195 

 29.2 

 1 

 

0.50 to <0.75

 

 36 

 16 

 52 

 26.4 

 39 

 0.6 

<0.1

 31.3 

 2.7 

 20 

 50.0 

 0 

 

0.75 to <2.50

 

 1 

 0 

 1 

 70.0 

 1 

 1.2 

<0.1

 9.1 

 1.9 

 0 

 15.2 

 0 

 

2.50 to <10.00

 

 60 

 0 

 60 

 0.0 

 1 

 2.9 

<0.1

 17.1 

 5.0 

 0 

 49.9 

 0 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100.00 (default)

 

 4 

 

 4 

 

 4 

 100.0 

<0.1

 0.05

 1.0 

 5 

 106.0 

 

 

Subtotal

 

 6,278 

 1,764 

 8,041 

 18.9 

 6,585 

 0.1 

 0.7 

 36.8 

 1.3 

 625 

 9.5 

 1 

 0 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public-sector entities, multi-lateral development banks as of 31.12.20

 

 

0.00 to <0.15

 

 9,792 

 1,293 

 11,085 

 17.8 

 10,059 

 0.0 

 0.3 

 38.6 

 1.1 

 819 

 8.1 

 1 

 

0.15 to <0.25

 

 923 

 372 

 1,296 

 19.3 

 993 

 0.2 

 0.2 

 18.3 

 1.7 

 140 

 14.1 

 0 

 

0.25 to <0.50

 

 649 

 356 

 1,005 

 23.8 

 737 

 0.3 

 0.2 

 23.9 

 2.5 

 202 

 27.4 

 1 

 

0.50 to <0.75

 

 40 

 27 

 67 

 22.2 

 45 

 0.6 

<0.1

 30.8 

 2.8 

 22 

 49.4 

 0 

 

0.75 to <2.50

 

 1 

 0 

 1 

 81.4 

 2 

 1.0 

<0.1

 17.2 

 2.6 

 1 

 33.7 

 0 

 

2.50 to <10.00

 

 68 

 0 

 68 

 9.7 

 1 

 2.9 

<0.1

 17.1 

 5.0 

 1 

 49.9 

 0 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100.00 (default)

 

 5 

 

 5 

 

 5 

 100.0 

<0.1

 0.25

 1.0 

 5 

 106.0 

 

 

Subtotal

 

 11,478 

 2,048 

 13,526 

 19.2 

 11,841 

 0.1 

 0.7 

 35.9 

 1.2 

 1,190 

 10.0 

 2 

 0 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporates: specialized lending as of 30.6.21

 

 

0.00 to <0.15

 

 2,694 

 648 

 3,342 

 72.9 

 3,005 

 0.1 

 0.5 

 15.8 

 2.3 

 290 

 9.6 

 0 

 

0.15 to <0.25

 

 1,664 

 474 

 2,139 

 70.2 

 1,997 

 0.2 

 0.3 

 15.4 

 2.2 

 285 

 14.3 

 1 

 

0.25 to <0.50

 

 4,304 

 2,226 

 6,530 

 39.7 

 5,163 

 0.4 

 0.6 

 25.7 

 1.7 

 1,822 

 35.3 

 5 

 

0.50 to <0.75

 

 5,112 

 2,650 

 7,762 

 39.7 

 6,099 

 0.6 

 0.6 

 27.6 

 2.0 

 3,123 

 51.2 

 11 

 

0.75 to <2.50

 

 8,005 

 2,536 

 10,541 

 38.8 

 8,970 

 1.4 

 1.3 

 29.0 

 2.0 

 6,342 

 70.7 

 37 

 

2.50 to <10.00

 

 1,781 

 413 

 2,194 

 50.2 

 1,968 

 3.4 

 0.4 

 35.7 

 2.1 

 2,192 

 111.4 

 24 

 

10.00 to <100.00

 

 28 

 

 28 

 

 29 

 18.3 

<0.1

 37.9 

 3.5 

 91 

 310.3 

 2 

 

100.00 (default)

 

 184 

 2 

 186 

 82.1 

 82 

 100.0 

<0.1

 55.85

 2.5 

 86 

 106.0 

 104 

 

Subtotal

 

 23,771 

 8,950 

 32,721 

 44.0 

 27,313 

 1.2 

 3.7 

 26.2 

 2.0 

 14,231 

 52.1 

 183 

 117 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporates: specialized lending as of 31.12.20

 

 

0.00 to <0.15

 

 3,082 

 684 

 3,767 

 71.9 

 3,372 

 0.1 

 0.5 

 13.8 

 2.0 

 229 

 6.8 

 0 

 

0.15 to <0.25

 

 2,023 

 452 

 2,475 

 65.1 

 2,317 

 0.2 

 0.3 

 14.2 

 2.0 

 304 

 13.1 

 1 

 

0.25 to <0.50

 

 5,025 

 2,361 

 7,386 

 34.8 

 5,745 

 0.4 

 0.6 

 24.8 

 1.8 

 1,954 

 34.0 

 5 

 

0.50 to <0.75

 

 4,286 

 2,892 

 7,177 

 32.8 

 5,147 

 0.6 

 0.6 

 27.0 

 1.7 

 2,450 

 47.6 

 9 

 

0.75 to <2.50

 

 8,141 

 2,715 

 10,856 

 39.3 

 9,189 

 1.4 

 1.4 

 29.2 

 1.8 

 6,275 

 68.3 

 38 

 

2.50 to <10.00

 

 1,660 

 398 

 2,059 

 61.3 

 1,904 

 3.4 

 0.3 

 35.8 

 2.0 

 2,172 

 114.1 

 23 

 

10.00 to <100.00

 

 18 

 

 18 

 

 18 

 22.0 

<0.1

 33.0 

 5.0 

 72 

 398.0 

 1 

 

100.00 (default)

 

 209 

 8 

 218 

 75.0 

 106 

 100.0 

<0.1

 50.25

 2.4 

 113 

 106.0 

 108 

 

Subtotal

 

 24,443 

 9,512 

 33,955 

 40.7 

 27,799 

 1.3 

 3.7 

 25.3 

 1.8 

 13,569 

 48.8 

 186 

 125 

 

18 


 

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-CCF1

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 30.6.21

 

 

0.00 to <0.15

 

 14,541 

 16,855 

 31,396 

 36.1 

 17,706 

 0.1 

 7.7 

 34.6 

 1.6 

 3,723 

 21.0 

 4 

 

0.15 to <0.25

 

 5,764 

 7,927 

 13,691 

 35.3 

 8,180 

 0.2 

 2.4 

 36.5 

 2.2 

 3,275 

 40.0 

 7 

 

0.25 to <0.50

 

 5,776 

 4,951 

 10,727 

 36.7 

 6,382 

 0.4 

 3.3 

 29.2 

 2.6 

 3,105 

 48.7 

 7 

 

0.50 to <0.75

 

 3,877 

 2,879 

 6,757 

 42.9 

 4,946 

 0.6 

 3.0 

 27.2 

 2.2 

 2,580 

 52.2 

 9 

 

0.75 to <2.50

 

 10,800 

 8,611 

 19,412 

 41.9 

 12,586 

 1.4 

 11.4 

 30.0 

 2.1 

 8,905 

 70.8 

 54 

 

2.50 to <10.00

 

 5,177 

 15,677 

 20,854 

 35.5 

 9,636 

 4.4 

 5.4 

 33.8 

 2.3 

 14,657 

 152.1 

 146 

 

10.00 to <100.00

 

 270 

 441 

 711 

 57.2 

 428 

 14.5 

 0.3 

 23.6 

 2.0 

 769 

 179.4 

 15 

 

100.00 (default)

 

 1,392 

 417 

 1,809 

 47.7 

 954 

 100.0 

 0.9 

 31.85

 3.0 

 1,002 

 106.0 

 463 

 

Subtotal

 

 47,597 

 57,758 

 105,355 

 37.3 

 60,818 

 2.8 

 34.3 

 32.5 

 2.1 

 38,016 

 62.5 

 703 

 739 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporates: other lending as of 31.12.20

 

 

0.00 to <0.15

 

 18,411 

 20,390 

 38,801 

 34.3 

 22,251 

 0.1 

 4.7 

 33.0 

 1.5 

 4,486 

 20.2 

 4 

 

0.15 to <0.25

 

 6,697 

 6,593 

 13,290 

 35.3 

 8,393 

 0.2 

 1.7 

 36.4 

 2.2 

 3,287 

 39.2 

 5 

 

0.25 to <0.50

 

 4,536 

 4,490 

 9,026 

 38.5 

 5,311 

 0.4 

 2.7 

 33.2 

 2.2 

 2,620 

 49.3 

 6 

 

0.50 to <0.75

 

 4,370 

 3,403 

 7,773 

 38.1 

 5,489 

 0.6 

 2.4 

 31.3 

 1.9 

 3,122 

 56.9 

 11 

 

0.75 to <2.50

 

 11,515 

 8,534 

 20,049 

 44.4 

 13,078 

 1.4 

 10.8 

 30.1 

 2.1 

 9,441 

 72.2 

 57 

 

2.50 to <10.00

 

 4,995 

 11,609 

 16,605 

 39.6 

 8,392 

 4.4 

 4.7 

 32.5 

 2.1 

 11,715 

 139.6 

 120 

 

10.00 to <100.00

 

 319 

 443 

 762 

 57.3 

 470 

 14.8 

 0.3 

 29.1 

 2.0 

 1,040 

 221.1 

 20 

 

100.00 (default)

 

 1,576 

 358 

 1,934 

 53.2 

 1,079 

 100.0 

 0.6 

 31.65

 3.0 

 1,144 

 106.0 

 487 

 

Subtotal

 

 52,420 

 55,821 

 108,241 

 37.9 

 64,463 

 2.8 

 28.0 

 32.6 

 1.9 

 36,855 

 57.2 

 712 

 862 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: residential mortgages as of 30.6.21

 

 

0.00 to <0.15

 

 74,438 

 1,618 

 76,056 

 61.0 

 75,427 

 0.1 

 138.2 

 18.4 

 

 2,940 

 3.9 

 12 

 

0.15 to <0.25

 

 17,957 

 312 

 18,269 

 76.7 

 18,199 

 0.2 

 22.2 

 25.6 

 

 1,729 

 9.5 

 9 

 

0.25 to <0.50

 

 24,379 

 617 

 24,996 

 82.2 

 24,887 

 0.4 

 28.8 

 27.9 

 

 4,136 

 16.6 

 24 

 

0.50 to <0.75

 

 14,322 

 541 

 14,863 

 88.5 

 14,801 

 0.6 

 14.0 

 30.3 

 

 4,093 

 27.7 

 28 

 

0.75 to <2.50

 

 21,597 

 1,603 

 23,200 

 80.7 

 22,895 

 1.3 

 25.3 

 34.1 

 

 11,759 

 51.4 

 104 

 

2.50 to <10.00

 

 6,711 

 440 

 7,151 

 84.8 

 7,085 

 4.3 

 7.5 

 33.6 

 

 7,005 

 98.9 

 101 

 

10.00 to <100.00

 

 1,015 

 21 

 1,036 

 90.9 

 1,034 

 15.6 

 0.9 

 32.0 

 

 1,603 

 154.9 

 53 

 

100.00 (default)

 

 639 

 2 

 642 

 72.7 

 614 

 100.0 

 0.9 

 4.15

 

 651 

 106.0 

 26 

 

Subtotal

 

 161,057 

 5,154 

 166,211 

 75.7 

 164,943 

 1.0 

 237.8 

 24.6 

 

 33,917 

 20.6 

 358 

 161 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: residential mortgages as of 31.12.20

 

 

0.00 to <0.15

 

 74,826 

 1,790 

 76,616 

 67.1 

 75,989 

 0.1 

 136.1 

 18.3 

 

 3,041 

 4.0 

 12 

 

0.15 to <0.25

 

 18,179 

 477 

 18,656 

 71.2 

 18,522 

 0.2 

 22.3 

 25.2 

 

 1,702 

 9.2 

 9 

 

0.25 to <0.50

 

 24,542 

 750 

 25,292 

 73.9 

 25,097 

 0.4 

 28.7 

 26.8 

 

 3,956 

 15.8 

 24 

 

0.50 to <0.75

 

 14,554 

 652 

 15,206 

 73.0 

 15,034 

 0.6 

 13.8 

 29.2 

 

 3,952 

 26.3 

 28 

 

0.75 to <2.50

 

 21,785 

 1,838 

 23,623 

 73.3 

 23,132 

 1.3 

 26.3 

 32.4 

 

 11,402 

 49.3 

 100 

 

2.50 to <10.00

 

 7,174 

 548 

 7,722 

 78.5 

 7,612 

 4.5 

 8.5 

 30.9 

 

 7,098 

 93.2 

 103 

 

10.00 to <100.00

 

 982 

 59 

 1,041 

 70.5 

 1,025 

 15.2 

 0.9 

 31.7 

 

 1,525 

 148.9 

 49 

 

100.00 (default)

 

 746 

 3 

 749 

 59.8 

 721 

 100.0 

 1.0 

 3.75

 

 764 

 106.0 

 27 

 

