6-K 1 6k2q18ubsbaseIIIpillar3.htm 6khy18ubsbaselIIIpillar3

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 7, 2018

 

 

UBS Group AG

Commission File Number: 1-36764

 

UBS AG

Commission File Number: 1-15060

 

 

(Registrants' Name)

 

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

(Address of principal executive offices)

 

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

 

Form 20-F  x                        Form 40-F  o 

 

 

This Form 6-K consists of the Basel III Pillar 3 disclosure for UBS Group AG and significant regulated subsidiaries and sub-groups as of 30 June 2018, which appears immediately following this page.

 

  

 

 

  

 

 

 

30 June 2018 Pillar 3 report

 

UBS Group and significant regulated subsidiaries and sub-groups

  

 

 

 

Table of contents

Introduction and basis for preparation

 

UBS Group AG consolidated

6

Section 1

Risk-weighted assets

10

Section 2

Credit risk

24

Section 3

Counterparty credit risk

30

Section 4

Securitizations

35

Section 5

Market risk

39

Section 6

Going and gone concern requirements
and eligible capital

46

Section 7

Leverage ratio

49

Section 8

Liquidity coverage ratio

51

Section 9

Requirements for global systemically important banks and related indicators

 

 

 

 

Significant regulated subsidiaries and sub-groups

54

Section 1

Introduction

54

Section 2

UBS AG standalone

57

Section 3

UBS Switzerland AG standalone

62

Section 4

UBS Limited standalone

63

Section 5

UBS Americas Holding LLC consolidated

 

 

 
       

 
 
Contacts

 


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Imprint

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

© UBS 2018. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

  

 

 

Introduction and basis for preparation

  

 

Introduction and basis for preparation 

Introduction and basis for preparation

 

Scope and location of Basel III Pillar 3 disclosures

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

This report provides Pillar 3 disclosures for UBS Group AG on a consolidated basis, as well as prudential key figures and regulatory information for our significant regulated subsidiaries and sub-groups. These Pillar 3 disclosures are supplemented by specific additional requirements of the Swiss Financial Market Supervisory Authority (FINMA) and voluntary disclosures on our part.

As UBS is considered a systemically relevant bank (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 information as of 30 June 2018 for UBS Group AG consolidated is provided in the “Capital management” section of our second quarter 2018 report under “Quarterly reporting” at www.ubs.com/investors.  Capital and other regulatory information as of 30 June 2018 for UBS AG consolidated is provided in the UBS AG second quarter 2018 report under “Quarterly reporting” at www.ubs.com/investors.   

We are also required to disclose certain regulatory information for our significant regulated subsidiaries and sub-groups, including UBS AG, UBS Switzerland AG and UBS Limited, each on a standalone basis, as well as UBS Americas Holding LLC on a consolidated basis. This information is provided under “Significant regulated subsidiaries and sub-groups” in this report.

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

Significant BCBS and FINMA capital adequacy, liquidity and funding and related disclosure requirements

This report has been prepared in accordance with FINMA Pillar 3 disclosure requirements (FINMA Circular 2016 / 01 “Disclosure – banks”), the underlying Basel Committee on Banking Supervision (BCBS) guidance (“Revised Pillar 3 disclosure requirements”) issued in January 2015 and related “Frequently asked questions on the revised Pillar 3 disclosure requirements” issued in August 2016. The legal entities UBS AG and UBS Switzerland AG are subject to standalone capital adequacy, liquidity and funding and disclosure requirements defined by FINMA. This information is provided under “Significant regulated subsidiaries and sub-groups” in this report.


Changes to significant BCBS and FINMA capital adequacy, liquidity and funding and related disclosure requirements

Changes to Pillar 1 requirements

Effective 1 January 2018, we became subject to the revised Basel III securitization framework for securitization exposures in the banking book, which had an immaterial effect on our risk-weighted assets (RWA). Related changes to Pillar 3 disclosure requirements are described below.

Changes to IFRS impacting Pillar 1

Effective 1 January 2018, we adopted IFRS 9, Financial Instruments for UBS Group AG and UBS AG on a consolidated basis.

The related FINMA guidance for the regulatory treatment of accounting provisions was issued on 16 July 2018, with an effective date of 1 January 2019. Our calculations as of 30 June 2018 are based on the FINMA consultation paper. We expect to implement any changes related to the final FINMA guidance by the effective date of 1 January 2019. The implementation of IFRS9 resulted in a reduction of Basel III common equity tier 1 (CET1) capital as of 1 January 2018 by approximately CHF 0.3 billion and an increase of RWA by approximately CHF 0.7 billion.

®   Refer to the “Recent developments” section starting on page 4 and “Note 1 Basis of accounting” in the “Consolidated financial statements” section starting on page 76 of our first quarter 2018 report and “Note 19 Transition to IFRS 9 as of 1 January 2018” in the “Consolidated financial statements” section starting on page 113 of our second quarter 2018 report available under “Quarterly reporting” at www.ubs.com/investors  for more information on the adoption of IFRS 9

 

In addition, the implementation of IFRS 9, Financial Instruments resulted in the following design and calculation changes to our semi-annual Pillar 3 disclosures, which are also outlined in footnotes or narrative text to the relevant tables:

(a) Allowances and impairments included in “CR1: Credit quality of assets” and Provisions included in “CR6: IRB – Credit risk exposures by portfolio and PD range” as of 30 June 2018 reflect expected credit loss allowances and provisions related to stages 1–3. Comparative numbers as of 31 December 2017 are based on the incurred loss model of IAS 39, Financial Instruments: Recognition and Measurement and are largely comparable to the IFRS 9 stage 3 allowances and provisions;

(b) the definitions of the FINMA-defined Pillar 3 credit risk exposure categories “Loans” and “Debt securities” have been updated to reflect the new IFRS balance sheet structure under IFRS 9; and

(c) RWA included in “CR10: IRB (equities under the simple risk weight method)” increased primarily due to the transition effect of IFRS 9, as a result of the reclassification of equity instruments from the IAS 39 category financial assets available for sale to the IFRS 9 category fair value through

2

 

profit or loss, as unrealized gains on such instruments (previously deducted from Basel III CET1 capital) were added back to the exposure at default for the purpose of the RWA calculation.

Changes to Pillar 3 disclosure requirements

The tables “SEC3: Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as originator or as sponsor” and “SEC4: Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as investor” have been modified to reflect changes to the revised securitization framework.

Significant BCBS and FINMA requirements to be adopted in the second half of 2018 or later

Information on BCBS and FINMA requirements to be adopted in the second half of 2018 or later is provided the “Introduction and basis for preparation” section on pages 2–3 of our 31 December 2017 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups under “Pillar 3 disclosures” at www.ubs.com/investors. Outlined below are significant developments related to BCBS and FINMA requirements, which are to be adopted by UBS or are applicable to UBS, that have occurred in the first half of 2018 on either new requirements, or on requirements described in previous Pillar 3 reports.

Changes to Pillar 1 requirements

On 16 July 2018, FINMA issued revised circulars mainly on

–   credit risk (FINMA Circular 2017/07 “Credit risk – banks”) to incorporate Frequently asked questions (FAQ) on the standardized approach for counterparty credit risk (SA-CCR), and

–   leverage ratio (FINMA Circular 2015/03 “Leverage ratio – banks”) to allow early adoption of modified SA-CCR rules in line with the BCBS Basel III finalization of the capital framework issued in December 2017 before 1 January 2020.  

Changes to Pillar 3 disclosure requirements

In March 2017, the BCBS issued the “Pillar 3 disclosure requirements – consolidated and enhanced framework,” which represents the second phase of the BCBS review of the Pillar 3 disclosure framework and builds on the revisions to the Pillar 3 disclosure requirements published in January 2015. On 16 July 2018, FINMA issued a revised Circular 2016 / 01 “Disclosure – banks” including the aforementioned second phase revisions, which requires banks to gradually implement the requirements from 31 December 2018 onwards.

Significant BCBS and FINMA consultation papers

A consultation on the BCBS’s market risk standard (Fundamental Review of the Trading Book (FRTB)), previously finalized in 2016 but not yet in effect, ended in June 2018. Certain elements of the 2016 FRTB rules are likely to be revised by the BCBS based on the consultation. The probable revisions, while they may provide some relief compared with the 2016 version, would likely continue to lead to an increase in market risk RWA as previously highlighted.


The final standard is expected to be announced by the end of 2018 and expected to be in effect starting 1 January 2022.

®   Refer to the “Capital Management” section on pages 183–198 of our Annual Report 2017 for more information on estimated RWA increases

 

Further to the finalization of the Basel III reforms, BCBS issued a consultation paper on its updated Pillar 3 disclosure requirements in February 2018. This consultation complements the first and second phases of the revised Pillar 3 disclosure requirements published earlier. The implementation deadline is expected to be in line with the overall finalization of the Basel III reforms, which will take effect from 1 January 2022.

2018 CCAR results on UBS Americas Holding LLC

In June 2018, the Federal Reserve Board released the results of its Comprehensive Capital Analysis and Review (CCAR) and did not object to UBS Americas Holding LLC’s capital plan.

Frequency and comparability of Pillar 3 disclosures

FINMA has specified the reporting frequency for each disclosure, as outlined in the table on pages 4–5 of our 31 December 2017 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups. We generally provide 31 December 2017 quantitative comparative information for all disclosures. Depending on the FINMA-specified disclosure frequency, we provide additional quantitative prior period information:

–   For quarterly disclosures on movements related to RWA for credit risk, counterparty credit risk and market risk, we provide additional comparative information for the first quarter of 2018.

–   For all other quarterly disclosures where movement explanation is required by FINMA in case of material changes, we provide 31 March 2018 comparative information, in addition to the 31 December 2017 information.

–   For disclosures on significant regulated subsidiaries and sub-groups, we provide 31 March 2018 comparative information, in addition to the 31 December 2017 information.

 

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

®   Refer to the 31 March 2018 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups under “Pillar 3 disclosures” at www.ubs.com/investors  for more information on previously published quarterly movement commentary

  

3

 

 

 

UBS Group AG consolidated

  

 

UBS Group AG consolidated

 

Section 1  Risk-weighted assets

Our approach to measuring risk exposure and risk-weighted assets

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

For information on the measurement of risk exposures and RWA, refer to pages 8–10 of the 31 December 2017 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups under “Pillar 3 disclosures” at www.ubs.com/investors. 

Effective 1 January 2018, we became subject to the revised Basel III securitization framework, which changed the calculation method for securitization exposures in the banking book, as outlined below.

Category

Definition of risk

Regulatory risk exposure

Risk-weighted assets (RWA)

III. Securitization exposures in the banking book

Securitization exposures in the banking book

Exposures arising from traditional and synthetic securitizations held in our banking book.

 

Refer to section 4 Securitizations.

The IFRS carrying value post eligible regulatory credit risk mitigation and credit conversion factor is the basis for measuring securitization exposure.

We apply the following approaches to measure securitization exposure RWA:

– Internal ratings-based approach (IRBA),  considering the advanced IRB risk weights, if the securitized pool largely consists of IRB positions and internal ratings are available.

– External ratings-based approach (ERBA), in case the IRB approach cannot be applied, risk weights are applied based on external ratings, provided that we are able to demonstrate our expertise in critically reviewing and challenging the external ratings.

– Standardized approach (SA) or 1,250% risk weight factor, in case none of the aforementioned approaches can be applied, we would apply the standardized approach where the delinquency status of a significant portion of the underlying exposure can be determined or a risk weight of 1,250%.

 

For re-securitization exposures we apply either the standardized approach or a risk weight factor of 1,250%.

 

 

6

 

RWA development in the second quarter of 2018

Quarterly | The “OV1: Overview of RWA” table below provides an overview of RWA and the related minimum capital requirements by risk type. It was enhanced in the first quarter of 2018 to early adopt the new template introduced with the second phase of revised Pillar 3 disclosure requirements to reflect changes to the securitization framework. The template includes rows that are currently not applicable to UBS and therefore have been left empty.

During the second quarter of 2018, RWA decreased by CHF 1.4 billion, mainly driven by lower market risk RWA in the amount of CHF 10.0 billion, partly offset by an increase of CHF 7.7 billion in credit and counterparty credit risk RWA and further increases in the lines Amounts below thresholds for deduction (250% risk weight) of CHF 0.3 billion and Equity positions under the simple risk weight approach of CHF 0.3 billion, as well as other increases totaling CHF 0.3 billion.

The flow tables for credit risk, counterparty credit risk and market risk RWA in the respective sections of this report provide further details on the movements in RWA in the second quarter of 2018. More information on capital management and RWA, including details on movements in RWA during the second and first quarter of 2018, is provided on pages 60–62 of our second quarter 2018 report and on pages 57–59 of our first quarter 2018 report, both available under “Quarterly reporting” at www.ubs.com/investors.p 

 

 

Quarterly |

OV1: Overview of RWA

CHF million

 

RWA

 

Minimum capital requirements2

 

 

30.6.18

31.3.18

31.12.171

 

30.6.18

1

Credit risk (excluding counterparty credit risk)

 

 108,308 

 101,165 

 97,678 

 

 8,665 

2

of which: standardized approach (SA)3

 

 24,096 

 23,956 

 23,987 

 

 1,928 

3

of which: foundation internal rating-based (F-IRB) approach

 

 

 

 

 

 

4

of which: supervisory slotting approach

 

 

 

 

 

 

5

of which: advanced internal ratings-based (A-IRB) approach

 

 84,212 

 77,210 

 73,691 

 

 6,737 

6

Counterparty credit risk4

 

 32,824 

 32,259 

 30,279 

 

 2,626 

7

of which: SA for counterparty credit risk (SA-CCR)5

 

 6,257 

 6,083 

 5,575 

 

 501 

8

of which: internal model method (IMM)

 

 18,386 

 18,556 

 17,274 

 

 1,471 

8a

of which: value-at-risk (VaR)

 

 4,419 

 4,288 

 3,999 

 

 354 

9

of which: other CCR

 

 3,763 

 3,331 

 3,432 

 

 301 

10

Credit valuation adjustment (CVA)

 

 3,465 

 3,260 

 3,084 

 

 277 

11

Equity positions under the simple risk weight approach6

 

 3,644 

 3,388 

 2,368 

 

 292 

12

Equity investments in funds – look-through approach7

 

 

 

 

 

 

13

Equity investments in funds – mandate-based approach7

 

 

 

 

 

 

14

Equity investments in funds – fall-back approach7

 

 

 

 

 

 

15

Settlement risk

 

 527 

 469 

 369 

 

 42 

16

Securitization exposure in banking book

 

 1,264 

 1,141 

 1,6968

 

 101 

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)

 

 1,263 

 1,062 

 

 

 101 

19

of which securitization standardized approach (SEC-SA)

 

 1 

 79 

 

 

 0 

20

Market Risk

 

 12,391 

 22,396 

 12,281 

 

 991 

21

of which: standardized approach (SA)

 

 361 

 401 

 400 

 

 29 

22

of which: internal model approaches (IMM)

 

 12,030 

 21,996 

 11,881 

 

 962 

23

Capital charge for switch between trading book and banking book

 

 

 

 

 

 

24

Operational risk

 

 79,422 

 79,422 

 79,422 

 

 6,354 

25

Amounts below thresholds for deduction (250% risk weight)9

 

 10,528 

 10,253 

 11,218 

 

 842 

26

Floor adjustment10

 

 0 

 0 

 0 

 

 0 

27

Total

 

 252,373 

 253,753 

 238,394 

 

 20,190 

1 Based on phase-in rules.    2 Calculated based on 8% of RWA.    3 Includes non-counterparty-related risk not subject to the threshold deduction treatment (30 June 2018: RWA CHF 9,264 million; 31 March 2018: RWA CHF 9,015 million; 31 December 2017: RWA CHF 8,949 million). Non-counterparty-related risk (30 June 2018: RWA CHF 8,526 million; 31 March 2018: RWA CHF 8,374 million; 31 December 2017: RWA CHF 9,310 million), which is subject to the threshold treatment, is reported in line 25 “Amounts below thresholds for deduction (250% risk weight).”    4 Excludes settlement risk, which is separately reported in line 15 “Settlement risk.” Includes RWA with central counterparties. New regulation for the calculation of RWA for exposure to central counterparties will be implemented by 1 January 2020. The split between the subcomponents of counterparty credit risk refers to the calculation of the exposure measure.    5 Calculated in accordance with the current exposure method (CEM), until SA-CCR is implemented by 1 January 2020.    6 Includes investments in funds. Items subject to threshold deduction treatments that do not exceed their respective threshold are risk weighted at 250% (30 June 2018: RWA CHF 2,002 million; 31 March 2018: RWA CHF 1,879 million; 31 December 2017: RWA CHF 1,908 million) and are separately included in line 25 “Amounts below thresholds for deduction (250% risk weight).”    7 New regulation for the calculation of RWA for investments in funds will be implemented by 1 January 2020.    8 Calculated on the basis of the former securitization rules applicable until 31 December 2017.    9 Includes items subject to threshold deduction treatments that do not exceed their respective threshold and risk weighted at 250%. Items subject to threshold deduction treatments are significant investments in common shares of non-consolidated financial institutions (banks, insurance and other financial entities) and deferred tax assets arising from temporary differences, both of which are measured against their respective threshold.    10 No floor effect, as 80% of our Basel I RWA including the RWA equivalent of the Basel I capital deductions do not exceed our Basel III RWA including the RWA equivalent of the Basel III capital deductions. For the status of the finalization of the Basel III capital framework, refer to the “Regulatory and legal developments” section of our Annual Report 2017, available under “Annual reporting” at www.ubs.com/investors, which outlines how the proposed floor calculation would differ in significant aspects from the current approach.

p

 

7

UBS Group AG consolidated

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

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

 

 

 

Regulatory exposures and risk-weighted assets

30.6.18

 

 

A-IRB / model-based approaches

 

Standardized approaches

 

Total

CHF million

 

Net EAD

RWA

Section or table reference

 

Net EAD

RWA

Section or table reference

 

Net EAD

RWA

Credit risk (excluding counterparty credit risk)

 

 541,313 

 84,212 

 2 

 

 50,899 

 24,096 

 2 

 

 592,212 

 108,308 

Central governments and central banks

 

 143,150 

 2,723 

CR6, CR7

 

 14,168 

 494 

CR4, CR5

 

 157,318 

 3,217 

Banks and securities dealers

 

 16,233 

 4,619 

CR6, CR7

 

 6,667 

 1,585 

CR4, CR5

 

 22,900 

 6,204 

Public sector entities, multilateral development banks

 

 11,555 

 866 

CR6, CR7

 

 1,588 

 443 

CR4, CR5

 

 13,143 

 1,308 

Corporates: specialized lending

 

 22,337 

 11,070 

CR6, CR7

 

 

 

CR4, CR5

 

 22,337 

 11,070 

Corporates: other lending

 

 59,606 

 30,846 

CR6, CR7

 

 5,328 

 4,142 

CR4, CR5

 

 64,934 

 34,987 

Central counterparties

 

 

 

 

 

 506 

 26 

 

 

 506 

 26 

Retail

 

 288,434 

 34,088 

CR6, CR7

 

 12,508 

 8,143 

CR4, CR5

 

 300,942 

 42,231 

Residential mortgages

 

 137,956 

 24,719 

 

 

 6,584 

 2,603 

 

 

 144,539 

 27,322 

Qualifying revolving retail exposures (QRRE) 

 

 1,640 

 577 

 

 

 

 

 

 

 1,640 

 577 

Other retail1

 

 148,838 

 8,792 

 

 

 5,925 

 5,540 

 

 

 154,762 

 14,332 

Non-counterparty-related risk

 

 

 

 

 

 10,133 

 9,264 

CR4, CR5

 

 10,133 

 9,264 

Property, equipment and software

 

 

 

 

 

 9,028 

 9,028 

 

 

 9,028 

 9,028 

Other

 

 

 

 

 

 1,105 

 236 

 

 

 1,105 

 236 

Counterparty credit risk2

 

 92,044 

 22,805 

 3 

 

 89,864 

 10,019 

 3 

 

 181,908 

 32,824 

Central governments and central banks

 

 7,133 

 871 

CCR3, CCR4

 

 2,285 

 231 

CCR3, CCR4

 

 9,418 

 1,102 

Banks and securities dealers

 

 18,597 

 5,220 

CCR3, CCR4

 

 6,461 

 1,452 

CCR3, CCR4

 

 25,058 

 6,672 

Public sector entities, multilateral development banks

 

 2,567 

 292 

CCR3, CCR4

 

 824 

 34 

CCR3, CCR4

 

 3,392 

 326 

Corporates incl. specialized lending

 

 45,892 

 16,083 

CCR3, CCR4

 

 17,934 

 5,827 

CCR3, CCR4

 

 63,826 

 21,910 

Central counterparties

 

 17,855 

 338 

 

 

 53,195 

 1,454 

 

 

 71,050 

 1,792 

Retail

 

 

 

 

 

 9,165 

 1,022 

CCR3, CCR4

 

 9,165 

 1,022 

Credit valuation adjustment (CVA)

 

 

 1,783 

3, CCR2

 

 

 1,682 

3, CCR2

 

 

 3,465 

Equity positions in the banking book (CR)

 

 874 

 3,644 

2, CR10

 

 

 

 

 

 874 

 3,644 

Settlement risk

 

 47 

 214 

 

 

 218 

 313 

 

 

 265 

 527 

Securitization exposure in the banking book

 

 

 

 

 

 232 

 1,264 

 4 

 

 232 

 1,264 

Market risk

 

 

 12,030 

 5 

 

 387 

 361 

4, 5

 

 387 

 12,391 

Value-at-risk (VaR)

 

 

 1,638 

MR3

 

 

 

 

 

 

 1,638 

Stressed value-at risk (SVaR)

 

 

 3,420 

MR3

 

 

 

 

 

 

 3,420 

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

 

 

 4,538 

MR4

 

 

 

 

 

 

 4,538 

Incremental risk charge (IRC)

 

 

 2,378 

MR4

 

 

 

 

 

 

 2,378 

Comprehensive risk measure (CRM)

 

 

 56 

MR4

 

 

 

 

 

 

 56 

Securitization / re-securitization in the trading book

 

 

 

 

 

 387 

 361 

SEC2, MR1

 

 387 

 361 

Operational risk

 

 

 79,422 

 

 

 

 

 

 

 

 79,422 

Amounts below thresholds for deduction (250% risk weight)

 

 755 

 2,002 

 

 

 3,410 

 8,526 

 

 

 4,166 

 10,528 

Deferred tax assets

 

 

 

 

 

 3,410 

 8,526 

 

 

 3,410 

 8,526 

Significant investments in non-consolidated financial institutions

 

 755 

 2,002 

 

 

 

 

 

 

 755 

 2,002 

Total

 

 635,034 

 206,112 

 

 

 145,011 

 46,260 

 

 

 780,044 

 252,373 

 

8

 

Regulatory exposures and risk-weighted assets (continued)

31.12.17

 

 

A-IRB / model-based approaches

 

Standardized approaches

 

Total

CHF million

 

Net EAD

RWA

Section or table reference

 

Net EAD

RWA

Section or table reference

 

Net EAD

RWA

Credit risk (excluding counterparty credit risk)

 

 507,294 

 73,691 

 2 

 

 49,527 

 23,987 

 2 

 

 556,821 

 97,678 

Central governments and central banks

 

 128,785 

 2,836 

CR6, CR7

 

 12,777 

 500 

CR4, CR5

 

 141,562 

 3,336 

Banks and securities dealers

 

 12,160 

 2,881 

CR6, CR7

 

 6,217 

 1,460 

CR4, CR5

 

 18,377 

 4,341 

Public sector entities, multilateral development banks

 

 11,401 

 820 

CR6, CR7

 

 2,016 

 636 

CR4, CR5

 

 13,416 

 1,456 

Corporates: specialized lending

 

 22,708 

 9,950 

CR6, CR7

 

 

 

 

 

 22,708 

 9,950 

Corporates: other lending

 

 55,542 

 25,136 

CR6, CR7

 

 5,727 

 4,409 

CR4, CR5

 

 61,269 

 29,545 

Central counterparties

 

 

 

 

 

 446 

 24 

CR4, CR5

 

 446 

 24 

Retail

 

 276,698 

 32,068 

CR6, CR7

 

 12,367 

 8,009 

CR4, CR5

 

 289,065 

 40,076 

Residential mortgages

 

 135,212 

 23,095 

 

 

 6,714 

 2,706 

 

 

 141,926 

 25,801 

Qualifying revolving retail exposures (QRRE) 

 

 1,617 

 564 

 

 

  

 

 

 

 1,617 

 564 

Other retail1

 

 139,869 

 8,409 

 

 

 5,653 

 5,303 

 

 

 145,522 

 13,712 

Non-counterparty-related risk3

 

 

 

 

 

 9,978 

 8,949 

CR4, CR5

 

 9,978 

 8,949 

Property, equipment and software

 

 

 

 

 

 8,772 

 8,772 

 

 

 8,772 

 8,772 

Other

 

 

 

 

 

 1,206 

 177 

 

 

 1,206 

 177 

Counterparty credit risk2

 

 104,023 

 21,273 

 3 

 

 88,589 

 9,007 

 3 

 

 192,612 

 30,280 

Central governments and central banks

 

 5,992 

 674 

CCR3, CCR4

 

 2,056 

 272 

CCR3, CCR4

 

 8,048 

 946 

Banks and securities dealers

 

 17,207 

 4,867 

CCR3, CCR4

 

 6,707 

 1,417 

CCR3, CCR4

 

 23,913 

 6,284 

Public sector entities, multilateral development banks

 

 2,920 

 397 

CCR3, CCR4

 

 790 

 27 

CCR3, CCR4

 

 3,710 

 424 

Corporates incl. specialized lending

 

 41,786 

 14,753 

CCR3, CCR4

 

 16,849 

 4,992 

CCR3, CCR4

 

 58,635 

 19,744 

Central counterparties

 

 36,118 

 582 

 

 

 54,545 

 1,784 

 

 

 90,663 

 2,366 

Retail

 

 

 

 

 

 7,643 

 515 

CCR3, CCR4

 

 7,643 

 515 

Credit valuation adjustment (CVA)

 

 

 1,966 

3, CCR2

 

 

 1,117 

3, CCR2

 

 

 3,084 

Equity positions in the banking book (CR)

 

 572 

 2,368 

2, CR10

 

 

 

 

 

 572 

 2,368 

Settlement risk

 

 69 

 77 

 

 

 356 

 293 

 

 

 425 

 369 

Securitization exposure in the banking book

 

 2,293 

 1,696 

 4 

 

 

 

 

 

 2,293 

 1,696 

Market risk

 

 

 11,881 

 5 

 

 284 

 400 

4, 5

 

 284 

 12,281 

Value-at-risk (VaR)

 

 

 1,614 

MR3

 

 

 

 

 

 

 1,614 

Stressed value-at risk (SVaR)

 

 

 3,529 

MR3

 

 

 

 

 

 

 3,529 

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

 

 

 3,201 

MR3

 

 

 

 

 

 

 3,201 

Incremental risk charge (IRC)

 

 

 3,457 

MR3

 

 

 

 

 

 

 3,457 

Comprehensive risk measure (CRM)

 

 

 79 

MR3

 

 

 

 

 

 

 79 

Securitization / re-securitization in the trading book

 

 

 

 

 

 284 

 400 

SEC2, MR1

 

 284 

 400 

Operational risk

 

 

 79,422 

 

 

 

 

 

 

 

 79,422 

Amounts below thresholds for deduction (250% risk weight)

 

 720 

 1,908 

 

 

 3,724 

 9,310 

 

 

 4,444 

 11,218 

Deferred tax assets

 

 

 

 

 

 3,724 

 9,310 

 

 

 3,724 

 9,310 

Significant investments in non-consolidated financial institutions

 

 720 

 1,908 

 

 

 

 

 

 

 720 

 1,908 

Total

 

 614,970 

 194,281 

 

 

 142,481 

 44,113 

 

 

 757,451 

 238,394 

1 Consists primarily of Lombard lending, which represents loans made against the pledge of eligible marketable securities or cash, as well as exposures to small businesses, private clients and other retail customers without mortgage financing.    2 The split between A-IRB / model-based approaches and Standardized approaches for counterparty credit risk refers to the exposure measure, whereas the split in CCR3 and CCR4 refers to the risk weighting approach. As of 30 June 2018, CHF 108,463 million of EAD (31 December 2017: CHF 100,439) was subject to the advanced risk weighting approach, and CHF 2,395 million of EAD (31 December 2017: CHF 1,510 million) was subject to the standardized risk weighting approach.    3 Excludes EAD for deferred tax assets on net operating losses of CHF 1,160 million, which is not subject to credit risk RWA calculation.   