Subtotal

 

 162,788 

 6,117 

 168,906 

 71.8 

 167,131 

 1.1 

 237.6 

 23.9 

 

 33,439 

 20.0 

 352 

 177 

 

19 


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-CCF1

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 30.6.213

 

 

0.00 to <0.15

 

 227 

 3,659 

 3,886 

 53.1 

 2,168 

 0.0 

 455.3 

 37.1 

 

 47 

 2.2 

 0 

 

0.15 to <0.25

 

 111 

 1,261 

 1,373 

 48.7 

 725 

 0.2 

 186.8 

 42.4 

 

 51 

 7.1 

 1 

 

0.25 to <0.50

 

 150 

 575 

 725 

 48.7 

 429 

 0.4 

 94.2 

 45.5 

 

 59 

 13.7 

 1 

 

0.50 to <0.75

 

 126 

 347 

 473 

 49.1 

 297 

 0.6 

 71.2 

 46.5 

 

 66 

 22.3 

 1 

 

0.75 to <2.50

 

 306 

 849 

 1,155 

 49.3 

 724 

 1.4 

 153.2 

 48.8 

 

 302 

 41.7 

 5 

 

2.50 to <10.00

 

 303 

 171 

 474 

 29.0 

 338 

 4.1 

 79.6 

 49.3 

 

 317 

 93.7 

 7 

 

10.00 to <100.00

 

 50 

 9 

 59 

 54.8 

 55 

 19.1 

 13.0 

 55.1 

 

 139 

 251.4 

 6 

 

100.00 (default)

 

 40 

 

 40 

 

 24 

 100.0 

 22.4 

 40.05

 

 25 

 106.0 

 16 

 

Subtotal

 

 1,313 

 6,871 

 8,185 

 50.6 

 4,761 

 1.3 

 1,075.6 

 42.1 

 

 1,007 

 21.1 

 36 

 27 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: qualifying revolving retail exposures (QRRE) as of 31.12.203

 

 

0.00 to <0.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.15 to <0.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.25 to <0.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.50 to <0.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.75 to <2.50

 

 66 

 462 

 528 

 

 91 

 1.7 

 29.1 

 47.0 

 

 97 

 106.6 

 1 

 

2.50 to <10.00

 

 1,245 

 6,425 

 7,670 

 

 1,723 

 2.7 

 901.7 

 42.0 

 

 606 

 35.2 

 19 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100.00 (default)

 

 40 

 

 40 

 

 24 

 100.0 

 23.0 

 40.05

 

 25 

 106.0 

 16 

 

Subtotal

 

 1,350 

 6,888 

 8,238 

 

 1,838 

 3.9 

 953.8 

 42.2 

 

 729 

 39.6 

 35 

 31 

 

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-CCF1

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 30.6.214

 

 

0.00 to <0.15

 

 131,672 

 324,934 

 456,605 

 19.3 

 194,127 

 0.0 

 397.3 

 28.9 

 

 8,541 

 4.4 

 23 

 

0.15 to <0.25

 

 3,768 

 6,668 

 10,436 

 19.8 

 5,085 

 0.2 

 8.5 

 25.1 

 

 547 

 10.8 

 2 

 

0.25 to <0.50

 

 6,697 

 9,172 

 15,869 

 17.3 

 8,280 

 0.4 

 9.6 

 35.4 

 

 2,007 

 24.2 

 10 

 

0.50 to <0.75

 

 3,518 

 6,846 

 10,364 

 19.7 

 4,865 

 0.6 

 10.1 

 24.0 

 

 1,122 

 23.1 

 7 

 

0.75 to <2.50

 

 5,268 

 8,370 

 13,638 

 21.7 

 7,084 

 1.1 

 45.0 

 32.3 

 

 2,844 

 40.1 

 26 

 

2.50 to <10.00

 

 704 

 748 

 1,453 

 19.5 

 846 

 5.0 

 3.5 

 47.6 

 

 711 

 84.1 

 25 

 

10.00 to <100.00

 

 75 

 104 

 178 

 20.8 

 96 

 20.1 

 0.8 

 27.7 

 

 71 

 74.2 

 5 

 

100.00 (default)

 

 45 

 1 

 46 

 27.7 

 20 

 100.0 

<0.1

 55.95

 

 21 

 106.0 

 26 

 

Subtotal

 

 151,746 

 356,843 

 508,589 

 19.3 

 220,404 

 0.1 

 474.9 

 29.1 

 

 15,865 

 7.2 

 125 

 40 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: other retail as of 31.12.20

 

 

0.00 to <0.15

 

 120,619 

 310,586 

 431,205 

 19.5 

 181,028 

 0.0 

 343.2 

 31.0 

 

 7,337 

 4.1 

 23 

 

0.15 to <0.25

 

 3,940 

 6,764 

 10,704 

 19.0 

 5,221 

 0.2 

 7.2 

 27.7 

 

 556 

 10.7 

 2 

 

0.25 to <0.50

 

 5,109 

 7,635 

 12,744 

 18.8 

 6,541 

 0.4 

 8.4 

 31.7 

 

 1,281 

 19.6 

 7 

 

0.50 to <0.75

 

 3,855 

 6,451 

 10,306 

 20.2 

 5,160 

 0.6 

 8.8 

 27.8 

 

 1,240 

 24.0 

 9 

 

0.75 to <2.50

 

 4,522 

 8,480 

 13,002 

 21.5 

 6,352 

 1.1 

 47.8 

 31.3 

 

 2,276 

 35.8 

 23 

 

2.50 to <10.00

 

 884 

 897 

 1,781 

 18.7 

 1,143 

 4.8 

 3.4 

 52.0 

 

 1,004 

 87.8 

 35 

 

10.00 to <100.00

 

 128 

 90 

 218 

 20.1 

 146 

 18.4 

 0.9 

 28.2 

 

 93 

 63.6 

 8 

 

100.00 (default)

 

 77 

 28 

 105 

 27.9 

 56 

 100.0 

<0.1

 28.05

 

 60 

 106.0 

 28 

 

Subtotal

 

 139,134 

 340,930 

 480,064 

 19.5 

 205,647 

 0.2 

 419.6 

 31.0 

 

 13,847 

 6.7 

 135 

 43 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total 30.6.21

 

 588,266 

 441,616 

 1,029,882 

 23.5 

 686,937 

 0.6 

 1,828.6 

 29.1 

 1.46

 111,267 

 16.2 

 1,450 

 1,106 

Total 31.12.20

 

 603,700 

 424,868 

 1,028,568 

 23.1 

 696,762 

 0.6 

 1,645.1 

 29.5 

 1.36

 108,281 

 15.5 

 1,466 

 1,264 

1 Figures as of 30 June 2021 and 31 December 2020 for off-balance sheet exposures, as well as EAD post-CCF and post-CRM, include uncommitted and fully unutilized Lombard loan limits for certain clients in Switzerland.    2 In line with 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 for QRRE, a balance factor approach was used instead of a CCF approach until 31 December 2020, where the EAD was calculated by multiplying the on-balance sheet exposure by a fixed factor of 1.4. A CCF approach has been applied from 2021 onward, due to the introduction of a new model for credit card exposures in Switzerland.    4 In the second quarter of 2021, we began to phase in a quarterly RWA increase of USD 0.7 billion related to a new model for structured margin loans and sophisticated lending in the “Retail: other retail” asset class. The RWA increase is being phased in over five quarters. The associated changes to PD and LGD, as well as a refinement to the asset class allocation, primarily toward the corporate asset class, will only be reflected with the introduction of the new model in the second quarter of 2022.    5 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.    6 Retail asset classes are excluded from the average maturity as maturity is not relevant for risk-weighting.

p

21 


UBS Group AG consolidated 

Credit derivatives used as CRM techniques

Semi-annual | Where credit derivatives are used for credit risk mitigation, the probability of default (PD) of the obligor is in general substituted with the PD of the hedge provider. In addition, default correlation between the obligor and the hedge provider is taken into account through the double default approach. Refer to the “CCR6: Credit derivatives exposures” table in the “Counterparty credit risk” section of this report for notional and fair value information about credit derivatives used as CRM techniques.

 

Semi-annual |

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

 

 

30.6.21

 

31.12.20

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

 

 2,342 

 2,342 

 

 2,847 

 2,847 

3

Banks and securities dealers – FIRB

 

 

 

 

 

 

4

Banks and securities dealers – AIRB

 

 5,266 

 5,266 

 

 5,806 

 5,806 

5

Public-sector entities, multi-lateral development banks – FIRB

 

 

 

 

 

 

6

Public-sector entities, multi-lateral development banks – AIRB

 

 625 

 625 

 

 1,190 

 1,190 

7

Corporates: specialized lending – FIRB

 

 

 

 

 

 

8

Corporates: specialized lending – AIRB

 

 14,231 

 14,231 

 

 13,569 

 13,569 

9

Corporates: other lending – FIRB

 

 

 

 

 

 

10

Corporates: other lending – AIRB

 

 38,292 

 38,016 

 

 37,220 

 36,855 

11

Retail: mortgage loans

 

 33,917 

 33,917 

 

 33,439 

 33,439 

12

Retail exposures: qualifying revolving retail (QRRE)

 

 1,007 

 1,007 

 

 729 

 729 

13

Retail: other

 

 15,865 

 15,865 

 

 13,847 

 13,847 

14

Equity positions (PD / LGD approach)

 

 

 

 

 

 

15

Total

 

 111,544 

 111,267 

 

 108,646 

 108,281 

p

 

22 


 

RWA flow statements of credit risk exposures under IRB

Quarterly | The CR8 table below provides a breakdown of the credit risk RWA movements in the second quarter of 2021 across movement categories defined by the Basel Committee on Banking Supervision (BCBS). These categories are described on page 48 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors

Credit risk RWA under the A-IRB approach increased by USD 5.1 billion to USD 111.3 billion during the second quarter of 2021.

The RWA increase from asset size movements of USD 1.4 billion was predominantly driven by increases in Lombard and other loans in Global Wealth Management and increases in loans and loan commitments to corporate clients in Personal & Corporate Banking. Model updates of USD 2.5 billion were mainly due to the phase-in impacts related to a new model for structured margin loans and sophisticated lending, new PD and LGD models for mortgages in the US, and updates to the LGD model for mortgages in Switzerland. Methodology and policy changes reduced RWA by USD 0.7 billion, primarily due to the application of the standardized approach to covered bonds, partly offset by a regulatory add-on for credit card exposures in Switzerland. Foreign exchange movements led to an RWA increase of USD 1.3 billion.

 

Quarterly |

CR8: RWA flow statements of credit risk exposures under IRB

USD million

For the quarter ended 30.6.21

 

For the quarter ended 31.3.21

1

RWA as of the beginning of the quarter

 106,186 

 

 108,281 

2

Asset size

 1,449 

 

 2,762 

3

Asset quality

 15 

 

 (1,456) 

4

Model updates

 2,467 

 

 550 

5

Methodology and policy

 (713) 

 

 

5a

of which: regulatory add-ons

 497 

 

 

6

Acquisitions and disposals

 

 

 

7

Foreign exchange movements

 1,260 

 

 (3,951) 

8

Other

 603 

 

 

9

RWA as of the end of the quarter

 111,267 

 

 106,186 

p

Equity exposures

Semi-annual | The CR10 table below provides information about our equity exposures under the simple risk-weight method.

 

Semi-annual |

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

USD million, except where indicated

 

On-balance sheet amount

Off-balance sheet amount

Risk weight in %1

Exposure amount2

RWA1

 

 

 

 

 

 

 

30.6.21

 

 

Exchange-traded equity exposures

 

 72 

 

 300 

 72 

 230 

Other equity exposures

 

 700 

 

 400 

 700 

 2,967 

Total

 

 772 

 

 

 772 

 3,197 

 

 

 

 

 

 

 

31.12.20

 

 

Exchange-traded equity exposures

 

 29 

 

 300 

 29 

 92 

Other equity exposures

 

 638 

 

 400 

 638 

 2,704 

Total

 

 667 

 

 

 667 

 2,796 

1 RWA are calculated post-application of the A-IRB multiplier of 6%, therefore the respective risk weight is higher than 300% and 400%.    2 The exposure amount for equities in the banking book is based on the net position.

p

  

23 


UBS Group AG consolidated 

 

Section 4  Counterparty credit risk

Introduction

Semi-annual I This section provides information about the exposures subject to the Basel III counterparty credit risk (CCR) framework. CCR arises from over-the-counter (OTC) and exchange-traded derivatives (ETDs), securities financing transactions (SFTs), and long settlement transactions. Within traded products, we determine the regulatory credit exposure on the majority of our derivatives portfolio by applying the effective expected positive exposure (EEPE) and stressed expected positive exposure (SEPE) as defined in the Basel III framework. For the rest of the portfolio, we apply the standardized approach for counterparty credit risk (SA-CCR). For the majority of SFTs (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.


Counterparty credit exposure

Semi-annual I The CCR1 table below presents the methods used to calculate counterparty credit risk exposure.

Compared with 31 December 2020, exposure at default (EAD) post-credit risk mitigation (CRM) related to the internal model method (IMM) decreased by USD 2.1 billion to USD 47.0 billion, primarily due to lower levels of client activity in the Investment Bank and mark-to-market movements in Non-core and Legacy Portfolio. EAD post-CRM related to the VaR approach decreased by USD 6.2 billion to USD 42.6 billion, primarily in the Investment Bank’s Financing business, due to lower levels of client activity, and in Group Treasury, mainly due to collateral optimization.

 

Semi-annual |

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

 

 

 

 

 

 

 

 

 

30.6.21

 

 

1

SA-CCR (for derivatives)

 

 4,420 

 6,321 

 

 1.4 

 15,039 

 5,223 

2

Internal model method (for derivatives)

 

 

 

 29,364 

 1.6 

 46,983 

 17,011 

3

Simple approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 

 

4

Comprehensive approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 23,906 

 6,471 

5

VaR (for SFTs)

 

 

 

 

 

 42,604 

 7,724 

6

Total

 

 

 

 

 

 128,532 

 36,429 

 

 

 

 

 

 

 

 

 

31.12.20

 

 

1

SA-CCR (for derivatives)

 

 5,090 

 5,383 

 

 1.4 

 14,663 

 4,353 

2

Internal model method (for derivatives)

 

 

 

 30,672 

 1.6 

 49,075 

 19,179 

3

Simple approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 

 

4

Comprehensive approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 23,464 

 6,544 

5

VaR (for SFTs)

 

 

 

 

 

 48,834 

 8,226 

6

Total

 

 

 

 

 

 136,036 

 38,301 

p

 

24 


 

Semi-annual | The CCR2 table below presents the credit valuation adjustment (CVA) capital charge with a breakdown by standardized and advanced approaches. In addition to the default risk capital requirements for CCR on derivatives, we are required to add a CVA capital charge to cover the risk of mark-to-market losses associated with the deterioration of counterparty credit quality. The advanced CVA value-at-risk (VaR) approach has been used to calculate the CVA capital charge where we use the IMM. Where this is not the case, the standardized CVA approach has been used.

Compared with 31 December 2020, the CVA risk-weighted assets (RWA) increased by USD 1.0 billion to USD 3.9 billion, primarily due to a methodology change related to CVA risk for derivative exposure with Lombard clients.

Semi-annual |

CCR2: Credit valuation adjustment (CVA) capital charge

 

 

 

30.6.21

 

31.12.20

USD million

 

EAD post-CRM

RWA

 

EAD post-CRM

RWA

 

Total portfolios subject to the advanced CVA capital charge

 

 45,791 

 1,182 

 

 48,453 

 1,358 

1

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

 

 

 277 

 

 

 371 

2

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

 

 

 905 

 

 

 987 

3

All portfolios subject to the standardized CVA capital charge

 

 14,733 

 2,756 

 

 5,470 

 1,586 

4

Total subject to the CVA capital charge

 

 60,525 

 3,938 

 

 53,923 

 2,945 

p

Semi-annual | The CCR3 table below provides information about our CCR exposures under the standardized approach. Compared with 31 December 2020, the total CCR exposures decreased by USD 0.5 billion to USD 5.8 billion, primarily due to lower margin lending exposures in the Investment Bank.

Semi-annual |

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 30.6.21

 

 

1

Central governments and central banks

 

 

 

 

 

 

 

 

 

 

2

Banks and securities dealers

 

 

 

 218 

 48 

 

 2 

 

 

 268 

3

Public-sector entities and multi-lateral development banks

 

 

 

 131 

 99 

 

 0 

 

 

 230 

4

Corporates

 

 

 

 27 

 116 

 3,136 

 1,775 

 

 

 5,054 

5

Retail

 

 

 

 0 

 

 91 

 164 

 

 

 255 

6

Equity

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 

 

 

 

 

 

 

 

 

8

Total

 

 

 

 376 

 263 

 3,227 

 1,941 

 

 

 5,807 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory portfolio as of 31.12.20

 

 

1

Central governments and central banks

 

 

 

 

 

 

 

 

 

 0 

2

Banks and securities dealers

 

 

 

 48 

 111 

 

 0 

 

 

 159 

3

Public-sector entities and multi-lateral development banks

 

 

 

 139 

 135 

 

 0 

 

 

 274 

4

Corporates

 

 

 

 77 

 123 

 3,712 

 1,758 

 2 

 

 5,672 

5

Retail

 

 

 

 0 

 

 3 

 179 

 

 

 182 

6

Equity

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 

 

 

 

 

 

 

 

 

8

Total

 

 

 

 263 

 369 

 3,715 

 1,938 

 2 

 

 6,287 

p

 

25 


UBS Group AG consolidated 

Semi-annual | 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 advanced internal ratings-based (A-IRB) approach across Swiss Financial Market Supervisory Authority (FINMA)-defined asset classes. Compared with 31 December 2020, EAD post-CRM decreased by USD 7.0 billion, to USD 122.7 billion across the various asset classes, resulting in an overall RWA decrease of USD 1.5 billion to USD 31.9 billion.

In the Central governments and central banks asset class, EAD post-CRM decreased by USD 4.8 billion to USD 10.7 billion and RWA decreased by USD 0.6 billion to USD 0.8 billion, mainly as a result of lower levels of activity in SFTs in the Investment Bank and Group Functions.

In the Banks and securities dealers asset class, EAD post-CRM decreased by USD 3.3 billion to USD 24.4 billion and RWA decreased by USD 1.2 billion to USD 6.3 billion, primarily driven by lower levels of activity, mainly in SFTs and, to a lesser extent, in derivatives in the Investment Bank and Group Functions.

In the Public-sector entities and multi-lateral development banks asset class, EAD post-CRM decreased by USD 0.8 billion to USD 1.0 billion, mainly due to mark-to-market movements in interest rate swap derivatives in Non-core and Legacy Portfolio.

In the Corporates: including specialized lending asset class, EAD post-CRM increased by USD 1.7 billion to USD 77.8 billion and RWA increased by USD 0.5 billion to USD 23.9 billion, due to exposure increases in SFTs and foreign exchange derivatives, as a result of increased levels of client activity, mainly in the Investment Bank.

Information about RWA, including details of movements in CCR RWA, is provided on pages 8–11 of our 31 March 2021 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors, and on page 30 of this report.

Semi-annual |

CCR4: IRB – CCR exposures by portfolio and PD scale

USD million, except where indicated

 

EAD post-CRM

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years1

RWA

RWA density in %

 

 

 

 

 

 

 

 

 

Central governments and central banks as of 30.6.21

 

 

0.00 to <0.15

 

 10,385 

 0.0 

 0.1 

 39.3 

 0.6 

 599 

 5.8 

0.15 to <0.25

 

 111 

 0.2 

<0.1

 40.9 

 0.7 

 30 

 26.8 

0.25 to <0.50

 

 225 

 0.3 

<0.1

 93.8 

 0.7 

 210 

 93.4 

0.50 to <0.75

 

 0 

 0.7 

<0.1

 100.0 

 1.0 

 1 

 146.2 

0.75 to <2.50

 

 4 

 1.3 

<0.1

 70.0 

 1.0 

 6 

 136.6 

2.50 to <10.00

 

 

 

 

 

 

 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 10,726 

 0.0 

 0.1 

 40.5 

 0.6 

 846 

 7.9 

 

 

 

 

 

 

 

 

 

Central governments and central banks as of 31.12.20

 

 

0.00 to <0.15

 

 14,751 

 0.0 

 0.1 

 38.6 

 0.5 

 787 

 5.3 

0.15 to <0.25

 

 199 

 0.2 

<0.1

 38.2 

 0.9 

 53 

 26.4 

0.25 to <0.50

 

 494 

 0.3 

<0.1

 96.3 

 0.9 

 469 

 94.9 

0.50 to <0.75

 

 128 

 0.7 

<0.1

 99.6 

 1.0 

 186 

 145.7 

0.75 to <2.50

 

 

 

 

 

 

 

 

2.50 to <10.00

 

 0 

 2.6 

<0.1

 75.0 

 1.0 

 0 

 228.3 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 15,572 

 0.0 

 0.1 

 40.9 

 0.5 

 1,495 

 9.6 

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 30.6.21

 

 

0.00 to <0.15

 

 17,595 

 0.1 

 0.4 

 50.0 

 0.6 

 2,948 

 16.8 

0.15 to <0.25

 

 4,192 

 0.2 

 0.2 

 51.6 

 0.7 

 1,553 

 37.1 

0.25 to <0.50

 

 1,482 

 0.4 

 0.2 

 52.6 

 0.6 

 695 

 46.9 

0.50 to <0.75

 

 399 

 0.6 

<0.1

 59.5 

 0.7 

 350 

 87.7 

0.75 to <2.50

 

 695 

 1.3 

 0.1 

 47.2 

 0.7 

 676 

 97.3 

2.50 to <10.00

 

 20 

 3.1 

<0.1

 70.7 

 1.0 

 41 

 208.5 

10.00 to <100.00

 

 3 

 22.0 

<0.1

 45.0 

 1.0 

 8 

 241.3 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 24,387 

 0.2 

 1.0 

 50.5 

 0.6 

 6,272 

 25.7 

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 31.12.20

 

 

0.00 to <0.15

 

 18,474 

 0.1 

 0.4 

 50.0 

 0.6 

 3,150 

 17.1 

0.15 to <0.25

 

 5,913 

 0.2 

 0.2 

 49.7 

 0.5 

 1,964 

 33.2 

0.25 to <0.50

 

 1,894 

 0.4 

 0.2 

 48.5 

 0.7 

 904 

 47.7 

0.50 to <0.75

 

 633 

 0.7 

<0.1

 60.4 

 0.6 

 582 

 91.9 

0.75 to <2.50

 

 738 

 1.3 

 0.1 

 52.4 

 1.0 

 827 

 112.1 

2.50 to <10.00

 

 29 

 3.9 

<0.1

 77.8 

 1.0 

 67 

 231.7 

10.00 to <100.00

 

 0 

 22.0 

<0.1

 45.0 

 1.0 

 0 

 241.8 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 27,681 

 0.2 

 1.0 

 50.1 

 0.6 

 7,494 

 27.1 

 

26 


 

  

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 and multi-lateral development banks as of 30.6.21

 

 

0.00 to <0.15

 

 736 

 0.0 

<0.1

 40.2 

 0.6 

 31 

 4.2 

0.15 to <0.25

 

 292 

 0.2 

<0.1

 55.8 

 1.3 

 100 

 34.3 

0.25 to <0.50

 

 0 

 0.4 

<0.1

 100.0 

 1.1 

 0 

 84.4 

0.50 to <0.75

 

 

 

 

 

 

 

 

0.75 to <2.50

 

 0 

 1.0 

<0.1

 34.9 

 1.0 

 0 

 60.2 

2.50 to <10.00

 

 

 

 

 

 

 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 1,029 

 0.1 

<0.1

 44.7 

 0.8 

 131 

 12.7 

 

 

 

 

 

 

 

 

 

Public-sector entities and multi-lateral development banks as of 31.12.20

 

 

0.00 to <0.15

 

 1,308 

 0.0 

<0.1

 41.0 

 0.7 

 129 

 9.9 

0.15 to <0.25

 

 470 

 0.2 

<0.1

 42.1 

 1.3 

 111 

 23.7 

0.25 to <0.50

 

 

 

 

 

 

 

 

0.50 to <0.75

 

 0 

 0.6 

<0.1

 100.0 

 1.4 

 0 

 121.3 

0.75 to <2.50

 

 

 

 

 

 

 

 

2.50 to <10.00

 

 

 

 

 

 

 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 26 

 100.0 

<0.1

 

 2.9 

 27 

 103.0 

Subtotal

 

 1,805 

 1.5 

<0.1

 40.7 

 0.9 

 268 

 14.8 

 

 

 

 

 

 

 

 

 

Corporates: including specialized lending as of 30.6.212

 

 

0.00 to <0.15

 

 52,198 

 0.0 

 11.3 

 34.4 

 0.5 

 6,427 

 12.3 

0.15 to <0.25

 

 9,975 

 0.2 

 2.0 

 50.8 

 0.6 

 5,438 

 54.5 

0.25 to <0.50

 

 3,088 

 0.3 

 0.7 

 71.8 

 0.6 

 3,669 

 118.8 

0.50 to <0.75

 

 2,753 

 0.6 

 0.7 

 32.0 

 0.5 

 1,836 

 66.7 

0.75 to <2.50

 

 7,951 

 1.2 

 1.2 

 22.8 

 0.4 

 5,062 

 63.7 

2.50 to <10.00

 

 1,847 

 2.9 

 0.1 

 17.3 

 0.4 

 1,403 

 75.9 

10.00 to <100.00

 

 9 

 13.0 

<0.1

 30.0 

 1.0 

 13 

 137.8 

100.00 (default)

 

 22 

 100.0 

<0.1

 

 2.6 

 23 

 102.6 

Subtotal

 

 77,843 

 0.3 

 16.1 

 36.3 

 0.5 

 23,870 

 30.7 

 

 

 

 

 

 

 

 

 

Corporates: including specialized lending as of 31.12.202

 

 