9

UBS Group AG consolidated

 

Section 2  Credit risk

Introduction

This section provides information on the exposures subject to the Basel III credit risk framework, as presented in the “Regulatory exposures and risk-weighted assets” table on pages 8–9  of this report. Information on counterparty credit risk is reflected in the “Counterparty credit risk” section starting on page 24 of this report. Securitization positions are reported in the “Securitizations” section starting on page 30 of this report.

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

 

This section is structured into four sub-sections:

–   Credit quality of assets

–   Credit risk mitigation

–   Credit risk under the standardized approach

–   Credit risk under internal ratings-based approaches

Credit risk exposure categories

The definitions of the FINMA-defined 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 have been updated to reflect the new IFRS balance sheet structure under IFRS 9.

 

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

–   balances at central banks

–   loans and advances to banks

–   loans and advances to customers

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

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

–   brokerage receivables

–   loans including structured loans that are included within financial assets at fair value not held for trading

–   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

–   financial assets measured at fair value through other comprehensive income

 

Refer to pages 20–22 and to pages 28–30 of our 31 December 2017 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups, available under “Pillar 3 disclosures” at www.ubs.com/investors  for more information on credit risk exposure categories, credit risk management and credit risk mitigation.

Credit quality of assets

Definition of default and credit impairment

The definition of default is based on quantitative and qualitative criteria. A counterparty is classified as in default no later than when material payments of interest, principal or fees are overdue for more than 90 days, or more than 180 days for the Personal & Corporate Banking and Swiss wealth management portfolios. Counterparties are also classified as in default when bankruptcy, insolvency proceedings or enforced liquidation have commenced, obligations have been restructured on preferential terms or there is other evidence that payment obligations will not be fully met without recourse to collateral. The latter may be the case even if all contractual payments have been made when due. If a counterparty is in default on one claim, then the counterparty is generally considered as in default on all claims.

An instrument is classified as credit-impaired if the counterparty is in default or it is a purchased or originated financial asset that satisfies our definition of in default at initial recognition. An instrument is purchased or originated credit impaired (POCI) if it has been purchased with a material discount to its carrying amount following a risk event of the issuer or originated with a defaulted counterparty. Once a financial asset is classified as defaulted / credit-impaired (except POCIs), it remains as such unless all past due amounts have been rectified, additional payments have been made on time, the position is not classified as credit-restructured, and there is general evidence of credit recovery. A minimum period of three months is applied whereby most instruments remain in stage 3 for a longer period.

®  Refer to “Note 19 Transition to IFRS9 as of 1 January 2018” in the “Consolidated financial statements” section on page 113 of our second quarter 2018 report available under “Quarterly reporting” at www.ubs.com/investors  for information on the adoption of IFRS 9

10

 

Semiannual | The table below provides a breakdown of defaulted and non-defaulted loans, debt securities and off-balance sheet exposures. With the implementation of IFRS 9, the “Allowances / impairments” columns were enhanced to reflect expected credit loss (ECL) allowances and provisions related to stages 1–3 as of 30 June 2018. Comparative numbers as of 31 December 2017 are based on the incurred loss model of IAS 39, Financial Instruments: Recognition and Measurement and were largely comparable to the IFRS 9 stage 3 allowances and provisions.

More information on the net value movements related to Loans and Debt securities shown in the table below is provided on page 12 in the “CR3: Credit risk mitigation techniques – overview” table.


Off-balance sheet exposures increased by CHF 110.8 billion to CHF 313.1 billion as of 30 June 2018, primarily due to a model update for Lombard loan facilities effective in the second quarter of 2018 in Global Wealth Management, as required by FINMA. Under the Pillar 1 framework, credit conversion factors have been implemented for facilities that are entirely undrawn, resulting in increased exposures to be disclosed under Pillar 3. p 

 

 

 

Semiannual |

CR1: Credit quality of assets

 

 

 

 

 

 

 

 

 

 

 

Gross carrying values of:

 

Allowances / impairments

 

Net values

CHF million

 

Defaulted exposures

 

Non-defaulted exposures

 

Stage 3

(credit-impaired)

Stage 1 & 2

Total

 

 

 

 

 

30.6.181

31.12.17

 

30.6.18

31.12.17

 

30.6.18

31.12.17

 

30.6.18

31.12.17

1

Loans2

 

 2,887 

 2,7843

 

 453,106 

 428,5234

 

 (746) 

 (274)5

 (1,019) 

 (680)3

 

 454,973 

 430,628 

2

Debt securities

 

 0 

 0 

 

 77,247 

 72,409 

 

 0 

 0 

 0 

 0 

 

 77,247 

 72,409 

3

Off-balance sheet exposures

 

 300 

 274 

 

 312,908 

 202,078 

 

 (26) 

 (85) 

 (111) 

 (33) 

 

 313,096 

 202,318 

4

Total

 

 3,186 

 3,0573

 

 843,260 

 703,0104

 

 (772) 

 (359) 

 (1,130) 

 (713)3

 

 845,316 

 705,354 

1 Defaulted exposures are in line with credit-impaired exposures (stage 3) under IFRS 9. Refer to “Note 9 Expected credit loss measurement“ and “Note 19 Transition to IFRS 9 as of 1 January 2018” of our second quarter 2018 report under “Quarterly reporting” at www.ubs.com/investors for more information on IFRS 9.    2 Loan exposure is reported in line with the Pillar 3 definition. Refer to “Credit risk exposure categories” in this section, for more information on the classification of Loans and Debt securities.    3 Includes exposures presented within “Note 12 a) Other financial assets measured at amortized cost“ of our second quarter 2018 report of CHF 352 million, with associated allowances of CHF 19 million.    4 Excludes exposures within “Note 12 a) Other financial assets measured at amortized cost“ of our second quarter 2018 report of CHF 352 million, with associated allowances of CHF 19 million.    5 Excludes ECL of CHF 2 million on exposures subject to counterparty credit risk.

p

 

Semiannual |

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

 

 

 

CHF million

For the half year ended 30.06.18

1

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

 3,0571

2

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

 411 

3

Returned to non-defaulted status

 (146) 

4

Amounts written off

 (37) 

5

Other changes

 (99) 

6

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

 3,186 

1 Includes exposures presented within “Note 12 a) Other financial assets measured at amortized cost“ of our second quarter 2018 report of CHF 352 million.

p

  

11

UBS Group AG consolidated

Credit risk mitigation

Semiannual | The table below provides a breakdown of unsecured and partially or fully secured exposures, including security type, for the categories “Loans” and “Debt securities.”

The total carrying amount of loans increased by CHF 24.3 billion in the first half of 2018. This was mainly driven by an increase of CHF 14.6 billion in cash and balances at central banks, mainly resulting from client-driven activity that affected funding consumption by the business divisions, contributing to unsecured exposures. In addition, loans increased by CHF 6.7 billion, primarily due to higher lending in Global Wealth Management, contributing to both secured and unsecured exposures. The residual increase of CHF 3.0 billion was primarily driven by asset size movements related to various balance sheet lines. p 

 

 

Semiannual |

CR3: Credit risk mitigation techniques – overview1

 

 

 

 

 

 

Secured portion of exposures partially or fully secured:

CHF 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

 

 

 

 

 

 

 

 

 

 

30.6.18

 

 

 

 

 

 

 

 

1

Loans2

 

 137,349 

 317,624 

 454,973 

 

 305,634 

 1,337 

 19 

2

Debt securities

 

 77,247 

 0 

 77,247 

 

 0 

 0 

 0 

3

Total

 

 214,596 

 317,624 

 532,220 

 

 305,634 

 1,337 

 19 

4

of which: defaulted

 

 661 

 1,480 

 2,141 

 

 1,046 

 253 

 0 

 

 

 

 

 

 

 

 

 

 

31.12.17

 

 

 

 

 

 

 

 

1

Loans2

 

 118,517 

 312,111 

 430,628 

 

 300,637 

 1,347 

 44 

2

Debt securities

 

 72,409 

 0 

 72,409 

 

 0 

 0 

 0 

3

Total

 

 190,926 

 312,111 

 503,036 

 

 300,637 

 1,347 

 44 

4

of which: defaulted

 

 7183

 1,386 

 2,1043

 

 870 

 288 

 0 

1 Exposures in this table represent carrying values 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 on the classification of Loans and Debt securities.    3 Includes exposures presented within “Note 12 a) Other financial assets measured at amortized cost“ of our second quarter 2018 report of CHF 352 million, with associated allowances of CHF 19 million.

 

p

 

12

 

Standardized approach – credit risk mitigation

Semiannual | The table below illustrates the effect of credit risk mitigation (CRM) on the calculation of capital requirements under the standardized approach. p 

 

 

Semiannual |

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

 

 

 

Exposures

before CCF and CRM

 

Exposures

post CCF and CRM

 

RWA and RWA density

CHF 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 %

 

 

 

 

 

 

 

 

 

 

 

 

 

30.6.18

 

 

 

 

 

 

 

 

 

 

 

Asset classes1

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 14,162 

 

 14,162 

 

 14,160 

 

 14,160 

 

 490 

 3.5 

2

Banks and securities dealers

 

 6,230 

 895 

 7,125 

 

 6,229 

 438 

 6,666 

 

 1,585 

 23.8 

3

Public sector entities and multilateral development banks

 

 1,542 

 276 

 1,818 

 

 1,539 

 55 

 1,594 

 

 446 

 28.0 

4

Corporates

 

 5,506 

 3,711 

 9,217 

 

 5,488 

 435 

 5,923 

 

 4,199 

 70.9 

5

Retail

 

 14,138 

 3,358 

 17,495 

 

 12,172 

 250 

 12,422 

 

 8,113 

 65.3 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 10,133 

 

 10,133 

 

 10,133 

 

 10,133 

 

 9,264 

 91.4 

8

Total

 

 51,710 

 8,241 

 59,950 

 

 49,721 

 1,178 

 50,899 

 

 24,096 

 47.3 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.17

 

 

 

 

 

 

 

 

 

 

 

Asset classes1

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 12,746 

 0 

 12,746 

 

 12,745 

 0 

 12,745 

 

 471 

 3.7 

2

Banks and securities dealers

 

 5,689 

 1,031 

 6,720 

 

 5,687 

 541 

 6,228 

 

 1,476 

 23.7 

3

Public sector entities and multilateral development banks

 

 1,883 

 282 

 2,165 

 

 1,881 

 140 

 2,020 

 

 639 

 31.6 

4

Corporates

 

 6,255 

 3,712 

 9,967 

 

 5,814 

 467 

 6,281 

 

 4,475 

 71.3 

5

Retail

 

 14,018 

 3,002 

 17,020 

 

 12,109 

 167 

 12,275 

 

 7,976 

 65.0 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 9,978 

 

 9,978 

 

 9,978 

 

 9,978 

 

 8,949 

 89.7 

8

Total

 

 50,568 

 8,027 

 58,595 

 

 48,212 

 1,314 

 49,527 

 

 23,987 

 48.4 

1 The CRM effect is reflected on the original asset class.  

p

 

 

13

UBS Group AG consolidated

IRB approach – credit derivatives used as credit risk mitigation

Semiannual | We actively manage the credit risk in our corporate loan portfolios by utilizing credit derivatives. Single-name credit derivatives that fulfill the operational requirements prescribed by FINMA are recognized in the RWA calculation using the probability of default (PD) or rating (and asset class) assigned to the hedge provider. The PD (or rating) substitution is only applied in the RWA calculation when the PD (or rating) of the hedge provider is lower than the PD (or rating) of the obligor. In addition, default correlation between the obligor and hedge provider is taken into account through the double default approach. Credit derivatives with tranched cover or first-loss protection are recognized through the securitization framework. Refer to the “CCR6: Credit derivatives exposures” table in the “Counterparty credit risk” section on page 29 of this report for notional and fair value information on credit derivatives used as credit risk mitigation. p 

  

 

Semiannual |

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

 

 

30.6.18

 

31.12.17

CHF 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

 

 2,705 

 2,698 

 

 2,716 

 2,705 

3

Banks and securities dealers – FIRB

 

 

 

 

 

 

4

Banks and securities dealers – AIRB

 

 4,521 

 4,521 

 

 2,653 

 2,653 

5

Public sector entities, multilateral development banks – FIRB

 

 

 

 

 

 

6

Public sector entities, multilateral development banks – AIRB

 

 894 

 894 

 

 852 

 852 

7

Corporates: Specialized lending – FIRB

 

 

 

 

 

 

8

Corporates: Specialized lending – AIRB

 

 11,220 

 11,220 

 

 10,014 

 10,014 

9

Corporates: Other lending – FIRB

 

 

 

 

 

 

10

Corporates: Other lending – AIRB

 

 31,680 

 31,211 

 

 26,156 

 25,398 

11

Retail: mortgage loans

 

 24,745 

 24,745 

 

 23,095 

 23,095 

12

Retail exposures: qualifying revolving retail (QRRE)

 

 577 

 577 

 

 564 

 564 

13

Retail: other

 

 8,346 

 8,346 

 

 8,409 

 8,409 

14

Equity positions (PD/LGD approach)

 

 

 

 

 

 

15

Total

 

 84,688 

 84,212 

 

 74,459 

 73,691 

1 The CRM effect is reflected on the original asset class.

p

 

  

14

 

Credit risk under the standardized approach

Semiannual | The standardized approach is generally applied where it is not possible to use the A-IRB approach. p 

 

Semiannual |

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

CHF million

 

 

 

 

 

 

 

 

 

 

 

Risk weight

 

0%

10%

20%

35%

50%

75%

100%

150%

Others

Total credit exposures amount (post CCF and CRM)

 

 

 

 

 

 

 

 

 

 

 

 

 

30.6.18

 

 

 

 

 

 

 

 

 

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 13,596 

 

 85 

 

 20 

 

 467 

 

 

 14,168 

2

Banks and securities dealers

 

 

 

 5,838 

 

 824 

 

 6 

 

 

 6,667 

3

Public sector entities and multilateral development banks

 

 174 

 

 963 

 

 402 

 

 48 

 

 

 1,588 

4

Corporates

 

 

 

 1,857 

 

 180 

 

 3,797 

 

 

 5,835 

5

Retail

 

 

 

 

 6,079 

 

 1,942 

 4,344 

 143 

 

 12,508 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 869 

 

 

 

 

 

 9,264 

 

 

 10,133 

8

Total

 

 14,640 

 

 8,742 

 6,079 

 1,427 

 1,942 

 17,926 

 143 

 0 

 50,899 

9

of which: mortgage loans

 

 

 

 

 6,079 

 

 115 

 389 

 

 

 6,584 

10

of which: past due1

 

 

 

 

 

 

 

 108 

 

 

 108 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.17

 

 

 

 

 

 

 

 

 

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

1

Central governments and central banks

 

 12,173 

 

 119 

 

 20 

 

 466 

 0 

 

 12,777 

2

Banks and securities dealers

 

 

 

 5,533 

 

 659 

 

 24 

 

 

 6,217 

3

Public sector entities and multilateral development banks

 

 210 

 

 1,153 

 

 494 

 

 158 

 0 

 

 2,016 

4

Corporates

 

 67 

 

 1,909 

 

 173 

 

 4,014 

 11 

 

 6,173 

5

Retail

 

 

 

 

 6,108 

 

 1,771 

 4,377 

 110 

 

 12,367 

6

Equity

 

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 1,030 

 

 

 

 

 

 8,948 

 

 

 9,978 

8

Total

 

 13,481 

 

 8,713 

 6,108 

 1,346 

 1,771 

 17,988 

 121 

 0 

 49,527 

9

of which: mortgage loans

 

 

 

 

 6,108 

 

 152 

 453 

 

 

 6,714 

10

of which: past due1

 

 

 

 

 2 

 

 2 

 57 

 16 

 

 77 

1 Includes mortgage loans.

p

 

 

15

UBS Group AG consolidated

Credit risk under internal ratings-based approaches

Semiannual | The tables in this sub-section provide information on credit risk exposures under the A-IRB approach, including the main parameters used in A-IRB models for the calculation of capital requirements, presented by portfolio and PD range.

Under the A-IRB approach, the required capital for credit risk is quantified through empirical models that we have developed to estimate the PD, loss given default (LGD), exposure at default (EAD) and other parameters, subject to FINMA approval. The proportion of EAD covered by either the standardized or the
A-IRB approach is provided in the “Regulatory exposures and risk-weighted assets” table in section 1 on pages 8–9 of this report.

The “CR6: IRB – Credit risk exposures by portfolio and PD range” table on the following pages provides a breakdown of the key parameters used for calculation of capital requirements under the A-IRB approach, shown by PD range across FINMA-defined asset classes. The key movements related to this table are described below:

–   As of 30 June 2018, exposures before the application of credit conversion factors (CCFs) increased by CHF 148.7 billion to CHF 789.3 billion and exposures post-CCF and post-credit risk mitigation (CRM) increased by CHF 34.0 billion to CHF 541.3 billion. This increase was primarily related to a model update in the asset class Retail: other retail for Lombard loan facilities effective in the second quarter of 2018 in Global Wealth Management, as required by FINMA. Under the Pillar 1 framework, CCFs have been implemented for facilities that are entirely undrawn, resulting in disclosures under Pillar 3 of increased exposures before the application of CCFs of CHF 118.6 billion. The effect from this change on exposures post-CCF and post-CRM is CHF 6.8 billion, because of low CCFs. In addition, exposures before the application of CCFs and post-CCF and post-CRM increased by CHF 14.4 billion in the asset class Central governments and central banks, primarily due to an increase in cash and balances at central banks, mainly resulting from client-driven activity that affected funding consumption by the business divisions. The implementation of a methodology and policy change resulted in a change in the regulatory portfolio segmentation of our structured margin lending portfolio in Global Wealth Management, which was previously captured within the Retail: other retail asset class, and is now subject to the Corporate treatment. Exposures before the application of CCFs and post-CCF and post-CRM increased by CHF 2.9 billion in the asset class Corporates: other lending with a corresponding decrease in Retail: other retail. Further increases among the asset classes Retail: other retail, Corporates: other lending, Banks and securities dealers and Retail: residential mortgages of CHF 16.6 billion in exposures before the application of CCFs and CHF 13.1 billion in exposures post-CCF and post-CRM are due to asset size movements in the first half of 2018. These are mainly driven by higher lending in Global Wealth Management, as well as temporary increases in unutilized credit facilities in the Investment Bank’s Corporate Client Solutions business.

–   Average CCFs decreased 9 percentage points to 21% as of 30 June 2018, which was primarily driven by the aforementioned model update for Lombard loan facilities that are entirely undrawn in Global Wealth Management.

–   Expected loss (EL) increased by CHF 0.1 billion to CHF 1.2 billion as of 30 June 2018, primarily reflecting the aforementioned increases in EAD post-CCF and post-CRM.

–   Provisions increased by CHF 227 million to CHF 940 million as of 30 June 2018. With the implementation of IFRS 9, the “Provisions” column was enhanced to reflect expected credit loss allowances and provisions related to stages 1–3 as of 30 June 2018, contributing to the majority of the increase. Comparative numbers as of 31 December 2017 are based on the incurred loss model of IAS 39, Financial Instruments: Recognition and Measurement and were largely comparable to the IFRS 9 stage 3 allowances and provisions.