0.00 to <0.15

 

 52,552 

 0.0 

 10.8 

 34.5 

 0.5 

 6,653 

 12.7 

0.15 to <0.25

 

 8,375 

 0.2 

 1.9 

 54.9 

 0.7 

 4,992 

 59.6 

0.25 to <0.50

 

 3,074 

 0.3 

 0.7 

 70.1 

 0.7 

 3,539 

 115.1 

0.50 to <0.75

 

 2,579 

 0.6 

 0.6 

 32.7 

 0.6 

 1,846 

 71.6 

0.75 to <2.50

 

 7,392 

 1.2 

 1.1 

 22.6 

 0.4 

 4,719 

 63.8 

2.50 to <10.00

 

 2,171 

 3.1 

 0.1 

 15.9 

 0.3 

 1,609 

 74.1 

10.00 to <100.00

 

 3 

 13.0 

<0.1

 20.0 

 1.0 

 5 

 147.0 

100.00 (default)

 

 0 

 100.0 

<0.1

 

 1.0 

 0 

 106.0 

Subtotal

 

 76,146 

 0.3 

 15.4 

 36.5 

 0.5 

 23,363 

 30.7 

 

27 


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 30.6.21

 

 

0.00 to <0.15

 

 7,509 

 0.0 

 13.4 

 28.6 

 

 326 

 4.3 

0.15 to <0.25

 

 131 

 0.2 

 0.1 

 26.3 

 

 18 

 13.7 

0.25 to <0.50

 

 215 

 0.4 

 0.1 

 33.8 

 

 57 

 26.4 

0.50 to <0.75

 

 101 

 0.6 

<0.1

 30.7 

 

 35 

 35.1 

0.75 to <2.50

 

 761 

 1.0 

 9.6 

 29.4 

 

 302 

 39.7 

2.50 to <10.00

 

 18 

 3.5 

<0.1

 32.0 

 

 9 

 49.1 

10.00 to <100.00

 

 7 

 20.4 

<0.1

 24.4 

 

 4 

 62.5 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 8,741 

 0.2 

 23.4 

 28.8 

 

 751 

 8.6 

 

 

 

 

 

 

 

 

 

Retail: other retail as of 31.12.20

 

 

0.00 to <0.15

 

 7,157 

 0.0 

 12.7 

 29.8 

 

 306 

 4.3 

0.15 to <0.25

 

 74 

 0.2 

 0.1 

 28.1 

 

 9 

 11.5 

0.25 to <0.50

 

 189 

 0.3 

 0.1 

 32.8 

 

 46 

 24.5 

0.50 to <0.75

 

 175 

 0.6 

<0.1

 30.5 

 

 53 

 30.1 

0.75 to <2.50

 

 915 

 1.0 

 9.5 

 31.3 

 

 293 

 32.1 

2.50 to <10.00

 

 32 

 3.9 

<0.1

 29.8 

 

 15 

 46.4 

10.00 to <100.00

 

 3 

 14.4 

<0.1

 27.9 

 

 2 

 56.9 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 8,546 

 0.2 

 22.7 

 30.1 

 

 724 

 8.5 

 

 

 

 

 

 

 

 

 

Total 30.6.21

 

 122,726 

 0.2 

 40.7 

 39.0 

 0.63

 31,870 

 26.0 

Total 31.12.20

 

 129,750 

 0.2 

 38.3 

 39.6 

 0.63

 33,344 

 25.7 

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 

 

  

28 


 

Semi-annual | The CCR5 table below presents a breakdown of collateral posted or received relating to counterparty credit risk exposures from derivative transactions or SFTs.

Compared with 31 December 2020, the fair value of collateral received for derivatives decreased by USD 3.4 billion to USD 66.9 billion, mainly due to lower collateral received on OTC derivatives in the Investment Bank as a result of lower levels of client activity. The fair value of posted collateral for derivatives decreased by USD 2.4 billion to USD 53.3 billion, mainly driven by a reduction in the Investment Bank based on a decrease in replacement values for foreign exchange and rates products during the first half of 2021.


The fair value of collateral received for SFTs increased by USD 12.8 billion to USD 681.5 billion, primarily reflecting higher collateral related to equity securities in the Investment Bank in line with equity market increases in the first half of 2021, partly offset by a balance sheet decrease related to sovereign debt collateral in Group Treasury. The fair value of posted collateral for SFTs increased by USD 2.7 billion to USD 490.0 billion, mainly driven by the Investment Bank, mainly due to higher collateral related to equity securities in line with equity market increases in the first half of 2021. This increase was also driven by higher cash collateral due to an increase in securities borrowing, partly offset by lower sovereign debt collateral in Group Treasury.

 

Semi-annual |

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.6.21

 

 

Cash – domestic currency4

 

 2,467 

 17,176 

 19,643 

 

 2,199 

 12,682 

 14,881 

 

 29,508 

 

 68,723 

Cash – other currencies4

 

 0 

 22,208 

 22,208 

 

 1,416 

 13,522 

 14,939 

 

 9,029 

 

 41,972 

Sovereign debt

 

 6,550 

 10,112 

 16,663 

 

 8,702 

 7,445 

 16,147 

 

 230,904 

 

 153,432 

Other debt securities

 

 0 

 2,499 

 2,499 

 

 324 

 482 

 806 

 

 87,268 

 

 32,946 

Equity securities

 

 5,642 

 284 

 5,926 

 

 2,609 

 3,889 

 6,499 

 

 324,774 

 

 192,955 

Total

 

 14,659 

 52,280 

 66,939 

 

 15,251 

 38,021 

 53,272 

 

 681,483 

 

 490,027 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.20

 

 

Cash – domestic currency4

 

 2,375 

 20,252 

 22,627 

 

 1,955 

 11,094 

 13,049 

 

 27,309 

 

 70,886 

Cash – other currencies4

 

 

 23,884 

 23,884 

 

 1,401 

 17,859 

 19,260 

 

 11,284 

 

 34,253 

Sovereign debt

 

 6,801 

 10,392 

 17,193 

 

 8,059 

 8,586 

 16,645 

 

 239,763 

 

 163,865 

Other debt securities

 

 

 2,317 

 2,317 

 

 503 

 524 

 1,027 

 

 81,959 

 

 33,238 

Equity securities

 

 4,241 

 31 

 4,271 

 

 2,604 

 3,077 

 5,681 

 

 308,349 

 

 185,050 

Total

 

 13,417 

 56,876 

 70,293 

 

 14,523 

 41,139 

 55,662 

 

 668,664 

 

 487,292 

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 event 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

 

Semi-annual | The CCR6 table below presents an overview of credit risk protection bought or sold through credit derivatives.

Compared with 31 December 2020, notionals for credit derivatives decreased by USD 11.7 billion to USD 84.8 billion for protection bought and by USD 13.4 billion to USD 74.4 billion for protection sold. This was primarily driven by single-name credit default swaps and index credit default swaps, mostly due to client-driven decreases in the Investment Bank’s Financing business, as well as compression activities and trade maturities in Group Treasury and the Investment Bank.

 

Semi-annual |

CCR6: Credit derivatives exposures

 

 

30.6.21

 

31.12.20

USD million

 

Protection bought

Protection

sold

 

Protection bought

Protection

sold

Notionals1

 

 

 

 

 

 

Single-name credit default swaps

 

 35,552 

 38,593 

 

 42,073 

 46,350 

Index credit default swaps

 

 41,854 

 33,629 

 

 49,311 

 40,022 

Total return swaps

 

 2,842 

 922 

 

 3,128 

 1,344 

Credit options

 

 4,570 

 1,250 

 

 2,045 

 61 

Total notionals

 

 84,818 

 74,394 

 

 96,556 

 87,777 

Fair values

 

 

 

 

 

 

Positive fair value (asset)

 

 485 

 1,569 

 

 535 

 1,839 

Negative fair value (liability)

 

 1,840 

 563 

 

 2,256 

 682 

1 Includes notional amounts for client-cleared transactions.

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UBS Group AG consolidated 

Counterparty credit risk risk-weighted assets

Quarterly | The CCR7 table below presents a flow statement explaining changes in counterparty credit risk RWA determined under the internal model method (IMM) for derivatives and the value-at-risk (VaR) approach for SFTs.

CCR RWA on derivatives under the IMM decreased by USD 2.1 billion to USD 17.2 billion during the second quarter of 2021, primarily due to asset size movements in the Investment Bank mainly as a result of lower client activity levels. CCR RWA on SFTs under the VaR approach increased by USD 0.6 billion to USD 7.9 billion during the second quarter of 2021, primarily driven by asset size movements due to higher levels of client 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 48 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at 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 30.6.21

 

For the quarter ended 31.3.21

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

 

 19,352 

 7,353 

 26,705 

 

 19,380 

 8,386 

 27,767 

2

Asset size

 

 (2,139) 

 752 

 (1,386) 

 

 911 

 (767) 

 144 

3

Credit quality of counterparties

 

 (73) 

 (69) 

 (141) 

 

 (338) 

 (37) 

 (376) 

4

Model updates

 

 17 

 

 17 

 

 (211) 

 (90) 

 (301) 

5

Methodology and policy

 

 

 (150) 

 (150) 

 

 

 

 

5a

of which: regulatory add-ons

 

 

 (150) 

 (150) 

 

 

 

 

6

Acquisitions and disposals

 

 

 

 

 

 

 

 

7

Foreign exchange movements

 

 74 

 23 

 97 

 

 (390) 

 (139) 

 (529) 

8

Other

 

 

 

 

 

 

 

 

9

RWA as of the end of the quarter

 

 17,232 

 7,909 

 25,141 

 

 19,352 

 7,353 

 26,705 

p

 

 

30 


 

Semi-annual | The CCR8 table below presents a breakdown of exposures to central counterparties and related RWA. Compared with 31 December 2020, exposures to qualifying central counterparties (QCCPs) increased by USD 2.2 billion to USD 56.7 billion, primarily due to exchange-traded derivatives in the Investment Bank and SFTs in Group Treasury. RWA relating to QCCPs increased by USD 0.3 billion to USD 1.8 billion and RWA relating to non-QCCPs increased by USD 0.3 billion to USD 0.9 billion, primarily due to higher default fund contributions.

 

Semi-annual |

CCR8: Exposures to central counterparties

 

30.6.21

31.12.20

USD million

EAD (post-CRM)

RWA

EAD (post-CRM)

RWA

1

Exposures to QCCPs (total)1

 56,664 

 1,754 

 54,507 

 1,431 

2

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

 27,964 

 320 

 24,531 

 258 

3

(i) OTC derivatives

 2,465 

 45 

 1,614 

 29 

4

(ii) Exchange-traded derivatives

 18,557 

 137 

 17,126 

 113 

5

(iii) Securities financing transactions

 6,943 

 139 

 5,792 

 116 

6

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

 

 

 

 

7

Segregated initial margin

 

 

 

 

8

Non-segregated initial margin2

 26,585 

 256 

 28,023 

 248 

9

Pre-funded default fund contributions

 2,115 

 1,177 

 1,953 

 925 

10

Unfunded default fund contributions

 

 

 

 

11

Exposures to non-QCCPs (total)

 645 

 874 

 478 

 622 

12

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

 199 

 199 

 143 

 143 

13

(i) OTC derivatives

 0 

 0 

 1 

 1 

14

(ii) Exchange-traded derivatives

 121 

 121 

 65 

 65 

15

(iii) Securities financing transactions

 78 

 78 

 77 

 77 

16

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

 

 

 

 

17

Segregated initial margin

 

 

 

 

18

Non-segregated initial margin2

 426 

 426 

 322 

 322 

19

Pre-funded default fund contributions

 9 

 113 

 6 

 73 

20

Unfunded default fund contributions

 11 

 136 

 7 

 84 

1 Qualifying central counterparties (QCCPs) are entities licensed by regulators to operate as CCPs.    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 (refer to line 2 for QCCPs and line 12 for non-QCCPs). The exposures for non-segregated initial margin (refer to line 8 for QCCPs and line 18 for non-QCCPs), i.e., not bankruptcy-remote in accordance with FINMA Circular 2017/7, reflect the replacement costs under SA-CCR multiplied by an alpha factor of 1.4. The RWA 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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31 


UBS Group AG consolidated 

 

Section 5  Securitizations

Introduction

Semi-annual | This section provides details of traditional and synthetic securitization exposures in the banking and trading book based on the Basel III securitization framework.

In a traditional securitization, a pool of exposures (e.g., loans, commitments, equity securities and other types of exposures) 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 exposures. 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.


Securitization exposures in the banking and trading book

Semi-annual | The ”Securitization exposures in the banking and trading book and associated regulatory capital requirements” table outlines the carrying values on the balance sheet in the banking and trading books as of 30 June 2021 and 31 December 2020, respectively. The table also shows the market risk RWA from securitization and the capital charge after application of the revised securitization framework caps. The semi-annual securitization disclosures (SEC1 – SEC4) have been condensed into the above-mentioned form based on materiality. Refer to our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information.

Development of securitization exposures in the first half of 2021

Semi-annual | Compared with 31 December 2020, securitization exposures in the banking book increased by USD 438 million, primarily due to a wholesale investment. Securitization exposures in the trading book increased by USD 28 million, mainly related to secondary trading in commercial mortgage-backed securities in the Investment Bank. p  

 

32 


 

Semi-annual |

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

USD million

 

Carrying Value

 

RWA

 

Total Capital Charge after cap

 

 

 

 

 

 

 

30.6.21

Asset Classes – Banking Book1

 

 

 

 

 

 

Retail

 

 35 

 

 248 

 

 20 

Wholesale

 

 550 

 

 130 

 

 10 

Re-securitization

 

 0 

 

 0 

 

 0 

Total Banking Book

 

 586 

 

 379 

 

 30 

of which: UBS acts as investor

 

 552 

 

 148 

 

 12 

of which: UBS acts as originator and / or sponsor

 

 34 

 

 230 

 

 18 

Asset Classes – Trading Book

 

 

 

 

 

 

Retail

 

 12 

 

 133 

 

 11 

Wholesale

 

 259 

 

 555 

 

 44 

Re-securitization

 

 14 

 

 38 

 

 3 

Total Trading Book

 

 285 

 

 726 

 

 58 

Total

 

 870 

 

 1,104 

 

 88 

 

 

 

 

 

 

 

31.12.20

Asset Classes – Banking Book1

 

 

 

 

 

 

Retail

 

 36 

 

 246 

 

 20 

Wholesale

 

 112 

 

 68 

 

 5 

Re-securitization

 

 0 

 

 0 

 

 0 

Total Banking Book

 

 148 

 

 314 

 

 25 

of which: UBS acts as investor

 

 113 

 

 74 

 

 6 

of which: UBS acts as originator and / or sponsor

 

 35 

 

 241 

 

 19 

Asset Classes – Trading Book

 

 

 

 

 

 

Retail

 

 18 

 

 163 

 

 13 

Wholesale

 

 224 

 

 270 

 

 22 

Re-securitization

 

 14 

 

 23 

 

 2 

Total Trading Book

 

 257 

 

 456 

 

 37 

Total

 

 405 

 

 771 

 

 62 

1 Of the securitization exposures in the banking book, 94% carried a risk weighting of up to 100% as of 30 June 2021 (31 December 2020: 76%).

p

  

33 


UBS Group AG consolidated 

 

 

Section 6  Market risk

Overview

Semi-annual | The amount of capital required to underpin market risk in the regulatory trading book is calculated using a variety of methods approved by the Swiss Financial Market Supervisory Authority (FINMA). The components contributing to market risk risk-weighted assets (RWA) are value-at-risk (VaR), stressed value-at-risk (SVaR), an add-on for risks that are potentially not fully modeled in VaR (risks not in VaR, or RniV), the incremental risk charge (IRC) and the securitization framework for securitization positions in the trading book. Refer to pages 74–75, 82 and 84–86 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at 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 2021

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

The MR2 table below provides a breakdown of the movement in market risk RWA in the second quarter of 2021 under an internal models approach across those components, pursuant to the movement categories defined by the Basel Committee on Banking Supervision (the BCBS). These categories are described on page 78 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.  

Market risk RWA under an internal models approach decreased by USD 2.7 billion to USD 7.1 billion in the second quarter of 2021, driven primarily by lower average value-at-risk (VaR) levels in the Investment Bank’s Global Markets business.

The VaR multiplier remained unchanged compared with the prior quarter, at 3.0.

 

 

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 31.12.20

 2,170 

 7,257 

 1,958 

 

 

 11,385 

1a

Regulatory adjustment

 (1,332) 

 (4,034) 

 

 

 

 (5,366) 

1b

RWA at previous quarter-end (end of day)

 838 

 3,223 

 1,958 

 

 

 6,019 

2

Movement in risk levels

 2,033 

 (1,950) 

 102 

 

 

 185 

3

Model updates / changes

 (102) 

 98 

 

 

 

 (4) 

4

Methodology and policy

 

 

 

 

 

 

5

Acquisitions and disposals

 

 

 

 

 

 

6

Foreign exchange movements

 

 

 

 

 

 

7

Other

 (77) 

 (21) 

 

 

 

 (98) 

8a

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

 2,692 

 1,350 

 2,060 

 

 

 6,102 

8b

Regulatory adjustment

 

 3,664 

 

 

 

 3,664 

8c

RWA as of 31.3.21

 2,692 

 5,014 

 2,060 

 

 

 9,766 

1

RWA as of 31.3.21

 2,692 

 5,014 

 2,060 

 

 

 9,766 

1a

Regulatory adjustment

 

 (3,664) 

 

 

 

 (3,664) 

1b

RWA at previous quarter-end (end of day)

 2,692 

 1,350 

 2,060 

 

 

 6,102 

2

Movement in risk levels

 (2,380) 

 226 

 (6) 

 

 

 (2,160) 

3

Model updates / changes

 

 (19) 

 157 

 

 

 137 

4

Methodology and policy

 

 

 

 

 

 

5

Acquisitions and disposals

 

 

 

 

 

 

6

Foreign exchange movements

 

 

 

 

 

 

7

Other

 (3) 

 1 

 

 

 

 (2) 

8a

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

 309 

 1,558 

 2,211 

 

 

 4,078 

8b

Regulatory adjustment

 727 

 2,288 

 

 

 

 3,015 

8c

RWA as of 30.6.21

 1,036 

 3,846 

 2,211 

 

 

 7,093 

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

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34 


 

Securitization positions in the trading book

Semi-annual | Our exposure to securitization positions in the trading book includes exposures arising from secondary trading in commercial mortgage-backed securities in the Investment Bank, and limited positions in Non-core and Legacy Portfolio within Group Functions that we continue to wind down.

Securitization exposures in the trading book is the only relevant disclosure component of market risk under the standardized approach. Our market risk RWA from securitization exposures in the trading book increased from USD 456 million as of 31 December 2020 to USD 726 million as of 30 June 2021.

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


Regulatory calculation of market risk

Semi-annual | The MR3 table below shows minimum, maximum, average and period-end regulatory VaR, SVaR, the IRC and the comprehensive risk capital charge. Since the second quarter of 2019, we have not held eligible correlation trading positions. During the first half of 2021, 10-day 99% regulatory VaR and SVaR decreased, driven by less volatile markets observed during the period affecting the Investment Bank’s Global Markets business, as well as from the credit and equity trading business. 

 

Semi-annual |

MR3: IMA values for trading portfolios

 

For the six-month period ended 30.6.21

For the six-month period ended 31.12.20

USD million

 

 

 

VaR (10-day 99%)

 

 

1

Maximum value

 124 

 76 

2

Average value

 26 

 34 

3

Minimum value

 3 

 15 

4

Period end

 14 

 37 

 

Stressed VaR (10-day 99%)

 

 

5

Maximum value

 211 

 190 

6

Average value

 71 

 88 

7

Minimum value

 28 

 39 

8

Period end

 68 

 138 

 

Incremental risk charge (99.9%)

 

 

9

Maximum value

 191 

 158 

10

Average value

 143 

 126 

11

Minimum value

 92 

 100 

12

Period end

 177 

 157 

 

Comprehensive risk capital charge (99.9%)

 

 

13

Maximum value

 

 

14

Average value

 

 

15

Minimum value

 

 

16

Period end

 

 

17

Floor (standardized measurement method)

 

 

p

 

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UBS Group AG consolidated 

MR4: Comparison of VaR estimates with gains / losses

Semi-annual | VaR backtesting is a performance measurement process in which the 1-day VaR prediction is compared with the realized 1-day profit or loss (P&L). We compute backtesting VaR using a 99% confidence level and 1-day holding period for the population included within regulatory VaR. Since 99% VaR at UBS is defined as a risk measure that operates on the lower tail of the P&L distribution, 99% backtesting VaR is a negative number. Backtesting revenues exclude non-trading revenues, such as valuation reserves, fees and commissions, and revenues from intraday trading, so as to provide a like-for-like comparison. A backtesting exception occurs when backtesting revenues are lower than the previous day’s backtesting VaR.

Statistically, given the confidence level of 99%, two or three backtesting exceptions per year can be expected. More than four exceptions could indicate that the VaR model is not performing appropriately, as could too few exceptions over a prolonged period of time. However, as noted under “VaR limitations” in the “Risk management and control” section of our Annual Report 2020, a sudden increase or decrease in market volatility relative to the five-year window could lead to a higher or lower number of exceptions, respectively. Accordingly, Group-level backtesting exceptions are investigated, as are exceptional positive backtesting revenues, with results being reported to senior business management, the Group Chief Risk Officer and the Group Chief Market & Treasury Risk Officer. Backtesting exceptions are also reported to internal and external auditors and to the relevant regulators.

The “Group: development of regulatory backtesting revenues and actual trading revenues against backtesting VaR” chart below shows the six-month development of backtesting VaR against the Group’s backtesting revenues and actual trading revenues for the first half of 2021. 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 negative backtesting exceptions in the first half of 2021 and no further backtesting exceptions within the most recent 250-business-day window. The total number of backtesting exceptions within the most recent 250-business-day window remained at 3. The FINMA VaR multiplier derived from backtesting exceptions for market risk RWA therefore remained unchanged at 3.0 throughout the first half of 2021.

Semi-annual |

  
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


  p 

  

36 


 

 

Section 7  Going and gone concern requirements and eligible capital

Quarterly | The table below provides details of the Swiss systemically relevant bank (SRB) going and gone concern capital requirements as required by the Swiss Financial Market Supervisory Authority (FINMA). More information about capital management is provided on pages 35–44 in the “Capital management” section of our second quarter 2021 report, available under ”Quarterly reporting” at ubs.com/investors.

 

Quarterly |

Swiss SRB going and gone concern requirements and information

As of 30.6.21

 

RWA

 

LRD

USD million, except where indicated

 

in %

 

 

in %

 

Required going concern capital

 

 

 

 

 

 

Total going concern capital

 

 13.961

 40,943 

 

 4.881

 50,697 

Common equity tier 1 capital

 

 9.66 

 28,332 

 

 3.382

 35,098 

of which: minimum capital

 

 4.50 

 13,197 

 

 1.50 

 15,599 

of which: buffer capital

 

 5.14 

 15,074 

 

 1.88 

 19,499 

of which: countercyclical buffer

 

 0.02 

 61 

 

 

 

Maximum additional tier 1 capital

 

 4.30 

 12,611 

 

 1.50 

 15,599 

of which: additional tier 1 capital

 

 3.50 

 10,265 

 

 1.50 

 15,599 

of which: additional tier 1 buffer capital

 

 0.80 

 2,346 

 

 

 

 

 

 

 

 

 

 

Eligible going concern capital

 

 

 

 

 

 

Total going concern capital

 

 20.18 

 59,188 

 

 5.69 

 59,188 

Common equity tier 1 capital

 

 14.52 

 42,583 

 

 4.09 

 42,583 

Total loss-absorbing additional tier 1 capital

 

 5.66 

 16,605 

 

 1.60 

 16,605 

of which: high-trigger loss-absorbing additional tier 1 capital 3

 

 4.81 

 14,096 

 

 1.36 

 14,096 

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

 

 0.86 

 2,509 

 

 0.24 

 2,509 

 

 

 

 

 

 

 

Required gone concern capital

 

 

 

 

 

 

Total gone concern loss-absorbing capacity4

 

 10.60 

 31,101 

 

 3.76 

 39,092 

of which: base requirement5

 

 12.86 

 37,715 

 

 4.50 

 46,797 

of which: additional requirement for market share and LRD

 

 1.08 

 3,167 

 

 0.38 

 3,900 

of which: applicable reduction on requirements

 

 (3.34) 

 (9,782) 

 

 (1.12) 

 (11,605) 

of which: rebate granted (equivalent to 47.5% of maximum rebate)6

 

 (2.54) 

 (7,439) 

 

 (0.89) 

 (9,262) 

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

 

 (0.80) 

 (2,343) 

 

 (0.23) 

 (2,343) 

 

 

 

 

 

 

 

Eligible gone concern capital

 

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 15.38 

 45,110 

 

 4.34 

 45,110 

Total tier 2 capital

 

 1.78 

 5,232 

 

 0.50 

 5,232 

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

 

 1.60 

 4,686 

 

 0.45 

 4,686 

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

 

 0.19 

 547 

 

 0.05 

 547 

TLAC-eligible senior unsecured debt

 

 13.60 

 39,878 

 

 3.83 

 39,878 

 

 

 

 

 

 

 

Total loss-absorbing capacity

 

 

 

 

 

 

Required total loss-absorbing capacity

 

 24.57 

 72,044 

 

 8.63 

 89,789 

Eligible total loss-absorbing capacity

 

 35.56 

 104,298 

 

 10.03 

 104,298 

 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

Risk-weighted assets

 

 

 293,277 

 

 

 

Leverage ratio denominator

 

 

 

 

 

 1,039,939 

1 Includes applicable add-ons of 1.08% for RWA and 0.375% for LRD.    2 Our minimum CET1 leverage ratio requirement of 3.375% consists of a 1.5% base requirement, a 1.5% base buffer capital requirement, a 0.25% LRD add-on requirement and a 0.125% market share add-on requirement based on our Swiss credit business.    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 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. Once at least 75% of the minimum gone concern requirement has been met with instruments that have a remaining maturity of greater than two years, all instruments that have a remaining maturity of between one and two years remain eligible to be included in the total gone concern capital.    5 The gone concern requirement after the application of the rebate for resolvability measures and the reduction for the use of higher quality capital instruments is floored at 8.6% and 3% for the RWA- and LRD-based requirements, respectively. This means that the combined reduction may not exceed 5.34 percentage points for the RWA-based requirement of 13.94% and 1.875 percentage points for the LRD-based requirement of 4.875%.    6 Based on the actions we completed by December 2020 to improve resolvability, FINMA granted an increase of rebate on the gone concern requirement from 47.5% to 55.0% of the maximum rebate, effective from 1 July 2021.

p

37 


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 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. Subject to the regulatory auditor’s consent, a subsidiary fully consolidated under IFRS may be proportionately consolidated under the regulatory scope of consolidation on an exceptional basis provided that (i) the bank’s obligation to support the company subject to consolidation is limited to the bank’s own holding quota and (ii) the remaining shareholders or partners are obliged to provide support in proportion to their holding quota and are legally and financially able to fulfil their obligations. The key difference between the IFRS and regulatory scope of consolidation as of 30 June 2021 relates to investments in insurance, real estate and commercial companies, as well as investment vehicles, that are consolidated under IFRS but either proportionately consolidated or not consolidated for regulatory capital purposes, where they are subject to risk-weighting.