–   Information on credit risk risk-weighted assets (RWA) for the first quarter of 2018, including details on movements in RWA, is provided on pages 5–6 in our 31 March 2018 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups, available under “Pillar 3 disclosures” at www.ubs.com/investors  and for the second quarter of 2018 on page 22 of this report. p 

  

16

 

Semiannual |

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

 

 

 

 

 

 

 

 

CHF million, except where indicated

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Total exposures pre-CCF

Average CCF in %

EAD post CCF and post CRM1

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

EL

Provisions2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central governments and central banks as of 30.6.18

 

 

0.00 to <0.15

 

 142,985 

 125 

 143,111 

 58 

 143,058 

 0.0 

 0.1 

 35.3 

 1.0 

 2,658 

 1.9 

 3 

 

0.15 to <0.25

 

 0 

 0 

 0 

 0 

 0 

 0.2 

<0.1

 61.0 

 1.2 

 0 

 38.9 

 0 

 

0.25 to <0.50

 

 4 

 0 

 4 

 10 

 4 

 0.3 

<0.1

 69.3 

 1.3 

 3 

 73.8 

 0 

 

0.50 to <0.75

 

 5 

 0 

 5 

 0 

 5 

 0.7 

<0.1

 95.7 

 1.2 

 7 

 140.1 

 0 

 

0.75 to <2.50

 

 1 

 3 

 4 

 1 

 1 

 1.1 

<0.1

 36.4 

 2.7 

 1 

 99.8 

 0 

 

2.50 to <10.00

 

 4 

 3 

 7 

 57 

 6 

 2.7 

<0.1

 9.7 

 4.0 

 2 

 32.5 

 0 

 

10.00 to <100.00

 

 37 

 0 

 37 

 50 

 37 

 13.9 

<0.1

 5.0 

 1.0 

 10 

 27.2 

 0 

 

100.00 (default)

 

 22 

 52 

 73 

 55 

 40 

 

<0.1

 

 

 42 

 106.0 

 10 

 

Subtotal

 

 143,058 

 183 

 143,241 

 56 

 143,150 

 0.0 

 0.1 

 35.3 

 1.0 

 2,723 

 1.9 

 14 

 11 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central governments and central banks as of 31.12.17

 

 

0.00 to <0.15

 

 128,670 

 125 

 128,796 

 49 

 128,731 

 0.0 

 0.1 

 39.0 

 1.0 

 2,783 

 2.2 

 4 

 

0.15 to <0.25

 

 0 

 0 

 0 

 0 

 0 

 0.2 

<0.1

 61.8 

 1.0 

 0 

 39.4 

 0 

 

0.25 to <0.50

 

 5 

 0 

 5 

 19 

 5 

 0.3 

<0.1

 70.0 

 1.8 

 4 

 83.3 

 0 

 

0.50 to <0.75

 

 4 

 0 

 4 

 0 

 4 

 0.7 

<0.1

 65.9 

 1.2 

 4 

 96.9 

 0 

 

0.75 to <2.50

 

 1 

 50 

 50 

 54 

 27 

 1.2 

<0.1

 6.9 

 4.6 

 28 

 100.6 

 0 

 

2.50 to <10.00

 

 0 

 3 

 3 

 36 

 1 

 2.7 

<0.1

 8.0 

 3.8 

 0 

 26.2 

 0 

 

10.00 to <100.00

 

 0 

 0 

 0 

 0 

 0 

 13.3 

<0.1

 10.0 

 1.0 

 0 

 46.4 

 0 

 

100.00 (default)

 

 26 

 1 

 27 

 55 

 16 

 

<0.1

 

 

 17 

 106.0 

 10 

 

Subtotal

 

 128,707 

 178 

 128,885 

 50 

 128,785 

 0.0 

 0.1 

 39.0 

 1.0 

 2,836 

 2.2 

 14 

 8 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 30.6.18

 

 

0.00 to <0.15

 

 11,718 

 1,897 

 13,615 

 52 

 12,774 

 0.1 

 0.5 

 42.3 

 1.1 

 2,098 

 16.4 

 3 

 

0.15 to <0.25

 

 1,087 

 687 

 1,774 

 52 

 1,384 

 0.2 

 0.3 

 48.4 

 1.2 

 527 

 38.1 

 1 

 

0.25 to <0.50

 

 334 

 523 

 858 

 53 

 564 

 0.4 

 0.2 

 56.3 

 1.1 

 341 

 60.4 

 1 

 

0.50 to <0.75

 

 115 

 304 

 419 

 44 

 180 

 0.5 

 0.1 

 56.1 

 1.1 

 285 

 158.2 

 3 

 

0.75 to <2.50

 

 1,183 

 594 

 1,777 

 37 

 1,050 

 1.5 

 0.2 

 48.1 

 1.6 

 1,009 

 96.1 

 6 

 

2.50 to <10.00

 

 207 

 289 

 495 

 46 

 275 

 5.3 

 0.2 

 52.4 

 1.2 

 357 

 129.9 

 7 

 

10.00 to <100.00

 

 1 

 16 

 17 

 26 

 5 

 15.7 

<0.1

 16.2 

 0.8 

 2 

 38.8 

 0 

 

100.00 (default)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 14,645 

 4,310 

 18,955 

 49 

 16,233 

 0.2 

 1.5 

 44.0 

 1.1 

 4,619 

 28.5 

 22 

 8 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 31.12.17

 

 

0.00 to <0.15

 

 8,148 

 3,123 

 11,271 

 47 

 9,584 

 0.0 

 0.5 

 40.6 

 1.1 

 1,379 

 14.4 

 2 

 

0.15 to <0.25

 

 781 

 663 

 1,444 

 46 

 928 

 0.2 

 0.3 

 46.9 

 1.3 

 328 

 35.3 

 2 

 

0.25 to <0.50

 

 361 

 286 

 647 

 37 

 487 

 0.4 

 0.2 

 66.8 

 1.1 

 291 

 59.8 

 1 

 

0.50 to <0.75

 

 225 

 240 

 464 

 34 

 264 

 0.6 

 0.1 

 64.3 

 1.0 

 159 

 60.3 

 1 

 

0.75 to <2.50

 

 698 

 554 

 1,252 

 40 

 648 

 1.2 

 0.2 

 61.4 

 1.2 

 488 

 75.2 

 5 

 

2.50 to <10.00

 

 224 

 223 

 447 

 20 

 215 

 4.4 

 0.2 

 65.1 

 1.0 

 227 

 105.4 

 6 

 

10.00 to <100.00

 

 32 

 6 

 39 

 39 

 34 

 12.3 

<0.1

 7.6 

 1.3 

 10 

 29.8 

 0 

 

100.00 (default)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 10,469 

 5,095 

 15,564 

 43 

 12,160 

 0.3 

 1.4 

 44.1 

 1.1 

 2,881 

 23.7 

 17 

 5 

 

17

UBS Group AG consolidated

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

 

 

 

 

 

 

 

 

CHF million, except where indicated

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Total exposures pre-CCF

Average CCF in %

EAD post CCF and post CRM1

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

EL

Provisions2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public sector entities, multilateral development banks as of 30.6.18

 

 

0.00 to <0.15

 

 10,343 

 925 

 11,268 

 19 

 10,520 

 0.0 

 0.4 

 36.3 

 1.1 

 545 

 5.2 

 1 

 

0.15 to <0.25

 

 331 

 99 

 430 

 14 

 345 

 0.2 

 0.2 

 32.0 

 2.9 

 102 

 29.7 

 0 

 

0.25 to <0.50

 

 555 

 310 

 864 

 26 

 635 

 0.3 

 0.2 

 26.4 

 2.5 

 195 

 30.7 

 1 

 

0.50 to <0.75

 

 45 

 4 

 49 

 11 

 45 

 0.6 

<0.1

 27.0 

 2.6 

 20 

 44.4 

 0 

 

0.75 to <2.50

 

 5 

 3 

 8 

 81 

 7 

 1.6 

<0.1

 10.5 

 2.8 

 2 

 22.8 

 0 

 

2.50 to <10.00

 

 1 

 4 

 6 

 31 

 2 

 2.8 

<0.1

 22.9 

 3.0 

 1 

 60.2 

 0 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100.00 (default)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 11,280 

 1,345 

 12,624 

 20 

 11,555 

 0.0 

 0.8 

 35.6 

 1.2 

 866 

 7.5 

 2 

 1 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public sector entities, multilateral development banks as of 31.12.17

 

 

0.00 to <0.15

 

 10,089 

 1,004 

 11,093 

 19 

 10,277 

 0.0 

 0.3 

 36.4 

 1.1 

 563 

 5.5 

 1 

 

0.15 to <0.25

 

 353 

 253 

 606 

 11 

 381 

 0.2 

 0.1 

 30.8 

 2.8 

 107 

 28.2 

 0 

 

0.25 to <0.50

 

 557 

 331 

 889 

 28 

 649 

 0.3 

 0.2 

 17.2 

 2.4 

 127 

 19.6 

 0 

 

0.50 to <0.75

 

 48 

 3 

 51 

 12 

 49 

 0.6 

<0.1

 17.8 

 2.7 

 15 

 30.3 

 0 

 

0.75 to <2.50

 

 2 

 3 

 4 

 99 

 4 

 1.3 

<0.1

 11.8 

 2.2 

 1 

 22.1 

 0 

 

2.50 to <10.00

 

 3 

 38 

 41 

 98 

 40 

 2.7 

<0.1

 8.8 

 1.0 

 7 

 17.9 

 0 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100.00 (default)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 11,052 

 1,632 

 12,684 

 21 

 11,401 

 0.1 

 0.7 

 34.9 

 1.3 

 820 

 7.2 

 1 

 0 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporates: specialized lending as of 30.6.18

 

 

0.00 to <0.15

 

 1,147 

 397 

 1,545 

 57 

 1,373 

 0.1 

 0.3 

 14.2 

 1.9 

 93 

 6.8 

 0 

 

0.15 to <0.25

 

 1,052 

 205 

 1,258 

 76 

 1,209 

 0.2 

 0.3 

 18.6 

 2.1 

 186 

 15.4 

 0 

 

0.25 to <0.50

 

 3,980 

 2,508 

 6,488 

 46 

 5,105 

 0.4 

 0.6 

 30.5 

 1.6 

 1,661 

 32.5 

 6 

 

0.50 to <0.75

 

 3,703 

 2,181 

 5,883 

 37 

 4,444 

 0.6 

 0.6 

 33.8 

 1.5 

 2,113 

 47.5 

 10 

 

0.75 to <2.50

 

 7,655 

 2,179 

 9,834 

 39 

 8,495 

 1.4 

 1.7 

 32.9 

 1.7 

 5,299 

 62.4 

 39 

 

2.50 to <10.00

 

 1,414 

 323 

 1,737 

 56 

 1,594 

 3.5 

 0.4 

 38.6 

 1.7 

 1,595 

 100.1 

 21 

 

10.00 to <100.00

 

 2 

 0 

 2 

 25 

 2 

 11.0 

<0.1

 10.0 

 1.0 

 1 

 38.1 

 0 

 

100.00 (default)

 

 238 

 25 

 263 

 54 

 114 

 

<0.1

 

 

 121 

 106.0 

 137 

 

Subtotal

 

 19,191 

 7,819 

 27,010 

 43 

 22,337 

 1.5 

 3.9 

 31.0 

 1.7 

 11,070 

 49.6 

 214 

 148 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporates: specialized lending as of 31.12.17

 

 

0.00 to <0.15

 

 1,128 

 446 

 1,573 

 62 

 1,402 

 0.1 

 0.3 

 16.7 

 1.9 

 88 

 6.3 

 0 

 

0.15 to <0.25

 

 864 

 347 

 1,211 

 72 

 1,115 

 0.2 

 0.3 

 19.6 

 2.0 

 154 

 13.8 

 0 

 

0.25 to <0.50

 

 3,847 

 2,878 

 6,725 

 35 

 4,856 

 0.4 

 0.6 

 28.1 

 1.7 

 1,395 

 28.7 

 5 

 

0.50 to <0.75

 

 4,280 

 2,087 

 6,367 

 33 

 4,892 

 0.6 

 0.6 

 31.5 

 1.5 

 2,116 

 43.2 

 10 

 

0.75 to <2.50

 

 7,813 

 2,214 

 10,027 

 40 

 8,660 

 1.4 

 1.7 

 30.8 

 1.7 

 4,711 

 54.4 

 38 

 

2.50 to <10.00

 

 1,427 

 323 

 1,750 

 70 

 1,643 

 3.2 

 0.4 

 35.8 

 1.6 

 1,342 

 81.6 

 19 

 

10.00 to <100.00

 

 6 

 0 

 6 

 43 

 6 

 11.7 

<0.1

 16.0 

 1.0 

 4 

 57.1 

 0 

 

100.00 (default)

 

 222 

 19 

 242 

 67 

 133 

 

<0.1

 

 

 142 

 106.0 

 101 

 

Subtotal

 

 19,588 

 8,315 

 27,902 

 40 

 22,708 

 1.6 

 3.9 

 29.4 

 1.7 

 9,950 

 43.8 

 174 

 95 

 

18

 

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

 

 

 

 

 

 

 

 

CHF million, except where indicated

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Total exposures pre-CCF

Average CCF in %

EAD post CCF and post CRM1

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

EL

Provisions2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporates: other lending as of 30.6.18

 

 

0.00 to <0.15

 

 17,615 

 21,383 

 38,998 

 37 

 19,605 

 0.0 

 3.9 

 34.5 

 1.9 

 4,569 

 23.3 

 21 

 

0.15 to <0.25

 

 4,968 

 6,609 

 11,577 

 39 

 6,343 

 0.2 

 1.7 

 34.3 

 2.2 

 2,401 

 37.9 

 4 

 

0.25 to <0.50

 

 3,238 

 4,119 

 7,357 

 41 

 4,769 

 0.4 

 2.6 

 30.3 

 2.1 

 2,137 

 44.8 

 6 

 

0.50 to <0.75

 

 3,308 

 2,720 

 6,027 

 33 

 4,184 

 0.6 

 2.7 

 38.8 

 1.8 

 2,887 

 69.0 

 10 

 

0.75 to <2.50

 

 7,412 

 5,679 

 13,091 

 41 

 9,059 

 1.4 

 11.5 

 28.6 

 2.0 

 5,810 

 64.1 

 35 

 

2.50 to <10.00

 

 9,977 

 11,815 

 21,793 

 34 

 14,047 

 3.4 

 4.9 

 19.2 

 2.1 

 11,320 

 80.6 

 103 

 

10.00 to <100.00

 

 343 

 423 

 766 

 47 

 548 

 16.1 

 0.1 

 15.1 

 2.1 

 607 

 110.8 

 12 

 

100.00 (default)

 

 1,250 

 253 

 1,504 

 41 

 1,051 

 

 0.6 

 

 

 1,114 

 106.0 

 318 

 

Subtotal

 

 48,111 

 53,001 

 101,113 

 37 

 59,606 

 3.0 

 28.0 

 29.8 

 2.0 

 30,846 

 51.7 

 510 

 501 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporates: other lending as of 31.12.17

 

 

0.00 to <0.15

 

 13,891 

 21,403 

 35,294 

 36 

 16,381 

 0.1 

 2.2 

 33.5 

 2.1 

 3,975 

 24.3 

 6 

 

0.15 to <0.25

 

 5,247 

 6,516 

 11,762 

 38 

 5,480 

 0.2 

 1.1 

 33.3 

 2.1 

 1,867 

 34.1 

 4 

 

0.25 to <0.50

 

 3,406 

 4,516 

 7,922 

 39 

 4,958 

 0.4 

 1.8 

 28.1 

 2.0 

 2,093 

 42.2 

 5 

 

0.50 to <0.75

 

 3,115 

 3,069 

 6,184 

 35 

 4,332 

 0.6 

 1.7 

 27.1 

 2.0 

 2,232 

 51.5 

 7 

 

0.75 to <2.50

 

 6,970 

 6,262 

 13,232 

 40 

 9,513 

 1.4 

 8.0 

 23.0 

 2.0 

 5,274 

 55.4 

 31 

 

2.50 to <10.00

 

 10,425 

 7,385 

 17,810 

 42 

 13,268 

 3.4 

 4.3 

 13.9 

 2.3 

 7,931 

 59.8 

 77 

 

10.00 to <100.00

 

 343 

 426 

 769 

 54 

 547 

 14.8 

 0.1 

 16.5 

 2.1 

 636 

 116.4 

 13 

 

100.00 (default)

 

 1,280 

 231 

 1,512 

 46 

 1,064 

 

 0.5 

 

 

 1,127 

 106.0 

 340 

 

Subtotal

 

 44,678 

 49,808 

 94,486 

 38 

 55,542 

 3.2 

 19.8 

 25.9 

 2.1 

 25,136 

 45.3 

 483 

 4253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: residential mortgages as of 30.6.18

 

 

0.00 to <0.15

 

 59,270 

 1,267 

 60,537 

 56 

 59,975 

 0.1 

 127.3 

 18.7 

 

 2,128 

 3.5 

 10 

 

0.15 to <0.25

 

 13,076 

 286 

 13,363 

 73 

 13,246 

 0.2 

 20.8 

 22.6 

 

 1,049 

 7.9 

 6 

 

0.25 to <0.50

 

 19,169 

 464 

 19,634 

 75 

 19,471 

 0.4 

 27.9 

 23.6 

 

 2,516 

 12.9 

 16 

 

0.50 to <0.75

 

 13,241 

 390 

 13,631 

 78 

 13,502 

 0.6 

 15.2 

 24.2 

 

 2,742 

 20.3 

 21 

 

0.75 to <2.50

 

 21,349 

 1,249 

 22,597 

 76 

 22,239 

 1.3 

 27.4 

 28.3 

 

 8,633 

 38.8 

 86 

 

2.50 to <10.00

 

 7,583 

 404 

 7,987 

 81 

 7,873 

 4.3 

 9.9 

 27.1 

 

 5,729 

 72.8 

 91 

 

10.00 to <100.00

 

 934 

 17 

 951 

 75 

 943 

 15.7 

 1.2 

 26.2 

 

 1,173 

 124.3 

 38 

 

100.00 (default)

 

 730 

 3 

 733 

 60 

 706 

 

 1.1 

 

 

 749 

 106.0 

 25 

 

Subtotal

 

 135,351 

 4,080 

 139,431 

 70 

 137,956 

 1.2 

 230.8 

 22.4 

 

 24,719 

 17.9 

 292 

 150 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: residential mortgages as of 31.12.17

 

 

0.00 to <0.15

 

 51,907 

 739 

 52,646 

 75 

 52,461 

 0.1 

 127.4 

 17.5 

 

 1,629 

 3.1 

 8 

 

0.15 to <0.25

 

 13,756 

 237 

 13,994 

 83 

 13,917 

 0.2 

 21.1 

 22.1 

 

 1,007 

 7.2 

 6 

 

0.25 to <0.50

 

 21,324 

 378 

 21,702 

 87 

 21,608 

 0.4 

 25.4 

 23.7 

 

 2,613 

 12.1 

 18 

 

0.50 to <0.75

 

 14,547 

 330 

 14,877 

 89 

 14,795 

 0.6 

 14.1 

 24.5 

 

 2,809 

 19.0 

 23 

 

0.75 to <2.50

 

 23,025 

 1,202 

 24,227 

 77 

 23,886 

 1.3 

 27.5 

 29.2 

 

 8,819 

 36.9 

 95 

 

2.50 to <10.00

 

 7,094 

 219 

 7,313 

 87 

 7,238 

 4.3 

 10.7 

 26.7 

 

 4,850 

 67.0 

 82 

 

10.00 to <100.00

 

 616 

 16 

 632 

 91 

 628 

 15.9 

 0.8 

 22.7 

 

 648 

 103.2 

 23 

 

100.00 (default)

 

 701 

 4 

 705 

 83 

 679 

 

 1.0 

 

 

 719 

 106.0 

 25 

 

Subtotal

 

 132,970 

 3,125 

 136,096 

 80 

 135,212 

 1.2 

 228.1 

 22.4 

 

 23,095 

 17.1 

 280 

 28 

 

19

UBS Group AG consolidated

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

 

 

 

 

 

 

 

 

CHF million, except where indicated

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Total exposures pre-CCF

Average CCF in %

EAD post CCF and post CRM1

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

EL

Provisions2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: qualifying revolving retail exposures (QRRE) as of 30.6.184

 

 

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

 

 109 

 326 

 434 

 

 151 

 1.7 

 35.8 

 47.0 

 

 42 

 27.9 

 1 

 

2.50 to <10.00

 

 1,064 

 4,836 

 5,901 

 

 1,474 

 2.7 

 827.2 

 42.0 

 

 518 

 35.2 

 16 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100.00 (default)

 

 34 

 0 

 34 

 

 15 

 

 25.3 

 

 

 16 

 106.0 

 19 

 

Subtotal

 

 1,207 

 5,162 

 6,369 

 

 1,640 

 3.5 

 888.3 

 42.1 

 

 577 

 35.2 

 36 

 32 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: qualifying revolving retail exposures (QRRE) as of 31.12.174

 

 

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

 

 96 

 330 

 426 

 

 135 

 1.7 

 34.1 

 47.0 

 

 38 

 28.0 

 1 

 

2.50 to <10.00

 

 1,054 

 4,804 

 5,858 

 

 1,476 

 2.7 

 818.5 

 42.0 

 

 519 

 35.2 

 16 

 

10.00 to <100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100.00 (default)

 

 25 

 0 

 25 

 

 7 

 

 21.8 

 

 

 7 

 106.0 

 0 

 

Subtotal

 

 1,175 

 5,133 

 6,309 

 

 1,617 

 3.0 

 874.4 

 42.2 

 

 564 

 34.9 

 17 

 16 

 

20

 

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

 

 

 

 

 

 

 

 

CHF million, except where indicated

 

Original on-balance sheet gross exposure

Off-balance sheet exposures pre-CCF

Total exposures pre-CCF

Average CCF in %

EAD post CCF and post CRM1

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

EL

Provisions2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: other retail as of 30.6.18

 

 

0.00 to <0.15

 

 106,975 

 206,081 

 313,056 

 15 

 137,803 

 0.0 

 189.2 

 31.0 

 

 5,643 

 4.1 

 15 

 

0.15 to <0.25

 

 2,938 

 5,703 

 8,641 

 13 

 3,652 

 0.2 

 4.7 

 29.8 

 

 418 

 11.5 

 2 

 

0.25 to <0.50

 

 1,340 

 3,085 

 4,425 

 11 

 1,689 

 0.4 

 3.1 

 31.9 

 

 333 

 19.7 

 2 

 

0.50 to <0.75

 

 1,049 

 2,302 

 3,350 

 11 

 1,297 

 0.6 

 1.7 

 32.2 

 

 534 

 41.2 

 3 

 

0.75 to <2.50

 

 2,276 

 4,106 

 6,382 

 20 

 3,109 

 1.2 

 45.2 

 31.7 

 

 1,218 

 39.2 

 12 

 

2.50 to <10.00

 

 615 

 3,145 

 3,761 

 11 

 968 

 4.3 

 2.1 

 30.4 

 

 476 

 49.2 

 13 

 

10.00 to <100.00

 

 173 

 690 

 863 

 20 

 309 

 16.9 

 3.1 

 23.9 

 

 158 

 51.1 

 12 

 

100.00 (default)

 

 95 

 7 

 102 

 0 

 11 

 

<0.1

 

 

 12 

 106.0 

 84 

 

Subtotal

 

 115,462 

 225,119 

 340,580 

 15 

 148,838 

 0.1 

 249.05

 31.0 

 

 8,792 

 5.9 

 142 

 89 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail: other retail as of 31.12.17

 

 

0.00 to <0.15

 

 104,827 

 95,987 

 200,814 

 25 

 129,164 

 0.0 

 206.2 

 30.5 

 

 5,265 

 4.1 

 17 

 

0.15 to <0.25

 

 2,010 

 2,260 

 4,270 

 26 

 2,603 

 0.2 

 5.5 

 27.4 

 

 273 

 10.5 

 1 

 

0.25 to <0.50

 

 1,717 

 1,652 

 3,369 

 19 

 2,031 

 0.4 

 3.6 

 29.7 

 

 372 

 18.3 

 2 

 

0.50 to <0.75

 

 760 

 856 

 1,616 

 27 

 992 

 0.6 

 2.0 

 35.9 

 

 308 

 31.0 

 2 

 

0.75 to <2.506

 

 3,042 

 3,153 

 6,195 

 25 

 3,834 

 1.1 

 55.9 

 34.3 

 

 1,501 

 39.4 

 16 

 

2.50 to <10.00

 

 744 

 878 

 1,622 

 22 

 939 

 3.7 

 2.5 

 35.7 

 

 500 

 53.3 

 12 

 

10.00 to <100.00

 

 172 

 594 

 766 

 20 

 290 

 16.8 

 3.6 

 27.5 

 

 170 

 58.7 

 13 

 

100.00 (default)6

 

 89 

 8 

 97 

 5 

 17 

 

<0.1

 

 

 18 

 106.0 

 726

 

Subtotal

 

 113,361 

 105,387 

 218,749 

 25 

 139,869 

 0.1 

 279.3 

 30.6 

 

 8,409 

 6.0 

 1346

 136 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total 30.6.18

 

 488,306 

 301,019 

 789,325 

 21 

 541,313 

 0.8 

 1,402.65

 30.3 

 1.3 

 84,212 

 15.6 

 1,231 

 940 

Total 31.12.17

 

 462,000 

 178,674 

 640,674 

 30 

 507,294 

 0.8 

 1,407.7 

 30.4 

 1.4 

 73,691 

 14.5 

 1,1216

 7133

1 CRM through financial collateral is considered in the EAD post CCF and post CRM, but not in the calculation of average CCF.    2 In line with the Pillar 3 guidance, provisions are only provided for the subtotals by asset class. With the implementation of IFRS 9 effective from 1 January 2018, this column includes expected credit loss allowances related to stages 1 – 3 for exposures subject to the advanced internal ratings-based approaches.     3 Includes allowances of CHF 19 million associated with exposures presented within “Note 12 a) Other financial assets measured at amortized cost” of our second quarter 2018 report.    4 For the calculation of column “EAD post CCF and post CRM,” a balance factor approach is used instead of a CCF approach. The EAD is calculated by multiplying the on-balance sheet exposure with a fixed factor of 1.4.    5 Does not include obligors for Lombard loan facilities in the region Americas that are entirely undrawn.    6 Total EL as of 31 December 2017 was restated from CHF 1,049 million as disclosed in the 31 December 2017 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups to CHF 1,121 million to include EL related to a margin loan to a single client originated by Wealth Management, risk-managed by the Investment Bank, included in the asset class Retail: other retail. The underlying exposure has been reclassified from the PD range “0.75 to < 2.5” to the PD range “100.00 (default)”. This restatement to our disclosure in table “CR6: IRB – Credit risk exposures by portfolio and PD range” did not have an impact on the CET1 capital and ratios as of 31 December 2017.

p

  

21

UBS Group AG consolidated

Credit risk RWA development in the second quarter 2018

Quarterly | The “CR8: RWA flow statements of credit risk exposures under IRB” table below provides a breakdown of the credit risk RWA movements in the second quarter of 2018 across Basel Committee on Banking Supervision (BCBS)-defined movement categories. These categories are described on page 42 of our 31 December 2017 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups, which is available under “Pillar 3 disclosures” at www.ubs.com/investors. 

Credit risk RWA under the advanced internal ratings-based
(A-IRB) approach increased by CHF 7.0 billion to CHF 84.2 billion as of 30 June 2018.

The RWA increase of CHF 3.6 billion from asset size movements was mainly due to a CHF 2.7 billion increase in the Investment Bank, primarily in the Corporate Client Solutions business, mainly reflecting temporary increases in unutilized credit facilities. In addition, a CHF 0.6 billion increase resulted from higher lending business activity in Global Wealth Management.

Model updates resulted in an increase in RWA of CHF 2.4 billion and was primarily driven by the continued phase-in of RWA increases related to probability of default (PD) and loss given default (LGD) changes from the implementation of revised models for Swiss residential mortgages and income-producing real estate, as well as from the new LGD model for unsecured financing and commercial self-used real estate resulting in an increase of CHF 2.1 billion. In addition, RWA increased by CHF 0.3 billion due to the implementation of credit conversion factors for Lombard loan facilities that are entirely undrawn in Global Wealth Management.

An increase of CHF 0.9 billion was driven by foreign exchange movements.

The RWA increase from methodology and policy changes of CHF 0.6 billion was due to a change in the regulatory portfolio segmentation of our structured margin lending portfolio in Global Wealth Management, which was previously captured within the Other Retail asset class, and is now subject to the Corporate treatment, as well as an increase from a higher IRB multiplier on Investment Bank exposures to corporates.

These increases were partly offset by changes to asset quality, primarily in the Investment Bank, Global Wealth Management and Personal & Corporate Banking. p 

 

 

Quarterly |

CR8: RWA flow statements of credit risk exposures under IRB

CHF million

For the quarter ended 30.6.18

For the quarter ended 31.3.18

1

RWA as of the beginning of the quarter

 77,210 

 73,691 

2

Asset size

 3,582 

 1,057 

3

Asset quality

 (843) 

 1,100 

4

Model updates

 2,430 

 9,810 

5

Methodology and policy

 620 

 (7,915) 

5a

of which: regulatory add-ons

 303 

 (7,848) 

6

Acquisitions and disposals

 0 

 0 

7

Foreign exchange movements

 913 

 (533) 

8

Other

 300 

 0 

9

RWA as of the end of the quarter

 84,212 

 77,210 

p

 

  

22

 

Equity exposures

Semiannual | The table below provides information on our equity exposures under the simple risk weight method. The increase of CHF 1.3 billion in RWA was mainly due to the transition effect of IFRS 9, as a result of the reclassification of equity instruments from the IAS 39 category financial assets available for sale to the IFRS 9 category fair value through profit or loss as unrealized gains on such instruments (previously deducted from Basel III CET1 capital) were added back to the exposure at default for the purpose of the RWA calculation, resulting in an increase in RWA of CHF 0.7 billion. The residual increase of CHF 0.6 billion in RWA was due to asset size movements, as well as fair value changes in the portfolio. p 

 

 

Semiannual |

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

CHF million, except where indicated

 

On-balance sheet amount

Off-balance sheet amount

Risk weight in %2

Exposure amount3

RWA2

 

 

 

 

 

 

 

30.6.18

 

 

 

 

 

 

Exchange-traded equity exposures

 

 58 

 

 300 

 58 

 184 

Other equity exposures

 

 1,102 

 

 400 

 816 

 3,460 

Total

 

 1,160 

 0 

 

 874 

 3,644 

 

 

 

 

 

 

 

31.12.17

 

 

 

 

 

 

Exchange-traded equity exposures

 

 58 

 

 300 

 58 

 183 

Other equity exposures

 

 851 

 

 400 

 516 

 2,185 

Total

 

 908 

 0 

 

 572 

 2,368 

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

 

p

 

  

23

UBS Group AG consolidated

 

Section 3  Counterparty credit risk

Counterparty credit risk (CCR) includes over-the-counter and exchange-traded derivatives, 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 (EPE) and stressed expected positive exposure (stressed EPE) methods as defined in the Basel III framework. For the rest of the portfolio, we apply the current exposure method (CEM) based on the replacement value of derivatives in combination with a regulatory prescribed add-on. 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.

 

This section is structured into two sub-sections:

Counterparty credit risk risk-weighted assets

Quarterly | Comprises disclosures on the quarterly credit risk risk-weighted assets (RWA) development. p 

Counterparty credit risk exposure

Semiannual | Provides information on our counterparty credit risk exposures, credit valuation adjustment (CVA) capital charge and credit derivatives exposures. This section excludes counterparty credit risk exposures to central counterparties and CVA is separately covered in the “CCR2: Credit valuation adjustment (CVA) capital charge” table. p 

Counterparty credit risk risk-weighted assets

Counterparty credit risk RWA development in the second quarter 2018

Quarterly | The “CCR7: RWA flow statements of CCR exposures under internal model method (IMM) and value-at-risk (VaR)” table below provides a breakdown of the CCR RWA movements in the second quarter of 2018 across categories defined by the Basel Committee on Banking Supervision. These categories are described on page 42 of our 31 December 2017 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups, which is available under “Pillar 3 disclosures” at www.ubs.com/investors. 

CCR RWA under the IMM and VaR remained stable at CHF 22.8 billion, as the increases from methodology and policy changes, driven by a higher internal ratings-based (IRB) multiplier on Investment Bank exposures to corporates, and currency effects, were offset by asset size and asset quality movements. p 

 

Quarterly |

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

 

 

For the quarter ended 30.6.18

 

For the quarter ended 31.3.18

 

 

Derivatives

 

SFTs

 

Total

 

Derivatives

SFTs

Total

CHF million

 

Subject to IMM

 

Subject to VaR

 

 

 

Subject to IMM

Subject to VaR

 

1

RWA as of the beginning of the quarter

 

 18,556 

 

 4,288 

 

 22,845 

 

 17,274 

 3,999 

 21,273 

2

Asset size

 

 (433) 

 

 62 

 

 (371) 

 

 1,067 

 333 

 1,400 

3

Credit quality of counterparties

 

 (236) 

 

 (48) 

 

 (284) 

 

 148 

 (71) 

 77 

4

Model updates

 

 0 

 

 0 

 

 0 

 

 0 

 0 

 0 

5

Methodology and policy

 

 227 

 

 64 

 

 291 

 

 225 

 54 

 279 

5a

of which: regulatory add-ons

 

 227 

 

 64 

 

 291 

 

 225 

 54 

 279 

6

Acquisitions and disposals

 

 0 

 

 0 

 

 0 

 

 0 

 0 

 0 

7

Foreign exchange movements

 

 271 

 

 53 

 

 324 

 

 (158) 

 (26) 

 (184) 

8

Other

 

 0 

 

 0 

 

 0 

 

 0 

 0 

 0 

9

RWA as of the end of the quarter

 

 18,386 

 

 4,419 

 

 22,805 

 

 18,556 

 4,288 

 22,845 

p

 

 

 

24

 

Counterparty credit risk exposure

Semiannual | Exposure at default (EAD) post-credit risk mitigation (CRM) related to counterparty credit risk increased by CHF 8.9 billion to CHF 110.9 billion and RWA increased by CHF 3.1 billion to CHF 31.0 billion as of 30 June 2018. This was mainly driven by an increase in derivative exposures of CHF 5.7 billion with an effect on RWA of CHF 2.4 billion, primarily in our Foreign Exchange, Rates and Credit and Equities businesses within the Investment Bank, mainly reflecting client-driven increases and fair value changes, as well as the effect from the higher IRB multiplier on Investment Bank exposures to corporates. A further increase of CHF 3.2 billion EAD post-CRM is related to securities financing transactions in the Investment Bank’s Equities business, with an effect on RWA of CHF 0.7 billion. p

 

 

Semiannual |

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

CHF million, except where indicated

 

Replacement cost

Potential future exposure

EEPE

Alpha used for computing regulatory EAD

EAD post-CRM

RWA

 

 

 

 

 

 

 

 

 

30.6.18

 

 

 

 

 

 

 

1

SA-CCR (for derivatives)1

 

 11,2792

 9,197 

 

 1.01

 20,476 

 4,819 

2

Internal model method (for derivatives)

 

 

 

 30,408 

 1.6 

 48,653 

 18,188 

3

Simple approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 

 

4

Comprehensive approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 16,194 

 3,746 

5

VaR (for SFTs)

 

 

 

 

 

 25,536 

 4,278 

6

Total

 

 

 

 

 

 110,859 

 31,032 

 

 

 

 

 

 

 

 

 

31.12.17

 

 

1

SA-CCR (for derivatives)1

 

 10,6652

 7,647 

 

 1.01

 18,313 

 3,803 

2

Internal model method (for derivatives)

 

 

 

 28,193 

 1.6 

 45,109 

 16,832 

3

Simple approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 

 

4

Comprehensive approach for credit risk mitigation (for SFTs)

 

 

 

 

 

 15,732 

 3,420 

5

VaR (for SFTs)

 

 

 

 

 

 22,796 

 3,859 

6

Total

 

 

 

 

 

 101,950 

 27,913 

1 Standardized approach for CCR. Calculated in accordance with the current exposure method (CEM) until the implementation of SA-CCR with expected effective date of 1 January 2020, when an alpha factor of 1.4 will be used for calculating regulatory EAD.    2 Replacement costs include collateral mitigation for on- and off-balance sheet exposures related to CCR for derivative transactions.   

p

 

Semiannual | In addition to the default risk capital requirements for CCR based on the advanced internal ratings-based or standardized approach, we are required to add a capital charge to derivatives to cover the risk of mark-to-market losses associated with the deterioration of counterparty credit quality, referred to as the credit valuation adjustment (CVA). The advanced CVA VaR approach has been used to calculate the CVA capital charge where we apply the IMM. Where this is not the case, the standardized CVA approach has been applied. More information on our portfolios subject to the CVA capital charge as of 30 June 2018 is provided in the table below. p 

 

Semiannual |

CCR2: Credit valuation adjustment (CVA) capital charge

 

 

 

30.6.18

 

31.12.17

CHF million

 

EAD post CRM1

RWA

 

EAD post CRM1

RWA

 

Total portfolios subject to the advanced CVA capital charge

 

 27,702 

 1,783 

 

 24,062 

 1,966 

1

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

 

 

 343 

 

 

 461 

2

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

 

 

 1,440 

 

 

 1,505 

3

All portfolios subject to the standardized CVA capital charge

 

 8,468 

 1,682 

 

 8,019 

 1,117 

4

Total subject to the CVA capital charge

 

 36,170 

 3,465 

 

 32,081 

 3,084 

1 Includes EAD of the underlying portfolio subject to the respective CVA charge.

p

 

25

UBS Group AG consolidated

Semiannual | More information on the EAD post-CRM movements shown in the table below is provided on page 25 in the table “CCR1: Analysis of counterparty credit risk (CCR) exposure by approach.” p  

 

Semiannual |

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

CHF million

 

 

 

 

 

 

 

 

 

 

Risk weight

 

0%

10%

20%

50%

75%

100%

150%

Others

Total credit exposure

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory portfolio as of 30.6.18

 

 

1

Central governments and central banks

 

 201 

 

 

 

 

 

 

 

 202 

2

Banks and securities dealers

 

 

 

 104 

 100 

 

 50 

 3 

 

 257 

3

Public sector entities and multilateral development banks

 

 

 

 

 

 

 1 

 

 

 1 

4

Corporates

 

 

 

 1 

 168 

 

 1,244 

 

 

 1,414 

5

Retail

 

 

 

 

 

 18 

 504 

 

 

 522 

6

Equity

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 

 

 

 

 

 

 

 

 

8

Total

 

 201 

 

 105 

 269 

 18 

 1,800 

 3 

 0 

 2,395 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory portfolio as of 31.12.17

 

 

1

Central governments and central banks

 

 202 

 

 

 

 

 

 

 

 202 

2

Banks and securities dealers

 

 

 

 99 

 236 

 

 1 

 

 

 337 

3

Public sector entities and multilateral development banks

 

 

 

 

 

 

 4 

 

 

 4 

4

Corporates

 

 

 

 

 60 

 

 806 

 

 

 867 

5

Retail

 

 

 

 

 

 4 

 97 

 

 

 101 

6

Equity

 

 

 

 

 

 

 

 

 

 

7

Other assets

 

 

 

 

 

 

 

 

 

 

8

Total

 

 202 

 

 99 

 296 

 4 

 908 

 0 

 0 

 1,510 

p

Semiannual | More information on the EAD post-CRM movements shown in the table below is provided on page 25 in the table “CCR1: Analysis of counterparty credit risk (CCR) exposure by approach.” Information on RWA for the first quarter of 2018, including details on movements in counterparty credit risk RWA, is provided on pages 5–6 in our 31 March 2018 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups, available under “Pillar 3 disclosures” at www.ubs.com/investors  and for the second quarter of 2018 on page 24 of this report. p  

  

 

Semiannual |

CCR4: IRB – CCR exposures by portfolio and PD scale

CHF million, except where indicated

 

EAD post CRM

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

 

 

 

 

 

 

 

 

 

Central governments and central banks as of 30.6.18

 

 

0.00 to <0.15

 

 8,747 

 0.0 

 0.1 

 49.1 

 0.4 

 797 

 9.1 

0.15 to <0.25

 

 277 

 0.2 

<0.1

 66.2 

 0.9 

 128 

 46.2 

0.25 to <0.50

 

 168 

 0.3 

<0.1

 90.7 

 1.0 

 151 

 89.9 

0.50 to <0.75

 

 

 

 

 

 

 

 

0.75 to <2.50

 

 25 

 0.9 

<0.1

 59.8 

 0.6 

 24 

 99.7 

2.50 to <10.00

 

 0 

 5.2 

<0.1

 67.2 

 1.0 

 1 

 253.9 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 9,217 

 0.1 

 0.2 

 50.4 

 0.5 

 1,102 

 12.0 

 

 

 

 

 

 

 

 

 

Central governments and central banks as of 31.12.17

 

 

0.00 to <0.15

 

 7,551 

 0.0 

 0.1 

 47.3 

 0.6 

 770 

 10.2 

0.15 to <0.25

 

 218 

 0.2 

<0.1

 68.1 

 0.9 

 105 

 48.2 

0.25 to <0.50

 

 26 

 0.3 

<0.1

 79.2 

 1.0 

 20 

 79.1 

0.50 to <0.75

 

 19 

 0.7 

<0.1

 70.0 

 0.1 

 17 

 87.8 

0.75 to <2.50

 

 31 

 1.0 

<0.1

 60.0 

 0.5 

 29 

 95.2 

2.50 to <10.00

 

 2 

 6.2 

<0.1

 70.0 

 1.0 

 5 

 281.5 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 7,847 

 0.1 

 0.2 

 48.1 

 0.6 

 946 

 12.1 

 

26

 

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

CHF million, except where indicated

 

EAD post CRM

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 30.6.18

 

 

0.00 to <0.15

 

 18,295 

 0.1 

 0.4 

 49.7 

 0.7 

 3,340 

 18.3 

0.15 to <0.25

 

 4,066 

 0.2 

 0.3 

 48.9 

 0.8 

 1,438 

 35.4 

0.25 to <0.50

 

 1,322 

 0.4 

 0.2 

 50.2 

 1.0 

 711 

 53.8 

0.50 to <0.75

 

 503 

 0.6 

 0.1 

 61.9 

 1.1 

 492 

 98.0 

0.75 to <2.50

 

 487 

 1.1 

 0.2 

 60.5 

 0.7 

 422 

 86.6 

2.50 to <10.00

 

 128 

 7.2 

 0.1 

 31.0 

 0.3 

 142 

 110.4 

10.00 to <100.00

 

 0 

 13.0 

<0.1

 66.0 

 1.0 

 1 

 249.1 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 24,801 

 0.2 

 1.2 

 50.0 

 0.7 

 6,546 

 26.4 

 

 

 

 

 

 

 

 

 

Banks and securities dealers as of 31.12.17

 

 

0.00 to <0.15

 

 17,970 

 0.1 

 0.4 

 50.0 

 0.7 

 3,076 

 17.1 

0.15 to <0.25

 

 3,121 

 0.2 

 0.3 

 49.2 

 0.9 

 1,177 

 37.7 

0.25 to <0.50

 

 1,364 

 0.4 

 0.2 

 47.6 

 1.0 

 716 

 52.5 

0.50 to <0.75

 

 418 

 0.6 

 0.1 

 63.6 

 1.0 

 421 

 100.7 

0.75 to <2.50

 

 588 

 1.1 

 0.2 

 61.6 

 0.7 

 603 

 102.6 

2.50 to <10.00

 

 84 

 4.7 

 0.1 

 42.7 

 0.4 

 117 

 139.5 

10.00 to <100.00

 

 0 

 13.0 

<0.1

 66.0 

 1.0 

 1 

 350.0 

100.00 (default)

 

 32 

 

<0.1

 

 

 34 

 106.0 

Subtotal

 

 23,577 

 0.3 

 1.2 

 50.3 

 0.7 

 6,145 

 26.1 

 

 

 

 

 

 

 

 

 

Public sector entities, multilateral development banks as of 30.6.18

 

 

0.00 to <0.15

 

 3,238 

 0.0 

 0.1 

 42.8 

 1.4 

 249 

 7.7 

0.15 to <0.25

 

 83 

 0.2 

<0.1

 58.9 

 1.0 

 31 

 36.7 

0.25 to <0.50

 

 44 

 0.3 

<0.1

 56.6 

 1.0 

 25 

 57.6 

0.50 to <0.75

 

 

 

 

 

 

 

 

0.75 to <2.50

 

 14 

 1.0 

<0.1

 35.0 

 1.0 

 8 

 60.4 

2.50 to <10.00

 

 0 

 2.7 

<0.1

 35.0 

 1.0 

 0 

 87.4 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 12 

 

<0.1

 

 

 13 

 106.0 

Subtotal

 

 3,391 

 0.4 

 0.1 

 43.3 

 1.4 

 326 

 9.6 

 

 

 

 

 

 

 

 

 

Public sector entities, multilateral development banks as of 31.12.17

 

 

0.00 to <0.15

 

 3,505 

 0.0 

 0.1 

 43.5 

 1.5 

 325 

 9.3 

0.15 to <0.25

 

 116 

 0.2 

<0.1

 49.3 

 1.2 

 35 

 30.6 

0.25 to <0.50

 

 41 

 0.3 

<0.1

 58.7 

 1.0 

 24 

 59.2 

0.50 to <0.75

 

 

 

 

 

 

 

 

0.75 to <2.50

 

 22 

 1.0 

<0.1

 35.0 

 0.0 

 11 

 50.0 

2.50 to <10.00

 

 0 

 2.7 

<0.1

 35.0 

 1.0 

 0 

 87.4 

10.00 to <100.00

 

 

 

 

 

 

 

 

100.00 (default)

 

 23 

 

<0.1

 

 

 24 

 106.0 

Subtotal

 

 3,706 

 0.6 

 0.1 

 43.6 

 1.5 

 420 

 11.3 

 

27

UBS Group AG consolidated

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

CHF million, except where indicated

 

EAD post CRM

Average PD in %

Number of obligors (in thousands)

Average LGD in %

Average maturity in years

RWA

RWA density in %

 

 

 

 

 

 

 

 

 

Corporates: including specialized lending as of 30.6.181

 

 

0.00 to <0.15

 

 41,586 

 0.0 

 12.2 

 35.9 

 0.6 

 5,246 

 12.6 

0.15 to <0.25

 

 8,801 

 0.2 

 1.5 

 46.6 

 0.5 

 4,159 

 47.3 

0.25 to <0.50

 

 2,478 

 0.4 

 0.9 

 73.8 

 1.0 

 3,032 

 122.3 

0.50 to <0.75

 

 2,270 

 0.6 

 0.9 

 62.9 

 0.7 

 3,390 

 149.4 

0.75 to <2.50

 

 5,482 

 1.2 

 1.9 

 25.2 

 0.8 

 3,801 

 69.3 

2.50 to <10.00

 

 1,790 

 3.1 

 0.3 

 12.6 

 0.4 

 938 

 52.4 

10.00 to <100.00

 

 4 

 13.1 

<0.1

 46.2 

 1.0 

 14 

 317.5 

100.00 (default)

 

 1 

 

<0.1

 

 

 1 

 106.0 

Subtotal

 

 62,412 

 0.3 

 17.7 

 38.3 

 0.6 

 20,582 

 33.0 

 

 

 

 

 

 

 

 

 

Corporates: including specialized lending as of 31.12.171

 

 

0.00 to <0.15

 

 37,903 

 0.0 

 12.0 

 37.7 

 0.6 

 4,862 

 12.8 

0.15 to <0.25

 

 7,472 

 0.2 

 1.5 

 46.9 

 0.5 

 3,403 

 45.5 

0.25 to <0.50

 

 2,592 

 0.4 

 1.0 

 68.8 

 1.0 

 3,061 

 118.1 

0.50 to <0.75

 

 1,921 

 0.6 

 0.9 

 64.7 

 0.7 

 2,828 

 147.2 

0.75 to <2.50

 

 6,084 

 1.2 

 1.9 

 22.3 

 0.8 

 3,807 

 62.6 

2.50 to <10.00

 

 1,781 

 3.2 

 0.3 

 12.8 

 0.4 

 928 

 52.1 

10.00 to <100.00

 

 2 

 13.5 

<0.1

 48.6 

 1.0 

 5 

 307.1 

100.00 (default)

 

 14 

 

<0.1

 

 

 15 

 106.0 

Subtotal

 

 57,768 

 0.3 

 17.6 

 38.8 

 0.6 

 18,908 

 32.7 

 

 

 

 

 

 

 

 

 

Retail: other retail as of 30.6.18

 

 

0.00 to <0.15

 

 7,907 

 0.0 

 17.1 

 27.8 

 

 292 

 3.7 

0.15 to <0.25

 

 308 

 0.2 

 0.2 

 61.1 

 

 72 

 23.5 

0.25 to <0.50

 

 61 

 0.3 

 0.1 

 27.2 

 

 10 

 16.8 

0.50 to <0.75

 

 11 

 0.6 

 0.1 

 27.0 

 

 3 

 23.4 

0.75 to <2.50

 

 337 

 1.0 

 11.2 

 29.8 

 

 117 

 34.7 

2.50 to <10.00

 

 15 

 3.8 

 0.1 

 29.1 

 

 7 

 44.7 

10.00 to <100.00

 

 5 

 21.4 

 0.1 

 29.4 

 

 3 

 69.7 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 8,643 

 0.1 

 29.0 

 29.0 

 

 504 

 5.8 

 

 

 

 

 

 

 

 

 

Retail: other retail as of 31.12.17

 

 

0.00 to <0.15

 

 6,931 

 0.0 

 13.9 

 27.2 

 

 250 

 3.6 

0.15 to <0.25

 

 193 

 0.2 

 0.1 

 28.9 

 

 21 

 11.1 

0.25 to <0.50

 

 43 

 0.4 

 0.1 

 29.3 

 

 8 

 18.1 

0.50 to <0.75

 

 13 

 0.6 

 0.1 

 28.8 

 

 3 

 24.9 

0.75 to <2.50

 

 316 

 1.0 

 10.4 

 29.7 

 

 111 

 35.3 

2.50 to <10.00

 

 42 

 3.9 

 0.2 

 29.4 

 

 19 

 45.2 

10.00 to <100.00

 

 4 

 20.2 

 0.1 

 32.1 

 

 3 

 74.5 

100.00 (default)

 

 

 

 

 

 

 

 

Subtotal

 

 7,542 

 0.1 

 24.8 

 27.4 

 

 415 

 5.5 

 

 

 

 

 

 

 

 

 

Total 30.6.18

 

 108,463 

 0.2 

 48.3 

 41.4 

 0.7 

 29,059 

 26.8 

Total 31.12.17

 

 100,439 

 0.3 

 43.9 

 41.6 

 0.8 

 26,834 

 26.7 

1 Includes exposures to managed funds.   

p

 

 

28

 

Semiannual | Fair value of collateral received from securities financing transactions decreased by CHF 9.7 billion to CHF 615.2  billion as of 30 June 2018. This decrease was primarily driven by lower securities financing transactions in Corporate Center – Group Asset and Liability Management (Group ALM), mainly reflecting reduced asset sourcing for central bank pledges and rebalancing within our high-quality liquid asset (HQLA) portfolio. In addition, fair value of collateral received from securities financing transactions decreased in the Investment Bank’s Corporate Client Solutions business, due to client-driven movements, mainly in margin lending transactions. These decreases were partly offset by a client-driven increase in the Investment Bank’s Equities business. p 

 

 

Semiannual |

CCR5: Composition of collateral for CCR exposure1

 

 

Collateral used in derivative transactions

 

Collateral used in SFTs

 

 

Fair value of collateral received

 

Fair value of posted collateral

 

Fair value of collateral received

 

Fair value of posted collateral

CHF million

 

Segregated2

Unsegregated

Total

 

Segregated3

Unsegregated

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.6.18

 

 

 

 

 

 

 

 

 

 

 

 

Cash – domestic currency

 

 

 1,393 

 1,393 

 

 27 

 936 

 963 

 

 570 

 

 4,903 

Cash – other currencies

 

 2,839 

 37,386 

 40,224 

 

 3,198 

 20,730 

 23,928 

 

 42,148 

 

 97,594 

Sovereign debt

 

 1,580 

 8,851 

 10,431 

 

 3,740 

 8,374 

 12,114 

 

 201,894 

 

 142,269 

Other debt securities

 

 

 1,415 

 1,415 

 

 5 

 1,096 

 1,101 

 

 79,883 

 

 36,364 

Equity securities

 

 4,385 

 36 

 4,421 

 

 1,597 

 1,579 

 3,175 

 

 290,718 

 

 173,878 

Total

 

 8,804 

 49,079 

 57,883 

 

 8,567 

 32,715 

 41,282 

 

 615,213 

 

 455,008 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.17

 

 

 

 

 

 

 

 

 

 

 

 

Cash – domestic currency

 

 

 1,340 

 1,340 

 

 22 

 912 

 934 

 

 284 

 

 2,400 

Cash – other currencies

 

 2,397 

 34,554 

 36,951 

 

 2,847 

 19,819 

 22,667 

 

 40,759 

 

 111,745 

Sovereign debt

 

 1,679 

 10,129 

 11,809 

 

 3,465 

 7,556 

 11,021 

 

 214,003 

 

 149,897 

Other debt securities

 

 

 1,181 

 1,181 

 

 5 

 1,334 

 1,338 

 

 71,659 

 

 30,043 

Equity securities

 

 2,825 

 44 

 2,869 

 

 1,782 

 1,119 

 2,900 

 

 298,179 

 

 158,348 

Total

 

 6,902 

 47,247 

 54,149 

 

 8,121 

 30,739 

 38,860 

 

 624,885 

 

 452,433 

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 only access in the case of counterparty default.    3 Includes collateral posted to central counterparties, where we apply a 0% risk weight for trades that we have entered into on behalf of a client and where the client has signed a legally enforceable agreement stipulating that the default risk of that central counterparty is carried by the client.

p

 

Semiannual | Notionals for credit derivatives decreased by CHF 15.6 billion for protection bought and by CHF 13.2 billion for protection sold, primarily driven by a decrease in Corporate Center – Group Asset and Liability Management following trade compression with central counterparties, as well as continuous reductions in Corporate Center – Non-core and Legacy Portfolio. p    

 

 

Semiannual |

CCR6: Credit derivatives exposures

 

 

30.6.18

 

31.12.17

CHF million

 

Protection bought

Protection

sold

 

Protection bought

Protection

sold

Notionals1

 

 

 

 

 

 

Single-name credit default swaps

 

 48,183 

 47,732 

 

 61,299 

 55,677 

Index credit default swaps

 

 33,988 

 33,145 

 

 38,268 

 38,372 

Total return swaps

 

 4,458 

 1,651 

 

 4,436 

 1,660 

Credit options

 

 6,034 

 58 

 

 4,289 

 58 

Total notionals

 

 92,662 

 82,586 

 

 108,292 

 95,767 

Fair values

 

 

 

 

 

 

Positive fair value (asset)

 

 932 

 1,206 

 

 793 

 2,035 

Negative fair value (liability)

 

 1,926 

 1,316 

 

 2,921 

 887 

1 Includes notional amounts for client-cleared transactions.

p

  

29

UBS Group AG consolidated

 

Section 4  Securitizations

Introduction

This section provides details of traditional and synthetic securitization exposures in the banking and trading book based on the revised Basel III securitization framework, applicable since 1 January 2018, which incorporated changes to the treatment of banking book securitization positions.