The table below provides a list of the most significant entities that were included in the IFRS scope of consolidation but not in the regulatory scope of consolidation. These entities account for most of the difference between the “Balance sheet in accordance with IFRS scope of consolidation” and the “Balance sheet in accordance with regulatory scope of consolidation” columns in the CC2 table. Such difference is mainly related to financial assets at fair value not held for trading and other financial liabilities designated at fair value. As of 30 June 2021, entities consolidated under either IFRS or the regulatory scope of consolidation did not report any significant capital deficiencies.

In the banking book, certain equity investments are not consolidated under either the IFRS or under the regulatory scope. As of 30 June 2021, these investments mainly consisted of infrastructure holdings and joint operations (e.g., settlement and clearing institutions, and 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 UBS Group and the IFRS scope of consolidation is provided on pages 14 and 288, respectively, of our Annual Report 2020, available under “Annual reporting” at ubs.com/investors

 

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

 

 

30.6.21

 

 

USD million

 

Total assets1

Total equity1

 

 

Purpose

UBS Asset Management Life Ltd

 

 22,262 

 44 

 

 

Life insurance

UBS Life Insurance Company USA

 

 143 

 43 

 

 

Life insurance

1 Total assets and total equity on a standalone basis.

 

 

38 


 

Semi-annual | The CCyB1 table below provides details of the underlying exposures and risk-weighted assets (RWA) used in the computation of the countercyclical capital buffer (CCyB) requirement applicable to UBS Group AG consolidated. Further information about the methodology of geographical allocation used is provided on page 133 of our Annual Report 2020, available under ”Annual reporting” at ubs.com/investors.  

The CCyB for Luxembourg was increased from 0.25% to 0.50%, effective from 1 January 2021.

 

Semi-annual |

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

USD million, except where indicated

30.6.21

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 

 8,949 

 

 2,127 

 

 

Luxembourg

 0.502

 22,100 

 

 3,720 

 

 

Sum

 

 31,049 

 

 5,847 

 

 

Total

 

 655,856 

 

 193,107 

 0.02 

 61 

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.”    2 The CCyB for Luxembourg was increased from 0.25% to 0.50%, effective from 1 January 2021.

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39 


UBS Group AG consolidated 

Semi-annual | The CC2 table below and on the following page provides a reconciliation of the IFRS balance sheet to the balance sheet according to the regulatory scope of consolidation as defined by the Basel Committee on Banking Supervision (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 for more information about the most significant entities consolidated under IFRS but not included in the regulatory scope of consolidation.

 

Semi-annual |

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

As of 30.6.21

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

References1

USD million

 

 

 

 

 

Assets

 

 

 

 

 

Cash and balances at central banks

 160,672 

 0 

 

 160,672 

 

Loans and advances to banks

 16,500 

 (189) 

 

 16,311 

 

Receivables from securities financing transactions

 83,494 

 

 

 83,494 

 

Cash collateral receivables on derivative instruments

 29,785 

 

 

 29,785 

 

Loans and advances to customers

 390,126 

 39 

 

 390,165 

 

Other financial assets measured at amortized cost

 27,143 

 (221) 

 

 26,923 

 

Total financial assets measured at amortized cost

 707,720 

 (371) 

 

 707,350 

 

Financial assets at fair value held for trading

 122,482 

 47 

 

 122,529 

 

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

 44,333 

 

 

 44,333 

 

Derivative financial instruments

 121,622 

 11 

 

 121,633 

 

Brokerage receivables

 23,010 

 

 

 23,010 

 

Financial assets at fair value not held for trading

 65,393 

 (21,994) 

 

 43,399 

 

Total financial assets measured at fair value through profit or loss

 332,507 

 (21,936) 

 

 310,571 

 

Financial assets measured at fair value through other comprehensive income

 7,775 

 

 

 7,775 

 

Investments in associates

 1,198 

 96 

 

 1,294 

 

of which: goodwill

 23 

 

 

 23 

 4 

Property, equipment and software

 12,895 

 (42) 

 

 12,852 

 

Goodwill and intangible assets

 6,452 

 (80) 

 

 6,372 

 

of which: goodwill

 6,168 

 

 

 6,168 

 4 

of which: intangible assets

 284 

 (80) 

 

 204 

 5 

Deferred tax assets

 8,988 

 (7) 

 

 8,981 

 

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

 5,000 

 (7) 

 

 4,993 

 6 

of which: deferred tax assets on temporary differences

 3,989 

 0 

 

 3,988 

 10 

Other non-financial assets

 8,982 

 (4) 

 

 8,979 

 

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

 144 

 

 

 144 

 8 

Total assets

 1,086,519 

 (22,344) 

 

 1,064,175 

 

 

 

 

 

 

 

 

40 


 

 

 

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

As of 30.6.21

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

References1

USD million

 

 

 

 

 

Liabilities

 

 

 

 

 

Amounts due to banks

 14,615 

 

 

 14,615 

 

Payables from securities financing transactions

 5,972 

 

 

 5,972 

 

Cash collateral payables on derivative instruments

 32,193 

 

 

 32,193 

 

Customer deposits

 513,290 

 20 

 

 513,310 

 

Debt issued measured at amortized cost

 139,911 

 0 

 

 139,910 

 

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

 12,330 

 

 

 12,330 

 9 

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

 2,509 

 

 

 2,509 

 9 

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

 4,686 

 

 

 4,686 

 11 

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

 479 

 

 

 479 

 12 

Other financial liabilities measured at amortized cost

 10,189 

 (100) 

 

 10,089 

 

Total financial liabilities measured at amortized cost

 716,169 

 (81) 

 

 716,089 

 

Financial liabilities at fair value held for trading

 33,348 

 

 

 33,348 

 

Derivative financial instruments

 121,686 

 11 

 

 121,697 

 

Brokerage payables designated at fair value

 39,129 

 

 

 39,129 

 

Debt issued designated at fair value

 75,065 

 47 

 

 75,112 

 

Other financial liabilities designated at fair value

 30,642 

 (22,217) 

 

 8,425 

 

Total financial liabilities measured at fair value through profit or loss

 299,869 

 (22,160) 

 

 277,709 

 

Provisions

 2,855 

 (1) 

 

 2,854 

 

Other non-financial liabilities

 8,576 

 (1) 

 

 8,575 

 

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

 1,335 

 

 

 1,335 

 9 

of which: deferred tax liabilities related to goodwill

 307 

 

 

 307 

 4 

of which: deferred tax liabilities related to other intangible assets

 4 

 

 

 4 

 5 

Total liabilities

 1,027,469 

 (22,242) 

 

 1,005,227 

 

Equity

 

 

 

 

 

Share capital

 322 

 

 

 322 

 1 

Share premium

 15,531 

 

 

 15,531 

 1 

Treasury shares

 (3,322) 

 

 

 (3,322) 

 3 

Retained earnings

 40,143 

 (29) 

 

 40,114 

 2 

Other comprehensive income recognized directly in equity, net of tax

 6,091 

 14 

 

 6,105 

 3 

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

 1,365 

 

 

 1,365 

 7 

Equity attributable to shareholders

 58,765 

 (15) 

 

 58,751 

 

Equity attributable to non-controlling interests

 284 

 (87) 

 

 197 

 

Total equity

 59,050 

 (102) 

 

 58,948 

 

Total liabilities and equity

 1,086,519 

 (22,344) 

 

 1,064,175 

 

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 1,500 million as of 30 June 2021. Refer to the “Compensation” section of our Annual Report 2020 for more information about the DCCP, available under ”Annual reporting” at ubs.com/investors.

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41 


UBS Group AG consolidated 

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


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

 

Semi-annual |

CC1: Composition of regulatory capital

As of 30.6.21

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

 15,853 

 1 

2

Retained earnings

 40,114 

 2 

3

Accumulated other comprehensive income (and other reserves)

 2,783 

 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

 58,751 

 

 

Common Equity Tier 1 capital: regulatory adjustments

 

 

7

Prudent valuation adjustments

 (146) 

 

8

Goodwill (net of related tax liability)

 (5,883) 

 4 

9

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

 (200) 

 5 

10

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

 (5,183) 

 6 

11

Cash flow hedge reserve

 (1,365) 

 7 

12

Shortfall of provisions to expected losses

 (463) 

 

13

Securitization gain on sale

 

 

14

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

 228 

 

15

Defined benefit pension fund net assets

 (144) 

 8 

16

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

 (1,645)3

 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

 (89) 

 

26b

Other adjustments

 (1,277)4

 

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

 (16,168) 

 

29

Common Equity Tier 1 capital (CET1)

 42,583 

 

 

 

42 


 

CC1: Composition of regulatory capital (continued)

As of 30.6.21

Amounts

References1

USD million, except where indicated

 

 

 

Additional Tier 1 capital: instruments

 

 

30

Directly issued qualifying additional Tier 1 instruments plus related stock surplus

 16,605 

 

31

of which: classified as equity under applicable accounting standards

 

 

32

of which: classified as liabilities under applicable accounting standards

 16,605 

 

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

 16,605 

 

 

Additional Tier 1 capital: regulatory adjustments

 

 

37

Investments in own additional Tier 1 instruments5

 

 

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)

 16,605 

 9 

45

Tier 1 capital (T1 = CET1 + AT1)

 59,188 

 

 

Tier 2 capital: instruments and provisions

 

 

46

Directly issued qualifying Tier 2 instruments plus related stock surplus

 1,5176

 11 

47

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

 479 

 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

 1,996 

 

 

Tier 2 capital: regulatory adjustments

 

 

52

Investments in own Tier 2 instruments5

 

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

 

 

58

Tier 2 capital (T2)

 1,996 

 

59

Total regulatory capital (TC = T1 + T2)

 61,184 

 

60

Total risk-weighted assets

 293,277 

 

 

43 


UBS Group AG consolidated 

CC1: Composition of regulatory capital (continued)

As of 30.6.21

Amounts

References1

USD million, except where indicated

 

 

 

Capital ratios and buffers

 

 

61

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

 14.52 

 

62

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

 20.18 

 

63

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

 20.86 

 

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)7

 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

 10.02 

 

 

Amounts below the thresholds for deduction (before risk weighting)

 

 

72

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

 2,823 

 

73

Significant investments in the common stock of financial entities

 1,239 

 

74

Mortgage servicing rights (net of related tax liability)

 

 

75

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

 4,157 

 

 

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

 630 

 

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 587 million reserves for potential share repurchases.    4 Includes USD 630 million in compensation-related charge for regulatory capital purposes.    5 Under IFRS, debt issued and subsequently repurchased is treated as extinguished.    6 Consists of instruments with an IFRS carrying amount of USD 4.7 billion less amortization of instruments where remaining maturity is between one and five years, own instruments held 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.    7 BCBS requirements are exceeded by our Swiss SRB requirements. Refer to the “Capital management“ section of our second quarter 2021 report for more information about the Swiss SRB requirements, available under ”Quarterly reporting” at ubs.com/investors.

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Section 8 Total loss-absorbing capacity

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

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

In the first half of 2021, we issued two high-trigger loss absorbing additional tier 1 (AT1) capital instruments with a nominal value of USD 1.5 billion and USD 0.8 billion respectively, and redeemed a USD 1.5 billion AT1 capital instrument. The aforementioned effects were partly offset by effects from foreign currency translation and interest rate risk hedges, resulting in a net increase of USD 0.3 billion in our eligible AT1 instruments.


Our eligible tier 2 (T2) instruments decreased by USD 2.6 billion to USD 5.3 billion as of 30 June 2021, mainly reflecting the call of an instrument with a nominal value of EUR 2 billion in February 2021.