In a traditional securitization, a pool of loans (or other debt obligations) is typically transferred to structured entities that have been established to own the loan pool and to issue tranched securities to third-party investors referencing this pool of loans. In a synthetic securitization, legal ownership of securitized pools of assets is typically retained, but associated credit risk is transferred to structured entities typically 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 advice on securitization programs. In line with the Basel III framework, sponsoring includes underwriting activities. In all other cases, we act in the role of investor by taking securitization positions.

Regulatory capital treatment of securitization exposures

With the implementation of the revised securitization framework as of 1 January 2018 for banking book securitization exposures, the following approaches to calculate the associated risk-weighted assets (RWA) have become available, each with specific preconditions that must be met:

–   we use internal ratings (internal ratings-based approach (IRBA)) if the securitized pool largely consists of IRB positions and internal ratings are available;

–   if the IRBA approach cannot be applied, we use external ratings (external ratings-based approach (ERBA)), if available, from Standard & Poor’s, Moody’s Investors Service and Fitch Ratings for securitization exposures, provided that we are able to demonstrate our expertise in critically challenging and reviewing the external ratings; or

–   if we cannot apply the IRBA or ERBA methods, we apply the standardized approach (SA) where the delinquency status of a significant portion of the underlying exposure can be determined or a risk weight of 1,250%. Re-securitization positions are either treated under the standardized approach or with a 1,250% risk weight.


The selection of the external credit assessment institutions (ECAI) is based on the primary rating agency concept. This concept is applied, in principle, to avoid having the credit assessment by one ECAI applied to one or more tranches and by another ECAI to the other tranches, unless this is the result of the application of the specific rules for multiple assessments. If any two of the aforementioned rating agencies have issued a rating for a particular exposure, we would apply the lower of the two credit ratings. If all three rating agencies have issued a rating for a particular exposure, we would apply the middle of the three credit ratings. As of 30 June 2018, UBS did not use internal ratings for the purpose of the RWA calculation for securitization positions in the banking book.

Securitization exposures in the banking and trading book

Semiannual | The tables “SEC1: Securitization exposures in the banking book” and “SEC2: Securitization exposures in the trading book” outline the carrying values on the balance sheet in the banking and trading books as of 30 June 2018 and 31 December 2017. The activity is further broken down by our role (originator, sponsor or investor) and by securitization type (traditional or synthetic). Amounts disclosed under the “Traditional” column of these tables reflect the total outstanding notes at par value issued by the securitization vehicle at issuance. For synthetic securitization transactions, the amounts disclosed generally reflect the balance sheet carrying values of the securitized exposures at issuance.

The tables “SEC3: Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as originator or as sponsor” and “SEC4: Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as investor” have been modified to reflect changes to the revised securitization framework.

Development in RWA related to securitization exposures in the banking book in the first half of 2018

Securitization exposures in the banking book decreased by CHF 2.1 billion to CHF 0.2 billion as of 30 June 2018, with a corresponding decrease in RWA of CHF 0.4 billion. This was primarily driven by the termination of certain hedges in our Investment Bank’s Corporate Client Solutions business. p 

 

 

30

 

Semiannual |

SEC1: Securitization exposures in the banking book

 

 

Bank acts as originator

 

Bank acts as sponsor

 

Bank acts as originator & sponsor

 

Bank acts as investor

 

Total

CHF million

 

Traditional

Synthetic

Subtotal

 

Traditional

Synthetic

Subtotal

 

Traditional

Synthetic

Subtotal

 

Traditional

Synthetic

Subtotal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.6.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Retail (total)

 

 91 

 

 91 

 

 

 

 

 

 

 

 

 

 0 

 

 0 

 

 91 

 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

Residential mortgage

 

 91 

 

 91 

 

 

 

 

 

 

 

 

 

 0 

 

 0 

 

 91 

3

Credit card receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

Student loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

Consumer loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

Other retail exposures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

Wholesale (total)

 

 

 

 

 

 

 

 

 

 

 

 

 

 141 

 

 141 

 

 141 

 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

Loans to corporates or SME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

Commercial mortgage

 

 

 

 

 

 

 

 

 

 

 

 

 

 0 

 

 0 

 

 0 

10

Lease and receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

Trade receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

Other wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 141 

 

 141 

 

 141 

13

Re-securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

Total securitization /

re-securitization

(including retail and wholesale)

 

 91 

 

 91 

 

 

 

 

 

 

 

 

 

 141 

 

 141 

 

 232 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Retail (total)

 

 95 

 

 95 

 

 134 

 

 134 

 

 

 

 

 

 0 

 

 0 

 

 229 

 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

Residential mortgage

 

 95 

 

 95 

 

 

 

 

 

 

 

 

 

 0 

 

 0 

 

 95 

3

Credit card receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

Student loans

 

 

 

 

 

 134 

 

 134 

 

 

 

 

 

 

 

 

 

 134 

5

Consumer loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

Other retail exposures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

Wholesale (total)

 

 

 1,926 

 1,926 

 

 

 

 

 

 

 

 

 

 138 

 

 138 

 

 2,065 

 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

Loans to corporates or SME

 

 

 1,926 

 1,926 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1,926 

9

Commercial mortgage

 

 

 

 

 

 

 

 

 

 

 

 

 

 0 

 

 0 

 

 0 

10

Lease and receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

Trade receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

Other wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 138 

 

 138 

 

 138 

13

Re-securitization

 

 0 

 

 0 

 

 0 

 

 0 

 

 

 

 

 

 0 

 

 0 

 

 0 

14

Total securitization /

re-securitization

(including retail and wholesale)

 

 95 

 1,926 

 2,021 

 

 134 

 

 134 

 

 

 

 

 

 138 

 

 138 

 

 2,293 

p

 

31

UBS Group AG consolidated

Semiannual |

SEC2: Securitization exposures in the trading book

 

 

Bank acts as originator

 

Bank acts as sponsor

 

Bank acts as originator & sponsor

 

Bank acts as investor

 

Total

CHF million

 

Traditional

Synthetic

Subtotal

 

Traditional

Synthetic

Subtotal

 

Traditional

Synthetic

Subtotal

 

Traditional

Synthetic

Subtotal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.6.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Retail (total)

 

 3 

 

 3 

 

 7 

 

 7 

 

 

 

 

 

 14 

 

 14 

 

 24 

 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

Residential mortgage

 

 3 

 

 3 

 

 7 

 

 7 

 

 

 

 

 

 14 

 

 14 

 

 24 

3

Credit card receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

Student loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

Consumer loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

Other retail exposures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

Wholesale (total)

 

 

 

 

 

 4 

 

 4 

 

 99 

 

 99 

 

 7 

 

 7 

 

 111 

 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

Loans to corporates or SME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

Commercial mortgage

 

 

 

 

 

 

 

 

 

 99 

 

 99 

 

 7 

 

 7 

 

 107 

10

Lease and receivables

 

 

 

 

 

 4 

 

 4 

 

 

 

 

 

 

 

 

 

 4 

11

Trade receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

Other wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

Re-securitization

 

 

 6 

 6 

 

 3 

 

 3 

 

 

 

 

 

 10 

 

 10 

 

 19 

14

Total securitization /

re-securitization

(including retail and wholesale)

 

 3 

 6 

 9 

 

 14 

 

 14 

 

 99 

 

 99 

 

 31 

 

 31 

 

 153 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.12.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset classes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Retail (total)

 

 3 

 

 3 

 

 10 

 

 10 

 

 

 

 

 

 26 

 

 26 

 

 39 

 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

Residential mortgage

 

 3 

 

 3 

 

 10 

 

 10 

 

 

 

 

 

 26 

 

 26 

 

 39 

3

Credit card receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

Student loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

Consumer loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

Other retail exposures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

Wholesale (total)

 

 

 

 

 

 2 

 

 2 

 

 18 

 

 18 

 

 7 

 

 7 

 

 26 

 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

Loans to corporates or SME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

Commercial mortgage

 

 

 

 

 

 

 

 

 

 18 

 

 18 

 

 7 

 

 7 

 

 25 

10

Lease and receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

Trade receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

Other wholesale

 

 

 

 

 

 2 

 

 2 

 

 

 

 

 

 

 

 

 

 

13

Re-securitization

 

 

 6 

 6 

 

 2 

 

 2 

 

 

 

 

 

 9 

 

 9 

 

 17 

14

Total securitization /

re-securitization

(including retail and wholesale)

 

 3 

 6 

 9 

 

 13 

 

 13 

 

 18 

 

 18 

 

 43 

 

 43 

 

 83 

 

p

  

32

 

Semiannual |

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

CHF million

 

Total exposure values

 

Exposure values (by RW bands)

 

Exposure values (by regulatory approach)

 

Total RWA

 

RWA (by regulatory approach)

 

Total capital charge after cap

 

Capital charge after cap

30.6.18

 

 

 

≤20% RW

>20% to 50% RW

>50% to 100% RW

>100% to <1250% RW

1250% RW

 

SEC-IRBA

SEC-ERBA

SEC-SA

1250%

 

 

 

SEC-IRBA

SEC-ERBA

SEC-SA

1250%

 

 

 

SEC-IRBA

SEC-ERBA

SEC-SA

1250%

Asset classes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Total exposures

 

 91 

 

 

 

 

 0 

 91 

 

 

 91 

 0 

 

 

 1,140 

 

 

 1,140 

 1 

 

 

 91 

 

 

 91 

 0 

 

2

Traditional securitization

 

 91 

 

 

 

 

 0 

 91 

 

 

 91 

 0 

 

 

 1,140 

 

 

 1,140 

 1 

 

 

 91 

 

 

 91 

 0 

 

3

of which: securitization

 

 91 

 

 

 

 

 0 

 91 

 

 

 91 

 0 

 

 

 1,140 

 

 

 1,140 

 1 

 

 

 91 

 

 

 91 

 0 

 

4

of which: retail underlying

 

 91 

 

 

 

 

 0 

 91 

 

 

 91 

 0 

 

 

 1,140 

 

 

 1,140 

 1 

 

 

 91 

 

 

 91 

 0 

 

5

of which: wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

of which: re-securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

of which: senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

of which: non-senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

Synthetic securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

of which: securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

of which: retail underlying

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

of which: wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

of which: re-securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

of which: senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

of which: non-senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total exposure values

 

Exposure values (by RW bands)

 

Exposure values (by regulatory approach)

 

Total RWA

 

RWA (by regulatory approach)

 

Total capital charge after cap

 

Capital charge after cap

31.12.17

 

 

 

≤20% RW

>20% to 50% RW

>50% to 100% RW

>100% to <1250% RW

1250% RW

 

IRB RBA

IRB SFA

1250%

 

 

 

IRB RBA

IRB SFA

1250%

 

 

 

IRB RBA

IRB SFA

1250%

Asset classes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Total exposures

 

 2,154 

 

 134 

 1,926 

 

 0 

 94 

 

 134 

 1,926 

 94 

 

 1,634 

 

 17 

 441 

 1,176 

 

 131 

 

 1 

 35 

 94 

2

Traditional securitization

 

 228 

 

 134 

 

 

 0 

 94 

 

 134 

 

 94 

 

 1,193 

 

 17 

 

 1,176 

 

 95 

 

 1 

 

 94 

3

of which: securitization

 

 228 

 

 134 

 

 

 

 94 

 

 134 

 

 94 

 

 1,193 

 

 17 

 

 1,176 

 

 95 

 

 1 

 

 94 

4

of which: retail underlying

 

 228 

 

 134 

 

 

 

 94 

 

 134 

 

 94 

 

 1,193 

 

 17 

 

 1,176 

 

 95 

 

 1 

 

 94 

5

of which: wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

of which: re-securitization

 

 0 

 

 

 

 

 0 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

7

of which: senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

of which: non-senior

 

 0 

 

 

 

 

 0 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

9

Synthetic securitization

 

 1,926 

 

 

 1,926 

 

 

 

 

 

 1,926 

 

 

 441 

 

 

 441 

 

 

 35 

 

 

 35 

 

10

of which: securitization

 

 1,926 

 

 

 1,926 

 

 

 

 

 

 1,926 

 

 

 441 

 

 

 441 

 

 

 35 

 

 

 35 

 

11

of which: retail underlying

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

of which: wholesale

 

 1,926 

 

 

 1,926 

 

 

 

 

 

 1,926 

 

 

 441 

 

 

 441 

 

 

 35 

 

 

 35 

 

13

of which: re-securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

of which: senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

of which: non-senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

p

 

33

UBS Group AG consolidated

Semiannual |

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

CHF million

 

Total exposure values

 

Exposure values (by RW bands)

 

Exposure values (by regulatory approach)

 

Total RWA

 

RWA (by regulatory approach)

 

Total capital charge after cap

 

Capital charge after cap

30.6.18

 

 

 

≤20% RW

>20% to 50% RW

>50% to 100% RW

>100% to <1250% RW

1250% RW

 

SEC-IRBA

SEC-ERBA

SEC-SA

1250%

 

 

 

SEC-IRBA

SEC-ERBA

SEC-SA

1250%

 

 

 

SEC-IRBA

SEC-ERBA

SEC-SA

1250%

Asset classes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Total exposures

 

 141 

 

 

 

 62 

 79 

 0 

 

 

 141 

 0 

 

 

 123 

 

 

 123 

 0 

 

 

 10 

 

 

 10 

 0 

 

2

Traditional securitization

 

 141 

 

 

 

 62 

 79 

 0 

 

 

 141 

 0 

 

 

 123 

 

 

 123 

 0 

 

 

 10 

 

 

 10 

 0 

 

3

of which: securitization

 

 141 

 

 

 

 62 

 79 

 0 

 

 

 141 

 0 

 

 

 123 

 

 

 123 

 0 

 

 

 10 

 

 

 10 

 0 

 

4

of which: retail underlying

 

 0 

 

 

 

 

 

 0 

 

 

 

 0 

 

 

 0 

 

 

 

 0 

 

 

 0 

 

 

 

 0 

 

5

of which: wholesale

 

 141 

 

 

 

 62 

 79 

 

 

 

 141 

 

 

 

 123 

 

 

 123 

 

 

 

 10 

 

 

 10 

 

 

6

of which: re-securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

of which: senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

of which: non-senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

Synthetic securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

of which: securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

of which: retail underlying

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

of which: wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

of which: re-securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

of which: senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

of which: non-senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total exposure values

 

Exposure values (by RW bands)

 

Exposure values (by regulatory approach)

 

Total RWA

 

RWA (by regulatory approach)

 

Total capital charge after cap

 

Capital charge after cap

31.12.17

 

 

 

≤20% RW

>20% to 50% RW

>50% to 100% RW

>100% to <1250% RW

1250% RW

 

IRB RBA

IRB SFA

1250%

 

 

 

IRB RBA

IRB SFA

1250%

 

 

 

IRB RBA

IRB SFA

1250%

Asset classes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Total exposures

 

 138 

 

 64 

 0 

 74 

 0 

 0 

 

 138 

 

 0 

 

 62 

 

 61 

 

 1 

 

 5 

 

 5 

 

 0 

2

Traditional securitization

 

 138 

 

 64 

 0 

 74 

 0 

 0 

 

 138 

 

 0 

 

 62 

 

 61 

 

 1 

 

 5 

 

 5 

 

 0 

3

of which: securitization

 

 138 

 

 64 

 0 

 74 

 0 

 0 

 

 138 

 

 0 

 

 62 

 

 61 

 

 1 

 

 5 

 

 5 

 

 0 

4

of which: retail underlying

 

 0 

 

 

 

 

 

 0 

 

 

 

 0 

 

 1 

 

 

 

 1 

 

 0 

 

 

 

 0 

5

of which: wholesale

 

 138 

 

 64 

 0 

 74 

 

 0 

 

 138 

 

 0 

 

 61 

 

 61 

 

 0 

 

 5 

 

 5 

 

 0 

6

of which: re-securitization

 

 0 

 

 

 0 

 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

7

of which: senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

of which: non-senior

 

 0 

 

 

 0 

 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

 

 0 

9

Synthetic securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

of which: securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

of which: retail underlying

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

of which: wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

of which: re-securitization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

of which: senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

of which: non-senior

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

p

  

34

 

 

Section 5  Market risk

Overview

The amount of capital required to underpin market risk in the regulatory trading book is calculated using a variety of methods approved by FINMA. The components of market risk risk-weighted assets (RWA) are value-at-risk (VaR), stressed VaR (SVaR), an add-on for risks that are potentially not fully modeled in VaR, the incremental risk charge (IRC), the comprehensive risk measure (CRM) for the correlation portfolio and the securitization framework for securitization positions in the trading book. Refer to pages 65–66, 79 and 81–83 in the 31 December 2017 Pillar 3 report – UBS Group AG and significant regulated subsidiaries and sub-groups under “Pillar 3 disclosures” at www.ubs.com/investors  for more information on each of these components.


Market risk risk-weighted assets

Market risk RWA development in the second quarter 2018

Quarterly | The four main components that contribute to market risk RWA are VaR, SVaR, IRC and CRM. VaR and SVaR components include the RWA charge for risks-not-in-VaR. The “MR2: RWA flow statements of market risk exposures under an internal models approach” table below provides a breakdown of the market risk RWA movement in the second quarter of 2018 across these components, according to Basel Committee on Banking Supervision-defined movement categories. These categories are described on page 75 of our 31 December 2017 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups, which is available under “Pillar 3 disclosures” at www.ubs.com/investors. 

Market risk RWA decreased by CHF 10.0 billion in the second quarter of 2018, primarily due to asset size and other movements resulting from lower average regulatory VaR and SVaR levels observed in the Investment Bank, mainly due to risk management actions taken during the quarter. The VaR multiplier remained unchanged at 3.0. p 

 

Quarterly |

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

CHF million

VaR

Stressed VaR

IRC

CRM

Other

Total RWA

1

RWA as of 31.12.17

 3,077 

 5,267 

 3,457 

 79 

 

 11,881 

1a

Regulatory adjustment

 (2,392) 

 (4,518) 

 0 

 (26) 

 

 (6,936) 

1b

RWA at previous quarter-end (end of day)

 685 

 749 

 3,457 

 53 

 

 4,944 

2

Movement in risk levels

 379 

 1,453 

 (1,181) 

 

 

 650 

3

Model updates / changes

 69 

 (3) 

 

 

 

 66 

4

Methodology and policy

 

 

 

 

 

 

5

Acquisitions and disposals

 

 

 

 

 

 

6

Foreign exchange movements

 

 

 

 

 

 

7

Other

 18 

 269 

 

 (16) 

 

 271 

8a

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

 1,150 

 2,468 

 2,276 

 37 

 

 5,932 

8b

Regulatory adjustment

 5,740 

 9,503 

 807 

 13 

 

 16,064 

8c

RWA as of 31.3.18

 6,891 

 11,971 

 3,083 

 50 

 

 21,996 

1

RWA as of 31.3.18

 6,891 

 11,971 

 3,083 

 50 

 

 21,996 

1a

Regulatory adjustment

 (5,740) 

 (9,503) 

 (807) 

 (13) 

 

 (16,064) 

1b

RWA at previous quarter-end (end of day)

 1,150 

 2,468 

 2,276 

 37 

 

 5,932 

2

Movement in risk levels

 1,069 

 908 

 102 

 

 

 2,080 

3

Model updates / changes

 (142) 

 13 

 

 

 

 (129) 

4

Methodology and policy

 

 

 

 

 

 

5

Acquisitions and disposals

 

 

 

 

 

 

6

Foreign exchange movements

 

 

 

 

 

 

7

Other

 (106) 

 26 

 

 19 

 

 (61) 

8a

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

 1,972 

 3,416 

 2,378 

 56 

 

 7,822 

8b

Regulatory adjustment

 1,300 

 2,908 

 0 

 0 

 

 4,208 

8c

RWA as of 30.6.18

 3,272 

 6,324 

 2,378 

 56 

 

 12,030 

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

p

 

 

35

UBS Group AG consolidated

Securitization positions in the trading book

Semiannual | Our exposure to securitization positions in the trading book is limited and relates primarily to positions in Corporate Center – Non-core and Legacy Portfolio that we continue to wind down. A small amount of exposure also arises from secondary trading in commercial mortgage-backed securities in the Investment Bank. Refer to the “Regulatory exposures and risk-weighted assets” table on pages 8–9 and to the “Securitizations” section of this report for more information.

The table below provides information on market risk RWA from securitization exposures in the trading book. p 

 

Semiannual |

MR1: Market risk under standardized approach

CHF million

30.6.18

31.12.17

 

Outright products

 

 

1

Interest rate risk (general and specific)

 

 

2

Equity risk (general and specific)

 

 

3

Foreign exchange risk

 

 

4

Commodity risk

 

 

 

Options

 

 

5

Simplified approach

 

 

6

Delta-plus method

 

 

7

Scenario approach

 

 

8

Securitization

 361 

 400 

9

Total

 361 

 400 

 

p

 

  

36

 

Regulatory calculation of market risk

Semiannual | The table below shows minimum, maximum, average and period-end regulatory VaR, SVaR, the IRC and the comprehensive risk capital charge.

During the first half of 2018, 10-day 99% regulatory VaR and SVaR increased, driven primarily by our Equities, Rates and Credit businesses. p 

 

Semiannual |

MR3: IMA values for trading portfolios

CHF million

For the six-month period ended 30.6.18

For the six-month period ended 31.12.17

 

VaR (10-day 99%)

 

 

1

Maximum value

 172 

 89 

2

Average value

 50 

 35 

3

Minimum value

 2 

 12 

4

Period end

 64 

 21 

 

Stressed VaR (10-day 99%)

 

 

5

Maximum value

 313 

 315 

6

Average value

 102 

 84 

7

Minimum value

 22 

 26 

8

Period end

 121 

 30 

 

Incremental risk charge (99.9%)

 

 

9

Maximum value

 331 

 303 

10

Average value

 214 

 265 

11

Minimum value

 147 

 208 

12

Period end

 190 

 277 

 

Comprehensive risk capital charge (99.9%)

 

 

13

Maximum value

 5 

 9 

14

Average value

 4 

 6 

15

Minimum value

 3 

 4 

16

Period end

 4 

 4 

17

Floor (standardized measurement method)

 1 

 1 

 

p

 

37

UBS Group AG consolidated

 

MR4: Comparison of VaR estimates with gains/losses

Semiannual | The “Group: development of backtesting revenues and actual trading revenues against backtesting VaR (1-day, 99% confidence)” chart below shows the six-month development of backtesting VaR against the Group’s backtesting revenues for the first half of 2018. The chart shows the negative and the positive tails of the backtesting VaR distribution at 99% confidence intervals representing the losses and gains, respectively, that could potentially be realized over a one-day period at that level of confidence.

The asymmetry between the negative and positive tails is due to the long gamma risk profile that is run historically in the Investment Bank. This long gamma position profits from increases in volatility, which therefore benefits the positive tail of the VaR simulated profit or loss distribution.

There was one new Group VaR negative backtesting exception in the first half of 2018. The total number of negative backtesting exceptions within a 250-business-day window increased to 2. The FINMA VaR multiplier for market risk RWA remained unchanged at 3.0.

More information on the backtesting exceptions that occurred during 2017 is provided on page 151 of our Annual Report 2017, available under “Annual reporting” at www.ubs.com/investors, and on page 80 of our 31 December 2017 Pillar 3 report – UBS Group AG and significant regulated subsidiaries and sub-groups, available under “Pillar 3 disclosures” at www.ubs.com/investors. p 

 

 

 

Semiannual |

p

 

  

38

 

 

Section 6  Going and gone concern requirements and eligible capital

The table below provides details on the Swiss systemically relevant bank going and gone concern requirements as required by FINMA. More information on capital management is provided on pages 54–64 of our second quarter 2018 report, available under “Quarterly reporting” at www.ubs.com/investors. 

 

Quarterly |

Swiss SRB going and gone concern requirements and information1

As of 30.6.18

 

Swiss SRB, including transitional arrangements

 

Swiss SRB as of 1.1.20

CHF million, except where indicated

 

RWA

LRD

 

RWA

LRD

 

 

 

 

 

 

 

 

 

 

 

Required loss-absorbing capacity

 

in %

 

in %

 

 

in %

 

in %

 

Common equity tier 1 capital

 

 9.72 

 24,528 

 2.90 

 26,170 

 

 10.26 

 25,891 

 3.50 

 31,584 

of which: minimum capital

 

 5.40 

 13,628 

 1.90 

 17,146 

 

 4.50 

 11,357 

 1.50 

 13,536 

of which: buffer capital

 

 4.06 

 10,246 

 1.00 

 9,024 

 

 5.50 

 13,880 

 2.00 

 18,048 

of which: countercyclical buffer2

 

 0.26 

 654 

 

 

 

 0.26 

 654 

 

 

Maximum additional tier 1 capital

 

 3.40 

 8,581 

 1.10 

 9,926 

 

 4.30 

 10,852 

 1.50 

 13,536 

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

 

 2.60 

 6,562 

 1.10 

 9,926 

 

 3.50 

 8,833 

 1.50 

 13,536 

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

 

 0.80 

 2,019 

 

 

 

 0.80 

 2,019 

 

 

Total going concern capital

 

 13.12 

 33,109 

 4.00 

 36,096 

 

 14.563

 36,743 

 5.003

 45,120 

Base gone concern loss-absorbing capacity, including applicable add-ons and rebate

 

 7.654

 19,317 

 2.584

 23,282 

 

 12.305

 31,037 

 4.305

 38,804 

Total gone concern loss-absorbing capacity

 

 7.65 

 19,317 

 2.58 

 23,282 

 

 12.30 

 31,037 

 4.30 

 38,804 

Total loss-absorbing capacity

 

 20.77 

 52,425 

 6.58 

 59,378 

 

 26.86 

 67,780 

 9.30 

 83,924 

 

 

 

 

 

 

 

 

 

 

 

Eligible loss-absorbing capacity

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital

 

 13.40 

 33,817 

 3.75 

 33,817 

 

 13.40 

 33,817 

 3.75 

 33,817 

High-trigger loss-absorbing additional tier 1 capital6,7

 

 7.10 

 17,912 

 1.98 

 17,912 

 

 4.41 

 11,139 

 1.23 

 11,139 

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

 

 3.48 

 8,780 

 0.97 

 8,780 

 

 3.48 

 8,780 

 0.97 

 8,780 

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

 

 0.93 

 2,359 

 0.26 

 2,359 

 

 0.93 

 2,359 

 0.26 

 2,359 

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

 

 0.17 

 434 

 0.05 

 434 

 

 

 

 

 

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

 

 2.51 

 6,339 

 0.70 

 6,339 

 

 

 

 

 

Total going concern capital

 

 20.50 

 51,729 

 5.73 

 51,729 

 

 17.81 

 44,956 

 4.98 

 44,956 

Gone concern loss-absorbing capacity

 

 11.96 

 30,195 

 3.35 

 30,195 

 

 14.48 

 36,535 

 4.05 

 36,535 

of which: TLAC-eligible senior unsecured debt

 

 11.54 

 29,123 

 3.23 

 29,123 

 

 11.54 

 29,123 

 3.23 

 29,123 

Total gone concern loss-absorbing capacity

 

 11.96 

 30,195 

 3.35 

 30,195 

 

 14.48 

 36,535 

 4.05 

 36,535 

Total loss-absorbing capacity

 

 32.46 

 81,924 

 9.08 

 81,924 

 

 32.29 

 81,491 

 9.03 

 81,491 

 

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets

 

 

 252,373 

 

 

 

 

 252,373 

 

 

Leverage ratio denominator

 

 

 

 

 902,408 

 

 

 

 

 902,408 

1 This table includes a rebate equal to 35% of the maximum rebate on the gone concern requirements, which was granted by FINMA and will be phased in until 1 January 2020. This table does not include a rebate for the usage of low-trigger loss-absorbing additional tier 1 or tier 2 capital instruments to meet the gone concern requirements.    2 Going concern capital ratio requirements include countercyclical buffer requirements of 0.26%.    3 Includes applicable add-ons of 1.44% for RWA and 0.5% for leverage ratio denominator (LRD).    4 Includes applicable add-ons of 0.72% for RWA and 0.25% for LRD and a rebate of 1.25% for RWA and 0.42% for LRD.    5 Includes applicable add-ons of 1.44% for RWA and 0.5% for LRD and a rebate of 2% for RWA and 0.7% for LRD.    6 Includes outstanding low-trigger loss-absorbing additional tier 1 (AT1) capital instruments, which are available under the transitional rules of the Swiss SRB framework to meet the going concern requirements until their first call date, even if the first call date is after 31 December 2019. As of their first call date, these instruments are eligible to meet the gone concern requirements.    7 Includes outstanding high- and low-trigger loss-absorbing tier 2 capital instruments, which are available under the transitional rules of the Swiss SRB framework to meet the going concern requirements until the earlier of (i) their maturity or first call date or (ii) 31 December 2019, and to meet gone concern requirements thereafter. Outstanding low-trigger loss-absorbing tier 2 capital instruments are subject to amortization starting five years prior to their maturity, with the amortized portion qualifying as gone concern loss-absorbing capacity. Instruments available to meet gone concern requirements are eligible until one year before maturity, with a haircut of 50% applied in the last year of eligibility.  

p

39

UBS Group AG consolidated

Explanation of the difference between the IFRS and regulatory scope of consolidation

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

The key difference between the IFRS and regulatory capital scope of consolidation as of 30 June 2018 relates to investments in insurance, real estate and commercial companies as well as investment vehicles that are consolidated under IFRS, but not for regulatory capital purposes, where they are subject to risk-weighting.

The table below provides a list of the most significant entities that were included in the IFRS scope of consolidation, but not in the regulatory capital 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 “Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation” table and 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 2018, entities consolidated under either the IFRS or the regulatory scope of consolidation did not report any significant capital deficiencies.

In the banking book, certain equity investments are consolidated neither under IFRS nor under the regulatory scope. As of 30 June 2018, these investments mainly consisted of infrastructure holdings and joint operations (e.g., settlement and clearing institutions, stock and financial futures exchanges) and included our participation in the SIX Group. These investments were risk-weighted based on applicable threshold rules.

More information on the legal structure of the UBS Group and on the IFRS scope of consolidation is provided on pages 12–13 and 325–326, respectively, of our Annual Report 2017, available under “Annual reporting” at www.ubs.com/investors. 

®  Refer to “Financial and regulatory key figures for our significant regulated subsidiaries and sub-groups” on page 142 of our second quarter 2018 report under “Quarterly reporting” at www.ubs.com/investors  for more information on transfer of funds or capital within the Group p 

 

 

Quarterly |

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

 

 

30.6.18

 

 

CHF million

 

Total assets1

Total equity1

 

 

Purpose

UBS Asset Management Life Limited

 

 24,959 

 41 

 

 

Life Insurance

A&Q Alternative Solution Master Limited

 

 307 

 3072

 

 

Investment vehicle for multiple investors

A&Q Alternative Solution Limited

 

 307 

 3012

 

 

Investment vehicle for multiple investors

UBS Life Insurance Company USA

 

 167 

 43 

 

 

Life Insurance

A&Q Alpha Select Hedge Fund Limited

 

 167 

 1562

 

 

Investment vehicle for multiple investors

A&Q Global Alpha Strategies XL Limited

 

 138 

 692

 

 

Investment vehicle for multiple investors

A&Q Alpha Select Hedge Fund XL

 

 115 

 582

 

 

Investment vehicle for multiple investors

1 Total assets and total equity on a standalone basis.    2 Represents the net asset value of issued fund units. These fund units are subject to liability treatment in the consolidated financial statements in accordance with IFRS.

p

 

40

 

Quarterly | The table below and on the next 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 (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 “Composition of capital” table. p 

 

Quarterly |

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

As of 30.6.18

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

CHF million

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Cash and balances at central banks

 102,262 

 

 

 102,262 

 

Loans and advances to banks

 15,577 

 (247) 

 

 15,331 

 

Receivables from securities financing transactions

 76,450 

 

 

 76,450 

 

Cash collateral receivables on derivative instruments

 24,937 

 

 

 24,937 

 

Loans and advances to customers

 318,278 

 19 

 

 318,297 

 

Other financial assets measured at amortized cost

 20,996 

 (272) 

 

 20,723 

 

Total financial assets measured at amortized cost

 558,500 

 (501) 

 

 557,999 

 

Financial assets at fair value held for trading

 112,121 

 (403) 

 

 111,718 

 

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

 36,580 

 

 

 36,580 

 

Derivative financial instruments

 121,604 

 11 

 

 121,615 

 

Brokerage receivables

 18,415 

 

 

 18,415 

 

Financial assets at fair value not held for trading

 93,217 

 (24,571) 

 

 68,646 

 

Total financial assets measured at fair value through profit or loss

 345,357 

 (24,962) 

 

 320,395 

 

Financial assets measured at fair value through other comprehensive income

 6,941 

 

 

 6,941 

 

Consolidated participations

 0 

 102 

 

 102 

 

Investments in associates

 1,026 

 

 

 1,026 

 

of which: goodwill

 350 

 

 

 350 

 4 

Property, equipment and software

 9,083 

 (55) 

 

 9,028 

 

Goodwill and intangible assets

 6,391 

 

 

 6,391 

 

of which: goodwill

 6,212 

 

 

 6,212 

 4 

of which: intangible assets

 179 

 

 

 179 

 5 

Deferred tax assets

 9,859 

 

 

 9,859 

 

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

 6,092 

 

 

 6,092 

 6 

of which: deferred tax assets on temporary differences                

 3,767 

 

 

 3,767 

 10 

Other non-financial assets

 7,324 

 (18) 

 

 7,306 

 

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

 61 

 

 

 61 

 8 

Total assets

 944,482 

 (25,433) 

 

 919,049 

 

 

41

UBS Group AG consolidated

 

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

As of 30.6.18

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

CHF million

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Amounts due to banks

 10,242 

 

 

 10,242 

 

Payables from securities financing transactions

 10,130 

 

 

 10,130 

 

Cash collateral payables on derivative instruments

 31,843 

 

 

 31,843 

 

Customer deposits

 403,430 

 (59) 

 

 403,371 

 

Debt issued measured at amortized cost

 137,530 

 (8) 

 

 137,521 

 

of which: amount eligible for high-trigger loss-absorbing additional tier 1 capital2

 7,119 

 

 

 7,119 

 9 

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

 2,359 

 

 

 2,359 

 9 

of which: amount eligible for low-trigger loss-absorbing tier 2 capital3

 6,339 

 

 

 6,339 

 11 

of which: amount eligible for capital instruments subject to phase-out from tier 2 capital4

 696 

 

 

 696 

 12 

Other financial liabilities measured at amortized cost

 6,909 

 (437) 

 

 6,472 

 

Total financial liabilities measured at amortized cost

 600,084 

 (505) 

 

 599,579 

 

Financial liabilities at fair value held for trading

 31,416 

 

 

 31,416 

 

Derivative financial instruments

 119,223 

 3 

 

 119,226 

 

Brokerage payables designated at fair value

 37,904 

 

 

 37,904 

 

Debt issued designated at fair value

 56,849 

 

 

 56,849 

 

Other financial liabilities designated at fair value

 37,342 

 (24,913) 

 

 12,429 

 

Total financial liabilities measured at fair value through profit or loss

 282,734 

 (24,910) 

 

 257,824 

 

Provisions

 3,123 

 

 

 3,123 

 

Other non-financial liabilities

 7,708 

 (16) 

 

 7,692 

 

of which: amount eligible for high-trigger loss-absorbing capital (Deferred Contingent Capital Plan (DCCP))5

 1,156 

 

 

 1,156 

 9 

of which: deferred tax liabilities related to goodwill

 54 

 

 

 54 

 4 

of which: deferred tax liabilities related to other intangible assets

 3 

 

 

 3 

 5 

Total liabilities

 893,649 

 (25,431) 

 

 868,218 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

Share capital

 385 

 

 

 385 

 1 

Share premium

 22,961 

 

 

 22,961 

 1 

Treasury shares

 (2,032) 

 

 

 (2,032) 

 3 

Retained earnings

 35,584 

 (22) 

 

 35,562 

 2 

Other comprehensive income recognized directly in equity, net of tax

 (6,124) 

 20 

 

 (6,104) 

 3 

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

 (264) 

 

 

 (264) 

 7 

Equity attributable to shareholders

 50,774 

 (3) 

 

 50,771 

 

Equity attributable to non-controlling interests

 60 

 

 

 60 

 

Total equity

 50,834 

 (3) 

 

 50,832 

 

Total liabilities and equity

 944,482 

 (25,433) 

 

 919,049 

 

1 References link the lines of this table to the respective reference numbers provided in the “References” column in the “Composition of capital” table.    2 Represents IFRS carrying value.    3 IFRS carrying value is CHF 6,748 million.    4 IFRS carrying value is CHF 705 million.    5 IFRS carrying value is CHF 1,770 million. Refer to the “Compensation” section of our Annual Report 2017 for more information on the DCCP.

p

 

42

 

Composition of capital

Quarterly | The table below and on the following pages provides the “Composition of capital” as defined by the BCBS and FINMA. Reference is made to items reconciling to the balance sheet under the regulatory scope of consolidation as disclosed in the “Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation” table.


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

 

Quarterly |

Composition of capital

 

 

 

As of 30.6.18

Numbers phase-in

Effect of the

transition phase

References1

CHF million, except where indicated

 

 

 

1

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

 23,346 

 

 1 

2

Retained earnings                                           

 35,562 

 

 2 

3

Accumulated other comprehensive income (and other reserves)                                      

 (8,136) 

 

 3 

4

Directly issued capital subject to phase-out from common equity tier 1 (CET1) capital (only applicable to non-joint stock companies)                              

 

 

 

5

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

 

 

 

6

Common equity tier 1 capital before regulatory adjustments                                     

 50,771 

 

 

7

Prudential valuation adjustments                                          

 (120) 

 

 

8

Goodwill, net of tax

 (6,508) 

 

 4 

9

Intangible assets, net of tax

 (176) 

 

 5 

10

Deferred tax assets recognized for tax loss carry-forwards2

 (6,113) 

 

 6 

11

Unrealized (gains) / losses from cash flow hedges, net of tax

 264 

 

 7 

12

Expected losses on advanced internal ratings-based portfolio less provisions

 (397) 

 

 

13

Securitization gain on sale

 

 

 

14

Own credit related to financial liabilities designated at fair value, net of tax, and replacement values

 (319) 

 

 

15

Defined benefit plans

 (61) 

 

 8 

16

Compensation and own shares-related capital components (not recognized in net profit)3

 (1,805) 

 

 9 

17

Reciprocal crossholdings in common equity

 

 

 

17a

Qualifying interest where a controlling influence is exercised together with other owners (CET1 instruments)

 

 

 

17b

Consolidated investments (CET1 instruments)

 

 

 

18

Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory

consolidation, net of eligible short positions, 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, net of eligible short positions (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)

 (289) 

 

 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 investments treated according to the PD / LGD approach

 

 

 

26a

Other adjustments relating to the application of an internationally accepted accounting standard

 

 

 

26b

Other deductions

 (1,429) 

 

 

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

 (16,954) 

 

 

 

43

UBS Group AG consolidated

 

Composition of capital (continued)

As of 30.6.18

Numbers phase-in

Effect of the

transition phase

References 1

CHF million, except where indicated

 

 

 

29

Common equity tier 1 capital (CET1)

 33,817 

 

 

30

Directly issued qualifying additional tier 1 instruments plus related stock surplus

 11,139 

 

 

31

of which: classified as equity under applicable accounting standards

 

 

 

32

of which: classified as liabilities under applicable accounting standards

 11,139 

 

 9 

33

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

 

 

 

34

Additional tier 1 instruments (and CET1 instruments not included in line 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

 11,139 

 

 

37

Investments in own additional tier 1 instruments

 

 

 

38

Reciprocal crossholdings in additional tier 1 instruments

 

 

 

38a

Qualifying interest where a controlling influence is exercised together with other owner (AT1 instruments)

 

 

 

38b

Holdings in companies which are to be consolidated (AT1 instruments)

 

 

 

39

Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, 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 (net of eligible short positions)

 

 

 

41

National specific regulatory adjustments

 

 

 

42

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

 

 

 

 

Tier 1 adjustments on impact of transitional arrangements

 

 

 

42a

Excess of the adjustments, which are allocated to the common equity tier 1 capital

 

 

 

43

Total regulatory adjustments to additional tier 1 capital

 

 

 

44

Additional tier 1 capital (AT1)

 11,139 

 

 

45

Tier 1 capital (T1 = CET1 + AT1)

 44,956 

 

 

46

Directly issued qualifying tier 2 instruments plus related stock surplus

 6,340 

 

 11 

47

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

 712 

 (712) 

 12 

48

Tier 2 instruments (and CET1 and AT1 instruments not included in lines 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

 7,051 

 

 

52

Investments in own tier 2 instruments4

 (16) 

 16 

11, 12

53

Reciprocal crossholdings in tier 2 instruments

 

 

 

53a

Qualifying interest where a controlling influence is exercised together with other owner (tier 2 instruments)

 

 

 

53b

Investments to be consolidated (tier 2 instruments)

 

 

 

54

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

 

 

 

55

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

 

 

 

56

National specific regulatory adjustments

 

 

 

56a

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

 

 

 

57

Total regulatory adjustments to tier 2 capital

 (16) 

 16 

 

 

44

 

 

Composition of capital (continued)

As of 30.6.18

Numbers phase-in

Effect of the

transition phase

References1

CHF million, except where indicated

 

 

 

58

Tier 2 capital (T2)

 7,035 

 (696) 

 

 

of which: low-trigger loss-absorbing capital

 6,339 

 

 11 

59

Total capital (TC = T1 + T2)

 51,991 

 (696) 

 

60

Total risk-weighted assets

 252,373 

 

 

 

Capital ratios and buffers

 

 

 

61

Common equity tier 1 (as a percentage of risk-weighted assets)

 13.4 

 

 

62

Tier 1 (pos 45 as a percentage of risk-weighted assets)

 17.8 

 

 

63

Total capital (pos 59 as a percentage of risk-weighted assets)

 20.6 

 

 

64

CET1 requirement (base capital, buffer capital and countercyclical buffer requirements) plus G-SIB buffer requirement, expressed as a percentage of risk-weighted assets5

 7.4 

 

 

65

of which: capital buffer requirement

 1.9 

 

 

66

of which: bank-specific countercyclical buffer requirement

 0.3 

 

 

67

of which: G-SIB buffer requirement

 0.8 

 

 

68

Common equity tier 1 available to meet buffers (as a percentage of risk-weighted assets)

 13.4 

 

 

68a–f

Not applicable for systemically relevant banks according to FINMA Circular 11/2

 

 

 

72

Non-significant investments in the capital of other financials

 1,629 

 

 

73

Significant investments in the common stock of financials

 743 

 

 

74

Mortgage servicing rights, net of tax

 

 

 

75

Deferred tax assets arising from temporary differences, net of tax

 3,700 

 

 

 

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

 

 

 

1 References link the lines of this table to the respective reference numbers provided in the “References” column in the “Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation” table.    2 IFRS netting for deferred tax assets and liabilities is reversed for items deducted from CET1 capital.    3 Includes CHF 505 million in DCCP-related charge for regulatory capital purposes.    4 Consists of own instruments for loss-absorbing tier 2 capital of CHF 0.1 million and for phase-out tier 2 capital of CHF 16.2 million.    5 BCBS requirements are exceeded by our Swiss SRB requirements. Refer to the “Capital management“ section of our Annual Report 2017 for more information on the Swiss SRB requirements.

p

  

45

UBS Group AG consolidated

 

Section 7  Leverage ratio

BCBS Basel III leverage ratio

Quarterly | The Basel Committee on Banking Supervision (BCBS) leverage ratio is calculated by dividing the period-end tier 1 capital by the period-end leverage ratio denominator (LRD). 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 value 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. In addition, balance sheet assets deducted from our tier 1 capital are excluded from LRD.

The “Reconciliation of IFRS total assets to BCBS Basel III total on-balance sheet exposures excluding derivatives and securities financing transactions” table below shows the difference between total IFRS assets per IFRS consolidation scope and the BCBS total on-balance sheet exposures, which are the starting point for calculating the BCBS LRD as shown in the “BCBS Basel III leverage ratio common disclosure” table on the next page. The difference is due to the application of the regulatory scope of consolidation for the purpose of the BCBS calculation. In addition, carrying values for derivative financial instruments and securities financing transactions 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 “BCBS Basel III leverage ratio common disclosure” table on the next page.

As of 30 June 2018, our BCBS Basel III leverage ratio was 5.0% and the BCBS Basel III LRD was CHF 902 billion. Information on our Swiss systemically relevant bank (SRB) leverage ratio and the movement in our LRD compared with the prior quarter is provided on pages 63–64 of our second quarter 2018 report, available under “Quarterly reporting” at www.ubs.com/investors. p 

Difference between the Swiss SRB and BCBS leverage ratio

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

 

Quarterly |

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

CHF million

30.6.18

31.3.18

31.12.17

On-balance sheet exposures

 

 

 

IFRS total assets

 944,482 

 919,361 

 915,642 

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

 (25,433) 

 (24,805) 

 (12,142) 

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

 0 

 0 

 0 

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

 0 

 0 

 0 

Less carrying value of derivative financial instruments in IFRS total assets1

 (146,553) 

 (137,616) 

 (141,673) 

Less carrying value of securities financing transactions in IFRS total assets2

 (103,361) 

 (106,485) 

 (114,895) 

Adjustments to accounting values

 0 

 0 

 0 

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

 669,135 

 650,455 

 646,933 

Asset amounts deducted in determining BCBS Basel III tier 1 capital

 (13,545) 

 (13,250) 

 (12,624) 

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

 655,591 

 637,205 

 634,309 

1 Consists of derivative financial instruments and cash collateral receivables on derivative instruments in accordance with the regulatory scope of consolidation.    2 Consists of receivables from securities financing transactions, and margin loans as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to securities financing transactions in accordance with the regulatory scope of consolidation.