Non-regulatory capital instruments increased by USD 2.1 billion to USD 39.9 billion as of 30 June 2021, mainly driven by eleven issuances amounting to a total of USD 6.1 billion denominated in US dollars, euro, Swiss francs and Australian dollars, partly offset by a decrease of eligibility of three external TLAC instruments amounting to USD 2.8 billion and USD 1.2 billion negative effects from foreign currency translation and interest rate risk hedges.

 

Semi-annual |

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

 

 

 

30.6.21

31.12.20

USD million, except where indicated

 

 

 

 

Regulatory capital elements of TLAC and adjustments

 

 

 

1

Common Equity Tier 1 capital (CET1)

 

 42,583 

 39,890 

2

Additional Tier 1 capital (AT1) before TLAC adjustments 

 

 16,605 

 16,288 

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 

 

 16,605 

 16,288 

6

Tier 2 capital (T2) before TLAC adjustments 

 

 1,996 

 5,049 

7

Amortized portion of T2 instruments where remaining maturity > 1 year 

 

 3,286 

 2,787 

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 

 

 5,282 

 7,835 

11

TLAC arising from regulatory capital 

 

 64,470 

 64,013 

 

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

 

 39,878 

 37,801 

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

 

 39,878 

 37,801 

 

Non-regulatory capital elements of TLAC: adjustments

 

 

 

18

TLAC before deductions

 

 104,348 

 101,814 

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

 

 104,348 

 101,814 

 

Risk-weighted assets and leverage exposure measure for TLAC purposes

 

 

 

23

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

 

 293,277 

 289,101 

24

Leverage exposure measure1

 

 1,039,939 

 1,037,150 

 

TLAC ratios and buffers

 

 

 

25

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

 

 35.58 

 35.22 

26

TLAC (as a percentage of leverage exposure)1

 

 10.03 

 9.82 

27

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

 

 10.02 

 9.30 

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 

 3.52 

29

of which: capital conservation buffer requirement

 

 2.50 

 2.50 

30

of which: bank-specific countercyclical buffer requirement

 

 0.02 

 0.02 

31

of which: higher loss absorbency requirement 

 

 1.00 

 1.00 

1 The leverage ratio exposure and leverage ratio for 31 December 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section 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 our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information.

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UBS Group AG consolidated 

Resolution entity – creditor ranking at legal entity level

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

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

UBS Group AG grants Deferred Contingent Capital Plan (DCCP) awards to UBS Group employees. Awards granted since February 2015 qualify as Basel III AT1 capital on a UBS Group consolidated basis and totaled USD 1,766 million as of 30 June 2021 (31 December 2020: USD 1,875 million). The related liabilities of UBS Group AG on a standalone basis of USD 1,325 million (31 December 2020: USD 1,613 million) are not included in the table below, as these do not give rise to any current claims until the awards are legally vested.


As of 30 June 2021, the TLAC available on a UBS Group AG consolidated basis amounted to USD 104,348 million (31 December 2020: USD 101,814 million).

   Refer to “Bondholder information” at 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 2021 is provided under “Holding company and significant regulated subsidiaries and sub-groups” at ubs.com/investors.

 

Semi-annual |

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

 

As of 30.6.21

 

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

 

 42,092 

 14,938 

 43,696 

 

 100,726 

3

Subset of row 2 that are excluded liabilities 

 

 

 

 

 

 

4

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

 

 42,092 

 14,9383,4

 43,6966,7

 

 100,726 

5

Subset of row 4 that are potentially eligible as TLAC 

 

 42,092 

 14,512 

 39,6018

 

 96,205 

6

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

 

 

 

 6,558 

 

 6,558 

7

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

 

 

 

 17,474 

 

 17,474 

8

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

 

 

 

 9,816 

 

 9,816 

9

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

 

 

 

 5,753 

 

 5,753 

10

Subset of row 5 that is perpetual securities

 

 42,092 

 14,5125

 

 

 56,603 

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 2021, 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 is not eligible as TLAC.    4 An AT1 instrument in the amount of USD 1.5 billion was redeemed and AT1 instruments in the total amount of USD 2.3 billion were issued during the six months ended 30 June 2021.    5 Includes an AT1 instrument in the amount of USD 1.1 billion, the call of which was announced on 6 July 2021 (call date 10 August 2021).    6 Includes interest expense accrued on bail-in debt, interest-bearing liabilities that comprise loans from UBS AG and UBS Switzerland AG, negative replacement values, and tax and other liabilities that are not excluded liabilities under Swiss law and that rank pari passu to bail-in debt.    7 Bail-in debt of USD 2.9 billion was redeemed and bail-in debt of USD 6.1 billion was issued during the six months ended 30 June 2021.    8 Bail-in debt of USD 2.8 billion has residual maturity of less than one year and is not eligible as TLAC.

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Section 9  Leverage ratio

Basel III leverage ratio

Quarterly | The Basel Committee on Banking Supervision (the BCBS) leverage ratio, as summarized in the “KM1: Key metrics“ table in section 1 of this report, is calculated by dividing the period-end tier 1 capital by the period-end leverage ratio denominator (the LRD).

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

The table below shows the difference between total IFRS assets per IFRS consolidation scope and the BCBS total on-balance sheet exposures. Those exposures are the starting point for calculating the BCBS LRD, as shown in the LR2 table in this section. The difference is due to the application of the regulatory scope of consolidation for the purpose of the BCBS calculation. In addition, carrying amounts for derivative financial instruments and SFTs are deducted from IFRS total assets. They are measured differently under BCBS leverage ratio rules and are therefore added back in separate exposure line items in the LR2 table.


Difference between the Swiss SRB and BCBS leverage ratio

Quarterly | The LRD is the same under Swiss systemically relevant bank (SRB) and BCBS rules. However, there is a difference in the capital numerator between the two frameworks. Under BCBS rules only common equity tier 1 and additional tier 1 capital are included in the numerator. Under Swiss SRB rules we are required to meet going and gone concern leverage ratio requirements. Therefore, depending on the requirement, the numerator includes tier 1 capital instruments, tier 2 capital instruments and / or total loss-absorbing capacity (TLAC)-eligible senior unsecured debt. p

 

Quarterly |

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

USD million

30.6.21

31.3.21

31.12.201

On-balance sheet exposures

 

 

 

IFRS total assets

 1,086,519 

 1,107,712 

 1,125,765 

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

 (22,344) 

 (21,535) 

 (21,166) 

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

 (151,418) 

 (183,352) 

 (192,370) 

Less carrying amount of securities financing transactions in IFRS total assets3

 (111,216) 

 (112,593) 

 (105,587) 

Adjustments to accounting values

 

 

 

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

 801,541 

 790,233 

 806,642 

Asset amounts deducted in determining BCBS Basel III tier 1 capital

 (11,963) 

 (12,632) 

 (12,754) 

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

 789,578 

 777,601 

 793,888 

1 The respective period shown ending on 31 December 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section 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 our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors, 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 (SFTs), margin loans, prime brokerage receivables and financial assets at fair value not held for trading related to SFTs in accordance with the regulatory scope of consolidation.

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UBS Group AG consolidated 

Quarterly | During the second quarter of 2021, the LRD increased by USD 2 billion to USD 1,040 billion, including currency effects of USD 9 billion. On-balance sheet exposures (excluding derivatives and SFTs) increased by USD 12 billion, mainly driven by currency effects of USD 8 billion and an increase in lending assets largely in Global Wealth Management, partly offset by lower high-quality liquid asset (HQLA) securities. Derivative exposures decreased by USD 8 billion, mainly driven by foreign exchange contracts, as a result of trade roll-offs, and lower collateral placed with counterparties and exchanges. SFTs decreased by USD 2 billion, mainly reflecting lower brokerage receivables, trade roll-offs and a reduction in collateral sourcing requirements, partly offset by excess cash re-investment.

   Refer to “Leverage ratio denominator” in the “Capital management” section of our second quarter 2021 report, available under “Quarterly reporting” at ubs.com/investors, for more information

 

 

Quarterly |

LR2: BCBS Basel III leverage ratio common disclosure

USD million, except where indicated

30.6.21

31.3.21

31.12.201

 

 

 

 

 

 

On-balance sheet exposures

 

 

 

1

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

 801,541 

 790,233 

 806,642 

2

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

 (11,963) 

 (12,632) 

 (12,754) 

3

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

 789,578 

 777,601 

 793,888 

 

 

 

 

 

 

Derivative exposures

 

 

 

4

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

 49,315 

 59,145 

 54,049 

5

Add-on amounts for PFE associated with all derivatives transactions

 84,187 

 84,270 

 79,901 

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)

 (19,910) 

 (23,146) 

 (21,420) 

8

(Exempted CCP leg of client-cleared trade exposures)

 (16,753) 

 (15,139) 

 (16,760) 

9

Adjusted effective notional amount of all written credit derivatives2

 72,949 

 80,570 

 85,274 

10

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

 (72,063) 

 (79,504) 

 (84,451) 

11

Total derivative exposures

 97,726 

 106,195 

 96,592 

 

 

 

 

 

 

Securities financing transaction exposures

 

 

 

12

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

 191,453 

 197,482 

 198,077 

13

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

 (80,150) 

 (84,890) 

 (92,490) 

14

CCR exposure for SFT assets

 10,204 

 10,648 

 9,759 

15

Agent transaction exposures

 

 

 

16

Total securities financing transaction exposures

 121,507 

 123,240 

 115,346 

 

 

 

 

 

 

Other off-balance sheet exposures

 

 

 

17

Off-balance sheet exposure at gross notional amount

 98,778 

 100,243 

 105,084 

18

(Adjustments for conversion to credit equivalent amounts)

 (67,649) 

 (69,053) 

 (73,760) 

19

Total off-balance sheet items

 31,129 

 31,189 

 31,324 

 

Total exposures (leverage ratio denominator)

 1,039,939 

 1,038,225 

 1,037,150 

 

 

 

 

 

 

Capital and total exposures (leverage ratio denominator)

 

 

 

20

Tier 1 capital

 59,188 

 56,288 

 56,178 

21

Total exposures (leverage ratio denominator)

 1,039,939 

 1,038,225 

 1,037,150 

 

 

 

 

 

 

Leverage ratio

 

 

 

22

Basel III leverage ratio (%)

 5.7 

 5.4 

 5.4 

1 The respective period shown ending on 31 December 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section 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 our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors, 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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Quarterly |

LR1: BCBS Basel III leverage ratio summary comparison

USD million

30.6.21

31.3.21

31.12.201

1

Total consolidated assets as per published financial statements

 1,086,519 

 1,107,712 

 1,125,765 

2

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

 (34,307) 

 (34,167) 

 (33,919) 

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

 (53,692) 

 (77,157) 

 (95,778) 

5

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

 10,291 

 10,648 

 9,759 

6

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

 31,129 

 31,189 

 31,324 

7

Other adjustments

 

 

 

8

Leverage ratio exposure (leverage ratio denominator)

 1,039,939 

 1,038,225 

 1,037,150 

1 The respective period shown ending on 31 December 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section 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 our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information.    2 Includes assets that are deducted from tier 1 capital.

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UBS Group AG consolidated 

 

Section 10  Liquidity coverage ratio

Liquidity coverage ratio

Quarterly | We monitor the liquidity coverage ratio (the LCR) in all significant currencies in order to manage any currency mismatch between high-quality liquid assets (HQLA) and the net expected cash outflows in times of stress.

 

Pillar 3 disclosure requirement

Second quarter 2021 report section

Disclosure

Second quarter 2021 report page number

Concentration of funding sources

Balance sheet and off-balance sheet

Liabilities by product and currency

49

 

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 2Q211

 

Average 1Q211

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

 

 154 

 

 154 

 

 145 

 

 145 

Securities (on- and off-balance sheet)

 

 61 

 17 

 78 

 

 58 

 18 

 76 

Total high-quality liquid assets4

 

 215 

 17 

 232 

 

 203 

 18 

 221 

1 Calculated based on an average of 64 data points in the second quarter of 2021 and 63 data points in the first quarter of 2021.    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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LCR development during the second quarter of 2021

Quarterly |

In the second quarter of 2021, the UBS Group quarterly average LCR increased 5 percentage points to 156%, remaining above the prudential requirement communicated by the Swiss Financial Market Supervisory Authority (FINMA).


The average LCR increase was driven by an USD 11 billion increase in average HQLA to USD 232 billion, driven by higher average cash balances, due to a decrease in assets subject to local transfer restrictions, lower funding consumption by the Investment Bank and net deposit growth. Average net cash outflows increased by USD 3 billion to USD 149 billion, mainly due to decreases in inflows from secured financing transactions. 