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46

 

Quarterly |

BCBS Basel III leverage ratio common disclosure

 

 

 

CHF million, except where indicated

30.6.18

31.3.18

31.12.17

 

 

 

 

 

 

On-balance sheet exposures

 

 

 

1

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

 669,135 

 650,455 

 646,933 

2

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

 (13,545) 

 (13,250) 

 (12,624) 

3

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

 655,591 

 637,205 

 634,309 

 

 

 

 

 

 

Derivative exposures

 

 

 

4

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

 43,788 

 42,546 

 42,135 

5

Add-on amounts for PFE associated with all derivatives transactions

 92,317 

 91,207 

 89,205 

6

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

 0 

 0 

 0 

7

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

 (13,662) 

 (13,266) 

 (12,481) 

8

(Exempted CCP leg of client-cleared trade exposures)

 (22,182) 

 (22,550) 

 (22,836) 

9

Adjusted effective notional amount of all written credit derivatives2

 79,933 

 87,252 

 94,031 

10

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

 (78,132) 

 (85,134) 

 (91,951) 

11

Total derivative exposures

 102,062 

 100,055 

 98,103 

 

 

 

 

 

 

Securities financing transaction exposures

 

 

 

12

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

 176,637 

 177,346 

 191,696 

13

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

 (73,276) 

 (70,861) 

 (76,802) 

14

CCR exposure for SFT assets

 9,787 

 9,406 

 9,269 

15

Agent transaction exposures

 0 

 0 

 0 

16

Total securities financing transaction exposures

 113,148 

 115,891 

 124,164 

 

 

 

 

 

 

Other off-balance sheet exposures

 

 

 

17

Off-balance sheet exposure at gross notional amount

 93,440 

 88,553 

 93,090 

18

(Adjustments for conversion to credit equivalent amounts)

 (61,833) 

 (59,235) 

 (62,031) 

19

Total off-balance sheet items

 31,607 

 29,318 

 31,059 

 

Total exposures (leverage ratio denominator), phase-in

 

 

 887,635 

 

(Additional asset amounts deducted in determining Basel III tier 1 capital fully applied)

 

 

 (1,519) 

 

Total exposures (leverage ratio denominator), fully applied

 902,408 

 882,469 

 886,116 

 

 

 

 

 

 

Capital and total exposures (leverage ratio denominator), phase-in

 

 

 

20

Tier 1 capital

 

 

 43,438 

21

Total exposures (leverage ratio denominator)

 

 

 887,635 

 

Leverage ratio

 

 

 

22

Basel III leverage ratio phase-in (%)

 

 

 4.9 

 

 

 

 

 

 

Capital and total exposures (leverage ratio denominator), fully applied

 

 

 

20

Tier 1 capital

 44,956 

 44,026 

 41,911 

21

Total exposures (leverage ratio denominator)

 902,408 

 882,469 

 886,116 

 

Leverage ratio

 

 

 

22

Basel III leverage ratio fully applied (%)

 5.0 

 5.0 

 4.7 

1 As of 31 December 2017, the phase-in deduction applied for the purpose of the CET1 capital calculation was 80%. These effects are fully phased in from 1 January 2018. Associated prudential filters applied to LRD are also fully phased in from 1 January 2018.    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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47

UBS Group AG consolidated

Quarterly |

BCBS Basel III leverage ratio summary comparison

 

 

 

CHF million

30.6.18

31.3.18

31.12.17

1

Total consolidated assets as per published financial statements

 944,482 

 919,361 

 915,642 

2

Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes but outside the scope of regulatory consolidation1

 (38,978) 

 (38,055) 

 (24,765) 

3

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

 0 

 0 

 0 

4

Adjustments for derivative financial instruments

 (44,491) 

 (37,561) 

 (43,570) 

5

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

 9,787 

 9,406 

 9,269 

6

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

 31,607 

 29,318 

 31,059 

7

Other adjustments

 0 

 0 

 0 

8

Leverage ratio exposure (leverage ratio denominator)2

 902,408 

 882,469 

 887,635 

1 This item includes assets that are deducted from CET1 capital.    2 As of 31 December 2017, the phase-in deduction applied for the purpose of the CET1 capital calculation was 80%. These effects are fully phased in from 1 January 2018. Associated prudential filters applied to LRD are also fully phased in from 1 January 2018.

p

 

Quarterly |

BCBS Basel III leverage ratio

 

 

 

 

CHF million, except where indicated

 

 

 

 

Phase-in

30.6.18

31.3.18

31.12.17

30.9.17

Total tier 1 capital

 

 

 43,438 

 44,315 

BCBS total exposures (leverage ratio denominator)

 

 

 887,635 

 886,969 

BCBS Basel III leverage ratio (%)

 

 

 4.9 

 5.0 

 

 

 

 

 

Fully applied

30.6.18

31.3.18

31.12.17

30.9.17

Total tier 1 capital

 44,956 

 44,026 

 41,911 

 41,493 

BCBS total exposures (leverage ratio denominator)

 902,408 

 882,469 

 886,116 

 884,834 

BCBS Basel III leverage ratio (%)

 5.0 

 5.0 

 4.7 

 4.7 

p

  

48

 

 

Section 8  Liquidity coverage ratio

High-quality liquid assets

Quarterly | High-quality liquid assets (HQLA) must be easily and immediately convertible into cash at little or no loss of value, especially during a period of stress. HQLA are assets that are of low risk and are unencumbered. Other characteristics of HQLA are ease and certainty of valuation, low correlation with risky assets, listing on a developed and recognized exchange, an active and sizable market and low volatility. Based on these characteristics, HQLA are categorized as Level 1 (primarily central bank reserves and government bonds) or Level 2 (primarily US and European agency bonds as well as non-financial corporate covered bonds). Level 2 assets are subject to regulatory haircuts and caps. p 

 

Quarterly |

High-quality liquid assets

 

 

 

 

 

 

 

 

 

 

Average 2Q181

 

Average 1Q181

 

Average 4Q171

CHF 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

 

Level 1

weighted

liquidity

value2

Level 2

weighted

liquidity

value2

Total

weighted

liquidity

value2

Cash balances3

 

 102 

 0 

 102 

 

 101 

 0 

 101 

 

 103 

 0 

 103 

Securities (on- and off-balance sheet)

 

 70 

 9 

 79 

 

 74 

 9 

 82 

 

 63 

 17 

 80 

Total high-quality liquid assets4

 

 172 

 9 

 181 

 

 174 

 9 

 183 

 

 166 

 17 

 183 

1 Calculated based on an average of 65 data points in the second quarter of 2018, 64 data points in the first quarter of 2018 and 63 data points in the fourth quarter of 2017.    2 Calculated after the application of haircuts.    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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49

UBS Group AG consolidated

Liquidity coverage ratio

Quarterly | In the second quarter of 2018, our liquidity coverage ratio (LCR) increased 8 percentage points to 144%, remaining above the 110% Group LCR minimum communicated by FINMA. The increase in LCR was mainly driven by lower net cash outflows primarily related to secured financing transactions, deposits and loans. These effects were partly offset by a reduction in eligible HQLA mainly due to an increase in assets subject to transfer restrictions in the US branches of UBS AG due to regulatory requirements for US liquidity stress testing. p 

®   Refer to the “Significant regulated subsidiaries and sub-groups” section in this report starting on page 54 for information on requirements applicable to UBS AG standalone and UBS Switzerland AG standalone

 

 

Quarterly |

Liquidity coverage ratio

 

 

 

 

 

 

 

 

 

 

 

 

Average 2Q181

 

Average 1Q181

 

Average 4Q171

CHF billion, except where indicated

 

Unweighted value

Weighted value2

 

Unweighted value

Weighted value2

 

Unweighted value

Weighted value2

 

High-quality liquid assets

 

 

 

 

 

 

 

 

 

1

High-quality liquid assets

 

 182 

 181 

 

 184 

 183 

 

 186 

 183 

 

 

 

 

 

 

 

 

 

 

 

Cash outflows

 

 

 

 

 

 

 

 

 

2

Retail deposits and deposits from small business customers

 

 234 

 26 

 

 231 

 26 

 

 237 

 26 

3

of which: stable deposits

 

 35 

 1 

 

 35 

 1 

 

 35 

 1 

4

of which: less stable deposits

 

 199 

 25 

 

 196 

 24 

 

 201 

 25 

5

Unsecured wholesale funding

 

 183 

 104 

 

 184 

 106 

 

 184 

 104 

6

of which: operational deposits (all counterparties)

 

 40 

 10 

 

 37 

 9 

 

 36 

 9 

7

of which: non-operational deposits (all counterparties)

 

 130 

 81 

 

 134 

 84 

 

 137 

 84 

8

of which: unsecured debt

 

 13 

 13 

 

 13 

 13 

 

 11 

 11 

9

Secured wholesale funding

 

 

 80 

 

 

 78 

 

 

 79 

10

Additional requirements:

 

 85 

 28 

 

 82 

 26 

 

 84 

 26 

11

of which: outflows related to derivatives and other transactions

 

 45 

 19 

 

 42 

 17 

 

 42 

 17 

12

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

 

 1 

 1 

 

 1 

 1 

 

 0 

 0 

13

of which: committed credit and liquidity facilities

 

 40 

 9 

 

 39 

 8 

 

 42 

 9 

14

Other contractual funding obligations

 

 13 

 11 

 

 12 

 12 

 

 14 

 13 

15

Other contingent funding obligations

 

 252 

 5 

 

 243 

 5 

 

 248 

 6 

16

Total cash outflows

 

 

 255 

 

 

 252 

 

 

 254 

 

 

 

 

 

 

 

 

 

 

 

Cash inflows

 

 

 

 

 

 

 

 

 

17

Secured lending

 

 311 

 86 

 

 295 

 80 

 

 293 

 83 

18

Inflows from fully performing exposures

 

 70 

 32 

 

 67 

 30 

 

 64 

 33 

19

Other cash inflows

 

 11 

 11 

 

 7 

 7 

 

 10 

 10 

20

Total cash inflows

 

 393 

 129 

 

 369 

 118 

 

 367 

 126 

 

 

 

 

 

 

 

 

 

 

 

 

Average 2Q181

 

 

Average 1Q181

 

 

Average 4Q171

CHF billion, except where indicated

 

 

Total adjusted value4

 

 

Total adjusted value4

 

 

Total adjusted value4

 

 

 

 

 

 

 

 

 

 

 

Liquidity coverage ratio

 

 

 

 

 

 

 

 

 

21

High-quality liquid assets

 

 

 181 

 

 

 183 

 

 

 183 

22

Net cash outflows

 

 

 126 

 

 

 135 

 

 

 128 

23

Liquidity coverage ratio (%)

 

 

 144 

 

 

 136 

 

 

 143 

1 Calculated based on an average of 65 data points in the second quarter of 2018, 64 data points in the first quarter of 2018 and 63 data points in the fourth quarter of 2017.    2 Calculated after the application of 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.

p

  

50

 

 

Section 9  Requirements for global systemically important banks and related indicators

Annual | The Financial Stability Board (FSB) determined that UBS is a global systemically important bank (G-SIB) using an indicator-based methodology adopted by the Basel Committee on Banking Supervision (BCBS). Banks that qualify as G-SIBs are required to disclose the 12 indicators for assessing the systemic importance of G-SIBs as defined by the BCBS. These indicators are used for the G-SIB score calculation and cover the following 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 capital buffer requirements in the range of 1.0% to 3.5%. These requirements are being phased in from 1 January 2016 to 31 December 2018 and become fully effective on 1 January 2019. In November 2017, the FSB determined that, based on the year-end 2016 indicators, the requirement for UBS is 1.0%. As our Swiss systemically relevant bank Basel III capital requirements exceed the BCBS requirements, including the G-SIB buffer, UBS is not subject to any additional requirements as a result of the above.

Our G-SIB indicators as of 31 December 2017 were published in July 2018 under “Pillar 3 disclosures” at www.ubs.com/investors. p 

  

51

 

 
 

 

 

Significant regulated subsidiaries and sub-groups

  

 

Significant regulated subsidiaries and sub-groups

 

Section 1  Introduction

The sections below include capital and other regulatory information for UBS AG standalone, UBS Switzerland AG standalone, UBS Limited standalone and UBS Americas Holding LLC consolidated. UBS AG consolidated capital and other regulatory information is provided in the UBS AG second quarter 2018 report, which is available under “Quarterly reporting” at www.ubs.com/investors.   

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

 

 

 

Section 2  UBS AG standalone

Swiss SRB going concern requirements and information

Quarterly | Under Swiss systemically relevant bank (SRB) regulations, article 125 “Reliefs for financial groups and individual institutions” of the Capital Adequacy Ordinance stipulates that the Swiss Financial Market Supervisory Authority (FINMA) may grant, under certain conditions, capital relief to individual institutions to ensure that an individual institution’s compliance with the capital requirements does not lead to a de facto overcapitalization of the group of which it is a part.

FINMA granted relief concerning the regulatory capital requirements of UBS AG on a standalone basis by means of decrees issued on 20 December 2013 and 20 October 2017, the latter effective as of 1 July 2017 and partly replacing the former.

More information is provided in “Section 2 UBS AG standalone”  of the 31 December 2017 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups under “Pillar 3 disclosures”  at www.ubs.com/investors. p 

 

Quarterly |

Swiss SRB going concern requirements and information

As of 30.6.18

 

Swiss SRB, including transitional arrangements

 

Swiss SRB after transition

CHF million, except where indicated

 

RWA

LRD

 

RWA

LRD

 

 

 

 

 

 

 

 

 

 

 

Required going concern capital

 

in %1

 

in %1

 

 

in %

 

in %

 

Common equity tier 1 capital

 

 10.08 

 28,623 

 3.50 

 21,512 

 

 10.08 

 37,618 

 3.50 

 21,512 

of which: minimum capital

 

 4.50 

 12,778 

 1.50 

 9,220 

 

 4.50 

 16,793 

 1.50 

 9,220 

of which: buffer capital

 

 5.50 

 15,617 

 2.00 

 12,293 

 

 5.50 

 20,525 

 2.00 

 12,293 

of which: countercyclical buffer2

 

 0.08 

 228 

 

 

 

 0.08 

 300 

 

 

Maximum additional tier 1 capital

 

 4.30 

 12,210 

 1.50 

 9,220 

 

 4.30 

 16,047 

 1.50 

 9,220 

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

 

 3.50 

 9,938 

 1.50 

 9,220 

 

 3.50 

 13,062 

 1.50 

 9,220 

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

 

 0.80 

 2,272 

 

 

 

 0.80 

 2,985 

 

 

Total going concern capital

 

 14.383

 40,832 

 5.003

 30,732 

 

 14.383

 53,665 

 5.003

 30,732 

 

 

 

 

 

 

 

 

 

 

 

Eligible going concern capital

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital

 

 17.31 

 49,148 

 8.00 

 49,148 

 

 13.17 

 49,148 

 8.00 

 49,148 

High-trigger loss-absorbing additional tier 1 capital4

 

 4.75 

 13,477 

 2.19 

 13,477 

 

 1.91 

 7,138 

 1.16 

 7,138 

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

 

 2.51 

 7,138 

 1.16 

 7,138 

 

 1.91 

 7,138 

 1.16 

 7,138 

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

 

 2.23 

 6,339 

 1.03 

 6,339 

 

 

 

 

 

Total going concern capital

 

 22.06 

 62,625 

 10.19 

 62,625 

 

 15.08 

 56,286 

 9.16 

 56,286 

 

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets

 

 

 283,948 

 

 

 

 

 373,186 

 

 

Leverage ratio denominator

 

 

 

 

 614,642 

 

 

 

 

 614,642 

1 By FINMA decree, requirements exceed those based on the transitional arrangements of the Swiss Capital Adequacy Ordinance, i.e., a total going concern capital ratio requirement of 12.86% plus the effect of countercyclical buffer (CCB) requirements of 0.08%, of which 9.46% plus the effect of CCB requirements of 0.08% must be satisfied with CET1 capital, and a total going concern leverage ratio requirement of 4%, of which 2.9% must be satisfied with CET1 capital.    2 Going concern capital ratio requirements as of 30 June 2018 include CCB requirements of 0.08%.    3 Includes applicable add-ons of 1.44% for RWA and 0.5% for LRD.    4 Includes outstanding low-trigger loss-absorbing tier 2 capital instruments, which are available under the transitional rules of the Swiss SRB framework to meet the going concern requirements until the earlier of (i) their maturity or first call date or (ii) 31 December 2019. Outstanding low-trigger loss-absorbing tier 2 capital instruments are subject to amortization starting five years prior to their maturity.

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54

 

Quarterly |

Swiss SRB going concern information

 

 

Swiss SRB, including transitional arrangements

 

Swiss SRB after transition

CHF million, except where indicated

 

30.6.18

 

31.3.18

31.12.171

 

30.6.18

 

31.3.18

31.12.17

 

 

 

 

 

 

 

 

 

 

 

Going concern capital

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital

 

 49,148 

 

 47,508 

 48,374 

 

 49,148 

 

 47,508 

 48,178 

High-trigger loss-absorbing additional tier 1 capital

 

 7,138 

 

 6,911 

 3,666 

 

 7,138 

 

 6,911 

 3,666 

Total loss-absorbing additional tier 1 capital

 

 7,138 

 

 6,911 

 3,666 

 

 7,138 

 

 6,911 

 3,666 

Total tier 1 capital

 

 56,286 

 

 54,419 

 52,040 

 

 56,286 

 

 54,419 

 51,845 

Low-trigger loss-absorbing tier 2 capital2

 

 6,339 

 

 7,698 

 7,874 

 

 

 

 

 

Total tier 2 capital

 

 6,339 

 

 7,698 

 7,874 

 

 

 

 

 

Total going concern capital

 

 62,625 

 

 62,118 

 59,914 

 

 56,286 

 

 54,419 

 51,845 

 

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets

 

 283,948 

 

 288,194 

 277,529 

 

 373,186 

 

 376,042 

 365,362 

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

 

 28,646 

 

 28,761 

 28,595 

 

 35,808 

 

 35,951 

 35,744 

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

 

 82,076 

 

 80,658 

 80,684 

 

 164,153 

 

 161,316 

 161,368 

Leverage ratio denominator

 

 614,642 

 

 591,413 

 599,727 

 

 614,642 

 

 591,413 

 599,532 

 

 

 

 

 

 

 

 

 

 

 

Capital ratios (%)

 

 

 

 

 

 

 

 

 

 

Total going concern capital ratio

 

 22.1 

 

 21.6 

 21.6 

 

 15.1 

 

 14.5 

 14.2 

of which: CET1 capital ratio

 

 17.3 

 

 16.5 

 17.4 

 

 13.2 

 

 12.6 

 13.2 

 

 

 

 

 

 

 

 

 

 

 

Leverage ratios (%)

 

 

 

 

 

 

 

 

 

 

Total going concern leverage ratio

 

 10.2 

 

 10.5 

 10.0 

 

 9.2 

 

 9.2 

 8.6 

of which: CET1 leverage ratio

 

 8.0 

 

 8.0 

 8.1 

 

 8.0 

 

 8.0 

 8.0 

1 As of 31 December 2017, phase-in deduction applied for the purpose of the CET1 capital calculation was 80%. These effects are fully phased in from 1 January 2018. Prudential filters applied to RWA and LRD are also fully phased in from 1 January 2018. The remaining difference on RWA relates to the treatment of direct and indirect investments.    2 Outstanding low-trigger loss-absorbing tier 2 capital instruments qualify as going concern capital until the earlier of (i) their maturity or first call date or (ii) 31 December 2019, and are subject to amortization starting five years prior to their maturity.    3 Carrying value for direct and indirect investments including holding of regulatory capital instruments in Swiss-domiciled subsidiaries (30 June 2018: CHF 14,323 million; 31 March 2018: CHF 14,380 million; 31 December 2017: CHF 14,298 million), and for direct and indirect investments including holding of regulatory capital instruments in foreign-domiciled subsidiaries (30 June 2018: CHF 41,038 million; 31 March 2018: CHF 40,329 million; 31 December 2017: CHF 40,342 million), is currently risk weighted at 200%. Risk weights are gradually increased by 5% per year for Swiss-domiciled investments and 20% per year for foreign-domiciled investments starting 1 January 2019 until the fully applied risk weights of 250% and 400%, respectively, are applied.

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55

Significant regulated subsidiaries and sub-groups

Leverage ratio information

 

Quarterly |

Swiss SRB leverage ratio denominator

 

 

LRD (fully applied)

 

LRD (phase-in)

CHF billion

 

30.6.18

 

31.3.18

31.12.17

 

31.12.17

 

 

 

 

 

 

 

 

Leverage ratio denominator

 

 

 

 

 

 

 

Swiss GAAP total assets

 

 488.5 

 

 464.3 

 477.0 

 

 477.0 

Difference between Swiss GAAP and IFRS total assets

 

 115.0 

 

 107.6 

 112.6 

 

 112.6 

Less: derivative exposures and SFTs1

 

 (215.7) 

 

 (205.3) 

 (216.0) 

 

 (216.0) 

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

 

 387.9 

 

 366.6 

 373.6 

 

 373.6 

Derivative exposures

 

 97.2 

 

 96.6 

 94.6 

 

 94.6 

Securities financing transactions

 

 99.0 

 

 98.8 

 101.8 

 

 101.8 

Off-balance sheet items

 

 32.3 

 

 31.3 

 31.6 

 

 31.6 

Items deducted from Swiss SRB tier 1 capital

 

 (1.7) 

 

 (1.8) 

 (1.9) 

 

 (1.7) 

Total exposures (leverage ratio denominator)

 

 614.6 

 

 591.4 

 599.5 

 

 599.7 

1 Consists of derivative financial instruments, cash collateral receivables on derivative instruments, receivables from securities financing transactions, and margin loans as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to securities financing transactions, in accordance with the regulatory scope of consolidation, which are presented separately under Derivative exposures and Securities financing transactions in this table.

 

p

 

Quarterly |

BCBS Basel III leverage ratio1

CHF million, except where indicated

 

30.6.18

31.3.18

31.12.17

30.9.17

Total tier 1 capital

 

 58,643 

 56,759 

 53,223 

 54,363 

Total exposures (leverage ratio denominator)

 

 614,642 

 591,413 

 599,727 

 597,002 

BCBS Basel III leverage ratio (%)

 

 9.5 

 9.6 

 8.9 

 9.1 

1 Until 31 December 2017, the phase-in deduction applied for the purpose of the CET1 capital calculation was 80%. These effects are fully phased in from 1 January 2018. Associated prudential filters applied to LRD are also fully phased in from 1 January 2018.

p

 

Liquidity coverage ratio

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

 

Quarterly |

Liquidity coverage ratio

 

 

 

 

 

 

Weighted value1

CHF billion, except where indicated

 

Average 2Q182

Average 1Q182

Average 4Q172

High-quality liquid assets

 

 82 

 85 

 87 

Total net cash outflows

 

 60 

 67 

 66 

of which: cash outflows

 

 183 

 180 

 188 

of which: cash inflows

 

 123 

 113 

 123 

Liquidity coverage ratio (%)

 

 137 

 127 

 132 

1 Calculated after the application of haircuts and inflow and outflow rates.    2 Calculated based on an average of 65 data points in the second quarter of 2018, 64 data points in the first quarter of 2018 and 63 data points in the fourth quarter of 2017.

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Section 3  UBS Switzerland AG standalone

Swiss SRB going and gone concern requirements and information

Quarterly | UBS Switzerland AG is considered a systemically relevant bank (SRB) under Swiss banking law and is subject to capital regulations on a standalone basis. As of 30 June 2018, the transitional going concern capital and leverage ratio requirements for UBS Switzerland AG standalone were 13.40% and 4.0%, respectively. The gone concern requirements under transitional arrangements were 7.65% for the risk-weighted assets (RWA)-based requirement and 2.58% for the leverage ratio denominator (LRD)-based requirement. p 

 

Quarterly |

Swiss SRB going and gone concern requirements and information1

As of 30.6.18

 

Swiss SRB, including transitional arrangements

 

Swiss SRB as of 1.1.20

CHF million, except where indicated

 

RWA

LRD

 

RWA

LRD

 

 

 

 

 

 

 

 

 

 

 

Required loss-absorbing capacity

 

in %2

 

in %

 

 

in %

 

in %

 

Common equity tier 1 capital

 

 10.00 

 9,488 

 2.90 

 8,817 

 

 10.54 

 10,001 

 3.50 

 10,642 

of which: minimum capital

 

 5.40 

 5,124 

 1.90 

 5,777 

 

 4.50 

 4,270 

 1.50 

 4,561 

of which: buffer capital

 

 4.06 

 3,852 

 1.00 

 3,040 

 

 5.50 

 5,219 

 2.00 

 6,081 

of which: countercyclical buffer3

 

 0.54 

 512 

 

 

 

 0.54 

 512 

 

 

Maximum additional tier 1 capital

 

 3.40 

 3,226 

 1.10 

 3,345 

 

 4.30 

 4,080 

 1.50 

 4,561 

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

 

 2.60 

 2,467 

 1.10 

 3,345 

 

 3.50 

 3,321 

 1.50 

 4,561 

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

 

 0.80 

 759 

 

 

 

 0.80 

 759 

 

 

Total going concern capital

 

 13.40 

 12,715 

 4.00 

 12,162 

 

 14.844

 14,081 

 5.004

 15,202 

Base gone concern loss-absorbing capacity, including applicable add-ons and rebate

 

 7.655

 7,263 

 2.585

 7,844 

 

 12.306

 11,669 

 4.306

 13,074 

Total gone concern loss-absorbing capacity

 

 7.65 

 7,263 

 2.58 

 7,844 

 

 12.30 

 11,669 

 4.30 

 13,074 

Total loss-absorbing capacity

 

 21.05 

 19,977 

 6.58 

 20,006 

 

 27.14 

 25,750 

 9.30 

 28,276 

 

 

 

 

 

 

 

 

 

 

 

Eligible loss-absorbing capacity

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital

 

 10.61 

 10,072 

 3.31 

 10,072 

 

 10.61 

 10,072 

 3.31 

 10,072 

High-trigger loss-absorbing additional tier 1 capital

 

 3.16 

 3,000 

 0.99 

 3,000 

 

 3.16 

 3,000 

 0.99 

 3,000 

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

 

 3.16 

 3,000 

 0.99 

 3,000 

 

 3.16 

 3,000 

 0.99 

 3,000 

Total going concern capital

 

 13.78 

 13,072 

 4.30 

 13,072 

 

 13.78 

 13,072 

 4.30 

 13,072 

Gone concern loss-absorbing capacity

 

 8.85 

 8,400 

 2.76 

 8,400 

 

 8.85 

 8,400 

 2.76 

 8,400 

of which: TLAC-eligible debt

 

 8.85 

 8,400 

 2.76 

 8,400 

 

 8.85 

 8,400 

 2.76 

 8,400 

Total gone concern loss-absorbing capacity

 

 8.85 

 8,400 

 2.76 

 8,400 

 

 8.85 

 8,400 

 2.76 

 8,400 

Total loss-absorbing capacity

 

 22.63 

 21,472 

 7.06 

 21,472 

 

 22.63 

 21,472 

 7.06 

 21,472 

 

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets

 

 

 94,887 

 

 

 

 

 94,887 

 

 

Leverage ratio denominator

 

 

 

 

 304,046 

 

 

 

 

 304,046 

1 This table includes a rebate equal to 35% of the maximum rebate on the gone concern requirements, which was granted by FINMA and will be phased in until 1 January 2020. Refer to the “Capital management” section of our Annual Report 2017 for more information.    2 The total loss-absorbing capacity ratio requirement of 21.05% is the current requirement based on the transitional rules of the Swiss Capital Adequacy Ordinance including the aforementioned rebate on the gone concern requirements. In addition, FINMA has defined a total capital ratio requirement, which is the sum of 14.4% and the effect of countercyclical buffer (CCB) requirements of 0.54%, of which 10% plus the effect of CCB requirements must be satisfied with CET1 capital. These FINMA requirements will be effective until they are exceeded by the Swiss SRB requirements based on the transitional rules.    3 Going concern capital ratio requirements include CCB requirements of 0.54%.    4 Includes applicable add-ons of 1.44% for RWA and 0.5% for LRD.    5 Includes applicable add-ons of 0.72% for RWA and 0.25% for LRD and a rebate of 1.25% for RWA and 0.42% for LRD.    6 Includes applicable add-ons of 1.44% for RWA and 0.5% for LRD and a rebate of 2% for RWA and 0.7% for LRD.   