 

Quarterly |

LIQ1: Liquidity coverage ratio

 

 

 

 

 

 

 

 

 

Average 2Q211

 

Average 1Q211

USD billion, except where indicated

 

Unweighted value

Weighted value2

 

Unweighted value

Weighted value2

 

High-quality liquid assets

1

High-quality liquid assets

 

 235 

 232 

 

 225 

 221 

 

Cash outflows

2

Retail deposits and deposits from small business customers

 

 296 

 33 

 

 299 

 34 

3

of which: stable deposits

 

 42 

 1 

 

 41 

 1 

4

of which: less stable deposits

 

 254 

 32 

 

 257 

 32 

5

Unsecured wholesale funding

 

 241 

 129 

 

 241 

 130 

6

of which: operational deposits (all counterparties)

 

 53 

 13 

 

 53 

 13 

7

of which: non-operational deposits (all counterparties)

 

 173 

 101 

 

 172 

 101 

8

of which: unsecured debt

 

 15 

 15 

 

 16 

 16 

9

Secured wholesale funding

 

 

 79 

 

 

 79 

10

Additional requirements

 

 96 

 27 

 

 90 

 26 

11

of which: outflows related to derivatives and other transactions

 

 54 

 18 

 

 47 

 17 

12

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

 

 0 

 0 

 

 0 

 0 

13

of which: committed credit and liquidity facilities

 

 42 

 9 

 

 43 

 9 

14

Other contractual funding obligations

 

 11 

 9 

 

 12 

 10 

15

Other contingent funding obligations

 

 264 

 6 

 

 254 

 5 

16

Total cash outflows

 

 

 284 

 

 

 285 

 

Cash inflows

17

Secured lending

 

 269 

 84 

 

 321 

 85 

18

Inflows from fully performing exposures

 

 77 

 35 

 

 78 

 36 

19

Other cash inflows

 

 16 

 16 

 

 18 

 18 

20

Total cash inflows

 

 361 

 135 

 

 417 

 138 

 

 

 

 

Average 2Q211

 

Average 1Q211

USD billion, except where indicated

 

 

Total adjusted value4

 

 

Total adjusted value4

 

 

 

 

 

 

 

 

Liquidity coverage ratio

21

High-quality liquid assets

 

 

 232 

 

 

 221 

22

Net cash outflows

 

 

 149 

 

 

 146 

23

Liquidity coverage ratio (%)

 

 

 156 

 

 

 151 

1 Calculated based on an average of 64 data points in the second quarter of 2021 and 63 data points in the first quarter of 2021.    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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51 


UBS Group AG consolidated 

Section 11  Requirements for global systemically important banks and related indicators

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

Based on the published indicators, G-SIBs are subject to additional common equity tier 1 (CET1) capital buffer requirements in the range from 1.0% to 3.5%. In November 2020, the FSB confirmed that, based on the year-end 2019 indicators, the additional CET1 capital buffer requirement for UBS Group will remain at 1.0%. As our Swiss systemically relevant bank (SRB) Basel III capital requirements exceed the BCBS requirements, including the G-SIB buffer, we are not affected by these additional G-SIB requirements.

In July 2018, the BCBS published a revised version of its assessment methodology. This will come into effect in 2022, based on year-end 2021 data, with the corresponding capital buffer requirement applied as of January 2024. We do not expect these changes to increase our additional CET1 capital buffer requirement.

Our G-SIB indicators as of 31 December 2020 were published in July 2021 under “Pillar 3 disclosures” at ubs.com/investors.

 

  

52 


 

Significant regulated subsidiaries and sub-groups

 


Significant regulated subsidiaries and sub-groups  

 

Section 1  Introduction

Quarterly | The sections on the following pages include capital and other regulatory information as of 30 June 2021 for UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated. Capital information in the following sections is based on Pillar 1 capital requirements. Entities may be subject to significant additional Pillar 2 requirements, which represent additional amounts of capital considered necessary and are agreed with regulators based on the risk profile of the respective entity.

Section 2  UBS AG standalone

Key metrics of the second quarter of 2021

Quarterly | The table below is based on the Basel Committee on Banking Supervision (the BCBS) Basel III rules.

During the second quarter of 2021, common equity tier 1 (CET1) capital increased by USD 1.1 billion to USD 51.3 billion, mainly due to operating profit before tax, partly offset by additional accruals for capital returns to UBS Group AG. Tier 1 capital increased by USD 1.8 billion to USD 66.5 billion, primarily driven by the aforementioned increase in CET1 capital and an issuance of a USD 750 million additional tier 1 capital instrument. Total capital increased by USD 1.3 billion to USD 68.4 billion, reflecting the aforementioned increase in tier 1 capital and partly offset by a decrease in the eligibility of a USD 2.5 billion tier 2 capital instrument.

Risk-weighted assets (RWA) increased by USD 1.4 billion to USD 319.2 billion during the second quarter of 2021, primarily
driven by increases in operational risk and participation RWA, partly offset by decreases in credit risk and market risk RWA. Leverage ratio exposure decreased by USD 4 billion to USD 607 billion, mainly driven by lower derivative exposures, partly offset by an increase in cash and balances at central banks.

Correspondingly, our CET1 capital ratio increased 0.3 percentage points to 16.1%, predominantly reflecting the increase in CET1 capital. Our Basel III leverage ratio increased 0.4 percentage points to 11.0%, due to the increase in tier 1 capital and lower leverage ratio exposure.

The average high-quality liquid assets (HQLA) increased by USD 6.9 billion to USD 89.0 billion, driven by higher average cash balances due to a reduction of funding consumption in the Investment Bank and a decrease in assets subject to local transfer restrictions. Average total net cash outflows increased by USD 2.6 billion to USD 50.5 billion, due to lower inflows from Fixed Term Loans.

 

Quarterly |

KM1: Key metrics

 

 

 

 

 

 

 

 

 

USD million, except where indicated

 

 

 

30.6.21

31.3.21

 

31.12.20

 

30.9.20

 

30.6.20

Available capital (amounts)

 

 

 

 

 

 

 

 

 

1

Common equity tier 1 (CET1)

 

 51,279 

 50,223 

 

 50,269 

 

 51,793 

 

 51,810 

1a

Fully loaded ECL accounting model CET11

 

 51,255 

 50,189 

 

 50,266 

 

 51,791 

 

 51,808 

2

Tier 1

 

 66,487 

 64,652 

 

 64,699 

 

 66,145 

 

 65,361 

2a

Fully loaded ECL accounting model tier 11

 

 66,463 

 64,618 

 

 64,696 

 

 66,143 

 

 65,359 

3

Total capital

 

 68,421 

 67,126 

 

 69,639 

 

 71,020 

 

 70,612 

3a

Fully loaded ECL accounting model total capital1

 

 68,398 

 67,091 

 

 69,636 

 

 71,018 

 

 70,610 

Risk-weighted assets (amounts)

 

 

 

 

 

 

 

 

 

4

Total risk-weighted assets (RWA)

 

 319,195 

 317,824 

 

 305,575 

 

 309,019 

 

 310,752 

4a

Minimum capital requirement2

 

 25,536 

 25,426 

 

 24,446 

 

 24,722 

 

 24,860 

4b

Total risk-weighted assets (pre-floor)

 

 319,195 

 317,824 

 

 305,575 

 

 309,019 

 

 310,752 

Risk-based capital ratios as a percentage of RWA

 

 

 

 

 

 

 

 

 

5

Common equity tier 1 ratio (%)

 

 16.06 

 15.80 

 

 16.45 

 

 16.76 

 

 16.67 

5a

Fully loaded ECL accounting model CET1 ratio (%)1

 

 16.06 

 15.79 

 

 16.45 

 

 16.76 

 

 16.67 

6

Tier 1 ratio (%)

 

 20.83 

 20.34 

 

 21.17 

 

 21.40 

 

 21.03 

6a

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

 

 20.82 

 20.33 

 

 21.17 

 

 21.40 

 

 21.03 

7

Total capital ratio (%)

 

 21.44 

 21.12 

 

 22.79 

 

 22.98 

 

 22.72 

7a

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

 

 21.43 

 21.11 

 

 22.79 

 

 22.98 

 

 22.72 

Additional CET1 buffer requirements as a percentage of RWA

 

 

 

 

 

 

 

 

 

8

Capital conservation buffer requirement (%)

 

 2.50 

 2.50 

 

 2.50 

 

 2.50 

 

 2.50 

9

Countercyclical buffer requirement (%)

 

 0.02 

 0.02 

 

 0.01 

 

 0.02 

 

 0.02 

9a

Additional countercyclical buffer for Swiss mortgage loans (%)

 

 

 

 

 

 

 

 

 

10

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

 

 

 

 

 

 

 

 

 

11

Total of bank CET1-specific buffer requirements (%)

 

 2.52 

 2.52 

 

 2.51 

 

 2.52 

 

 2.52 

12

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

 

 11.56 

 11.30 

 

 11.95 

 

 12.26 

 

 12.17 

Basel III leverage ratio4

 

 

 

 

 

 

 

 

 

13

Total Basel III leverage ratio exposure measure

 

 606,536 

 611,022 

 

 595,017 

 

 588,204 

 

 573,741 

14

Basel III leverage ratio (%)

 

 10.96 

 10.58 

 

 10.87 

 

 11.25 

 

 11.39 

14a

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

 

 10.96 

 10.58 

 

 10.87 

 

 11.24 

 

 11.39 

Liquidity coverage ratio5

 

 

 

 

 

 

 

 

 

15

Total HQLA

 

 88,964 

 82,041 

 

 83,905 

 

 88,424 

 

 91,877 

16

Total net cash outflow

 

 50,537 

 47,927 

 

 52,851 

 

 52,463 

 

 52,209 

17

LCR (%)

 

 176 

 172 

 

 159 

 

 169 

 

 178 

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 and gone concern requirements and information for UBS AG standalone are provided on the following pages in this section.    4 The temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19 had no net effect on UBS AG standalone in 2020. Refer to the “Introduction and basis for preparation” section and to the “UBS AG standalone” section of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information.    5 Calculated based on quarterly average. Refer to “Liquidity coverage ratio” in this section for more information.

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54 


 

Swiss SRB going and gone concern requirements and information

Quarterly | The tables below and on the next page provide details of the Swiss systemically relevant bank (SRB) RWA- and leverage ratio denominator (LRD)-based going and gone concern requirements and information as required by the Swiss Financial
Market Supervisory Authority (FINMA); details regarding eligible gone concern instruments are provided on the next page.

More information about the going and gone concern requirements and information is provided on page 112 of our 31 December 2020 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.

 

Quarterly |

Swiss SRB going and gone concern requirements and information

As of 30.6.21

 

RWA, phase-in

 

RWA, fully applied as of 1.1.28

 

LRD

USD million, except where indicated

 

in %

 

 

in %

 

 

in %

 

Required going concern capital

 

 

 

 

 

 

 

 

 

Total going concern capital

 

 13.961

 44,547 

 

 13.961

 53,581 

 

 4.88 

 29,569 

Common equity tier 1 capital

 

 9.66 

 30,822 

 

 9.66 

 37,072 

 

 3.38 

 20,471 

of which: minimum capital

 

 4.50 

 14,364 

 

 4.50 

 17,277 

 

 1.50 

 9,098 

of which: buffer capital

 

 5.14 

 16,407 

 

 5.14 

 19,734 

 

 1.88 

 11,373 

of which: countercyclical buffer

 

 0.02 

 51 

 

 0.02 

 62 

 

 

 

Maximum additional tier 1 capital

 

 4.30 

 13,725 

 

 4.30 

 16,509 

 

 1.50 

 9,098 

of which: additional tier 1 capital

 

 3.50 

 11,172 

 

 3.50 

 13,438 

 

 1.50 

 9,098 

of which: additional tier 1 buffer capital

 

 0.80 

 2,554 

 

 0.80 

 3,071 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eligible going concern capital

 

 

 

 

 

 

 

 

 

Total going concern capital

 

 20.83 

 66,487 

 

 17.32 

 66,487 

 

 10.96 

 66,487 

Common equity tier 1 capital

 

 16.06 

 51,279 

 

 13.36 

 51,279 

 

 8.45 

 51,279 

Total loss-absorbing additional tier 1 capital

 

 4.76 

 15,208 

 

 3.96 

 15,208 

 

 2.51 

 15,208 

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

 

 3.98 

 12,702 

 

 3.31 

 12,702 

 

 2.09 

 12,702 

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

 

 0.79 

 2,506 

 

 0.65 

 2,506 

 

 0.41 

 2,506 

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

 

 

 

 

 

Risk-weighted assets

 

 

 319,195 

 

 

 383,929 

 

 

 

Leverage ratio denominator

 

 

 

 

 

 

 

 

 606,536 

 

 

 

 

 

 

 

 

 

 

Required gone concern capital2

 

Higher of RWA- or LRD-based

 

 

 

 

 

 

Total gone concern loss-absorbing requirement

 

 

 37,380 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eligible gone concern capital

 

 

 

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 

 45,091 

 

 

 

 

 

Gone concern coverage capital ratio

 

 120.63 

 

 

 

 

 

 

 

1 Includes applicable add-ons of 1.08% for RWA and 0.375% for LRD.    2 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. Once at least 75% of the minimum gone concern requirement has been met with instruments that have a remaining maturity of greater than two years, all instruments that have a remaining maturity of between one and two years remain eligible to be included in the total gone concern capital.

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55 


Significant regulated subsidiaries and sub-groups  

Quarterly |

Swiss SRB going and gone concern information

USD million, except where indicated

 

30.6.21

 

31.3.21

31.12.20

 

 

 

 

 

 

Eligible going concern capital

 

 

 

 

 

Total going conce