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57

Significant regulated subsidiaries and sub-groups

Swiss SRB loss-absorbing capacity

 

Quarterly |

Swiss SRB going and gone concern information

 

 

 

 

 

 

Swiss SRB, including transitional arrangements

 

Swiss SRB as of 1.1.20

CHF million, except where indicated

 

30.6.18

31.3.18

31.12.17

 

30.6.18

31.3.18

31.12.17

 

 

 

 

 

 

 

 

 

Going concern capital

 

 

 

 

 

 

 

 

Common equity tier 1 capital

 

 10,072 

 10,118 

 10,160 

 

 10,072 

 10,118 

 10,160 

High-trigger loss-absorbing additional tier 1 capital

 

 3,000 

 3,000 

 3,000 

 

 3,000 

 3,000 

 3,000 

Total tier 1 capital

 

 13,072 

 13,118 

 13,160 

 

 13,072 

 13,118 

 13,160 

Total going concern capital

 

 13,072 

 13,118 

 13,160 

 

 13,072 

 13,118 

 13,160 

 

 

 

 

 

 

 

 

 

Gone concern loss-absorbing capacity

 

 

 

 

 

 

 

 

TLAC-eligible debt

 

 8,400 

 8,400 

 8,400 

 

 8,400 

 8,400 

 8,400 

Total gone concern loss-absorbing capacity

 

 8,400 

 8,400 

 8,400 

 

 8,400 

 8,400 

 8,400 

 

 

 

 

 

 

 

 

 

Total loss-absorbing capacity

 

 

 

 

 

 

 

 

Total loss-absorbing capacity

 

 21,472 

 21,518 

 21,560 

 

 21,472 

 21,518 

 21,560 

 

 

 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

 

 

 

 

Risk-weighted assets

 

 94,887 

 94,311 

 92,894 

 

 94,887 

 94,311 

 92,894 

Leverage ratio denominator

 

 304,046 

 301,968 

 302,987 

 

 304,046 

 301,968 

 302,987 

 

 

 

 

 

 

 

 

 

Capital and loss-absorbing capacity ratios (%)

 

 

 

 

 

 

 

 

Going concern capital ratio

 

 13.8 

 13.9 

 14.2 

 

 13.8 

 13.9 

 14.2 

of which: common equity tier 1 capital ratio

 

 10.6 

 10.7 

 10.9 

 

 10.6 

 10.7 

 10.9 

Gone concern loss-absorbing capacity ratio

 

 8.9 

 8.9 

 9.0 

 

 8.9 

 8.9 

 9.0 

Total loss-absorbing capacity ratio

 

 22.6 

 22.8 

 23.2 

 

 22.6 

 22.8 

 23.2 

 

 

 

 

 

 

 

 

 

Leverage ratios (%)

 

 

 

 

 

 

 

 

Going concern leverage ratio

 

 4.3 

 4.3 

 4.3 

 

 4.3 

 4.3 

 4.3 

of which: common equity tier 1 leverage ratio

 

 3.3 

 3.4 

 3.4 

 

 3.3 

 3.4 

 3.4 

Gone concern leverage ratio

 

 2.8 

 2.8 

 2.8 

 

 2.8 

 2.8 

 2.8 

Total loss-absorbing capacity leverage ratio

 

 7.1 

 7.1 

 7.1 

 

 7.1 

 7.1 

 7.1 

 

p

 

 

58

 

Leverage ratio information

 

Quarterly |

Swiss SRB leverage ratio denominator

 

 

 

 

 

 

 

 

LRD

(fully applied)

 

LRD

(phase-in)

CHF billion

 

30.6.18

31.3.18

31.12.17

 

31.12.17

 

 

 

 

 

 

 

Leverage ratio denominator

 

 

 

 

 

 

Swiss GAAP total assets

 

 290.3 

 289.4 

 290.3 

 

 290.3 

Difference between Swiss GAAP and IFRS total assets

 

 1.7 

 1.5 

 1.3 

 

 1.3 

Less: derivative exposures and SFTs1

 

 (35.2) 

 (30.5) 

 (39.6) 

 

 (39.6) 

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

 

 256.9 

 260.4 

 252.0 

 

 252.0 

Derivative exposures

 

 4.6 

 4.5 

 4.0 

 

 4.0 

Securities financing transactions

 

 30.4 

 25.8 

 35.3 

 

 35.3 

Off-balance sheet items

 

 12.7 

 11.8 

 12.2 

 

 12.2 

Items deducted from Swiss SRB tier 1 capital

 

 (0.5) 

 (0.4) 

 (0.5) 

 

 (0.5) 

Total exposures (leverage ratio denominator)

 

 304.0 

 302.0 

 303.0 

 

 303.0 

1 Consists of derivative financial instruments, cash collateral receivables on derivative instruments, receivables from securities financing transactions, and margin loans as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to securities financing transactions, in accordance with the regulatory scope of consolidation, which are presented separately under Derivative exposures and Securities financing transactions in this table.

p

 

Quarterly |

BCBS Basel III leverage ratio1

CHF million, except where indicated

 

30.6.18

31.3.18

31.12.17

30.9.17

Total tier 1 capital

 

 13,072 

 13,118 

 13,160 

 12,272 

Total exposures (leverage ratio denominator)

 

 304,046 

 301,968 

 302,987 

 305,229 

BCBS Basel III leverage ratio (%)

 

 4.3 

 4.3 

 4.3 

 4.0 

1 Until 31 December 2017, the phase-in deduction applied for the purpose of the CET1 capital calculation was 80%. These effects are fully phased in from 1 January 2018. Associated prudential filters applied to LRD are also fully phased in from 1 January 2018.

p

 

 

Liquidity coverage ratio

Quarterly | UBS Switzerland AG, as a Swiss SRB, is required to maintain a minimum liquidity coverage ratio of 100%. p 

 

Quarterly |

Liquidity coverage ratio

 

 

Weighted value1

CHF billion, except where indicated

 

Average 2Q182

Average 1Q182

Average 4Q172

High-quality liquid assets

 

 69 

 69 

 69 

Total net cash outflows

 

 54 

 55 

 48 

of which: cash outflows

 

 88 

 87 

 89 

of which: cash inflows

 

 34 

 33 

 41 

Liquidity coverage ratio (%)

 

 128 

 126 

 144 

1 Calculated after the application of haircuts and inflow and outflow rates.    2 Calculated based on an average of 65 data points in the second quarter of 2018, 64 data points in the first quarter of 2018 and 63 data points in the fourth quarter of 2017.

p

 

59

Significant regulated subsidiaries and sub-groups

Capital instruments

 

Quarterly |

Capital instruments of UBS Switzerland AG – key features

Presented according to issuance date.

 

 

 

Share capital

 

Additional tier 1 capital

1

Issuer (country of incorporation; if applicable, branch)

 

UBS Switzerland AG, Switzerland

 

UBS Switzerland AG, Switzerland

 

UBS Switzerland AG, Switzerland

 

UBS Switzerland AG, Switzerland

1a

Instrument number

 

 1 

 

 2 

 

 3 

 

 4 

2

Unique identifier (e.g., ISIN)

 

N/A

 

N/A

 

N/A

 

N/A

3

Governing law(s) of the instrument

 

Swiss

 

Swiss

 

Swiss

 

Swiss

 

Regulatory treatment

 

 

 

 

 

 

 

 

4

Transitional Basel III rules1

 

CET1 – Going concern capital

 

Additional tier 1 – Going concern capital

5

Post-transitional Basel III rules2

 

CET1 – Going concern capital

 

Additional tier 1 – Going concern capital

6

Eligible at solo / group / group and solo

 

UBS Switzerland AG standalone

 

UBS Switzerland AG standalone

7

Instrument type

 

Ordinary shares

 

Loan4

8

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

 

CHF 10.0

 

CHF 1,500

 

CHF 500

 

CHF 1,000

9

Outstanding amount (par value, million)

 

CHF 10.0

 

CHF 1,500

 

CHF 500

 

CHF 1,000

10

Accounting classification3

 

Equity attributable to UBS Switzerland AG shareholders

 

Due to banks held at amortized cost

11

Original date of issuance

 

–

 

1 April 2015

 

11 March 2016

 

18 December 2017

12

Perpetual or dated

 

–

 

Perpetual

13

Original maturity date

 

–

 

–

14

Issuer call subject to prior supervisory approval

 

–

 

Yes

15

Optional call date, subsequent call dates, if applicable, and redemption amount

 

–

 

First optional repayment date:

1 April 2020

 

First optional repayment date:

11 March 2021

 

First optional repayment date:

18 December 2022

 

Repayable at any time after the first optional repayment date.

Repayment subject to FINMA approval. Optional repayment amount: principal amount, together with any accrued and unpaid interest thereon

16

Contingent call dates and redemption amount

 

–

 

Early repayment possible due to a tax or regulatory event. Repayment due to tax event subject to FINMA approval.

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

 

 

60

 

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

 

Coupons / dividend

 

 

 

 

 

 

 

 

17

Fixed or floating dividend / coupon

 

–

 

Floating

18

Coupon rate and any related index;

frequency of payment

 

–

 

6-month CHF Libor + 

370 bps per annum

semiannually

 

3-month CHF Libor + 

459 bps per annum

quarterly

 

3-month CHF Libor + 

250 bps per annum

quarterly

19

Existence of a dividend stopper

 

–

 

No

20

Fully discretionary, partially discretionary or mandatory

 

Fully discretionary

 

Fully discretionary

21

Existence of step-up or other incentive to redeem

 

–

 

No

22

Non-cumulative or cumulative

 

Non-cumulative

 

Non-cumulative

23

Convertible or non-convertible

 

–

 

Non-convertible

24

If convertible, conversion trigger(s)

 

–

 

–

25

If convertible, fully or partially

 

–

 

–

26

If convertible, conversion rate

 

–

 

–

27

If convertible, mandatory or optional conversion

 

–

 

–

28

If convertible, specify instrument type convertible into

 

–

 

–

29

If convertible, specify issuer of instrument it converts into

 

–

 

–

30

Write-down feature

 

–

 

Yes

31

If write-down, write-down trigger(s)

 

–

 

Trigger: CET1 ratio is less than 7%

 

 

FINMA determines a write-down necessary to ensure UBS Switzerland AG’s viability; or UBS Switzerland AG receives a commitment of governmental support that FINMA determines necessary to ensure UBS Switzerland AG‘s viability.

Subject to applicable conditions

32

If write-down, full or partial

 

–

 

Full

33

If write-down, permanent or temporary

 

–

 

Permanent

34

If temporary write-down, description of write-up mechanism

 

–

 

–

35

Position in subordination hierarchy in liquidation

(specify instrument type immediately senior to instrument)

 

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

 

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

36

Existence of features that prevent full recognition under Basel III

 

–

 

–

37

If yes, specify non-compliant features

 

–

 

–

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

p

 

 

61

Significant regulated subsidiaries and sub-groups

 

Section 4  UBS Limited standalone

Quarterly | The table below includes required information on the regulatory capital components and capital ratios, as well as leverage ratio, of UBS Limited standalone based on the Pillar 1 capital requirements. Entities may also be subject to significant Pillar 2 requirements, which represent additional amounts of capital considered necessary and agreed with regulators based on the risk profile of the entities. p 

 

Quarterly |

Prudential key figures1

 

 

 

 

GBP million, except where indicated

 

30.6.18

31.3.18

31.12.172

1

Minimum capital requirement (8% of RWA)

 

 927 

 862 

 838 

2

Eligible capital

 

 3,447 

 3,427 

 3,449 

3

of which: common equity tier 1 (CET1) capital

 

 2,524 

 2,521 

 2,529 

4

of which: tier 1 capital

 

 2,759 

 2,756 

 2,764 

5

Risk-weighted assets

 

 11,593 

 10,778 

 10,473 

6

CET1 capital ratio in % of RWA

 

 21.8 

 23.4 

 24.2 

7

Tier 1 capital ratio in % of RWA

 

 23.8 

 25.6 

 26.4 

8

Total capital ratio in % of RWA

 

 29.7 

 31.8 

 32.9 

9

Countercyclical buffer (CCB) in % of RWA

 

 0.2 

 0.1 

 0.1 

10

CET1 capital requirement (including CCB) (%)

 

 6.5 

 6.5 

 5.8 

11

Tier 1 capital requirement (including CCB) (%)

 

 8.0 

 8.0 

 7.3 

12

Total capital requirement (including CCB) (%)

 

 10.0 

 10.0 

 9.3 

13

Basel III leverage ratio (%)3

 

 7.6 

 7.7 

 7.6 

14

Leverage ratio denominator

 

 36,217 

 35,995 

 36,409 

15

Liquidity coverage ratio (%)4

 

 473 

 473 

 454 

16

Numerator: High-quality liquid assets

 

 5,712 

 5,744 

 5,758 

17

Denominator: Net cash outflows

 

 1,237 

 1,269 

 1,317 

1 Based on Directive 2013/36/EU and Regulation 575/2013 (together known as “CRD IV”) and their related technical standards, as implemented in the UK by the Prudential Regulation Authority.    2 Figures as of or for the quarter ended 31 December 2017 have been adjusted for consistency with the full year audited financial statements and / or local regulatory reporting, which were finalized after the publication of the UBS Group Annual Report 2017 and the 31 December 2017 Pillar 3 report on 9 March 2018.    3 On the basis of tier 1 capital.    4 The values represent an average of the month-end balances for the twelve months ending 30 June 2018, 31 March 2018 and 31 December 2017 in line with the European Banking Authority guidelines on the liquidity coverage ratio disclosure (EBA/GL/2017/01). Including PRA Pillar 2 requirements, the equivalent average ratios were 192%, 192% and 187% for 30 June 2018, 31 March 2018 and 31 December 2017, respectively.

p

 

 

62

 

 

Section 5  UBS Americas Holding LLC consolidated

Quarterly | The table below includes required information on the regulatory capital components and capital ratios, as well as leverage ratio, of UBS Americas Holding LLC consolidated based on Pillar 1 capital requirements. Entities may also be subject to significant Pillar 2 requirements, which represent additional amounts of capital considered necessary and agreed with regulators based on the risk profile of the entities. p 


2018 CCAR results

In June 2018, the Federal Reserve Board released the results of its Comprehensive Capital Analysis and Review (CCAR) and did not object to UBS Americas Holding LLC’s capital plan.

 

 

Quarterly |

Prudential key figures1,2

 

 

 

 

USD million, except where indicated

 

30.6.18

31.3.18

31.12.173

1

Minimum capital requirement (8% of RWA)

 

 4,091 

 4,039 

 3,967 

2

Eligible capital

 

 13,555 

 13,048 

 12,769 

3

of which: common equity tier 1 (CET1) capital

 

 10,693 

 10,188 

 10,851 

4

of which: tier 1 capital

 

 12,834 

 12,329 

 12,047 

5

Risk-weighted assets

 

 51,136 

 50,485 

 49,587 

6

CET1 capital ratio in % of RWA

 

 20.9 

 20.2 

 21.9 

7

Tier 1 capital ratio in % of RWA

 

 25.1 

 24.4 

 24.3 

8

Total capital ratio in % of RWA

 

 26.5 

 25.8 

 25.8 

9

Countercyclical buffer (CCB) in % of RWA4

 

 

 

 

10

CET1 capital requirement (including CCB) (%)

 

 6.4 

 6.4 

 5.8 

11

Tier 1 capital requirement (including CCB) (%)

 

 7.9 

 7.9 

 7.3 

12

Total capital requirement (including CCB) (%)

 

 9.9 

 9.9 

 9.3 

13

Basel III leverage ratio (%)5

 

 9.9 

 9.3 

 8.9 

14

Leverage ratio denominator

 

 129,375 

 132,764 

 135,718 

1 For UBS Americas Holding LLC based on applicable US Basel III rules.    2 There is no local disclosure requirement for liquidity coverage ratio for UBS Americas Holding LLC as of 30 June 2018.    3 Figures as of or for the quarter ended 31 December 2017 have been adjusted for consistency with the full year audited financial statements and / or local regulatory reporting, which were finalized after the publication of the UBS Group Annual Report 2017 and the 31 December 2017 Pillar 3 report on 9 March 2018.    4 Not applicable as the countercyclical buffer requirement applies only to banking organizations subject to the advanced approaches capital rules.    5 On the basis of tier 1 capital.

p

  

 
 

63

 
 
Appendix

Abbreviations frequently used in our financial reports

 

A

ABS                 asset-backed security

AEI                  automatic exchange of information

AGM               annual general meeting of shareholders

A-IRB              advanced internal
ratings-based

AIV                  alternative investment vehicle

ALCO              Asset and Liability Management Committee

AMA               advanced measurement approach

AoA                Articles of Association of UBS Group AG

ASFA               advanced supervisory formula approach

AT1                 additional tier 1

 

B

BCBS               Basel Committee on
Banking Supervision

BD                   business division

BEAT               base erosion and anti-abuse tax

BIS                   Bank for International Settlements

BoD                 Board of Directors

BVG                Swiss occupational
pension plan

 

C

CC                   Corporate Center

CCAR              Comprehensive Capital Analysis and Review

CCB                countercyclical buffer

CCF                 credit conversion factor

CCP                 central counterparty

CCR                counterparty credit risk

CCRC              Corporate Culture and Responsibility Committee

CDO                collateralized debt
obligation

CDR                constant default rate

CDS                 credit default swap

CEA                 Commodity Exchange Act

CECL               current expected credit loss

CEM                current exposure method

CEO                Chief Executive Officer

CET1               common equity tier 1

CFO                 Chief Financial Officer

CFTC               US Commodity Futures Trading Commission

CHF                 Swiss franc

CLN                 credit-linked note

CLO                 collateralized loan obligation

CMBS             commercial mortgage-backed security

COP                close-out period

CRD IV            EU Capital Requirements Directive of 2013

CRM               credit risk mitigation (credit risk) or comprehensive risk measure (market risk)

CST                 combined stress test

CVA                credit valuation adjustment

 

D

DBO                defined benefit obligation

DCCP              Deferred Contingent Capital Plan

DOJ                 US Department of Justice

DOL                 US Department of Labor

D-SIB               domestic systemically important bank

DTA                 deferred tax asset

DVA                debit valuation adjustment

 

E

EAD                 exposure at default

EBA                 European Banking Authority

EC                   European Commission

ECAI                external credit assessment institution

ECB                 European Central Bank

ECL                  expected credit losses

EEPE                effective expected positive exposure

EIR                   effective interest rate

EL                    expected loss

EMEA              Europe, Middle East and Africa

EOP                 Equity Ownership Plan

EPE                  expected positive exposure

EPS                  earnings per share

ERISA              Employee Retirement Income Security Act of 1974

ETD                 exchange-traded derivative

ETF                  exchange-traded fund

EU                   European Union

EUR                 euro

EURIBOR        Euro Interbank Offered Rate


F

FCA                 UK Financial Conduct
Authority

FCT                  foreign currency translation

FDIC                US Federal Deposit Insurance Corporation

FINMA            Swiss Financial Market Supervisory Authority

FINRA              US Financial Industry Regulatory Authority

FMIA               Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading

FMIO               FINMA Ordinance on Financial Market Infrastructure

FRA                 forward rate agreement

FSA                  UK Financial Services Authority

FSB                  Financial Stability Board

FTA                  Swiss Federal Tax Administration

FTD                  first to default

FTP                  funds transfer price

FVA                 funding valuation adjustment

FVOCI             fair value through other comprehensive income

FVTPL              fair value through profit or loss

FX                    foreign exchange

 

G

GAAP              generally accepted
accounting principles

GBP                 British pound

GEB                 Group Executive Board

GHG               greenhouse gas

GIA                 Group Internal Audit

GIIPS               Greece, Italy, Ireland,
Portugal and Spain

GMD               Group Managing Director

GRI                  Global Reporting Initiative

Group ALM    Group Asset and Liability Management

G-SIB              global systemically important bank

 

 
 

 
 
64

 
 
 

Abbreviations frequently used in our financial reports (continued)

 

H

HQLA              high-quality liquid assets

 

I

IAA                  internal assessment approach

IAS                  International Accounting Standards

IASB                International Accounting Standards Board

IFRIC               International Financial Reporting Interpretations Committee

IFRS                 International Financial Reporting Standards

IMA                 internal models approach

IMM                internal model method

IRB                  internal ratings-based

IRC                  incremental risk charge

ISDA                International Swaps and Derivatives Association

 

K

KPI                   key performance indicator

KRT                 Key Risk Taker

 

L

LAC                 loss-absorbing capacity

LAS                  liquidity-adjusted stress

LCR                 liquidity coverage ratio

LGD                 loss given default

LIBOR              London Interbank Offered Rate

LLC                  Limited liability company

LRD                 leverage ratio denominator

LTV                  loan-to-value

 

M

MiFID II           Markets in Financial Instruments Directive II

MiFIR              Markets in Financial Instruments associated Regulation

MRT                Material Risk Taker

MTN                medium-term note


N

NAV                net asset value

NII                   net interest income

NPA                 non-prosecution agreement

NRV                 negative replacement value

NSFR               net stable funding ratio

 

O

OCA                own credit adjustment

OCI                 other comprehensive income

OIS                  overnight index swap

OTC                over-the-counter

 

P

PD                   probability of default  

PFE                  potential future exposure

PIT                   point in time

P&L                  profit or loss

PRA                 UK Prudential Regulation Authority

PRV                 positive replacement value

 

Q

QRRE              qualifying revolving retail exposures

 

R

RBA                 ratings-based approach

RBC                 risk-based capital

RLN                 reference-linked note

RMBS              residential mortgage-backed security

RniV                risks-not-in-VaR

RoAE               return on attributed equity

RoE                 return on equity

RoTE               return on tangible equity

RV                   replacement value

RW                  risk weight

RWA               risk-weighted assets

 


S

SA                   standardized approach

SA-CCR          standardized approach for counterparty credit risk

SAR                 stock appreciation right

SE                    structured entity

SEC                 US Securities and Exchange Commission

SEEOP             Senior Executive Equity Ownership Plan

SESTA             Swiss Federal Act on Stock Exchanges and Securities Trading

SESTO             FINMA Ordinance on Stock Exchanges and Securities Trading

SFA                  supervisory formula approach

SFT                  securities financing transaction

SI                     sustainable investing

SICR                significant increase in credit risk

SME                small and medium-sized enterprises

SMF                 Senior Management Function

SNB                 Swiss National Bank

SPPI                 solely payments of principal and interest

SRB                 systemically relevant bank

SRM                specific risk measure

SSFA                simplified supervisory formula approach

SVaR               stressed value-at-risk

 

T

TBTF                too big to fail

TCJA               US Tax Cuts and Jobs Act

TLAC               total loss-absorbing capacity

TRS                  total return swap

TTC                 through the cycle

 

U

USD                 US dollar

 

V

VaR                 value-at-risk

 

 

This is a general list of the abbreviations frequently used in our financial reporting. Not all of the listed abbreviations may appear in this particular report.

 
 

</BCLPAGE>65

 
 
Appendix

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cautionary Statement | This report and the information contained herein are provided solely for information purposes, and are not to be construed as solicitation of an offer to buy or sell any securities or other financial instruments in Switzerland, the United States or any other jurisdiction. No investment decision relating to securities of or relating to UBS Group AG, UBS AG or their affiliates should be made on the basis of this report. Refer to UBS’s second quarter 2018 report and its Annual Report 2017, available at www.ubs.com/investors, for additional information.

Rounding | Numbers presented throughout this report may not add up precisely to the totals provided in the tables and text. Starting in 2018, percentages, absolute and percent changes, and adjusted results are calculated on the basis of unrounded figures, with the exception of movement information provided in text that can be derived from figures displayed in the tables, which is calculated on a rounded basis. For prior periods, these values are calculated on the basis of rounded figures displayed in the tables and text.

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

 

 
 
66

 
 
 

 

 
 
  

</BCLPAGE>67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UBS Group AG

P.O. Box

CH-8098 Zurich

 

ubs.com

 

 

  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.

 

 

UBS Group AG

 

 

 

By: _/s/ David Kelly_____________

Name:  David Kelly          

Title:    Managing Director

 

 

By: _/s/ Ella Campi _____________

Name:  Ella Campi

Title:    Executive Director

 

 

UBS AG

 

 

 

By: _/s/ David Kelly_____________

Name:  David Kelly          

Title:    Managing Director

 

 

By: _/s/ Ella Campi _____________

Name:  Ella Campi

Title:    Executive Director

 

 

 

Date: August 7, 2018